New York Incapacity Under Article 81 of the Mental Hygiene Law Does Not Void All Prior Contracts

A New York Court can appoint a Guardian of the person or property for an individual who is found to be incapacitated. As previously discussed in the New York Probate Lawyer Blog, Mental Hygiene Law Section 81.29(d) provides, in part, that “the Court may modify, amend, or revoke any previously executed. . . contract, conveyance, or disposition during lifetime or to take effect upon death, made by the incapacitated person prior to the appointment of the guardian . . . .”

While the Court has the power to undo agreements that were unfairly entered into while a person was incapacitated, such power will be exercised by a Court only after a thorough examination of the facts and circumstances in each instance. In JPMorgan v. CV Haedrich, reported in the New York Law Journal on November 3, 2010, the Court had appointed a Guardian for the person and property of Oden and Marie Haedrich in or about 2005. Prior to such appointment in or about 1999 and 2003, the Haedrich’s had taken mortgage loans. Beginning in or about 2008, payments on the mortgage loans stopped and a foreclosure action was commenced. The Guardian then asked the Court to void the mortgage foreclosure on the ground that the Haedrich’s did not have the capacity to enter into these loans.

The Court, however, refused to vacate the foreclosure. Essentially, the Court found that the loans were taken many years prior to the 2005 determination of incapacity. No credible evidence was presented by the Guardian that either Mr. or Mrs. Haedrich were incapacitated when the transactions occurred or that the lender knew of or was notified of any such incapacity.

As shown by the Court in the Haedrich decision, the mere determination of incapacity does not in and of itself overturn or void all past transactions by the incapacitated person. Specific demonstration of incapacity and/or notice at the time of the occurrence that a party is incapacitated is essential for a Court to revoke a transaction.

New York Guardianship attorney, Jules Martin Haas, Esq. has been representing clients in New York Guardianship proceedings throughout the past 30 years. If you or someone you know is involved with or has questions about New York Guardianship, please contact me at (212) 355-2575 for an initial consultation

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