Washburn v. Northern Health Facilities, Inc. ( 2015 )

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2015 PA Super 168SHIRLEY WASHBURN, ADMINISTRATRIX IN THE SUPERIOR COURT OF
OF THE ESTATE OF DONALD PENNSYLVANIA
WASHBURN,
Appellee
v.
NORTHERN HEALTH FACILITIES, INC.;
EXTENDICARE HEALTH FACILITIES,
INC.; EXTENDICARE HEALTH SERVICES,
INC.; EXTENDICARE HEALTH NETWORK,
INC.; EXTENDICARE HOLDINGS, INC.;
EXTENDICARE, INC.; EXTENDICARE
REIT; EXTENDICARE, L.P.,
Appellants No. 1118 MDA 2014
Appeal from the Order Entered June 9, 2014
In the Court of Common Pleas of Schuylkill County
Civil Division at No(s): S-399-13
BEFORE: BOWES, DONOHUE AND ALLEN, JJ.
OPINION BY BOWES, J.: FILED AUGUST 07, 2015
Northern Health Facilities, Inc., d/b/a Tremont Health & Rehabilitation,
an Extendicare entity (collectively “Tremont”), appeals from the June 9,
2014 order overruling preliminary objections in the nature of a petition to
compel arbitration. After careful review, we affirm.
On March 4, 2011, Donald Washburn (“Mr. Washburn” or “Decedent”)
was transferred via ambulance from the East Orange Veterans’
Administration Medical Center to Tremont. Shirley Washburn, his wife,
drove behind the ambulance. Upon arrival at Tremont, nursing home
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personnel pulled Mrs. Washburn aside to sign the paperwork to enable her
husband’s admission to the facility. The staff member assisting her was not
the usual intake person. When Mrs. Washburn advised her that she did not
have power of attorney for her husband, the staff person insisted that all the
paperwork had to be signed prior to his admission.
Among the documents executed by Mrs. Washburn was a stand-alone
“Alternative Dispute Resolution Agreement” (“ADR agreement”) between
Extendicare, on behalf of its affiliates and subsidiaries including Tremont,
and the Resident Donald Washburn. Mr. Washburn did not sign the ADR
agreement. Mrs. Washburn signed next to the “Xs” placed by Tremont staff
on the lines for “Legal Representative for Healthcare Decisions” and “Legal
Representative for Financial Decisions.” ADR Agreement, 3/4/11, at 5.1 Mr.
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1
Mrs. Washburn signed numerous documents in various representative
capacities. She signed a “Responsible Party Agreement” on the line
designated for the legal representative of the resident. That Responsible
Party Agreement provided: “It is Center policy that this form must be
presented to and signed by someone other than the Resident.” Responsible
Party Agreement, 3/4/11, at 1. She also signed the Admission Agreement,
an agreement between the Center and Mr. Washburn, as the legal
representative for both healthcare and financial decisions. On the form
giving permission to Tremont to hold and safeguard funds, Mrs. Washburn
signed as the “patient representative.” She signed the form authorizing the
expenditure of personal funds as the “resident representative.” The
Resident Trust Fund Authorization form bears her signature as “Legal
Representative for Financial Decisions,” although the adjacent line for the
legal representative’s title, such as POA or guardian, is blank. On several
occasions, Mrs. Washburn requested copies of the documents she signed,
but Tremont did not provide them.
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Washburn remained a resident at Tremont until April 28, 2011. He never
regained mental competency before his death on March 1, 2012.
On March 1, 2013, Shirley Washburn filed the within survival action in
her capacity as Administratrix of the Estate of Donald Washburn, and alleged
that Tremont’s facility was negligently understaffed and mismanaged and
unable to meet the Decedent’s needs. She averred that Tremont’s care
violated the Neglect of a Care/Dependent Person Statute, 18 Pa.C.S. § 2713,
and the Older Adults Protective Services Act, 35 P.S. § 10225.101 et seq.
She also maintained that, due to Tremont’s failure to provide sufficient food,
water, medication and overall care, Decedent became dehydrated,
contracted pneumonia, urinary and respiratory infections, and sepsis, all of
which contributed to his death.
