RENDERED: MAY 31, 2024; 10:00 A.M. NOT TO BE PUBLISHED
Commonwealth of Kentucky Court of Appeals NO. 2023-CA-0823-MR
ST. MATTHEWS CARE AND REHAB CENTER, LLC D/B/A ST. MATTHEWS CARE CENTER AND MEDICAL REHABILITATION CENTERS, LLC D/B/A EXCEPTIONAL LIVING CENTERS APPELLANTS
APPEAL FROM JEFFERSON CIRCUIT COURT v. HONORABLE BRIAN C. EDWARDS, JUDGE ACTION NO. 22-CI-006338
TROY WOOD, AS ADMINISTRATOR OF THE ESTATE OF EDITH K. WOOD, DECEASED; CARLA BREWER; JOHN VAN AALST; KENTUCKIANA GERIATRIC AND PALLIATIVE SERVICES, PLLC; MUHAMMAD BABAR; AND VOHRA POST ACUTE CARE PHYSICIANS OF THE EAST, P.A., PSC APPELLEES
OPINION AFFIRMING
** ** ** ** ** BEFORE: THOMPSON, CHIEF JUDGE; A. JONES AND LAMBERT, JUDGES.
THOMPSON, CHIEF JUDGE: St. Matthews Care and Rehab Center, LLC d/b/a
St. Matthews Care Center, and Medical Rehabilitation Centers, LLC d/b/a
Exceptional Living Centers (“Appellants”) appeal from an opinion and order of the
Jefferson Circuit Court denying Appellant’s motion to compel arbitration.
Appellants argue that the circuit court erred in holding that Edith Wood (“Ms.
Wood”), deceased, lacked the capacity to contract when she signed an arbitration
agreement with Appellants. It also asserts that state and federal law supports the
resolution of disputes through arbitration. After careful review, we find no error
and affirm the order on appeal.
FACTS AND PROCEDURAL HISTORY
Medical Rehabilitation Centers LLC d/b/a Exceptional Living Centers
owned St. Matthews Care and Rehab Center d/b/a St. Matthews Care Center. St.
Matthews Care Center (“St. Matthews”) was a nursing facility.1 On September 25,
2021, Ms. Wood was admitted to Appellants’ nursing facility. In the year
preceding her admission, Ms. Wood was repeatedly hospitalized for dementia, loss
of consciousness, hallucinations, and metabolic encephalopathy. For the 12 days
1 According to the United States Department of Justice website, St. Matthews Care Center agreed to permanently close in 2023.
-2- immediately preceding Ms. Wood’s admission to St. Matthews, she was
hospitalized at Baptist Hospital East for dementia and loss of consciousness.
Three days after Ms. Wood’s admission to St. Matthews, she signed
an alternative dispute resolution agreement (“arbitration agreement”), in which she
allegedly agreed to forego litigation with St. Matthews in favor of arbitration.2 The
agreement was revocable for 30 days. No family member or legal representative
was present with Ms. Wood when she signed the agreement.
At the time of her admission, St. Matthews’ staff conducted a
perfunctory mental assessment referred to as a Brief Interview for Mental Status
(“BIMS”). The assessment revealed some degree of cognitive decline. One
response, for example, indicated that Ms. Wood did not know what year it was, or
could not guess the year within a range of five years. Nevertheless, St. Matthews
staff found that Ms. Wood’s BIMS score was high enough to allow her to execute
the agreement.
Ms. Wood died of septicemia on October 15, 2021, some 20 days
after her admission to St. Matthews. Thereafter, her estate filed the instant action
against Appellants alleging that their negligence proximately resulted in Ms.
Wood’s death.
2 There is evidence in the record that Ms. Wood signed the arbitration agreement by pushing a button on an electronic device.
-3- In response, Appellants moved to stay the estate’s claims and compel
arbitration. In support of the motion, Appellants relied on the arbitration
agreement Ms. Wood executed upon admission. The estate, through Troy Wood,
administrator, countered that the arbitration agreement was not enforceable
because Ms. Wood lacked the capacity to execute a contract at the time of her
admission. In support of the estate’s argument, it pointed to Ms. Wood’s medical
history both immediately preceding her admission to St. Matthews, as well as her
documented decline throughout 2021.
