The Arkansas Court of Appeals affirmed the Drew County Circuit Court's decree that set aside two special warranty deeds transferring forty-nine acres of land from Wiley Ballow to Jack and Cindy Bennett. The court found that Ballow lacked the mental capacity to execute the deeds, or that the transfers resulted from undue influence and constructive fraud. Ballow, aged ninety-one, was hospitalized following a car accident in December 2017, during which he executed the deeds—one on December 26, 2017, and another correcting a legal description error on December 31, 2017. Both deeds were executed in consideration of one dollar and assistance provided by Bennett. The second deed was recorded on January 5, 2018. Testimony from Sherry Knight, who befriended Ballow, revealed that he expressed confusion over the transfer, believing he was only authorizing Bennett to manage his property during his hospitalization, rather than transferring ownership.
Ms. Burch testified that Mr. Ballow initially did not remember signing any documents regarding his property and struggled to understand the deed's implications until she and Ms. Knight clarified that he might lose ownership if his signature was present. Although Mr. Ballow acknowledged his signature on the deed, he could not connect it to a specific event. He later remembered signing something in the hospital but insisted he would not willingly give away his property, expressing intentions to bequeath it to a family member in Texas.
Subsequently, with Ms. Knight's help, Mr. Ballow filed a petition on April 12, 2018, to set aside the warranty deed, claiming it resulted from constructive fraud, undue influence, and unilateral mistake. In an accompanying affidavit, he stated that he executed the deed around December 31, 2017, at Jack Bennett's request while he was hospitalized with serious injuries, believing it was a temporary measure for Jack to manage his property.
The Bennetts admitted that Mr. Ballow signed the deed in the hospital but contended that he requested the preparation of the deed as a reward for their years of assistance to him, which included various forms of help like home maintenance and financial support. They claimed that external parties interfered with their relationship and expressed willingness to return the property to Mr. Ballow upon receiving a written demand from him, asserting that he was not under any undue influence at the time.
The case proceeded to trial on September 3, 2019. During the trial, Mr. Ballow described his long-standing relationship with the Bennetts, noting their assistance over the years, but firmly stated he never promised to give them any of his land. He recounted that Jack visited him in the hospital with a notary and requested his signature on the papers, suggesting they were needed for property management while he recovered.
Mr. Ballow testified that he never instructed Jack to have a lawyer prepare a deed for transferring his land and expressed uncertainty about whether he signed the relevant documents. He only realized he had transferred the property to Jack after Ms. Knight showed him the recorded special warranty deed dated January 5, 2018. Mr. Ballow noted the land's significant value due to uncut timber and emphasized his desire to control its future ownership, stating he did not want it to go to Jack.
Cindy, a witness, recounted visiting Mr. Ballow shortly after his accident, where he asked her to tell Jack to visit him. She claimed Mr. Ballow expressed regret that his name was not included on the deed after signing it, although he later did not remember these conversations and was surprised to learn of the land transfer.
Ms. Bennett highlighted her long-standing friendly relationship with Mr. Ballow, including regular visits and assistance during his hospitalization and recovery. Jack Bennett testified that he prepared the deed after learning from his family that Mr. Ballow wanted to discuss his land. During a visit to the hospital, Mr. Ballow, who stated he was 91 and would not need the land much longer, consented to the transfer. Jack read the first deed to Mr. Ballow, who signed it, and later returned with a corrected deed due to legal discrepancies, though he could not confirm if Mr. Ballow read it or if it was read to him. Jack noted that Mr. Ballow appeared happy and engaged during the signing process and emphasized their long history of friendship and mutual assistance.
Mr. Bennett testified about his longstanding assistance to Mr. Ballow, including washing clothes, grocery shopping, and providing food, stating his actions were not motivated by expectation of return. He noted he had not interacted with Mr. Ballow since the lawsuit was filed, but his wife continued to check on him. During cross-examination, Mr. Bennett explained the execution of two warranty deeds with lawyer Jenny Lemoine, stating they met on December 26 and December 31 in different rooms due to Mr. Ballow's transfer to a rehab wing on December 28. He requested his lawyer to prepare the deed quickly, considering Mr. Ballow's advanced age of 91.
Lemoine, who is Mr. Bennett's maternal uncle, accompanied him to the hospital as a notary, responding to Mr. Bennett's request due to the unavailability of notaries during the holidays. She was initially unaware of the deed's content but observed Mr. Ballow reading the deed and appearing cognitively competent and alert. She noted that Mr. Ballow was cordial and seemed to understand the nature of the transaction, expressing pleasure when informed that his heirs would include Cindy.
