Rogers v. Household Life Ins. Co.

• Citation: 250 P.3d 786,150 Idaho 735
• Decision Date: 18 March 2011
• Docket Number: No. 36746.,36746.
• Court: Idaho Supreme Court
• Parties: Jason ROGERS, Plaintiff–Appellant, v. HOUSEHOLD LIFE INSURANCE COMPANY, Defendant–Respondent.

150 Idaho 735

250 P.3d 786

Jason ROGERS, Plaintiff–Appellant,

v.HOUSEHOLD LIFE INSURANCE COMPANY, Defendant–Respondent.

No. 36746.

Supreme Court of Idaho, Boise, December 2010 Term.

March 18, 2011.

Rehearing Denied April 29, 2011.

Thomas, Williams & Park, LLP, Boise, for appellant. Daniel Williams argued.

Naylor & Hales, P.C., Boise, for respondent. Bruce Castleton argued.

HORTON, Justice.

This appeal arises from a claim for life insurance proceeds. The district court granted summary judgment in favor of Household Life Insurance Company (HLIC) on the grounds that Alan Rogers' life insurance contract was void because he was adjudicated incompetent before he entered the contract. Alan's son and guardian, Jason Rogers, argues that the contract was merely voidable, that as Alan's guardian he had the capacity to and did ratify the contract, and that the contract was thus enforceable. We affirm, but deny HLIC's request for attorney fees incurred on appeal.

I. FACTUAL AND PROCEDURAL BACKGROUND

Alan Rogers was diagnosed with Alzheimer's and dementia in 2003. Soon after, Alan's son Jason sought an adjudication that Alan was incapacitated. An order to that effect was entered on January 27, 2004. The letters appointing Jason as guardian and conservator for his father did not place any limitations on Jason's powers.

On May 15, 2007, Jason assisted his father in completing and submitting an online application for life insurance offered by HLIC. The application requested information regarding Alan's health, but did not specifically inquire as to whether Alan suffered from Alzheimer's or dementia. The completed application did not reveal that Alan was adjudicated to be incapacitated, nor did it reveal that Jason had been appointed as his father's guardian and conservator. That day, HLIC approved the application, the initial $447.20 premium was paid, and Alan Rogers' term life insurance policy with a face value of $250,000 took effect. Jason was the sole beneficiary of the policy.

Alan passed away on June 7, 2007. His death certificate lists the sole cause of his death as "dementia of the Alzheimer's type." Jason submitted a notice of claim to HLIC, seeking the $250,000 policy proceeds. HLIC conducted a medical-history verification, a routine procedure for claims arising within two years of a policy's inception. Several months later, HLIC informed Jason of its position that, because Alan had been adjudicated mentally incompetent prior to the May 15, 2007, application and effective date, the policy was void from its inception.

Jason brought suit against HLIC, alleging breach of contract and tortious bad faith. HLIC moved for summary judgment on the grounds that Alan Rogers was adjudicated mentally incapacitated prior to entering into the insurance contract and therefore the contract was void ab initio. Jason countered that a contract entered into by one adjudicated incompetent is not void, but rather is merely voidable at the election of the incompetent's guardian, and also that a guardian may ratify such a contract.

The district court granted summary judgment in favor of HLIC on the ground that Alan's adjudication of incompetence rendered the contract void and dismissed Jason's complaint. Jason timely appealed. HLIC requests attorney fees and costs on appeal under Idaho Code § 41–1839.

II. STANDARD OF REVIEW

This Court reviews a district court's order granting summary judgment under the same standard used by the district court in its ruling on the motion for summary judgment. Cristo Viene Pentecostal Church v. Paz, 144 Idaho 304, 307, 160 P.3d 743, 746 (2007). Summary judgment is proper "if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." I.R.C.P. 56(c). This Court exercises free review over questions of law. Cristo, 144 Idaho at 307, 160 P.3d at 746.

III. ANALYSIS

A. Under Idaho Code § 32–108, one who is adjudicated incapacitated lacks the capacity to contract as a matter of law.

Idaho Code § 32–108 provides as follows:

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. But a certificate from the medical superintendent or resident physician of the insane asylum to which such person may have been committed, showing that such person had been discharged therefrom cured and restored to reason, shall establish the presumption of legal capacity in such person from the time of such discharge.