Appellants’ motion proceeded in Jefferson Circuit Court, culminating
in the court’s order on June 7, 2023, denying Appellants’ motion to send the matter
to arbitration. In examining the issues presented, the court found that Ms. Wood
was 76 years old at the time of admission to St. Matthews; she had previously been
hospitalized for hallucinations and dementia in May 2021; she was hospitalized for
loss of consciousness and confusion in September 2021; and, she was diagnosed
with cognitive communication deficit and moderate cognitive impairment while at
St Matthews. Based on the medical record, the court determined that,
Ms. Wood, an individual with dementia and diagnosed cognitive impairment, likely could not understand and appreciate what she was doing when signing the Arbitration Agreement. There is evidence that Ms. Wood did not have the capacity to contract, and therefore there was no meeting of the minds between the parties when entering into this contract.
-4- After the motion to stay the proceeding and compel arbitration was denied, this
appeal followed.
STANDARD OF REVIEW
[C]ourts will not lightly set aside an executed contract. However, it is equally well settled that this Court will carefully scrutinize transactions between persons who from the very nature of the circumstances occupy unequal positions. To create a valid, enforceable contract, there must be a voluntary, complete assent by the parties having capacity to contract. The test of legal capacity to contract is the ability to understand and appreciate the consequences of the particular transaction. There must be a meeting of the minds to effect assent, and there can be no meeting of the minds where either party to the agreement is mentally incapable of understanding the consequence of his acts.
Conners v. Eble, 269 S.W.2d 716, 717-18 (Ky. 1954) (citations omitted).
Contract interpretation raises questions of law, which we review de
novo. North Fork. Collieries, LLC v. Hall, 322 S.W.3d 98, 102 (Ky. 2010). The
trial court’s findings of fact are reviewed for clear error. Id.
ARGUMENTS AND ANALYSIS
Appellants argue that the Jefferson Circuit Court erred in denying
their motion to stay the proceedings and compel arbitration. They assert that an
arbitration agreement is a contract; that as a matter of public policy, the law favors
arbitration agreements; and, that there exists a presumption of one’s capacity to
freely contract, and a heavy burden to overcome that presumption. While
-5- acknowledging that Ms. Wood suffered from medical issues in the months
preceding her execution of the arbitration agreement, they argue that the record is
insufficient to overcome the presumption that Ms. Wood had the capacity to
understand and sign the contract. Appellants also point to the BIMS assessment
conducted when Ms. Wood was admitted to St. Matthews, which they claim
demonstrated her capacity to understand and assent to the agreement. They also
argue that Ms. Wood’s health issues and diagnoses after executing the agreement
are not relevant to the issues before us. They request an opinion reversing the
order on appeal and remanding the matter for arbitration pursuant to the agreement.
When considering Appellants’ motion to compel arbitration, the
Jefferson Circuit Court made findings of fact that Ms. Wood was diagnosed and
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RENDERED: MAY 31, 2024; 10:00 A.M. NOT TO BE PUBLISHED
Commonwealth of Kentucky Court of Appeals NO. 2023-CA-0823-MR
ST. MATTHEWS CARE AND REHAB CENTER, LLC D/B/A ST. MATTHEWS CARE CENTER AND MEDICAL REHABILITATION CENTERS, LLC D/B/A EXCEPTIONAL LIVING CENTERS APPELLANTS
APPEAL FROM JEFFERSON CIRCUIT COURT v. HONORABLE BRIAN C. EDWARDS, JUDGE ACTION NO. 22-CI-006338
TROY WOOD, AS ADMINISTRATOR OF THE ESTATE OF EDITH K. WOOD, DECEASED; CARLA BREWER; JOHN VAN AALST; KENTUCKIANA GERIATRIC AND PALLIATIVE SERVICES, PLLC; MUHAMMAD BABAR; AND VOHRA POST ACUTE CARE PHYSICIANS OF THE EAST, P.A., PSC APPELLEES
OPINION AFFIRMING
** ** ** ** ** BEFORE: THOMPSON, CHIEF JUDGE; A. JONES AND LAMBERT, JUDGES.
THOMPSON, CHIEF JUDGE: St. Matthews Care and Rehab Center, LLC d/b/a
St. Matthews Care Center, and Medical Rehabilitation Centers, LLC d/b/a
Exceptional Living Centers (“Appellants”) appeal from an opinion and order of the
Jefferson Circuit Court denying Appellant’s motion to compel arbitration.
