Such approval did not take place. Thus, both cases have broadened traditional cognitive tests to take account of motivational factors. There must be at least two parties to the contract, both of which must have the capacity to enter into the agreement; that is, each party must understand what he or she is entering into and the consequences of doing so. Dr. Allison testified that in the manic stage, Smalley "might not be able to properly evaluate various types of business conduct.". Get free summaries of new California Court of Appeal opinions delivered to your inbox! The original and substituted modification differed as follows: By the original modification Smalley and Bratton would have received under their contract with Baker the nonexclusive right to sell the device to the entire world plus the exclusive right to sell to the United States government, and would have been forced to purchase the device in lots of 1,000 units minimum. Mentally impaired or incompetent person - any individual in a state of arrested or incomplete mental development, . Code, 38); (2) a lesser weakness of mind which does not leave a person entirely without understanding but destroys the capacity of the person to make a contract, thus rendering the contract subject to rescission (Civ. Mrs. Smalley testified that the Smalleys moved to Santa Cruz in late June 1965, and that about three weeks thereafter Smalley became hyperactive, entered into many business transactions, and was hospitalized on a police hold for disturbing a place of business. Determine Whether Adult Protective Services Must be Notified. 2d 835] section 1575 need not be long lasting or wholly incapacitating, but may consist of such factors as lack of full vigor due to age, physical condition, emotional anguish, or a combination of such factors. App. 4 states that Smalley did not consent to the terms of the substituted license modification agreement. Add to this the dementia caused by Alzheimer's and you have a nearly irresistible opportunity for the unscrupulous. no If a person who has been declared incompetent by the courts enters into a "contract," what kind of contract is it? an action for divorce on behalf of a person declared to be mentally ill. 13 10 Boberg's Law of Persons and the Family132 - 133 and the cases cited there. App. The second exception to legal capacity is mental illness or mental defect [5]. He argues, however, that the record discloses that as a matter of law Bratton and Smalley were either partners or joint venturers and that, accordingly, Smalley consented to the modification in that Bratton had authority to approve said modification on Smalley's behalf. The patient wastes his money, becomes involved in impulsive activities, is seductive and sexually promiscuous. Haile was acting as the attorney for all parties. 533]; see generally Weihofen, Mental Incompetency to Contract or Convey (1966) 39 So.Cal.L.Rev. This case,In the Matter of Agnes D. Rick[1], illustrates the legal and financial dangers faced by those with mental illness or degenerative diseases. The Supreme Court established the following as the test of mental incompetency in Florida for contract matters: "The sole question is whether [the alleged incompetent], at the time he executed the deed, ha [d] sufficient intelligence to understand fully the nature and effect of the transaction. 3. Other Significant Supreme Court Cases. App. Subsequently there was a meeting in Haile's office with Baker, Mr. and Mrs. Smalley and Bratton present. In response to the question, how Smalley's psychosis would affect his ability to enter into a business transaction where Smalley bought the privilege of selling a mechanical device to the government under a license [262 Cal. The testimony of the psychiatrists was not to the contrary, the essence of their testimony in this regard being that Smalley's judgment was affected. Accordingly, cases in other jurisdictions [262 Cal. Instead of showing the agreement to Haile, Bratton, without Smalley's knowledge, delivered it directly to Mrs. Baker, who took it to Los Angeles for final approval by Pendleton.pendleton then signed the agreement. In May of 1961, Baker had given to Pendleton Tool Industries, Inc., a California corporation (hereafter referred to as "Pendleton"), a license to make and sell an axle puller invented and patented by Baker. Some contracts require less competence than others, so that the test of understanding varies from one contract to the next. Legal Incapacity. A recent Wisconsin court of appeals case highlights the importance of the cause of action that exists under Wisconsin law to rescind a contract based upon mental incompetency. Consider including an investigation of competency in any due diligence investigation for a major business transaction where competency may be an issue. She received $900 per month from social security and from interest income from a mutual fund. 2d 828] right to sell the invention to all the world, and