Med. Recovery Servs., LLC v. Merritt ( 2018 )

IN THE COURT OF APPEALS OF THE STATE OF IDAHO
Docket No. 45024
MEDICAL RECOVERY SERVICES, ) 2018 Opinion No. 23
LLC, an Idaho limited liability company, )
) Filed: May 7, 2018
Plaintiff-Appellant, )
) Karel A. Lehrman, Clerk
v. )
)
MARY LOU MERRITT, )
)
Defendant-Respondent. )
)
Appeal from the District Court of the Sixth Judicial District, State of Idaho,
Caribou County. Hon. Mitchell W. Brown, District Judge. Hon. David R. Kress,
Magistrate.
Judgment denying request for post-judgment attorney fees and costs, affirmed;
judgment denying request for attorney fees and costs on appeal, affirmed; request
for fees and costs on instant appeal, denied; case remanded.
Smith, Driscoll & Associates, PLLC; Bryan N. Zollinger, Idaho Falls, for
appellant.
Mary Lou Merritt, Soda Springs, pro se respondent. Respondent did not
participate on appeal.
________________________________________________
GRATTON, Chief Judge
Medical Recovery Services, LLC (MRS) appeals from the district court’s judgment
denying its request for post-judgment attorney fees and costs and further denying its request for
post-judgment attorney fees and costs on appeal. We affirm.
I.
FACTUAL AND PROCEDURAL BACKGROUND
On August 15, 2013, MRS filed a complaint to collect on a debt owed by Mary Lou
Merritt. MRS alleged that Merritt owed approximately $680.22, which included attorney fees in
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the amount of $350.00. 1 Merritt failed to respond, and MRS filed an application for entry of
default. On December 11, 2013, the magistrate entered a default judgment, which specified that
Merritt owed MRS $651.22, plus interest and costs. Subsequently, the magistrate entered a writ
of execution and order for continuing garnishment.
The Caribou County Sheriff served the writ of execution on Merritt’s employer.
However, it was returned unsatisfied on July 23, 2014, having garnished $131.57, which was
applied to the judgment. On August 14, 2014, the magistrate issued an order of examination
after MRS filed an application requesting the examination. On September 2, 2014, counsel for
MRS met with Merritt and agreed upon a payment plan. Thereafter, Merritt made voluntary
payments on September 22, 2014, October 3, 2014, October 24, 2014, November 17, 2014, and
December 1, 2014. MRS subsequently filed its second application for order of continuing
garnishment, and on January 21, 2015, the magistrate entered a writ of execution and order for
continuing garnishment. However, Merritt began making voluntary payments again on
January 26, 2015, February 26, 2015, and two payments on April 1, 2015. MRS filed a third
application for order of continuing garnishment, and on July 13, 2015, the magistrate entered a
writ of execution and order for continuing garnishment. Merritt paid off the remaining balance
on August 28, 2015.
On September 8, 2015, MRS filed an application for an award of supplemental attorney
fees and costs in the amount of $1,323.74. The basis for the application was that MRS continued
to incur attorney fees while attempting to collect on the default judgment. The magistrate denied
the request. The magistrate’s order consisted of a one sentence decision that provided “based on
the defendants [sic] payment record [on] the original debt owed, Court denied application for
supplemental fees.” MRS appealed. The district court, acting in its appellate capacity, remanded
the case to the magistrate court with instructions to make specific findings of fact on the issue of
attorney fees. Thereafter, on August 18, 2016, the magistrate issued its findings of fact and again
denied MRS’s request for post-judgment attorney fees and costs. MRS filed a motion for
reconsideration, which the magistrate denied.
MRS again appealed to the district court. On March 7, 2017, the district court affirmed
in part and reversed in part the magistrate’s order. The district court essentially ruled that the
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MRS is the assignee of Oregon Trail Eye Care, P.C., to whom Merritt owed an original
principal amount of $216.96.
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magistrate committed error in not awarding any attorney fees to MRS with respect to its post-
judgment collection efforts. The district court concluded that, based upon Idaho Code § 12-
120(5), reasonable attorney fees should be awarded. However, the district court declined to
award MRS attorney fees after September 2, 2014, when MRS had met with Merritt for the
debtor’s examination. Thereafter, MRS filed a second application for an award of supplemental
attorney fees and costs on appeal in the amount of $3,343.90. On May 10, 2017, the district
court issued a second memorandum decision and order denying MRS’s request for attorney fees
and costs on appeal. MRS timely appeals.
