Mary Rushing v. Franklin Hills Health & Rehabilitation Center ( 2014 )

FILED
JAN. 30, 2014
In the Office of the Clerk of Court
W A State Court of Appeals, Division III
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DNISION THREE
MARY RUSHING as the Administrator ) No. 31055-8-III
And on Behalf ofthe Estate ofROBERT )
COON, and MARY RUSHING, )
Individually, )
)
Respondent, )
) UNPUBLISHED OPINION
v. )
)
FRANKLIN HILLS HEALTH & )
REHABILITATION, )
)
Appellant. )
KULIK, J. - The question here is whether the parties should be compelled to
arbitrate their dispute. The trial court refused to order arbitration. We reverse and
remand for a hearing to address whether the arbitration agreement is enforceable.
FACTS
Robert Coon, a 63-year-old fonner attorney with a history of mental illness,
voluntarily admitted himself to Franklin Hills Health and Rehabilitation Center after he
fell and injured himself. During the admission process, Mr. Coon allegedly signed an
alternative dispute resolution (ADR) agreement with Franklin Hills. The ADR applied to
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any and all disputes arising out of or relating to the resident's stay at the center, including
tort, breach of contract, fraud, negligence, wrongful death, departure from any applicable
consumer or safety standards, and a variety of other causes of action. The agreement
stated that the "intent of the Parties" was that the agreement "shall inure to the benefit of,
bind, and survive the Parties, their heirs, successors, and assigns." Clerk's Papers (CP) at
45.
Two months later, Mr. Coon died. Mary Rushing, Mr. Coon's daughter, brought a
wrongful death action against Franklin Hills in her individual capacity and as the
administrator of Mr. Coon's estate. The suit alleged negligence by the nursing staff;
failure of Franklin Hills to properly train, instruct, and supervise its employees; and
violations by Franklin Hills of the vulnerable adult statute.
Franklin Hills moved to compel arbitration of all Ms. Rushing's claims and
produced a copy ofthe signed arbitration agreement. Ms. Rushing opposed the motion,
contending that the arbitration agreement could not be enforced because the signature on
the agreement was not that ofMr. Coon and because Mr. Coon did not have the mental
capacitY to enter into the agreement. As evidence, Ms. Rushing submitted Mr. Coon's
power of attorney, the petition to extend Mr. Coon's LRA (least restrictive alternative),
Mr. Coon's mental health evaluation, an affidavit of Ms. Rushing, the ADR agreement,
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and Mr. Coon's mental health authorization to release medical information. Ms. Rushing
filed an additional affidavit that addressed Mr. Coon's mental state while he was in
Eastern State Hospital and what he would have been capable of understanding when he
entered Franklin Hills.
In reply, Franklin Hills asserted that Mr. Coon signed the agreement and was not
incapacitated at the time of signing. Franklin Hills filed declarations from six Franklin
Hills' staff members who interacted with and evaluated Mr. Coon and their
accompanying records and notes. Franklin Hills also filed declarations from a medical
doctor and a doctor of clinical psychology who both reviewed Mr. Coon's medical
records and concluded that Mr. Coon had a reasonable mental capacity for decision
making at the time of admission to Franklin Hills.
At the hearing, the trial court declined to make a finding on whether the arbitration
agreement was binding or enforceable. It was concerned about the potential facts that
may not be in the record. As a result, the court denied the motion to stay and the motion
to compel arbitration. The court said that it did not intend to strike the arbitration
agreement, but advised the parties that the issue may be raised again in the same format or
through a request for an evidentiary hearing. Specifically, the court stated:
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[THE COURT:] Therefore, what ultimately I am doing here is I am
going to-I'm denying today the motion to stay. I'm denying that based on
the fact that I haven't made a finding as to whether or not the agreement is
binding and enforceable or in existence because I do not believe I can do so
based on the record provided. That doesn't mean I won't come back in the
same format or through a request for evidentiary hearing but I think in
either event that it's going to be necessary for me to have the comfort I need
to go further with this decision.
Any questions?
