Ortelere v. Teachers’ Retirement Bd

Citation. 25 N.Y.2d 196, 250 N.E.2d 460, 303 N.Y.S.2d 362, 1969 N.Y. 1673

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Citation25 N.Y.2d 196, 250 N.E.2d 460, 303 N.Y.S.2d 362, 1969 N.Y. 1673

Brief Fact Summary. Grace Ortelere, wife of Plaintiff Mr. Ortelere, elected to take the maximum retirement benefits during her lifetime, leaving Plaintiff, who quit his job to care for Mrs. Ortelere until her death, with no benefits beyond her death. Plaintiff sought to have his wife’s election voided on the ground of mental incompetence.

Synopsis of Rule of Law. A person entering into a contract by reason of mental illness incurs only voidable contractual duties provided he cannot act in a reasonable manner and the other party had reason to know of his condition.

Points of Law - Legal Principles in this Case for Law Students.

Contracts of a mentally incompetent person who has not been adjudicated insane are voidable.

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Facts. Grace Ortelere, a 60-year-old schoolteacher, suffered a nervous breakdown and went on leave for mental illness. Her psychiatrist suspected that she suffered from cerebral arteriosclerosis. Plaintiff quit his job to care for his wife. In 1965, Mrs. Ortelere obtained a loan from the public retirement system, with which she had an account, in the largest amount possible and made an irrevocable election to take the maximum retirement benefits of $450 a month during her lifetime, which left her husband with no benefits upon her death. Under an earlier election, she received only $375 a month, but Plaintiff would receive the unexhausted reserve upon her death. Two months after the election, Grace Ortelere died, and her husband sued to set aside her election on the ground of mental incompetence.

Issue. Was Grace Ortelere mentally incompetent, rendering her unable to legally make the election she did?

Held. Yes. The general rule is that a person who enters into a contract by reason of mental illness incurs only voidable contractual duties provided that she is unable to act reasonably, and the other party had reason to know of the condition. Here, Mrs. Ortelere’s psychiatrist testified that a victim of involutional melancholia cannot think rationally and make decisions. Defendant either knew or should have known about Mrs. Ortelere’s condition. Hence, her election is voidable.

Dissent. The record indicates that Grace Ortelere indeed could think rationally and had the capacity to contract.

Discussion. The mental incompetence of a contracting party renders the contract voidable for that party, provided the other party knew or should have known of the incompetence.

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