Heaphy v. Willow Canyon Healthcare, Inc., 2 CA-CV 2020-0113

• Court: Court of Appeals of Arizona
• Writing for the Court: ESPINOSA, Presiding Judge
• Citation: 44 Arizona Cases Digest 39,491 P.3d 1165
• Parties: Shirley Z. HEAPHY, Plaintiff/Appellee, v. WILLOW CANYON HEALTHCARE, INC., dba Pueblo Springs Rehabilitation Center, Defendant/Appellant.
• Docket Number: No. 2 CA-CV 2020-0113,2 CA-CV 2020-0113
• Decision Date: 18 May 2021

44 Arizona Cases Digest 39
491 P.3d 1165

Shirley Z. HEAPHY, Plaintiff/Appellee,
v.
WILLOW CANYON HEALTHCARE, INC., dba Pueblo Springs Rehabilitation Center, Defendant/Appellant.

No. 2 CA-CV 2020-0113

Court of Appeals of Arizona, Division 2.

Filed May 18, 2021

Goldberg & Osborne, Tucson By Lisa Kimmel and Jacoby & Meyers Law Offices, Tucson By Bonnie S. Dombrowski Counsel for Plaintiff/Appellee

Ensign Services Inc., Higley By Michael J. Ryan Counsel for Defendant/Appellant

Presiding Judge Espinosa authored the opinion of the Court, in which Vice Chief Judge Staring and Judge Eckerstrom concurred.

ESPINOSA, Presiding Judge:

¶1 Willow Canyon Healthcare, Inc. appeals from the trial court's denial of its motion to compel arbitration, arguing the court erred by determining Shirley Heaphy lacked authority to enter into an arbitration agreement on behalf of her husband's estate and the statutory beneficiaries and that she should be equitably estopped from denying such authority. For the following reasons, we affirm.

Factual and Procedural Background

¶2 "We view the facts in the light most favorable to upholding the trial court's ruling." Estate of Decamacho ex rel. Guthrie v. La Solana Care & Rehab, Inc. , 234 Ariz. 18, n.1, 316 P.3d 607, n. 1 (App. 2014). Charles and Shirley Heaphy had been married for more than sixty years when in 2012, Charles appointed Shirley his agent in a Healthcare Power of Attorney (HPOA) contract. The contract was "effective upon, and only during, any period of incapacity in which, in the opinion of [Shirley] and attending physician, [Charles is] unable to make or communicate a choice regarding a particular health care decision."¹ In December 2017, Charles was admitted to Pueblo Springs Rehabilitation Center for skilled nursing and rehabilitation.

¶3 Shirley signed Charles's admission paperwork at Pueblo Springs, which consisted of several separate but consecutively paginated acknowledgements and agreements totaling fifty-nine pages and included an "optional" Agreement to Arbitrate Disputes (the "Agreement"). The second page of the Agreement had a signature line for a "Legal Representative or Agent," and directed an agent signing in that capacity to also execute on the same page a separate "Acknowledgement of Legal Representative or Agent." Shirley did not sign either the legal representative line or the acknowledgement, instead entering Charles's name on the resident line and signing her name on the adjacent signature line.

¶4 A few weeks after his admission to Pueblo Springs, Charles died. In 2019, Shirley, as personal representative of Charles's estate and on behalf of all statutory beneficiaries, sued Willow Canyon Healthcare, Inc., the owner of Pueblo Springs, and a doctor who treated Charles, alleging elder abuse, negligence, negligent hiring and supervision, and wrongful death. Willow Canyon filed a motion to compel arbitration, seeking to require all plaintiffs to arbitrate based on the Agreement. In response, the plaintiffs argued

491 P.3d 1168

the Agreement was unenforceable because it was procedurally and substantively unconscionable and Shirley lacked authority to bind the estate or the beneficiaries to it. Reasoning the beneficiaries were not parties to the Agreement and their wrongful death claim did not derive from Charles, the trial court denied the motion to compel arbitration as to that claim but held an evidentiary hearing to determine whether Shirley had the authority to sign the Agreement as Charles's agent.

