Escareno Ex Rel. Estate of Escareno v. Kindred Nursing Centers West, L.L.C. , 239 Ariz. 126 ( 2016 )

IN THE
ARIZONA COURT OF APPEALS
DIVISION TWO
ARISTEO ESCARENO, PERSONAL REPRESENTATIVE OF THE
ESTATE OF MARIA ESCARENO, ON BEHALF OF THE
ESTATE OF MARIA ESCARENO; AND ARISTEO ESCARENO,
PERSONAL REPRESENTATIVE, FOR AND ON BEHALF OF
MARIA ESCARENO’S STATUTORY BENEFICIARIES
PURSUANT TO A.R.S. § 12-612(A),
Plaintiff/Appellant,
v.
KINDRED NURSING CENTERS WEST, L.L.C.,
A DELAWARE LIMITED LIABILITY COMPANY,
DBA HACIENDA REHABILITATION AND CARE CENTER,
NKA KINDRED NURSING AND REHABILITATION-HACIENDA;
KINDRED HEALTHCARE OPERATING, INC.,
A DELAWARE CORPORATION;
KINDRED HEALTHCARE, INC., A DELAWARE CORPORATION;
JOSEPH CHESNEY, ADMINISTRATOR;
AND PATRICK KINNEY, ADMINISTRATOR,
Defendants/Appellees.
No. 2 CA-CV 2015-0046
Filed January 26, 2016
Appeal from the Superior Court in Cochise County
No. CV201200501
The Honorable Karl D. Elledge, Judge
REVERSED AND REMANDED
ESCARENO v. KINDRED NURSING
Opinion of the Court
COUNSEL
Law Office of Scott E. Boehm, P.C., Phoenix
By Scott E. Boehm
and
Wilkes & McHugh, P.A., Phoenix
By Melanie L. Bossie and Mary Ellen Spiece
Counsel for Plaintiff/Appellant
Quintairos, Prieto, Wood & Boyer, P.A., Phoenix
By Anthony J. Fernandez, Vincent J. Montell, and Rita J. Bustos
Counsel for Defendants/Appellees
OPINION
Presiding Judge Vásquez authored the opinion of the Court, in
which Chief Judge Eckerstrom and Judge Miller concurred.
V Á S Q U E Z, Presiding Judge:
¶1 Aristeo Escareno, as personal representative of the
Estate of Maria Escareno and on behalf of the decedent’s statutory
beneficiaries, appeals from the trial court’s order compelling
arbitration of his claim brought under the Adult Protective Services
Act (APSA) against Kindred Nursing Centers West, L.L.C., Kindred
Healthcare Operating, Inc., Kindred Healthcare, Inc., Joseph
Chesney, and Patrick Kinney (collectively, Kindred). On appeal,
Aristeo argues the arbitration agreement relied on by Kindred was
unenforceable against Maria’s estate because it was not signed by
Maria and he was not authorized to sign the agreement on her
behalf as her agent.1 For the reasons set forth below, we reverse the
court’s order and remand for further proceedings.
1Aristeo also argues the agreement was unconscionable and a
contract of adhesion. Although we have serious concerns about the
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Opinion of the Court
Factual and Procedural Background
¶2 We view the facts in the light most favorable to
upholding the trial court’s order compelling arbitration. 2 Estate of
DeCamacho ex rel. Guthrie v. La Solana Care and Rehab, Inc., 234 Ariz.
18, n.1, 316 P.3d 607, 608 n.1 (App. 2014). Maria Escareno moved
from Oklahoma to Arizona with her adult son, Aristeo, in 2006 or
2007. While in Arizona, Maria suffered a stroke and began to
develop cognitive disabilities. Aristeo then assumed some of her
responsibilities, paying her bills and signing medical documents on
her behalf. However, Maria’s capacity to live independently
continued to deteriorate, and she ultimately was diagnosed with
encephalopathy, cognitive deficits, and “a severe case of dementia.”
At the height of her disability, Maria was coherent at times but had
difficulty remembering who Aristeo was, could not “participate in a
conversation,” and was “childlike.”
¶3 In May 2009, Arizona Adult Protective Services (APS)
opened a case regarding Maria’s care because she had little
assistance or supervision while Aristeo worked during the day. APS
“gave [Aristeo] an ultimatum: Either [he] put her in a home . . . to
take care of her or [he] could also face . . . jail time.” He then had
Maria admitted to three different assisted-living facilities between
October 2009 and April 2010, ultimately choosing Kindred because
“there was no other facilities around that would be able to take her
alternative dispute resolution agreement, because the agency issue is
dispositive, we do not address these arguments.