II.
ANALYSIS
On appeal, MRS asserts that the district court erred when it determined that MRS was not
entitled to supplemental attorney fees for post-judgment collection efforts after September 2,
2014. MRS further asserts that, as the prevailing party, MRS is entitled to an award of costs and
attorney fees on appeal under Idaho Code § 12-120(1), (3), and (5) and Idaho Appellate Rules 40
and 41.
A. Default Judgment--Introduction
Although I.C. § 12-120 authorizes attorney fees in certain types of cases,
I.R.C.P. 54(e)(4) limits an award of fees in cases involving default judgments. Rule 54(e)(4)(B)
provides: “An award of attorney fees under Idaho Code section 12-120 in default judgments
where the defendant has not appeared must not exceed the amount of the judgment for the claim,
exclusive of costs.” The original complaint against Merritt was to recover on a debt Merritt
incurred in the amount of $216.96. The complaint also alleged entitlement to $17.26 in
prejudgment interest, and requested attorney fees pursuant to I.C. § 12-120(1), and (3). With
respect to attorney fees, MRS asserted it was entitled to recover fees “in the sum of $350.00 if
judgment is taken by default and such greater amounts as may be evidenced to the court if this
claim is contested.” MRS also requested costs pursuant to I.R.C.P. 54(d)(1) in the amount of
$96.00 for its filing fee. The total requested judgment was $680.22.
Between the filing of the complaint and MRS’s application for default, Merritt paid
$109.00 toward the original debt, reducing the amount owed on the claim to $107.96, plus
$17.26 in prejudgment interest. MRS’s application for default after the $109.00 payment
requested the balance due on the debt plus $17.26 in interest, $350.00 in attorney fees, the
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$96.00 filing fee, and an additional service fee of $80.00. Pursuant to I.R.C.P. 54(e)(4)(B), MRS
was not entitled to attorney fees beyond the amount of the judgment for the claim, i.e., beyond
the balance of the debt due and the interest, which totaled $125.22. Nevertheless, the default
judgment MRS requested, which the magistrate granted, included an attorney fee award of
$350.00, more than twice the amount of the judgment for the claim.
B. Post-judgment Attorney Fees Incurred after September 2, 2014
1. District court’s decision was not arbitrary
MRS claims that the district court’s decision to limit attorney fees to the date of the
debtor’s exam was arbitrary. MRS argues that the efforts it took after the order of examination
were reasonable and necessary because Merritt did not honor the agreement to make voluntary
payments. For an appeal from the district court, sitting in its appellate capacity over a case from
the magistrate division, this Court’s standard of review is the same as expressed by the Idaho
Supreme Court. The Supreme Court reviews the magistrate record to determine whether there is
substantial and competent evidence to support the magistrate’s findings of fact and whether the
magistrate’s conclusions of law follow from those findings. Pelayo v. Pelayo, 154 Idaho 855,
858-59, 303 P.3d 214, 217-18 (2013). If those findings are so supported and the conclusions
follow therefrom, and if the district court affirmed the magistrate’s decision, we affirm the
district court’s decision as a matter of procedure. Id. Thus, the appellate courts do not review
the decision of the magistrate. Bailey v. Bailey, 153 Idaho 526, 529, 284 P.3d 970, 973 (2012).
Rather, we are procedurally bound to affirm or reverse the decision of the district court. Id.
MRS asserts that the district court erred by arbitrarily selecting September 2, 2014, as the
date after which MRS was not entitled to any incurred post-judgment attorney fees, and asserts
that this determination was not based on the magistrate’s findings. MRS points to a footnote in
the district court’s order in support of its contention:
The Court recognizes that the Magistrate Court likely believed, based
upon the facts and circumstances which are evident upon reviewing this file, that
upon contact by M.R.S. or its representative, Merritt would have arranged to pay-
off the judgment without all of the legal maneuvering and additional attorney
involvement and fees. She had paid $109.00 between the time the Complaint had
been filed and judgment entered. . . . She appears to have entered into an
agreement to pay the judgment following the debtor’s examination. . . . Finally,
when M.R.S. filed its last Affidavit in Support of Writ of Execution, Merritt
arranged to pay the remaining debt in full.
