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In re Marriage of Davis

Court of Appeals of Oregon
193 Or. App. 279, 89 P.3d 1206 (2004)
ELI5:

Rule of Law:

In Oregon, the standard for determining mental competency to enter into a contract is the cognitive test, which asks whether a person has the capacity to understand the nature of the act and apprehend its consequences.


Facts:

  • Husband and Wife were married for approximately 17 years and had two minor children.
  • The marriage involved numerous instances of domestic violence, for which Wife obtained two restraining orders against Husband.
  • After the parties separated, Wife began seeing a clinical social worker and was diagnosed with depression, post-traumatic stress disorder, and battered woman's syndrome.
  • During a two-day settlement conference, Wife was emotionally distraught, alternating between hope for reconciliation and extreme distress.
  • On the second day, after Husband confirmed he wanted to proceed with the dissolution, Wife became emotionally overwhelmed and entered what her attorney described as a 'zombie-like' state.
  • Against the strong advice of her attorney, Wife abruptly agreed to a settlement in which Husband received all of the parties' valuable Intel stock options and interest in a software company, stating she just wanted the proceedings to be over.
  • Approximately one week after signing the stipulated judgment, Wife was admitted to a hospital psychiatric unit for several days.

Procedural Posture:

  • Husband and Wife entered into a stipulated dissolution judgment in the trial court.
  • Wife filed a motion in the same trial court to set aside the judgment, arguing she was not mentally competent at the time she agreed to it.
  • The trial court held a hearing and denied Wife's motion, concluding that under the controlling 'cognitive test,' she was legally competent.
  • Wife appealed the trial court's decision to the intermediate court of appeals, arguing the trial court applied the wrong legal test for competency.

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Issue:

Does Oregon law require a court to apply the traditional 'cognitive test' or the more modern 'affective test' to determine a party's mental competency to enter into a stipulated dissolution judgment?


Opinions:

Majority - Per Curiam

Yes, the cognitive test is the correct legal standard. Oregon law requires courts to apply the cognitive test to determine mental competency. Although some Oregon cases may have alluded to aspects of the affective test, the cognitive test, which focuses on the capacity to understand the nature of the act and its consequences, remains the established law of the state. Therefore, the trial court did not err in applying this standard, and its finding that the Wife was competent under that test is supported by the record.


Concurring - Deits, C. J.

Yes, the cognitive test is the controlling law in Oregon that this court is bound to follow. While agreeing that precedent compels the application of the cognitive test, this test is outdated and fails to account for modern psychiatric understanding. The 'affective test,' adopted by the Restatement (Second) of Contracts and other jurisdictions, recognizes that a person may understand a transaction but be unable to act rationally due to a mental illness. Given the evidence of Wife's severe emotional distress and the 'grossly inequitable' result, the affective test would likely have produced a different and more just outcome, and it is appropriate for the state's highest court to reexamine and modernize the law in this area.



Analysis:

This decision affirms the 'cognitive test' as the binding standard for contractual capacity in Oregon, prioritizing a party's intellectual understanding over their volitional ability to act rationally. The case highlights the significant tension between stare decisis and the evolution of legal and psychological principles. The strong concurring opinion acts as a direct appeal to the Oregon Supreme Court to modernize the state's doctrine by adopting the 'affective test' from the Restatement (Second) of Contracts, which would better protect individuals whose mental illness impairs their judgment even if their cognitive understanding remains intact.

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