Tender Loving Care Management, Inc., d/b/a TLC Management LLC v. Randall Sherls, as Personal Representative of the Estate of Berdie Sherls

FOR PUBLICATION
ATTORNEYS FOR APPELLANT: ATTORNEYS FOR APPELLEE:
JANET A. MCSHARAR I. PETER POLANSKY
ALBERT BARCLAY WONG ELIZABETH A. MOORE
JENNIFER L. STRANGE Polansky & Cichon, Chtd.
Harrison & Moberly, LLP Chicago, Illinois
Indianapolis, Indiana
Jul 22 2014, 10:13 am
IN THE
COURT OF APPEALS OF INDIANA
TENDER LOVING CARE MANAGEMENT, )
INC., d/b/a TLC MANAGEMENT LLC, d/b/a )
LINCOLNSHIRE HEALTH CARE CENTER, )
INC., d/b/a/ RIVERVIEW HOSPITAL and )
LINCOLNSHIRE HEALTH CARE CENTER, )
INC., )
)
Appellants-Defendants, )
)
vs. ) No. 45A05-1311-CT-562
)
RANDALL SHERLS, as Personal Representative )
of the ESTATE OF BERDIE SHERLS, )
DECEASED )
)
Appellee-Plaintiff. )
APPEAL FROM THE LAKE SUPERIOR COURT
The Honorable John M. Sedia, Judge
Cause No. 45D01-1308-CT-161
July 22, 2014
OPINION – FOR PUBLICATION
MATHIAS, Judge
Tender Loving Care Management, Inc., d/b/a TLC Management, LLC, d/b/a
Lincolnshire Health Care Center, Inc., d/b/a Riverview Hospital and Lincolnshire Health
Care Center, Inc. (hereinafter “Lincolnshire”) appeals challenging the trial court’s
judgment denying its motion to compel arbitration in a lawsuit filed by Randall Sherls, as
personal representative of the Estate of Birdie Sherls (hereinafter “the Estate”).
Lincolnshire challenges the trial court’s conclusion that the arbitration agreement was
ambiguous because the parties bound by the agreement are not clearly named.
The Estate cross appeals and argues that the trial court erred when it concluded
that the decedent’s son had the authority to waive the decedent’s right to a jury trial. The
Estate also contends that the trial court erred when it determined that the agreement was
not an unconscionable adhesion contract.
We affirm in part and reverse in part and remand for proceedings consistent with
this opinion.
Facts and Procedural History
Birdie Sherls was admitted to Lincolnshire on November 15, 2010, after she
suffered a stroke. On the date she was admitted, Birdie’s son, Oliver Sherls, signed
Lincolnshire’s “Facility Admission Agreement” on Birdie’s behalf. The agreement
provides in relevant part:
This AGREEMENT is made by and between Lincolnshire
(hereinafter referred to as the “Facility”) and Birdie Sherls (hereinafter
referred to as the “Resident”) Oliver Sherls, the Resident’s Legal
Representative, who is the individual with legal access to the Resident’s
income and assets and Oliver Sherls, the Resident’s Health Care
Representative, who is the individual designated to make decisions
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concerning the provision of health care if the Resident is incapable of
making health care decisions.
***
Arbitration. Any disputes other [sic] matters in question arising out of or
related to the Resident’s receipt of care and services pursuant to this
Agreement that are not settled by mediation within 60 days after a mediator
is appointed are subject to binding Arbitration, which unless the parties
mutually agree otherwise, shall be administered by the Alternative Dispute
Resolution Service of the American Health Lawyers Association. A
written Arbitration demand shall be made to the Facility within a
reasonable amount of time after the dispute arises. The arbitration award
shall be final. The Facility’s enforcement of the Agreement’s terms and
conditions relating to payment for the care and services provided shall not
be subject to Arbitration and the Facility may pursue all legal means of
collection.
The Resident and Legal Representative understand and agree that by
entering into this Agreement they are giving up and waiving the
constitutional right to have any claim decided in a court of law before a
judge and jury.
Appellant’s App. pp. 24, 32.
On August 4, 2011, Birdie died from bed sores and stage four decubitus ulcers
which led to sepsis. On August 1, 2013, her Estate filed a complaint against Lincolnshire
alleging that its negligent care caused Birdie’s death. Shortly thereafter, Lincolnshire
filed a motion to compel arbitration and stay the proceedings.
