DA 09-0394

IN THE SUPREME COURT OF THE STATE OF MONTANA

2010 MT 28

SHIRLEY RIEHL, Personal Representative of

the ESTATE OF SHIRLEY ANN YANUSKI,

Plaintiff and Appellee,

v.

CAMBRIDGE COURT GF, LLC; SUNSET

MANAGEMENT, INC; and WENDY SMITH,

Defendants and Appellants.

APPEAL FROM: District Court of the Eighth Judicial District,

In and For the County of Cascade, Cause No. DDV 2008-913

Honorable Dirk M. Sandefur, Presiding Judge

COUNSEL OF RECORD:

For Appellant:

J. Daniel Hoven, Carlo Canty, Chad Robert Vanisko, Browning, Kaleczyc,

Berry & Hoven, P.C., Helena, Montana

For Appellee:

Stephanie Oblander, Smith, Oblander & Mora, P.C., Great Falls, Montana

Submitted on Briefs: December 10, 2009

Decided: February 9, 2010

Filed:

__________________________________________

Clerk

February 9 2010
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Justice James C. Nelson delivered the Opinion of the Court.

¶1 Appellants Cambridge Court GF, LLC, Sunwest Management, Inc., and Wendy

Smith (collectively “Cambridge Court”), appeal from a decision of the Eighth Judicial

District Court denying Cambridge Court’s motion to compel arbitration based on an

arbitration provision in a contract between Cambridge Court and Appellee Shirley Riehl

(Riehl), personal representative of the Estate of Shirley Ann Yanuski (Yanuski). The

District Court further granted Riehl’s motion for summary judgment and concluded that

the arbitration provision was invalid and unenforceable. For the reasons set forth below,

we affirm the District Court.

BACKGROUND

¶2 In 2005, Shirley Yanuski was suffering from a form of dementia which

significantly impaired her ability to care for herself and competently manage her own

affairs. Her daughter, Riehl, became Yanuski’s personal representative. In September

2007, Riehl moved her mother into an establishment in Great Falls, Montana, known as

“Murphy’s Elderly Guesthouse” (Guesthouse). Ultimately, Yanuski was unable to reside

there because the Guesthouse could not provide for her special needs.

¶3 Riehl and her sister looked into other placement options for their mother in Great

Falls which would be able to provide the specialized assisted living care which she

required, including a facility known as the “Beehive.” They ultimately determined that

Cambridge Court would best serve their mother, and moved her into the Cambridge

Court Memory Care Unit on or about September 25, 2007. Yanuski was transferred from

the Guesthouse directly to the Cambridge Court facility. According to Riehl, Yanuski
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did not want to move to Cambridge Court and objected to her placement there. At the

time Yanuski was transferred, Riehl did not execute an admission agreement with

Cambridge Court.

1

 

¶4 Shannon Freeman (Freeman) was the interim administrator for Cambridge Court

at the time. Approximately 3 days after Yanuski was admitted, Freeman met with Riehl

to execute a care and admission agreement on behalf of Yanuski. The meeting lasted

approximately 20 to 30 minutes. At that time, Freeman and Riehl discussed the costs of

placement at Cambridge Court’s facility. Freeman also went over the terms of a

typewritten, 13-page standard contract entitled “Memory Care Admission Agreement”

(Agreement), which was customarily used by Cambridge Court for admission into the

Memory Care Unit.

¶5 Several portions of the Agreement are relevant to the instant appeal. For instance,

the Agreement contains the following two provisions:

[Section] 6.12 Legal rights. Nothing in this agreement shall construe any

limit of Resident’s or Owner’s inalienable legal rights.

. . .

[Section] 8.9 Governing law. The laws of the State of Oregon, subject to

Montana law regarding a licensed Assisted Living Facility, and the

Federal Arbitration Act regarding dispute resolution, govern this

agreement.

