Filed 8/10/18 Baker v. TJD, LLC CA5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIFTH APPELLATE DISTRICT

LAWRENCE BAKER,

Plaintiff and Respondent,

v.

TJD, LLC et al.,

Defendants and Appellants.

F074547

(Super. Ct. No. 16CV-00840)

OPINION

THE COURT*

APPEAL from a judgment of the Superior Court of Merced County. Donald J. Proietti, Judge.

Lewis Brisbois Bisgaard & Smith, Lann G. McIntyre, Kevin L. Eng and Brittany Bartold Sutton for Defendants and Appellants.

Arata, Swingle & Van Egmond & Goodwin and Gregory J. Goodwin for Plaintiff and Respondent.

-ooOoo-

Plaintiff Lawrence Baker was an 81-year-old patient at the defendant’s skilled nursing facility when he was dropped during a bathroom transfer directly onto his surgically repaired right knee. Baker sued the facility and a nursing assistant for negligence and elder abuse. The defendants filed a petition to compel arbitration based on a written arbitration agreement Baker signed the day after he was admitted to the nursing facility. The trial court denied the petition to compel arbitration on the ground that Baker lacked the legal capacity to contract at the time he signed the arbitration agreement.

On appeal, defendants argue (1) Baker had the burden of proving his lack of capacity, (2) the evidence presented by Baker was speculative, (3) the evidence presented by defendants was admissible and demonstrated that Baker had the ability to understand and appreciate the consequences of his actions, and (4) the court erred in relying on speculative evidence to draw inferences about Baker’s lack of mental capacity.

We conclude substantial evidence, albeit circumstantial, supports the trial court’s finding of fact that Baker lacked the capacity to contract when he signed the arbitration agreement. The events that occurred before and after the agreement was executed, including the administration of the medication Tramadol, constitutes circumstantial evidence from which the court reasonably could infer Baker lacked the capacity to contract.

We therefore affirm the order denying the petition to compel arbitration.

FACTS

Baker was employed as a peace officer with the California Highway Patrol for 32 years and retired in 1989 at the age of 55. During his employment, he suffered an injury that caused problems with his right knee. In March 2015, when Baker was 81 years old, he underwent an operation to replace his right knee.

While at the hospital, Baker was given Tramadol for pain. This medication caused Baker to be confused, disoriented and suffer hallucinations, such as feeling the staff at the hospital intended to cause him harm. Baker was physically restrained on at least two occasions during his hospitalization.

On March 23, 2015, after the surgery, Baker was transferred for rehabilitation to a skill nursing facility operated by defendant TJD, LLC, which does business as Anberry Nursing and Rehabilitation Center (Anberry). His wife did not ride in the transport vehicle with him, but followed in her own automobile. On March 23, 2015, Anberry had a “resident’s representative” sign a “consent to treatment” document on behalf of Baker. It is unclear from the evidence presented who signed the consent to treatment document on behalf of Baker.

Sometime on March 24, 2015, Baker signed a separate six-page document titled, “ARBITRATION AGREEMENT (READ CAREFULLY – NOT PART OF ADMISSION AGREEMENT).” A box around this title also contain a sentence stating: “Residents shall not be required to sign this Arbitration Agreement as a condition of admission to this facility and cannot waive the ability to sue for violation of the Resident Bill of Rights.” Clause 1.1 of the agreement stated “that any dispute as to medical malpractice … will be determined by submission to arbitration as provided by California law, and not by a lawsuit or resort to court process .…” Baker’s signature appears on the agreement in two separate signature blocks. Immediately above the first signature block, the following notice appears in red ink: “NOTICE: BY SIGNING THIS CONTRACT YOU ARE AGREEING TO HAVE ANY ISSUE OF MEDICAL MALPRACTICE DECIDED BY NEUTRAL ARBITRATION AND YOU ARE GIVING UP YOUR RIGHT TO A JURY OR COURT TRIAL. SEE ARTICLE I OF THIS CONTRACT.” His second signature appears on the next page and “B.” is used after his first name and middle initial, instead of “Baker.”

The arbitration agreement was signed on behalf of Anberry by Armida Virgen, an employee who worked in Anberry’s admissions department from January through May 2015. Virgen’s declaration stated (1) she signed the arbitration agreement contemporaneously with Baker, (2) Baker signed the agreement after having an opportunity to completely review the agreement and ask any questions that he may have had, and (3) she did not recall Baker having any questions about the arbitration agreement. Virgen’s declaration also stated Baker had an opportunity to rescind the arbitration agreement, but never exercised his right to do so.