2Neither party requested, and the trial court did not provide,
written findings of facts or specific conclusions of law in this case.
“In the absence of express findings of fact, we must presume the
court found every controverted issue of fact necessary to sustain the
judgment, providing there was evidence in the record to support the
same.” Helfenbein v. Barae Inv. Co., 19 Ariz. App. 436, 440, 508 P.2d
101, 105 (1973).
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ESCARENO v. KINDRED NURSING
Opinion of the Court
because of her dementia.” 3 At each facility, Aristeo signed the
admission documents on behalf of Maria. And, at Kindred, he also
signed the alternative dispute resolution (ADR) agreement at issue
in this case. It states, in relevant part:
Any and all claims or controversies
arising out of or in any way relating to this
Agreement or the Resident’s stay at the
Facility including disputes regarding the
interpretation of this Agreement, whether
arising out of State or Federal law, whether
existing or arising in the future, whether
for statutory, compensatory or punitive
damages and whether sounding in breach
of contract, tort or breach of statutory
duties . . . , irrespective of the basis for the
duty or of the legal theories upon which
the Claim is asserted, shall be submitted to
alternative dispute resolution as described
in this Agreement.
¶4 Maria died in April 2011, and, the following year,
Aristeo filed the underlying civil action alleging wrongful-death and
APSA claims against Kindred. Kindred filed a motion to dismiss
and to compel arbitration pursuant to the ADR agreement signed by
Aristeo. In his response, Aristeo argued inter alia that he lacked
authority to sign the agreement for Maria and that the wrongful-
death claim was brought on behalf of Maria’s beneficiaries, none of
whom had signed the ADR agreement in their own capacity. In
response to his agency argument, Kindred countered that “Aristeo’s
custom of acting on [Maria’s] behalf [was] enough to prove agency
as a matter of law.”
3 WhenAristeo had Maria admitted at Kindred, the facility
operated under a different name, Hacienda Rehabilitation and Care
Center.
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ESCARENO v. KINDRED NURSING
Opinion of the Court
¶5 The parties submitted a stipulated set of exhibits, and,
after hearing oral argument, the trial court denied the motion as to
the wrongful-death claim, but ordered that the parties submit the
APSA claim to arbitration and stayed the action pending that claim’s
resolution.4 This appeal followed.5 We have jurisdiction pursuant
to A.R.S. § 12-2101(A)(1). See S. Cal. Edison Co. v. Peabody W. Coal Co.,
194 Ariz. 47, ¶¶ 16-20, 977 P.2d 769, 774-75 (1999).
Discussion
¶6 Aristeo argues the trial court erred by compelling
arbitration of the APSA claim because he “had no authority to sign
the ADR agreement” on behalf of Maria. “Generally, whether
agency exists is a question of fact, but when the material facts are not
in dispute, the existence of such a relationship is a question of law
for the court to decide.” Goodman v. Physical Res. Eng’g, Inc., 229
Ariz. 25, ¶ 12, 270 P.3d 852, 856 (App. 2011); see Salvation Army v.
Bryson, 229 Ariz. 204, ¶ 23, 273 P.3d 656, 663 (App. 2012). In this
case, the parties do not dispute the material facts found in their
stipulated set of exhibits, but rather, they dispute the legal
significance of those facts. Our review therefore is de novo. See
DeCamacho, 234 Ariz. 18, ¶ 8, 316 P.3d at 609.
4 SeeDeCamacho, 234 Ariz. 18, ¶ 27, 316 P.3d at 614 (“[A]n
APSA claim is derivative of the decedent’s rights, whereas a
wrongful death claim is independently held by the decedent’s
statutory beneficiaries. Therefore, the APSA claim is brought on
behalf of [the decedent’s] estate by [the] personal representative
. . . .”).
5Initially,Aristeo filed a petition for special action requesting
review of the trial court’s order, which this court declined. Then, at
the request of Aristeo, the trial court amended its order, clarifying
that “[t]here [was] no just reason for delay in the entry of final
judgment on [Kindred’s] Motion to Dismiss and Compel
Arbitration,” thereby making its order appealable pursuant to
Rule 54(b), Ariz. R. Civ. P. See S. Cal. Edison Co. v. Peabody W. Coal
Co., 194 Ariz. 47, ¶¶ 16-20, 977 P.2d 769, 774-75 (1999).
