Court Opinion

ID: 4279729
Source: CourtListenerOpinion
Date Created: 2018-05-30 20:22:08.862183+00
Date Added: 2024-06-11T14:07:23.777790
License: Public Domain

FILED
No. 17-0096 – AMFM LLC v. Shanklin                                            May 30, 2018
                                                                                released at 3:00 p.m.
                                                                            EDYTHE NASH GAISER, CLERK
WORKMAN, C. J., dissenting:                                                 SUPREME COURT OF APPEALS
                                                                                 OF WEST VIRGINIA

              I dissent to the majority’s nonsensical conclusion that a third party may

enforce a contract entered into by a person who indisputably had neither actual nor apparent

authority to do so. This position violates every tenet of contract and agency law and further

distorts a salutary statutory provision which is patently inapplicable.          Petitioner’s

argument—contained in a mere singular paragraph in its original brief and completely

devoid of any authority in support—is that a provision contained in the Uniform Durable

Power of Attorney Act, designed to encourage acceptance of facially valid powers of

attorney and immunize those who act in good faith reliance thereon, somehow creates legal

capacity to make a binding contract where none otherwise exists. The majority whole-

heartedly accepts this nonsensical premise, despite the absence of a single case in which

this uniform provision has been utilized in a similar fashion. Nevertheless, the majority

boldly concludes that the statute somehow granted respondent authority that she did not

otherwise have, thereby conflating the immunizing effect of this statute with the contractual

requirement of assent by a competent party.

              With respect to this limited issue, the pertinent facts are undisputed. While

she was still competent, Lena Nelson executed a power of attorney naming her son,

Stephen Nelson, as her attorney in fact. The power of attorney stated that “if, for any

reason, STEPHEN NELSON, cannot or will not serve as such, then I do hereby make,

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constitute, and appoint my daughter, KIMBERLY SHANKLIN . . . my true and lawful

attorney for me.” (emphasis added). Ms. Nelson was thereafter admitted to petitioner’s

facility; upon her admission, her daughter, Ms. Shanklin—the successor power of

attorney—executed admission papers and an arbitration agreement. It is undisputed, based

upon the discovery conducted on this issue, that petitioner’s facility had the power of

attorney document in its possession at the time of admission which plainly designated an

entirely different individual—Mr. Nelson—as power of attorney. It is further undisputed

that petitioner provided no evidence that it undertook any efforts to determine whether Mr.

Nelson, “could not” or “would not” serve as power of attorney before respondent executed

the admission and arbitration documents. Moreover, Ms. Shanklin testified in deposition

that there was, in fact, absolutely no reason why Mr. Nelson could not or would not serve

as power of attorney.

              This Court has held generally that “[a]s a written understanding between

parties to resolve future disputes through arbitration, the validity of an arbitration

agreement is determined in the same manner that the validity of other written agreements

is determined—through the application of well-established contract principles.” State ex

rel. AMFM, LLC v. King, 230 W. Va. 471, 477, 740 S.E.2d 66, 72 (2013). Further, “to be

valid, the subject Arbitration Agreement must have (1) competent parties; (2) legal subject

matter; (3) valuable consideration; and (4) mutual assent. Absent any one of these

elements, the Arbitration Agreement is invalid.” Id. at 478, 740 S.E.2d at 73 (emphasis in

original). The key factor in this case is obviously whether a “competent party” entered into
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the subject arbitration agreement. “To be a competent party, the persons or entities signing

the Arbitration Agreement must have had the authority to do so.” Id. (emphasis added).

The analysis, then, requires nothing more than an examination of basic principles of

agency.

              Agency is created through actual or apparent authority: “A principal is

bound by acts of an agent if those acts are either within the authority the principal has

actually given his agent, or within the apparent authority that the principal has knowingly

permitted the agent to assume.” Thompson v. Stuckey, 171 W. Va. 483, 487, 300 S.E.2d

295, 299 (1983). Petitioner ardently insists that Ms. Shanklin had “actual” authority to

enter into the arbitration agreement because Mr. Nelson was not present at admission and

therefore “unable” to serve. 1 This argument is nonsense. The majority declines this

obviously untenable argument in favor of a much bolder proposition—that Mr. Nelson had

somehow “declined to serve” simply because the record contains no evidence that he ever

utilized his authority, thereby giving Ms. Shanklin actual authority as the successor.

