Recent NY Court Decision Clarifies Power of Attorney Limitations in Property Transfers

This week we wanted to bring your attention to an interesting decision out of the Second Department in a case entitled Choudhari v. Choudhari, 220 AD3d 835 (2023) which affirmed and modified, in part, a Supreme Court Order declaring two (2) recorded deeds null and void based on the fact that the Power of Attorney used to effectuate the deed transfers did not expressly grant the Attorney in Fact authorization to “gift” the real property to himself or other parties.
The relevant facts of, as well as a link to, the case are set forth below. 

 In or about October 2016 and March 2017 respectively, the Defendant/Appellant, Mustafa Choudhari, caused two deeds to be recorded which transferred title of two (2) separate Brooklyn properties owned individually by his brother, Mohammad Choudhari (Plaintiff/Respondent), to himself and his brother to hold title 50/50% for nominal consideration.  Upon discovering the deed transfers, Plaintiff commenced an action pursuant to RPAPL Article 15 to quiet title alleging that the two (2) deeds had been forged by his brother.  During the course of the litigation and in defense to the allegation of forgery, Defendant/Appellant produced a Power of Attorney that was executed in 2006 by Mohammad Choudhari appointing his brother, Mustafa Choudhari his attorney in fact (the “2006 POA”) and filed a motion seeking to amend his Answer to assert a counterclaim for a “constructive trust” based on an alleged joint venture agreement between the parties.  While the 2006 POA did grant authority to consummate real estate transactions on behalf of the Principal, the 2006 POA failed to include express language granting Defendant/Appellant authority to gift Plaintiff/Respondent’s property to himself or any other party.  In an order dated October 21, 2020, the Supreme Court denied the Defendant's motion for leave to amend his answer and granted the Plaintiff's cross-motion for summary judgment, determining that the subject deeds are null and void. Further, in an order and interlocutory judgment dated December 10, 2020, the court granted the Plaintiff's cross-motion for summary judgment on his causes of action to declare certain deeds null and void, declared and adjudged the deeds null and void, and directed the County Clerk to remove them from its records and the Defendant thereafter appealed both Orders.

While the Appellate Court ’s Order did modify the lower Court’s Order and directed that the Defendant/Appellant should be given leave to amend his Answer to assert a counterclaim(s) sounding in constructive trust, the Appellate Court affirmed that portion of the Order that declared the two (2) deeds null and void and clearly stated that "absent a specific provision in the power of attorney document authorizing gifts, an attorney-in-fact, in exercising his or her fiduciary responsibilities to the principal, may not make a gift to himself [or herself] or a third party of the money or property which is the subject of the agency relationship" (citing McGregor v McGregor, 191 AD3d 974, 976 [2021] [internal quotation marks omitted]; see General Obligations Law § 5-1505 [2] [a] [2].

You can view this case by clicking the below link: 
https://www.nycourts.gov/reporter/3dseries/2023/2023_05245.htm

This case is an important reminder for practitioners to expressly set forth the full and complete authority to be granted to Agents when drafting POAs.