In re Thames

• Decision Date: 26 March 2001
• Docket Number: No. 3326.,3326.
• Citation: 544 S.E.2d 854,344 S.C. 564
• Court: South Carolina Court of Appeals
• Parties: In the Matter of Doris W. THAMES. Doris W. Verdery, Individually as an Interested party, and as Attorney-in-fact for Doris W. Thames, Appellant, v. Betty Jane Daniels and C. Covert Daniels, Respondents.

344 S.C. 564

544 S.E.2d 854

In the Matter of Doris W. THAMES.

Doris W. Verdery, Individually as an Interested party, and as Attorney-in-fact for Doris W. Thames, Appellant, v. Betty Jane Daniels and C. Covert Daniels, Respondents.

No. 3326.

Court of Appeals of South Carolina.

Heard October 12, 2000.

Decided March 26, 2001.

A.F. Carter, III, of Carter Law Firm, of Orangeburg, for appellant.

Steven S. McKenzie, of Coffey, Chandler & Johnson, of Manning, for respondents.

STILWELL, Judge:

Doris W. Verdery brought this action seeking to set aside a power of attorney and a revocation of an earlier power of attorney, both executed by her mother, Doris W. Thames. Verdery alleges that on December 16, 1996, the date both documents were executed, Thames lacked mental capacity. The probate court dismissed Verdery's action, holding Thames was mentally competent when she executed the power of attorney in favor of Betty Jane Daniels and revoked the former power of attorney which appointed Verdery her attorney in fact. The circuit court affirmed. Verdery appeals, and we affirm.

BACKGROUND

Thames, who was in her late eighties at the time of trial, has been married to Harry A. Thames (Mr. Thames) since 1969. Verdery and Daniels are her daughters from a previous marriage, and Daniels' husband, C. Covert Daniels, is her sonin-law.

Thames had been living with her husband, but in the latter part of 1995 she began living at Verdery's home in Orangeburg. During March of 1996, Verdery attempted to have a guardian and a conservator appointed for her mother, apparently on the ground that her mother suffered from dementia and was mentally incompetent. After reviewing the medical evidence, the probate court declined Verdery's request, concluding Thames was mentally competent.

In May of 1996, Thames, while still living with Verdery, executed a durable power of attorney in Verdery's favor. In the summer of that year, Mr. Thames brought a family court action seeking visitation with or custody of his wife. Under a consent order in that case, Thames remained in Verdery's home, but other family members, including her husband, were granted limited visitation. The order also prohibited family members from discussing or transacting business during these visits. The court later held Mr. Thames in contempt after he, Daniels, and Daniels' son, during a visit with Thames, took her to a bank where she withdrew money and refused to return her to Verdery's home. The family court's order included the following statements regarding Thames' competency:

The Defendant, Doris 0. [sic] Thames, is not competent to manage her affairs. Dr. Vann Beth Shuler expressed her medical opinion that Defendant Thames was not competent. The Court further finds from Defendant Thames' testimony that she is not competent and has very little memory.

...

It appears that Defendant Thames is not competent and constantly gives contradictory statements.

Mr. Thames later brought an action in probate court to have a guardian appointed for Thames, alleging she was an "incapacitated person." The court appointed him guardian, noting that the parties' counsel stipulated that she was incapacitated. In its order, the probate court discussed in detail the difference between a guardian and a conservator. The court did not appoint a conservator.

Less than one month later, Thames executed the documents which are the subject of this lawsuit. In addition to asking that the documents be set aside, Verdery asked the court to recognize her as the attorney in fact for Thames, enjoin Daniels and her husband from interfering with Verdery's management of Thames' business affairs, order Daniels and her husband to make an accounting to Verdery regarding transfers of Thames' real and personal property, and award Verdery attorney's fees and costs.

DISCUSSION

While Verdery raises several grounds for appeal, her arguments essentially boil down to two main issues: (1) what is the applicable standard of review for an appellate court in an action to set aside a power of attorney and a revocation of a power of attorney for lack of mental capacity; and (2) based on the appropriate standard of review, did the circuit court err in affirming the probate court's finding that Thames was competent to execute the challenged documents on December 16, 1996?

I. Standard of Review

Verdery first argues the circuit court erred in concluding this was an action at law and thus applied the wrong standard of review. We agree.

