Outsource Receivables Management, Inc. v. Bishop ( 2015 )


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    2015 UT App 41
    _________________________________________________________
    THE UTAH COURT OF APPEALS
    OUTSOURCE RECEIVABLES MANAGEMENT, INC.,
    Plaintiff and Appellee,
    v.
    KELLENE BISHOP AND SCOTT RAY BISHOP,
    Defendants and Appellants.
    Memorandum Decision
    No. 20140082-CA
    Filed February 20, 2015
    Fourth District Court, Provo Department
    The Honorable Fred D. Howard
    No. 139403193
    Kellene Bishop and Scott Ray Bishop,
    Appellants Pro Se
    Chad B. McKay, Attorney for Appellee
    JUDGE KATE A. TOOMEY authored this Memorandum Decision, in
    which JUDGES J. FREDERIC VOROS JR. and MICHELE M.
    CHRISTIANSEN concurred.
    TOOMEY, Judge:
    ¶1    Kellene and Scott Ray Bishop appeal from a final
    judgment entered against them and in favor of Outsource
    Receivables Management, Inc. (Outsource). We affirm.
    Outsource Receivables Management, Inc. v. Bishop
    ¶2     In June 2012, Kellene was a surgical patient at Orem
    Community Hospital.1 While preparing for surgery, Kellene met
    an anesthesiologist who identified himself as her doctor. Kellene
    replied that she was his patient. Although Kellene believed the
    anesthesiologist was employed by the hospital, he was in fact
    employed by an affiliated medical practice, Lone Peak
    Anesthesia, LC (LPA). After her surgery, Kellene received two
    bills—one from the hospital for surgery, and another from LPA
    for the anesthesiologist’s services. Kellene and Scott made three
    partial payments to LPA but later asked the company for relief
    from payment on the basis of hardship. LPA denied the Bishops’
    request and eventually assigned its claim against them to
    Outsource, a debt-collection agency.
    ¶3     Outsource filed suit against the Bishops, seeking payment
    of outstanding debt and requesting awards of prejudgment
    interest, costs, and attorney fees. The case proceeded to a bench
    trial. Though the Bishops did not specifically deny their
    obligation to pay for the anesthesia, they argued the cost should
    have been borne by the hospital. The Bishops further argued the
    payment for anesthesia should be subsumed into their obligation
    to pay the hospital for surgery.
    ¶4    After hearing the evidence, the trial court determined
    Kellene and LPA had a contract implied in law and in fact, as
    evidenced by Kellene’s receipt of the benefit of surgery with
    anesthesia and by the verbal exchange between Kellene and the
    anesthesiologist. It therefore entered judgment in favor of
    Outsource and against Kellene and Scott for $801.57 for the
    1. ‚On appeal from a bench trial, we view the evidence in a light
    most favorable to the trial court’s findings, and therefore recite
    the facts consistent with that standard.‛ ProMax Dev. Corp. v.
    Mattson, 
    943 P.2d 247
    , 250 n.1 (Utah Ct. App. 1997) (citation and
    internal quotation marks omitted).
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    Outsource Receivables Management, Inc. v. Bishop
    services rendered.2 The court also awarded $3,680 in attorney
    fees and $95 in costs against Kellene. The trial court based the
    attorney fee award on its finding that Kellene’s defense was in
    bad faith because she had previously received anesthesia
    services from LPA in 2008 and had been separately billed. The
    Bishops appeal.
    I. Contract Implied in Fact
    ¶5      The Bishops challenge the trial court’s finding that
    Kellene and LPA formed a contract implied in fact. ‚Whether a
    contract implied in fact exists is generally considered a question
    of fact, and we review a trial court’s factual findings under the
    deferential clearly erroneous standard.‛ Uhrhahn Constr.
    & Design, Inc. v. Hopkins, 
    2008 UT App 41
    , ¶ 7, 
    179 P.3d 808
    .
    ‚However, we ‘retain*+ the power to decide whether, as a matter
    of law, a reasonable [fact finder] could find that an implied
    contract exists.’‛ 
    Id.
     (alterations in original) (quoting Ryan v.
    Dan’s Food Stores, Inc., 
    972 P.2d 395
    , 401 (Utah 1998)).
