Recovering Attorneys' Fees for the Misuse of a Power of Attorney
Tennessee courts have long followed the “American Rule” when it comes to deciding whether attorneys’ fees should be awarded to the prevailing party in a lawsuit.
Under the American Rule, a prevailing party is entitled to an award of attorneys’ fees only under three circumstances:
Where the parties have a contract that contains a term providing for the award of attorneys’ fees.
Where a statute provides for the award of attorneys’ fees.
Where there is some recognized exception to the American Rule established by Tennessee courts.
There are very few recognized exceptions that fall into category three. One of those exceptions is where someone has deliberately used a power of attorney to benefit themselves. That exception was recently applied by the Court of Appeals of Tennessee in Ellis v. Duggan (2021).
In the Ellis case, a niece used a power of attorney granted by her aunt to pay about $175,000 for a house titled in the niece’s name. The majority of the funds for the purchase came from an annuity, the beneficiaries of which were the aunt’s three grandsons. The niece was not a beneficiary of the annuity.
The heirs sued the niece for breach of fiduciary duty for misusing the power of attorney and prevailed at trial. However, the trial court denied their request for attorneys’ fees, reasoning that such an award was not permissible under the American Rule because there was no “basis in case law” for it.
On appeal, the court of appeals found there was a basis in Tennessee case law for awarding attorneys’ fees against a fiduciary who had “knowingly violated the power of attorney to benefit herself.” The court described the niece’s conduct as a “deliberate abuse of her position.”
The court of appeals pointed to earlier cases as the legal foundation for this exception, including Martin v. Moore (Tenn. Ct. App. 2003) and Lewis v. Lewis (Tenn. Ct. App. 2015).
In Martin v. Moore, the holder of the power of attorney—Mr. Moore’s wife of 18 years used her authority to withdraw $47,000 from his account. She sent the money to her brother in the Philippines, who used it to buy a chicken ranch titled in his and his sister’s names. The court of appeals held that an exception to the American Rule existed because the wife, a fiduciary, had deliberately breached her duties to enrich herself.
In Lewis v. Lewis, a son used a power of attorney to withdraw $600,000 from his father’s account. He deposited those funds into an account owned jointly by him and his wife. The court of appeals upheld the trial court’s award of attorneys’ fees against the son.
This exception to the American Rule is notable because other types of equally egregious conduct are not exempt. For example, even where a defendant commits intentional misrepresentation or conversion in a deliberate and self-serving manner, the prevailing party cannot recover attorneys’ fees. While punitive damages may be awarded in such cases, the burden of proof for obtaining them is quite high.
A related issue arises in will contest cases. Defendants who abuse powers of attorney often exert undue influence to procure wills that benefit them. Under Tennessee law, parties who prevail in will contests—or other actions that create a monetary recovery for the estate of the deceased—are entitled to an award of attorneys’ fees. In those cases, the fees are paid from the estate’s assets, not by the defendant who procured the invalid will.
If you believe that a power of attorney has been used improperly, you should consult with a qualified Tennessee attorney to better understand your rights.