HEIGHTS REALTY, LTD. V. PHILLIPS, 1988-NMSC-007,
106 N.M. 692, 749 P.2d 77 (S. Ct. 1988)
Heights Realty, Ltd., a New Mexico
corporation, et al.,
Plaintiffs-Appellants,
vs.
E. A. Phillips, Conservator for the Estate of Johnye Mary
Gholson, an incapacitated adult, Defendant-Appellee
SUPREME COURT OF NEW MEXICO
1988-NMSC-007, 106 N.M. 692, 749 P.2d 77
Appeal from the District Court of
Bernalillo County, Phillip R. Ashby, District Judge.
Turner W. Branch, Margaret Moses Branch,
Albuquerque, for plaintiffs-appellants.
Coors & Ginsburg, Ronald Ginsburg,
Albuquerque, for defendant-appellee.
{1} This case involves an
exclusive listing contract between plaintiff-appellant, Heights Realty, Ltd.
(Heights Realty), and Johnye Mary Gholson (Mrs. Gholson), the original named
defendant. Heights Realty filed an amended complaint seeking its
{*693} commission for having performed under
the terms of the contract by having provided a buyer to purchase Mrs. Gholson's
property. During the pendency of this action, Mrs. Gholson was adjudicated
incompetent and E. A. Phillips (Phillips), the present defendant-appellee, was
appointed conservator of her estate. Following a bench trial, the district
court found Mrs. Gholson lacked the mental capacity to have validly executed
the listing contract and entered judgment in favor of Phillips. On appeal,
Heights Realty argues that the presumption of competency was not overcome by
clear and convincing evidence. We disagree and affirm the judgment of the
district court.
{2} In 1984, Mrs. Gholson was
interested in selling her North Valley property. She telephoned Heights Realty
and spoke with Pat Eichenberg, a real estate broker and owner of Heights Realty
and also an acquaintance of hers, who brought Mrs. Gholson an exclusive listing
agreement. Mrs. Gholson was approximately eighty-four years old when she signed
the contract on September 26, 1984, listing the property for one year in the amount
of $250,000 with a cash down payment of $75,000. No other terms were included
in the agreement. Subsequently, Mrs. Gholson changed her mind about the amount
of the down payment and on October 10, 1984, signed an addendum increasing it
to $100,000. In November 1984 an offer was made to purchase the property for
$255,000. Mrs. Gholson did not accept that offer.
{3} The question to be
determined is whether substantial evidence was presented from which the trial
court could properly conclude that the presumption of competency was overcome
by clear and convincing evidence.
{4} On appeal, this court
reviews the record to determine whether there is substantial evidence to
support the trial court's findings of fact.
State ex rel. Goodmans Office
Furnishings, Inc. v. Page & Wirtz Constr. Co.,
102 N.M. 22, 24,
690
P.2d 1016, 1018 (1984). If such substantial evidence appears in the record, we
will not disturb those findings.
Phelps Dodge Corp. v. New Mexico Employment
Sec. Dept.,
100 N.M. 246, 247,
669 P.2d 255, 256 (1983).
{5} The test of mental
capacity is whether a person is capable of understanding in a reasonable manner
the nature and effect of the act in which the person is engaged.
In re
Estate of Head,
94 N.M. 656, 659,
615 P.2d 271, 274 (Ct. App.),
cert.
denied sub nom. Taute v. Poppe,
94 N.M. 675,
615 P.2d 992 (1980). The law
presumes that every person is competent. To show the contrary, the burden of
proof rests on the person asserting lack of capacity to establish the same by
clear and convincing proof.
Roybal v. Morris,
100 N.M. 305, 309,
669
P.2d 1100, 1104 (Ct. App.1983);
In re Estate of Taggart,
95 N.M. 117,
120,
619 P.2d 562, 565 (Ct. App.1980);
Estate of Head, 94 N.M. at 659,
615 P.2d at 274. The burden remains on those alleging incompetency unless the
case is brought within the exception in which previous incompetency is admitted
or sufficiently shown and thus changes that burden. If incompetency of a
general permanent nature has been shown to once exist for a period of time
prior to the execution of the instrument under attack, it is presumed to
continue until there is a showing by the person relying on the validity of that
instrument that proves the existence of a lucid interval at the time of its
execution.
