June 11, 2020- Loretta D. Harrison v. Farmington Operations, LLC, No. A-1-CA-37540

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IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO	1
LORETTA D. HARRISON and	2
WISDOMA LIFEWARRIOR, as	3
Co-Personal Representatives of	4
the WRONGFUL DEATH ESTATE	5
OF FANNIE DEAL, Deceased,	6
Plaintiffs-Appellees,	7
v. 	No. A-1-CA-37540	8
FARMINGTON OPERATIONS,	9
LLC d/b/a LIFE CARE CENTER	10
OF FARMINGTON; LIFE CARE	11
CENTERS OF AMERICA, INC.;	12
BRENDA CARLEY-DOSTALER,	13
Administrator; KORTNIE R. HARRIS,	14
Administrator; and JOHN DOES 1-250,	15
Defendants-Appellants.	16
APPEAL FROM THE DISTRICT COURT OF SAN JUAN COUNTY	17
Daylene A. Marsh, District Judge	18
Bossie, Reilly & Oh, P.C.	19
Donna Y. Oh	20
Mary Ellen Reilly	21
Phoenix, AZ	22
for Appellees	23
Modrall, Sperling, Roehl, Harris & Sisk, P.A.	24
Michelle A. Hernandez	25
Tomas J. Garcia	26
Albuquerque, NM	27
for Appellants	28
Court of Appeals of New Mexico
Filed 6/11/2020 11:19 AM

2
MEMORANDUM OPINION	1
HANISEE, Chief Judge.	2
{1} 	Farmington Operations LLC, d/b/a Life Care Center of Farmington, Life Care	3
Centers 	of 	America, 	Inc., 	Brenda-Carley-Dostaler, 	and 	Kortnie 	R. 	Harris	4
(collectively, Defendants) appeal from the district court’s order denying Defendants’	5
motion to compel arbitration of claims brought by Loretta D. Harrison and Wisdoma	6
Lifewarrior (Plaintiffs), daughters and co-personal representatives of the wrongful	7
death estate of Fannie Deal (Decedent), following Decedent’s death while in	8
Defendants’ care at a skilled nursing facility. On appeal, Defendants argue that the	9
district court erred in concluding that (1) the power of attorney did not grant	10
Lifewarrior authority to bind Decedent; (2) Defendants’ reliance on the power of	11
attorney was unreasonable; and (3) Lifewarrior was not authorized to act on	12
Decedent’s behalf under principles of agency law. We affirm.	13
BACKGROUND	14
{2} 	Decedent was admitted to Life Care Center (The Facility) in May 2015 by her	15
daughter, Lifewarrior, who signed the Admission Agreement as Decedent’s legal	16
representative. Two years earlier, Decedent had given Lifewarrior durable power of	17
attorney (the POA) to act on her behalf for financial and healthcare decisions. The	18
POA provides:	19
My attorney-in-fact shall have the power to act in my name, place and	20
stead in any way which I myself could do with respect to all matters to	21

3
the extent permitted by law, including, by way of example and not by	1
way of limitation.	2
Immediately following this language, the POA lists eighteen specific authorizations	3
and in bold capital letters, instructed the principal to “INITIAL LINE OPPOSITE	4
EACH AUTHORIZATION THAT YOU DESIRE TO GIVE YOUR DECISION-	5
MAKER.” Decedent’s POA had check marks next to twelve of the eighteen	6
categories, including “[b]usiness operating transactions[,]” “[e]state, trust, and other	7
beneficiary transactions[,]” and “[d]ecisions relating to medical treatment, . . .	8
nursing care, . . . institutionalization in a nursing home or other facility and home	9
health care[.]” However, there is no check mark next to the category “[c]laims and	10
litigation[.]” Moreover, instead of Decedent, Lifewarrior initialed the spaces stating	11
that the POA is “effective immediately” as well as until death or revocation.	12
Decedent, as the principal, signed the POA using her fingerprint at the end of the	13
document.	14
{3} 	There is no indication in the record, and the parties have not argued, that	15
Decedent was incapacitated or unable to understand and execute the admission	16
agreement on her own behalf in 2015. Nevertheless, in this case Lifewarrior signed	17
a resident admission agreement on her mother’s behalf as her “legal representative.”	18
The resident admission agreement included three “facility inserts,” or addendums,	19
one 	of 	which 	was 	a 	two-and-a-half 	page, 	prominently 	labeled, 	“Voluntary	20
Agreement For Arbitration,” (Arbitration Agreement) wherein a resident and/or her	21

