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Pappert v. Sargent - 847 P.2d 66 (Alaska 1993)

Rule:

A contract voidable on the grounds of incompetency is not to be set aside where other party had no notice of incompetency and derived no inequitable advantage from the contract and the parties cannot be returned to their original positions.

Facts:

In 1981, Harold Sargent and the Papperts entered into an agreement whereby the Papperts traded a mobile home for Sargent’s property on Ugak Bay in Alaska. Sargent’s wife, as his guardian, filed a complaint for rescission of the transaction, contending that Sargent was incompetent when he traded the property. At trial, Mrs. Sargent entered the deposition of Dr. Nemiroff to establish that Sargent was incompetent in 1981. It was said that Sargent was suffering from a transient ischemic attack (TIA), a condition in which the brain is not getting enough blood. The trial court found that Sargent was incompetent when he traded the property and that the Papperts knew or should have known of his condition. The trial court therefore voided the transaction and denied the Papperts’ restitution. The Papperts challenged the decision.

Issue:

  1. Was Sargent incompetent at the time of the transaction?
  2. Should the Papperts’ have known of Sargent’s condition?

Answer:

1) Yes. 2) No.

Conclusion:

The Supreme Court of Alaska affirmed the trial court's determination that Sargent was incompetent but reversed the determination that the Papperts should have known of Sargent’s condition. The Court found, inter alia, that laypersons, such as the Papperts, could not reasonably be charged with the same knowledge that Sargent’s doctor had of his disease. According to the Court, the testimony of Mrs. Sargent failed to establish that a person having dealings with Sargent would have been plainly aware of his lack of competency to contract. As such, the Court concluded that the Papperts who contracted with Sargent in good faith, without actual or constructive knowledge of his condition, were entitled to restitution.

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