Filed 8/7/15 Starling v. St. John of God Retirement &Care Center CA2/3
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
DORIS STARLING, as Personal B253064
Representative, etc., et al.,
(Los Angeles County
Plaintiffs and Respondents, Super. Ct. No. BC517093)
v.
ST. JOHN OF GOD RETIREMENT &
CARE CENTER,
Defendant and Appellant.
APPEAL from an order of the Superior Court of Los Angeles County,
Daniel Buckley, Judge. Affirmed.
Foley & Mansfield, Noelle M. Natoli-Duffy, Louis C. Klein and M. Amadea
Groseclose for Defendant and Appellant.
Kristensen Weisberg, David Weisberg and John Kristensen for Plaintiffs and
Respondents.
_________________________
Defendant St. John of God Retirement & Care Center (St. John) appeals from the
trial court’s denial of its motion to compel arbitration of a civil action filed by the Estate
of Ella McKennis, a former resident, against St. John. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
In 2010, 96-year-old Ella McKennis fell and broke her femur. As a result, she
moved from the home of her daughter, Doris Starling, to St. John’s skilled nursing
facility in Los Angeles.
As part of the admissions process, St. John’s administration office provided
Starling with a multi-page set of paperwork to review and sign. Included therein was a
document entitled “California Standard Admission Agreement For Skilled Nursing
Facilities and Intermediate Care Facilities” (“Admission Agreement”); a “Resident-
Facility Arbitration Agreement” (“Arbitration Agreement”); and various consent and
miscellaneous forms. As required by Health and Safety Code section 1599.81, the
Arbitration Agreement was set forth on a separate one and one-half page form.
The Arbitration Agreement contained three signature lines: one for “resident
representative,” one for “resident,” and one for “facility employee.” Preceding the
Arbitration Agreement’s signature block was the following language: “The undersigned
certifies that he/she has read this Agreement, and has been given a copy, and is either the
Resident, or is the representative of the Resident, duly authorized to execute the above
and accept its terms. [¶] NOTICE: BY SIGNING THIS CONTRACT, YOU ARE
AGREEING TO HAVE ANY ISSUE OF MEDICAL MALPRCTICE DECIDED BY
NEUTRAL ARBITRATION AND YOU ARE GIVING UP YOUR RIGHT TO A JURY
OR COURT TRIAL. SEE ARTICLE I OF THIS CONTRACT.” A second, similar
signature block followed, regarding submission of monetary disputes, except collections
and evictions, to arbitration.
The Arbitration Agreement bore the signature “Ella McKennis” on the “Resident’s
Signature” line, and “Doris Starling” on the “Resident Representative’s Signature” line.
Both signatures were dated December 10, 2010.
2
As relevant here, the Arbitration Agreement provided that any dispute between the
resident and the facility for medical malpractice, negligence, tort, and statutory causes of
action, would be submitted to arbitration as provided by California law, with arbitration
to proceed pursuant to the Medical Arbitration Rules of the California Hospital
Association – California Medical Association.1 It also stated that agreement to arbitrate
was not a precondition for treatment or admission, and that the agreement was binding on
“all parties, including their personal representative, successors, family members and
heirs.”
McKennis was apparently admitted to St. John’s facility the same date the
Admission Agreement and Arbitration Agreement were signed, December 10, 2010.
1
The relevant portions of the Arbitration Agreement provided: “Article 1. It is
understood that any dispute as to medical malpractice, that is, as to whether any medical
services rendered under this contract were unnecessary or unauthorized or were
improperly, negligently or incompetently rendered will be determined by submission to
arbitration as provided by California law, and not by a lawsuit or resort to court process,
except as California law provides for judicial review of arbitration proceedings. Both
parties to this contract, by entering into it, are giving up their constitutional right to have
any such dispute decided in a court of law before a jury, and instead are accepting the use
of arbitration. [¶] Article 2. It is further understood that any dispute between Resident
and Facility, including any action for injury or death arising from negligence, intentional
tort and/or statutory causes of action (including all California Welfare and Institutions
Code sections, but not including California Health & Safety Code § 1430 and/or
California Administrative Code § 73527), will be determined by submission to arbitration
as provided by California law, and not by lawsuit or resort to court process except as
California law provides for judicial review of arbitration proceedings. Resident and
Facility, as parties to this agreement, are giving up their Constitutional rights to have a
dispute under this agreement decided in a court of law before a jury, and instead are
accepting the use of arbitration. [¶] Article 3. Resident and Facility agree that any
arbitration pursuant to this agreement will proceed according to the Medical Arbitration
Rules of the California Hospital Association – California Medical Association (copies
available at Facility Admissions Office). [¶] Article 4. Agreement to arbitrate is not a
precondition for medical treatment or for admission to the Facility. [¶] Article 5. This
Agreement shall be binding for any dispute except for disputes pertaining to collections
or evictions within thirty (30) days of signature. This Agreement may be rescinded by
written notice within thirty (30) days of signature. This Agreement is binding on all
parties, including their personal representative, successors, family members and heirs.”
(Boldface omitted.)
3
On February 14, 2012, McKennis and Starling executed a “Durable Power of
Attorney for Management of Property and Personal Affairs” (the POA). The POA
authorized Starling to make decisions regarding McKennis’s health and real and personal
property. As pertinent here, it empowered Starling to “take any actions she believes
necessary or desirable with respect to any claim that I may have or that has been asserted
against me and with respect to any legal proceeding in which I have an interest when this
Power is executed, or in which I later acquire an interest,” including the power to “submit
any dispute in which I have an interest to arbitration.”
According to McKennis, on August 30, 2012, a nurse working at St. John’s
facility administered the wrong medication to her, causing her to become comatose,
requiring several days of hospitalization, and causing injury.