4
legal representative and Farmington Operations LLC, including The Facility, all	1
agents, affiliates, and employees (effectively, all Defendants here) agreed “to	2
arbitrate any dispute that might arise” between them. Decedent resided at the facility	3
for eight months until her death in January 2016.	4
Procedural History	5
{4} 	Plaintiffs filed a complaint in district court alleging that their mother died	6
because of Defendants’ inadequate care and treatment and raising claims for	7
wrongful 	death, 	negligence, 	negligence 	per 	se, 	negligent 	or 	intentional	8
misrepresentations, violations of the New Mexico Unfair Trade Practices Act	9
(UPA), and punitive damages. Approximately four months later, one of the	10
Defendants, Life Care Centers of America, a Tennessee corporation, filed a separate	11
action in the United States District Court for the District of New Mexico (the federal	12
court action) to compel arbitration. Defendants filed a motion for protective order	13
and motion to stay the state proceedings pending resolution of the federal court	14
action, or in the alternative to request that the district court compel arbitration. The	15
district court denied the motion to compel arbitration without prejudice, concluding	16
that the POA did not grant Lifewarrior the authority to enter into the arbitration	17
agreement on her mother’s behalf and noting if the federal court compels arbitration	18
as to the single Defendant, a schedule for briefing and a hearing will be set to	19
consider the impact of the decision. Defendants appeal.	20

5
{5} 	In their reply brief to this Court, Defendants stated that during the pendency	1
of this appeal the federal district court granted Life Care Centers of America’s	2
motion to compel arbitration, concluding that Decedent was a third-party beneficiary	3
of a contract and is bound by the contract. Life Care Ctrs. of Am., Inc. v. Estate of	4
Deal, 	No. 	18-CV-187-MV, 	2019 	WL 	1283006, 	at 	*6 	(D.N.M. 	Mar. 	2019).	5
Subsequently, this Court ordered the parties to each submit a report describing the	6
status of the arbitration ordered by the federal court and whether remand to the	7
district court is appropriate in this case. Plaintiffs notified the Court that the parties	8
have not commenced arbitration, that Defendants have declined to participate in	9
discovery pending this appeal, and that Defendants did not file a notice in district	10
court of the outcome of the federal court action. Defendants report that they notified	11
this Court of the outcome of the federal court action, that Plaintiffs have not	12
complied with or appealed the federal court’s order granting the motion to compel	13
arbitration as to Defendant Life Care Centers of America, and that remand would be	14
unnecessary since this case is an appeal of a district court’s order denying arbitration.	15
We proceed in evaluating the district court’s order denying Defendants’ motion to	16
compel arbitration.	17
DISCUSSION	18
{6} 	The issue remains whether the district court erred in denying Defendants’	19
motion to compel arbitration. Defendants argue that the district court erred in	20
concluding that (1) the POA did not grant Lifewarrior authority to bind Decedent;	21

6
(2) Defendants’ reliance on the POA was unreasonable; and (3) Lifewarrior was not	1
authorized to act on Decedent’s behalf under principles of agency law. We review a	2
district court’s denial of a motion to compel arbitration de novo, Peavy ex rel. Peavy	3
v. Skilled Healthcare Grp., Inc., 2020-NMSC-___, ¶ 9, ___P.3d ___ (No. S-1-SC-	4
37370, Apr. 6, 2020); see Barron v. Evangelical Lutheran Good Samaritan Soc’y,	5
2011-NMCA-094, ¶ 13, 150 N.M. 669, 265 P.3d 720 (explaining that where the	6
material facts are undisputed, the existence of an agency relationship is reviewed de	7
novo). Our review of the record reveals that the district court did not err in	8
concluding that the POA did not authorize Lifewarrior to agree to arbitration as part	9
of the admissions process because Decedent specifically withheld such authority as	10
pertains to “claims and litigation.” We explain.	11
{7} 	“The New Mexico Supreme Court has repeatedly reaffirmed the [state’s]	12
strong public policy . . . in favor of resolution of disputes through arbitration.” Id.	13
¶ 14 (internal quotation marks and citation omitted); see New Mexico Uniform	14
Arbitration Act, NMSA 1978, §§ 44-7A-1 to -32 (2001). Our state’s policy aligns	15
with the federal policy favoring arbitration under the Federal Arbitration Act (the	16
FAA). See 9 U.S.C. §§ 1-16 (2018). State courts may not treat arbitration provisions	17
differently compared to other contract provisions. See Allied-Bruce Terminix Cos.,	18
Inc. v. Dobson, 513 U.S. 265, 281 (1995) (“What [s]tates may not do is decide that	19
a contract is fair enough to enforce all its basic terms (price, service, credit), but not	20
fair enough to enforce its arbitration clause. The [FAA] makes any such state policy	21