The standard of review applicable to cases originating in the probate court is controlled by whether the underlying cause of action is at law or in equity. Howard v. Mutz, 315 S.C. 356, 361-62, 434 S.E.2d 254, 257-58 (1993) (noting the circuit court may not disturb the probate court's findings of fact on appeal in an action at law unless there is no evidence to support them as compared to an equitable action in which the circuit court may make factual findings according to its own view of the preponderance of evidence). The question of whether an action to set aside a power of attorney and a revocation of a power of attorney on the ground of mental incompetency is at law or in equity has not been previously addressed in South Carolina. Therefore, we must examine a power of attorney, and the capacity required to execute and revoke one, in light of other existing legal authority to determine the nature of Verdery's cause of action.

Both Verdery and Daniels compare the current lawsuit to actions to set aside other legal instruments or transactions on the basis of a lack of mental capacity. Verdery argues that her cause of action is akin to an action to set aside a deed or petition signature on the basis of mental incompetence, which is an action in equity. Vereen v. Bell, 256 S.C. 249, 251-52, 182 S.E.2d 296, 297 (1971) (applying an equitable standard of review on appeal for an action to rescind and cancel a deed for lack of capacity); Ballenger v. City of Inman, 336 S.C. 126, 130, 518 S.E.2d 824, 827 (Ct.App.1999) (applying an equitable standard of review on appeal for an action to set aside the signature on land annexation petition for lack of mental capacity). Likewise, an action to rescind a contract is in equity. Gibbs v. G.K.H., Inc., 311 S.C. 103, 105, 427 S.E.2d 701, 702 (Ct.App.1993).

Daniels, on the other hand, equates the current action to a will contest, which is an action at law. Estate of Cumbee v. Cumbee, 333 S.C. 664, 670, 511 S.E.2d 390, 393 (Ct.App. 1999). This general principle applies even when the ground for setting aside the will is lack of mental capacity. Estate of Weeks v. Drawdy, 329 S.C. 251, 262, 495 S.E.2d 454, 460 (Ct.App.1997) (applying a legal standard of review on appeal in an action to set aside a will on the sole ground of lack of capacity).

A durable power of attorney allows a person, the principal, to designate another as his or her attorney in fact to act on the principal's behalf as provided in the document even if the principal becomes mentally incompetent. S.C.Code Ann. § 62-5-501 (Supp.2000); see also 3 Am.Jur.2d Agency § 23 (1986) ("A power of attorney is an instrument in writing by which one person, as principal, appoints another as his agent and confers upon him the authority to perform certain specified acts or kinds of acts on behalf of the principal. The written authorization itself is the power of attorney." (footnotes omitted)). With a durable power of attorney, a principal creates an agency in another that continues despite the principal's later physical disability or mental incompetency. See § 62-5-501; see also 3 Am.Jur.2d Agency § 28 ("The only requirement is that an instrument creating a durable power contain language showing that the principal intends the agency to remain effective in spite of his later incompetency."). Moreover, in order for the principal to create the agency relationship in the first instance, the principal must have the mental capacity to contract. 3 Am.Jur.2d Agency § 12 ("A person who is not in a mental condition to contract and conduct his business is not in a condition to appoint an agent for that purpose."). Therefore, in order to execute or revoke a valid power of attorney, the principal must possess contractual capacity.

South Carolina has defined contractual capacity as a person's ability to understand, at the time the contract is executed, the nature of the contract and its effect. In re: Nightingale's Estate, 182 S.C. 527, 542, 189 S.E. 890, 896 (1937) ("[A] mere infirmity of mind, if it does not amount to an incapacity to understand, at the time of the execution of a contract, the nature of the act done and the effect thereof, ... does not render a person incapable of executing a valid and binding contract."); see also 53 Am.Jur.2d Mentally Impaired Persons § 156 (1996) ("The test for lack of [contractual] capacity is generally said to be whether an individual lacks sufficient mental capacity to understand in a reasonable manner the nature of the transaction in which he or she is engaging, and to understand its consequences and effect upon his or her rights and interests." (footnotes omitted)).

Other jurisdictions addressing this issue have found contractual capacity is required to execute a power of attorney. Younggren v. Younggren, 556 N.W.2d 228, 232 (Minn.Ct.App. 1996) (holding a person is competent when he signs a power of attorney if he has sufficient mental capacity to understand, to a reasonable degree, the nature and effect of his act); Testa v. Roberts, 44 Ohio App.3d 161, 542 N.E.2d 654, 658 (1988) ("[For a power of attorney,] the test to be used to determine mental capacity is the ability of the principal to understand the nature, scope and the extent of the business she is about to transact."). Because a person must possess contractual capacity to execute or revoke a valid power of attorney, we believe a cause of action to set aside such a document is more closely akin to an action...