McKennis left the facility and was readmitted several days later. On September 6,
2012, Starling executed a “Resident Readmission Agreement” (“Readmission
Agreement”) on McKennis’s behalf. It stated, in pertinent part: “This Readmission
Agreement is a legally binding contract and incorporates herein all terms and conditions
of the admission agreement. [¶] . . . [¶] 1. I certify that Ella McKennis was a resident at
the facility and is returning to the facility after an absence not greater than thirty (30)
days. [¶] 2. I certify that I have previously read and signed all terms and conditions
listed in the admission agreement dated 12/10/10 and understand that by signing this
agreement, I agree that the terms and conditions of said admission agreement remain in
full force and effect and said terms and conditions shall be applicable and enforceable
throughout the duration of the present stay at the facility. [¶] 3. I agree that all consents
previously given to the facility are still valid and in full force and effect.” A line in
section 3, “Exceptions are:” was left blank.
4
On August 2, 2013, McKennis filed a complaint individually and by and through
Starling, her guardian ad litem, against St. John and two other defendants2 alleging
negligence, negligence per se, negligent hiring, training and supervision, and unfair
competition, arising out of the alleged August 30, 2012 medication error.
On October 11, 2013, St. John filed a motion to compel arbitration of McKennis’s
claims and to stay the trial court proceedings, based on the December 10, 2010 arbitration
agreement.
McKennis opposed the motion. In support of the opposition, Starling filed a
declaration stating that she had signed her mother’s name on the Arbitration Agreement’s
“Resident’s Signature” line; McKennis was not present when Starling signed the
Arbitration Agreement; McKennis never signed the Arbitration Agreement, nor did
Starling show it to her, read it to her, or explain it to her; the Arbitration Agreement was
“buried” within approximately 20 sheets of admissions paperwork; and Starling felt as if
she had no choice but to sign “all of the paperwork” in order for McKennis to become a
resident. When Starling signed the Arbitration Agreement, McKennis had not yet
executed a POA. McKennis argued that because she did not sign the Arbitration
Agreement, and had not executed the POA at the time Starling signed it, it did not bind
her. She also urged that the Arbitration Agreement was unconscionable; failed to comply
with Health and Safety Code section 1599.81; and there was a possibility of inconsistent
rulings if the motion to compel arbitration was granted.
In reply, St. John countered that Starling’s execution of the Readmission
Agreement, after McKennis had executed the POA, ratified the Arbitration Agreement
and cured any deficiency therein; the agreement was not unconscionable and complied
with Health and Safety Code section 1599.81; and discounted the risk of inconsistent
rulings.
2
The record does not include a copy of the complaint. However, Respondents state
that the complaint also named as defendants the nurse alleged to have administered the
incorrect medication, and the medical staffing company that allegedly employed her.
Neither is a party to this appeal.
5
On December 3, 2013, the trial court denied St. John’s motion. In a written ruling,
the court reasoned that Pagarigan v. Libby Care Center, Inc. (2002) 99 Cal.App.4th 298
(Pagarigan), which held that an arbitration agreement could not be enforced when an
elderly patient’s adult children signed on the resident’s behalf without express
authorization, was “directly on point.” The court found St. John had failed to show that
Starling’s subsequent signature on the Readmission Agreement satisfied the requirement
that McKennis or her authorized agent actually sign the Arbitration Agreement. The
court reasoned: “The problem with [St. John’s] argument is that the readmission
agreement references a prior ‘admission agreement,’ but does not reference the prior
‘Resident-Facility Arbitration Agreement.’ ” Furthermore, “even if the agreement were
referenced,” St. John had failed to address whether Starling’s signature on the
Readmission Agreement would satisfy the requirements of Health and Safety Code
section 1599.81. The court did not reach the additional arguments raised by the parties.
On December 11, 2013, St. John filed a notice of appeal challenging the trial
court’s ruling.
McKennis died on March 19, 2014. Starling was appointed as the representative
of McKennis’s Estate, and to act as McKennis’s successor in interest.
CONTENTIONS
Appellant St. John argues that respondent, the Estate of McKennis by and through
Starling and Willie McKennis, the successors in interest to the Estate (hereinafter
Respondents), must be compelled to arbitrate because (1) Starling “ratified the signed
Arbitration Clause through the Readmission Agreement”; (2) Respondents are equitably
estopped from refusing to arbitrate; (3) it is against public policy to allow Starling to
“commit fraud” in order to escape arbitration; and (4) Pagarigan and its progeny are
legally and factually distinguishable from the instant matter.
6
Respondents counter that the December 10, 2010 Arbitration Agreement is invalid
because McKennis did not sign it; when Starling signed it, the POA was not yet in effect;
even if the agreement is deemed binding, the motion was properly denied because the
agreement is unconscionable; and grant of the motion could lead to inconsistent rulings
“based on the presence of the other defendants . . . who are not parties to the arbitration
agreement.”
DISCUSSION
1. Applicable legal principles
An order denying a motion to compel arbitration is appealable. (Code Civ. Proc.,
§ 1294, subd. (a); Valentine Capital Asset Management, Inc. v. Agahi (2009)
174 Cal.App.4th 606, 612, fn. 5.) If the facts are undisputed, we independently review
the record to determine whether a valid arbitration agreement exists. (Flores v.
Evergreen at San Diego, LLC (2007) 148 Cal.App.4th 581, 586 (Flores); Young v.
Horizon West, Inc. (2013) 220 Cal.App.4th 1122, 1127-1128 (Young); Garrison v.
Superior Court (2005) 132 Cal.App.4th 253, 263.) Insofar as the trial court’s order is
based on findings of material fact, we apply a substantial evidence standard. (Young,
supra, at p. 1127.) We “apply general California contract law to determine whether the
parties formed a valid agreement to arbitrate.” (Marcus & Millichap Real Estate
Investment Brokerage Co. v. Hock Investment Co. (1998) 68 Cal.App.4th 83, 89;
Garrison, supra, at p. 263.) Here, because the trial court’s decision rested on undisputed
facts, we independently review its ruling.