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Indeed, after listing all of the payments made by Merritt to MRS, where ten out of
twelve payments were made after the debtor’s examination, the magistrate court noted that MRS
“continued to use writs of execution while Merritt was satisfying the debt through her own
payments.” The magistrate court also pointed out that MRS only collected two payments
through its efforts to use writs of execution, all the while incurring more fees and costs for which
Merritt was also expected to pay. The magistrate court further observed that “there did not
appear to be any reasonable efforts to work with [Merritt].” Thus, although the magistrate
declined to award any attorney fees, the magistrate’s analysis supports the district court’s
determination that attorney fees should be awarded, but only through the date of the debtor’s
examination on September 2, 2014.
2. Idaho Rule of Civil Procedure 54(e)(3)
MRS further argues that the district court abused its discretion by failing to consider the
reasonableness of MRS’s post-judgment collection efforts as required by I.R.C.P. 54(e)(3).
When a trial court’s discretionary decision is reviewed on appeal, the appellate court conducts a
multi-tiered inquiry to determine whether the lower court correctly perceived the issue as one of
discretion; acted within the boundaries of such discretion and consistently with any legal
standards applicable to the specific choices before it; and reached its decision by an exercise of
reason. Sun Valley Shopping Ctr., Inc. v. Idaho Power Co., 119 Idaho 87, 94, 803 P.2d 993,
1000 (1991).
To properly exercise its discretion on a request for attorney fees, a trial court must, at a
minimum, consider the twelve factors outlined in I.R.C.P. 54(e)(3). Boel v. Stewart Title Guar.
Co., 137 Idaho 9, 16, 43 P.3d 768, 775 (2002); Nalen v. Jenkins, 113 Idaho 79, 81, 741 P.2d 366,
368 (Ct. App. 1987). These factors are:
(A) the time and labor required;
(B) the novelty and difficulty of the questions;
(C) the skill requisite to perform the legal service properly and the experience
and ability of the attorney in the particular field of law;
(D) the prevailing charges for like work;
(E) whether the fee is fixed or contingent;
(F) the time limitations imposed by the client or the circumstances of the
case;
(G) the amount involved and the results obtained;
(H) the undesirability of the case;
(I) the nature and length of the professional relationship with the client;
(J) awards in similar cases;
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(K) the reasonable cost of automated legal research (Computer Assisted Legal
Research), if the court finds it was reasonably necessary in preparing a
party’s case;
(L) any other factor which the court deems appropriate in the particular case.
I.R.C.P. 54(e)(3). The trial court is required to consider the existence and applicability of each
factor without placing undue weight or emphasis upon any one element. Nalen, 113 Idaho at 81,
741 P.2d at 368. The trial court need not specifically address all of the factors in writing, so long
as the record clearly indicates that all of them were considered. Boel, 137 Idaho at 16, 43 P.3d at
775. It is incumbent upon the appellant to demonstrate that the court failed to consider or apply
the appropriate criteria. Irwin Rogers Ins. Agency, Inc. v. Murphy, 122 Idaho 270, 277, 833 P.2d
128, 135 (Ct. App. 1992).
MRS contends that the district court abused its discretion by failing to consider the
reasonableness of MRS’s post-judgment collection efforts. MRS further asserts that the district
court made assumptions not supported by the record. A court may not use the award or denial of
attorney fees to vindicate its sense of justice beyond the judgment rendered on the underlying
dispute, provide indirect relief from an adverse judgment, or penalize a party for misdeeds during
the litigation. Eighteen Mile Ranch, LLC v. Nord Excavating & Paving, Inc., 141 Idaho 716,
720, 117 P.3d 130, 134 (2005); Evans v. Sawtooth Partners, 111 Idaho 381, 387, 723 P.2d 925,
931 (Ct. App. 1986). Nevertheless, a court need not blindly accept the figures advanced by the
attorney and may disallow fees that were unnecessarily and unreasonably incurred. Craft Wall of
Idaho, Inc. v. Stonebraker, 108 Idaho 704, 706, 701 P.2d 324, 326 (Ct. App. 1985).
