← Back to Articles & Developments | Bill text below is the chaptered text as passed in 2010 and is reproduced for historical reference.
What this bill didSB 1038 (Harman) created the remedies statute for power of attorney abuse. It added Probate Code section 4231.5, which makes an attorney-in-fact who breaches a duty chargeable with losses, profits made through the breach and profits the principal would have realized, gives the court discretion to excuse an agent who acted reasonably and in good faith, and imposes liability for twice the value of property taken in bad faith. Just as significantly, it amended section 4231 to delete the provision that had shielded an uncompensated attorney-in-fact from liability for loss to the principal’s property unless the loss resulted from bad faith, intentional wrongdoing or gross negligence. Since January 1, 2011, an unpaid agent under a power of attorney is held to the same prudent person standard as a paid one.
Partly superseded — subdivision (c) below is not currentChaptered as Stats. 2010, Ch. 48, on July 6, 2010, effective January 1, 2011. Section 4231.5 was amended by AB 381 (Stats. 2013, Ch. 99), effective January 1, 2014, and subdivision (c) as reproduced below is no longer current. AB 381 extended it beyond a bad faith wrongful taking to reach property taken by undue influence in bad faith or through the commission of financial elder abuse, and added the discretionary award of reasonable attorney’s fees and costs to the prevailing party. Subdivisions (a) and (b) were not disturbed. For the operative text see the Relevant Statutes page and AB 381. Section 4231 as amended by this bill remains current.
Why it matters in practiceThe deletion of the uncompensated agent exemption is the quiet half of this bill and the half most often overlooked. In the typical fact pattern the agent is an adult child serving for nothing, and before 2011 that alone raised the bar to bad faith, intentional wrongdoing or gross negligence. It no longer does. Subdivision (b) still gives the court discretion to excuse an agent who acted reasonably and in good faith where it would be equitable, so the statute preserves room for the well-meaning family member who simply got it wrong — but the starting point is now ordinary prudence, and good faith is a matter for the court’s discretion rather than a threshold the plaintiff must clear.
Where it sits among the remediesSection 4231.5 is the power of attorney analogue to Probate Code section 859, which supplies the parallel double damages remedy for property belonging to a decedent’s estate, a conservatee, a minor, an elder, a dependent adult or a trust. The two sections have moved together: AB 381 amended both in 2013 to add undue influence, financial elder abuse and attorney’s fees. Where an agent’s conduct reaches trust property as well as property held individually, both statutes may be in play.
Chaptered Bill Text
Senate Bill No. 1038 — Chapter 48, Statutes of 2010
Introduced by Senator Harman, February 12, 2010
Amended in Senate April 8, 2010 · Amended in Senate April 26, 2010
Chaptered by the Secretary of State July 6, 2010
An act to amend Section 4231 of, and to add Section 4231.5 to, the Probate Code, relating to powers of attorney.
Legislative Counsel’s Digest
SB 1038, Harman. Powers of attorney: duties.
The Power of Attorney Law creates various duties and requires an attorney-in-fact to observe the standard of care that would be observed by a prudent person dealing with property of another, or if an attorney-in-fact has special skills he or she shall observe the standard of care that would be observed by others with similar skills. However, existing law provides that an attorney-in-fact is not liable for a loss to the principal’s property if he or she is not compensated, unless the loss results from his or her bad faith, intentional wrongdoing, or gross negligence.
This bill would delete this provision. The bill would provide that if the attorney-in-fact breaches a duty pursuant to the Power of Attorney Law he or she can be charged with interest for any loss or depreciation in value of the property, any profit made through the breach, or any profit that would have accrued to the principal if the loss or profit is a result of the breach. This bill would allow the court, in its discretion, to excuse the attorney-in-fact if he or she acted reasonably and in good faith, or if the attorney-in-fact acted in bad faith, he or she can be held liable for twice the value of the property recovered.
The People of the State of California Do Enact As Follows
SECTION 1. Section 4231 of the Probate Code is amended to read:
4231. (a) Except as provided in subdivision (b), in dealing with property of the principal, an attorney-in-fact shall observe the standard of care that would be observed by a prudent person dealing with property of another and is not limited by any other statute restricting investments by fiduciaries.
(b) An attorney-in-fact who has special skills or expertise or was designated as an attorney-in-fact on the basis of representations of special skills or expertise shall observe the standard of care that would be observed by others with similar skills or expertise.
SEC. 2. Section 4231.5 is added to the Probate Code, to read:
4231.5. (a) If the attorney-in-fact breaches a duty pursuant to this division, the attorney-in-fact is chargeable with any of the following, as appropriate under the circumstances:
(1) Any loss or depreciation in value of the principal’s property resulting from the breach of duty, with interest.
(2) Any profit made by the attorney-in-fact through the breach of duty, with interest.
(3) Any profit that would have accrued to the principal if the loss of profit is the result of the breach of duty.
(b) If the attorney-in-fact has acted reasonably and in good faith under the circumstances as known to the attorney-in-fact, the court, in its discretion, may excuse the attorney-in-fact in whole or in part from liability under subdivision (a) if it would be equitable to do so.
(c) If a court finds that a person has in bad faith wrongfully taken, concealed, or disposed of property belonging to a principal under a power of attorney, the person shall be liable for twice the value of the property recovered by an action to recover the property or for surcharge. The remedy provided in this section shall be in addition to any other remedies available in law to the principal or any successor in interest of the principal.
Bill text is a public record of the California Legislature, reproduced here as a convenience and for historical reference. Subdivision (c) of Section 4231.5 has since been amended and the version above is not current law. This page is not legal advice. Verify the operative text at leginfo.legislature.ca.gov before relying on it.