The “ ‘right to compel arbitration depends upon the existence of a valid agreement
to arbitrate between the parties.’ ” (Garrison v. Superior Court, supra, 132 Cal.App.4th
at p. 263; Sky Sports, Inc. v. Superior Court (2011) 201 Cal.App.4th 1363, 1368; Young,
supra, 220 Cal.App.4th at p. 1128.) A party cannot be compelled to arbitrate a dispute
that it has not elected to submit to arbitration. (Sky Sports, Inc. v. Superior Court, supra,
at p. 1367; Avery v. Integrated Healthcare Holdings, Inc. (2013) 218 Cal.App.4th 50,
59.) A person authorized to act as a patient’s agent can bind the patient to an arbitration
7
agreement. (Goldman v. Sunbridge Healthcare, LLC (2013) 220 Cal.App.4th 1160,
1169; Young, supra, at p. 1128; Garrison v. Superior Court, at p. 264.)
Code of Civil Procedure section 1281.2 sets forth the procedure to compel
arbitration.3 “On petition of a party to an arbitration agreement alleging the existence of
a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate
such controversy, the court shall order the petitioner and the respondent to arbitrate the
controversy” unless the petitioner has waived the right to compel arbitration, or grounds
for revocation exist. (Code Civ. Proc., § 1281.2; Sky Sports, Inc. v. Superior Court,
supra, 201 Cal.App.4th at p. 1367.) The party seeking to compel arbitration has the
initial burden to prove the existence of a valid arbitration agreement by a preponderance
of the evidence. (Young, supra, 220 Cal.App.4th at p. 1128; Flores, supra,
148 Cal.App.4th at p. 586; Villacreses v. Molinari (2005) 132 Cal.App.4th 1223, 1230.)
“ ‘Once that burden is satisfied, the party opposing arbitration must prove by a
preponderance of the evidence any defense to the petition. [Citations.]’ ” (Avery v.
Integrated Healthcare Holdings, Inc., supra, 218 Cal.App.4th at p. 59; Villacreses, supra,
at p. 1230.)
California has a strong policy favoring arbitration. (Young, supra,
220 Cal.App.4th at p. 1128; Molecular Analytical Systems v. Ciphergen Biosystems, Inc.
(2010) 186 Cal.App.4th 696, 704; Villacreses v. Molinari, supra, 132 Cal.App.4th at
p. 1229.) However, “ ‘[e]ven the strong public policy in favor of arbitration does not
extend to those who are not parties to an arbitration agreement or who have not
authorized anyone to act for them in executing such an agreement.’ ” (Young, supra, at
p. 1128; Garrison v. Superior Court, supra, 132 Cal.App.4th at pp. 263-264; Sky Sports,
Inc. v. Superior Court, supra, 201 Cal.App.4th at p. 1367.)
3
Petitions to compel arbitration are generally “ ‘resolved by a summary procedure
that allows the parties to submit declarations and other documentary testimony and, at the
trial court’s discretion, to provide oral testimony.’ ” (Warfield v. Summerville Senior
Living, Inc. (2007) 158 Cal.App.4th 443, 446; Flores, supra, 148 Cal.App.4th at p. 586.)
8
California law contains a “detailed and comprehensive statutory scheme governing
nursing homes,” including “a series of provisions permitting arbitration provisions in
nursing home contracts but imposing rigorous disclosure requirements and excluding
certain claims from arbitration coverage.” (Flores, supra, 148 Cal.App.4th at p. 590.)
For example, when a patient is admitted to a skilled nursing facility, the patient or his or
her representative must sign a standardized admission agreement. (Health & Saf. Code,
§ 1599.61, subd. (a); Flores, supra, at p. 585.) Health and Safety Code section 1599.60
et seq. addresses the legal requirements for admission contracts for long term health care
facilities. (Hogan v. Country Villa Health Services (2007) 148 Cal.App.4th 259, 267.)
Health and Safety Code section 1599.81 “addresses arbitration clauses used in contracts
of admission and provides certain requirements for the form and content of the same.”
(Hogan, supra, at p. 267.) As pertinent here, section 1599.81 requires that all arbitration
clauses in an admission contract must be “included on a form separate from the rest of the
admission contract” and “shall contain space for the signature of any applicant who
agrees to arbitration of disputes.”
2. The December 2010 arbitration agreement is invalid because McKennis did
not sign it and there was no power of attorney in effect when Starling signed it.
The Arbitration Agreement, standing alone, was not valid because it was neither
signed by the principal, McKennis, nor by a person legally authorized, at the time, to act
on her behalf. In the nursing facility setting, an arbitration agreement signed by a
resident’s relative is not binding on the resident unless the resident has previously signed
a durable power of attorney giving the relative legal authority to act on the resident’s
behalf. At the time Starling signed the Arbitration Agreement, McKennis had not yet
executed a power of attorney. Therefore, Starling had no power to bind McKennis to the
agreement.
As the trial court found, several authorities compel this conclusion. In Pagarigan,
supra, 99 Cal.App.4th 298, a comatose patient was admitted to a skilled nursing facility,
and a week later her two daughters executed arbitration agreements, signing their own
names. The daughters and their brother subsequently sued the facility for negligence and
9
other claims arising from the mother’s death. The arbitration agreements were held to be
invalid because the facility failed to produce any evidence the daughters had authority to
enter into an arbitration contract on behalf of their mother. (Id. at pp. 300-301.) The
court reasoned: “Defendants bore the burden of establishing a valid agreement to
arbitrate. Defendants admit [the mother] did not sign either arbitration agreement. They
further admit [she] was mentally incompetent at the time she was admitted . . . and at the
time her daughters signed the arbitration agreements . . . . There was no evidence
Ms. Pagarigan had signed a durable power of attorney. It necessarily follows
Ms. Pagarigan lacked the capacity to authorize either daughter to enter into the arbitration
agreements on her behalf. Consequently no valid arbitration contract exists.” (Id. at
p. 301, fn. omitted.)
The court rejected the argument that the agreements were enforceable because the
signatures on the agreements proved the daughters “ ‘represented themselves as having
the power to bind’ ” the mother. (Pagarigan, supra, 99 Cal.App.4th at p. 301.)