Tremont filed preliminary objections to both the original and amended
complaints seeking to compel arbitration of the claim pursuant to the ADR
agreement signed by Mrs. Washburn in her representative capacity on behalf
of her husband. The trial court ordered discovery on the enforceability of
the arbitration agreement, and, following argument and the submission of
briefs, the trial court overruled the preliminary objections. Tremont filed the
within appeal and complied with the trial court’s order to file a Pa.R.A.P.
1925(b) concise statement of errors complained of on appeal. Tremont
presents five issues for our review, which we have re-reordered for ease of
disposition:
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1. Whether the Court committed reversible error in concluding
that Mrs. Washburn did not have authority to sign the ADR
Agreement on her husband’s behalf.
2. Whether the Court committed reversible error when it
concluded that Plaintiff was not equitably estopped from
attempting to disavow the ADR Agreement she signed on her
husband’s behalf after she agreed to a full range of other
contractual undertakings, and pursuant to her agreements as
evidenced by her signature on his behalf, her husband
received the full panoply of nursing home goods and services
to be paid for, again as a result of Mrs. Washburn’s
agreement and signature, by Medicare and then Medicaid.
3. Whether the Court committed reversible error in concluding
that Mr. Washburn was not a third party beneficiary of the
ADR agreement signed for his benefit by his wife.
4. Whether the Court committed reversible error in concluding
that the Federal Arbitration Act did not mandate enforcement
of the ADR Agreement Mrs. Washburn signed on her
husband’s behalf.
5. If arbitration is ordered as a result of this appeal, should the
order concerning the remaining preliminary objections be
vacated so that those issues can, consistent with the enforced
ADR Agreement, be presented for decision to the arbitrator.
Appellants’ brief at 2-3.
Our scope and standard of review of a claim that the trial court erred
in overruling a preliminary objection in the nature of a motion to compel
arbitration is whether there has been an abuse of discretion and whether the
trial court's findings are supported by substantial evidence. Taylor v.
Extendicare Health Facilities, Inc., 113 A.3d 317, 320 (Pa.Super. 2015).
We employ a two-part test to determine whether the trial court should have
compelled arbitration: 1) whether a valid agreement to arbitrate exists, and
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2) whether the dispute is within the scope of the agreement. Pisano v.
Extendicare Homes, Inc., 77 A.3d 651, 654 (Pa.Super. 2013); see also
Elwyn v. DeLuca, 48 A.3d 457, 461 (Pa.Super. 2012) (quoting Smay v.
E.R. Stuebner, Inc., 864 A.2d 1266, 1270 (Pa.Super. 2004)).
At issue herein is whether a valid agreement to arbitrate existed. It is
undisputed that the Mr. Washburn had dementia and lacked the capacity to
execute the arbitration agreement. Mrs. Washburn signed as the designated
legal representative for healthcare and financial decisions, but she did not
have her husband’s power of attorney and she had not been appointed his
guardian and she communicated that to Tremont’s employee. Thus, the
question is whether Mrs. Washburn had the authority, apparent or
otherwise, as her husband’s agent, to legally bind him and his estate to
arbitrate claims arising from his stay at Tremont.
Tremont, the party asserting agency, has the burden of establishing an
agency relationship. Basile v. H & R Block. Inc., 761 A.2d 1115, 1120
(Pa. 2000). “The basic elements of agency are the manifestation by the
principal that the agent shall act for him, the agent's acceptance of the
undertaking and the understanding of the parties that the principal is to be
in control of the undertaking.” Bradney v. Sakelson, 473 A.2d 189, 191
(Pa.Super. 1984) (quoting Restatement (Second) of Agency, § 1, Comment
b (1958)). “An agency relationship may be created by any of the following:
(1) express authority, (2) implied authority, (3) apparent authority, and/or
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(4) authority by estoppel.” Walton v. Johnson, 66 A.3d 782, 786
(Pa.Super. 2013).
Express authority exists where the principal deliberately and
specifically grants authority to the agent as to certain matters.