[MS. RUSHING]: Just so I understand, Your Honor, you're not
clear on either issue, whether it's his signature or the mental competency?
THE COURT: That's true, I have questions on each. No findings
one way or the other.
Report of Proceedings (RP) at 31-32.
The trial court did not order an evidentiary hearing. When asked for direction on
the scope of discovery, the court's answer was vague:
[FRANKLIN HILLS]: ... I think we're going to need direction
from the Court because we would object to all kinds of discovery that don't
go to these issues. That's the very purpose for having an arbitration
agreement is to not do certain types of discovery and to move the case
forward. So I think we're going to need some direction by the Court or
perhaps maybe some suggestions or agreements as to what we could do.
On the other hand, Your Honor, I would think by law we could note
this up for [an] evidentiary hearing.
THE COURT: You could do that and that would be fine. In terms
of direction from the Court, I don't know exactly what you are asking the
Court to give. If in fact the parties enter into some discovery or some
process that one or the other thinks is inappropriate, the only way to address
that for direction would be to understand each party's position on what
direction it should go. But to tell you today which direction to go I think is
presumptive. Maybe I'm missing both but you got a denial on your motion
so it's not stayed and it's not being compelled. That's kind of where you're
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left and I think your direction now is your basic lawyering instincts on what
tactical approach is best suited for your client's best interest. That's vague;
I know it.
RP at 32-33. The trial court did not limit the scope of discovery to the issues of whether
or not Mr. Coon signed the agreement or was competent. The trial court stated that it was
not in a position to put limits on the discovery because it needed to know more about the
merits of the argument. The court suggested that the parties come up with their own
discovery agreement that the court would resolve any arguments or other issues that arise.
Franklin Hills appeals the denial of its motion to compel arbitration. It contends
that the trial court erred in denying the motion because Ms. Rushing failed to establish by
clear, cogent, and convincing evidence that Mr. Coon was incapacitated at the time he
signed the ADR agreement, or that the signature on the agreement did not belong to Mr.
Coon. Franklin Hills also contends that Ms. Rushing is required to arbitrate her
individual cause of action according to the terms of the arbitration agreement signed by
Mr. Coon.
ANALYSIS
We give de novo review to a trial court's decision to compel or deny arbitration.
Satomi Owners Ass 'n v. Satomi, LLC, 167 Wash. 2d 781, 797, 225 P .3d 213 (2009). "The
party opposing arbitration bears the burden of showing that the agreement is not
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enforceable." Zuver v. Airtouch Commc'ns, Inc., 153 Wn.2d 293,302, 103 P.3d 753
(2004). Washington has a strong public policy favoring arbitration. Alder v. Fred Lind
Manor, 153 Wn.2d 331,341 n.4, 103 P.3d 773 (2004). A trial court's decision denying a
motion to compel arbitration is immediately appealable. Hill v. Garda CL Nw., Inc.,
_ Wn.2d _,308 P.3d 635,638 (2013).
Motion to Compel. Courts determine the threshold matter of whether an
arbitration agreement is valid and enforceable. See McKee v. AT&T Corp., 164 Wn.2d
372,383-84, 191 P.3d 845 (2008). An arbitration agreement "is valid, enforceable, and
irrevocable except upon a ground that exists at law or in equity for the revocation of
contract." RCW 7 .04A.060(1). If a party opposes a motion to compel arbitration, "the
court shall proceed summarily to decide the issue. Unless the court finds that there is no
enforceable agreement to arbitrate, it shall order the parties to arbitrate. If the court finds
that there is no enforceable agreement, it may not order the parties to arbitrate."
RCW 7.04A.070(1).
Standard contract defenses can be used to challenge enforceability of an arbitration
agreement. McKee, 164 Wash. 2d at 383. The person seeking to enforce a contract need
only prove the existence of a contract and the other party's objective manifestation of
intent to be bound. Retail Clerks Health & Welfare Trust Funds v. Shopland
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Supermarket, Inc., 96 Wash. 2d 939, 944, 640 P.2d 1051 (1982). Once a party's objectively
manifested intent has been established, the burden then moves to the party seeking to
avoid the contract to prove a defense to the contract's enforcement. Id.