Pagarigan explained: “This may be true but it is totally irrelevant. A person cannot
become the agent of another merely by representing herself as such. To be an agent she
must actually be so employed by the principal or ‘the principal intentionally, or by want
of ordinary care, [has caused] a third person to believe another to be his agent who is not
really employed by him.’ Defendants produced no evidence Ms. Pagarigan had ever
employed either of her daughters as her agent in any capacity. Nor did defendants
produce any evidence this comatose and mentally incompetent woman did anything
which caused them to believe either of her daughters was authorized to act as her agent in
any capacity.” (Id. at pp. 301-302, fns. omitted.) The court further reasoned that the
daughters’ status as next of kin and their admitted authority to make medical decisions
for their mother did not authorize them to execute an arbitration agreement on their
mother’s behalf. (Id. at pp. 302-303.)
In Goliger v. AMS Properties, Inc. (2004) 123 Cal.App.4th 374, an adult daughter
filled out her parent’s admission papers to a nursing facility, including two arbitration
agreements. The daughter signed her own name on a signature line marked “responsible
10
party,” and left a line marked “agent” blank. (Id. at pp. 375-376.) In accord with
Pagarigan, the court held the daughter could not bind the parent to the arbitration clause.
(Goliger, supra, at pp. 376-377.) Unlike the comatose patient in Pagarigan, the patient
in Goliger was mentally alert and consented to her daughter making health care decisions
for her. However, this was a distinction without a difference: allowing the daughter to
make health care decisions did not translate into authority to agree to arbitration, and did
“not equate with being an agent empowered to waive the constitutional right of trial by
jury.” (Id. at p. 377.)
In Flores, supra, 148 Cal.App.4th 581, a husband signed various admission
documents, including two arbitration agreements, when his wife was admitted to the
defendant’s skilled nursing facility. (Id. at p. 585.) At the time, the husband did not have
a power of attorney to act for his wife, who suffered from dementia, nor had he been
declared her conservator or guardian. Nine months after her admission, the wife signed a
power of attorney giving the husband authority over claims and litigation. (Ibid.) The
nursing facility’s motion to compel arbitration of a civil claim later filed by the couple
was properly denied. Absent a legislative directive, the spousal relationship alone was
insufficient to confer authority to agree to an arbitration provision in a nursing home
admission contract. (Id. at pp. 586-587.) Furthermore, and more significant for our
purposes here, the court rejected the notion that the arbitration agreement should be
upheld because the husband had represented himself as his wife’s agent. (Id. at p. 589.)
The wife did not sign the arbitration agreements, and at the time the husband signed
them, he did not have a power of attorney authorizing him to act as the wife’s agent. (Id.
at p. 587.) Neither the fact he signed the admission documents nor the wife’s subsequent
execution of the power of attorney was sufficient. (Id. at pp. 588-589; see also Goldman
v. Sunbridge Healthcare, LLC, supra, 220 Cal.App.4th at p. 1173; Warfield v.
Summerville Senior Living, Inc., supra, 158 Cal.App.4th at p. 445 [husband lacked
authority to sign arbitration agreement for his wife]; Young, supra, 220 Cal.App.4th at
pp. 1128-1129.)
11
Thus, as in the foregoing cases, the Arbitration Agreement, at least as executed in
December 2010, was invalid.
St. John urges that Pagarigan and its progeny are inapplicable, because in those
cases, the relatives signed their own names to the arbitration agreements and held
themselves out as the residents’ agents, whereas here, Starling signed – or “forged,” as
St. John characterizes it – McKennis’s name. In St. John’s view, the legal issue in the
Pagarigan line of cases was “one of agency – i.e. whether a purported agent had actual or
ostensible authority to bind a principal to an arbitration agreement.” St. John contends
that because it was unaware McKennis was not the actual signatory, it had no notice of a
purported agency relationship, and no obligation to inquire whether Starling had authority
to bind McKennis. Had St. John known McKennis did not sign the agreement, it would
have taken the required step of obtaining proof of agency. Thus, St. John argues, “no
Pagarigan facts exist that would require a finding that the arbitration agreement is not
legally binding and enforceable.”
We are not persuaded. Pagarigan and similar cases are not irrelevant. To the
extent St. John avers the Arbitration Agreement, as signed in December 2010, was valid
and binding, the foregoing authorities clearly stand for opposite proposition. We do not
discern legal significance in the fact that Starling signed her mother’s name. As
Pagarigan explained, a “person cannot become the agent of another merely by
representing herself as such.” (Pagarigan, supra, 99 Cal.App.4th at p. 301.) St. John
does not persuasively explain how a person can become another’s agent by “forging” the
principal’s name, at least absent ratification by the principal. If this theory were
accepted, a forger could bind an unknowing and unwilling principal, if only the other
party to the ostensible arbitration agreement lacked notice. That St. John was not on
notice that the signature was actually Starling’s cannot somehow give rise to an agency
relationship. “To be an agent [one] must actually be so employed by the principal or ‘the
principal intentionally, or by want of ordinary care, [has caused] a third person to believe
another to be his agent who is not really employed by him.’ ” (Id. at pp. 301-302, fn.
omitted.) The record is devoid of evidence that McKennis did anything to cause St. John
12
to believe she had personally signed the Arbitration Agreement, or that Starling was her
agent in December 2010.
3. The Readmission Agreement
We agree, however, that on the facts of this case the question does not end with
Pagarigan, given Starling’s subsequent execution of the Readmission Agreement after
the POA was in place. The parties do not appear to dispute that, had Starling signed the
Arbitration Agreement after McKennis executed the POA, it would have been
enforceable. (See Young, supra, 220 Cal.App.4th at p. 1128 [a person who is authorized
to act as the patient’s agent can bind the patient to an arbitration agreement]; Garrison v.
Superior Court, supra, 132 Cal.App.4th at p. 264; Flores, supra, 148 Cal.App.4th at
p. 587; cf. Hogan v. Country Villa Health Services, supra, 148 Cal.App.4th at p. 262.)
We therefore turn to St. John’s primary argument: that Starling’s execution of the
Readmission Agreement, after the POA was in place, ratified the agreement to the
Arbitration Agreement and cured any defects in the original agreement.
