#23946-rev&rem-SLZ
2006 SD 81
IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
* * * *
CREDIT COLLECTION SERVICES,
INC., a South Dakota Corporation, Plaintiff and Appellant,
v.
BRADLEY J. PESICKA and
MARTINA ASHFORD, Defendants.
* * * *
APPEAL FROM THE CIRCUIT COURT
OF THE FIRST JUDICIAL CIRCUIT
YANKTON COUNTY, SOUTH DAKOTA
* * * *
HONORABLE ARTHUR RUSCH
Judge
* * * *
DAVID M. HOSMER Attorney for plaintiff
Yankton, South Dakota and appellant.
* * * *
CONSIDERED ON BRIEFS
ON MAY 23, 2006
OPINION FILED 08/23/06
#23946
ZINTER, Justice
[¶1.] Credit Collection Services, Inc. (CCS) appeals a judgment denying
attorney’s fees in a breach of contract action against Bradley Pesicka and his former
wife Martina Ashford. We reverse and remand.
FACTS
[¶2.] In 2003, Pesicka and Ashford, who were still married, received medical
services from Avera Sacred Heart Hospital in Yankton, South Dakota. In
connection with obtaining these services, Pesicka signed a contract entitled
“Consent Form.” The one page printed form was on Avera letterhead and contained
provisions on the following matters: authorization for care and treatment; consent
to blood test for healthcare provider protection; procurement of information;
authorization for release of information; personal items acknowledgement; Medicare
consent; Medicare/Champus acknowledgement of receipt; assignment of insurance
benefits; precertification; billing and credit policy; and, patient self determination
and advance directives. The section on billing and credit policy provided:
All patient accounts will be considered due upon receipt of
your bill. As a courtesy to me, the business office and any
physician of the hospital providing services will process
my insurance if information is provided. It is understood
that all insurance deductibles be paid at the time of
dismissal. I will be billed on the current balance of my
account regardless of the insurance claim status.
Accounts over thirty (30) days old may bear interest at a
rate allowed under South Dakota State Law. Accounts
over ninety (90) days old may be referred to an attorney or
an agency for collection at which time the undersigned
shall become responsible for all attorney’s fees and
collection expenses. (emphasis added).
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[¶3.] Pesicka made only two small payments on the debt to Avera and failed
to pay the balance. Avera assigned the debt to CCS for collection. CCS attempted
to collect the debt but was unsuccessful. CCS then commenced a breach of contract
action against Pesicka and Ashford. A default judgment was entered against
Ashford, and Pesicka failed to appear for trial. Thereafter, a judgment was also
entered against Pesicka in the amount of $12,569.51. CCS subsequently filed a
motion for attorney’s fees relying on that portion of the consent form in which the
parties agreed that Pesicka would be responsible for those fees. Pesicka did not
appear or resist the motion. Nevertheless, the trial court denied CCS’s motion
reasoning that the consent form’s provision for attorney’s fees violated public policy
and was void. CCS appeals.
ISSUE
[¶4.] Did the trial court err in denying CCS’s motion for attorney’s
fees?
[¶5.] An award of attorney’s fees is reviewed under the abuse of discretion
standard. In re South Dakota Microsoft Antitrust Litigation, 2005 SD 113, ¶27, 707
NW2d 85, 97. “‘[B]y definition, a decision based on an error of law is an abuse of
discretion.’” State v. Vento, 1999 SD 158, ¶5, 604 NW2d 468, 469. The question in
this case is a question of law: does SDCL 15-17-39 prohibit an award of attorney’s
fees to CCS based upon the attorney’s fee provision in the consent form signed by
Pesicka. See State v. Schroeder, 2004 SD 21, ¶5, 674 NW2d 827, 829 (construction
of a statute is a question of law and is fully reviewable without deference to the trial
court’s interpretation); Microsoft, 2005 SD 113 at ¶28, 707 NW2d at 98 (“standards
and procedures applied by trial court in determining attorney fees are legal
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questions” and “trial court’s conclusions of law are given no deference and are
reviewed . . . de novo.”).