¶6 Immediately following this provision is Section 8.10, entitled “Dispute

Resolution.” Section 8.10 is 6 paragraphs in length and, unlike the other provisions of

1 Riehl notes that Admin. R. M. 37.106.2823 required Cambridge Court to provide the

care plan and admission agreement prior to Yanuski’s admission to the Memory Care

Unit.
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the Agreement, is entirely in bold. This provision explicitly states that the parties to the

Agreement will resolve “any legal dispute, controversy, demand or claim . . . arising

out of, or relating to” the Agreement through “Binding Arbitration.” The phrase

“binding arbitration” is itself bolded and underlined so as to stand out from the rest of the

text. Furthermore, the fourth paragraph of Section 8.10 states that the parties to the

Agreement “understand and acknowledge that, by entering into this binding

arbitration agreement, they are giving up and waiving their right to have claims

decided in a court of law before a judge and a jury.”

¶7 At the hearing in the District Court, Freeman testified about her discussion of the

terms of the Agreement with Riehl. Freeman testified that she did not specifically go

over every provision of the Agreement with Riehl. Freeman generally advised Riehl that

the Agreement contained a binding arbitration provision to resolve disputes arising from

the Agreement. During direct examination, Freeman testified as follows concerning her

routine practice in explaining Section 8.10 to a prospective resident:

Q. You advised [a prospective resident], as your routine practice, you

paraphrased what was in that paragraph. If I was a prospective resident or

a legal representative, what would it have been your practice to tell them

about that particular section regarding arbitration?

A. Typically, when I did approach that section, I would let the family

members and the prospective resident know that if anything needed to be 

decided legally, at some point in time, that the company had a section on 

binding arbitration. And that that’s the way that they would prefer to see 

things go forth, if anything needed to be decided. 

¶8 On cross-examination, Riehl’s counsel followed up with Freeman on this portion

of her testimony.
5

Q. [Y]ou said something on direct that I wanted to follow up briefly 

and then this will be the end, I’ll finish.

I believe you had indicated that in the section about arbitration in

[the Agreement], the Arbitration Provision 8.10, that you explained it [to]

the residents that arbitration is how the company would prefer to see

things go if there was a dispute down the road; was that you testimony?

A. Yes.

Q. So, you wouldn’t even explain it that the resident had no choice that 

arbitration was going to be mandatory. You explained that the company’s

preference was that arbitration is how they wanted to see things handled?

A. Yes, that is how I was under the impression, when I had started

wanting to go over this, that that’s how it was.

Q. So, in none of the meetings, and specifically, certainly not with Ms.

Riehl, did you explain to the resident that, in signing the admission

agreement, the resident was waiving their constitutional right to a jury

trial; you didn’t explain that to them?

A. No, I did not because I was not aware of that at the time.

THE COURT: Because why?

THE WITNESS: I was not aware of that.

¶9 On February 13, 2008, Yanuski died at Cambridge Court’s facility. Riehl alleged

that Yanuski’s death was due acts of negligence by Cambridge Court. On July 18, 2008,

Riehl filed a negligence suit against the defendants. Riehl also specifically sought a

declaratory judgment that the dispute resolution provision of the Agreement was

unenforceable and invalid.

¶10 Cambridge Court subsequently filed a motion to compel arbitration. Riehl resisted

the motion to compel and sought summary judgment on her declaratory judgment action

regarding the validity and enforceability of the arbitration provision. A hearing on the

motion to compel and motion for summary judgment was held before the District Court

on May 26, 2009.2 At the conclusion of the hearing, the District Court denied Cambridge

2 Cambridge Court also filed a motion to stay the District Court proceedings based on

pending actions against Sunwest, Inc., in federal court in Oregon. Furthermore, Riehl
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Court’s motion to compel and granted Riehl’s summary judgment motion from the

bench, holding that the arbitration provision was invalid and unenforceable. In its oral

findings, the District Court determined that Freeman did not discuss with Riehl the fact

that Section 8.10 constituted a waiver of the right to a jury trial, and did not herself

understand that it was such a waiver. Instead, Freeman thought that arbitration was

simply a preferred method of dispute resolution. The District Court also found that the

arbitration provision was not itself subject to negotiation, and was presented to Riehl as

part of a “take it or leave it” contract.

