Title: Richard Carraway, as executor of the estate of Shirley Carraway v. Beverly Enterprises Alabama, Inc., et al.

State: alabama

Issuer: Alabama Supreme Court

Document:

REL: 7/20/07
Notice: This opinion is subject to formal revision before publication in the advance
sheets of Southern Reporter.  Readers are requested to notify the Reporter of Decisions,
Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334) 229-
0649)), of any typographical or other errors, in order that corrections may be made before
the opinion is printed in Southern Reporter.
SUPREME COURT OF ALABAMA
SPECIAL TERM, 2007
____________________
1051409
____________________
Richard Carraway, as executor of the estate of Shirley
Carraway
v.
Beverly Enterprises Alabama, Inc., et al.
Appeal from Baldwin Circuit Court 
(CV-05-1357)
SEE, Justice.
Facts and Procedural History
On May 5, 2006, Richard Carraway met with Myrtle Seals,
the admissions coordinator of a nursing home located in Foley,
owned 
and operated by 
Beverly 
Enterprises 
Alabama, 
Inc., 
doing
1051409
2
business as Beverly Healthcare-Foley.  Richard executed a
number of documents on behalf of his sister, Shirley Carraway,
as her authorized representative.  Those documents included a
"Resident 
Admission 
Agreement" 
("the 
admission 
agreement") 
and
a "Resident and Facility Arbitration Agreement" ("the
arbitration agreement").  The next day, Shirley Carraway was
admitted into the nursing home.   
The admission agreement states:
"If the resident is unable to make decisions for
himself 
or 
herself, 
an 
Agent 
and/or 
Legal
Representative may be available to make certain
decisions on behalf of the Resident.  These terms
are defined below:
"AGENT 
- 
For 
the 
purposes 
of 
this
Agreement, an Agent is a person who
manages, uses, or controls funds/assets
that may be legally used to pay the
Resident's charges or who otherwise acts on
behalf of the Resident.  The Agent's
financial obligations are limited to the
amount of funds received or held by the
Agent for the Resident.  The Agent does not
assume responsibility for payment of the
costs of the Resident's care out of the
Agent's personal 
funds.  However, 
the Agent
is contractually bound by the terms of this
agreement and may become liable for failure
to perform duties under the Agreement.  THE
AGENT IS REQUIRED TO SIGN THIS AGREEMENT
FOR ADMISSION AND AGREES TO DISTRIBUTE TO
THE FACILITY, FROM THE RESIDENT'S INCOME OR
RESOURCES, 
PAYMENT 
WHEN 
DUE 
FOR
ITEMS/SERVICES PROVIDED TO THE RESIDENT.
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The Agent is required to produce financial
documentation as proof of the Resident's
ability to pay for charges when due.
Wherever this Agreement refers to the
Resident's financial obligation under this
agreement, 
'Resident' 
shall 
be 
construed 
to
include the obligations of Agent to act on
behalf of Resident. 
"LEGAL REPRESENTATIVE - 
For the purposes of
this Agreement, Legal Representative is
defined as a person recognized under State
law as having the authority to make health
care and/or financial decisions for the
Resident.  The Legal Representative may or
may not be court appointed.  A Legal
Representative may be an attorney-in-fact
acting under a durable power of attorney
for health care[,] guardian, conservator,
next-of-kin, or other person allowed to act
for the Resident under State law.  If Legal
Representative 
status 
has 
been 
conferred 
by
a court of law or through appointment by
the Resident, verification of such status
must be provided to the Facility at the
time of Admission."
(Emphasis, capitalization, and bold typeface in original.)
The 
admission 
agreement 
also 
contains 
the 
following 
provision:
"SOLE AGREEMENT - This Agreement, along with any
other documents attached or included by reference,
is the only agreement between the Facility and
parties.  Changes to this Agreement are valid only
if made in writing and signed by all parties.  If
changes in State or Federal law make any part of
this Agreement invalid, the remaining terms shall
stand as a valid agreement."