The threshold question posed by the parties relevant to this issue is whether the
Arbitration Agreement was part of the Admission Agreement, or whether the Arbitration
Agreement was a separate document. The Readmission Agreement purported to reaffirm
only the “terms and conditions” of the “admission agreement” and “consents previously
given.” Therefore, Starling’s execution of the Readmission Agreement is relevant to the
validity of the Arbitration Agreement, if at all, only if the Arbitration Agreement was part
of the Admission Agreement. The parties set forth a variety of arguments in support of
their respective positions.
a. Health and Safety Code sections 1599.60 and 1599.81 do not compel the
conclusion that the Admission Agreement and Arbitration Agreement were separate
documents.
Respondents posit that the two agreements were, by law, separate contracts. Her
argument runs as follows. Health and Safety Code section 1599.60, subdivision (b)
provides: “ ‘Contract of admission’ includes all documents which a resident or his or her
representative must sign at the time of, or as a condition of, admission to a long-term
13
health care facility, as defined in Section 1326.” They interpret this provision to mean
that only those documents which must be signed at the time of admission may be
considered part of the contract. Health and Safety Code section 1599.81, subdivision (a)
requires that “[a]ll contracts of admission that contain an arbitration clause shall clearly
indicate that agreement to arbitration is not a precondition for medical treatment or for
admission to the facility.” Therefore, Respondents reason, an arbitration agreement is not
a required document and cannot be a part of the contract of admission.
Respondents also point to the following language in Flores, supra, 148
Cal.App.4th 581: “Because arbitration agreements waive important legal rights, the
Legislature has imposed heightened requirements on arbitration provisions in nursing
home contracts. Notably, the Legislature has required that arbitration agreements be
separate from the rest of the admission contract and contain separate signatures. Thus,
when a family member signs an admission agreement, this signature cannot by law also
cover an arbitration agreement.” (Id. at p. 594, italics added.) Respondents reason that if
an arbitration agreement must be separate from an admission agreement, “it is axiomatic
that an arbitration agreement must also be separate from a readmission agreement.”
We disagree with Respondents’ interpretation. When construing a statute, we
begin with the plain, commonsense meaning of the language used by the Legislature.
(Riverside County Sheriff’s Dept. v. Stiglitz (2014) 60 Cal.4th 624, 630.) Health and
Safety Code section 1599.81 provides as follows: “(a) All contracts of admission that
contain an arbitration clause shall clearly indicate that agreement to arbitration is not a
precondition for medical treatment or for admission to the facility. [¶] (b) All arbitration
clauses shall be included on a form separate from the rest of the admission contract.
This attachment shall contain space for the signature of any applicant who agrees to
arbitration of disputes. [¶] (c) On the attachments, clauses referring to arbitration of
medical malpractice claims, as provided for under Section 1295 of the Code of Civil
Procedure, shall be clearly separated from other arbitration clauses, and separate
signatures shall be required for each clause. [¶] (d) In the event the contract contains an
arbitration clause, the contract attachment pertaining to arbitration shall contain notice
14
that under Section 1430, the patient may not waive his or her ability to sue for violation
of the Patient’s Bill of Rights.” (Italics added.)
This statutory language is not ambiguous: it clearly contemplates that an
admission agreement may contain an arbitration clause. The statute speaks in terms of
separate clauses, not separate agreements. The first sentence of Health and Safety Code
section 1599.81, subdivision (a) expressly allows that arbitration provisions may be part
of the admissions contract, in that it references “[a]ll contracts of admission that contain
an arbitration clause.” (Italics added.) This language, as well as the other portions of
the statute italicized ante, require rejection of Respondents’ contention. That the statute
mandates that arbitration clauses be on a separate page, and be signed separately, does
not mean they are necessarily excluded from the admission contract. In short,
Respondents’ argument is foreclosed by the plain statutory language. As one court has
noted, “The statutory framework . . . sanctions the use, in contracts of admission, of
arbitration clauses meeting” the requirements of Health and Safety Code section 1599.81.
(Hogan v. Country Villa Health Services, supra, 148 Cal.App.4th at p. 267.) Further,
Health and Safety Code section 1599.60, subdivision (b) does not suggest that an
admission contract is limited to required documents. Instead, the word “includes”
appears to be used in the permissive, rather than exclusive, sense. If there was any doubt
on this point, it is settled by the express language of Health and Safety Code section
1599.81.
As for the language cited from Flores, it is apparent the court there was simply
making the point that pursuant to Health and Safety Code section 1599.81, an arbitration
clause must bear a separate signature and must be set forth on a separate form, in order to
ensure the arbitration agreement is obtained with the party’s informed consent. (Flores,
supra, 148 Cal.App.4th at pp. 591, 594.) Elsewhere in Flores the court referred to “an
arbitration provision in a nursing home admission contract” (id. at p. 587, italics added),
and the opinion does not stand for the proposition that an arbitration agreement and an
admission contract must, by law, be separate documents.
15
b. The parties’ other arguments
St. John, for its part, argues that the “arbitration clause” is part of the Admission
Agreement between the parties. It points to Civil Code section 1642, which provides:
“Several contracts relating to the same matters, between the same parties, and made as
parts of substantially one transaction, are to be taken together.” (See, e.g., Reigelsperger
v. Siller (2007) 40 Cal.4th 574, 580; Nevin v. Salk (1975) 45 Cal.App.3d 331, 338
[“Under section 1642 of the Civil Code, it is the general rule that several papers relating
to the same subject matter and executed as parts of substantially one transaction, are to be
construed together as one contract”]; Freedland v. Greco (1955) 45 Cal.2d 462, 468;
Cadigan v. American Trust Co. (1955) 131 Cal.App.2d 780, 782.) Here, the Arbitration
Agreement and the Admission Agreement were both contained in the packet of
paperwork given to Starling; she signed all the documents on the same date; and all
pertained to the same event, McKennis’s admission to the facility. The fact that the
Arbitration Agreement was contained on separate pages lacks significance, St. John
urges, because pursuant to Health and Safety Code section 1599.81, subdivision (b), an
arbitration clause is required to be so formatted.
