Campbell v. United States
228 Ct. Cl. 440, 657 F.2d 1174, 48 A.F.T.R.2d (RIA) 6266 (1981)
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Rule of Law:
An act performed by an agent under a power of attorney after the principal has become comatose is voidable, not void. The transaction can be subsequently ratified by the principal's estate, making the principal the legal owner of any property purchased through the transaction.
Facts:
- In 1965, Lionel L. Campbell granted his son, Campbell Junior, a full and universal power of attorney.
- On December 9, 1976, Campbell suffered a severe cerebral hemorrhage and fell into a permanent and irreversible coma.
- On December 10, 1976, Campbell Junior, acting as his father's agent and using his father's funds, purchased a $200,000 U.S. Treasury 'flower bond' at a significant discount.
- Campbell remained comatose until his death on January 2, 1977, twenty-four days after the stroke.
- The executrix of Campbell's estate later attempted to redeem the bond at its full par value to satisfy the federal estate tax liability.
- The U.S. government, through the Bureau of Public Debt, refused to redeem the bond at par value.
Procedural Posture:
- The executrix of Campbell's estate filed an application with the Federal Reserve Bank to redeem a portion of the flower bond at par to satisfy federal estate taxes.
- The Commissioner of the Bureau of Public Debt refused the redemption request.
- The executrix (plaintiff) filed suit against the United States in the U.S. Court of Claims, seeking damages for the government's refusal to redeem the bond.
- The United States filed a counterclaim for the unpaid estate tax of $103,219.
- The case came before the U.S. Court of Claims for a determination on stipulated facts.
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Issue:
Does a principal's lapse into a permanent and irreversible coma automatically terminate an agent's authority under a power of attorney, thereby rendering the agent's subsequent purchase of bonds on the principal's behalf void?
Opinions:
Majority - Friedman, C.J.
No. A principal's incapacitation does not automatically render an agent's subsequent actions void; instead, such actions are merely voidable by the principal's estate. The court reasoned that state law, in this case Texas law, governs the termination of a power of attorney. Citing precedent like United States v. Manny, the court determined that the common law in this area treats contracts made on behalf of an incompetent person as voidable, not inherently void. This is because at the time of the transaction, the agent cannot be certain whether the incapacity is permanent or temporary. Therefore, the power to either disaffirm or ratify the transaction rests solely with the principal's personal representatives after their death. Since Campbell's estate ratified the purchase by submitting the bonds for redemption, the purchase was valid, making Campbell the legal owner of the bonds at the time of his death and thus eligible for the tax benefit.
Analysis:
This decision solidifies the legal principle that an agent's actions during a principal's sudden incapacity are voidable rather than void. This strengthens the reliability of powers of attorney in end-of-life planning by allowing an estate to ratify beneficial transactions, such as the tax-advantaged purchase of flower bonds. By preventing third parties like the IRS from challenging the validity of such transactions, the court protects the principal's interests and reinforces the agent's ability to act in the principal's best interest during a crisis. This ruling aligns with a developing consensus among federal courts to uphold such bond purchases against government challenges.
