- Plaintiff’s Own Testimony: Smalley himself testified that “he thought he knew what he was doing when he entered into the transaction.”
- Witness Testimony: Smalley’s wife, his business partner (Bratton), and the escrow attorney (Haile) all testified that Smalley appeared to understand the nature of the transaction on the day the contract was signed.
- Expert Testimony: Psychiatrists testified that Smalley’s judgment was impaired and he felt “invincible,” but they did not state that his fundamental understanding of the deal was gone. The court noted this distinction, stating, “the manic phase of the manic-depressive psychosis does not impair such understanding, but only relates to the motivation.”
Ultimately, the court affirmed the rescission of the contract on separate grounds—that Smalley had not consented to later modifications of the agreement—but it explicitly ruled that he was not mentally incompetent at the time of signing. This shows the court’s preference for finding other legal grounds rather than expanding the definition of incapacity.
