Heights Realty v. Phillips

• Heights Realty, Ltd. = "Heights" = plaintiff = entered into an exclusive listing contract = a New Mexico corporation

• Mrs. Gholson = "Gholson" = original named defendant = woman in her 80s = home seller
• Phillips = "Phillips" = defendant = Gholson’s son-in-law

• Gholson listed her home with Heights Realty seeking
  • a purchase price of $250,000 &
  • a down payment of $75,000.

2 week later, Gholson increased the down payment to $100,000.

• 1 month later, Heights presented Gholson with an offer of $255,000 which she rejected.

Heights sued Gholson for the commission it would have received for the $255,000 offer per the listing.

A psychiatrist testified that Gholson was incompetent when she signed the agreement to list her home.

A 2nd psychiatrist gave a conflicting assessment.

In the middle of the case, Gholson was declared incompetent judicially & Phillips was appointed as her conservator.

Heights lost in the trial court.

Can a person have the mental capacity to enter into a contract if that person can't reasonably understand the nature & effect of the contract?

Gholson testified that she didn't remember signing the addendum to the listing contract.

Phillips took over for Gholson & testified that her mother-in-law Gholson had been in mental decline.

No. A person doesn't have the mental capacity to enter into a contract if that person isn't capable of reasonably understanding the nature & effect of the contract.

Affirmed

Justice Stowers: Gholson had been adjudged incompetent.

Gholson died in 1993.