Opinion ID: 1959103
Heading Depth: 2
Heading Rank: 2

Heading: Effect of Evidence of Plaintiffs' Mental Retardation

Text: The plaintiffs' second argument is that, based on evidence indicating that all of the plaintiffs are mentally retarded, all of the contracts between the plaintiffs and the defendants are void under Ala.Code 1975, § 8-1-170, which provides that all contracts of an insane person are void. The defendants argue that this Court need not decide whether the trial court correctly found this provision inapplicable to the plaintiffs, because the question of the effect of the plaintiffs' alleged mental retardation on the contract is one for an arbitrator, not the court. We disagree. Generally, a challenge that concerns `the making of [a] contract in its entirety, rather than just ... the arbitration agreement itself' is for an arbitrator, rather than a court, to resolve. Nations-Banc Invests., Inc. v. Paramore, 736 So.2d 589, 591 (Ala.1999) (quoting Anniston Lincoln Mercury Dodge v. Conner, 720 So.2d 898, 902 (Ala.1998)). However, a challenge to the very existence of the contractas is the case when contracts are challenged as being void as opposed to voidableis an issue for a court, not an arbitrator, to decide. As we recently explained in J.C. Bradford & Co. v. Vick, 837 So.2d 271, 273 n. 2 (Ala.2002): When a party is seeking to enforce an arbitration clause, the question whether a valid contract exists between the parties is to be decided by the trial court, not an arbitrator. Lee v. YES of Russellville, Inc., 784 So.2d 1022 (Ala. 2000); Ex parte Payne, [741 So.2d 398 (Ala.1999)]; NationsBanc Invs., Inc. v. Paramore, 736 So.2d 589 (Ala.1999).2 2 Our holdings in these cases derive from a decision by the United States Supreme Court. In Prima Paint Corp. v. Flood & Conklin Manufacturing Co., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967), the United States Supreme Court held that a fraud-in-the-inducement challenge to a contract that contained an arbitration clause should be decided by an arbitrator, and not by a court. However, we follow the reasoning of other courts that limit the holding in Prima Paint Corp. to `voidable' contracts (e.g., a contract where a party is induced through fraud or a contract where a party is an infant). However, where a party challenges the very existence of a contract, that dispute must be decided by a court. See Shearson Lehman Bros. v. Crisp, 646 So.2d 613 (Ala. 1994). Therefore, whether the plaintiffs may avail themselves of § 8-1-170 is an issue that was properly addressed by the trial court and that may now be properly addressed by this Court. In addressing this issue, we agree with the trial court that the plaintiffs are not properly characterized as insane for purposes of § 8-1-170. In Shoals Ford, Inc. v. Clardy, 588 So.2d 879, 881 (Ala.1991), we summarized the law relevant to this issue as follows: The well-settled law in Alabama is that contracts of insane persons are wholly and completely void. See, Williamson v. Matthews, 379 So.2d 1245 (Ala.1980); Ala.Code 1975, § 8-1-170. In McAlister v. Deatherage, 523 So.2d 387, 388 (Ala.1988), quoting from Weaver v. Carothers, 228 Ala. 157, 160, 153 So. 201, 202 (1934), this Court explained the cognitive (understanding) test that Alabama adopted in order to determine whether a contract can be avoided because of insanity: `[To] avoid a contract on the ground of insanity, it must be satisfactorily shown that the party was incapable of transacting the particular business in question. It is not enough that he was the subject of delusions not affecting the subject-matter of the transaction, nor that he was, in other respects, mentally weak. A party cannot avoid a contract, free from fraud or undue influence, on the ground of mental incapacity, unless it can be shown that his insanity ... was of such character that he had no reasonable perception or understanding of the nature and terms of the contract. ' (Emphasis added.) The plaintiffs' affidavits indicate that they knew, after having been told, that they were signing loan papers and insurance papers. The plaintiffs' evidence of insanity includes evidence indicating (1) that the plaintiffs' IQ's were low enough that many of them could be classified as mildly retarded; (2) that many of the plaintiffs were illiterate; (3) that the plaintiffs had very limited education, which for some of them included special education classes; and (4) that many of the plaintiffs could not understand legal or business terminology. However, as the trial court correctly held, this evidence is not evidence of insanity for purposes § 8-1-170, but is rather, as stated above, evidence of mental weakness. Conditions such as illiteracy and a lack of education do not make one insane or otherwise deprive one of the ability to contract. See Johnnie's Homes, Inc. v. Holt, 790 So.2d 956, 963-64 (Ala. 2001) (holding that evidence indicating that the plaintiff had little education, that he was illiterate, and that he was unaware of the existence of an arbitration provision in a contract did not prove that the provision was unconscionable); Mitchell Nissan, Inc. v. Foster, 775 So.2d 138, 140 (Ala. 2000) (stating that an illiterate person, if he neglects to have [a document he signs] read, or to enquire as to its contents, cannot, in the absence of fraud, deceit or misrepresentation, avoid the effect of his signature, because [he is] not informed of its contents .... (emphasis omitted) (quoting Beck & Pauli Lithographing Co. v. Houppert, 104 Ala. 503, 506, 16 So. 522, 522 (1894))). Instead, our