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ESCARENO v. KINDRED NURSING
Opinion of the Court
¶7 “‘[T]he fundamental prerequisite to arbitration is the
existence of an actual agreement or contract to arbitrate.’” Id. ¶ 10,
quoting Schoneberger v. Oelze, 208 Ariz. 591, ¶ 17, 96 P.3d 1078, 1082
(App. 2004); see A.R.S. § 12-1501 (arbitration agreement “valid,
enforceable and irrevocable, save upon such grounds as exist at law
or in equity for the revocation of any contract”). 6 Thus, a defendant
seeking to compel arbitration must show that the plaintiff accepted
the arbitration agreement. See Nationwide Res. Corp. v. Massabni, 134
Ariz. 557, 562, 658 P.2d 210, 215 (App. 1982); see also DeCamacho, 234
Ariz. 18, ¶ 11, 316 P.3d at 610 (“A valid contract is formed when
there is an offer, an acceptance, [and] consideration . . . .”).
Similarly, if the defendant asserts that an agent of the plaintiff
signed the agreement, the defendant bears the burden to show the
person in fact was the plaintiff’s agent and, thus, had authority to do
so. See Goodman, 229 Ariz. 25, ¶ 11, 270 P.3d at 856; see also
Restatement (Third) of Agency § 6.01 (2006) (describing agency
relationship).7
¶8 An agent may have authority to act on behalf of a
principal through either actual or apparent authority. Best Choice
Fund, LLC v. Low & Childers, P.C., 228 Ariz. 502, ¶ 26, 269 P.3d 678,
686-87 (App. 2011). “Actual authority ‘may be proved by direct
evidence of express contract of agency between the principal and
agent or by proof of facts implying such contract or the ratification
thereof.’” Ruesga v. Kindred Nursing Ctrs., L.L.C., 215 Ariz. 589, ¶ 29,
161 P.3d 1253, 1261 (App. 2007), quoting Corral v. Fid. Bankers Life Ins.
Co., 129 Ariz. 323, 326, 630 P.2d 1055, 1058 (App. 1981). Apparent
authority, in contrast, arises when “the principal has intentionally or
inadvertently induced third persons to believe that such a person
6Although our legislature has adopted the Revised Uniform
Arbitration Act, see A.R.S. §§ 12-3001 through 12-3029, we cite to the
statutes governing arbitration agreements at the time of the contract
formation in this case, see § 12-3003(A)(1).
7Arizona generally applies the Restatement of Agency unless
it is contrary to prior precedent. Fid. & Deposit Co. of Maryland v.
Bondwriter Sw., Inc., 228 Ariz. 84, ¶ 30, 263 P.3d 633, 639 (App. 2011);
Cannon v. Dunn, 145 Ariz. 115, 116, 700 P.2d 502, 503 (App. 1985).
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was his agent although no actual or express authority was conferred
on him as agent.” Reed v. Gershweir, 160 Ariz. 203, 205, 772 P.2d 26,
28 (App. 1989). In this case, Kindred conceded below that, when
Maria arrived at its nursing facility, she did not have the capacity to
“intentionally or inadvertently induce[]” the staff into believing
Aristeo was her agent. Id. Thus, apparent authority cannot apply
here. See Ruesga, 215 Ariz. 589, ¶ 30, 161 P.3d at 1261-62. Instead,
the parties focus their arguments on whether Maria had granted
Aristeo actual authority prior to her admission at the Kindred
facility.
¶9 Kindred relies exclusively on Ruesga, 215 Ariz. 589,
¶¶ 29-36, 161 P.3d at 1261-63, to support its position. In Ruesga, the
plaintiff admitted her husband, who was incapacitated at the time,
to an assisted-living facility and signed an ADR agreement on his
behalf. Id. ¶¶ 2-5. The plaintiff later filed multiple claims against
the facility on behalf of her husband’s estate, and the facility moved
to dismiss and compel arbitration. Id. ¶ 6. The trial court initially
denied the motion, “concluding that ‘[t]he arbitration agreement
[wa]s not a valid contract because it [had not been] signed by Mr.
Ruesga or his authorized agent.’” Id. (alterations in Ruesga).
However, later discovery revealed several medical records
indicating “a history of [the plaintiff] acting and making decisions
on [her husband’s] behalf.” Id. ¶¶ 7, 35. Based on these documents,
the court granted the facility relief from the previous ruling and
ordered the parties to resolve the claims through arbitration. Id. ¶ 7.
¶10 On special-action review, this court affirmed. Id. ¶¶ 36,
40. As an initial matter, we noted “‘the degree of proof required to
establish and define the agency relationship’” between spouses is
lower than with non-spouses. Id. ¶ 33, quoting State Farm Mut. Auto.
Ins. Co. v. Long, 16 Ariz. App. 222, 225, 492 P.2d 718, 721 (1972). We
then determined that the newly discovered medical records “not
only constituted circumstantial evidence of an agency relationship,
but arguably contained an express authorization” from the husband
to the wife. Id. ¶ 35. Both the husband and wife had signed one
document, and the husband had “failed to contest [the wife’s]
signature as [his] ‘Agent or Legally Authorized Representative.’” Id.