A hearing was held on Lincolnshire’s motion on November 7, 2013. The next day,
the trial court issued its order denying the motion and stating in pertinent part:
2. There is no dispute that Birdie had appointed no health care
representative and that there existed no judicially appointed guardian or
other representative for Birdie pursuant to IC 16-36-1-5(a) at the time
Oliver signed the Agreement. Nevertheless, under IC 16-36-1-5(a)(2)(C),
Oliver was fully empowered to act on Birdie’s behalf in signing the
Agreement.
3. There is also no dispute that the Agreement is a contract of adhesion,
drafted by Lincolnshire, clearly the party of superior bargaining strength
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and that had Oliver not signed the Agreement on behalf of Birdie, Birdie
would not have been admitted to Lincolnshire. . . .
4. . . . [I]t cannot be said that the Agreement that Oliver executed was
“ . . . such as no sensible man not under delusion or duress would make,
and such as no honest and fair man would accept.” The Agreement clearly
imposed the limitation that any disputes regarding Birdie’s care had to be
submitted to arbitration, and that the parties were waiving proceeding
before a Judge or jury to resolve these disputes. Sanford [v. Castleton
Health Care Co., Inc.] held that such a limitation is reasonable and
enforceable.
5. . . . The Agreement clearly binds Oliver and Birdie to its terms. It is
unclear as to which entity was supposed to provide services and care to
Birdie and to which Birdie and Oliver were bound to arbitrate: the opening
paragraph only refers to “Lincolnshire” which is handwritten. The
defendants named in the Complaint are: Tender Loving Care Management,
Inc., d/b/a TLC Management, LLC, d/b/a Lincolnshire Health Care Center,
Inc., d/b/a Riverview Hospital, and Lincolnshire Health Care Center, Inc. It
is not clear to which of these entities to whom the word “Lincolnshire” in
the Agreement refers. Oliver signed the Agreement both as Health Care
Representative and Legal Representative. Another signature appears below
those of Oliver, but it is illegible and does not appear by or on behalf of any
of the named defendants nor any other entity. Moreover, at the bottom of
every page of the Agreement is a logo that appears to read: “TLC
Incorporated Health and Rehab.”
6. The Court cannot determine which “Facility” is supposed to be bound
to provide care and services and to which Birdie and Oliver are supposed to
be bound to Arbitration regarding the provision of care and services to
Birdie. The Agreement, in its opening paragraph, did not state: “Tender
Loving Care Management, Inc., [or TLC Management, LLC, d/b/a
Lincolnshire Health Care Center, Inc., d/b/a Riverview Hospital, or
Lincolnshire Health Care Center, Inc.] By: ____.”
***
[8]. It is impossible for the Court to determine, under the four corners of the
Agreement, the entity that is identified by the words “Lincolnshire” and
“facility.” The surrounding circumstances can be used to ascertain the
intent to the parties only to a limited degree: obviously, Oliver and Birdie
sought to admit Birdie for nursing home care, and, it is equally obvious,
whomever was going to provide nursing home care sought to have any
dispute (other than fees for payment) resolved through arbitration. This is
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still not enough to ascertain who was supposed to provide the care to Birdie
and with whom Oliver and Birdie were bound to arbitrate.
[9]. The Court is not willing to enforce an agreement that does not state
with sufficient clarity all the parties who are bound by it and who will
benefit from it.
Appellant’s App. pp. 7-9. Lincolnshire appeals the judgment and the Estate cross-
appeals. Additional facts will be provided as necessary.
Standard of Review
Lincolnshire contends that the trial court erred when it denied the motion to
compel arbitration. Written agreements to submit to arbitration are valid and enforceable,
except where grounds exist for revocation of any contract. Ind. Code § 34-57-2-1(a).
Arbitration is initiated by written notice by either party. I.C. § 34-57-2-2. If a party
seeks arbitration, and the other party refuses to arbitrate, the party seeking arbitration
may move a trial court to compel arbitration, and, where arbitration is ordered, the
underlying action at the trial court must be stayed. I.C. § 34-57-2-3(a), (d).
Our review of a trial court’s order denying a motion to compel arbitration is de
novo. Brumley v. Commonwealth Bus. College Educ. Corp., 945 N.E.2d 770, 775 (Ind.