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4
The arbitration agreement states that it is an agreement
between Beverly Healthcare-Foley and the "'Resident' or
'Resident's 
Authorized 
Representative,' 
hereafter 
collectively
referred to as 'Resident.'" The arbitration agreement
conspicuously states that it is "NOT A CONDITION OF ADMISSION
- READ CAREFULLY."  The arbitration agreement states: "[U]pon
execution, this Arbitration Agreement becomes part of the
Admission Agreement."  Just above the signature lines, the
arbitration agreement states:
"The undersigned certifies that he/she has read this
Arbitration Agreement and that it has been fully
explained to him/her, that he/she understands its
contents, and has received a copy of the provision
and that he/she is the Resident, or a person duly
authorized by the Resident or otherwise to execute
this agreement and accept its terms."
The signature line for the "Resident" has been left blank.
The document provides that "[i]f the resident is unable to
consent or sign this provision because of physical disability
or mental incompetence or is a minor and this provision is
being 
signed 
by 
an 
authorized representative," the spaces 
left
for "Date," "Relationship to Resident," "Signature [of
Authorized 
representative]," 
and 
"Witness" are 
to 
be
completed.  Richard signed his name on the line reserved for
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5
"Authorized representative," and Myrtle Seals signed her name
on the lines for "Witness" and on behalf of the facility as
"Authorized representative."  
On May 30, 2006, shortly after she was admitted as a
resident into the nursing home, Shirley executed a durable
power of attorney, naming Richard as her attorney-in-fact.
Shirley died while she was a resident at the Beverly
Healthcare-Foley nursing home, and Richard now seeks to bring
a wrongful-death action against, among others, Beverly
Enterprises Alabama, Inc., 
doing 
business 
as 
Beverly
Healthcare-Foley.  Beverly Enterprises Alabama, Inc., doing
business as Beverly Healthcare-Foley, Beverly Enterprises
Alabama, Inc., Beverly Health and Rehabilitation Services,
Inc., and three of the four individual defendants ("the
Beverly Enterprises defendants") moved to compel arbitration.
The trial court granted that motion, and Richard now appeals
that ruling. 
Issue
The issue is whether the trial court erred in finding
that Richard Carraway's wrongful-death action against the
1051409
6
Beverly Enterprises defendants is subject to the arbitration
agreement. 
Standard of Review
"We review the trial court's grant or denial of a motion
to compel arbitration de novo." Title Max of Birmingham, Inc.
v. Edwards, [Ms. 1051140, May 18, 2007] ___ So. 2d ___, ___
(Ala. 2007).
Analysis
Richard argues that the Beverly Enterprises defendants
have not met their initial burden of proving the existence of
a valid arbitration agreement between Shirley Carraway and
Beverly Healthcare-Foley because Shirley did not sign the
arbitration agreement herself.  The agreement states: "If the
resident is unable to consent or sign this provision because
of physical disability or mental incompetence or is a minor
and this provision is being signed by an authorized
representative, complete the following."  Signature lines
indicating the relationship of the signatory to the resident
are provided below this language.  Richard contends that
because he signed the arbitration agreement on Shirley's
1051409
7
behalf, it is valid only if Shirley was physically unable to
sign the agreement herself or if she was mentally incompetent.
We disagree.  Just as Richard signed all the other
documents relating to Shirley's admission into the nursing
home on Shirley's behalf, Richard signed the arbitration
agreement on Shirley's behalf expressly as an "authorized
representative."  Apparent authority "is implied where the
principal passively permits the agent to appear to a third
person to have the authority to act on [her] behalf."
Treadwell Ford, Inc. v. Courtesy Auto Brokers, Inc., 426 So.
2d 859, 861 (Ala. Civ. App. 1983).  "It is not essential that
the right of control be exercised so long as that right
actually exists." Wood Chevrolet Co. v. Bank of the Southeast,
352 So. 2d 1350, 1352 (Ala. 1977).
 There is no evidence
indicating that Shirley had any objection to Richard's acting
on her behalf in admitting Shirley to the nursing home.  On
the contrary, the evidence suggests that Shirley approved of
her brother's acting on her behalf.  A few weeks into
Shirley's residency at the nursing home, she executed a power
of attorney, giving Richard further authority to act on her
behalf.  The arbitration agreement did not call for the
1051409
8
signature 
of 
a legal 
representative; 
instead, 
it 
provided 
that
"a person duly authorized by the Resident" could sign the
agreement on the resident's behalf.   