Appellants argue that the circuit court erred in holding that Edith Wood (“Ms.
Wood”), deceased, lacked the capacity to contract when she signed an arbitration
agreement with Appellants. It also asserts that state and federal law supports the
resolution of disputes through arbitration. After careful review, we find no error
and affirm the order on appeal.
FACTS AND PROCEDURAL HISTORY
Medical Rehabilitation Centers LLC d/b/a Exceptional Living Centers
owned St. Matthews Care and Rehab Center d/b/a St. Matthews Care Center. St.
Matthews Care Center (“St. Matthews”) was a nursing facility.1 On September 25,
2021, Ms. Wood was admitted to Appellants’ nursing facility. In the year
preceding her admission, Ms. Wood was repeatedly hospitalized for dementia, loss
of consciousness, hallucinations, and metabolic encephalopathy. For the 12 days
1 According to the United States Department of Justice website, St. Matthews Care Center agreed to permanently close in 2023.
-2- immediately preceding Ms. Wood’s admission to St. Matthews, she was
hospitalized at Baptist Hospital East for dementia and loss of consciousness.
Three days after Ms. Wood’s admission to St. Matthews, she signed
an alternative dispute resolution agreement (“arbitration agreement”), in which she
allegedly agreed to forego litigation with St. Matthews in favor of arbitration.2 The
agreement was revocable for 30 days. No family member or legal representative
was present with Ms. Wood when she signed the agreement.
At the time of her admission, St. Matthews’ staff conducted a
perfunctory mental assessment referred to as a Brief Interview for Mental Status
(“BIMS”). The assessment revealed some degree of cognitive decline. One
response, for example, indicated that Ms. Wood did not know what year it was, or
could not guess the year within a range of five years. Nevertheless, St. Matthews
staff found that Ms. Wood’s BIMS score was high enough to allow her to execute
the agreement.
Ms. Wood died of septicemia on October 15, 2021, some 20 days
after her admission to St. Matthews. Thereafter, her estate filed the instant action
against Appellants alleging that their negligence proximately resulted in Ms.
Wood’s death.
2 There is evidence in the record that Ms. Wood signed the arbitration agreement by pushing a button on an electronic device.
-3- In response, Appellants moved to stay the estate’s claims and compel
arbitration. In support of the motion, Appellants relied on the arbitration
agreement Ms. Wood executed upon admission. The estate, through Troy Wood,
administrator, countered that the arbitration agreement was not enforceable
because Ms. Wood lacked the capacity to execute a contract at the time of her
admission. In support of the estate’s argument, it pointed to Ms. Wood’s medical
history both immediately preceding her admission to St. Matthews, as well as her
documented decline throughout 2021.
Appellants’ motion proceeded in Jefferson Circuit Court, culminating
in the court’s order on June 7, 2023, denying Appellants’ motion to send the matter
to arbitration. In examining the issues presented, the court found that Ms. Wood
was 76 years old at the time of admission to St. Matthews; she had previously been
hospitalized for hallucinations and dementia in May 2021; she was hospitalized for
loss of consciousness and confusion in September 2021; and, she was diagnosed
with cognitive communication deficit and moderate cognitive impairment while at
St Matthews. Based on the medical record, the court determined that,
Ms. Wood, an individual with dementia and diagnosed cognitive impairment, likely could not understand and appreciate what she was doing when signing the Arbitration Agreement. There is evidence that Ms. Wood did not have the capacity to contract, and therefore there was no meeting of the minds between the parties when entering into this contract.
-4- After the motion to stay the proceeding and compel arbitration was denied, this
appeal followed.
STANDARD OF REVIEW
[C]ourts will not lightly set aside an executed contract. However, it is equally well settled that this Court will carefully scrutinize transactions between persons who from the very nature of the circumstances occupy unequal positions. To create a valid, enforceable contract, there must be a voluntary, complete assent by the parties having capacity to contract. The test of legal capacity to contract is the ability to understand and appreciate the consequences of the particular transaction. There must be a meeting of the minds to effect assent, and there can be no meeting of the minds where either party to the agreement is mentally incapable of understanding the consequence of his acts.