7
unlawful, for that kind of policy would place arbitration clauses on an unequal	1
‘footing,’ directly contrary to the [FAA]’s language and Congress’ intent.”).	2
“Congress did not, however, intend the FAA to entirely displace state law governing	3
contract 	formation 	and 	enforcement. 	. 	. 	. Courts 	may 	invalidate 	arbitration	4
agreements through the application of generally applicable contract defenses, such	5
as fraud, duress, or unconscionability, without violating the FAA.” Strausberg v.	6
Laurel Healthcare Providers, LLC, 2013-NMSC-032, ¶ 52, 304 P.3d 409 (internal	7
quotation marks and citations omitted).	8
{8} 	Since Lifewarrior acted as Decedent’s agent in signing the admissions	9
agreement and the voluntary arbitration agreement, we also consider New Mexico’s	10
agency law. “An agent is a person who, by agreement with another called the	11
principal, represents the principal in dealings with third persons or transacts some	12
other business, manages some affair, or does some service for the principal, with or	13
without 	compensation.” 	Barron, 	2011-NMCA-094, 	¶ 	16 	(alteration, 	internal	14
quotation marks, and citation omitted). Actual authority arises from the principal’s	15
express terms or in terms that are “implied from words or conduct of the principal	16
to the agent or from the circumstances of the relationship.” Id. Conversely, apparent	17
authority arises from “manifestations by the principal to the third party and can be	18
created by appointing a person to a position that carries with it generally recognized	19
duties.” Id. (internal quotation marks and citation omitted). A principal is bound by	20
the acts of his or her agent whether acting with actual or apparent authority. Id.	21

8
Specifically, “in considering the scope of an agent’s apparent authority, New Mexico	1
courts look to the reasonableness of the third party’s reliance on the agent’s	2
representation of authority.” Id.	3
I. 	The District Court Did Not Err in Denying Defendants’ Motion to	4
Compel Arbitration	5
{9} 	The district court concluded that the arbitration agreement was unenforceable	6
because Lifewarrior’s authority under the POA was limited, specifically withholding	7
any authority as pertains to “claims and litigation,” and thus, Lifewarrior was not	8
authorized to enter into the arbitration agreement. The district court further noted	9
that any apparent authority exercised by Lifewarrior stemmed exclusively from	10
Decedent’s representations in the POA. Accordingly, the district court determined	11
that Defendants’ reliance on the POA was unreasonable because Defendants did not	12
exercise reasonable diligence to ascertain the scope of Lifewarrior’s authority under	13
the POA. We agree.	14
{10} 	Under New Mexico’s 	agency law, actual 	and apparent 	authority stem	15
primarily from the principal’s representations. See id., ¶ 16 (explaining that actual	16
authority arises from the principal’s express terms or terms “implied from words or	17
conduct of the principal to the agent or from the circumstances of the relationship”	18
and that apparent authority arises from “manifestations by the principal to the third	19
party” (emphasis added) (internal quotation marks and citation omitted)). In this	20
case, Decedent’s only representation to Defendants was her POA, and thus, any	21

9
authority Decedent granted to Lifewarrior stemmed exclusively therefrom. In that	1
POA, Decedent limited the scope of her daughter’s authority by not initialing or	2
checking off the authorization for “claims and litigation”—a term of art that our	3
Legislature has plainly defined in New Mexico’s Uniform Power of Attorney Act	4
(UPAA) as “submit[ting] to alternative dispute resolution” such as arbitration.	5
NMSA 1978, § 45-5B-212(E) (2011) (defining claims and litigation in the UPAA to	6
include submitting to “alternative dispute resolution, settle and propose or accept a	7
compromise”). Given this express definition, and that there were no representations	8
by the principal other than that expressed within the POA itself, Decedent’s	9
deliberate choice to withhold authority as to “claims and litigation” demonstrates	10
that Lifewarrior had no authority—actual or apparent—to enter into the voluntary	11
arbitration agreement on Decedent’s behalf. And because this limitation was	12
apparent from the face of the POA, Defendants’ reliance on the POA for such	13
authority was unreasonable. See Comstock v. Mitchell, 1990-NMSC-054, ¶ 4, 110	14
N.M. 131, 793 P.2d 261 (“Clearly, a limitation by the principal of the agent’s	15
authority, communicated to a third party, is effective to excuse the principal from	16
liability to that third party for acts by the agent in excess of the limit prescribed; and	17
a person dealing with an agent must use reasonable diligence and prudence to	18
ascertain whether the agent is acting within the scope of his powers.”); Barron, 2011-	19
NMCA-094, ¶ 16 (stating that New Mexico courts look to the reasonableness of the	20
third party’s reliance on the agent’s representation of authority).	21

