Business Law

Algo-Heyres v. Oxnard Manor LP (Feb. 28, 2023, B319601) _ Cal.App.5th _ [2023 WL 2257761]

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Nursing facility’s arbitration agreement is unenforceable against cognitively impaired patient.

Cornelio Algo-Heyres entered Oxnard Manor, a skilled nursing facility, after suffering a stroke. Although Algo-Heyres struggled to communicate and comprehend things, Oxnard Manor had him sign an arbitration agreement waiving his rights to sue for medical malpractice, elder abuse, and other torts. Algo-Heyres lived at Oxnard Manor for nine years. After he died, his successors sued Oxnard Manor for wrongful death, elder abuse, and other causes of action. Oxnard Manor moved to arbitrate the claims. The trial court denied the motion, ruling that Algo-Heyres likely lacked capacity to understand the arbitration agreement that he executed. Oxnard Manor appealed.

The Court of Appeal affirmed, rejecting ’s Oxnard Manor’s argument that the trial court improperly required it to prove that Algo-Heyres had the capacity to contract. The court first explained that Oxnard Manor had the burden of proving the existence of an enforceable arbitration agreement. Oxnard Manor pointed out that the Probate Code created a rebuttable presumption of capacity and required an incapacity finding to be supported by evidence of deficits in specific areas. (Prob. Code, §§ 810, 811.)  But the Court of Appeal found that the more specific guidelines in Civil Code section 39, subdivision (b), governed the controversy. Section 39 establishes a rebuttable presumption that an individual is of unsound mind if he cannot manage his own financial resources or resist fraud and undue influence. Here, the trial court reasonably could have found the section 39 presumption applied because Algo-Heyres was unable to solve complex problems like managing a checking account. And even if section 39 didn’t apply, substantial evidence supported the trial court’s finding that Algo-Heyres lacked the capacity to understand the arbitration agreement because he struggled with communication, memory, problem solving, following abstract directions, and executive functioning.  Accordingly, Oxnard Manor failed to meet its burden of proving the existence of an enforceable agreement.

The bulletin describing this appellate decision was originally prepared for the California Society for Healthcare Attorneys (CSHA) by H. Thomas Watson and Peder K. Batalden, who are partners at the appellate firm Horvitz & Levy LLP, and is republished with permission.

For more information regarding this bulletin, please contact H. Thomas Watson, Horvitz & Levy LLP, at 818-995-0800 or

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