Heights Realty, Ltd. v. Phillips

Heights Realty, Ltd. (the plaintiff) entered into an exclusive listing contract with Johnye Gholson. In 1984, Gholson telephoned Pat Eichenberg, a real estate broker and owner to Heights Realty to secure his services in selling her property. At this time, Gholson was 84 years old. In September 1984, Gholson entered into a contract to list the property for one year at $250,000 with a $75,000 cash down payment. No other terms were included in the contract. In October 1984, Gholson signed an addendum increasing the down payment to $100,000. In November 1984, an offer was made to purchase Gholson’s property for $255,000. Gholson did not accept that offer. The plaintiff brought suit against Gholson seeking the commission it earned for finding a buyer for Gholson’s property. During the proceedings, Gholson was adjudicated incompetent. As a result, Gholson’s son-in-law, Phillips (the defendant), was appointed conservator of her estate.

At trial, the plaintiff argued that the contract it made with Gholson was enforceable because she did not lack the mental capacity to contract at the time of contract formation. Based on expert testimony from psychiatrists, testimony from Gholson’s relatives, and from Gholson herself, the trial court found that Gholson did not have the requisite mental capacity to enter into the contract with the plaintiff. Accordingly, the trial court voided the contract. The plaintiff appealed.