Richard next argues that the arbitration agreement is not
effective because, he says, it was not "executed in accordance
with ... the [']Sole Agreement['] provisions of the Resident
Admission Agreement."  The "sole agreement" provision in the
admission 
agreement 
states, in pertinent 
part: 
"This
Agreement, along with any documents attached or included by
reference, is the only agreement between the Facility and
parties.  Changes to this Agreement are valid only if made in
writing and signed by all parties."  Richard cites Blue Cross
& Blue Shield of Alabama v. Woodruff, 803 So. 2d 519 (Ala.
2001), as authority for his claim that the arbitration
agreement violates the "sole agreement" provision.  In Blue
Cross, Vera Brooks had entered into a contract with Blue Cross
for insurance coverage.  According to its terms, the contract
could "only be changed by written amendments, endorsements,
and revisions signed by one of our officers and sent to [the
policyholder]."  Blue Cross attempted to amend the contract by
adding an arbitration provision; however, there was no
1051409
9
evidence indicating that the amended contract had been signed
by one of Blue Cross's officers and had been sent to the
policyholder.  When a dispute arose, Blue Cross moved to
compel arbitration according to the arbitration provision in
the amended contract.  This Court affirmed the trial court's
order denying Blue Cross's motion to compel arbitration
because in amending the original contract between the parties
to add the arbitration provision, the drafters had not
complied with the procedure set forth in the original contract
for amending the contract.  The arbitration provision was
therefore ineffective.
The present case is readily distinguishable from Blue
Cross. Here, the parties complied with the requirements in the
"sole agreement" provision for amending the admission
agreement.  Under the terms of the admission agreement,
changes to the admission agreement are valid "if made in
writing and signed by all parties."  The arbitration
agreement, a written document, was signed by both the
admissions 
coordinator, 
on 
behalf 
of 
Beverly 
Healthcare-Foley,
and Richard, as Shirley's authorized representative.  The
arbitration agreement expressly states that "[t]he parties to
1051409
10
this Arbitration Agreement acknowledge and agree that upon
execution, this Arbitration Agreement becomes part of the
Admission Agreement ...."  Thus, neither Blue Cross nor the
record supports Richard's argument that the arbitration
agreement 
conflicts 
with 
the 
"sole 
agreement" 
provision 
in 
the
admission agreement.
Richard's final argument is that the arbitration
agreement is invalid 
because, 
he 
argues, 
it 
is 
unconscionable.
In particular, Richard alleges that the arbitration agreement
is unconscionable for two reasons: first, because the Beverly
Enterprises defendants withheld material facts from Richard,
and, second, because the actual terms of the arbitration
agreement are unconscionable.  This Court has stated that
"'"[u]nconscionability is an affirmative defense, ... and the
party asserting the defense bears the burden of proof."'"
Steele v. Walser, 880 So. 2d 1123 (Ala. 2003) (quoting Conseco
Fin. Corp.-Alabama v. Boone, 838 So. 2d 370, 373 (Ala. 2002),
quoting in turn Fleetwood Enters., Inc. v. Bruno, 784 So. 2d
277, 281 (Ala. 2000)).  The test for determining whether an
agreement is unconscionable is "'"whether there are (1) terms
that are grossly favorable to a party that has (2)
1051409
11
overwhelming bargaining power."'" Steele, 880 So. 2d at 1129
(quoting Gayfer Montgomery Fair Co. v. Austin, 870 So. 2d 683,
688-89 (Ala. 2003), quoting in turn Leonard v. Terminix Int'l
Co., 854 So. 2d 529, 538 (Ala. 2002)).  
Richard alleges that the Beverly Enterprises defendants
withheld material facts concerning the rules governing the
arbitration 
process, 
including 
fee 
amounts, 
discovery
limitations, admissibility of evidence, and damages awards.