[¶6.] “An award of attorney’s fees is not the norm. The party requesting . . .
fees has the burden to show, by a preponderance of the evidence, the basis for such
an award.” Jacobson v. Gulbransen, 2001 SD 33, ¶31, 623 NW2d 84, 91. In this
jurisdiction the recovery of attorney fees is governed by the American rule, which
provides:
each party bears the party’s own attorney fees. However,
attorney fees are allowed when there is a contractual agreement
that the prevailing party is entitled to attorney fees or there is
statutory authority authorizing an award of attorney fees.
Crisman v. Determan Chiropractic, Inc., 2004 SD 103, ¶26, 687 NW2d 507, 513.
(citations omitted)(emphasis added). Thus, even if there is no statute authorizing
attorney’s fees, they are recoverable if the parties’ contract so provides. Microsoft,
2005 SD 113 at ¶29, 707 NW2d at 98; City of Aberdeen v. Rich, 2003 SD 27, ¶25,
658 NW2d 775, 781; Jacobson, 2001 SD 33 at ¶31, 623 NW2d at 91; Estate of
O'Keefe, 1998 SD 92, ¶17, 583 NW2d 138, 142; Vanderwerff Implement, Inc. v.
McCance, 1997 SD 32, ¶17, 561 NW2d 24, 27; O’Connor v. King, 479 NW2d 162, 166
(SD 1991); Assman v. J.I. Case Credit Corp., 411 NW2d 668, 671 (SD 1987); Lowe v.
Steele Const. Co., 368 NW2d 610, 614 (SD 1985); NBC Leasing Co. v. Stilwell, 334
NW2d 496, 500 (SD 1983); Tracy v. T & B Const Co., 85 SD 337, 340, 182 NW2d
320, 322 (1970); Dodds v. Bickle, 77 SD 54, 62, 85 NW2d 284, 289 (1957). 1
1. While the body of the dissent appears to acknowledge that attorney’s fees are
recoverable upon an agreement of the parties, that rule does not appear to be
(continued . . .)
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[¶7.] CCS argued that Avera’s consent form was a contractual agreement
authorizing an award of attorney’s fees. However, the trial court held that the
contract was “evidence of debt.” Therefore, it held that the provision authorizing
attorney’s fees was void under SDCL 15-17-39, which provides:
Any provision contained in any note, bond, mortgage, or
other evidence of debt that provides for payment of
attorneys’ fees in case of default of payment or foreclosure
is against public policy and void, except as authorized by
specific statute. (emphasis added).
On appeal, CCS argues that the consent form is not a “note, bond, mortgage, or
other evidence of debt,” and therefore, the provision authorizing attorney’s fees was
not prohibited by this statute. We agree with CCS.
[¶8.] Before SDCL 15-17-39 was enacted, SDCL 15-17-10 contained the
same relevant language:
Any provision contained in any note, bond, mortgage, or
other evidence of debt for the payment of any attorney fee
in case of default in payment or of proceedings had to
collect such note, bond, or evidence of debt or to foreclose
such mortgage is hereby declared to be against public
policy and void.
________________________
(. . . continued)
followed in the dissent’s footnote emphasizing that attorney’s fees may only
be granted in those cases specifically allowed by statute (listing those specific
statutes). Furthermore, any suggestion in the footnote that there is some
sort of public policy violation to award attorney’s fees based upon an
agreement by the parties is contrary to at least half a century of this Court’s
legal precedent.
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SDCL 15-17-10 (1984 Rev)(emphasis added). SDCL 15-17-39 replaced SDCL 15-17-
10 in 1992. See 1992 SDSessL ch 148, §§ 4 & 26. 2
[¶9.] This Court has applied this “other evidence of debt” language under
both statutes. In Midcontinent Broadcasting Co. v. AVA Corp., 329 NW2d 378 (SD
1983), the Court reversed an award of attorney’s fees in a lawsuit against
guarantors on a promissory note, holding that a guaranty was “other evidence of
debt.” The Court observed that the principals could not be liable for attorney’s fees
on the promissory note and the “guaranty agreement [was] linked to the note.” Id.
at 381. Therefore, the attorney’s fee collection provision of the guaranty was void.
