Apparent Authority to Execute Arbitration Agreement – Competence to Contract

Alabama Somerby, LLC, et al. v. L.D., as next friend of E.D., [Ms. SC-2022-0828, May 12, 2023] __ So. 3d __ (Ala. 2023). The Court (Parker, C.J., and Bryan, Mendheim, and Mitchell, JJ., concur) reverses the Jefferson Circuit Court’s denial of the Defendants’ motion to compel arbitration of claims alleging that E.D. was the victim of sexual offenses while a resident of Brookdale, an assisted living facility operated by the defendants. C.C., E.D.’s daughter, who was named as her attorney in fact under various powers of attorney, signed an admission agreement containing an agreement to arbitrate.

L.D., another daughter of E.D., filed suit alleging that E.D. was mentally incompetent and unable to consent to any sexual contact while at Brookdale. L.D. also alleged that “[Brookdale] was aware that [C.C.] … had relinquished her rights and failed to have the proper healthcare power of attorney sign their [residency] agreement, which makes the [arbitration] agreement unenforceable.” Ms. *7.

The Court concludes “C.C. clearly had apparent authority to execute the residency agreement and thus bound E.D. to the arbitration provision.” Ms. **13-14. The Court notes that to avoid the arbitration agreement, L.D. had to establish E.D. was incompetent “‘at the very time of the transaction.’” Ms. *19, quoting Troy Health & Rehabilitation Center v. McFarland, 187 So. 3d 1112, 1119 (Ala. 2015), some internal quotation marks omitted.

The Court notes that the record shows only that E.D. had an informal diagnosis of dementia and reiterates “‘[t]he presumption is that every person is sane, until the contrary is proven.’ ... Additionally, proof of insanity at intervals or of a temporary character would create no presumption that it continued up to the execution of the instrument, and the burden would be upon the attacking party to show insanity at the very time of the transaction.’” Ms. *22, quoting McFarland, 187 So. 3d at 1119, emphasis in McFarland.

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