The signature of a party is evidence of a party's objective intent to be bound. See
id. The trier of fact has the duty to decide the factual question of whether or not the
handwriting in question belongs to the person charged with executing the document.
Mitchell v. Mitchell, 24 Wash. 2d 701, 704, 166 P.2d 938 (1946).
A contract may be invalidated if a person lacks sufficient mental capacity or
competence to appreciate the nature and effect ofthe particular contract at issue. Page v.
Prudential Life Ins. Co. ofAm., 12 Wash. 2d 101, 108-09, 120 P.2d 527 (1942) (quoting 17
C.J.S. Contracts § 133, at 479 (1939)). In Washington, a person is presumed competent
to enter into an agreement. Grannum v.Berard, 70 Wn.2d 304,307,422 P.2d 812
(1967). A person challenging the enforcement of an agreement can overcome the
presumption by presenting clear, cogent, and convincing evidence that the party signing
the contract did not possess sufficient mind or reason at the time he entered into the
contract to enable him to comprehend the nature, terms, and effect of the contract. Id.
"What constitutes clear, cogent, and convincing proof necessarily depends upon the
character and extent of the evidence considered, viewed in connection with the
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surrounding facts and circumstances." Blandv. Mentor, 63 Wash. 2d 150, 154,385 P.2d
727 (1963).
The question of contractual capacity or competence is a question of fact.
Grannum, 70 Wash. 2d at 307. It is the responsibility of the trial court to determine whether
the evidence meets the clear, cogent, and convincing standard because the determination
requires weighing and evaluating evidence and credibility determinations that are best
suited for the trier of fact. Bland, 63 Wash. 2d at 154. "Thus, the appellate court's role is
limited to determining whether substantial evidence supports the trial court's findings of
fact." Endicottv. Saul, 142 Wn. App. 899,910,176 P.3d 560 (2008).
"When disputes exist as to the circumstances surrounding an agreement, we
remand to the trial court to make additional findings." Alder, 153 Wash. 2d at 350. In
Alder, Mr. Alder sought to void an arbitration agreement for procedural
unconscionability, claiming that he lacked meaningful choice in entering the contract and
that he did not have a reasonable opportunity to understand the terms of the contract
because of his limited ability to comprehend the English language. Id. at 348-49. The
Washington Supreme Court determined that the circumstances suggested that Fred Lind
Manor provided Mr. Alder with a reasonable opportunity to understand the terms of the
agreement. Id. at 350-51. However, because both parties offered different facts
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pertaining to the manner in which the contract was entered into, the Supreme Court
determined that it could not make a determination of procedural unconscionability
without further factual findings. Id. The court remanded the case for the entry of
additional findings. Id.
Here, we cannot review the trial court's denial of the motion to compel without a
decision on enforceability of the arbitration agreement. Two reasons support this
conclusion. First, under RCW 7.04A.070, the trial court was required to determine
whether the agreement was enforceable before denying a motion to compel arbitration.
The trial court expressly stated that it did not know whether the agreement was
enforceable. Without such a determination, the trial court could not deny the motion to
compel. Remand is necessary for the court to make the appropriate determination
regarding enforceability of the arbitration agreement.
Second, much like Alder, unresolved factual disputes must be decided by the trial
court before we can engage in review. The enforceability of the arbitration agreement
depends on whether Mr. Coon was competent when he entered into the agreement and
whether he signed the agreement. These are both questions of fact to be determined by
the trial court. The trial court has the task of weighing the evidence and credibility ofthe
witnesses to determine if Mr. Coon had the mental capacity to contract. Only after such
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factual findings are made can this court give de novo review to the trial court's decision
on Franklin Hills' motion to compel arbitration. 1
On remand, discovery must be limited to the issues surrounding the validity of the
arbitration agreement. "If a party files a motion with the court to order arbitration under
this section, the court shall on just terms stay any judicial proceeding that involves a claim
alleged to be subject to the arbitration until the court renders a final decision under this
section." RCW 7.04A.070(5). The threshold question ofarbitrability must be resolved
without inquiry into the merits of the dispute. Heights at Issaquah Ridge Owners Ass 'n v.
