A full seating of the District of Columbia Court of Appeals heard arguments today on whether to overturn a case from 1892 that held that a contract is void if one of the parties is deemed mentally incapacitated.
The case, Sullivan v. Flynn, was decided by the court's predecessor, the District of Columbia Supreme Court, and upheld an even older U.S. Supreme Court decision from 1872, Dexter v. Hall. Attorneys in favor of overturning Sullivan say it's based on an outdated understanding of mental illness and doesn't account for developments in laws protecting the rights of mentally incapacitated individuals.
Local attorney Aaron Sokolow, who argued today in favor of upholding Sullivan, urged the court to first consider the facts of the underlying case and then decide that, given the circumstances presented in that case, Sullivan appropriately set out a "bright line" rule for when a contract should be considered void.
The underlying case involved a dispute between a company that purchased a house in Northwest Washington through a tax sale and the Banks family, who claimed that they had entered into a lease with the now-deceased property owner, Patricia Speleos, which allowed them to stay in the house.
The new owner sued for possession of the house in District of Columbia Superior Court, arguing that because a judge had deemed Speleos mentally incompetent after she entered into the lease with the Banks family, the contract should be considered void under Sullivan.
Superior Court Judge Stephanie Duncan-Peters found that the contract was voidable by Speleos or her representatives, but not inherently void, noting that this was the more modern approach adopted by many other jurisdictions. She found that because the woman who served as Speleos' conservator never moved to set aside the lease, it should stand. The new owner appealed. Last June, a three-judge appeals panel found that the court was bound by Sullivan and that only an en banc court could change that.
Sokolow told the en banc court this morning that there is a "strong preference for a bright line rule." Even though Speleos wasn't declared incompetent until after she signed the lease with the Banks family, Sokolow said, it was already known that Speleos was incapacitated. In declaring Speleos incompetent, a judge even voided several other real estate transactions Speleos had signed in the past, he said.
Several judges pressed Sokolow about the movement of other courts, including the Supreme Court, towards rules that made contracts voidable, but not void on their face, recognizing that mentally incapacitated individuals can and should be able to enter into some contracts.
Sokolow said that society's evolving understanding of mental illness wasn't relevant because a judge had found Speleos incapacitated and specifically unable to enter into real estate transactions. If the court did decide to make such contracts voidable, however, he said his client still won because the lease was "facially unfair" to Speleos, allowing the Banks family to stay in the house for very little rent and the option to buy the house for only $50,000.
Daniel Harawa, a recent Georgetown Law Center graduate with the D.C. Law Students in Court program, argued this morning on behalf of the Banks family. Harawa said that a bright line rule upholding Sullivan wouldn't be appropriate because mental illness, as it is understood today, isn't a bright line. A rule that such contracts can be voidable at the election of the incapacitated person or his or her representatives would give judges more leeway to weigh the different factors presented in each case.
If the court adopted a rule that the contracts are voidable and not inherently void, Harawa said judges would have to consider certain standards, such as whether the non-incapacitated party had notice of the incapacitated person's status and whether the contract was fair.
In the underlying case, Harawa disputed that Sokolow's client now represented the interests of Speleos just because they had purchased the property. Since Speleos' conservator never tried to disaffirm the lease, the power to disaffirm went away after Speleos died, Harawa said, arguing that a mentally incapacitated person's representative had to be someone with the person's interests at heart.
The court also heard arguments from Julie Becker of the Legal Aid Society of the District of Columbia, who represented the amici legal services groups supporting the Banks family's claim.