The parties also devote considerable analysis to the question of whether the
Readmission Agreement incorporated the Arbitration Agreement by reference.
“ ‘ “ ‘ “It is, of course, the law that the parties may incorporate by reference into their
contract the terms of some other document. [Citations.] But each case must turn on its
facts. [Citation.] For the terms of another document to be incorporated into the
document executed by the parties the reference must be clear and unequivocal, the
reference must be called to the attention of the other party and he must consent thereto,
and the terms of the incorporated document must be known or easily available to the
contracting parties.” ’ [Citations.]” [Citation.]’ [Citation.] ‘The contract need not recite
that it “incorporates” another document, so long as it “guide[s] the reader to the
incorporated document.” [Citations.]’ [Citation.]” (Avery v. Integrated Healthcare
Holdings, Inc., supra, 218 Cal.App.4th at p. 66; Wolschlager v. Fidelity National Title
16
Ins. Co. (2003) 111 Cal.App.4th 784, 790; Chan v. Drexel Burnham Lambert, Inc. (1986)
178 Cal.App.3d 632, 641.)
Respondents argue there was no incorporation by reference because the
Readmission Agreement did not clearly and unequivocally reference the Arbitration
Agreement; indeed, it never expressly mentioned arbitration or named the Arbitration
Agreement. Respondents cite Chan v. Drexel Burnham Lambert, Inc., supra, 178
Cal.App.3d 632, in which this court held an arbitration clause was not incorporated by
reference. In Chan, a stockbroker, as a condition of her employment with a brokerage
firm, signed a “U-4” application concerning her registration as a securities broker and
submitted it to the New York Stock Exchange (NYSE). (Id. at pp. 635-636.) By signing
the U-4 Chan agreed to be bound by the rules of any organization to which the
application was submitted, and the NYSE had a rule requiring arbitration of controversies
arising out of a broker’s termination from a member brokerage firm. We held that the
arbitration provision was not incorporated by reference into the U-4 agreement, because
the relevant portion of the U-4 did not mention arbitration, did not identify any document
or source by title, and did not guide the reader to the incorporated document. (Id. at
pp. 643-645.) Respondents argue that, as in Chan, the Readmission Agreement does not
refer to the Arbitration Agreement by title and does not guide the reader to it.
St. John distinguishes Chan on the basis that there, the employee did not sign an
arbitration agreement and had to seek out the NYSE rule to locate the arbitration clause,
whereas here Starling actually signed the Arbitration Agreement, which was readily
available to her. St. John instead focuses on King v. Larsen Realty, Inc. (1981)
121 Cal.App.3d 349, 357, in which the court held an arbitration provision in the bylaws
of a real estate board had been incorporated into realtors’ membership agreements, and
Avery v. Integrated Healthcare Holdings, Inc., supra, 218 Cal.App.4th at page 66, in
17
which employees were held to have agreed to one version of an arbitration agreement by
signing various employment documents.4
c. The Readmission Agreement cannot ratify a term that did not exist
We need not decide whether the Arbitration Agreement form was part of the
Admission Agreement or was incorporated by reference, however, because even
assuming arguendo it was, St. John’s contention -- that Starling, on McKennis’s behalf,
agreed to arbitration by signing the Readmission Agreement -- fails. The Readmission
Agreement states: “I certify that I have previously read and signed all terms and
conditions listed in the admission agreement dated 12/10/10 and understand that by
signing this agreement, I agree that the terms and conditions of said admission agreement
remain in full force and effect and said terms and conditions shall be applicable and
enforceable throughout the duration of the present stay at the facility.” (Italics added.)
St. John argues: “the 2012 Readmission Agreement clearly and unequivocally
incorporates by reference all terms and conditions that were part of the 2010 admission
contract.” But therein lies the rub: the arbitration provision was not part of the 2010
contract. As we have discussed, the December 2010 arbitration clause was not valid;
therefore, there was no arbitration agreement that could have “remain[ed] in full force
and effect.” The agreement to arbitrate could not, and did not, become one of the terms
and conditions of the contract because Starling lacked authority to agree to arbitration.
Starling’s signature on the Readmission Agreement cannot have affirmed the continued
existence of a term that never came to be; she cannot have ratified something that did not
exist. If, for example, the Arbitration Agreement had never been executed by anyone, it
4
Avery nonetheless affirmed the trial court’s denial of the employer’s motion to
compel arbitration because, inter alia, “the incomplete and confusing patchwork of
documents [the employer] submitted” prevented the court from finding an enforceable
arbitration agreement. (Avery v. Integrated Healthcare Holdings, Inc., supra,
218 Cal.App.4th at p. 71.)
18
would not make sense to argue that the readmission agreement brought it to life. For all
practical purposes, the same is true here.5
Nor can we conclude that McKennis “agreed to arbitrate her claims through
ratification of her agent’s conduct through the Readmission Agreement,” as St. John
claims. “Ratification is the voluntary election by a person to adopt in some manner as his
own an act which was purportedly done on his behalf by another person, the effect of
which . . . is to treat the act as if originally authorized by him.” (Rakestraw v. Rodrigues
(1972) 8 Cal.3d 67, 73.) St. John points to several authorities, all arising in a context
quite different than that present here, for the proposition that a principal may ratify his
signature forged by his agent, and the ratification will relate back to the time the forgery
was made. (See, e.g., Navrides v. Zurich Ins. Co. (1971) 5 Cal.3d 698, 703-704;
Ballard v. Nye (1903) 138 Cal. 588, 596-597; Common Wealth Ins., Systems, Inc. v.