¶11 In its conclusions of law, the District Court considered whether the arbitration

provision was enforceable under Kortum-Managhan v. Herbergers NBGL, 2009 MT 79,

349 Mont. 475, 204 P.3d 693. The District Court noted that the threshold inquiry in

considering a motion to compel arbitration is whether the parties agreed to arbitrate, and

that the existence of an agreement to arbitrate is analyzed in accordance with principles

of contract formation under Montana law. Kortum-Managhan, ¶¶ 15-17. The District

Court noted that a valid contract must contain the following four elements: (1)

identifiable parties capable of contracting; (2) their consent; (3) a lawful object; and (4)

consideration. Kortum-Managhan, ¶ 18. In this regard, the District Court observed that

in order for consent to be established under Montana law, there must be “mutual assent”

sought summary judgment on a declaratory judgment count in her complaint that the

choice of law provision was unenforceable. The District Court entertained argument on

these pending motions at the May 26 hearing as well. The District Court denied the 

motion to stay and granted Riehl’s motion for summary judgment on the choice of law

provision. These rulings have not been appealed and will not be discussed in this

Opinion.
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or a “meeting of the minds” on all essential terms of the contract, and that there must be a

valid offer and acceptance in order to effectuate a contract. See Kortum-Managhan, ¶ 18

(quoting Keesun Partners v. Ferdig Oil Co., Inc., 249 Mont. 331, 337, 816 P.2d 417, 421

(1991)).

¶12 The District Court further observed that a contract of adhesion will not be

enforced against a weaker party if the terms of the contract are not within the reasonable

expectations of the party, or they are within the reasonable expectations of the party, but

either unduly oppressive, unconscionable, or against public policy. See KortumManaghan, ¶ 23 (citing Zigrang v. U.S. Bancorp Piper Jaffray, Inc., 2005 MT 282, ¶ 13,

329 Mont. 239, 123 P.3d 237). A contract of adhesion is said to arise “when a party

possessing superior bargaining power presents a standardized form of agreement to a

party whose choice remains either to accept or reject the contract without the opportunity

to negotiate its terms.” Zigrang, ¶ 14.

¶13 Additionally, the District Court noted that in order for a party to consent to

arbitration, she must knowingly, intelligently, and voluntarily waive her fundamental

rights of access to the courts and a jury trial under the Montana Constitution. See

Kortum-Managhan, ¶ 26 (citing Kloss v. Edward D. Jones & Co., 2002 MT 129, ¶¶ 48

n.1, 64, 310 Mont. 123, 54 P.3d 1, cert denied, 538 U.S. 956, 123 S. Ct. 1633 (2003)

(Nelson, Cotter, Leaphart & Trieweiler, J.J., specially concurring)). The District Court

considered whether Riehl had executed a valid waiver of these rights under the 10-factor

test discussed in Kortum-Managhan, and determined that the factors weighed against the

finding of a valid waiver. See Kortum-Managhan, ¶ 27.
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¶14 Based on this analysis, the District Court drew two dispositive conclusions. First,

it concluded that the Agreement was a contract of adhesion, and that the binding

arbitration provision was beyond the objective and subjective expectations of Riehl.

Consequently, the District Court determined the arbitration provision was unconscionable

and unenforceable. Second, the District Court independently concluded that Riehl did

not knowingly, intelligently, and voluntarily waive her fundamental rights to access to the

courts and a jury trial. Because there was not a valid waiver of these rights, the District

Court concluded there was no mutual consent between the parties to agree to binding

arbitration and the arbitration provision was not valid and enforceable as a matter of

contract law. The District Court summarized its pronouncement from the bench in a

written order date June 3, 2009.

¶15 Cambridge Court now appeals from the decision of the District Court. We state

the issue presented by Cambridge Court as follows:

¶16 Did the District Court err in concluding that the arbitration provision in this case

was invalid and unenforceable?

STANDARD OF REVIEW

¶17 We review de novo a district court’s disposition of a motion to compel arbitration.

Woodruff v. Bretz, Inc., 2009 MT 329, ¶ 5, 353 Mont. 6, 218 P.3d 486; Howard Elec. and

Mechanical Co., Inc. v. Frank Briscoe Co., Inc., 754 F.2d 847, 849 (9th Cir. 1985). We

also review de novo a district court’s decision granting summary judgment. Rich v.