Burton Landscape Grp., Inc., 148 Wash. App. 400, 403, 200 P.3d 254 (2009).
However, a full evidentiary hearing may not be required. Whether an agreement is
enforceable is to be summarily decided by the trial court. RCW 7.04A.070(1). The trial
court may decide the issue of enforceability if the affidavits and evidence in the record
are sufficient to summarily make a determination. If needed, the trial court should allow
the parties to produce additional evidence regarding the enforceability of the arbitration
agreement. See Alder, 153 Wash. 2d at 353-54 (where the court set forth the procedure on
remand for the introduction of evidence regarding costs of arbitration).
IBut see Weiss v. Lonnquist, 153 Wash. App. 502, 513 n.8, 224 P.3d 787 (2009) (the
appellate court determined that the absence of findings and conclusions was of no
consequence because the trial court did not receive testimony in relation to the motion).
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Findings are needed in order to review the trial court's reasoning in denying the
motion to compel. The matter must be remanded for the trial court to determine whether
the arbitration agreement is enforceable. Discovery must be limited to the issues
surrounding the validity of the arbitration agreement.
The parties also dispute whether the declarations of Franklin Hills' employees are
inadmissible under the deadman's statute, RCW 5.60.030, and whether Mr. Coon's power
of attorney precluded him from contracting with Franklin Hills. These issues were argued
at the motion hearing but not decided by the trial court. The issues may be raised again
on remand.
Individual Claims. Franklin Hills contends that Ms. Rushing's individual claims
are subject to arbitration even though she did not sign the agreement because Ms.
Rushing's claims arise out of the admission contract, which therefore binds her to all of
its terms, including the arbitration agreement. The arbitration agreement expressly
provides that it applies to all disputes that arise out of the agreement or the resident's stay
at the center, and that heirs of the parties were bound by the agreement.
Generally, a nonsignatory party is not subject to an arbitration agreement signed by
another. Satomi Owners Ass 'n, 167 Wash. 2d at 810. '" [A ]rbitration is a matter of contract
and a party cannot be required to submit to arbitration any dispute which he has not
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agreed so to submit.'" Id. (internal quotation marks omitted) (quoting Howsam v. Dean
Witter Reynolds, Inc., 537 U.S. 79, 83, 123 S. Ct. 588, 154 L. Ed. 2d 491 (2002)).
However as an exception, equitable estoppel'" precludes a party from claiming the
benefits from a contract while simultaneously attempting to avoid the burdens that
contract imposes.'" Townsendv. Quadrant Corp., 173 Wash. 2d 451, 461, 268 PJd 917
(2012) (internal quotation marks omitted) (quoting Mundi v. Union Sec. Life Ins. Co., 555
FJd 1042, 1045-46 (9th Cir. 2009)); see also Townsend, 173 Wash. 2d at 464 (Stephens, J.,
concurring/dissenting).
Again, the trial court did not make a decision on whether Ms. Rushing was bound
by the arbitration agreement. Also, it is possible that this issue is irrelevant if the trial
court determines that the arbitration agreement is not enforceable because Mr. Coon did
not have the capacity to enter into the agreement. Therefore, even though Ms. Rushing's
obligation to arbitrate is an issue of law, remand is necessary for a resolution of the
underlying factual issues that may affect this court's decision.
Attornev Fees. Franklin Hills requests attorney fees on appeal as the prevailing
party. Neither party prevailed. Thus, we decline an award of attorney fees.
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We reverse and remand for a hearing to address whether the arbitration agreement
is enforceable.
A majority of the panel has determined this opinion will not be printed in the
Washington Appellate Reports, but it will be filed for public record pursuant to
RCW 2.06.040.
WE CONCUR:
Brown, 1.
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