Stephenson v. Warren, NO. COA99-13, 525 S.E.2d. 809, (2000), is a recent case that illustrates the considerations involved in an attempt to void a conveyance executed by a grantor with questionable competency. It is not unusual for us to receive inquiries from attorneys concerning prospective grantors in assisted living facilities. This case may prove helpful in analyzing such situations in order to make decisions on how best to proceed.

In Stevenson the plaintiff, grantor brought an action to set aside a deed that conveyed a 16-acre tract of land and residence ("the property") to the Wake Forest Baptist Church ("the church"). After filing the complaint, but before trial, Stevenson died and her executor was substituted.
Plaintiff appealed from the trial court’s order granting defendants' motion for summary judgment. In early 1994, plaintiff left the property to reside at the Wake Forest Rest Home. She executed a power of attorney designating Linwood Stevenson as her attorney-in-fact. On August 11, 1995, plaintiff executed as grantor an unrecorded "Offer to Purchase and Contract" for a 12.44-acre tract of the property to Ten Oaks Partners. Evidence submitted for the hearing showed that in early 1996, the plaintiff's mental health began to decline, and she was lucid only part of the time. In April 1996, a general warranty deed was recorded in the name of the plaintiff, as grantor, conveying the property to the church and reserving a life estate. The deed was executed by plaintiff at the Wake Forest Rest Home with two witnesses present, as well as an attorney, all being members of the defendant church. Plaintiff had never hired the attorney to perform any legal services, and he was not acting as her attorney in this transaction. Plaintiff's attorney-in-fact was not present at the execution of the deed, and he was not given prior of the transaction. No consideration was ever tendered or paid to or for plaintiff.

The Court focused on plaintiff’s argument of her claim for undue influence in granting a partial reversal and remand. The Court defined undue influence as "the exercise of an improper influence over the mind and will of another to such an extent that his professed act is not that of a free agent, but in reality is the act of the third person who procured the result." citing Lee v. Ledbetter, 229 N.C. 330, 332, 49 S.E.2d 634, 636 (1948). The opinion points out that although "there is no definitive test for establishing undue influence, several factors have been identified as bearing on the question, including:
1. Old age and mental weakness of a party executing the instrument.
2. That the instrument is different from and revokes a prior instrument.
3. That the instrument favors one of no blood relation.
4. That the beneficiary has procured its execution.
5. That it disinherits the natural objects of the grantor's bounty.
6. That the person signing the paper is in the home of the beneficiary and subject to his constant association and supervision.
7. That others have little or no opportunity to see the grantor.
Caudill v. Smith, 117 N.C. App. 64, 66, 450 S.E.2d 8, 10 (1994), disc. review denied, 339 N.C. 610, 454 S.E.2d 247 (1995)."

The Court concluded that the evidence supporting plaintiff's claim tended to show that on the date of the deed's execution, the plaintiff was eighty-seven, her mental health had begun to fail noticeably and it contravened the prior contract of sale with Ten Oaks Partners. Further, defendants alone procured the deed's execution, with neither attorney nor family were present on behalf of plaintiff. As a result, "plaintiff's forecast of evidence demonstrates facts which would satisfy several of the factors bearing on undue influence. The motion for summary judgment on the issue of undue influence was erroneously granted."

The practical result of the holding in this case is a laundry list that provides a basis for analyzing transactions where a grantor is inconsistently lucid but is not clearly incompetent. Unfortunately, there is no bright line rule to tell us good from bad. When the issue arises, we recommend additional investigation to determine if closing without a special proceeding is an acceptable insurance risk. Factors to be considered include; whether the grantor’s heirs concur in the transaction, whether the consideration appears adequate and is to be paid to the grantor, whether the grantor’s physician is willing to be present at execution and state an opinion as to competency and whether the transaction favors one heir to the detriment of the others.