The Trusted Adviser May 2010 | Volume 3 • Number 5



Mental Capacity; Undue Influence

Nichols v Estate of Tyler, 910 NE2d 221 (Ind Ct App, 2009).

Facts:Ernest Tyler had a history of mental illness and was cared for by his siblings late in his life. When his siblings could no longer care for him, they asked Tyler's neighbor and friend, James Nichols, to care for Tyler. In October 2001, Tyler signed a Durable Power of Attorney making Nichols his attorney in fact. In March 2002, Tyler signed a revocable living trust making Nichols the trustee and Tyler the sole beneficiary. The trust property was Tyler's 124 acre farm and farmhouse valued at approximately $1.5 million. On February 8, 2005, Tyler signed a contract that directed Nichols to sell the trust property to himself, leaving Tyler a life estate in the property and paying Tyler $200 a month for the rest of his life.

In July 2005, Tyler's family tried to contact him, but Nichols refused them access to Tyler. Tyler's family contacted the sheriff who forced Nichols to let the family into Tyler's home. Tyler and his living conditions were unsanitary; subsequently, the family sought guardianship of Tyler. On August 2, 2005, Tyler was diagnosed by a Dr. Lucena as incapacitated by Alzheimer's Disease, which he probably had suffered from for about one year.

Tyler died on January 6, 2006. In 2008, the family successfully challenged the formation of the trust and the contract for sale of Tyler's land to Nichols on the grounds that Tyler was mentally incompetent when he signed them and Nichols exerted undue influence over Tyler. Nichols appealed on both grounds

Holding:Affirmed. The court applied a "clearly erroneous" standard of review for the trial court's decision. First, Nichols unsuccessfully challenged the trial court's conclusion that Tyler was incompetent when he signed the February 8, 2005, contract of sale based on Dr. Lucena's testimony and deposition. The court instead concluded that Dr. Lucena testified as to Tyler's condition with a reasonable degree of medical certainty based on his medical history and the August 2, 2005, examination. Extensive evidence of Tyler's condition and behavior were also introduced at trial on which the court based its decision. On this ground, the trial court's holding of mental incompetence was not clearly erroneous.

Second, Nichols argued that insufficient evidence existed to prove that he ever influenced Tyler to form the trust. However, the court cited the presumption of undue influence raised by Nichols' fiduciary relationship with Tyler as his attorney in fact. That presumption was strengthened by Nichols' constant access to Tyler, Nichols' failure to inform Tyler's family of his activities and well-being, and the extreme one-sidedness of the exchange of a $1.5 million farm for $200 a month for life. This circumstantial evidence was sufficient to prove that Nichols exerted undue influence and the trial court's decision was not clearly erroneous.

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[Last update: 4-23-10]