Irrevocable Trust; Power of Attorney declared void ab initio
In re: Joseph L. Koepfinger, 2020 WL 6470840 (Pa. Super 2021) (unreported), allocatur granted May 17, 2022, appeal docket 20 WAP 2022
The issue in this case is whether a trust created by an improperly executed, but otherwise facially proper power of attorney (POA) is void upon creation. Reversing the trial court, the Superior Court found that the trust not voided. The factual and procedural history, as summarized by the Superior Court, is as follows:
Joseph Koepfinger (Father) is an approximately 94-year-old professional engineer and disabled veteran. Father has several children, including Daughter. After Father’s wife, the children’s mother, passed away, Father signed a power of attorney (POA) in favor of Daughter in 2016 ( 2016 POA), Thereafter, tension allegedly ensued between Father and Daughter due to a relationship Father had begun with another woman. In 2017, Father revoked Daughter’s POA and instead appointed his son, Joseph Koepfinger, Jr., as his agent. Daughter contends that she was never told that her POA had been revoked in favor of her brother until May 2018. Father maintains that Daughter was orally told that she was no longer Father’s agent at the time he revoked the 2016 POA.
The month before Daughter alleges that she first learned of the revocation, but after Father alleges he orally informed Daughter that her agency had been revoked, Daughter, acting pursuant to the 2016 POA, created the Trust on April 17, 2018. Daughter proceeded to transfer a majority of Father’s assets, including his residence, into the Trust. Daughter appointed herself as Trustee of the Trust and was thereby charged with providing for the care and needs of Father.
Shortly thereafter, on May 21, 2018, Daughter filed the instant Declaratory Judgment action, asking the [trial] court to determine, inter alia, that the 2016 POA was valid, she had authority under the 2016 POA to create the Trust, and that the Trust was valid. Father filed a motion seeking to dismiss the declaratory action alleging that Daughter lacked standing and that the 2016 POA had not been properly executed. The Honorable Kathleen A. Durkin entered an order on February 13, 2019, concluding that the 2016 POA was void ab initio because Father had failed to sign it in the presence of a notary. Judge Durkin’s February 2019 order made no determination as to the continuing validity of the Trust.
Father subsequently filed a motion to terminate the Trust in June 2019, claiming that because the court had deemed the 2016 POA void ab initio, the Trust was likewise void. He also alleged that he had revoked the POA to Daughter before she purported to create the Trust, and she had “acted in bad faith in creating the Trust. . . .
Daughter filed preliminary objections averring that Father’s motion to terminate was both procedurally and legally deficient. The [trial] court issued an order, on June 11, 2019, simply ordering “that the Motion to Terminate Trust is DENIED.” . . .
Slip op. at 1-3. Thereafter, the matter was assigned to another judge to conduct conferences and requested that the parties prepare legal memoranda to answer the question whether the Trust remained valid. Thereafter, an order was entered declaring that the Trust was void and terminated. Daughter timely filed an appeal to Superior Court.
In its Opinion pursuant to Pennsylvania Rule of Appellate Procedure 1925(a), the trial court concluded that “the Trust must be considered void because it was created with the 2016 POA, which the court concluded was void ab initio.” Slip op. at 3. The trial court considered Section 5608 of the Probate, Estates and Fiduciaries Code and found Superior Court’s decision in Vine v. Commonwealth of Pennsylvania, State Employees’ Retirement Board, 9 A.3d 1150 (Pa. Super. 2010), instructive. The trial court cited Vine “for the proposition that an invalid POA cannot create a valid principal and agent relationship.” Slip op. at 3. Accordingly, the trial court concluded that because the actions undertaken pursuant to an invalid POA are a legal nullity, the Trust was void.
On appeal, Daughter argued that the trial court erred in terminating the Trust by failing to consider the version of Section 5608 in effect at the relevant time. She further argued that the trial “court erred by finding that the Trust had effectively already been determined to be void due to the court’s prior determination that the 2016 POA was void ab initio.” Slip op. at 5. Superior Court agreed with Daughter’s contentions.
Superior Court concluded that the trial court’s reliance on Vine was misplaced because the General Assembly, in 2014, amended Section 5608 to reverse the Vine court’s ruling. Superior Court explained that in amending the statute the General Assembly instructed that “[i]n interpreting and applying the amendment or addition of 20 Pa.C.S. §§ 5601(f), 5608, 5608.1, 5608.2 and 5611, a court shall give due consideration of the intent of the General Assembly to reverse the interpretation of 20 Pa.C.S. § 5608 as set forth in” Vine. Slip op. at 5. Accordingly, Superior Court concluded that the trial court’s “reliance on Vine to conclude that a trust instrument created by an improperly executed, but otherwise facially proper, POA is void upon creation, was error.
Superior Court also addressed the validity of Section 5608 to this matter and concluded that Section 5608 does not apply. Superior Court reasoned that Section 5608 “concerns ‘liability’ incurred upon the reliance on a facially valid POA. Here, although Daughter requested a determination regarding any potential liability she may have incurred due to her creation of the Trust with the 2016 POA, the instant [trial] court order does not address this issue.” Slip op. at 6.
Finally, Superior Court explained that neither Father nor the trial court “points to anything in the law in force at the relevant time that would automatically render an irrevocable trust created pursuant to a POA void ab initio because the POA is ultimately found to have been properly executed.” Slip op. at 6. Thus, Superior Court reversed and remanded the matter back to the trial court.
The Supreme Court granted allocatur to consider the following issue:
What is the effect of a Power of Attorney which is not executed in conformance with the statute and did the Superior Court commit reversible error by reversing the trial court which held that a trust was void and terminated as it was created by a Power of Attorney which was later declared void ab initio?