¶5 Following the hearing, the trial court concluded the estate's claims were not subject to arbitration because although the HPOA had been in effect, it did not authorize Shirley to sign the Agreement on Charles's behalf. The court determined Shirley did not otherwise have actual or apparent authority to sign the Agreement and further found the Agreement procedurally unconscionable under the circumstances. Willow Canyon then appealed; we have jurisdiction pursuant to A.R.S. § 12-2101.01(A)(1).

Discussion

¶6 Willow Canyon argues the trial court erred in denying its motion to compel arbitration because Shirley had actual authority, either express or implied, to sign the Agreement on behalf of Charles, and even if not, she should be equitably estopped from denying such authority, the Agreement was not unconscionable, and the Federal Arbitration Act (FAA) preempts Arizona case law holding that an arbitration agreement cannot bind non-signatories. When reviewing the trial court's denial of a motion to compel arbitration, "[w]e must defer, absent clear error, to the factual findings upon which the trial court's conclusions are based." Estate of Decamacho , 234 Ariz. 18, ¶ 8, 316 P.3d 607 (quoting Harrington v. Pulte Home Corp. , 211 Ariz. 241, ¶ 16, 119 P.3d 1044 (App. 2005) ). To the extent we must consider and interpret legal principles and statutes, however, our review is de novo. Id.

Agency

¶7 "Agency is the fiduciary relationship that arises when one person (a ‘principal’) manifests assent to another person (an ‘agent’) that the agent shall act on the principal's behalf and subject to the principal's control, and the agent manifests assent or otherwise consents so to act." Restatement (Third) of Agency § 1.01 (2006) ; see Maricopa P'ships, Inc. v. Petyak , 163 Ariz. 624, 626, 790 P.2d 279, 281 (App. 1989) (Arizona courts generally follow Restatement of Agency). Although an agency relationship can derive from either actual or apparent authority, see Restatement §§ 2.01, 2.03, Willow Canyon agrees with the trial court's determination that apparent authority is not applicable here, as there was no evidence Charles "communicated anything to anyone at Pueblo Springs indicating his wife could act on his behalf." See Ruesga v. Kindred Nursing Ctrs., L.L.C. , 215 Ariz. 589, ¶ 29, 161 P.3d 1253 (App. 2007) (apparent authority exists when "the principal has intentionally or inadvertently induced third persons to believe that such a person was its agent although no actual or express authority was conferred" (quoting Premium Cigars Int'l, Ltd. v. Farmer-Butler-Leavitt Ins. Agency , 208 Ariz. 557, ¶ 30, 96 P.3d 555 (App. 2004) )). Actual authority "may be proved by direct evidence of express contract of agency between the principal and agent"—express actual authority—or "by proof of facts implying such contract or the ratification thereof"—implied actual authority. See Corral v. Fid. Bankers Life Ins. Co. , 129 Ariz. 323, 326, 630 P.2d 1055, 1058 (App. 1981) ; Restatement § 2.01 cmt. b.

Express Actual Authority

¶8 Willow Canyon first contends the HPOA gave Shirley the express actual authority to sign the Agreement on Charles's behalf, thus binding the estate.² Under A.R.S. § 36-3223(B), "[a]n agent's authority to make health care decisions on behalf of the principal is limited only by the express language of the health care power of attorney."

491 P.3d 1169

When interpreting the language of a contract, our purpose is to determine and enforce the parties’ intent. See U S W. Commc'ns, Inc. v. Ariz. Corp. Comm'n , 185 Ariz. 277, 288, 915 P.2d 1232, 1243 (App. 1996). And when "the language is clear and unambiguous, we apply it as written." Estate of Decamacho , 234 Ariz. 18, ¶ 17, 316 P.3d 607.

¶9 As Willow Canyon argues is relevant here,...