Jason asserts that the statute's language that one adjudicated to be incapacitated "can make no conveyance or other contract" means that although such a person should not contract, if he or she does, the contract is merely voidable. HLIC responds that under the statute's plain language, the contracts of one who is adjudicated incompetent are void because the individual lacks all capacity to contract.

The language of I.C. § 32–108 does not, upon preliminary consideration, support Jason's position. Effectively, Jason argues that the statutory language that a person adjudicated to be incapacitated "can make no ... contract" means that such a person may enter into a contract, while simultaneously retaining the ability to avoid the obligations imposed by the agreement. Nevertheless, when considering Jason's claim that the insurance contract in this case was merely voidable, rather than void ab initio, we consider the statutory framework relating to persons who suffer from impaired capacity and their ability to make decisions regarding the conduct of their lives. This is because "[i]t is a fundamental law of statutory construction that statutes that are in pari materia are to be construed together, to the end that the legislative intent will be given effect." State v. Yager, 139 Idaho 680, 689–90, 85 P.3d 656, 665–66 (2004) (citing State v. Creech, 105 Idaho 362, 367, 670 P.2d 463, 468 (1983) ).

Idaho Code §§ 32–106 through 32–108 address the enforceability of contracts involving persons of unsound mind. If a person is "entirely without understanding," he "has no power to make a contract of any kind, but he is liable for the reasonable value of things furnished to him necessary for his support or the support of his family." I.C. § 32–106. A contract involving a party who is "not entirely without understanding" and has not been adjudicated to be incapacitated "is subject to rescission." I.C. § 32–107. In other words, prior to a judicial determination of incapacity, such contracts are voidable. However, after a judicial determination of incapacity, "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." I.C. § 32–108. Comparing I.C. § 32–107 and I.C. § 32–108, it is evident that the legislature intended that contracts involving persons not adjudicated to be incapacitated are to be voidable and to declare that a person adjudicated to be incompetent is without the legal capacity to contract until that person has been "restored to reason."

A judicial determination of incapacity and appointment of a guardian is a proceeding in which a judge assesses the capacity and decision-making ability of an individual and determines whether he or she is generally and consistently incapable of caring for his or her personal needs and financial affairs. Several statutory definitions inform the magistrate court's determination of competency and, under the doctrine of pari materia, inform this Court's interpretation of the statutes at issue here.

First, an "incapacitated person" is one "who is impaired ... to the extent that he lacks sufficient understanding or capacity to make or communicate responsible decisions concerning his person ..." I.C. § 15–5–101(a). "Incapacity" is the legal disability of one "likely to suffer [ ] substantial harm due to an inability to provide for his personal needs for food, clothing, shelter, health care, or safety, or an inability to manage his or her property or financial affairs." I.C. § 15–5–101(a)(1). Further, "[i]solated instances of simple negligence or improvidence, lack of resources, or any act, occurrence, or statement ... [that is] the product of an informed judgment [ ] shall not constitute evidence of inability to provide for personal needs or to manage property." I.C. § 15–5–101(a)(3). Rather, a judicial finding of incapacity must be supported by evidence of "acts or occurrences, or statements which strongly indicate imminent acts or occurrences ... [that] occurred within twelve (12) months prior to the filing of the petition for guardianship or conservatorship." I.C. § 15–5–101(a)(2). Thus, a judicial finding of incapacity and appointment of guardian must be supported by evidence of multiple events that demonstrate the individual's inability to care for his basic needs, property, and financial affairs, such that appointment of a guardian who is capable of making those decisions in his stead is justified.

These definitions support a plain reading of Idaho Code § 32–108, as does longstanding Idaho precedent. In 1925, this Court approvingly quoted the Colorado Supreme Court's statement that because one was adjudicated incompetent, her "contract and [ ] deed were absolutely void.... ‘To compromise a suit instituted to set aside such a void deed is to nullify the statute. It is by judicial decree to inject life and vitality into an instrument which the law imperatively prohibits as contrary to public policy.’ " Miles v. Johanson, 40 Idaho 782, 787, 238 P. 291, 292 (1925) (quoting Rohrer v. Darrow, 66 Colo. 463, 182 P. 13, 15 (1919) ).

This Court recognizes the individual's interest in the right to contract, and in Fleming v. Bithell we held that a summary civil commitment proceeding, as then conducted, was "not a conclusive judicial...