Board of Regents v. Davis

• Decision Date: 18 April 1975
• Citation: 120 Cal.Rptr. 407,14 Cal.3d 33
• Parties: , 533 P.2d 1047 BOARD OF REGENTS STATE UNIVERSITIES, STATE OF WISCONSIN, Plaintiff and Appellant, v. Ralph E. DAVIS, Jr., as Executor, etc., Defendant and Respondent. L.A. 30326.
• Court: California Supreme Court

Page 407

120 Cal.Rptr. 407

14 Cal.3d 33, 533 P.2d 1047

BOARD OF REGENTS STATE UNIVERSITIES, STATE OF WISCONSIN, Plaintiff and Appellant, v. Ralph E. DAVIS, Jr., as Executor, etc., Defendant and Respondent.

L.A. 30326.

Supreme Court of California In Bank.

April 18, 1975.

Archibald, Zelezny & Spray and Kenneth L. Moes, Santa Barbara, for plaintiff and appellant.

Robert R. Stone, Santa Barbara, for defendant and respondent.

Beardsley, Hufstedler & Kemble, Jerome H. Craig, Irwin & Gluecksman, J. D. Gluecksman, and Joseph L. Wyatt, J., Los Angeles, as amici curiae for defendant and respondent.

TOBRINER, Justice.

Plaintiff Board of Regents State Universities, State of Wisconsin, appeals from a judgment on the pleadings in defendant's favor in an action to collect from the estate of a former conservatee, now deceased, a claim for $150,000. The question presented is whether the imposition of a conservatorship without a finding of incompetency deprives the conservatee of the capacity to contract. We conclude that, subject to the limitations of Probate Code section 1858, it does not.

On August 25, 1967, defendant Ralph Davis, Jr., petitioned for appointment as conservator of the estate of Ralph Davis, Sr. The petition alleged that Davis, Sr., was over the age of 80 and unable properly to care for his property, a sizable estate with a net worth of.$1.8 million. The court appointed defendant as a temporary conservator, and on October 25, 1967, named a committee of five, including defendant, as permanent conservators. The temporary conservatorship continued until the court issued letters of conservatorship for the five committee members on January 15, 1968. The petition did not allege, nor did the court find, that Davis, Sr., was either insane or incompetent.

Davis, Sr., was a graduate and former director of the Wisconsin Mining School, now the Wisconsin State University-Platteville. On January 6, 1968, he attended a stadium fund raising dinner in Platteville, Wisconsin at which time he signed a written agreement pledging $150,000 on a matching basis, for construction of a stadium for his alma mater. ¹ Thereupon the university, unaware that Davis, Sr., was a conservatee, widely publicized the pledge in order to solicit matching contributions.

On September 10, 1968, the conservators filed in the probate court a petition for an order to show cause why the conservators should not be instructed to rescind the pledge, but, on September 21, 1968, before the petition could be heard, Davis, Sr., died. The court appointed defendant as executor of the estate. Representing the Wisconsin State University- plaintiff filed a claim in probate for $150,000, and upon defendant's rejection of the claim, commenced the present action.

Defendant filed a demurrer to plaintiff's complaint, contending in part that the mere existence of a conservatorship deprived the deceased conservatee of the capacity to enter into a pledge agreement. The trial court overruled the demurrer defendant then moved for judgment on the pleadings on the ground that the complaint failed to state a cause of action for the reasons set forth in the demurrer. ² The trial court denied that motion. Defendant then renewed his motion for judgment on the pleadings, alleging that the Court of Appeal's decision in PLACE V. TRENT (1972) 27 CAL.APP.3D 526, 103 CAL.RPTR. 841,³ filed August 29, 1972, after denial of the original motion, required the court to grant the motion. The trial court granted the renewed motion, entering judgment on the pleadings in favor of defendant. ⁴

Prior to 1957, a petition for guardianship presented the only procedure available for a party to assume administration of the estate of an adult unable to manage his affairs (Prob.Code, div. 4). Except in the case of minors, a guardianship requires both allegation and proof of the insanity or incompetency of the proposed ward. (Prob.Code. § 1460.) A ward under a guardianship lacks the capacity to enter into a contract (Hellman Commercial T. & S. Bk. v. Alden (1929) 206 Cal. 592, 608--609, 275 P. 794).

Believing that the stigma of the label 'incompetent' discouraged persons unable to conduct their affairs from seeking appointment of a guardian, the State Bar of California recommended, and the Legislature established, the new protective relationship of conservatorship. These efforts resulted in 1957 in the addition to the Probate Code of a fifth division, consisting of sections 1701 through 2207 (Stats.1957, ch. 1902, § 1) establishing probate conservatorships.