Implied authority exists in situations where the agent's actions
are "proper, usual and necessary" to carry out express agency.
Apparent agency exists where the principal, by word or conduct,
causes people with whom the alleged agent deals to believe that
the principal has granted the agent authority to act. Authority by
estoppel occurs when the principal fails to take reasonable steps
to disavow the third party of their belief that the purported agent
was authorized to act on behalf of the principal.
Walton, supra at 786 (citations omitted).
Tremont concedes that Mrs. Washburn had no written express
authority from her husband to act on his behalf generally or with regard to
his admission at Tremont specifically. It contends, however, that the trial
court erred in requiring evidence of specific authorization and maintains that
agency may be implied by attending circumstances. Tremont directs our
attention to the Restatement (Second) of Agency § 22, which provides that
“husband or wife may be authorized to act for the other party to the marital
relationship.” Comment b to the section suggests that one spouse’s custom
or habit in acting for the other may imply the necessary apparent authority.
The identical provision in the Restatement (First) of Agency was cited with
approval in Sidle v. Kaufman, 29 A.2d 77 (Pa. 1942).
Tremont contends that evidence that Mr. Washburn “habitually
permitted Mrs. Washburn to attend to some of his business matters” both
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before and after he became disabled created an implied or apparent agency.
Appellants’ brief at 16. Mrs. Washburn electronically signed their joint tax
returns on his behalf. She also completed his application for Medicaid
benefits and a “Do not Resuscitate” form. Tremont maintains that this
course of conduct distinguishes this case from Lapio v. Robbins, 729 A.2d
1229 (Pa.Super. 1999), where the issue was whether wife was liable for
default on a loan which her husband secured by signing her name. In that
case, there was no express authority conferred. This Court found no spousal
agency because there was no evidence that wife had ever permitted
husband to endorse her name on a check or transact her business affairs or
that she was involved in the business that benefitted from the loan.
The trial court relied on this Court’s decision in Walton, supra, in
refusing to compel arbitration. In that case, a hospital sought to enforce
against a patient, daughter, an arbitration agreement signed by her mother
on daughter’s behalf while daughter was comatose. As herein, the
arbitration agreement was one in a series of documents presented to
mother; mother believed she was signing documents authorizing the hospital
to treat her daughter. Mother did not have a power of attorney and
daughter had not expressly authorized mother to act on her behalf. The
enforceability of the agreement depended on whether mother was acting as
daughter’s agent when she signed the document.
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We concluded that daughter, who was comatose, could neither
authorize her own treatment nor grant such authority to mother. We held,
based on Sidle, supra at 81, that an agency relationship could not be
inferred from “mere relationship or family ties unattended by conditions,
acts or conduct clearly implying an agency.” The hospital had failed to
satisfy its burden of demonstrating an agency relationship. We relied on
deposition testimony from mother and daughter that daughter was unaware
of the arbitration clause, did not agree to arbitrate disputes, and did not
authorize her mother to so agree. Since the documents were not presented
to daughter for ratification when she regained consciousness, and there was
no evidence that she was aware of mother’s consent to arbitrate and
negligently failed to repudiate her mother’s consent, we found no agency by
estoppel. We held that the arbitration agreement was unenforceable as to
daughter.
Tremont attempts to distinguish Walton on two bases: (1) it involved
a mother and adult daughter rather than a husband and wife, and the
Restatement (Second) of Agency § 22 was inapplicable, and (2) there was
no evidence that mother habitually acted as her daughter’s agent. We are
not persuaded that the marital relationship herein warrants a contrary
result. The Restatement (Second) of Agency § 22 does not create a marital
agency, but merely recognizes that due to the relationship, “circumstances
which in the case of strangers would not indicate the creation of authority or
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apparent authority may indicate it in the case of husband or wife.” We find
that may be equally true of a parent/child relationship.
The second basis for distinguishing Walton is without factual support.
