Bank Loses Guaranty Appeal
In SunTrust Bank v. C&D Custom Homes, et al., decided November 6, 2012, the North Carolina Court of Appeals found in favor of a Defendant sued by a bank on a guaranty agreement executed pursuant to a power of attorney. The Defendant contended that the attorney in fact had no authority under the terms of the power of attorney to act on the Defendant’s behalf until a physician had certified that the Defendant was incompetent. The Court of Appeals found that there was no evidence of incompetency and rejected the Bank’s argument that it could rely upon the apparent authority of the attorney in fact.
It is difficult for a guarantor to prevail in North Carolina against claims by the lender. This case was decided on very narrow grounds, relying upon the specific language of the power of attorney. If you have a power of attorney, you should be careful that the person you appoint as your attorney in fact does not use the power of attorney to create liability for you in an unexpected manner.