    ¶6     Contracts implied in fact are ‚established by conduct.‛
    Knight v. Post, 
    748 P.2d 1097
    , 1100 (Utah Ct. App. 1988). To show
    the existence of a contract implied in fact, Outsource was
    required to prove that (1) Kellene requested LPA to perform the
    work, (2) LPA expected Kellene to compensate it, and (3) Kellene
    2. Outsource pursued the claim as a family expense. ‚It is well
    established that the costs of . . . medical services . . . are family
    expenses‛ for which both spouses are liable. N.A.R., Inc. v. Elmer,
    
    2006 UT App 293
    , ¶ 4 n.2, 
    141 P.3d 606
    . Under the family
    expense statute, the ‚expenses of the family . . . are chargeable
    upon the property of both husband and wife or of either of them,
    and in relation thereto they may be sued jointly or separately.‛
    
    Utah Code Ann. § 30-2-9
    (1) (LexisNexis 2013).
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    Outsource Receivables Management, Inc. v. Bishop
    knew or should have known that LPA expected compensation.
    See id. at 1101.
    ¶7     The Bishops dispute the trial court’s finding on each of
    these elements. They first contend that the hospital or the
    surgeon, not Kellene, requested LPA’s services. The trial court
    specifically found to the contrary, explaining that Kellene
    requested LPA’s services when she presented herself for surgery
    and consented to the care and treatment by the anesthesiologist.
    As Kellene testified, she ‚consented to treatment for whatever
    was necessary to perform the procedure on [her] in a safe
    manner‛ and she ‚certainly wouldn’t have gone in for a surgical
    procedure of that nature without anesthesia.‛ The Bishops have
    not demonstrated clear error in the court’s finding that Kellene
    requested LPA perform the anesthesia work.
    ¶8     Next, the Bishops argue that because LPA had a contract
    with the hospital, LPA did not expect Kellene to compensate
    LPA and that LPA could not have reasonably expected payment
    from Kellene unless she had signed a consent form. In other
    words, the Bishops imply that LPA could not expect
    compensation without having its own signed contract with
    Kellene. A contract implied in fact, however, allows ‚a plaintiff
    to recover payment for labor performed in a variety of
    circumstances in which that plaintiff, for some reason, would not
    be able to sue on an express contract.‛ Davies v. Olson, 
    746 P.2d 264
    , 268 (Utah Ct. App. 1987). As a result, LPA could expect
    payment under a contract-implied-in-fact theory even though
    Kellene did not sign a consent form for LPA. The trial court
    found that the anesthesiologist expected payment. The Bishops
    have not shown that this finding is clearly erroneous.
    ¶9     Finally, the Bishops assert that Kellene believed the cost of
    the anesthesia services was part of the cost of the services
    provided by the hospital. But Kellene’s misunderstanding
    actually supports the trial court’s finding that Kellene knew that
    the anesthesiologist expected compensation. Indeed, the Bishops
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    Outsource Receivables Management, Inc. v. Bishop
    have not specifically denied their obligation to pay for the
    anesthesiologist’s services. Furthermore, the trial court found
    that the Bishops recognized their obligation to pay LPA when
    they made initial payments to LPA and petitioned for relief from
    payment on the basis of hardship. The Bishops have not shown
    that the trial court erred in finding that the third element of a
    contract implied in fact was met.3 Accordingly, we affirm the
    trial court’s finding that the conduct of Kellene and LPA
    established a contract implied in fact.4
    3. On appeal, the Bishops attack the trial court’s determination
    that Kellene and LPA had a contract implied in law. Because we
    affirm the trial court’s finding that a contract implied in fact
    existed, we need not address the trial court’s alternative basis for
    awarding judgment in favor of Outsource. Additionally, we do
    not address the Bishops’ other arguments that no express
    contract existed and that there was no account stated, because
    the trial court’s ruling did not make determinations to the
    contrary. See DeMentas v. Estate of Tallas, 
    764 P.2d 628
    , 634 (Utah
    Ct. App. 1988) (‚An account stated has been defined as an
    agreement between parties who have had previous transactions
    of a monetary character that all the items of the account
    representing such transactions, and the balance struck, are
    correct, together with a promise, express or implied, for the
    payment of such balance.‛ (citation and internal quotation marks
    omitted)).
