Lorine Goodwin Hindman v. Allen Moore and wife, Jackie Moore

Citation: Not availableDocket: E2005-01287-COA-R3-CV

Court: Court of Appeals of Tennessee; May 23, 2006; Tennessee; State Appellate Court

Original Court Document: View Document

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Decedent Lorine Goodwin executed a broad Power of Attorney in 1981, appointing her son, Alvin Goodwin, to act on her behalf without limitations. In the early 1990s, she voluntarily pledged her rental property to secure a loan for her daughter-in-law's interior design business, which was documented in a Deed of Trust. This loan was repaid, but later, Alvin Goodwin executed a second note secured by the same property without the decedent’s knowledge, exceeding his authority as her attorney in fact. Decedent filed a complaint against Allen Moore and Jackie Moore, alleging fraud due to forgeries and misrepresentations related to the second note. The Chancery Court dismissed her case, and on appeal, the court affirmed the lower court's judgment, concluding that the Power of Attorney granted Alvin sufficient authority to execute the documents in question.

The Note and Deed of Trust from 1995 secured a loan obtained by Design Resources from Capital Bank, which included both the decedent’s rental property and personal residence. Reta Goodwin signed the Deed of Trust without the decedent’s knowledge or consent. Alvin Goodwin, who signed as attorney in fact for the decedent, believed he was continuing a prior Deed of Trust and was unaware that it included the decedent's personal residence. A Modification Agreement in 1999 amended the terms of the 98 Note and Deed of Trust but still involved the decedent's properties without her knowledge. After Design Resources faced financial difficulties, Allen and Jackie Moore purchased the modified Note to safeguard their interests, ultimately leading to foreclosure proceedings against the decedent’s properties, which Alvin Goodwin learned about only upon seeing a foreclosure notice.

The Trial Court made several findings: Alvin Goodwin executed the deed without the decedent’s consent, the loan proceeds did not benefit the decedent, he breached his fiduciary duty, Capital Bank was unaware of this breach, and the defendants acted as bona fide purchasers without unjust enrichment. The decedent's estate appealed the dismissal of the case, raising issues about the validity of the modified Deed of Trust, including whether it was void due to exceeding authority, flawed acknowledgment, and fraud. The Chancellor's findings are subject to de novo review, with a presumption of correctness for the Trial Court's factual findings unless evidence suggests otherwise, while legal conclusions are not afforded this presumption.

The Plaintiff contends that the 98 Deed of Trust is invalid due to Mr. Goodwin exceeding his authority under the power of attorney, asserting that the decedent was unaware of Mr. Goodwin's actions involving the power of attorney in subsequent transactions. Mr. Goodwin testified that the decedent had no knowledge of or would not have approved the 1999 modification of the 98 Deed of Trust. The Defendants counter that they are protected as holders in due course and that Mr. Goodwin acted within his apparent authority, thus validating the Deed of Trust. 

Should the Defendants possess holder in due course immunity, it would apply to both the 98 Note and the 98 Deed of Trust, as a deed of trust is an accessory to a negotiable instrument. However, this immunity is not absolute; they may still face "real defenses," including 'lack of legal capacity' as defined under Tennessee law, which allows such a defense against holders in due course if incapacity renders the obligation void. A deed executed by an attorney in fact is void if it exceeds the granted authority.

The Plaintiff's argument is characterized as a real defense, governed by agency law, which encompasses both actual and apparent authority. Apparent authority arises when a principal's conduct leads a third party to reasonably believe that the agent has authority. For apparent authority to bind the principal, three conditions must be met: the principal must acquiesce in the agent's exercise of authority, the third party must have a good faith belief in the agent's authority, and the third party must rely on this authority to their detriment.

The Plaintiff claims the power of attorney did not authorize Mr. Goodwin to pledge real property, thus negating any reasonable belief of authority. However, the power of attorney contains broad language granting Mr. Goodwin extensive authority to act on behalf of the decedent, allowing him to execute necessary instruments without limitations. This general power of attorney empowers Mr. Goodwin to conduct various acts as if the decedent were present, countering the Plaintiff's argument.

The power of attorney was recorded twice, with Mr. Goodwin publicly presented as having significant authority to act for the decedent. His first use of this authority involved the execution of the 93 Deed of Trust, which both he and the decedent signed, though only Mr. Goodwin's signature was acknowledged. An innocent third party may conclude that if the power of attorney did not authorize Mr. Goodwin to pledge the decedent's property, his signature would be meaningless, suggesting that the decedent's signature was merely to affirm Mr. Goodwin's authority. The decedent's signature indicated her consent to Mr. Goodwin's actions on her behalf, including pledging her property for loans related to Mrs. Goodwin and her business partners. The Chancery Court determined that Capital Bank and the defendants were innocent third parties, with evidence supporting this finding. The power of attorney did not indicate Mr. Goodwin lacked authority, and both Capital Bank and the defendants were unaware of any such limitation. Mr. Goodwin represented himself as authorized to pledge the property, and Capital Bank would not have issued a substantial loan without confidence in his authority. The defendants, including Mrs. Moore, testified that Mr. Goodwin did not claim a lack of authority until after they acquired the 98 Note and Deed of Trust. The documentation suggested Mr. Goodwin had apparent authority to execute both the 98 Deed of Trust and the 99 Modification Agreement, with the decedent's signature on the 93 Deed of Trust signifying her acquiescence. Consequently, innocent third parties could reasonably believe Mr. Goodwin had the authority to sign the subsequent documents. The Estate is thus bound by these transactions. The plaintiff argues the 98 Deed of Trust is void due to a flawed acknowledgment, citing In re Crim v. EMC Mortgage Corp., but this case does not support the claim that a flawed acknowledgment invalidates a deed of trust.

A deed of trust with a flawed acknowledgment is considered not legally registered and is void for subsequent creditors or bona fide purchasers without notice, per Tenn. Code Ann. 66-26-103. However, it remains valid for the original parties and their heirs, as established in Tenn. Code Ann. 66-26-101 (2005). A flawed acknowledgment does not impact the rights of the original party, such as Capital Bank, or its assignees. 

The plaintiff contends that the 98 Deed of Trust is void due to alleged fraud by Mr. and Mrs. Goodwin. The 95 Deed of Trust, which was the first to secure the decedent’s personal residence, was signed by Reta Goodwin without authorization. Mr. Goodwin later signed the 98 Deed of Trust and a 99 Modification Agreement without the decedent's knowledge but claimed to be authorized. 

Despite Mr. Goodwin exceeding his actual authority, his actions did not constitute forgery, as he acted within his apparent authority. The estate's claims of misrepresentation do not invalidate the 98 Deed of Trust or the 99 Modification Agreement. Consequently, the judgment of the Chancery Court is affirmed, with costs assessed to the Estate of Lorine Goodwin Hindman. The 98 Deed of Trust and 99 Modification Agreement are deemed valid.