Hedgepeth v. Home Sav. and Loan Ass'n

Annotate this Case

361 S.E.2d 888 (1987)


No. 8715SC224.

Court of Appeals of North Carolina.

November 17, 1987.

*889 Gunn & Messick by Paul S. Messick, Jr., Pittsboro, for plaintiff-appellant.

L.T. Dark, Jr., Siler City, for defendant-appellee.

ORR, Judge.

It is well established in our state that a contract executed by an incompetent prior to being so adjudicated, is voidable and not void ab initio. Reynolds v. Earley, 241 N.C. 521, 85 S.E.2d 904 (1955). The party contracting with an incompetent may nevertheless enforce the agreement if the following requirements can be established: (1) ignorance of the party's mental incapacity; (2) lack of notice of the incapacity such as would indicate to a reasonably *890 prudent person that inquiry should be made of the party's mental condition; (3) payment of a full and fair consideration; (4) that no unfair advantage was taken of the incompetent; and (5) that the incompetent had not restored and could not restore the consideration or make adequate compensation therefor. Chesson v. Insurance Co., 268 N.C. 98, 150 S.E.2d 40 (1966).

In the case sub judice there is a durable power of attorney executed by an incompetent. The issue before us is whether a note and deed of trust can be enforced by a party contracting solely with the attorney-in-fact in reliance on the recorded power of attorney.

To begin with we acknowledge the distinction between a third party seeking to enforce a power of attorney executed between two other parties and a party seeking to enforce a contract made directly with the incompetent as found in Chesson. However, we find that the logic behind the decision in Chesson and the established rule set forth in Reynolds should apply to the facts of this case. Therefore, the power of attorney in the case sub judice should be treated the same as any other contract. 2 S. Williston, The Law of Contracts § 250 (3d ed. 1959) and cases cited therein. See generally 44 C.J.S. Insane Persons § 116 (1945). Likewise, a power of attorney executed by a nonadjudicated incompetent should be considered voidable and not void ab initio.

If the third party contracting solely with the attorney-in-fact can satisfy all five of the Chesson requirements, the power of attorney will be enforced even though the principal was a nonadjudicated incompetent when the power of attorney was executed.

After carefully examining the record, we are satisfied it contains sufficient evidence to support the trial court's finding that all five Chesson requirements were met in this case.

Plaintiff conceded defendant did not know Mrs. Haith was incompetent when she executed the power of attorney in 1981 or when her attorney-in-fact executed the note and deed of trust in 1983. When coupled with the fact that James Haith as attorney-in-fact executed three of his mother's seven previous loans from defendant, all of which were routine transactions, we find sufficient evidence to support the trial court's finding that defendant was not aware of anything which would reasonably indicate it should have inquired into Mrs. Haith's mental condition.

Uncontradicted testimony shows more than one-half of the loan proceeds were used to pay off Mrs. Haith's prior indebtedness to defendant. Moreover, the evidence tends to show Mrs. Haith's home increased in value substantially as a result of renovations made after James Haith received the remaining proceeds of approximately $5,000. We believe both of these factors sufficiently support the findings that defendant paid full and fair consideration to Mrs. Haith in exchange for the note and deed of trust and that defendant did not take unfair advantage of her.

Finally, three factors convince us that sufficient evidence existed for the trial court to conclude that Mrs. Haith could not restore the consideration or make adequate compensation thereof. First, the uncontradicted testimony that Mrs. Haith owed a balance in excess of $18,000 on the note and was in arrears several months at the time of trial. Second, the uncontradicted testimony also showed her total liquid assets were approximately $2,000. Finally, plaintiff's own statement that her mother "can't afford to pay noway."

The trial court was not required to find that all of the evidence supported his decision. So long as sufficient evidence supported the judgment, it will not be disturbed on appeal. Aetna Casualty and Surety Co. v. Younts, 84 N.C.App. 399, 352 S.E.2d 850, disc. rev. denied, 319 N.C. 671, 356 S.E.2d 774 (1987). We believe the evidence sufficiently supports the trial court's conclusion and therefore affirm.


HEDRICK, C.J., and ARNOLD, J., concur.