Conners v. Eble, 269 S.W.2d 716, 717-18 (Ky. 1954) (citations omitted).
Contract interpretation raises questions of law, which we review de
novo. North Fork. Collieries, LLC v. Hall, 322 S.W.3d 98, 102 (Ky. 2010). The
trial court’s findings of fact are reviewed for clear error. Id.
ARGUMENTS AND ANALYSIS
Appellants argue that the Jefferson Circuit Court erred in denying
their motion to stay the proceedings and compel arbitration. They assert that an
arbitration agreement is a contract; that as a matter of public policy, the law favors
arbitration agreements; and, that there exists a presumption of one’s capacity to
freely contract, and a heavy burden to overcome that presumption. While
-5- acknowledging that Ms. Wood suffered from medical issues in the months
preceding her execution of the arbitration agreement, they argue that the record is
insufficient to overcome the presumption that Ms. Wood had the capacity to
understand and sign the contract. Appellants also point to the BIMS assessment
conducted when Ms. Wood was admitted to St. Matthews, which they claim
demonstrated her capacity to understand and assent to the agreement. They also
argue that Ms. Wood’s health issues and diagnoses after executing the agreement
are not relevant to the issues before us. They request an opinion reversing the
order on appeal and remanding the matter for arbitration pursuant to the agreement.
When considering Appellants’ motion to compel arbitration, the
Jefferson Circuit Court made findings of fact that Ms. Wood was diagnosed and
hospitalized for dementia and hallucinations about four months prior to her signing
the arbitration agreement. It also found that she was hospitalized for confusion and
loss of consciousness in the days preceding her admission to St. Matthews, and that
she was transferred directly from the hospital to St. Matthews on that day. The
court went on to find that while at St. Matthews, Ms. Wood was diagnosed with
cognitive communication deficit and moderate cognitive impairment. While this
latter diagnosis was made after she executed the agreement, it occurred within days
of her admission.
-6- These findings are amply supported by the medical record, which is
found at vol. II, pp. 174-202 of the circuit court record. Prior to her admission at
St. Matthews, the medical record states that Ms. Wood was chronically ill-
appearing; responded to verbal stimuli but fell back to sleep; had impaired
cognition and memory; was “very obtunded” (reduced consciousness) and not
answering any questions; and, had an “altered mental status.” St. Matthews’ BIMS
results showed that Ms. Wood had “cognitive communication deficit,” along with a
myriad of physical maladies including heart disease, difficulty swallowing, and
end-stage renal disease.
Having determined that the Jefferson Circuit Court’s findings are
supported by the record, the question then becomes whether based on those
findings Ms. Wood had the legal capacity to contract evinced by the ability to
understand and appreciate the consequences of the particular transaction. Conners,
supra. Examining this question of law de novo, we conclude that the record
reasonably supports the circuit court’s conclusion that Ms. Wood lacked the
capacity to understand and appreciate the consequences of executing an arbitration
agreement. When presented with the arbitration agreement, Ms. Wood was not
merely being asked a simple question such as “how do you feel” or “do you want
something to drink?” Rather, Ms. Wood was being asked to consider her right to
engage in litigation, to waive that right, and to participate in arbitration as a means
-7- of dispute resolution. This was true despite St. Matthews’ knowledge of her
diminished mental capacity and its own assessment that Ms. Wood had a cognitive
communication deficit. Further, Ms. Wood had no family member or legal
representative present when she was asked to waive her legal rights.
CONCLUSION
When considering the totality of the record and the law, we conclude
that the Jefferson Circuit Court properly determined that Ms. Wood lacked the
capacity to execute the arbitration agreement. As such, the arbitration agreement is
not enforceable. Accordingly, we affirm the circuit court’s order denying
Appellants’ motion to stay the proceedings and compel arbitration.
ALL CONCUR.
BRIEFS FOR APPELLANTS: BRIEF FOR APPELLEE TROY WOOD, AS ADMINISTRATOR OF Paul A. Dzenitis THE ESTATE OF EDITH K. WOOD, Emily W. Newman DECEASED: Melissa M. Anderson Louisville, Kentucky Paul A. Casi, II Paul A. Casi, III Louisville, Kentucky
-8-