The Superior Court of Pennsylvania (“Pennsylvania Appellate Court”) stated in its non-precedential Memorandum decision filed on August 5, 2021 in a nursing home survival action, “we vacate the order referring the survival action to arbitration and remand the case to the trial court. Upon remand, the court shall allow the parties to engage in discovery on the issue of Decedent’s competency to execute the Agreement and, if necessary, hold a hearing.”
The Underlying Facts
Upon her admission to the defendant nursing home, Timber Ridge, on October 1, 2008, Decedent executed an arbitration agreement (“Agreement”), pursuant to which the parties agreed that all claims by one party against the other must be arbitrated. Following Decedent’s death, Appellants brought a survival action. In response to Appellants’ amended complaint, Timber Ridge filed preliminary objections, in which it, inter alia, petitioned the court to compel arbitration of the survival claim pursuant to the Agreement.
Decedent’s son filed an affidavit in which he averred that: Decedent had only a sixth-grade education and a limited ability to read and write; Decedent was subject to cyclical psychotic mental breakdowns and periodic hospitalization; upon admission to various institutions, he reviewed and approved any documents that required Decedent’s signature since she did not have the capacity to understand the import of legal documents; a judge had twice ordered Decedent be admitted to a psychiatric facility; and he did not believe Decedent could have understood the documents Timber Ridge asked her to sign upon admission.
The trial court issued an order sustaining Timber Ridge’s first preliminary objection, referring the survival action to arbitration, and staying all remaining claims pending the outcome of arbitration. The plaintiff filed an interlocutory appeal.
Pennsylvania Appellate Court Decision
The Pennsylvania Appellate Court stated that its review of a grant or denial of a petition to compel arbitration is limited to determining whether the trial court’s findings are supported by substantial evidence and whether the trial court abused its discretion, applying a two-part test: determining first whether a valid agreement to arbitrate exists and second, determining whether the dispute is within the scope of the agreement. Since arbitration is a matter of contract, a party cannot be compelled to arbitrate unless he or his agent have agreed to do so. Whether an agreement to arbitrate disputes exists is a question of law. Thus, the appellate court’s standard of review is limited to determining whether the trial court committed an error of law, and the scope of review is plenary.
The Pennsylvania Appellate Court stated: “Here, Appellants raised an issue of fact by alleging in their response to Timber Ridge’s preliminary objections that Decedent was legally incompetent to execute a valid contract. Documents submitted by the Appellants in conjunction with their response to the preliminary objections included, inter alia, evidence that Decedent had a long history of mental illness—specifically, schizoaffective disorder—which impaired her “capacity to exercise self-control, judgment, and discretion in the conduct of her personal needs[.]” …. Over the course of Decedent’s life, she was hospitalized repeatedly, beginning at some point in her twenties … Evidence further showed that just one week prior to the execution of the Agreement, Decedent suffered from impaired insight, cognitive impairment, and impaired judgment … Decedent had a “limited ability to read and write”and “did not have the capacity to understand the import of legal documents.””
The Pennsylvania Appellate Court held: “given the nature and lifelong duration of Decedent’s diagnosis, the evidence of her limited ability to read and write, and the fact that, only a week prior to discharging herself from treatment, Decedent suffered from impaired insight, cognitive impairment, and impaired judgment, we conclude that the trial court erred in failing to receive evidence through interrogatories, depositions or an evidentiary hearing.”
Source Shotwell v. Valley Crest Nursing, Inc., d/b/a Timber Ridge Health Care Center, J-A03035-21.
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