Outsource Receivables Management, Inc. v. Bishop

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).
20140082-CA 2 2015 UT App 41Outsource 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).
20140082-CA 3 2015 UT App 41Outsource 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
20140082-CA 4 2015 UT App 41Outsource 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...)
20140082-CA 5 2015 UT App 41Outsource 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...)
20140082-CA 6 2015 UT App 41Outsource 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.
20140082-CA 7 2015 UT App 41Outsource 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
20140082-CA 8 2015 UT App 41Outsource 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.
20140082-CA 9 2015 UT App 41