    4. The Bishops also contest the trial court’s calculation of
    damages, arguing that Outsource did not present any evidence
    of ‚the value of the benefit received by *Kellene+, as
    distinguished by the service provided.‛ In announcing its
    findings, the trial court determined that the undisputed evidence
    showed the amount LPA charged was the fair value of the
    services rendered and the benefits conferred. The court further
    explained there was no testimony to suggest that the amount of
    (continued...)
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    Outsource Receivables Management, Inc. v. Bishop
    II. Attorney Fees
    ¶10 Kellene challenges the trial court’s award of attorney fees5
    to Outsource under the statute providing for an award of
    attorney fees based on a party asserting a cause of action or
    defense in bad faith.6 Section 78B-5-825 of the Utah Code
    the claim was unreasonable. The Bishops have not demonstrated
    that this finding is clearly erroneous.
    5. Kellene argues on appeal that the trial court’s findings lacked
    specificity to support the attorney fee award under the bad faith
    statute. ‚To preserve an appellate challenge to the adequacy of
    the trial court findings, an appellant must first have raised the
    objection in the trial court with sufficient clarity to alert the trial
    court to the alleged inadequacy.‛ Cook v. Cook, 
    2013 UT App 57
    ,
    ¶ 3, 
    298 P.3d 700
     (citing 438 Main St. v. Easy Heat, Inc., 
    2004 UT 72
    , ¶ 56, 
    99 P.3d 801
    ). Although the Bishops objected to the
    proposed findings of fact and conclusions of law by asserting
    that ‚there is no basis for an award of attorney fees to
    *Outsource+‛ and that ‚the court should revise its Ruling, Order,
    and Judgment accordingly,‛ they did not alert the trial court to
    the alleged inadequacy of its findings in support of the attorney
    fee award. Consequently, Kellene has not preserved this
    argument for appeal. See id. ¶ 4 (refusing to consider the merits
    of an unpreserved challenge to the adequacy of the trial court’s
    findings). But in any event, ‚we do not require specific factual
    findings to support an award of attorney fees under [the bad
    faith statute+.‛ Migliore v. Livingston Fin., LLC, 
    2015 UT 9
    , ¶ 33.
    6. Kellene also challenges the attorney fee award on the ground
    that the family expense statute does not authorize the award of
    attorney fees when no express contract exists between the
    parties. See 
    Utah Code Ann. § 30-2-9
    (2) (LexisNexis 2013) (‚In an
    action by a creditor against either husband or wife for the
    (continued...)
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    Outsource Receivables Management, Inc. v. Bishop
    provides that ‚*i+n civil actions, the court shall award reasonable
    attorney fees to a prevailing party if the court determines that
    the action or defense to the action was without merit and not
    brought or asserted in good faith.‛ Utah Code Ann. § 78B-5-825
    (LexisNexis 2012). ‚In order to award attorney fees under this
    provision, a trial court must determine both that the losing
    party’s action or defense was ‘without merit’ and that it was
    brought or asserted in bad faith.‛ Still Standing Stable, LLC v.
    Allen, 
    2005 UT 46
    , ¶ 7, 
    122 P.3d 556
    .
    ¶11 ‚We review a trial court’s grant of attorney fees under
    *the bad faith statute+ as a mixed question of law and fact.‛ Verdi
    Energy Group, Inc. v. Nelson, 
    2014 UT App 101
    , ¶ 13, 
    326 P.3d 104
    (alteration in original) (citation and internal quotation marks
    omitted). ‚A finding of bad faith is a question of fact and is
    reviewed by this court under the ‘clearly erroneous’ standard.‛
    Jeschke v. Willis, 
    811 P.2d 202
    , 204 (Utah Ct. App. 1991). ‚The
    ‘without merit’ determination is a question of law, and therefore
    we review it for correctness.‛ 
    Id. at 203
    .
    ¶12 Kellene contends that because her defense was based in
    law, it did not lack merit. To demonstrate that a defense to an
    action is ‚without merit,‛ ‚the party seeking an award of
    attorney fees must do more than assert that the case was
    unsuccessful.‛ Verdi Energy Group, 
    2014 UT App 101
    , ¶ 33.