an exclusive right to sell said invention to United States government agencies; two, a proposed modification of the 1961 Baker-Pendleton contract, not yet signed by Pendleton, permitting Baker to license independent contractors to purchase the invention from Pendleton and to market the same; and three, written escrow instructions directing Haile to deliver the $10,000 deposit to Baker upon full execution of the modification of the Baker-Pendleton contract, and further directing Haile to return the deposit to Smalley if Baker did not deliver an executed modification agreement within 90 days. You already receive all suggested Justia Opinion Summary Newsletters. According to Dr. Giese, people with these defects in judgment can come to grief in business transactions because they are unrealistic. Plaintiff eventually received the money from the Bank, putting up her mutual fund as security. Rptr. 6, if Smalley did not have the requisite mental capacity to enter into a contract at the time he executed the instant agreements, then under Civil Code section 39 he is entitled to rescission. It would appear, therefore, that since the manic-depressive psychosis is a mental illness it is clearly a weakness of mind in the context of Civil Code section 1575. Axley is committed to providing a website that is accessible to all. App. The last mentioned statute, in subdivision 2 thereof, provides that undue influence consits "In taking an unfair advantage of another's weakness of mind. He imagined himself to be in command of a large army engaged in protecting the country. Lee Black, JD, LLM is a senior research associate for the Council on Ethical and Judicial Affairs at the American Medical Association in Chicago. Under 38 C.F.R. FN 2. The abuse or fraud is often difficult to detect because the offender is commonly a family member or someone in a position of authority or trust who has the ability to hide what he or she is doing. Answer only. Our task is to determine whether either of the foregoing findings is sustained by the evidence, and if there is some evidentiary basis for either finding, the judgment must be affirmed. Dr. Allison diagnosed Smalley as a manic depressive, which psychosis characteristically causes the patient to be hyperactive, [262 Cal. 2d 183, 185 [217 P.2d 150]), and the proof must be clear and convincing. These cases appear, however, to rest on the factual situations therein which involved ventures of a limited scope. Mental Incompetency A person who is diagnosed as being mentally ill, senile, or suffering from some other debility that prevents them from managing his own affairs may be declared mentally incompetent by a court of law. A mentally incompetent person is one who because of injury or disease lacks the mental capacity to contract or to manage his or her own affairs, including disbursement of funds without limitation. 2d 511, 517 [325 P.2d 612]; Block v. D. W. Nickolson Corp., 77 Cal. These symptoms are noticeable because they differ markedly from the patient's previous behavior." The modification agreement was discussed, and Smalley said that Mr. Barrett, his [262 Cal. In a display . [5] In the present case all the evidence shows that Smalley did have the capacity to understand what he was doing. In a California appellate case, the court opined that "[M]ental capacity can be measured on a sliding scale, with marital capacity requiring the least amount of capacity, followed by testamentary capacity, and on the high end of the scale is the mental capacity required to enter contracts." 4 In this case, the primary question was the . 2d 836] competence set out in Civil Code section 39, Smalley was not incompetent to enter into a contract. About the data. 2d 210; Peterson v. Ellebrecht, supra (1962) 205 Cal. Although there is an exception to capacity for those who suffer from degenerative mental diseases, it can be difficult to show that the person was suffering debilitating effects when the contract, will, power of attorney, or other agreement was entered into or executed. The court did not directly address the issue of the will because the niece, who was the petitioner, had not raised it in the filing. Expert Answer 1. In addition to intoxication, mental incapacity can result from mental illness, such as. Haile testified that there was an initial meeting in his office on October 11, 1965, with Bratton, the Smalleys and Baker, and that Smalley appeared normal and competent. Plaintiff Kathy Hauer brought suit against Defendant Union State Bank of Wautoma to recover the collateral used to secure the loan agreement with Defendant Bank. (Civ. App. Void Contract: A party who has been adjudged mentally incompetent by a court of law prior to entering into a contract and who has a court-appointed guardian cannot enter into a legally binding contract. Smith-Blackmon was taken to the Wayne County Jail on March 22 after he was accused of killing a fellow resident at Woods Care Home, an adult foster