Kersten (1974) 40 Cal.App.3d 1014, 1024-1025; Crittenden v. McCloud (1951)
106 Cal.App.2d 42, 49-50; cf. Merry v. Garibaldi (1941) 48 Cal.App.2d 397; see also
Civ. Code, § 2307 [“An agency may be created, and an authority may be conferred, by a
precedent authorization or a subsequent ratification.”].) The problem with this argument
is that there is no evidence in the record suggesting McKennis ever expressly, or by
implication, ratified the Arbitration Agreement. “A purported agent’s act may be adopted
expressly or it may be adopted by implication based on conduct of the purported principal
from which an intention to consent to or adopt the act may be fairly inferred, including
conduct which is ‘inconsistent with any reasonable intention on his part, other than that
5
Respondents urge that the Readmission Agreement could not have established a
valid agreement to arbitrate because it did not comply with the dictates of Health and
Safety Code section 1599.81. They point out that, inter alia, the Readmission Agreement
failed to advise that an agreement to arbitrate is not a precondition for admission; was
not set forth on a separate form; and was not separately signed. Therefore, they contend,
enforcing an arbitration agreement without statutory compliance would violate public
policy and contravene the Legislature’s intent. However, in light of our conclusion we
need not reach these arguments, nor need we address St. John’s contention that
Respondents’ argument on this point is preempted by the Federal Arbitration Act.
19
he intended approving and adopting it.’ [Citations.]” (Rakestraw v. Rodrigues, supra, at
p. 73.) No such evidence exists here.
Flores, supra, 148 Cal.App.4th 581, is instructive. There, a skilled nursing facility
argued an agency relationship should be implied because the patient, Josephina, had
allowed the facility to believe her husband, Luis, had the authority to act for her. (Id. at
p. 588.) The court explained: “[A]n agency cannot be created by the conduct of the
agent alone; rather conduct by the principal is essential to create the agency.” (Ibid.)
Although defendant Evergreen presented evidence that Luis acted as if he were
Josephina’s agent, “the establishment of the agency also requires conduct on the part of
Josephina conferring that status. It was Evergreen’s burden to show the validity of the
arbitration agreement based on Josephina’s express or implied consent to have her
husband act as her agent.” (Id. at p. 589.) The principal must in some manner indicate
that the agent is to act for him, and formation of an agency is a bilateral matter;
“ ‘ “[w]ords or conduct by both principal and agent are necessary to create the
relationship . . . .” ’ [Citation.]” (Flores, supra, at p. 588; Goldman v. Sunbridge
Healthcare, LLC, supra, 220 Cal.App.4th at p. 1173 [agency cannot be created by the
conduct of the agent alone; rather, conduct by the principal is essential].) “Although
Evergreen presented evidence regarding Luis’s conduct, it failed to offer evidence
regarding Josephina’s conduct.” (Flores, supra, at p. 588.) The facts that Luis had
signed the admissions documents, and that Josephina subsequently signed a general
power of attorney giving Luis agency authority, did “not provide the necessary
evidentiary support.” (Ibid.) Thus, “no facts were presented suggesting that by signing
the power of attorney form Josephina intended to ratify Luis’s earlier agreement to the
arbitration.” (Id. at pp. 588-589.)
The same is true here. The record is devoid of evidence showing any conduct by
McKennis suggesting that she ratified Starling’s signature on the 2010 agreement.
St. John’s argument that “there is no evidence to suggest that Ms. McKennis was not
fully aware of the facts and circumstances surrounding Ms. Starling’s signing of the
arbitration agreement . . . .” improperly flips St. John’s burden of proof to McKennis. It
20
is St. John’s burden to establish the existence of a valid arbitration contract, and the
absence of evidence does not meet this burden.
4. Equitable estoppel
St. John next urges that McKennis is equitably estopped from refusing to arbitrate.
We disagree, for several reasons.
While the general rule is that one must be a party to an arbitration agreement to be
bound by it, an exception exists based on the doctrine of equitable estoppel. (Molecular
Analytical Systems v. Ciphergen Biosystems, Inc., supra, 186 Cal.App.4th at p. 706.)
“ ‘A valid claim for equitable estoppel requires: (a) a representation or concealment of
material facts; (b) made with knowledge, actual or virtual, of the facts; (c) to a party
ignorant, actually and permissibly, of the truth; (d) with the intention, actual or virtual,
that the ignorant party act on it; and (e) that party was induced to act on it. [Citation.]’ ”
(Young, supra, 220 Cal.App.4th at p. 1131.) “The determination of equitable estoppel
ordinarily is a question of fact for the trier of fact, unless the facts are undisputed and can
support only one reasonable conclusion as a matter of law.” (Windsor Pacific LLC v.
Samwood Co., Inc. (2013) 213 Cal.App.4th 263, 272; Estate of Bonzi (2013)
216 Cal.App.4th 1085, 1106.) St. John argues that these elements have been met here.
First, we agree with McKennis that this claim has been waived because St. John
failed to raise it below. St. John avers that the elements of estoppel are met because
(1) Starling knowingly “forged” McKennis’s name on the Arbitration Agreement;
(2) Starling never apprised St. John of the forgery and it neither knew nor had reason to
know the signature was not genuine; (3) St. John acted in reliance on the forgery because
it admitted McKennis to the facility and failed to conduct an inquiry into whether Starling
had legal authority to bind McKennis to arbitration; and (4) Starling intended St. John to
act on the forged signature by admitting McKennis. McKennis responds that there is
“scant evidence” of concealment; instead, given the language of the Admission
Agreement, Starling likely innocently or mistakenly believed she could sign the
21
arbitration agreement on her mother’s behalf.6 St. John’s theory clearly depends on a
determination of disputed facts. The record contains no evidence, let alone undisputed
evidence, in support of most of St. John’s contentions.7 Because St. John’s “new theory
involves an issue of fact . . . and the facts to support the theory were not developed
below, we find the argument was waived for failure to raise it in the trial court.” (City of
Merced v. American Motorists Ins. Co. (2005) 126 Cal.App.4th 1316, 1327; People
ex rel. Totten v. Colonia Chiques (2007) 156 Cal.App.4th 31, 40; Bogacki v. Board of
Supervisors (1971) 5 Cal.3d 771, 780 [“The general rule that a legal theory may not be
raised for the first time on appeal is to be stringently applied when the new theory
depends on controverted factual questions”].)