    ‚Rather, it must persuade the court that *the defense+ ‘border*s+
    on frivolity,’ meaning the claims have ‘little weight or
    importance’ or have ‘no basis in law or fact.’‛ 
    Id.
     (second
    payment of a family expense, the creditor or debtor as the
    prevailing party shall be entitled to recover reasonable collection
    costs, interest, and attorney fees as provided in a contract
    between the creditor and debtor.‛). Because the trial court
    awarded attorney fees under the bad faith statute, not the family
    expense statute, we do not address this argument.
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    Outsource Receivables Management, Inc. v. Bishop
    alteration in original) (quoting Cady v. Johnson, 
    671 P.2d 149
    , 151
    (Utah 1983)). Put differently, a defense lacks merit when the
    court determines not only that it was unsuccessful, but that the
    party asserting it ‚could not have reasonably believed *it+ to
    have a basis in law and fact.‛ 
    Id.
    ¶13 Although Kellene made legal arguments to the trial court,
    those legal arguments ‚‘border*ed+ on frivolity’‛ in light of the
    evidence and Kellene’s prior experience with LPA and
    Outsource. See 
    id.
     (quoting Cady, 671 P.2d at 151). The trial
    court’s award of attorney fees was grounded in its finding that
    the Bishops had been billed by LPA once before in 2008. An
    Outsource collector testified at trial that it had an account
    against the Bishops in 2008 for a collection from LPA. She further
    testified that the 2008 account was closed when Outsource
    received full payment and satisfied a judgment in December
    2009. Given this history, Kellene’s defense that she could not be
    billed separately for the anesthesia services had ‚‘little weight’‛
    and had ‚‘no basis in law or fact.’‛ See id. (quoting Cady, 671 P.2d
    at 151). As a result, the trial court did not err in determining that
    Kellene’s defense lacked merit.
    ¶14 Kellene also attacks the trial court’s finding of bad faith.
    In particular, she argues that her defense could not have been in
    bad faith, because there was a lack of evidence that ‚the
    circumstances and facts were similar enough [in 2008] that the
    basis for a judgment would be the same in both cases.‛ For a trial
    court to conclude that a defense was asserted in bad faith, it
    must find that the party ‚‘(1) [lacked a]n honest belief in the
    propriety of the activities in question; (2) . . . inten[ded] to take
    unconscionable advantage of others; [or] (3) [had] intent to, or
    knowledge of the fact that the activities in question will . . .
    hinder, delay or defraud others.’‛ Id. ¶ 30 (alterations and
    omissions in original) (quoting Cady, 671 P.2d at 151). ‚A finding
    of bad faith is upheld when ‘there is sufficient evidence in the
    record to support a finding that at least one of these three factors
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    Outsource Receivables Management, Inc. v. Bishop
    applies.’‛ Blum v. Dahl, 
    2012 UT App 198
    , ¶ 9, 
    283 P.3d 963
    (quoting Still Standing Stable, 
    2005 UT 46
    , ¶ 13).
    ¶15 The trial court’s determination of Kellene’s bad faith was
    based on its finding that ‚*t+he testimony that *the Bishops+
    believed that the anesthesia would be rendered directly by the
    hospital is belied by evidence of prior services provided by
    [LPA] and by the prior efforts of [Outsource] in collecting
    monies owed by *the Bishops+ in similar services.‛ Furthermore,
    the court found that the Bishops ‚knew that they were obligated
    to pay the bill, and failed to present evidence of a hospital bill or
    itemization of services‛ that might cast doubt on Outsource’s
    claim. These findings support a conclusion that Kellene knew
    her defense would hinder or delay Outsource’s collection efforts.
    Notably, Kellene brought this simple debt collection case to trial
    even when she fundamentally did not dispute that she was
    responsible for paying for the anesthesiologist’s services. Under
    these circumstances, Kellene has not demonstrated that the trial
    court’s finding of bad faith is clearly erroneous. Accordingly, we
    affirm the court’s award of attorney fees under the bad faith
    statute.
    III. Conclusion
    ¶16 In summary, the trial court did not err in concluding
    under a theory of contract implied in fact that the Bishops were
    obligated to pay for anesthesia services rendered during
    Kellene’s surgery. The trial court also did not err in awarding
    attorney fees under the bad faith statute. Accordingly, we affirm.
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