## Facts

- Beginning in late 2000, Hermina Brunson received ongoing mental-health treatment, including monthly psychiatric treatment from Dr. Arthur Lewis at a hospital and biweekly psychological treatment.
- Dr. Lewis diagnosed Brunson with chronic paranoid-type schizophrenia.
- By late 2001, Brunson was experiencing cognitive impairment, memory loss, and diminished ability to function; she also had auditory hallucinations and delusions, including a persistent belief that she was losing or had lost the deed to her home.
- Around the same period, Brunson was reportedly extremely anxious and fearful of her brother, Joseph Brunson; Dr. Lewis observed their interactions and believed Joseph was mistreating her.
- Brunson owned her home, and she later transferred the deed so that she and Joseph held title as joint tenants.
- After the deed transfer, Brunson and Joseph entered into a reverse-mortgage transaction with Freedom Financial Senior Funding Corp. (Freedom Financial) for $300,000.
- On June 20, 2003, Brunson and Joseph entered into a second reverse-mortgage transaction for $375,000, which paid off the first reverse mortgage and left only the second mortgage outstanding.
- Foreclosure proceedings were later commenced on the home and were stayed in 2009 while a guardianship proceeding was pending.
- In the guardianship matter, a court-appointed guardian sought an order setting aside the deed transfer and vacating the reverse mortgages, arguing that Brunson lacked capacity when she executed the transactions and that the proceeds were used for Joseph’s benefit rather than Brunson’s.
- Freedom Financial appeared and argued that Brunson had capacity. As support, it submitted a certificate signed by Rosa Colarte stating that Brunson received telephone counseling before the June 2003 reverse-mortgage closing, but Colarte was not produced to testify about the counseling or Brunson’s understanding.

## Issues

1. Whether Hermina Brunson had sufficient mental capacity, at the time of execution, to transfer the deed to her home into a joint tenancy with her brother and to enter into the reverse-mortgage transactions.
2. Whether a lender’s certificate stating that the borrower received telephone counseling—without testimony from the counselor regarding the counseling and the borrower’s comprehension—was sufficient to show that Brunson understood the nature and consequences of the reverse-mortgage transaction(s).
3. Whether, in the guardianship proceeding, the court should set aside the deed transfer and vacate the reverse mortgages based on lack of capacity (and related evidence that the transactions benefited the brother rather than Brunson).

## Decision

- The court credited the medical evidence, including Dr. Lewis’s diagnosis and observations of Brunson’s schizophrenia, cognitive decline, hallucinations, and delusional thinking, as bearing directly on her ability to understand property and borrowing transactions during the relevant period.
- The court found that Brunson lacked capacity to understand the nature and consequences of the deed transfer and the reverse-mortgage transactions.
- The court rejected Freedom Financial’s reliance on the telephone-counseling certificate as sufficient proof of comprehension where the counselor did not testify and the record did not otherwise establish what was explained or what Brunson actually understood.
- The court granted the guardian’s application to set aside the challenged real-estate and reverse-mortgage transactions, thereby vacating the reverse mortgages and undoing the deed transfer as executed without capacity.

## Legal Principles

- Capacity to execute a deed or mortgage depends on whether the person understood the nature and consequences of the transaction at the time it was made; the analysis is time-specific and transaction-specific.
- Long-term treating-physician evidence regarding serious mental illness and functional impairment may be persuasive on the question of capacity, especially when tied to the period in which the transactions occurred.
- A paper certification that counseling occurred—standing alone and without testimony from the counselor—may be given little weight on the question whether a borrower actually understood a complex loan transaction.
- In an Article 81 guardianship context, the court may grant relief to protect an incapacitated person and the person’s property by setting aside conveyances and loan transactions shown to have been executed without capacity, particularly where the record indicates the transactions served a third party rather than the protected person.

## Conclusion

In *In re Doar (Brunson)*, the Supreme Court of New York County set aside Brunson’s deed transfer and vacated the reverse mortgages after finding that, due to documented schizophrenia and cognitive impairment, she lacked capacity to understand the nature and consequences of those transactions; the lender’s telephone-counseling certificate, without the counselor’s testimony, did not establish that Brunson comprehended the reverse-mortgage agreement.


In re Doar (Brunson), 900 N.Y.S.2d 593 (2009)