Opinion

IN THE

TENTH COURT OF APPEALS

No. 10-06-00176-CV

Eugenia Ginger Sikes, CYNTHIA DURHAM , AND

JENNIFER

BRANAM, INDIVIDUALLY AND ON BEHALF

OF

THE ESTATE OF JOEL SIKES, DECEASED

Appellants

v.

Heritage Oaks West Retirement Village ,

SHAMROCK CARE CENTER , INC., INDIVIDUALLY AND

D/B/A

HERITAGE OAKS WEST RETIREMENT VILLAGE,

JAMES

MOORE, HERITAGE OAKS RETIREMENT VILLAGE,

NAVARRO

CONVALESCENT, INC., INDIVIDUALLY AND

D/B/A

HERITAGE OAKS RETIREMENT VILLAGE, THE

WESTWIND

CORP., INDIVIDUALLY AND D/B/A CENTEX

MANAGEMENT

CO., AND CAROLEE HUGHEY

Appellees

From the 13th District Court

Navarro County , Texas

Trial Court No. 03-00-12552-CV

Opinion

The wife and children of decedent Joel Sikes [1]

filed wrongful death and survival claims against Heritage Oaks West Retirement Village and others [2]

alleging malpractice in his treatment.

The Sikeses appeal the trial court’s judgment

on an arbitration award. They first complain that the Dispute Resolution Plan is

unenforceable because: 1) it does not comply with former article 4590i; 2)

Heritage failed to sign the agreement; 3) the wrongful death claims are not

within the scope of the agreement; 4) Eugenia Sikes lacked authority to sign

the agreement on behalf of her husband; 5) the agreed order to arbitrate was

both revoked and superseded; and 6) Heritage failed to negate the Sikeses’

contractual defenses to arbitration. In the alternative, the Sikeses contend

that the judgment on the arbitrator’s decision is in error because: 1) under

federal law, the arbitrator’s decision failed to adjudicate all claims and

reflected a manifest disregard of the law; and 2) under state law, the decision

resulted from a gross mistake and a failure to execute an honest judgment. We

will reverse and remand.

A party seeking to compel arbitration must

establish that: (1) there is a valid arbitration agreement; and (2) the claims

raised fall within the agreement’s scope. In re Kellogg Brown & Root,

Inc ., 166 S.W.3d 732, 737 (Tex. 2005) (orig. proceeding). Because there is

a presumption favoring agreements to arbitrate, doubts regarding an agreement’s

scope are resolved in favor of arbitration; however, the presumption arises

only after the party seeking to compel arbitration proves that a valid

arbitration agreement exists. Id .

The Sikeses contend in their first

issue that the Dispute Resolution Plan is unenforceable because it does not

comply with former article 4590i. Ordinarily, state laws burdening arbitration

are preempted by the Federal Arbitration Act (FAA), but the Sikeses contend that

the McCarran-Ferguson Act “reverse preempts” the FAA to allow the application

of stricter state law. See In re Kepka , 178 S.W.3d 279, 292 (Tex. App.—Houston [1st] 2005, orig. proceeding). However, the Sikeses failed to raise this issue before

the trial court and have not preserved it for appellate review.

The Sikeses contend in their fourth issue

that Eugenia Sikes lacked authority to sign the Dispute Resolution Plan on

behalf of her husband. Eugenia signed the document on the line labeled “Power

of Attorney/Guardian’s Signature.” The Sikeses presented affidavit proof that Eugenia

was neither Joel Sikes’s guardian nor had she been given power of attorney. Affidavits

further established that Joel Sikes was not incapacitated and was capable of signing

the document upon admittance to the nursing home. Heritage offered no rebuttal

evidence. Instead, Heritage argues that Eugenia is estopped from denying the validity

of the signature.

Heritage relies on arbitration cases

stating that in certain circumstances a non-signatory to an arbitration

agreement can be equitably estopped from denying that his claims are

arbitrable. See, e.g., Kellogg Brown & Root , 166 S.W.3d at 739 . However,

this form of estoppel arises only when the plaintiff seeks “to derive a direct

benefit from the contract containing the arbitration provision.” Id. at 741. Stated another way, “nonparties generally must arbitrate claims

if liability arises from a contract with an arbitration clause, but not if

liability arises from general obligations imposed by law.” In re Vesta Ins.

Group, Inc. , 192 S.W.3d 759, 761 (Tex. 2006) (orig. proceeding) (per

curiam).

Here, the Sikeses do not assert claims

arising under Joel’s purported arbitration agreement with Heritage. Rather,

their malpractice claims “arise[ ] from general obligations imposed by law.” See

id. Therefore, Heritage’s equitable estoppel theory does not excuse

Heritage from proving the existence of a valid arbitration agreement.

Nonetheless, Eugenia may be estopped to deny her

authority to sign the arbitration agreement if she acted with apparent authority.