The legislative history ⁵ indicates that both the State Bar and the Senate Judiciary Committee intended that the new relationship achieve two major objectives. The first was the establishment of the conservatorship as an alternative to guardianship to avoid, as we have noted, the 'stigma' of the label 'incompetency.' In such a situation a conservator is merely another linguistic designation for a guardian. ⁶

The second objective of the new statute was to extend its embrace to those who would otherwise find themselves without legal protection. ⁷ The Legislature achieved this objective by providing that the court could appoint a conservator for a person who was neither insane nor incompetent, but who, for a variety of other reasons, needed direction in the management of his affairs. ⁸ Thus, clearly, the Legislature designed the conservatorship statute to cover a much more extensive category of eligible persons than the more limited guardianship law.

In view of the fact that the Legislature sought to accomplish by its conservatorship structure both the avoidance of the stigma of incompetency and the inclusion of a wider class, we must decide whether the Legislature intended that the conservatee who had not been adjudicated incompetent should nevertheless lose his capacity to enter into a contract. Although Place v. Trent, Supra, 27 Cal.App.3d 526, 103 Cal.Rptr. 841, held that in this respect the conservatee could not be distinguished from the ward in his inability to contract, we do not believe that the legislative history confirms this identity. As we shall show, this court has recognized a distinction between conservatee and ward; furthermore, we shall point out that section 1858 expressly upholds the conservatee's limited power to contract and, finally, that the Lanterman-Petris-Short Act (Welf. & Inst.Code, § 5000 et seq.) likewise recognizes such restricted power of the conservatee.

In our past treatment of the present problem we have linked the incapacity to contract under Civil Code section 40 with an adjudication of incompetency. Thus in Hellman Commercial T. & S. Bk. v. Alden, Supra, 206 Cal. 592, 275 P. 794, we held that a ward's incapacity to contract stems from Civil Code section 40 which reads, as amended, in pertinent part, 'Subject to Sections 1561 and 1910 of the Probate Code, and subject to Part I (Commencing with Section 5000) of Division 5 of the Welfare and Institutions Code after his incapacity has been judicially determined, a person of unsound mind can make no conveyance or other contract, nor delegate any power or waive any right, until his restoration to capacity. . . .' ⁹ As we explained, when 'a court has regularly adjudged one to be incompetent, he thereby becomes incapable of making a valid contract, and it is deemed to be void, not because he is unable, unassisted, to properly care for his property, or lacked understanding of the nature and effect of the particular transaction, but because the decree of incompetency is notice to the world of his incapacity to make a valid contract.' (206 Cal. at p. 604, 275 P. at p. 799.)

Hellman has accordingly determined that an adjudication of Incompetency presupposes a lack of capacity to understand the nature and effect of a contract. (206 Cal. at p. 605, 275 P. 794.) Noting that Code of Civil Procedure section 1764 authorizes a court to appoint a guardian for a person who is either insane or incompetent, the Hellman court concluded that such an appointment is an adequate adjudication of incompetency, and hence also of incapacity under Civil Code section 40. (206 Cal. at pp. 604--605, 275 P. 794.)

The argument that a conservatee lacks capacity to contract would necessarily, if it has any statutory source at all, stem from Civil Code section 40. Yet, inasmuch as Hellman holds that it is the finding of Incompetency that serves notice of a person's incapacity under Civil Code section 40, conservatees who have Not been adjudged incompetent should not be bound by that section's proscriptions. ¹⁰

The fact that a conservatee has at least a limited power to contract is further evidenced by the 1963 amendment to section 1858 ¹¹ (Stats.1963, ch. 1549, p. 3132, § 1), which provides in part that 'The conservator shall pay debts incurred by the conservatee during the conservatorship for the necessaries of life. . . . The conservator shall pay any other debts incurred by the conservatee during the conservatorship only if they appear to be such as a reasonably prudent person might incur.' This section quite clearly indicates that a conservatee retains power to contract, subject to the conservator's right to disaffirm unreasonable contracts other than those involving the purchase of necessaries which cannot be disaffirmed. ¹² This section also provides that if the conservator entertains any doubt as to the propriety of the debt he may petition the court for instructions. ¹³ If all contracts of a conservatee, like those of a ward, were void, the protections of amended section 1858 would be totally unnecessary.

Although defendant attacks this interpretation by urging that the term 'debts' in section 1858 should be construed to include only liability for 'nonconsensual' debts such as tort and quasi-contractual obligations, we believe that such a construction of the statute is strained. Nothing supports the hypothesis that the Legislature intended to abnormal a...