During her deposition, Virgen was asked if she had any independent recollection of Baker and she answered, “I don’t remember.” Virgen then confirmed that she had processed a lot of admissions. Counsel then asked, “You don’t have any independent recollection whatsoever regarding your admission of Mr. Baker; is that correct?” Virgen answered, “Correct.” Thus, Virgen’s deposition testimony established that the statements made in her declaration were based on her custom and practice during the time she worked in the admissions department and were not based on specific recollections of her meeting with Baker.

Baker has no recollection of meeting with Virgen or of signing the arbitration agreement. Both his wife and his son stated the signatures do not appear to be Baker’s normal signature. Their declarations did not explain how the signatures differed from Baker’s normal signature.

PROCEEDINGS

In March 2016, Baker filed a complaint against Anberry for negligence and elder abuse. The complaint alleged that on March 29, 2015, Baker suffered a fall during a bathroom transfer when he was dropped by defendant Sarah Kimbrough, a certified nursing assistant employed by Anberry, onto his surgically repaired right knee. The complaint also alleged (1) Baker landed with such force as to cause a rupture of his right quadriceps tendon and immediate bleeding at the site of his incision; (2) Anberry actively concealed how the fall occurred and the nature and extent of Baker’s injuries; and (3) Anberry’s actions caused Baker to undergo at least three additional surgeries to his right knee, culminating on September 10, 2015, when a total arthroplasty revision was performed.

In June 2016, defendants filed a petition to compel arbitration. Defendants supported their petition with the declaration of Virgen, which included attached copies of the arbitration agreement signed by Baker. Baker’s opposition to the petition argued (1) he did not voluntarily execute the arbitration agreement; (2) he did not have the capacity to consent or, alternatively, his consent was obtained by fraud, duress or undue influence; and (3) any arbitration ordered should be at the expense of the defendants.

After the petition was filed, the parties conducted discovery. As a result, Baker’s opposition to the petition was supported by excerpts from the deposition of Virgen and documents produced by Anberry relating to its assessment of Baker. Baker also submitted his own declaration and declarations from his wife and son. Baker’s declaration stated he had absolutely no recollection whatsoever of meeting or speaking with Virgen or of signing the arbitration agreement. Baker’s declaration also stated during his time with the California Highway Patrol he was trained to accurately perceive, record and remember events and, if necessary testify regarding those events in court.

In September 2016, the trial court filed an order denying the petition to compel arbitration. The court noted it was undisputed that an arbitration agreement was signed by Baker and, consequently, addressed Baker’s argument that he lacked the capacity to make a contract at the time he signed the document. The court determined a preponderance of the evidence supported a finding that Baker lacked the capacity to contract when he signed the agreement on March 24, 2015.

In October 2016, defendants filed a notice of appeal from the order denying their petition to compel arbitration. The denial of a petition to compel arbitration is an appealable order. (Valentine Capital Asset Management, Inc. v. Agahi (2009) 174 Cal.App.4th 606, 613.)

DISCUSSION

I. BASIC LEGAL PRINCIPLES

A. Allocation of Burdens in Trial Court

A petition to compel arbitration is simply a suit in equity seeking specific performance of a contract. (Aanderud v. Superior Court (2017) 13 Cal.App.5th 880, 890.) The party seeking to compel arbitration bears the burden of proving the existence of an arbitration agreement. (Ibid.) The party opposing the petition bears the burden of establishing a defense to the agreement’s enforcement. (Ibid.)

B. Standard of Review

Whether the parties formed a valid agreement to arbitrate is determined under general contract law. (City of Vista v. Sutro & Co. (1997) 52 Cal.App.4th 401, 407.) When factual issues are raised as to the formation of a contract, the trial court considers the evidence presented on those disputed questions of fact and makes findings that are subject to appellate review under the substantial evidence test. (Ibid.) When the mental capacity of a party to an arbitration agreement is disputed and there is a conflict in the relevant evidence presented to the trial court, the resolution of the conflict and the determination of the party’s mental capacity is a finding of fact subject to the substantial evidence standard of review. (Mattos v. Kirby (1955) 133 Cal.App.2d 649, 652 (Mattos).)

Substantial evidence may consist of circumstantial evidence from which inferences are drawn about the ultimate question of fact. Those inferences, however, “must be the result of logic and reason emanating from the evidence and not mere speculation or conjecture.” (Quigley v. McClellan (2013) 214 Cal.App.4th 1276, 1282.) When applying the substantial evidence standard, appellate courts “determine whether a reasonable trier of fact could have found for the respondent based on the entire record.” (Ibid.)