care facility in the city of Wayne. (P. In testifying, Bratton referred to their deal as a business venture. Submit a manuscript for peer review consideration. These sections exclude the manic-depressive psychosis by their very language since they make specific reference to the person's "understanding." Those whose affairs are under the control of the Court. lack mental capacity enters into a contract, the contract is voidable at the option of the intoxicated person. Mrs. Rick granted Sailer an option to purchase the Rick's home for significantly less than the probable market value. A mentally incompetent person is one who because of injury or disease lacks the mental capacity to contract or to manage his or her own affairs, includ-ing disbursement of funds without lim-itation. FN 5. These contracts are voidable only by the infirm party. does not Case Managers are supervised by The Act then refers to three categories of mental incapacity:-. Accordingly, the condition precedent of the written contract between Smalley and Bratton on the one hand and Baker on the other hand was never satisfied. 2 but that he wanted Haile to see the agreement before it was returned to Los Angeles. Eilbes had been seeking funds to assist repayment of a loan that he had defaulted on with Defendant bank. App. An elderly woman with early signs of Alzheimer's disease is widowed. The manic phase of the manic-depressive psychosis does not impair such understanding, but only relates to the motivation. The reason for this conclusion is that first, as to finding No. An incompetent adult is responsible for . A contract to do something that is prohibited by statutory law is illegal but not void from the outset. A few cases have opined that in certain joint ventures one adventurer may not have the power to bind the other. 2d 517, 524 [322 P.2d 933] and Coronet Credit Corp. v. West Thrift Co., 244 Cal. 2d 714, 726 [329 P.2d 953].) In the Matter of Agnes D. Rick(Del Ch, No 6920, 1994 WL 148268). fn. The steps in declaring an individual as mentally incompetent are as follows: In light of the well-known rule that the evidence must be construed in support of the findings and judgment, defendant clearly cannot argue at the appeal stage that we should reweigh the evidence; rather, since there is some evidence that Smalley did not approve the modification, we are bound to accept the trial court's resolution of this factual question. Issue. (Keyes v. Nims, 43 Cal. 2d 814; Philbrook v. Howard, supra (1958) 157 Cal. Accordingly, he requests damages under Code of Civil Procedure section 957 providing for damages when it appears to the appellate court that the appeal was made for delay. 7 (See Deicher [262 Cal. In some cases, an Alzheimer's patient has already been deemed legally incompetent and ceded power of attorney to a guardian, such as a child or an attorney. (Sullivan v. Schellinger, 170 Cal. Rptr. App. The court did recognize that Sailer clearly used his position for his own benefit rather than that of Mrs. Rick's future estate. The Bank was ordered to return Plaintiff her collateral, and Plaintiff was not forced to repay Aug. 29, 2018). A contract entered into by someone who lacks mental capacity is voidable. Mrs. Rick also claimed that Sailer was going to marry her, even though he was much younger and already married. Under the authority of Gombos v. Ashe, 158 Cal. 285]; Nels E. Nelson, Inc. v. Tarman, 163 Cal. This means that Fay can legally be able to declare the contract void and this will make the contract unenforceable. The court also confirmed that the civil standard of proof for a cause of action for rescission based on lack of mental competency is the greater weight of the credible evidence standard, which is the same as the preponderance of the evidence standard. In this case [1], Mrs. Rick's niece was trying to have guardians appointed for her aunt's person (a public guardian) and property (a bank); Mrs. Rick's investment account manager, Mr. Sailer, and Mrs. Rick's brother-in-law and sister-in-law were trying to have Sailer appointed guardian. Certain requirements must be met before a legal contractbe it for property, goods, or servicesis valid and enforceable. Bratton testified that Smalley had always seemed perfectly normal and competent to him from the time that they met to at least sometime after Mrs. Baker brought the amended modification back from Los Angeles, except that on one occasion in July of 1965, during a conversation with Bratton, Smalley broke into tears. Authorities: FY 16-17 General Appropriations Act, . In that case, the court acknowledged that the manic-depressive psychosis does not render a party incompetent under the traditional test of lack of understanding of the transaction, but stated that since this test was developed prior to the recognition of the manic- depressive psychosis as a distinct form of mental illness, it is now appropriate to broaden that test in light of recent psychiatric developments.