decisions make clear that one claiming to be insane and thereby seeking to void a contract under § 8-1-170 must present evidence of some condition substantially different in nature and degree than mere mental weakness. For example, in Shoals Ford we affirmed a finding of insanity with regard to an individual, Bobby Joe Clardy, and held that his contract to purchase a truck was void based upon the following facts: According to Ms. Clardy, Bobby Joe had suffered from a manic-depressive disorder for 15 years and was taking lithium to control his condition. She said that she observed in mid-March 1989 that Bobby Joe was becoming manic, but she said that because he was not violent and had not endangered himself or anyone else at that time, she could not involuntarily commit him for treatment. On April 5, 1989, Ms. Clardy received a telephone call from Leslie Clardy Daniel, Ms. Clardy and Bobby Joe's daughter (`the daughter'), concerning Bobby Joe's condition. The daughter told Ms. Clardy that Bobby Joe had threatened her and had obtained $500 from her to make the down payment on a truck he was going to buy from Shoals Ford. Subsequently, Ms. Clardy drove to Shoals Ford and noticed that the truck Bobby Joe had previously looked at, in her presence, was still on the lot. At that time she spoke with a salesperson, and she later telephoned a sales representative with Shoals Ford, concerning Bobby Joe's incompetency and asked that they not allow Bobby Joe to take the truckthat is, she told them that Bobby Joe was not working, that he was ill and would be committed, and that the truck could not be insured. Thereafter, on April 5, 1989, Shoals Ford gave Bobby Joe possession of the truck after he gave it $10,000 as the down payment. Ford Motor Credit Company eventually repossessed and sold the truck and mailed Ms. Clardy a check for $3,284.98, which left a balance of $6,715.02 of the $10,000 down payment unrecovered by Ms. Clardy. According to the daughter, when Bobby Joe visited her around April 1, 1989, she tried to get him to resume taking his medicine. He became agitated and went out of control, threw his medicine into a burning pile of leaves, and then left. Around 5 A.M. on April 5, 1989, Bobby Joe returned to the daughter's house, banged on the doors and windows until he awakened the household, threatened their lives, and forced the daughter to write him a check for $500. When he left, the daughter telephoned 911 to report the incident and, as soon as the probate office opened, she telephoned the probate judge to inform him of the situation. She then went to her attorney's office, explained the situation to him, and asked that he prepare a petition to have Bobby Joe involuntarily committed for treatment. While in her attorney's office, she notified the bank to stop payment on the $500 check she had written to Bobby Joe and then called to notify Shoals Ford of Bobby Joe's mental condition, telling a representative that Bobby Joe would be coming in to purchase a truck, specifically describing the particular truck; telling the representative that Bobby Joe was not healthy; and telling the representative that she had filed a petition to have Bobby Joe involuntarily committed. She also asked Shoals Ford to call the Lauderdale County sheriff, a family member, her attorney, Riverbend Center for Mental Health, or the probate office for verification in the event Bobby Joe did appear at the dealership. She further explained to the representative that `buying sprees' was a symptom of Bobby Joe's illness, that he would not be able to make the payments, and that he was not insurable. When she notified Shoals Ford of the situation, it merely stated that if Bobby Joe had the money to purchase the truck, it was `none of her concern.' Around 10 A.M. on April 5, 1989, she drove by Shoals Ford and, noticing that the truck was still there, she once again telephoned `to plead' with Shoals Ford to notify her when Bobby Joe arrived. At this time, the representative told her that `it was really not of concern to Shoals Ford.' According to Dr. Joseph W. Glaister, a local psychiatrist who had treated Bobby Joe since 1984, Bobby Joe suffered from a manic depressive illness, manic type, recurrent. Dr. Glaister testified that Bobby Joe's illness was episodic, that his competency could come and go, and that there were stages of the illness when, on mere observation, one might think that Bobby Joe was a slightly excessive, overly friendly individual. He further testified that Bobby Joe had been admitted to the hospital after regular working hours on April 5, 1989, and that when he saw Bobby Joe on April 6, 1989, Bobby Joe was incompetent. Furthermore, according to the testimony of Dr. Glaister, he could not visualize Bobby Joe being otherwise on April 5, 1989. The daughter's attorney testified that he remembered the events of April 5, 1989, when the daughter contacted him, when he obtained a history of the events of the day, and when he prepared the commitment petition and other documents that were filed with the probate court on that morning. He stated that he did not prepare and file the petition to appoint Ms. Clardy as conservator and limited guardian for Bobby Joe until a month after the petition to commit, because Bobby Joe was hospitalized during that period of time and, in the attorney's opinion, had no opportunity to dissipate his estate. Based on the foregoing, we hold that there was sufficient evidence to support the jury's verdict that during the period in questionfrom April 1, 1989 (when Bobby Joe began negotiations to purchase