10
{11} 	Defendants contend that the district court narrowly construed the POA and	1
that the language preceding the list of eighteen authorizations granted broad	2
authority to Lifewarrior, including the authority to agree to arbitration. We disagree.	3
In pertinent part, the POA provides:	4
My attorney-in-fact shall have the power to act in my name, place and	5
stead in any way which I myself could do with respect to all matters to	6
the extent permitted by law, including, by way of example and not by	7
way of limitation.	8
(Emphasis added.) The district court considered this language and concluded that	9
the “POA, taken as a whole, was not a general POA granting broad authority to	10
Lifewarrior in ‘all matters.’ ” Instead, the POA, as its title denotes, was specifically	11
limited to “financial and healthcare decision making.” Moreover, immediately	12
following the language Defendants point out as granting broad authority, and	13
preceding the list of eighteen authorizations, were instructions in bold capital letters	14
to the principal to: “INITIAL LINE OPPOSITE EACH AUTHORIZATION THAT	15
YOU DESIRE TO GIVE YOUR DECISION-MAKER.” The district court aptly	16
concluded that while the list of eighteen choices was not an all-inclusive list, and	17
that the principal could choose to add categories to those listed in the POA, such did	18
not change “the character of the entire POA into one granting Lifewarrior unlimited	19
authority.”	20
{12} 	Furthermore, we cannot conclude there to be broad authority over a subject	21
matter that a principal specifically chose not to select in the POA. Here, Decedent	22

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granted Lifewarrior authorization in her POA by checking the line next to twelve of	1
the eighteen categories, but withheld authorization as to “claims and litigation.” To	2
expand the scope of Lifewarrior’s authority beyond the categories that Decedent	3
elected to check off, and in particular, to subject matter where authorization was	4
specifically withheld, would render the enumerated list of categories and instruction	5
about initialing next to each category “meaningless surplusage,” as the district court	6
noted, significantly undermining a principal’s choice to craft the scope of her agent’s	7
authority by including some categories and excluding others, consistent with the	8
UPAA. See ConocoPhillips Co. v. Lyons, 2013-NMSC-009, ¶ 67, 299 P.3d 844	9
(“When a contract is clear as written, a court must give effect to the contract and	10
enforce it as written. Courts cannot create a new agreement for the parties . . . and	11
will not give effect to a party’s undisclosed intentions.” (internal quotation marks	12
and citations omitted)); Heimann v. Kinder-Morgan CO2 Co., L.P., 2006-NMCA-	13
127, ¶ 10, 140 N.M. 552, 144 P.3d 111 (“We will not read language into a contract	14
that is not there, but neither will we construe any clause so as to render it	15
meaningless.”).	16
{13} 	Defendants also rely heavily on Barron for the proposition that the authority	17
to admit a principal to a nursing home through a health care power of attorney also	18
encompasses the authority to enter into an arbitration agreement. See 2011-NMCA-	19
094, ¶ 30 (“Thus, regardless of whether an agent’s authority to admit a principal to	20
a nursing home is granted through a healthcare power of attorney . . . or is orally	21

12
granted, as in the present case, once granted, the authority encompasses arbitration	1
agreement decisions.”). We decline to extend the holding in Barron as applicable in	2
this case and note two key points of distinction.	3
{14} 	First, in Barron, the principal granted her agent an unlimited grant of authority	4
through both a verbal authorization to the defendants that her agent would handle all	5
the admission paperwork as well as a healthcare power of attorney. See id. ¶¶ 24-28.	6
There, this Court emphasized that the principal did not place any limitation on her	7
agent’s authority to complete the admission paperwork. See id. ¶¶ 24-25 (stating	8
twice that the principal’s designation of authority to her agent was “unlimited” and	9
describing agent’s authority as a “broad grant of authority to [her agent] to complete	10
the admission paperwork”); id. ¶ 28 (“No limitation of any sort on [the agent’s]	11
authority was ever communicated to [the nursing home’s employee.]”). On the other	12
hand, in this case, there is no broad grant of authority, and we rely solely on	13
Decedent’s POA to ascertain the scope of authority granted to Lifewarrior. Second,	14
in Barron, the principal did not expressly decline to grant her agent the authority to	15
make 	decisions 	about 	“claims 	and 	litigation.” 	Conversely, 	here, 	Decedent	16
unambiguously limited Lifewarrior’s authority to certain enumerated categories and	17
declined to grant authority about “claims and litigation” which includes the authority	18
to enter into arbitration agreements pursuant to Section 45-5B-212(E).	19
{15} 	We note that generally, “an agent’s authority to bind a principal to arbitration	20
does not have to be specifically or separately granted.” Barron, 2011-NMCA-094,	21

