A power of attorney is a document by which an individual authorizes another person to act on their behalf. Powers of attorney are generally granted where it is anticipated that the grantor of the power will be temporarily or even permanently unable to handle certain transactions and appoints an agent, usually a trusted friend or family member, to manage their affairs. For the power of attorney to be valid, it must be signed and acknowledged by both the grantor and the agent, who is supposed to act in the grantor’s best interest and in accordance with the grantor’s instructions. Generally, in New York, an agent is not personally liable for actions taken on behalf of its principal if the power of attorney is valid. A recent decision clarified this rule in a case involving a failed transaction.

In Adamo v. Mazzei, the plaintiff entered a contract of sale to purchase a vacant lot in Staten Island, New York, from the defendant, Mr. Mazzei. Mazzei’s sister, Ms. Noble, executed the contract on Mazzei’s behalf pursuant to the power of attorney granted her by her brother, which authorized her to handle, inter alia, the real estate transaction on his behalf. The transaction dragged on for several months, and during this delay, Noble resigned as agent for Mazzei and provided written notice of termination of the power of attorney directly to Mazzei and the plaintiff through his counsel.

Thereafter, for reasons unrelated to any action on the part of Noble, the transaction failed, and the plaintiff commenced an action seeking damages for breach of contract and named both Mazzei and Noble as defendants. The claim against Noble was based solely on the grounds that she had executed the contract using the power of attorney.

The New York Supreme Court, Richmond County, dismissed the claim against Noble, finding that Noble clearly executed the contract as agent for a disclosed principal. As an agent, she could not be personally liable unless it could be established that she had committed some wrongdoing, such as misrepresenting her authority or self-dealing, which was not the case. The record also established that Noble did not own or otherwise control the property being sold, and that the contract Noble signed as agent “contained no promise, covenant, warranty or obligation running from Noble to Plaintiff.”

In finding for Noble, the Court relied on a line of cases holding that an agent for a disclosed principal could not be liable for actions properly taken pursuant to the authority granted to the agent.

Although the Court allowed the claim to continue against Mazzei, it granted Noble’s motion to dismiss, finding that she had no contractual privity with the plaintiff and, therefore, could not be liable to the plaintiff for breach of contract.

It appears the plaintiff was desperate to include as many potential pockets from which to receive compensation as possible by adding Noble. However, it has long been the law in New York that an agent for a disclosed principal cannot be held liable when acting within the scope of its agency.

Should you have any questions regarding appointing an agent pursuant to a power of attorney or the rights and obligations that such an appointment creates, please contact one of our attorneys.