Ct. App. 2011). Both Indiana and federal law recognize a strong public policy favoring
enforcement of arbitration agreements. Safety Nat. Cas. Co. v. Cinergy Corp., 829
N.E.2d 986, 1000 (Ind. Ct. App. 2005), trans. denied. A party seeking to compel
arbitration must satisfy two elements. Id. First, the party must demonstrate that there is
an enforceable agreement to arbitrate the dispute. Id. Second, the party must prove the
disputed matter is the type of claim that the parties agreed to arbitrate. Id.5
I. Whether the Agreement is Ambiguous
The goal of contract interpretation is to determine the intent of the parties when
they made the agreement. Citimortgage, Inc. v. Barabas, 975 N.E.2d 805, 813 (Ind.
2012), reh’g denied. “We begin with the plain language of the contract, reading it in
context and, whenever possible, construing it so as to render each word, phrase, and term
meaningful, unambiguous, and harmonious with the whole.” Id. “[C]onstruction of the
terms of a written contract is a pure question of law for the court, reviewed de novo.”
Harrison v. Thomas, 761 N.E.2d 816, 818 (Ind. 2002).
“A contract is ambiguous if a reasonable person would find the contract subject to
more than one interpretation.” Barabas, 975 N.E.2d at 813 (quotation omitted). If the
language is unambiguous, we may not look to extrinsic evidence to expand, vary, or
explain the instrument but must determine the parties’ intent from the four corners of the
instrument. Bd. of Commr’s of Delaware Cnty. v. Evans, 979 N.E.2d 1042, 1046 (Ind.
Ct. App. 2012); Niezer v. Todd Realty, Inc., 913 N.E.2d 211, 215 (Ind. Ct. App. 2009),
trans. denied. However, if the language is ambiguous, we will construe the terms to
determine and give effect to the intent of the parties when they entered into the contract.
Barabas, 975 N.E.2d at 813.
Courts may properly consider all relevant evidence to resolve the ambiguity.1
University of Southern Indiana Found. v. Baker, 843 N.E.2d 528, 535 (Ind. 2006).
1
Lincolnshire argues that any ambiguity concerning its identity is latent and we agree. However, our
supreme court abandoned a prior distinction between patent and latent ambiguities. University of
Southern Indiana Found. v. Baker, 843 N.E.2d 528 (Ind. 2006). Before Baker, extrinsic evidence could
only be used to address latent ambiguities in written instruments, i.e. ambiguities that arose only by
reference to extrinsic facts, and not patent ambiguities, which arose from the language of the instrument
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“Extrinsic evidence is evidence relating to a contract but not appearing on the face of the
contract because it comes from other sources, such as statements between the parties or
the circumstances surrounding the agreement.” CWE Concrete Const., Inc. v. First Nat’l
Bank, 814 N.E.2d 720, 724 (Ind. Ct. App. 2004), trans. denied. If a contract is
ambiguous, it should be construed against the party who furnished and drafted the
agreement. Keithley’s Auction Serv. v. Children of Jesse Wright, 579 N.E.2d 657, 659
(Ind. Ct. App. 1991).
As the trial court found, on the face of the contract Oliver and Birdie (and
therefore Birdie’s Estate) are clearly bound to its terms. However, the trial court also
determined that “[i]t is unclear as to which entity was supposed to provide services and
care to Birdie and to which Birdie and Oliver were bound to arbitrate: the opening
paragraph only refers to ‘Lincolnshire’ which is handwritten.” Appellant’s App. p. 8.
Lincolnshire argues that if reference to its health care facility and corporate entity solely
by the name “Lincolnshire” is ambiguous, the parties’ intent is clearly established by
extrinsic evidence.
Oliver averred that Birdie was admitted to “a nursing home commonly referred to
as Lincolnshire located at 8380 Virginia Street in Merrillville, Indiana.” Id. at 105. In
his affidavit, Oliver also made reference to discussions he had with Lincolnshire’s
“admittance personnel.” Id. The evidence in the record establishes that Oliver and Birdie
understood that they were entering into a contract with Lincolnshire Health Care Center,
itself. Baker. 843 N.E.2d at 534-35 (stating that “the distinction between patent and latent ambiguities is
not useful, and it is proper to admit extrinsic evidence to resolve any ambiguity”).
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which agreed to provide certain services to Birdie. Moreover, the Estate’s complaint
named Tender Loving Care Management, Inc., d/b/a TLC Management, LLC, d/b/a
Lincolnshire Health Care Center, Inc., d/b/a Riverview Hospital and Lincolnshire Health
Care Center, Inc. as the Defendants. The extrinsic evidence in the record resolves the
ambiguity surrounding the identity of the parties to the Agreement; therefore, we
conclude the trial court erred when it found that the Agreement was unenforceable
because of ambiguity.