              The problem with either of these illogical attempts to divest Mr. Nelson of

his authority as power of attorney is obvious. Either position would allow any successor

power of attorney to surreptitiously perform unauthorized acts and then claim that his or

       1
         Petitioner states “[i]t is clear from the very fact that Stephen Nelson was not
present during his mother’s admission that he ‘could not’ or was unable or unwilling to act
as his mother’s DPOA on that day[.]” Mr. Nelson lives in Charleston. Ms. Nelson was
admitted to petitioner’s facility in Boone County where respondent’s sister, Regina, works.
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her successor status was activated by the unwitting attorney-in-fact’s mere absence or lack

of notice and opportunity to act. There is no evidence whatsoever that Mr. Nelson was

aware of and elected not to serve on any prior occasion when Ms. Shanklin exercised her

non-existent authority. Nor does simply having not yet had occasion to exercise one’s

authority under a power of attorney equate to a declination to serve. A successor agent

quite simply has no authority to act unless and until the conditions precedent to his or her

succession occur. See Estate of Alford v. Shelton, 89 N.E.3d 391, 401 (Ill. 2017) (finding

successor agent without the “duties and liability” described in the power of attorney act

where agent was “merely [the] successor agent and was not yet [the] ‘agent’ as defined in

the Act.”).2 The majority opinion stands for the shockingly unsustainable conclusion that

blatantly wielding and utilizing non-existent authority somehow creates actual authority in

hindsight.

              In absence of actual authority—which is unquestionable in this case—

petitioner must establish that Ms. Shanklin had apparent authority. However, “ostensible”

or “apparent” agency did not exist in this instance because its creation required some act

by the principal (Ms. Nelson) to create the appearance of agency in Ms. Shanklin:

              Agency by representation or estoppel, sometimes designated
              as “apparent agency,” involves a case in which there may be
              no agency in fact, but where the principal or employer holds

       2
        Compare Kennedy v. Robinson Mem. Hosp., 72 N.E.3d 70, 72 (Ohio Ct. App.
2016) (finding arbitration agreement executed by successor power of attorney valid where
power of attorney included language expressly providing that “[a]ny person can rely on a
statement by a successor Agent that he or she is properly acting under this document . . . .
That person does not have to make any further investigation or inquiry.”).
                                            4

             out or represents a person to be his agent or employee, and a
             third party or parties rely thereon, in which case the person
             making the representation is estopped to deny the agency.

Burless v. West Virginia University Hospitals, Inc., 215 W.Va. 765, 772, 601 S.E.2d 85,

92 (2004) (quoting Syl. Pt. 8, Brewer v. Appalachian Constructors, Inc., 138 W.Va. 437,

76 S.E.2d 916 (1953)) (emphasis added). There is no allegation that Ms. Nelson took any

action or was even competent to take any action to create ostensible agency in Ms.

Shanklin. Accordingly, it is evident that Ms. Shanklin had neither actual nor apparent

authority to enter into the arbitration agreement.3 The absence of a competent party’s

      3
        The straight-forward analysis ignored by the majority and easily followed by other
courts is well-stated in Robbins ex rel. Robbins v. Beverly Enterprises, Inc., No.
3:07CV047-B-A, 2008 WL 907465, at *2 (N.D. Miss. Mar. 31, 2008):

                    To bind her husband to the arbitration agreement at
             issue, Virginia Robbins was required to have authority to act
             as Dedric Robbins' agent, and to succeed on their motion to
             compel arbitration, the defendants must show that Mrs.
             Robbins did, in fact, have that authority. The three potential
             grounds for finding agency authority are the existence of actual
             authority (either express or implied), apparent authority, or
             statutory authority.

                    The defendants have set forth no documentation or
             evidence of any kind showing that Dedric Robbins gave
             express authority to Virginia Robbins to act as his agent.
             “[W]ithout express authority to act as an agent, there can be no
             implied authority.” Thus, Virginia Robbins did not have actual
             authority to bind Dedric Robbins to the arbitration agreement.

                   Next, the court examines whether Mrs. Robbins had
             apparent authority to bind Mr. Robbins to the arbitration
             agreement. For a determination of apparent authority, “[t]here
             must be a showing of (1) acts or conduct by the principal

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execution of the arbitration agreement is therefore fatal to its enforcement without further

analysis.