Nicki Thornton, a licensed master social worker assessing patients at JRMC, testified about Mr. Ballow's capacity to sign legal documents. She confirmed he signed Medicare paperwork and demonstrated understanding during the process, although she noted that other legal documents require the approval of Dr. Frigon, the medical director. Thornton recalled the Bennetts seeking a notary and informed them that Mr. Ballow's competence needed confirmation from Dr. Frigon before signing any documents. Mr. Bennett ultimately bypassed this protocol when Mr. Ballow signed the corrected warranty deed on December 31.
A notary public at the hospital required permission from Dr. Frigon to sign any documents for Mr. Ballow, who was deemed incompetent by his rehabilitation team, including Ms. Thornton, due to confusion and comprehension issues. Ms. Thornton noted that Mr. Ballow often needed repeated explanations and sometimes did not recognize her. Ms. Capps, a speech pathologist, assessed Mr. Ballow's cognitive abilities between December 28 and 29, indicating significant deficits in understanding legal documents. His auditory and visual comprehension scored a four, requiring minimal assistance, while his ability to express basic ideas was between 50% to 74%, reflecting moderate assistance needs. He scored a three for problem-solving, indicating he could solve routine issues with moderate assistance, and an 18 out of 30 on the Mini-Mental State Exam, signaling moderate impairment. Capps concluded that Mr. Ballow lacked the cognitive ability to sign documents, advising against signing a deed for land. However, she believed he could recall information about his property. On September 13, 2019, the circuit court set aside two warranty deeds Mr. Ballow signed in December 2017 and another involving a life estate due to a determination that he was not mentally competent at the time of execution. The court relied on cognitive assessments, witness testimonies, and its own observations of Mr. Ballow’s limited education, hearing difficulties, and poor eyesight in reaching its conclusion.
Mr. Ballow was deemed incompetent to execute special warranty deeds due to diminished mental capacity, comprehension ability, injuries, advanced age, and the gross inadequacy of the purchase price. The court found that he was unduly influenced by Jack Bennett, citing their long-term relationship and the assistance Bennett provided over several years. Additionally, the Bennetts were noted as Mr. Ballow’s caretakers in medical records. The ruling indicated that Mr. Ballow’s injuries and mental incapacity, along with the inadequacy of the transaction, led to an egregious outcome that amounted to constructive fraud. The court criticized Bennett for bypassing formal procedures for signing legal documents, and the resulting actions deprived Mr. Ballow of land ownership without compensation.
The Bennetts appealed, arguing the circuit court failed to properly assess mental incompetence, improperly restricted the admission of medical records as evidence, incorrectly found constructive fraud, and erroneously concluded that Bennett unduly influenced Mr. Ballow. The appellate court reviews equity cases de novo using a clearly erroneous standard, deferring to the circuit court's credibility assessments and factual determinations. The Bennetts raised a fifth point regarding unilateral mistake, but the appellate court found no such finding in the original decree. Mental capacity is presumed, and the burden lies with the challengers to prove incapacity, which is assessed based on the grantor's mental ability at the time of execution.
Sufficient mental ability to exercise reasonable judgment is the legal standard for validating executed instruments. In the absence of fraud, duress, or undue influence, mental weakness, whether due to age or physical infirmities, does not invalidate such instruments. The inquiry into Mr. Ballow's mental capacity during the deed's execution is key, but evidence of his mental state before and after may also be relevant. Contrary to the Bennetts' assertion, the standard for proving mental incapacity is a preponderance of the evidence, not a higher standard of "clear, cogent, and convincing" evidence. Factors like age, health, and price inadequacy may be considered but do not automatically invalidate the deed if it was executed fairly and without undue influence. Each case regarding a grantor’s mental capacity should be assessed based on its unique circumstances. The circuit court erred in ruling that Mr. Ballow's alleged mental incompetence alone justified setting aside the deeds. It failed to evaluate whether he had the capacity to understand his property and the nature of the transaction. Evidence shows that Mr. Ballow was mentally competent at the time of execution; he demonstrated understanding of the deeds, engaged in relevant questions, and was aware of the property details. Although testimony indicated some cognitive impairment, it did not establish his incompetence to execute the deeds, as he was able to articulate knowledge of his property and intentions clearly.