II. Whether Oliver had Authority to Enter Into the Agreement on Birdie’s Behalf
Next, we consider the Estate’s argument raised in its cross-appeal that Oliver
lacked authority to enter into the Agreement on behalf of Birdie. The trial court found in
relevant part:
There is no dispute that Birdie had appointed no health care representative
and that there existed no judicially appointed guardian or other
representative for Birdie pursuant to IC 16-36-1-5(a) at the time Oliver
signed the Agreement. Nevertheless, under IC 16-36-1-5(a)(2)(C), Oliver
was fully empowered to act on Birdie’s behalf in signing the Agreement.
Appellant’s App. p. 7.
Indiana Code section 16-36-1-5(a) provides that certain individuals may consent to
health care if an individual is incapable of making a decision concerning the proposed
health care and the individual has not appointed a health care representative pursuant to
Indiana Code section 16-36-1-7. See also Ind. Code § 16-36-1-4(a). The parties do not
dispute the fact of Birdie’s incapacity and lack of an appointed health care representative.
Therefore, this issue is resolved pursuant to section 16-36-1-5(a), which provides:
[C]onsent to health care may be given:
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(1) by a judicially appointed guardian of the person or a representative
appointed under section 8 of this chapter; or
(2) by a spouse, a parent, an adult child, or an adult sibling, unless
disqualified under section 9 of this chapter, if:
(A) there is no guardian or other representative described in
subdivision (1);
(B) the guardian or other representative is not reasonably available
or declines to act; or
(C) the existence of the guardian or other representative is unknown
to the health care provider . . .
(Emphasis added).
The Estate concedes that under Indiana Code section 16-36-1-5(a), Oliver had
authority to contract with Lincolnshire to provide health care for Birdie, but argues that
the statute did not give Oliver authority to enter into an agreement to arbitrate any claims
Birdie might have against Lincolnshire. See Appellee’s/Cross-Appellant’s Br. at 12. In
support of his argument, the Estate cites to Article I, Section 20 of the Indiana
Constitution, which provides: “In all civil cases, the right of trial by jury shall remain
inviolate.”
Constitutional rights are not absolute and may be waived. Sanford v. Castleton
Health Care Center, LLC., 813 N.E.2d 411, 420 (Ind. Ct. App. 2004), trans. dismissed
(citation omitted). Trial Rule 38(E), which governs the right to a jury trial, states:
Nothing in these rules shall deny the parties the right by contract or
agreement to submit or to agree to submit controversies to arbitration made
before or after commencement of an action thereon or deny the courts
power to specifically enforce such agreements.
“This trial rule recognizes a ‘very strong presumption of enforceability of contracts that
represent the freely bargained agreement of the parties.’” Sanford, 813 N.E.2d at 420(quoting Ransburg v. Richards, 770 N.E.2d 393, 395 (Ind. Ct. App. 2002), trans denied).
9
In Sanford, the contract Sanford executed, in her capacity as the decedent’s legal
representative, to admit the decedent to the health care facility contained an arbitration
clause. Under the terms of the contract, Sanford waived the decedent’s right to a jury
trial and agreed to submit any future controversies to arbitration. Our court affirmed the
trial court’s order compelling arbitration of the decedent’s Estate’s claims after
concluding that the waiver was knowing and voluntary.
Recently, in Anonymous, M.D. v. Hendricks, 994 N.E.2d 324, 328 (Ind. Ct. App.
2013), our court observed that the Sanford court “was not specifically asked in Sanford to
decide whether the representative’s authority extended to executing arbitration
agreements on the patient’s behalf.” The Estate relies on this observation to support its
argument that Oliver did not have the authority to waive Birdie’s right to a jury trial.
Lincolnshire only agrees to provide services to patients, or their representatives,
who have entered into the Agreement. Tr. p. 5. Although Oliver was not Birdie’s legal
representative or court-appointed guardian, because Birdie was incapacitated, as her adult
son, Oliver had authority pursuant to Indiana Code section 16-36-1-5(a) to enter into the
Agreement on her behalf. Section 16-36-1-5 only specifically authorizes adult children
to consent to health care on their parent’s behalf. However, to obtain nursing care
services for Birdie, either Birdie or an individual named in section 16-36-1-5 was
required to enter into the Agreement containing the arbitration clause with Lincolnshire.