¶¶ 19, 35; see Restatement § 1.03 cmt. b (“Silence may constitute a
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manifestation when, in light of all the circumstances, a reasonable
person would express dissent to the inference that other persons will
draw from silence.”). In addition, the husband had signed a health
insurance document that authorized the disclosure of health
information to the wife and for her “to make, inter alia, a ‘primary
care physician change,’ or a ‘change in network.’” Id. ¶ 19; see
Restatement § 3.01 (“Actual authority . . . is created by a principal’s
manifestation to an agent that, as reasonably understood by the
agent, expresses the principal’s assent that the agent take action on
the principal’s behalf.”). The facility also submitted medical records
“that indicated [the wife] had controlled [the husband’s] care even
when he was conscious and able to ‘follow some simple
commands.’” Id. ¶¶ 19, 35. Accordingly, this court concluded
“‘there were sufficient facts to show that both [the husband’s]
actions and his wife’s long history of making decisions on his behalf
gave rise to an agency relationship such that [the wife] could bind
her husband to the ADR Agreement.’” Id. ¶ 36.
¶11 We find Ruesga distinguishable. Unlike the spousal
relationship in that case, Aristeo is Maria’s son, and therefore
Kindred’s burden to establish the existence of an agency is higher
than in Ruesga. See id. ¶ 33. More importantly, though, the record
contains no evidence of a manifestation by Maria granting authority
to her son or any “‘facts implying such contract or the ratification
thereof.’” Id. ¶ 29, quoting Corral, 129 Ariz. at 326, 630 P.2d at 1058.
Although Aristeo testified during his deposition that he had signed
documents in other circumstances on Maria’s behalf before her
admission to Kindred’s facility, “[i]t is well settled that the
declarations of an agent are insufficient to establish the fact or extent
of his authority.” Jolly v. Kent Realty, Inc., 151 Ariz. 506, 512, 729 P.2d
310, 316 (App. 1986).
¶12 For example, Aristeo testified that Maria had not
handled her own financial matters since 2007. But, during his
deposition, Aristeo stated he was not “on her [bank] account,” and,
when asked how he acted on her behalf, he explained:
Well, everybody [at the bank] knew
us, because I would bring her to the bank,
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take her here or there. And I guess just—
you know, I would take mom with me
when I would go get that set up.
Then when I realized that mom
couldn’t do much for herself, I asked—we
talked to the banker, and they set it up to
where if I had to go and pay her rent or
stuff, I could get it out of her account and
put it towards that.8
He also clarified that, “[o]ut of her money, [he] would only pay for
her rent,” and that he was “providing all [other] financial support
for [Maria].” This testimony does not amount to a manifestation by
Maria showing that she had “failed to contest” Aristeo’s acts on her
behalf. Ruesga, 215 Ariz. 589, ¶ 35, 161 P.3d at 1263. Moreover,
because Aristeo’s assistance apparently increased as Maria’s
capacity to handle these matters decreased, it is questionable
whether she even had the capacity to grant authority to her son.9 Cf.
Golleher v. Horton, 148 Ariz. 537, 540-41, 715 P.2d 1225, 1228-29 (App.
1985) (discussing capacity to grant power of attorney).
¶13 Notably, in its answering brief, Kindred does not
dispute evidence in the record that shows Maria experienced
cognitive impairment between the time she suffered a stroke after
8 The record does not include any document from Maria’s
bank showing that Aristeo signed on Maria’s behalf or that Maria
added Aristeo to the account. See Ruesga, 215 Ariz. 589, ¶ 19, 161
P.3d at 1259.
9Similarly, Aristeo argues in his reply brief that, even if Maria
“had created an agency before she became incapacitated . . . , it
would have terminated as a matter of law after she became
incapacitated.” However, this argument was not presented to the
trial court, or in the opening brief, and we therefore will not address
it here. See Romero v. Sw. Ambulance, 211 Ariz. 200, ¶ 6 & n.3, 119
P.3d 467, 470-71 & n.3 (App. 2005) (issues raised for first time on
appeal waived).