The trial court herein found no evidence that Mr. Washburn authorized his
wife to act on his behalf. The trial court found that “Mrs. Washburn’s
testimony was that she believed her husband would have given her authority
to sign tax returns but he became sick and she took it upon herself to grant
herself that authority.” Trial Court Opinion, 6/9/14, at 10. The court relied
upon Turnway Corp. v. Soffer, 336 A.2d 871, 876 (Pa. 1975), for the well-
established proposition that an agent cannot “simply by his own words,”
clothe himself with apparent authority; such authority must come from the
principal.
Furthermore, for purposes of apparent authority, the trial court
reasoned that Tremont did not know at the time it presented Mrs. Washburn
with the admission packet that she had executed tax returns on her
husband’s behalf. It concluded that, “[n]o facts were presented to indicate
that Mr. Washburn by words or conduct led Tremont Nursing Center to
believe Mr. Washburn had granted his wife the authority to sign the
admission paperwork.” Id.The record supports the trial court’s view of the evidence and we find
Walton sufficiently analogous as to be controlling herein. It is well settled
that neither a husband nor wife has the power to act as agent for the other
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merely due to the marriage relationship. Bradney, supra. However, the
law recognizes that, due to the nature of the relationship, there may be
circumstances where one spouse has apparent authority to act for the other.
In Tonuci v. Beegal, 145 A.2d 885, 888 (Pa.Super. 1958) (citing
Restatement, Agency 2d § 22(b)), husband had a power of attorney from his
wife to sign checks. In addition, husband had acted as her agent throughout
the transaction at issue as well as many other transactions. Husband
reported that his wife gave him blanket authority to make whatever financial
arrangements he felt were in her best interest. On those facts, we found
that husband contracted as an agent for his wife.
The flaw in Tremont’s position is that while there is evidence that Mrs.
Washburn previously acted on her husband’s behalf, the record is devoid of
evidence that Mr. Washburn ever authorized his wife to do so. Although
Mrs. Washburn filed a joint tax return, her husband did not authorize her to
fill in his birthdate or social security number for the electronic signature.
Mrs. Washburn believed that he would have authorized her to execute the
tax form had he not been sick. Deposition, Shirley Washburn, 11/13/13, at
26.2 She signed the form declining CPR and extraordinary measures
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2
Mrs. Washburn’s deposition is not contained in the certified record. It is
the responsibility of the appellant to ensure that the certified record is
complete prior to transmittal to this Court. Parr v. Ford Motor Co., 109
A.3d 682, 695 (Pa.Super. 2014) (en banc) (holding under the Pa.R.A.P.
(Footnote Continued Next Page)
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because her husband specifically articulated that he did not want such
measures performed. She did not sign documents because he authorized
her to do so. Id. at 71.
Moreover, the fact that Mrs. Washburn affixed her husband’s signature
to joint tax returns and healthcare forms does not establish that her
husband authorized her to act as his agent in the circumstances herein.
Mrs. Washburn signed the ADR agreement on the lines indicated by an “X”
because a Tremont employee represented that her signature was required
for admission. She signed the application for Medicaid benefits “because
Tremont personnel told her she had to sign it.” Id. at 42. Conspicuously
absent is the authority from the principal to act as his agent. See Turnway
Corp., supra.
In addition, apparent authority exists where a principal, by words or
conduct, leads people with whom the alleged agent deals to believe that the
principal has granted agent authority he or she purports to exercise.
Turner Hydraulics, Inc. v. Susquehanna Constr. Corp., 606 A.2d 532,
_______________________
(Footnote Continued)
1921, any document which is not part of the officially certified record is
deemed non-existent. See also Commonwealth v. Walker, 878 A.2d
887, 888 (Pa.Super. 2005); Fiore v. Oakwood Plaza Shopping Ctr., 585
A.2d 1012, 1019 (Pa.Super. 1991). However, since the transcript is
contained in the reproduced record, and there is no objection to its accuracy,
we may rely upon it. Wmi Group, Inc. v. Fox, 109 A.3d 740, 744 n.5
(Pa.Super. 2015) (citing Commonwealth v. Brown, 52 A.3d 1139, 1145
n.4 (Pa. 2012)).