In any event, St. John’s argument is misplaced. As McKennis points out, St. John
confuses the party to be estopped (McKennis) with the party who allegedly concealed the
material facts (Starling). Starling is not the party seeking to avoid arbitration; McKennis
is. There is no evidence in the record that McKennis ever concealed or misrepresented
any facts, or that she intended that St. John act in reliance on them. As Young explained,
on similar facts, “In this case, the critical threshold element is missing: Plaintiff did not
represent or conceal any fact. Equitable estoppel is not available to appellants . . . .”
(Young, supra, 220 Cal.App.4th at pp. 1131-1132.)
5. St. John’s public policy arguments
Finally, St. John makes several arguments aimed at the conclusion that denying
arbitration here would violate public policy. None persuade us.
6
The Admission Agreement stated, for example, that the Resident’s Representative,
Starling, was “the person who will sign on your behalf to admit you to this Facility.”
7
Respondents urge that the trial court considered and rejected St. John’s “ ‘forgery’
argument” and implicitly found there was no fraud. They are incorrect. The trial court’s
ruling was based on its reading of Pagarigan and similar cases, Health and Safety Code
section 1599.81, and its interpretation of the Readmission Agreement. To the extent the
issue was raised at all, the court “decline[d] to consider the remaining arguments
advanced by Plaintiff.”
22
First, St. John argues it is “against public policy for Respondent to escape
arbitration by allowing her agent to commit fraud upon St. John.” St. John states that the
law disfavors criminal conduct to avoid contractual obligations; and every contract
contains an implied covenant of good faith and fair dealing (Avery v. Integrated
Healthcare Holdings, Inc., supra, 218 Cal.App.4th at p. 61.) St. John avers that in light
of the Admission Agreement’s definitions of McKennis as “resident” and Starling as
“resident’s representative,” “Respondent impliedly agrees that the arbitration agreement
was procured by fraudulent inducement . . . .” We do not necessarily agree that the
evidence shows Starling admitted she committed “fraud.” But more to the point, there is
no evidence that McKennis, the principal, had any inkling that Starling signed her name,
and there is accordingly a lack of evidence that McKennis committed fraud or
fraudulently induced St. John to enter into the Admission Agreement. As there is no
valid Arbitration Agreement, one cannot have been procured by fraud.8
St. John also argues that a “ ‘person may not lull another into a false sense of
security by conduct causing the latter to forebear to do something which he otherwise
would have done and then take advantage of the inaction caused by his own conduct.’ ”
(Common Wealth Ins. Systems, Inc. v. Kersten, supra, 40 Cal.App.3d at p. 1028.)
St. John complains that it “materially changed its position in reliance on the admission
contract” by allowing McKennis admission to the facility. But St. John offers only
argument, not evidence, showing that it materially changed its position or forbore to take
action in light of Starling’s action. Moreover, in light of the fact that execution of the
Arbitration Agreement was not, by law, a precondition to McKennis’s admission,
St. John’s arguments are less compelling.
Nor are we persuaded by St. John’s contention that McKennis may not adopt that
part of the contract which is beneficial to her and simultaneously reject its burdens.
8
St. John cites Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 30, for the
proposition that “whether an arbitration agreement was . . . induced by fraud, is subject to
arbitration.” As noted, there is no arbitration agreement in effect between the parties, so
St. John’s point is not germane here.
23
(NORCAL Mutual Ins. Co. v. Newton (2000) 84 Cal.App.4th 64, 84.) As we have
explained, the arbitration clause was not a valid provision of the contract. Moreover,
given that agreement to arbitrate was optional, not required, it does not appear that
McKennis obtained any benefit. (See Warfield v. Summerville Senior Living, Inc., supra,
158 Cal.App.4th at pp. 450-451 [resident did not seek to make use of the arbitration
agreement and was not estopped to assert that it was unenforceable against her].)
Finally, St. John argues “it would be inequitable and against public policy for the
Court to find the arbitration agreement is not binding on Respondent. Pagarigan and its
progeny have not created safe passage for one person to forge another’s signature on a
contract in order to help the second person avoid arbitration later. Even assuming
Ms. Starling ‘innocently or mistakenly’ signed Ms. McKennis’s signature, if the Court
allows Respondent to avoid arbitration, it will create an unintended precedent such that
others in the future can intentionally deceive a contracting party by forging a signature,
so that the individual whose signature was forged can claim he or she is not bound to
arbitrate claims. This is particularly worrisome in the nursing home context as relatives
of residents often complete paperwork . . . .”
There is no evidence that Starling signed her mother’s name in an attempt to later
avoid arbitration about an alleged injury that had not yet occurred. Further, the converse
of St. John’s argument is simply untenable – that is, that a valid arbitration contract is
created by a forgery as long as the nursing home is in the dark about it. “[W]e are not at
liberty to ignore the well-established California law that ‘[t]he party seeking to compel
arbitration bears the burden of proving the existence of a valid arbitration agreement.’ ”
(Goldman v. Sunbridge Healthcare, LLC, supra, 220 Cal.App.4th at p. 1178.) “Simply
put, ‘ “[t]he strong public policy in favor of arbitration does not extend to those who are
not parties to an arbitration agreement, and a party cannot be compelled to arbitrate a
dispute that he [or she] has not agreed to resolve by arbitration.” ’ ” (Ibid.)
While we are not unsympathetic to St. John’s argument that a relative’s “forgery”
of admissions papers may prove problematic, it is not as if St. John is without readily
24
accessible means to ensure that a signature is actually the resident’s. A nursing home
can, for example, insist that the resident sign in the presence of a facility employee.
In sum, we conclude that the trial court properly denied St. John’s motion to
compel arbitration. In light of our conclusion, we do not reach McKennis’s arguments
that the arbitration agreement is unconscionable, or that it is unenforceable because it
would lead to the possibility of inconsistent rulings.
DISPOSITION
The order denying the motion to compel arbitration is affirmed. Costs are
awarded to Respondents.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
ALDRICH, J.
We concur:
KITCHING, Acting P. J.
EGERTON, J.
Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.
25