Ellingson, 2007 MT 346, ¶ 12, 340 Mont. 285, 174 P.3d 491. A district court’s
9

conclusions of law in both of these contexts are reviewed for correctness. Martz v.

Beneficial Mont., Inc., 2006 MT 94, ¶ 10, 332 Mont. 93, 135 P.3d 790; Rich, ¶ 12.

DISCUSSION

¶18 Cambridge Court claims the District Court erred in its decision. First, Cambridge

Court argues the arbitration provision in Section 8.10 was conspicuous, clear,

unambiguous, and agreed to by both parties. In this connection, Cambridge Court asserts

the waiver provision in Section 8.10 was not in conflict with Section 6.12. See Opinion,

¶¶ 5-6. Second, Cambridge Court asserts that the Agreement was not a contract of

adhesion. Cambridge Court argues that Riehl was not forced to execute the Agreement

with Cambridge Court because she could have sought admission at other facilities and

had alternatives other than Cambridge Court. Further, Cambridge Court asserts that

Riehl cannot claim she was “compelled” to sign the Agreement in order to avoid moving

Yanuski a second time, since she had an opportunity to inquire about the terms of the

Agreement prior to moving Yanuski into Cambridge Court. Cambridge Court

acknowledges that Freeman allowed Yanuski to move in before the appropriate paper

work was formalized, but claims this was done in the immediate and best interests of

Yanuski in order to place her immediately. Furthermore, Cambridge Court notes that

Freeman testified it was her policy to give potential residents time to review the

Agreement.

¶19 Regarding the “negotiability” of the Agreement, Cambridge Court argues that

Section 8.2 of the Agreement outlines the procedures to be followed in order to amend its
10

terms.3 Moreover, Cambridge Court asserts there was no evidence presented that Riehl

ever requested negotiation of any of the terms of the Agreement. For these reasons,

Cambridge Court asserts that the District Court erred in concluding the Agreement was a

contract of adhesion under Kortum-Managhan.

¶20 Additionally, Cambridge Court argues that the Agreement was enforceable against

Riehl because it was within her reasonable expectations and was not unduly oppressive,

unconscionable, or against public policy. Cambridge Court claims that Freeman’s

explanation to Riehl that it would “prefer” to use arbitration accurately informed her

expectations. Cambridge Court also argues that because Riehl was acting as Yanuski’s

personal representative, she had a heightened responsibility to be fully informed of the

provisions and consequences of the Agreement. Because she reviewed the Agreement,

was aware of its contents, and the arbitration provision was unambiguous, Cambridge

Court argues it was within her reasonable expectations. Furthermore, Cambridge Court

claims the arbitration provision is not unconscionable or against public policy, insofar as

the terms of the Agreement are not unreasonably favorable to Cambridge Court, both

parties share mutuality of obligation under its terms, and Riehl had meaningful choices

and options available to her before deciding to sign it.

3 Section 8.2 reads as follows: “Amendments. This Agreement constitutes the entire

agreement between Owner and Resident and no amendment, alteration, modification or

addition to this Agreement shall be valid or enforceable unless all parties express consent

in writing and sign it. However, Owner may change, without such written, signed

expression, and without prior notice, the Resident Handbook, House Rules, or its policies

and procedures, so long as the changes would not cause a material breach to this

Agreement.”
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¶21 Finally, Cambridge Court argues that the District Court erred in concluding that

Riehl did not knowingly, voluntarily, and intelligently waive her rights to a jury trial and

access to the courts when she signed the Agreement. Cambridge Court disputes the

District Court’s analysis under the 10-factor test as recently described in KortumManaghan.

¶22 Riehl urges us to affirm. First, Riehl argues that the Agreement was a contract of

adhesion. Riehl claims the facts show that Freeman required her to sign the Agreement,

and did not actually engage in negotiations with her regarding its contents. Riehl argues

the Agreement was presented on a “take it or leave it” basis, including the arbitration

provision, and that the language in Section 8.2 only contemplates modification of the

Agreement after it has been executed. Riehl disputes the contention that she had the

opportunity to negotiate its terms, especially given the fact that Yanuski was already at

Cambridge Court and it would have been very difficult to move her.