C. Capacity to Contract

1. Statutory Provisions

An enforceable contract exists only if there are (1) “[p]arties capable of contracting;” (2) consent from those parties, (3) a lawful objective, and (4) sufficient consideration. (Civ. Code, § 1550.) Under Civil Code section 1556, “[a]ll persons are capable of contracting, except minors, persons of unsound mind, and persons deprived of civil rights.” (Italics added.)

“The capacity of a person of unsound mind to contract is governed by Part 1 (commencing with Section 38) of Division 1.” (Civ. Code, § 1557, subd. (b).) Civil Code section 38 provides in relevant part: “A person entirely without understanding has no power to make a contract of any kind.” Civil Code section 39, subdivision (a) provides that a “contract of a person of unsound mind, but not entirely without understanding, made before the incapacity of the person has been judicially determined, is subject to rescission, as provided in Chapter 2 (commencing with Section 1688) .…” Civil Code section 39, subdivision (b) sets forth a rebuttable presumption that a person is of unsound mind if it is shown the person is “substantially unable to manage his or her own financial resources or resist fraud or undue influence.” Otherwise, the rebuttable presumption is that a person is mentally competent. Thus, a person who claims he or she was not competent at a particular time has the burden of establishing that fact by a preponderance of the evidence. (Mattos, supra, 133 Cal.App.2d at p. 653; Prob. Code, § 810, subd. (a) [rebuttable presumption].)

Probate Code section 811, subdivision (a) states a determination that a person is of unsound mind for purposes of contracting “shall be supported by evidence of a deficit in at least one of the following mental functions” and lists those functions as (1) alertness and attention, (2) information processing, (3) thought processes, and (4) ability to modulate mood and affect. Information processing includes immediate recall, short-term memory, long-term memory, and the ability to understand and communicate with others. (Prob. Code, § 811, subd. (a)(2).) Deficits in thought processes may be demonstrated by severely disorganized thinking, hallucinations, delusions or uncontrollable thoughts. (Prob. Code, § 811, subd. (a)(3).)

2. Evidence Relevant to Incapacity

“The critical determination is incapacity at the time of contracting, although evidence of incapacity before or after the time of contracting may provide circumstantial evidence.” (Schwing, 2 Cal. Affirmative Defenses (2017) § 52:22, pp. 1688-1689.) For instance, in Guardianship of Walters (1951) 37 Cal.2d 239, the appellant contended that evidence of facts occurring between 1944 and 1946 was too remote to be relevant to her competency at the hearing in February 1949. (Id. at p. 249.) The court rejected this argument, stating: “Evidence of conduct tending to show mental condition a reasonable time before the hearing is admissible on the question of competence [citations], and broad discretion is left to the trial court as to the character of such testimony and the period of time over which it may extend.” (Ibid.) Similarly, in Goldman v. Goldman (1959) 169 Cal.App.2d 103, the court stated the determination of lack of capacity on the day of marriage “may, of course, be determined from proof of the party’s condition before and after that date.” (Id. at p. 109.)

II. INCAPACITY OF BAKER

A. Contentions of the Parties

Defendants argue that Baker’s evidence that he lacked the capacity to form a binding arbitration agreement is speculative. Defendants also argue their evidence was admissible and demonstrated that Baker had the ability to understand and appreciate the consequences of his actions. Defendants also refer to Probate Code section 811 and argue the evidence presented was insufficient to prove Baker was deficit in one or more of the statutorily identified mental functions that must be deficit to establish an incapacity to contract.

Baker contends the record contains substantial evidence supporting the trial court’s finding that he lacked to the capacity to form a contract. Baker argues the evidence includes his declaration, the declarations of his wife and son, and Anberry’s records. Baker asserts the evidence shows (1) he did not sign the consent to treatment provided on the day of his admission to Anberry’s facility, (2) he was administered Tramadol on the day in question, and (3) he was experiencing severe pain after his surgery.

B. Trial Court’s Ruling

The trial court’s written decision set forth the rules of law applicable to a petition to compel arbitration and to a dispute over the capacity of a party to form a binding arbitration agreement. Neither side contends the trial court erred in identifying the rules of law. For instance, the court correctly identified that Baker was required to prove by a preponderance of the evidence that he lacked the capacity to form a binding contract. (See Mattos, supra, 133 Cal.App.2d at p. 653.)