Willis v. James, 284 Ala. 673, 676-77, 227 So.2d 573, 576-77
(1969);
In re Peter's Estate, 43 Wash.2d 846, 862, 264 P.2d 1109, 1118
(1953);
In re Ingram's Estate, 384 P.2d 1020, 1021 (Wyo. 1963).
{6} Although the test of
mental capacity is applied as of the date that the attacked instrument is
executed, evidence of a person's prior or subsequent condition is admissible to
show the condition at the time in issue.
Harrison v. City Nat'l Bank of
Clinton, Iowa, 210 F. Supp. 362, 371 (S.D. Iowa 1962). The combined weight
of all the evidence in each case determines the result. The court is entitled
to take into consideration the individual's physical condition; the adequacy of
consideration; whether or not the transaction was improvident; the relation of
trust and confidence between the parties to the transaction and
{*694} the weakness of the mind of the alleged
incompetent person as judged by all other acts within a reasonable time prior
and subsequent to the act in question.
Harrison, 210 F. Supp. at 371;
see
also Turner v. Cole, 116 N.J. Eq. 368, 380, 173 A. 613, 619 (Ch. 1934).
Cf.
In re Meyers, 410 Pa. 455, 476-77, 189 A.2d 852, 862 (1963) (the testimony
of those who observed the speech and conduct of the person on the date the
instrument is executed outranks the testimony as to observations made prior to
and subsequent to that date).
{7} Only Mrs. Eichenberg and
Mrs. Gholson were present at the time of the signing of the exclusive listing
agreement on September 26, 1984, and its addendum on October 10, 1984. Mrs.
Eichenberg testified that Mrs. Gholson was "just as sharp as a tack"
when the agreement was executed. She further testified that on the date the
addendum was signed, Mrs. Eichenberg read the contents of it to Mrs. Gholson
who had been lying down on the couch because she had injured her foot and that
Mrs. Gholson appeared to have no problems understanding the addendum since she
even corrected a misspelling in her name.
{8} Testimony was presented
that Mrs. Gholson owned approximately twelve acres with a residence in
Albuquerque's North Valley at the time she decided to sell the property for
financial reasons. Mrs. Gholson stated that she set the asking price of
$250,000 by guessing at the value of the property and left open all other terms
vital to the contract. Mrs. Gholson also testified that she had no recollection
of signing the addendum because she "couldn't think of anything in
sequence at that time." Evidence showed that no family or lawyer assisted
her in executing the agreements. It appears from the record that the trial
court discounted Mrs. Eichenberg's testimony.
{9} Additional testimony as
to Mrs. Gholson's mental capacity was elicited from her son-in-law, Phillips,
and granddaughter, Louise Loomis, both of whom had for many years observed Mrs.
Gholson's speech and conduct. Phillips testified that he first noticed behavior
evidencing her general mental decline in 1959, after the death of her husband.
He recounted a number of incidents: for example, beginning in May 1983, Mrs.
Gholson began to mismanage the payment of her bills, confusing credit with
debit balances; she set off her burglar alarm and left it running; she locked
herself out of her automobile while the engine was still on; and she failed to
recall the death of her younger brother, with whom she had been extremely
close, on September 19, 1984. Phillips characterized her as being constantly
confused.
{10} Louise Loomis testified
that she always maintained a close and intimate relationship with her
grandmother. She described the degeneration of Mrs. Gholson's mind over a
period of years. In particular, she stated that around 1979 or 1980, her
grandmother began to have problems comprehending matters. Mrs. Loomis testified
that by the summer of 1984 on a trip to Utah, her grandmother was unable to
communicate with people or dial a telephone number for room service and that
shortly thereafter, Mrs. Gholson could not carry on her personal affairs nor
make appointments with the hairdresser. She also developed erratic eating
habits and was incapable of dealing with restaurant bills. Continuing, Mrs.