The Bennetts contended that the circuit court improperly excluded two medical records (defendant’s exhibits 1 and 2) on the grounds of inadequate authentication, asserting that the court wrongly accepted Mr. Ballow’s argument that the Medical Records Act's certification procedure was the only authentication method available. They cited Ark. R. Evid. 901(b)(1), indicating that a witness with knowledge could authenticate records. The appellants claimed Ms. Capps, during cross-examination, authenticated the records by stating they were part of the rehab team’s assessment while Mr. Ballow was in her care, and that they accurately represented his medical condition. Mr. Ballow objected to their admission, referencing the Medical Records Act's certification protocols, which the circuit court upheld, allowing cross-examination on the records instead.
Despite acknowledging that the records were likely admissible, the appellate court determined that the circuit court's exclusion did not justify a reversal. The court emphasized that it reviews evidentiary rulings for abuse of discretion and noted uncertainty regarding whether the circuit court excluded the records solely due to authentication issues. The court pointed out that Mr. Ballow’s objection might have included concerns about the records' authenticity and admissibility under the business records exception. The Hospital Records Act allows for the certification of medical records via affidavit, not exclusively requiring live testimony, which the circuit court seemed to misinterpret. Ultimately, while the appellate court recognized the circuit court's error in excluding the records, it did not find sufficient grounds for reversal.
Ark. R. Evid. 803(6) allows a records custodian or qualified witness to testify about records maintained in the regular course of business. Under Ark. R. Evid. 901, records can be authenticated through witness testimony. Ms. Capps provided such testimony, recognizing the documents as authentic and stating her familiarity with them in her role. The circuit court's exclusion of the defendant's exhibits was erroneous due to the Bennetts' failure to certify the documents per the Hospital Records Act, but the evidentiary error did not warrant reversal as it did not prejudice the trial’s fairness. The relevant information contained in the excluded records was adequately elicited through cross-examination.
Regarding the claim of constructive fraud, the Bennetts contended that the circuit court improperly found that the special warranty deeds resulted from constructive fraud due to insufficient evidence on necessary elements. To prove fraud, a plaintiff must demonstrate a false representation of material fact, knowledge of its falsity, intent to induce reliance, justifiable reliance, and resulting damages. Constructive fraud does not require intent to deceive, but rather arises from a breach of duty that tends to mislead others. Clear and convincing evidence is required to establish constructive fraud, and on appeal, the focus is on whether the circuit court's findings are clearly erroneous rather than on the presence of sufficient evidence.
The court determined that it does not require uncontradicted proof and must defer to the circuit court's credibility assessments. At trial, there was conflicting evidence regarding whether Mr. Bennett misrepresented facts to Mr. Ballow about the nature of a deed, with Mr. Ballow asserting that Mr. Bennett claimed the deed was only to manage property while he was hospitalized, while Mr. Bennett contended that Mr. Ballow proposed transferring ownership. The decree did not resolve this conflict or address other elements of constructive fraud, focusing instead on Mr. Bennett's bypassing of procedures related to signing legal documents and the transaction's negative effects on Mr. Ballow. The court viewed this oversight as an error that justified reversing the decree absent evidence of undue influence.
To establish undue influence, the burden lies on the party challenging the deed to demonstrate that they were deprived of their free will through coercion or fear, with the need for clear and convincing proof. The law distinguishes between legitimate influence stemming from affection and malign influence that compromises free agency. Undue influence can be inferred from the case's facts, including the grantor’s mental capacity, which may render them more vulnerable to such influence. In cases of wills, stronger evidence of undue influence is required when the testator's mind is alert compared to when impaired.
In this instance, the circuit court found sufficient evidence of undue influence, noting Mr. Ballow's advanced age, injuries, and diminished mental capacity. Although not deemed mentally incompetent, these factors were significant enough to affect his free will. Additionally, the deeds were prepared by Mr. Bennett's attorney, not anyone representing Mr. Ballow, and Mr. Bennett's actions—visiting Mr. Ballow for execution of the deeds, circumventing signing procedures, and the inadequate purchase price—further supported the finding of undue influence.
The circuit court's decree to set aside the warranty deeds was affirmed. While the court found insufficient evidence for constructive fraud or mental incapacity, it agreed that undue influence was established. The exclusion of medical records was acknowledged as an error, but the appellants did not demonstrate prejudicial impact warranting a reversal. The decision was affirmed, with agreement from judges Abramson and Vaught.