the truck), to April 3, 1989 (when Shoals Ford alleges the transaction was completed), to April 5, 1989 (when Ms. Clardy alleges the transaction was completed)Bobby Joe was incompetent; that during that period of time, he was incapable of understanding and appreciating the nature, terms, and effect of the contract. Shoals Ford, 588 So.2d at 881-83 (footnote omitted). Further, in McAlister v. Deatherage, 523 So.2d 387 (Ala.1988), we found the following evidence of the insanity of the plaintiff, McAlister, sufficient to preclude a summary judgment for the defendants: [6] McAlister was diagnosed as having bipolar disorder (manic-depression) at least as far back as 1967, when the military service declared him to be 100 percent disabled. Since that time he has not worked, living entirely off Veterans Administration benefits and social security benefits. McAlister began seeing Dr. Lopez in 1975 and was treated by Dr. Lopez until McAlister moved to North Alabama and began treatment with Dr. Phillips in November 1985. During McAlister's treatment under Dr. Lopez, he was committed at least once through the probate court to a mental hospital and was, for the vast majority of that time, on various medications, including Lithium, to help control his illness. Three days before the contract to buy the house was signed, Dr. Lopez had a meeting with McAlister. Dr. Lopez was of the opinion that at that time McAlister was off his medication and `was psychotic. And, when he is psychotic,... it is a major psychiatric disorder of psychotic proportions.' Lopez also stated that such episodes last weeks at a time and that even with `intensive treatment at a psychiatric hospital,' the manic episode may be shortened only to `two or three weeks.' McAlister testified that during the early part of July 1985 he was hospitalized to undergo a gall bladder operation, during which time none of his medication for his illness was administered to him by the hospital. According to McAlister, he remembers only bits and pieces over the next two months (from mid-July to late-September or early October). McAlister stated in his deposition that he remembered nothing about any financial statements he may have signed and did not know what, if any, other documents he had signed during that time. Most of what McAlister does remember is through what third persons have recently told him. The very nature of the manic-depressive, as stated in Dr. Phillips's deposition, is often characterized by `buying sprees, frequently buying things that they don't need and often charging or writing checks for which they have no funds to finance.' This is not to say that all manic-depressives may be classified as insane within the cognitive test that Alabama utilizes. However, under this set of facts and in this circumstance, we cannot say that McAlister `had sufficient capacity to understand in a reasonable manner the nature and effect of the act which he was doing,' Hall v. Britton, [216 Ala. 265, 113 So. 238 (1927)], or that he had a `reasonable perception or understanding of the nature and terms of the contract.' Weaver v. Carothers, [228 Ala. 157, 153 So. 201 (1934) ]. Taking the depositions and affidavits submitted on behalf of McAlister as true, we find that, in light of the scintilla rule, summary judgment for the Deatherages was inappropriate. We therefore reverse and remand as to them. McAlister, 523 So.2d at 388-89. Likewise, in Weaver v. Carothers, 228 Ala. 157, 153 So. 201 (1934), we upheld a finding of insanity with regard to a defendant debtor, Carothers, who had acquired certain contractual liabilities: [P]hysicians have testified in their opinion that this defendant, William Carothers is insane. There does not appear any good reason for the Court to review the testimony of these witnesses. The Court will mention the testimony of one of these witnesses. This evidence was taken on the 2nd day of May, 1932. It is the testimony of Dr. L. Hays. This physician says he has known the defendant for a long period of time; that he has seen him frequently, and had conversations with him and there is other intimacy with the defendant shown by his testimony. This physician states he was a person in his opinion of unsound mind, and in addition to his opinion he states that the defendant was suffering from a mental affliction; that he has hydrocephalus; that it was a condition that existed from his birth, and that it caused him to be mentally deficient. The term hydrocephalus is a disease recognized by medicine; it causes its victim to be mentally deficient, and often idiotic; it is a lesion of the brainan affection of the very substance of the brain. This testimony is not disputed by any one. The Court is, therefore, of the opinion that the defendants have shown by the evidence that William Carothers is suffering from mental imbecility to such a degree as to void his contracts, and that he was so suffering at the time the contracts sued on were made. 228 Ala. at 159, 153 So. at 202. When compared to the evidence involved in those cases, it is clear that the evidence proffered by the plaintiffs in this case does not establish that the plaintiffs were insane, so as to void their contracts under § 8-1-170. Not only does the evidence support a finding only of mere mental weakness as stated above, but the plaintiffs insanity argument is also undermined further by evidence indicating that the plaintiffs had repeated transactions with the defendants before the transactions at issue. In sum, we conclude that the trial court correctly rejected the plaintiffs' insanity argument.