Munn v. Haymount Rehabilitation & Nursing Center, Inc.

Citations: 704 S.E.2d 290; 208 N.C. App. 632; 2010 N.C. App. LEXIS 2414Docket: COA10-105

Court: Court of Appeals of North Carolina; December 21, 2010; North Carolina; State Appellate Court

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In the case of Munn v. Haymount Rehabilitation, the North Carolina Court of Appeals upheld the trial court's decision to deny the defendants' amended motion to compel arbitration and to grant the plaintiff's motion to dismiss the claim for arbitration. The plaintiff, Iris B. Munn, acting as Administratrix of the Estate of Demetra C.B. Murphy, brought a complaint against Haymount Rehabilitation and Century Care of Fayetteville for wrongful death and negligence following the care of her daughter at the defendants' nursing home.

The background reveals that Murphy was admitted to the nursing facility after a prolonged hospitalization and was unresponsive upon admission. During this process, her husband and Munn participated in the admission paperwork, although both expressed concerns about the facility's condition and did not focus on the details of the admission process. Mr. Murphy designated Munn to make decisions regarding his wife's care due to his work commitments.

The defendants based their motion to compel arbitration on a "Mandatory Arbitration" clause in an Admission Agreement signed by Munn in 2004. This clause required arbitration for disputes, excluding actions to collect payments or discharges from the facility. However, the court found there was no valid arbitration agreement in this case, affirming the lower court's ruling.

The arbitration section of the Admission Agreement stipulates that its terms bind the parties, including their successors, assigns, and anyone with claims derived from the Resident. It explicitly states that agreeing to the arbitration terms means waiving the constitutional right to a jury trial. The Plaintiff, who signed as the 'Responsible Party,' did not inquire about the arbitration clause prior to signing. Notably, the decedent, Murphy, did not sign the agreement, and the Plaintiff lacked legal authority, such as power of attorney or guardianship, to bind Murphy to the arbitration provision. The facility did not require proof of legal authority during the admission process and typically worked with next-of-kin or others acting on behalf of the patient, regardless of their relationship. Consequently, the trial court ruled that a valid arbitration agreement did not exist between Murphy's estate and the defendants. The defendants appealed this ruling, which is classified as an interlocutory appeal because it addresses a substantial right to arbitrate claims. The appellate review is de novo, focusing on whether the trial court's findings about the arbitration agreement are supported by competent evidence. The defendants argue that the trial court erred in concluding there was no valid arbitration agreement, emphasizing that the Admission Agreement included various provisions beyond the arbitration clause, mainly concerning financial responsibilities and operational details of the nursing home, and asserting that the Plaintiff did not require authorization to agree to financial liability for Murphy’s care.

The admission document does not specifically address Ms. Murphy's consent for health care, although Ms. Munn's authority to consent is not contested. Ms. Munn must possess legal authority to enter into an arbitration agreement for Ms. Murphy or her estate. The court must determine if a valid arbitration agreement exists, requiring a two-part analysis: 1) the existence of a valid arbitration agreement between the parties, and 2) whether the dispute falls within its scope. The party seeking arbitration bears the burden of proving mutual agreement.

The defendants argue that the trial court incorrectly determined that Ms. Munn was neither the actual nor apparent agent of Ms. Murphy. A principal is liable on contracts made by agents under three conditions: when the agent acts within actual authority, when an unauthorized contract is ratified, or when the agent acts within apparent authority without the third party knowing of any limitation. Essential elements of a principal-agent relationship include the agent's authority and the principal's control over the agent, which can be established through evidence connecting the principal to the agent.

Defendants assert that Ms. Munn was Ms. Murphy's actual agent, requiring proof of Ms. Murphy's consent for Ms. Munn to act on her behalf. Actual authority can be implied from the parties' actions and circumstances surrounding the transaction. Evidence presented includes Ms. Murphy voluntarily committing herself for psychiatric care in December 2003 and identifying Ms. Munn as her primary contact. The plaintiff also claims Ms. Murphy communicated with caregivers and family before her death without contesting her mother’s decisions regarding her health care. These facts support the finding of an agency relationship. The trial court’s factual findings are substantiated by the evidence, despite the defendants' arguments.

Ms. Murphy's identification of her mother as her next of kin and primary contact does not establish that Ms. Munn had actual authority as Ms. Murphy's agent, nor does it indicate that Ms. Murphy consented to Ms. Munn acting on her behalf. The trial court correctly concluded that no actual agency relationship existed. Regarding apparent authority, it is defined as the authority a principal has allowed an agent to represent they possess. A principal's liability is based on what a third party could reasonably believe regarding the agent's authority. In contrast to the Raper case, where the decedent's agency was uncontested, the current case does not establish Ms. Munn as Ms. Murphy's general agent for matters like arbitration agreements. Although Ms. Munn acted as the responsible party for signing forms during her daughter's care, there is no evidence that Ms. Murphy had communicated any authority to Ms. Munn at the time of signing, as Ms. Murphy was unresponsive and unable to communicate. The evidence shows Ms. Munn was consulted for medical decisions, but does not confirm her authority as a general agent.

The determination of an agent's apparent authority relies on the principal's manifestations of authority rather than the agent's own claims. The trial court found that Ms. Munn lacked apparent authority to enter into an arbitration agreement on behalf of Ms. Murphy, and the defendants failed to show that the court’s factual findings were unsupported by evidence. The defendants' reference to case law concerning consent for medical treatment for incompetent patients does not apply, as it is distinct from the authority to enter contractual agreements like arbitration. They also claimed that N.C. Gen. Stat. 90-21.13 granted Ms. Munn the authority to consent to arbitration; however, the relevant provision did not take effect until 2007, after Ms. Murphy's death in 2005, and the 2005 version does not pertain to arbitration agreements. The statute addresses consent for health care treatment, not contractual authority. Moreover, the inclusion of arbitration in a financial admission agreement does not equate to consent for health care treatment. 

Defendants argued they relied on Ms. Munn's claims of agency, but the only evidence cited is her signing documents, which does not imply she had authority from Ms. Murphy. The concept of agency requires mutual consent, which was not demonstrated in this case. Thus, the trial court correctly concluded that the defendants could not reasonably rely on any representations of agency by Ms. Munn. The court did not need to address additional defenses raised by the defendants, as those were contingent on a finding against the trial court’s conclusion regarding agency. Lastly, the defendants' argument concerning the public policy implications of their position misunderstands the admission document's components, which primarily focused on securing payment for services rather than requiring legal guardianship or power of attorney for every admission.

A signature from a 'responsible party' in an admission agreement is legally binding regarding matters within their authority. A nursing home can obtain healthcare consent from a designated individual under N.C. Gen. Stat. 90-21.13 when the patient cannot make decisions, and it can have a 'responsible party' contract for payment without patient authorization. However, for an arbitration agreement to be binding on the patient, the responsible party must possess legal authority, such as agency or power of attorney. This ruling does not limit the responsible party's ability to contract for medical services. The defendants' argument that Ms. Murphy's estate is estopped from denying the validity of the contract is overruled because they failed to plead estoppel as an affirmative defense. Similarly, the defense of ratification was not pled, barring its consideration on appeal. The issue of unconscionability need not be addressed since Ms. Munn lacked authority to bind Ms. Murphy to the arbitration agreement. Consequently, the trial court's findings are upheld, affirming the denial of the motion to compel arbitration and granting the plaintiff’s motion to dismiss. Chief Judge Martin and Judge Ervin concur.