Faber v. Sweet Style Mfg. Corp.
40 Misc. 2d 212, 242 NYS 2d 763 (1963)
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Rule of Law:
A contract is voidable if a party, due to mental illness, enters into it under a compulsion or motivation that they are unable to resist and but for which the contract would not have been made, even if the party understood the nature and consequences of the transaction.
Facts:
- From August to October 1961, Isidore Faber was in the manic phase of a manic-depressive psychosis, causing him to behave expansively and impulsively.
- During this period, Faber, who was previously frugal, engaged in several uncharacteristic transactions, including purchasing expensive cars and entering into contracts for large land developments.
- On September 16, 1961, Faber began negotiations with Kass, the president of Semel Realty Corp., to purchase a vacant lot for a commercial development.
- On September 23, 1961, Faber agreed to purchase the property for $51,500 and signed a contract that afternoon, paying a $5,150 deposit.
- Faber's lawyer, who was present at the contract signing, advised against the deal and withdrew when the seller refused to add a requested condition.
- Between signing the contract and his hospitalization, Faber took abnormally rapid and premature steps to develop the property, including hiring an architect, initiating a mortgage application, and hiring laborers to begin digging before the title closing.
- On October 8, 1961, Faber's condition worsened, and he was hospitalized after purchasing a hunting gun.
Procedural Posture:
- Isidore Faber filed a lawsuit in the New York Supreme Court, Special Term (a trial-level court), against Semel Realty Corp., seeking rescission of a real estate contract.
- Semel Realty Corp. filed a counterclaim against Faber, requesting specific performance of the contract.
- During the trial, the defendant's name was formally changed to Sweet Style Manufacturing Corporation, the successor entity.
- The case was decided in a bench trial before Justice Meyer.
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Issue:
Does a person's manic-depressive psychosis, which affects motivation and judgment rather than the cognitive ability to understand a transaction, render a contract voidable on the ground of mental incompetence?
Opinions:
Majority - Bernard S. Meyer, J.
Yes. A contract is voidable where a party's mental illness, such as manic-depressive psychosis, compels them to enter into it, irrespective of their cognitive capacity to understand the transaction's terms. The traditional standard for incompetence, which focuses solely on cognitive ability (the capacity to understand), is insufficient for mental illnesses that affect volition and motivation rather than comprehension. The law recognizes that incompetence can also exist when a contract is entered into under the compulsion of a mental disease or disorder but for which the contract would not have been made. In this case, Faber's objective behavioral evidence—including his grandiose plans, rapid and premature actions to develop the property, and uncharacteristic spending—convincingly demonstrates that the contract was a product of his psychosis. This behavioral evidence, supported by the testimony of his treating physicians, outweighs the opinion of the defendant's expert and establishes that the transaction was compelled by his mental illness, thus entitling him to rescission.
Analysis:
This case is significant for expanding the legal standard for contractual incompetence in New York beyond the traditional cognitive test. By introducing a volitional or motivational test, the court aligned the legal doctrine with modern psychiatric understanding of mental illnesses that impair judgment and self-control rather than comprehension. This decision established a precedent allowing contracts to be voided if they are the product of an irresistible impulse caused by a mental disorder. It empowers courts to look beyond a party's superficial understanding of a transaction and consider objective behavioral evidence to determine if the party lacked true contractual capacity.
