The contracts of a person of unsound mind, who has not been judicially declared incompetent, are voidable at his election upon recovering his reason or at the election of his committee or personal representatives or heirs. (Finch v. Goldstein,245 N.Y. 300; Smith v. Ryan, 191 N.Y. 452; Blinn v. Schwarz,177 N.Y. 252; McCarthy v. Bowling Green Storage Van Co.,182 App. Div. 18.) The power of avoiding such a contract may be exercised, at least against the other party thereto, even in the case of an executed contract which is fair and for the benefit of the incompetent and which has been made in good faith and without notice of the incompetency, provided only that the party so executing it can be and is placed in statu quo. (Smith v.Ryan, supra; Riggs v. American Tract Society, 84 N.Y. 330;Mutual Life Ins. Co. v. Hunt, 79 N.Y. 541; McCarthy v.Bowling Green Storage Van Co., supra.) Since defendants herein have offered to replace plaintiff in her original position, their counterclaim for rescission should not
have been dismissed in the absence of a finding that the statusquo cannot be restored.
The reference in Goldberg v. McCord (251 N.Y. 28, 32) to "bona fide purchasers for value without notice of the incompetency" relates to remote grantees and cannot be applied to the immediate parties to the contract.
The judgments should be reversed, and a new trial granted, with costs to abide the event.
LOUGHRAN, Ch. J., LEWIS, CONWAY, DESMOND, THACHER, DYE and FULD, JJ., concur.
Judgments reversed, etc. [See 296 N.Y. 997.]