13
¶ 26 (stating that “an agent with authority to complete the documents for admission	1
is likewise permitted to decide on behalf of the principal whether future disputes	2
with the facility should be arbitrated or litigated”). However, when a principal	3
expressly withholds authority, such as regarding claims and litigation, we will not	4
override the principal’s choice to limit her agent’s authority to the extent she deems	5
appropriate. See Comstock, 1990-NMSC-054, ¶ 4 (“It is always competent for a	6
principal to limit the authority of his [or her] agent, and if such limitations have been	7
brought to the attention of the party with whom the agent is dealing, the power to	8
bind the principal is defined thereby. Clearly, a limitation by the principal of the	9
agent’s authority, communicated to a third party, is effective to excuse the principal	10
from liability to that third party for acts by the agent in excess of the limit prescribed;	11
and a person dealing with an agent must use reasonable diligence and prudence to	12
ascertain whether the agent is acting within the scope of his [or her] powers.”	13
(emphasis, internal quotation marks, and citation omitted)).	14
{16} 	Finally, to the extent Defendants argue that the district court placed arbitration	15
on unequal footing by treating certain contractual choices made by Lifewarrior as	16
enforceable while treating her choices regarding arbitration as unenforceable, we	17
find the argument to be unavailing. The district court here, using generally applicable	18
principles of state contract law and agency law, evaluated the particular POA at issue	19
and the threshold question of whether Lifewarrior had the authority to enter into the	20
arbitration agreement. As we already held, she did not.	21

14
{17} 	Moreover, as the district court observed, Defendants failed to exercise	1
reasonable diligence and prudence to ascertain that Lifewarrior acted outside the	2
scope of her authority under the POA by signing the agreement to arbitrate. As our	3
Supreme Court noted in Comstock, the relevant inquiry is whether Defendants knew	4
or should have known of the limitation, and in particular, whether they used	5
“reasonable diligence and prudence to ascertain whether the agent is acting within	6
the scope of [her] powers.” Id. ¶ 4 (internal quotation marks and citation omitted).	7
A cursory review of the POA by Defendants at the time of admission would have	8
revealed Lifewarrior’s limited authority, since nine of eighteen categories of	9
financial and healthcare decisions in the POA were left unchecked. In addition, other	10
irregularities on the face of the document should have signaled Defendants to closely	11
review the POA, including Decedent’s failure to follow the document’s instructions	12
by using check marks instead of initials to mark the enumerated authorizations, the	13
fact that Lifewarrior’s initials appear elsewhere where Decedent’s initials should	14
have been, and that Decedent signed the POA using a thumbprint. We conclude that	15
had Defendants been reasonably diligent in reviewing the POA, they should have	16
known of the limited scope of Lifewarrior’s authority. See id. Given Lifewarrior’s	17
lack of actual or apparent authority to agree to arbitration on Decedent’s behalf as	18
well as Defendant’s unreasonable reliance on the POA to grant such authority, we	19
conclude that the arbitration agreement is unenforceable against Decedent’s estate.	20
See Felts v. CLK Mgmt., Inc., 2011-NMCA-062, ¶ 19, 149 N.M. 681, 254 P.3d 124	21

15
(observing 	that 	the 	United 	States 	Supreme 	Court 	has 	established 	a 	rule 	of	1
severability where “an arbitration provision is severable from the remainder of the	2
contract”); Heye v. Am. Golf Corp., 2003-NMCA-138, ¶ 8, 134 N.M. 558, 80 P.3d	3
495 (holding that a legally enforceable agreement to arbitrate is a prerequisite to	4
arbitration and without such agreement, parties will not be forced to arbitrate); 3 Am.	5
Jur. 2d Agency § 77 (2020) (stating that a contract beyond the scope of an agent’s	6
authority “as thus limited or restricted, is not binding on the principal”).	7
CONCLUSION	8
{18} 	For these reasons set forth above, we affirm the district court order.	9
{19} 	IT IS SO ORDERED.	10
_____________________________	11
J. MILES HANISEE, Chief Judge	12
WE CONCUR:	13
___________________________	14
MEGAN P. DUFFY, Judge
___________________________	15
ZACHARY A. IVES, Judge	16