¶23 Second, Riehl claims that arbitration was simply not within her reasonable

expectations, and that she cannot be compelled to arbitrate. Riehl notes that Freeman

herself testified that she did not believe the binding arbitration provision would waive

Riehl’s rights to a jury trial and access to the courts. Riehl argues that if this was not

within Freeman’s reasonable expectations, it could not be within her reasonable

expectations either. Riehl disputes the argument that she was somehow under a greater

burden to understand the contents of the Agreement, simply because she was acting as

Yanuski’s personal representative. Riehl also argues the Agreement is unconscionable

and against public policy on the grounds that it lacks mutuality of obligation between the
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parties. Riehl also argues the District Court did not err in its analysis of whether she

knowingly, intelligently, and voluntarily waived her rights to access to the courts and a

jury trial under the 10-factor test in Kortum-Managhan.

¶24 Finally, Riehl requests that the arbitration provision in Section 8.10 be stricken

from the Agreement due to the conflicts and ambiguities caused by it in relation to

Sections 6.12 and 8.9. Riehl argues that when read together, the “Legal Rights”

provision (Section 6.12), the “Governing Law” provision (Section 8.9), and the

arbitration provision (Section 8.10), render the Agreement susceptible to at least two

reasonable but conflicting interpretations. On the one hand, the “Legal Rights” provision

could indicate that the signing party is not waiving any of her rights; on the other hand,

the arbitration provision indicates that the rights to a jury trial and access to the courts are

being waived. The claimed ambiguity is a function of the fact that Section 8.9 calls for

the Agreement to be interpreted according to Oregon law, but that the “inalienable legal

rights” referred to in Section 6.12, are not defined under the laws of Oregon or Montana.

Thus, Riehl argues, Section 6.12 does not define “inalienable legal rights” clearly,

creating confusion as to the applicability and scope of a waiver of the fundamental rights

to a jury trial and access to the courts as set forth in the arbitration provision. Riehl also

seeks attorney fees under M. R. App. 19(5), for what she terms a “frivolous” appeal.

¶25 We review de novo the District Court’s disposition of the motion to compel, as

well as the motion for summary judgment. Woodruff, ¶ 5; Rich, ¶ 12. In KortumManaghan, we noted that the threshold inquiry in this context is whether the parties have
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agreed to arbitrate. Kortum-Managhan, ¶ 15 (citing Zigrang, ¶ 8). The existence of such

an agreement is a matter of Montana contract law. Kortum-Managhan, ¶ 17.

¶26 The construction and interpretation of a contract, including the existence of any

ambiguities in the provisions of a contract, is a question of law. Performance Machinery

Co., Inc. v. Yellowstone Mountain Club, LLC, 2007 MT 250, ¶ 39, 339 Mont. 259, 169

P.3d 394 (citing Ophus v. Fritz, 2000 MT 251, ¶ 19, 301 Mont. 447, 11 P.3d 1192; Mary

J. Baker Revoc. Trust v. Cenex Harvest, 2007 MT 159, ¶ 19, 338 Mont. 41, 164 P.3d

851). “ ‘An ambiguity exists where the language of a contract, as a whole, reasonably is

subject to two different interpretations.’ ” West v. Club at Spanish Peaks, L.L.C., 2008

MT 183, ¶ 53, 343 Mont. 434, 186 P.3d 1228 (quoting Wurl v. Polson Sch. Dist. No. 23,

2006 MT 8, ¶ 17, 330 Mont. 282, 127 P.3d 436). “The existence of an ambiguity must be

determined on an objective basis, and an ambiguity exists only if the language is

susceptible to at least two reasonable but conflicting meanings.” Performance

Machinery, ¶ 39. If the court determines a contract is ambiguous, it is interpreted “most

strongly” against the party who drafted it. West, ¶ 53 (citing Eschenbacher v. Anderson,

2001 MT 206, ¶ 24, 306 Mont. 321, 34 P.3d 87); see also Performance Machinery, ¶ 39

(citing Ophus, ¶ 31). Furthermore, “ ‘when a contract term is ambiguous, interpretation

of the term involves determining a question of fact regarding the intent of the parties to

the contract.’ ” West, ¶ 53 (citing Wurl, ¶ 17).

