Vine v. Commonwealth, State Employees' Retirement Board

Justice EAKIN,

dissenting.

This case highlights the dilemma created by the presentation to a fiduciary of a facially valid power of attorney, later found to be invalid for reasons not discoverable by reasonable diligence of the fiduciary. In the end, we have two innocent parties, SERS and appellant, and one bad party, but must determine as between the innocents, which must bear the loss. While there is facial salience in finding the acronymed fiduciary1 better able to bear the loss, I conclude the relevant statute does not lead to this result.

This situation is hardly uncommon, and our legislature has attempted to address the matter through 20 Pa.C.S. § 5608. My colleagues find that § 5608(b) does not protect an innocent third party who in good faith relies on a facially valid power of attorney; I respectfully disagree and conclude the statute is designed to do exactly that.

There are two subsections of the statute. The first requires a third party to obey the power of attorney’s instructions, absent a good reason not to do so. The second says that if the third party acts in good faith reliance on the document, it is immune. Such legislation allows, nay demands, compliance with the facially valid power of attorney, and in return assures a party immunity if it follows the agent’s instructions in good faith.

20 Pa.C.S. § 5608(a) provides that “[a]ny person who without reasonable cause fails to comply with [the attorney-in-fact’s] instructions shall be subject to civil liability....” Id. As the majority notes, the record shows the SERS counselor had no reasonable cause to do anything but that which the attorney-in-fact instructed. As the legislature created specific *679statutory liability for not acting in compliance with those instructions, SERS had to act in accordance with them, on pain of statutory liability. And as the record shows, SERS did so in good faith. 20 Pa.C.S. § 5608(b) provides that one acting in good faith reliance on a power of attorney “shall incur no liability” in following the agent’s instructions. Id. Ergo, SERS should not be liable.

The majority suggests the legislature could have added words requiring “indicia of validity” to obtain the protections of the statute, which is true — such words would indicate application where there is only apparent authority. However, this argument is equally if not more applicable in reverse — the legislature could have shown the intent the majority attributes to it by adding the single unambiguous word, “valid.” This would accomplish the majority’s result — to deny immunity to those acting on apparent authority and in good faith. The legislature did not do so.

As the legislature did not add a defining adjective, what then was its intent? I suggest it is clearly established by the requirement of good faith. If actual authority were required, the good faith element necessary for immunity would be irrelevant — there can never be liability for acting on the instructions of an agent with actual authority. There simply is no need for any statute to require good faith as a precursor for immunity, if immunity attaches because actual authority exists.

A good faith requirement for immunizing the third party only makes sense if it contemplates a situation where there was no actual authority. If the attorney-in-fact has actual authority to issue the instructions, there is no need for immunity. It is only where the instructions were issued by one without actual authority that immunity is a consideration. The legislature did not write a statute to apply protection to a situation where it is irrelevant — it created protection for the instant situation, a good faith compliance with apparent authority.

*680Here, there is no dispute SERS followed the instructions of the power of attorney in good faith. There was no facial indication the power of attorney was fraudulent, as the SERS counselor knew appellant had been in an accident and her husband was acting on her behalf. Thus, under the clear language of § 5608(b), SERS is immune from liability; the contrary holding condemns the statute to irrelevance and places SERS and all third parties and fiduciaries in an untenable position.

Accordingly, I respectfully dissent.

. In reality, the fiduciary is not a monolithic bureaucracy, but the repository of the money of countless employees whose retirement is dependent on the proper management of it. To deplete the assets of these very real people when the fiduciary acts properly and in good faith is not as salient an outcome as it may at first appear.