A third party with power of attorney could not agree to arbitrate on behalf of a nursing home admittee unless the mental incapacity precondition specified in the instrument was satisfied, according to the Tennessee Court of Appeals.

In Hendrix v. Life Care Centers of America, Inc., No. E2006-02288-COA-R3-CV, 2007 WL 4523876 (Tenn. Ct. App. Dec. 21, 2007), Hendrix brought a wrongful death lawsuit against Life Care Centers (LCC) after Beck, Hendrix's mother, died while in LCC's care.

LCC moved to compel arbitration of the claim, maintaining that Hendrix signed an arbitration agreement on Beck's behalf. Specifically, LCC alleged that Beck had granted Hendrix power of attorney in two separate instruments: a power of attorney for health care decisions and a general power of attorney.

The trial court denied the motion to compel, holding that Hendrix's power of attorney was not effective at the time of admission and, accordingly, that Hendrix could not agree to arbitration on Beck's behalf. Specifically, the trial court found that Beck was not incapacitated at the time of admission, a precondition to the power of attorney becoming effective.

On appeal, the Tennessee Court of Appeals affirmed the lower court ruling, noting that the factual findings of the trial court regarding Beck's capacity at the time of admission supported its holding that Hendrix did not have the power of attorney necessary to agree to arbitration on Beck's behalf.

The Court found that the two power of attorney instruments had two different preconditions to becoming effective. The power of attorney for health care decisions became effective when Beck could "not make [her] own medical decisions," which the Court interpreted as referring to mental incapacity. Alternatively, the general power of attorney became effective upon Beck's "incapacity or inability to manage [her] own affairs," which the Court interpreted as encompassing both physical and mental incapacity.

However, the Court gave precedence to the power of attorney for health care decisions over the general power of attorney, noting that the latter instrument specified the former as controlling upon a conflict between the instruments. Therefore, the Court held that Hendrix could only have the authority to bind Beck under the terms of the power of attorney for health care decisions, and could only do so if Beck was mentally incapacitated at the time of admission.

While the Court did note a conflict in the record regarding Beck's capacity at the time of admission, the Court pointed to evidence that Beck was able to understand instructions, assist in her own care, and voluntarily sign other documents at admission. The Court refused to set aside the factual findings of the trial court regarding Beck's capacity based only on that conflicting factual record.