See Baptist Memorial Hosp. Sys. v. Sampson , 969 S.W.2d 945, 949 (Tex. 1998) (“Apparent authority in Texas is based on estoppel.”). Apparent authority looks

to the actions of the principal, Joel Sikes, to determine if he participated

in, had knowledge of, or acquiesced in his agent, Eugenia, signing on his

behalf. See id. ; Tex. Cityview Care Ctr., L.P. v. Fryer ,

227 S.W.3d 345, 353 (Tex. App.—Fort Worth 2007, pet. filed); Lifshutz v.

Lifshutz , 199 S.W.3d 9, 22 (Tex. App.—San Antonio 2006, pet. denied). Without

actions by the principal, “no mere combination of circumstances which may

mislead persons into a false inference of authority, however reasonable, will

serve as a predicate for apparent authority.” Hall v. F.A. Halamicek Enters.,

Inc. , 669 S.W.2d 368, 375 (Tex. App.—Corpus Christi 1984, no writ).

There is no evidence of Joel Sikes taking actions to

induce the belief that Eugenia was his agent. In fact, there is no evidence he

was even present when the form was signed. See Texas Cityview , 227

S.W.3d at 353-54 . Because there is no evidence that Eugenia had authority to

sign the agreement, Heritage failed to prove the existence of a valid

arbitration agreement. Id. at 354 . Similarly, the arbitration

agreement is unenforceable against Eugenia in her individual capacity because

there is no evidence that she signed in that capacity. Id .; see also

Kepka , 178 S.W.3d at 294 .

To the extent that Heritage attempts to assert the

common-law affirmative defense of equitable estoppel, this too fails under

agency principles. In signing the arbitration agreement, Eugenia acted without

authority and, therefore, any misrepresentation on her part cannot be imputed

to the ostensible principal, Joel Sikes. Great Am. Life Ins. Co. v.

Lonze , 803 S.W.2d 750, 754 (Tex. App.—Dallas 1990, writ denied). Accordingly,

we sustain the Sikeses’s fourth issue.

The Sikeses contend in their fifth

issue that the court erred by concluding that they are bound by an agreed order

to arbitrate which was later superseded by an amended order to which they did

not agree. An “agreed order to arbitrate” was rendered by the court with each

party’s attorney signing to indicate his agreement as to form and substance. Subsequent

to that order, the Sikeses amended their pleadings to add an additional

defendant, and a second motion to compel arbitration was filed and was granted

in an amended order. The Sikeses asked the court to reconsider its ruling on

the second motion to compel. After a hearing, the court signed a final order

sending the case to arbitration.

The Sikeses contend that they revoked

the agreed order or in the alternative that the subsequent order superseded the

agreed order. Heritage counters that the agreed order is a separate

arbitration agreement which is “more than a mere common law contract” and cannot

be revoked “without leave of the court.” Brown v. Eubank , 443 S.W.2d

386, 390 (Tex. App.—Dallas 1969, no writ). The Brown case is distinguishable

because the complaining party in that case did not seek to set aside the agreed

order for arbitration until after the arbitrators had rendered their decision. Here,

the Sikeses withdrew their consent before the case was submitted to arbitration.

Thus, the amended arbitration order (entered over the Sikeses’ objection) superseded

the original agreed order. See B & M Mach. Co. v. Avionic Enters., Inc. ,

566 S.W.2d 901, 902 (Tex. 1978); Wortham v. Dow Chem. Co., 179 S.W.3d 189 ,

202 n.18 (Tex. App.—Houston [14th Dist.] 2005, no pet.); Kolfeldt v. Thoma ,

822 S.W.2d 366, 368 (Tex. App.—Houston [14th Dist.] 1992, orig. proceeding).

Therefore, because the agreed order was no longer effective, we sustain the

Sikeses’ fifth issue.

Because of our disposition of the Sikeses’

fourth and fifth issues, we need not address the remaining issues presented. Having

found there is no valid agreement to arbitrate, we reverse the judgment of the

trial court and remand this cause for further

proceedings consistent with this opinion.

FELIPE REYNA

Justice

Before

Chief Justice Gray,

Justice

Vance, and

Justice

Reyna

(Chief

Justice Gray joins no part of the Court’s opinion and dissents to the judgment

of the Court without a separate opinion.)

Reversed

and remanded

Opinion

delivered and filed September 26, 2007

[CV06]

[1] Eugenia Sikes and daughters Cynthia

Durham and Jennifer Branam brought suit individually and on behalf of the

Estate of Joel Sikes. The plaintiffs/appellants are collectively referred to

as “the Sikeses.”

[2] The Sikeses sued Heritage Oaks West Retirement Village; parent organizations Shamrock Care Center, Inc. and

Navarro Convalescent, Inc.; Heritage Oaks Retirement Village; The Westwind Corp.

(dba Centex Management Co.); James Moore; and Carolee Hughey. The defendants/appellees

are collectively referred to as “Heritage.”