              In the face of this fatal lack of authority, the majority unsuccessfully reaches

for a lone provision contained in the Uniform Durable Power of Attorney Act, West

Virginia Code § 39B-1-119(c), which states that

              [a] person who in good faith accepts an acknowledged power
              of attorney without actual knowledge that the power of
              attorney is void, invalid or terminated, that the purported
              agent’s authority is void, invalid or terminated, or that the
              agent is exceeding or improperly exercising the agent’s
              authority may rely upon the power of attorney as if the power
              of attorney were genuine, valid and still in effect, the agent’s
              authority were genuine, valid and still in effect, and the agent
              had not exceeded and had properly exercised the authority . . .

Based on this statute, petitioner argues that “when Ms. Shanklin presented the durable

power of attorney at the time of admission, [petitioner] had no duty to question her

authority to act as successor agent [and] without actual knowledge that the durable power

              indicating the agent's authority, (2) reasonable reliance upon
              those acts by a third party, [and] (3) a detrimental change in
              position by the third party as a result of that reliance.” Though
              it was incumbent upon the defendants to make certain that
              Virginia Robbins had authority to act as her husband's agent
              and bind him to the arbitration agreement, the defendants have
              alleged no acts or conduct on the part of Dedric Robbins
              indicating that he so authorized her. “In Mississippi, ‘one who
              relies on the acts of an agent to bind his principal has the
              burden of proving the authority of the agent.’”

(citations omitted).

                                              6

of attorney is in some way defective, [petitioner] can act in good faith on the representations

made by Ms. Shanklin when she admitted her mother to the facility.” (emphasis in

original). The majority goes a step further, declaring that this uniform statutory provision

itself bestowed authority on Ms. Shanklin to enter into the arbitration agreement. The

majority cites no caselaw whatsoever—despite an overwhelming majority of states having

a similar statutory provision—supporting its use of this statute to create binding and

enforceable authority where none exists.

              Both the petitioner and the majority’s respective premises are fatally flawed.

First, it is clear there was nothing “defective” about the power of attorney—Ms. Shanklin

simply had no authority to act pursuant to it. Secondly, petitioner’s undisputed possession

of the power of attorney document which on its face demonstrated that Ms. Shanklin was

not the power of attorney is unquestionably sufficient to create actual knowledge that she

had no authority to act. See Hutcheson v. Eskaton Fountainwood Lodge, 225 Cal. Rptr. 3d

829, 843 (Cal. Ct. App.), reh’g denied (Cal. Ct. App. 2017) (finding “personal care” power

of attorney “did not have authority to execute the health care agreement, including the

arbitration clause, because [“health care” power of attorney’s] authority was known to

[third party]”); Coffill v. Coffill, 656 F.3d 93, 96 (1st Cir. 2011) (rejecting defense of good

faith reliance where document was “of no effect on its face, being limited by an expiration

date long past before its purported exercise . . . and thus apparently worthless”); see also

Syl., Uniontown Grocery Co. v. Dawson, 68 W. Va. 332, 69 S.E. 845 (1910) (“The general

                                              7

rule is that one dealing with an agent is bound at his peril to know the agent's authority. If

in writing, he is presumed to have read his warrant of authority.”).

              More importantly, however, the majority’s application of West Virginia

Code § 39B-1-119 is a complete distortion of the statute’s intended operation. This statute

allows a third party, in good faith, to “rely on” on a power of attorney in absence of “actual

knowledge” that the individual’s authority is “void, invalid or terminated.” W. Va. Code

§ 39B-1-119(c). Its purpose, therefore, is not to create authority where none exists. Rather,

this provision is plainly intended to protect third parties from liability when they act in

reliance on the power of attorney which they have no actual knowledge regarding its

invalidity. This interpretation and operation of the statute is unequivocally verified by the

very drafters of the Act. As the Prefatory Note and Comments to the Uniform Durable

Power of Attorney Act explains, “[s]ections 119 and 120 of the Act address the problem

of persons refusing to accept an agent’s authority. Section 119 provides protection from

liability for persons that in good faith accept an acknowledged power of attorney.”

Uniform Power of Attorney Act, National Conference of Commissioners on Uniform State

Laws, 2006 (emphasis added). In this regard, it provides a shield of immunity for those

relying on facially valid, but ultimately defective, powers of attorney, rather than a sword

to create otherwise non-existent authority.

              Further, the very language of the statute suggests the scope of its operation

is limited to powers of attorney which on their face appear to grant authority. West
                                              8

Virginia Code § 39B-1-119(c) plainly presupposes that the third party has in its possession

an “acknowledged power of attorney” purporting to give the named attorney-in-fact

authority—thus is the significance of it having been acknowledged. (emphasis added).