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535 (Pa.Super. 1992). There were no prior dealings between Mr. Washburn
and Tremont. When the arbitration agreement was signed, Tremont was
unaware that Mrs. Washburn had been signing her husband’s name to some
documents. Thus, it had no basis to infer that she was authorized to act on
his behalf. To the contrary, Mrs. Washburn specifically informed Tremont
that she did not have a power of attorney or guardianship for her husband.
On the record before us, we find no basis to disturb the ruling of the trial
court.
Tremont’s equitable estoppel argument fares no better. Tremont
maintains that, since Mr. Washburn accepted the benefit flowing from his
wife’s agreements on his behalf, namely the services set forth in the
admission agreement, he is estopped to disavow the arbitration agreement
“because his estate finds that one obligation distasteful.” Appellants’ brief at
20 (citing E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber &
Resin Intermediates, S.A.S., 269 F.3d 187, 200 (3d Cir. 2001) and
Friedman v. Yula, 679 F.Supp.2d 617, 627-28 (E.D. Pa. 2010)). The trial
court distinguished DuPont and Friedman because they involved a single
contract containing a mandatory arbitration clause while the arbitration
agreement herein is a stand-alone agreement. Tremont contends that is a
“distinction without a difference.” Appellants’ brief at 20. It directs our
attention to THI of New Mexico at Hobbs Ctr., LLC v. Patton, 2012 WL
112216 (D.N.M. 2012), where the federal district court in New Mexico
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rejected a nursing home resident’s representative’s attempt to disavow an
arbitration agreement while retaining the benefits of the separate admission
agreement.
We agree with the trial court that the distinction is a critical one. In
DuPont, the Court of Appeals for the Third Circuit acknowledged that other
courts had applied equitable estoppel to bind non-signatories to an
arbitration clause when the non-signatory knowingly exploits the agreement
containing the arbitration clause despite having never signed the agreement.
(citing Thomson-CSF, S.A. v. American Arbitration Assoc., 64 F.3d 773,
778 (2d Cir. 1995)). The DuPont court refused, however, to apply the
doctrine in that case as there was no evidence that DuPont embraced the
agreement or received any direct benefit under it.
Similarly, in this case, there is no evidence that the Decedent availed
himself of the ADR agreement or received any benefit under that agreement.
The ADR agreement was separate from the admission agreement and
admission was not conditioned upon agreeing to arbitrate. Thus, the
agreement to arbitrate was not part of the contractual quid pro quo for
admission to the facility and its attendant benefits. Such was not the case in
THI of New Mexico. Although that arbitration agreement was separate,
admission to the facility was contingent upon agreeing to arbitrate. The
arbitration agreement provided: “Resident/Representative understands that
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signing this Agreement to arbitrate is a precondition for medical treatment
or admission to the Health Care Center.” Id. at *2.
Nor do we find any merit in Tremont’s claim that Mr. Washburn’s
estate is required to arbitrate his survival action because he was an intended
third-party beneficiary of the arbitration agreement signed by his wife. Mrs.
Washburn did not sign the ADR agreement in her personal capacity, but in a
representative capacity. Mr. Washburn could not be an intended third-party
beneficiary of a contract to which he was ostensibly a party. In short, there
is no evidence in the writing that the parties intended to confer third-party
beneficiary status upon Mr. Washburn. Burks v. Fed. Ins. Co., 883 A.2d
1086 (Pa.Super. 2005).
Thus, there was no enforceable arbitration agreement under any of the
theories advanced by Tremont. Despite national and state policies favoring
arbitration, a party cannot be compelled to arbitrate in the absence of a valid
agreement to do so under either Pennsylvania law or the Federal Arbitration
Act. See Prima Paint Corp. v. Conklin Mfg. Co., 388 U.S. 395, 404 n.12
(construing the Federal Arbitration Act as designed “to make arbitration
agreements as enforceable as other contracts, but not more so”); Taylor,
supra at 324 (absent an agreement to arbitrate, arbitration cannot be
compelled). Moreover, since we are affirming the trial court’s order
overruling the petition to arbitrate, Tremont’s request that the court’s rulings
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on the other preliminary objections be vacated and addressed by the
arbitrator is moot.
Order affirmed. Case remanded. Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 8/7/2015
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