Loomis testified that her grandmother became much more confused after she broke
her foot in September of 1984. She opined that her grandmother did not have the
mental capacity to understand a listing agreement.
{11} Two psychiatrists
testified, Dr. Farber for Heights Realty, and Dr. Muldawer on behalf of Mrs.
Gholson. Dr. Farber neither met with nor examined Mrs. Gholson and only
reviewed documents about her. Dr. Farber indicated that primarily he relied on
Dr. Muldawer's handwritten notes and his deposition. Dr. Farber averred that he
neither had sufficient evidence nor had he made a timely examination of her to
enable him to say that she was incompetent, and therefore the presumption of
competency had to prevail.
{12} Dr. Muldawer testified
that he examined Mrs. Gholson on January 11, 1985, reviewed relevant documents,
and thereafter
{*695} conferred with her
relatives. He found that Mrs. Gholson showed a general decline in her cognitive
skills about 1979 or 1980 involving her judgment, reasoning and memory. He
further stated that this decline was slow and subtle and was evidenced by
increasing forgetfulness and the general inability to take care of her own
needs. He concluded that when she signed the listing agreement "she
certainly didn't fully understand the terms" even though "in a
broader sense she knew she was disposing of property." He then stated he
could not use the word "conclusively" to describe Mrs. Gholson's lack
of contractual capacity on September 26, 1984, but he could state that she was
incompetent on that date within "reasonable medical probability."
{13} A review of the trial
record indicates, as properly found by the court below, that "on September
26, 1984 and thereafter Mrs. Gholson was suffering from a progressive,
deteriorating mental disease which prevented her from understanding the nature
and consequences of the * * * agreement and the Addendum thereto"; and
that "on September 26, 1984 and thereafter, Mrs. Gholson was without lucid
intervals."
{14} There was a conflict in
the general medical testimony adduced from Dr. Muldawer, who observed Mrs.
Gholson, and Dr. Farber, who never observed her but relied on observations of
another party. This type of medical testimony therefore, in and of itself, is
not sufficient to overcome the presumption of competency.
See In re Estate
of Head, 94 N.M. at 659, 615 P.2d at 273;
see also In re Estate of
Taggart, 95 N.M. at 120, 619 P.2d at 565. The opinions expressed by
Phillips and Mrs. Loomis were predicated on their many experiences with Mrs.
Gholson tending to afford them opportunities to observe her mental capacity.
Thus, there was substantial evidence presented from those who were in a
position to observe Mrs. Gholson's conduct before and after the day the instrument
in question was executed.
{15} Even though some of the
evidence adduced was conflicting, this goes to the question of credibility, a
question solely for resolution by the trier of fact, who after hearing the
testimony resolved the question in favor of Mrs. Gholson. This court will not
resolve conflicts or substitute its judgment where the record as a whole
substantially supports the trial court's findings of fact.
Sternloff v.
Hughes,
91 N.M. 604, 608,
577 P.2d 1250, 1254 (1978). The fact that there
may have been some evidence upon which the court might have found facts other
than what it did is not sufficient for reversal.
Dibble v. Garcia,
98
N.M. 21, 25,
644 P.2d 535, 539 (Ct. App.),
cert. denied,
98 N.M. 50,
644
P.2d 1039 (1982).
{16} Although the trial court
did not specifically state in its findings that the presumption of competency
was overcome by clear and convincing evidence, it is implicit in those findings
when the evidence is viewed in its entirety that this burden of proof had been sustained.
We hold that substantial evidence was presented from which the trial court
could properly conclude that the presumption of competency was overcome by
clear and convincing evidence; consequently, Mrs. Gholson lacked mental
capacity to enter into the exclusive listing agreement and its addendum. The
judgment of the district court is affirmed.
SOSA, Senior Justice, concurs.
WALTERS, J., concurs in result only.