“The purpose of [the acknowledgment requirement] is to protect a person that in good faith

accepts an acknowledged power of attorney without knowledge that it contains a forged

signature or a latent defect in the acknowledgment.” Uniform Power of Attorney Act,

supra. In this instance, the acknowledged power of attorney was both facially and

substantively valid—it simply gave no authority to Ms. Shanklin in absence of the

precondition that her brother was unable or refused to act. Documents which on their face

fail to create agency have long been held invalid by this Court. Syl., Uniontown Grocery,

68 W. Va. 332, 69 S.E. 845 (“If a written instrument . . . be relied on, in order that it may

be held to create agency, it must also on its face, or when read in the light of surrounding

circumstances, appear that such was the intention.”). West Virginia Code § 39B-1-119 has

no effect whatsoever on this well-established tenet of agency law.

              At base, the majority’s opinion holds that West Virginia Code § 39B-1-119,

allows a third party to enforce a contract entered into with an individual who had no

authority, but merely represented themselves as having such authority, all while in

possession of information which flatly contradicts this representation. 4 This premise

       4
        Notably, petitioner fails to make any sort of estoppel argument, i.e. Ms. Shanklin
cannot, with knowledge that she lacked authority to enter the agreement, avoid the effects
of the agreement. Given its abject failure to pursue such an argument, it is beyond the

                                             9

simply has no basis in law. As explained in Pagarigan v. Libby Care Ctr., Inc., 120 Cal.

Rptr. 2d 892, 894-95 (Cal. Ct. App. 2002):

              A person cannot become the agent of another merely by
              representing herself as such. To be an agent she must actually
              be so employed by the principal or “the principal intentionally,
              or by want of ordinary care, [has caused] a third person to
              believe another to be his agent who is not really employed by
              him.” Defendants produced no evidence Ms. Pagarigan had
              ever employed either of her daughters as her agent in any
              capacity. Nor did defendants produce any evidence this
              comatose and mentally incompetent woman did anything
              which caused them to believe either of her daughters was
              authorized to act as her agent in any capacity.

(emphasis in original). In fact, were the statute’s intent to allow third parties to merely rely

on the word of a purported agent without even so much as the necessity of reading the

document granting such authority, there would be no need for subsection (d). Critically,

subsection (d) provides that a person who is asked to accept an acknowledged power of

attorney may “request, and rely upon, without further investigation . . . [a]n agent’s

certification under penalty of perjury of any factual matter concerning the principal, agent

o power of attorney[.]” W. Va. Code § 39B-1-119(d). Accordingly, were subsection (c)

to have the effect urged by petitioner—that a third party may blindly rely upon a shallow

purview of this Court to speculate about the viability of such an argument: “Courts cannot
concoct or resurrect arguments neither made nor advanced by the parties.” Syl. Pt. 13, in
part, W. Va. Reg’l Jail & Corr. Facility Auth. v. A. B., 234 W. Va. 492, 766 S.E.2d 751,
757 (2014).

                                              10 

representation of authority—there would be no need to empower the third party to request

additional certification of any “factual matter” from the purported agent.

              It is clear from petitioner’s cursory brief and nonsensical arguments that it

lacks even minimal conviction that its arguments are availing.5 In spite of this, the majority

endorses petitioner’s specious reasoning and without a scintilla of support, summarily

declares that respondent’s unauthorized acts served to divest Mr. Nelson of his authority.

The majority’s opinion runs counter to the most fundamental principles of contract and

agency law and badly misapplies the immunity provision of the Uniform Durable Power

of Attorney Act. Accordingly, for the reasons set forth hereinabove, I respectfully dissent.

       5
         In its Reply brief, petitioner unsuccessfully attempts to expound on its original
premise by detailing at length all of the occasions on which Ms. Shanklin acted as Ms.
Nelson’s power of attorney before and after her nursing home admission including writing
checks on Ms. Nelson’s behalf, arranging for medical care, and signing hospital admission
papers. There is, of course, no evidence that petitioner was aware of or relied on those
prior acts, nor does petitioner argue as much. Rather, petitioner appears to suggest that
since Ms. Shanklin had previously and subsequently acted as power of attorney (despite
having no written authority to do so) this created “actual authority” to do so. For reasons
that the majority does not articulate, it likewise finds this wholly irrelevant unauthorized
activity to be compelling evidence of Ms. Shanklin’s actual authority.

                                             11