¶27 We agree with Riehl that the Agreement, as a whole, is ambiguous regarding the

scope and applicability of the arbitration provision. Section 6.12, entitled “Legal rights,”

states that “[n]othing in this agreement shall construe any limit of Resident’s or Owner’s
14

inalienable legal rights.” Neither the Agreement itself, nor the laws of Montana or

Oregon, specifically define the term “inalienable legal rights.” However, Section 8.10

states that the parties to the Agreement “understand and acknowledge that, by

entering into this binding arbitration agreement, they are giving up and waiving

their right to have claims decided in a court of law before a judge and a jury.” The

Agreement itself never explains how these two provisions are to be reconciled. Section

8.10 informs the parties that they are “waiving” their legal rights to access to the courts.

Section 6.12 informs the resident that “nothing in this agreement” limits any of their

“inalienable legal rights.”

¶28 We conclude that the Agreement, when considered as a whole, is ambiguous as to

whether Riehl actually agreed to waive her rights to access to the courts and a trial by

jury when she entered into the Agreement. While the District Court determined that the

express language of the waiver clause was not, in and of itself, internally ambiguous or

misleading, it did find that the wavier in Section 8.10 could be misleading or ambiguous

given that Section 6.12 states that nothing in the Agreement shall construe any limits on

the resident’s “inalienable legal rights.” However, we review the District Court’s

decision in this case de novo are not bound by its reasoning or interpretation.

¶29 Accordingly, we consider whether the parties actually intended to agree to the

binding arbitration provision as a question of fact. West, ¶ 53. As noted above, see

Opinion, ¶¶ 7-8, Freeman specifically testified that she did not know or believe that the

Agreement called for binding arbitration. Instead, Freeman thought that Cambridge

Court merely “preferred” arbitration. Thus, as a factual question, Freeman, on behalf of
15

Cambridge Court, did not intend to enter into a binding arbitration agreement with Riehl.4

Similarly, Riehl stated to the District Court that she had “no idea” that the Agreement

required her to waive her rights to a jury trial. Thus, we hold there was no “mutual

intent,” or “meeting of the minds,” between the parties regarding the binding arbitration

provision in this case.

¶30 As Riehl notes, Section 8.4 of the Agreement contains a severability clause which

specifically states that “[i]f any term or provision of this Agreement proves to be invalid,

illegal or unenforceable, the remainder of this Agreement shall remain in full force and

effect.” We conclude the arbitration provision, Section 8.10, is unenforceable against

Riehl in this case.

¶31 Since we hold that the arbitration provision is unenforceable against Riehl due to

ambiguities in the Agreement and a lack of mutual consent between the parties to agree

to arbitration, it is not necessary for this Court to decide whether the Agreement was a

contract of adhesion, or whether the arbitration provision was within the reasonable

expectations of Riehl, or unconscionable. Nor must this Court consider whether Riehl

waived her rights to access to the courts and a trial by jury, because in any event the

arbitration provision is unenforceable against Riehl. Likewise, our decision disposes of

Cambridge Court’s argument under § 27-5-114(2), MCA.

CONCLUSION

4 We note that there is no genuine issue of material fact regarding Freeman’s

understanding of the arbitration provision, although Cambridge Court does dispute the

legal significance of Freeman’s understanding as it pertains to the question of whether or

not the arbitration provision is enforceable against Riehl.
16

¶32 We affirm the District Court’s denial of Cambridge Court’s motion to compel

arbitration and grant of summary judgment to Riehl. We deny Riehl’s request for

attorney fees for work done on appeal. Although we have denied Cambridge Court’s

efforts to reverse the District Court, its appeal is meritorious and adequately argued.

¶33 Affirmed.

/S/ JAMES C. NELSON

We Concur:

/S/ MIKE McGRATH

/S/ W. WILLIAM LEAPHART

/S/ PATRICIA O. COTTER

/S/ BRIAN MORRIS