Mr. Kringle is not sane because he believes himself to be Santa Claus.
6 seconds sound clip from the Miracle on 34th Street (1947) movie soundboard.
You can hear this line at 01:09:35 in the Blu-ray version of the movie.
Quote context
[...]
- Oh, I understood the question perfectly, Your Honor.
- No further questions at this time.
- In view of this statement, do you still wish to put in a defense, young man?
- Mr. Kringle is not sane because he believes himself to be Santa Claus.
- An entirely logical and reasonable assumption, I'm afraid.
- It would be if the clerk here or Mr. Mara or I believed that we were Santa Claus.
- Anyone who thinks he's Santa Claus is not sane.
[...]