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In affirming a lower court order denying a nursing home's motion to compel arbitration, the Kentucky Court of Appeals found no apparent authority and also rejected a third-party beneficiary theory because the resident was competent to sign the agreement and the agreement specifically stated that it must be signed by the resident if competent.
In Mt. Holly Nursing Center v. Crowdus, No. 2007-CA-001708-MR, 2008 WL 2852881 (Ky. Ct. App. July 25, 2008), McGaughey designated Crowdus, her friend, as her health care surrogate, but did not provide her with a general power of attorney. Later, McGaughey was admitted to the Mt. Holly Nursing Center, and during the admission process, Crowdus signed various documents, including an arbitration agreement, on McGaughey's behalf.
When Crowdus sued Mt. Holly on McGaughey's behalf, Mt. Holly filed a motion to compel arbitration. The circuit court denied the motion.
On appeal, Mt. Holly argued that the agreement signed by Crowdus was binding on McGaughey either by virtue of apparent authority or as a third-party beneficiary. The Court found that Mt. Holly had failed to demonstrate apparent authority because there was no evidence that McGaughey had even seen the documents signed by Crowdus and no evidence of any conduct by McGaughey signaling that Crowdus had authority to sign the arbitration agreement.
The Court rejected the third-party beneficiary argument because the arbitration agreement stated that it must be signed by the resident except in cases of incompetency, but it was undisputed that McGaughey was both physically and mentally competent.
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