In this case, the magistrate court identified each of the factors to be considered as
enumerated in I.R.C.P. 54(e)(3). Although the trial court stated that “the case is absurd,
unequitable, and a bad example of collection work,” the court’s further remarks clearly establish
that its rejection of the claimed fees was not a punishment. Rather, it was based on an analysis
of the amount reasonably incurred. In particular, the magistrate court’s comments were focused
on counsel’s work after Merritt already made several voluntary payments. The court said:
In summation, as stated above, Merritt owed $216.96 for medical purposes and
paid half, $109, of that before the judgment was ordered. Thereafter, she paid an
additional $637.90 on her own. There did not appear to be any reasonable efforts
to work with the defendant and this Court feels the Medical Recovery Services
has already been adequately and overpaid for their efforts. In totality, the case is
absurd, unequitable, and a bad example of collection work. The Court finds that a
denial of attorney’s fees and costs, under these circumstances, is reasonable.
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The magistrate court further noted that Merritt was charged a fee each time she made a payment
for a paralegal to review and process the payment, a “scheme” which the court found “very
troubling.”
MRS argues that it sought writs of execution or other post-judgment collection efforts
only after Merritt failed to continue making voluntary payments. MRS asserts that it was only
after MRS obtained the final writ of execution that Merritt finally paid the remaining balance of
the judgment. However, it is evident from the magistrate court’s recitation of the above-
mentioned facts in a detailed timeline of the procedural history of the case that the magistrate
court took these events into account. The magistrate court’s assessment encompassed an
analysis of several I.R.C.P. 54(e)(3) factors, including the relative simplicity of the issues, the
requisite skill for collection services, the prevailing charges, and the results obtained. The court
also considered the relatively low principal amount involved. It is therefore evident that the
court did not disregard the factors of I.R.C.P. 54(e)(3) in favor of imposing its own sense of
justice.
While the magistrate declined to award any attorney fees, it did so after analyzing
relevant factors to be considered. The district court reviewed the magistrate court’s analysis and
application of the I.R.C.P. 54(e)(3) factors. This review led the district court to its conclusion
that attorney fees after the debtor’s examination were not reasonable. Thus, while the district
court disagreed with the magistrate’s refusal to award any fees, it agreed that attorney fees
should not be awarded after the debtor’s examination. In sum, MRS has not shown that the
district court abused its discretion by violating governing legal standards or by failing to exercise
reason in arriving at its decision.
C. Attorney Fees and Costs on Appeal to the District Court and the Current Appeal
MRS argues that because it was the prevailing party, the district court erred when it
declined to award attorney fees on appeal under I.C. § 12-120(1), (3), or (5). MRS further argues
that it should have been awarded costs as the prevailing party on appeal. MRS points to
I.A.R. 40 in support of its contention, which provides that: “With the exception of post-
conviction appeals and appeals from proceedings involving the termination of parental rights or
an adoption, costs shall be allowed as a matter of course to the prevailing party unless otherwise
provided by law or order of the Court.” I.A.R. 40(a). MRS asserts that the district court failed to
make any findings regarding the costs sought in its second memorandum decision and order.
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“The district court’s decision to award attorney fees is reviewed under the
abuse of discretion standard.” Stout v. Key Training Corp., 144 Idaho 195, 196,
158 P.3d 971, 972 (2007). “However, when an award of attorney fees depends on
the interpretation of a statute, the standard of review for statutory interpretation
applies.” Id. “The interpretation of a statute is a question of law over which this
Court exercises free review.” Id. (quoting Carrier v. Lake Pend Oreille Sch. Dist.
# 84, 142 Idaho 804, 807, 134 P.3d 655, 658 (2006)).
Simono v. House, 160 Idaho 788, 791, 379 P.3d 1058, 1061 (2016). “It is well established that
attorney fees and costs cannot be awarded unless they are authorized by statute or by contract.”
Allison v. John M. Biggs, Inc., 121 Idaho 567, 568, 826 P.2d 916, 917 (1992). Idaho Code § 12-
120 allows a court to award attorney fees in civil actions, and provides, in pertinent part, as
follows:
(1) Except as provided in subsections (3) and (4) of this section, in any
action where the amount pleaded is thirty-five thousand dollars ($35,000) or less,
there shall be taxed and allowed to the prevailing party, as part of the costs of the
action, a reasonable amount to be fixed by the court as attorney’s fees. For the
plaintiff to be awarded attorney’s fees, for the prosecution of the action, written
demand for the payment of such claim must have been made on the defendant not
less than ten (10) days before the commencement of the action; provided, that no
attorney’s fees shall be allowed to the plaintiff if the court finds that the defendant
tendered to the plaintiff, prior to the commencement of the action, an amount at
least equal to ninety-five percent (95%) of the amount awarded to the plaintiff.
....