The trial court denied “defendants’ petition to compel binding arbitration on the ground that a preponderance of the evidence supports a finding that [Baker] lacked capacity to contract at the time he signed the agreement on March 24, 2015.” The court referred to Baker’s declaration, the declarations of Baker’s wife and son, and medical records produced by Anberry. The declarations of Baker’s wife and son described the effect of Tramadol on Baker based on events that occurred during his hospitalization and prior to his admission to Anberry’s facility. Those effects included confusion, disorientation and hallucinations resulting in his being placed in physical restraints. The progress notes produced by Anberry showed that, on March 24, 2015 (the day the arbitration agreement was signed), Anberry administered a double dose of Tramadol to Baker for moderate to severe pain in the morning (6:05 a.m. and 6:26 a.m.) and another dose of Tramadol in the afternoon (3:49 p.m.). The evidence presented did not address the time of day that Baker met with Virgen and signed the arbitration agreement and, therefore, did not show how that meeting related to the times Baker was administered Tramadol.

C. Analysis of the Evidence

1. Direct Evidence of Incapacity

The signed arbitration agreement is the only direct evidence of what happened when Baker met with Virgen on March 24, 2015. Baker and Virgen—the persons who attended the meeting—do not recall it. As a result, they are not able to provide direct evidence about Baker’s actions and demeanor during the meeting. In particular, they were not able to testify as to Baker’s alertness and attention, his ability to process information, manifestations of his thought processes, or his ability to modulate mood and affect during the meeting. (See Prob. Code, § 811, subd. (a)(1)-(4) [mental functions relevant to determining if a person is of unsound mind].)

2. Baker’s Inability to Recall

Baker’s declaration stating he could not recall signing the arbitration agreement, while not direct evidence of his mental functions during the meeting, is relevant to determining his capacity. Baker’s present inability to recall the meeting supports the inference that he was not processing information about the events occurring immediately before he signed the agreement on March 24, 2015, which supports an inference of deficit mental function at that time. (See Prob. Code, § 811, subd. (a)(2) [memory is part of information processing, which is one of the four mental functions listed as relevant to soundness of mind and capacity to contract].) Thus, defendants’ argument that there was no evidence relating to the mental functions listed in the statute overlooks Baker’s testimony about his memory.

For purposes of this appeal, we assume that Baker’s inability to recall what happened at the meeting is insufficient, by itself, to rebut the presumption that he was mentally competent to contract. Accordingly, we address whether the other circumstantial evidence presented was sufficient to support the trial court’s finding of a lack of capacity to contract.

3. Other Circumstantial Evidence

As described in part I.C.2, ante, evidence about the mental condition of a party to a contract a reasonable time before and after the time of contracting is relevant circumstantial evidence as to that party’s capacity at the time of contracting. Here, the declarations of Baker’s wife and son focused on Baker’s condition while he was hospitalized for his surgery and the effect of the pain medication Tramadol on Baker. This evidence is relevant to Baker’s capacity on March 24, 2015, because Baker was given Tramadol on that date and it is reasonable to infer that the Tramadol caused Baker to be confused and disoriented on March 24, 2015—that is, it created deficits in his information processing and thought processes. (See Prob. Code, § 811, subd. (a)(2)-(3).)

The inference that Baker was confused and disoriented when he signed the agreement is further supported by his wife’s statement that she had reviewed the signatures on the arbitration agreement and the signatures appeared to be her husband’s, but “they do not look to be his normal signature.” Defendants did not object to this testimony on any ground, including the lack of a proper foundation. (See generally, Evid. Code, § 1416 [proof of handwriting by person familiar with handwriting of supposed writer].) Baker and his wife had been married 54 years when she executed the declaration containing this statement. Based on the length of the marriage, the trial court reasonably could infer that she could identify when her husband’s signature looked normal and when it did not. Thus, the trial court, although it did not explicitly refer to her statement about the appearance of Baker’s signature, that statement is circumstantial evidence that provides additional support for the finding as to Baker’s mental condition and the effects the medication and pain were having on him when he signed the agreement.

We conclude the evidence about Baker’s pain, his reaction to the administration of Tramadol, the timing and doses given to him on March 24, 2015, and other circumstantial evidence constitutes substantial evidence supporting the finding that Baker lacked the capacity to form a binding contract when he signed the arbitration agreement on March 24, 2015. Therefore, the trial court’s finding as to the lack of capacity cannot be overturned due to insufficient evidence.

DISPOSITION

The order denying the petition to compel arbitration is affirmed. Baker shall recover his costs on appeal.