The arbitration agreement states that "all claims, disputes,
and controversies ... relating in any way to the Admission
Agreement ... shall be resolved exclusively by binding
arbitration ... in accordance with the National Arbitration
Forum Code of Procedure, which is hereby incorporated into
this Agreement, and not by a lawsuit or resort to court
process."  This sentence references a footnote, which states:
"Information about the National Arbitration Forum, including
a complete copy of the Code of Procedure, can be obtained from
the Forum at 800-474-2371, by fax at 651-604-6778 or toll-free
fax at 866-743-4517, or on the internet at http://www.arb-
forum.com."  In addition to the explicit reference to the
arbitration terms of the National Arbitration Forum Code of
1051409
12
Procedure and directions as to how to access those terms, the
arbitration agreement expressly informs the signatory of his
right to have the arbitration agreement reviewed by a lawyer:
"The Resident understands that (1) he/she has the
right to seek legal counsel concerning this
Arbitration Agreement, (2) that execution of this
Arbitration Agreement is not a precondition to
admission or the furnishing of services to the
Resident by the Facility, and (3) this Arbitration
Agreement may be rescinded by written notice to the
Facility from the Resident within thirty days of
signature.  If not rescinded within thirty days,
this Arbitration Agreement shall remain in effect
for all subsequent stays at the Facility, even if
the Resident is discharged from and readmitted to
the Facility." 
"There is a general duty on the part of a person to read the
documents received in connection with any transaction." Brown
v. St. Vincent's Hosp., 899 So. 2d 227, 242 (Ala. 2004).
"'"[O]rdinarily when a competent adult, having the ability to
read and understand an instrument, signs a contract, he will
be held to be on notice of all the provisions contained in
that contract and will be bound thereby."'" Tyler v. Williams,
[Ms. 1051435, Feb. 9, 2007] ___ So. 2d ___, ___ (Ala. 2007)
(quoting Green Tree Fin. Corp. v. Vintson, 753 So. 2d 497, 502
(Ala. 1999), quoting in turn Power Equip Co. v. First Alabama
Bank, 585 So. 2d 1291, 1296 (Ala. 1991)).  Richard has thus
1051409
13
failed to show that the Beverly Enterprises defendants
withheld information.  
Richard also claims that some of the terms set out in the
National Arbitration Forum Code of Procedure are "grossly
favorable" 
to 
the 
Beverly 
Enterprises 
defendants. 
 Steele, 
880
So. 2d at 1129.  He argues that the costs in initiating
arbitration are exorbitant and prohibitive, that the process
of selecting an arbitrator favors the Beverly Enterprises
defendants and that, "[i]f the NAF Code of Procedure is read
to restrict the arbitrator's authority to award punitive
damages," then it is unconscionable.  Other than stating the
terms themselves of the arbitration agreement, Richard offers
no 
authority 
establishing 
the 
unreasonableness 
of 
those 
terms.
Richard instead relies on Sloan Southern Homes, LLC v.
McQueen, 955 So. 2d 401 (Ala. 2006).  In Sloan, this Court
held that the arbitration clause was not unconscionable
because the party was unable to demonstrate that the terms of
the arbitration clause were grossly unfavorable.  Richard has
failed to show that the terms of the arbitration agreement are
grossly favorable to the Beverly Enterprises defendants.
1051409
14
Moreover, Richard has not shown that the Beverly
Enterprises defendants possessed "overwhelming bargaining
power."  Steele, 880 So. 2d at 1129.  In fact, the execution
of the arbitration agreement was expressly "not a condition of
admission," 
and, 
under 
the 
terms 
of 
the 
arbitration 
agreement,
it could have been "rescinded by written notice to the
Facility from the Resident within thirty days of signature."
Therefore, Richard has failed to "carry [his] burden in
establishing 
that 
the 
arbitration 
agreement 
was
unconscionable." Steele, 880 So. 2d at 1130.
Conclusion
The Beverly Enterprises defendants have satisfied their
burden of showing that a valid arbitration agreement exists.
We conclude that the trial court did not err in granting the
Beverly Enterprises defendants' motion to compel arbitration
in accordance with the arbitration agreement.
AFFIRMED.
Cobb, C.J., and Woodall, Smith, and Parker, JJ., concur.