(3) In any civil action to recover on an open account, account stated, note,
bill, negotiable instrument, guaranty, or contract relating to the purchase or sale of
goods, wares, merchandise, or services and in any commercial transaction unless
otherwise provided by law, the prevailing party shall be allowed a reasonable
attorney’s fee to be set by the court, to be taxed and collected as costs.
....
(5) In all instances where a party is entitled to reasonable attorney’s fees
and costs under subsection (1), (2), (3) or (4) of this section, such party shall also
be entitled to reasonable postjudgment attorney’s fees and costs incurred in
attempting to collect on the judgment.
I.C. § 12-120 (1), (3), (5).
The Idaho Supreme Court recently addressed this issue in Medical Recovery Services,
LLC v. Lopez, 163 Idaho 281, 411 P.3d 1182 (2018), and the facts of that case closely align with
the case at bar. In that case, the dispute arose after MRS attempted to collect a debt owed by
Robert Lopez. The magistrate court entered a default judgment and awarded attorney fees to
MRS. MRS continued to incur attorney fees while attempting to collect on the default judgment
and filed a request to recover its post-judgment attorney fees, which the magistrate court denied.
8
MRS appealed, and the district court reversed the magistrate court’s denial of post-judgment
attorney fees, but declined to award MRS attorney fees related to its appeal of the magistrate
court’s decision. In affirming the district court’s judgment, the Supreme Court examined Credit
Bureau of Eastern Idaho, Inc. v. Lecheminant, 149 Idaho 467, 235 P.3d 1188 (2010) and
Medical Recovery Services, LLC v. Siler, 162 Idaho 30, 394 P.3d 73 (2017).
In Lecheminant, the Supreme Court held that I.C. § 12-120(5) was the specific statute
that applied to a party’s request for attorney fees on an appeal from a proceeding relating to the
collection on a judgment. Lecheminant, 149 Idaho at 473, 235 P.3d at 1194 (“Idaho Code
[section] 12-120(5) . . . is the exclusive fee provision [when collecting on a judgment] and [Idaho
Code section] 12-120(1) and (3) do not apply.”). The Supreme Court’s analysis in Siler supports
such a holding because in Siler, MRS requested attorney fees on appeal under Idaho
Code section 12-120(1), (3), and (5). The Court followed its precedent in Lecheminant by
focusing on the specific provision, section 12-120(5), instead of the general provisions,
section 12-120(1), (3). The Supreme Court concluded that attorney fees were not proper because
the appeal related to the denial of attorney fees rather than an attempt to collect on the judgment.
Siler, 162 Idaho at 36, 394 P.3d at 79 (“[a] request for post-judgment attorney fees under section
12-120(5) is not a proceeding that would satisfy the requirements of subsections (1), (2), (3), or
(4) of section 12-120.”).
Thus, in Lopez, the Supreme Court held that the district court did not err when it denied
MRS’s request for attorney fees on appeal. Similarly, we are not persuaded by MRS’s argument
that it was entitled to attorney fees on appeal under I.C. § 12-120(1) and (3). The Court makes
clear in Lopez that I.C. § 12-120(1) and (3) are not applicable to MRS’s claim. The district court
properly reversed the magistrate court’s judgment, determining that some post-judgment attorney
fees were mandatory under I.C. § 12-120(5). However, after the district court’s decision, MRS
was no longer trying to collect on a judgment. Rather, MRS was attempting to collect attorney
fees related to its previous attempt to collect attorney fees. According to Lecheminant, I.C. § 12-
120(1) and (3) do not apply to such an attempt. Further, according to Siler, I.C. § 12-120(5) does
not support such an award. Therefore, the district court properly denied MRS’s request for
attorney fees on appeal. Moreover, the district court clearly declined to award costs to MRS on
the same basis. MRS has failed to show that the district court abused its discretion in declining
to award attorney fees or costs.
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MRS also requests attorney fees and costs on the current appeal under I.C. § 12-120(1),
(3) or (5). We decline to award attorney fees on this appeal for the same reasons outlined above.
III.
CONCLUSION
The district court’s order affirming in part and reversing in part the magistrate court’s
decision denying MRS’s request for post-judgment attorney fees and costs is affirmed. The
district court’s judgment denying MRS’s requests for attorney fees and costs on appeal is
affirmed. MRS’s request for attorney fees and costs on the instant appeal is denied. This matter
is remanded.
Judge HUSKEY and Judge LORELLO CONCUR.
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