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Opinion of the Court
arriving in Arizona and when she was actually diagnosed with “a
severe case of dementia” in 2009. And, in any event, even when we
presume Maria was capable of creating an agency relationship, see
Golleher, 148 Ariz. at 541, 715 P.2d at 1229 (describing presumption
of competence), Aristeo’s testimony that he transferred money from
her bank to pay her bills, by itself, does not amount to circumstantial
evidence that Maria actually created such a relationship, see State
Farm, 16 Ariz. App. at 225, 492 P.2d at 721 (actual agency created by
“‘spoken words or other conduct of the principal’”), quoting
Restatement (Second) of Agency § 26 (1958). Moreover, even if his
testimony was sufficient evidence of an actual, implied agency, its
scope does not suggest a broad agency relationship but, rather,
appears limited to the transfer of money for the purpose of paying
bills. See Restatement § 2.02 (“Scope of Actual Authority”);
Restatement § 3.11 cmt. c (not reasonable to assume agent has
lingering authority when “agent’s authority was limited . . . to a
specific undertaking”); cf. Higgins v. Assmann Elecs., Inc., 217 Ariz.
289, ¶ 29, 173 P.3d 453, 461 (App. 2007) (discussing factors to apply
when considering scope of agency).
¶14 Kindred also asserts Aristeo “would bring [Maria] to
medical appointments and execute all the documents for his mother
when she was mentally capable of handling her own affairs.” The
entire testimony on which it relies, is as follows:
Q. . . . When you went to the
doctor’s office with your mother, did you
fill out whatever paperwork was presented
by the doctor’s office?
....
A. Yes, I would fill them out,
because she—you know, her eyesight
wasn’t so great. I would just do it because
a lot of times when she had to go in to the
doctor, if it was like real bad where she
couldn’t sign for herself, I’d ask if I could
sign for her, because I was her—I let them
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know that I was the only person there to
take care of her. And if she didn’t get the
treatment, then, you know . . . .
Q. . . . So you told her doctor’s office
that you were taking responsibility for her?
A. Yes.
Later in his testimony, Aristeo also explained:
Q. . . . The time came when your
mom was no longer capable of handling
her own affairs. That . . . time came here in
Arizona, correct?
A. Yes.
Q. It was sometime around that
period when a health care provider told
you that your mom had severe dementia,
correct?
A. Yes.
Q. Was it around that time that you
began signing for your mom at health care
providers’ offices?
A. Yes.
¶15 Like Aristeo’s testimony regarding Maria’s financial
affairs, we cannot say this testimony establishes a manifestation of
assent by Maria, even if we presume she was competent at that time.
See Ruesga, 215 Ariz. 589, ¶¶ 19, 35, 161 P.3d at 1259, 1263; Golleher,
148 Ariz. at 541, 715 P.2d at 1229; Restatement §§ 1.03, 3.01. Nor can
we treat Aristeo’s initiative in taking care of his mother’s health
needs as circumstantial evidence of an agency relationship. As we
explained in Ruesga, although signing medical documents could
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“arguably lend support to the determination that [Maria] had
intended [Aristeo] to act as [her] agent, [he] had statutory authority
‘to make health care decisions’” to the extent she was “‘unable to
make or communicate’ such decisions, even absent any agency
authority.” Ruesga, 215 Ariz. 589, n.7, 161 P.3d at 1263 n.7, quoting
A.R.S. § 36-3231(A).10 Thus, we cannot “rely on those documents to
determine an agency relationship.” Id.
¶16 We recognize, as a general matter, that the elderly very
well may rely on others to meet their needs as their health
deteriorates. But a pattern of care-giving alone is insufficient to
create an agency relationship, particularly in the absence of any
evidence showing a manifestation of assent on the part of the elderly
person. Accordingly, the record here does not show that Aristeo
had authority to sign the ADR agreement on behalf of Maria when
she was admitted to Kindred, see Goodman, 229 Ariz. 25, ¶ 11, 270
P.3d at 856, and, in turn, Maria’s estate is not bound by that
agreement, see Nationwide Res. Corp., 134 Ariz. at 562, 658 P.2d at 215.
Therefore, the trial court abused its discretion in finding facts
sufficient to establish an agency relationship and thus granting
Kindred’s motion to dismiss and compel arbitration of the APSA
claim. See DeCamacho, 234 Ariz. 18, ¶ 8, 316 P.3d at 609.
Disposition
¶17 For the foregoing reasons, we reverse the trial court’s
order compelling arbitration and remand for further proceedings.
10 Section 36-3231(A) provides that, “[i]f an adult patient is
unable to make or communicate health care treatment decisions,” a
health care provider must consult a surrogate. Subsection (A)(2) of
the statute specifies that the surrogate may be an adult child, and
“[i]f the patient has more than one adult child, the health care
provider shall seek the consent of a majority of the adult children
who are reasonably available for consultation.” In this case, Maria’s
adult children had “consent[ed] and agree[d] that [Aristeo] should
be her financial and medical decision-maker.” See § 36-3231(A)(2).
12