Under these circumstances, we conclude, as did the trial court, that Oliver had the
authority to enter into the Agreement, and therefore, had the authority to waive Birdie’s
right to a jury trial.
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III. Whether the Agreement is an Unconscionable Adhesion Contract
Finally, in its cross-appeal, the Estate claims that the trial court erred when it
found that the Agreement was not an unconscionable adhesion contract. In Sanford, our
court described adhesion contracts and their enforceability as follows:
[A]n adhesion contract–i.e., “a standardized contract, which, imposed and
drafted by the party of superior bargaining strength, relegates to the
subscribing party only the opportunity to adhere to the contract or reject
it”–is not per se unconscionable. Rather, a contract is unconscionable if a
great disparity in bargaining power exists between the parties, such that the
weaker party is made to sign a contract unwillingly or without being aware
of its terms. To be unconscionable, “[t]he contract must be ‘such as no
sensible man not under delusion, duress or in distress would make, and
such as no honest and fair man would accept.’” A contract is not
unenforceable merely because one party enjoys advantages over another.
813 N.E.2d at 417 (internal citations omitted).
The Estate argues that the Agreement is unconscionable because the Agreement
“gives [Lincolnshire] the sole power to choose the arbitration forum, and given that the
same is the ‘American Health Lawyers Association’, it possesses a rather hearty ‘home
team advantage.’” Appellee’s/Cross-Appellant’s Br. at 13. The Estate claims that Oliver,
as an average lay person, could not have understood “the extreme advantage afforded by
this home team forum selection provided by the arbitration clause.” Id.First, we observe that the Estate does not allege that Oliver had difficulty
understanding the terms of the Agreement or that he unwillingly signed the Agreement.
And the arbitration clause does not limit the Estate’s ability to recover damages from
Lincolnshire’s alleged negligent acts.
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The Estate’s claim that the American Health Lawyers Association has some bias
favoring health care centers is not supported by any evidence, but is simply conjecture.2
And the Estate is not without remedy if an arbitrator demonstrates bias toward
Lincolnshire. Although judicial review of arbitration awards are narrow in scope, a trial
court may vacate an arbitration award where “there was evident partiality by an arbitrator
appointed as a neutral or corruption in any of the arbitrators or misconduct prejudicing
the rights of any party[.]” Ind. Code § 34-57-2-13(a)(2); see also Droscha v. Shepherd,
931 N.E.2d 882 (Ind. Ct. App. 2010).
For all of these reasons, we conclude that the trial court properly found that “it
cannot be said that the Agreement that Oliver executed was ‘ . . . such as no sensible man
not under delusion or duress would make, and such as no honest and fair man would
accept.’” Cf. Sanford, 813 N.E.2d at 418 (acknowledging the limitation imposed on the
admittee by virtue of the arbitration clause, but rejecting Sanford’s argument that the
admission agreement was unconscionable because it “required the nursing home admittee
to accept the arbitration clause on a take-it-or-leave-it basis” and did not “delineate to
unsuspecting admittees the process of arbitration”).
Conclusion
The trial court properly found that due to Birdie’s incapacity, Oliver, her adult son,
had the authority to enter into the Agreement providing for arbitration of any future
2
We also note that in its brief, Lincolnshire states that the American Health Lawyers Association no
longer accepts arbitrations without a post-dispute agreement to arbitrate. Therefore, in its motion to
compel, Lincolnshire asked the trial court to compel arbitration pursuant to the provisions of the Uniform
Arbitration Act found at Indiana Code chapter 34-57-2. See Appellant’s Reply Br. p. 13; see also
Appellant’s App. p. 22.
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controversies between the parties. We also affirm the trial court’s finding that the
Agreement is not an unconscionable adhesion contract.
However, the trial court erred when it found that the Agreement was ambiguous as
to the identity of the parties bound by it. We conclude that the parties’ identity is not
ambiguous after considering the parties’ intent established by extrinsic evidence.
Therefore, the Agreement is enforceable. Accordingly, on remand, we direct the trial
court to grant Lincolnshire’s motion to compel arbitration.
Affirmed in part, reversed in part, and remanded for proceedings consistent with
this opinion.
FRIEDLANDER, J., and PYLE, J., concur.
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