In International Multifoods Corp. v. Mardian, 379 NW2d 840 (SD 1985), this Court
followed Midcontinent and again denied attorney’s fees in an action against
guarantors on a promissory note, holding that the guaranty was “other evidence of
debt.” In Vanderwerff, supra, this Court examined a sales contract that required
the payment of $2,575 for a farm implement. The contract also permitted the
recovery of attorney’s fees upon default. This Court concluded that the sales
contract constituted “other evidence of debt” under SDCL 15-17-39, and therefore,
the attorney’s fee provision was void.
[¶10.] On the other hand, in Assman, supra, a retail purchaser defaulted on
the purchase of farm machinery and a financing company incurred attorney’s
fees repossessing the collateral. This Court permitted the financing company to
recover attorney’s fees from the implement dealer under a provision of a “Retail
2. The current version of SDCL 15-17-39 actually came into being with
amendments made in 1993. See 1993 SDSessL ch 165.
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Financing Agreement” between the financing company and the implement dealer.
That agreement allowed the financing company to recover “‘any net loss which [the
financing company might] sustain on any [s]ecurity [i]nstrument accepted . . .
resulting from repossessing machines or equipment which secure a [s]ecurity
[i]nstrument [originating from the retail purchaser] including . . . legal expenses. . .
.’” Id. at 671 (emphasis original). This Court held that the “Retail Financing
Agreement” was not “other evidence of debt.” Rather, this Court noted that
agreement “was designed ‘to set forth the conditions under which [s]ecurity
[i]nstruments [with retail purchasers would] be accepted by [the financing company
on assignment] from [the implement dealer], and to establish the rights, liabilities
and obligations of [the financing company and implement dealer] with respect to
such [s]ecurity [i]nstruments[.]’” Id.
[¶11.] In this case, the contract bears little similarity to the contracts this
Court examined in Midcontinent and Mardian (promissory note guaranties) and in
Vanderwerff (fixed-price sales contract). Rather, this contract is like the agreement
in Assman, which merely governed the terms and conditions of providing services
and further governed the rights, liabilities and obligations of the parties with
respect to those services.
[¶12.] Two Eighth Circuit Court of Appeals decisions construing SDCL 15-17-
10 and SDCL 15-17-39 also provide thoughtful analysis on this question. In
Overholt Crop Insurance Service Co. v. Travis, 941 F2d 1361 (8thCir 1991), the
Eighth Circuit, relying upon our decision in Assman, upheld an attorney’s fee award
authorized by a provision in an employment agreement. The court noted that the
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language under review was an employment agreement and the statutory
prohibition only applied to “‘notes, bonds, mortgages, or other evidence of debt.’”
See Overholt, 941 F2d at 1370 (quoting SDCL 15-17-10 (1990)).
[¶13.] Orion Financial Corp. v. American Foods Group, Inc., 281 F3d 733
(8thCir 2002) provides more comprehensive analysis. There, a consultant sought to
enforce an attorney’s fee provision in a consulting service agreement. The district
court, relying on Vanderwerff, supra, declined to award attorney’s fees, holding that
the agreement violated SDCL 15-17-39. The Eighth Circuit reversed. Judge
Wollman reasoned:
The service contract in this case, like the employment
contract in Overholt, does not constitute evidence of a debt
owed by one party to the other, but instead creates
mutual obligations to provide services and payment
therefor.
The phrase “evidence of debt” as used in the statute refers
to debtor-creditor relationships, such as those in bonds,
mortgages, and promissory notes, not to every contract
where one party is obligated to pay money to the other.
Moreover, the phrase “evidence of debt” when used
elsewhere in the South Dakota Codified Laws is
connected with banking or other debtor-creditor
relationships. See, e.g., S.D. Codified Laws § 7-25A-25
(Michie 1993)(improvement districts’ authority to issue
notes); S.D. Codified Laws § 15-2-18 (Michie
2001)(limitations on actions on instruments circulated as
money); S.D. Codified Laws § 21-17A-3 (Michie
1987)(requirements for writ of attachment for a debt);
S.D. Codified Laws § 21-47-3 (Michie 1987)(actions to
foreclose real property mortgages); S.D. Codified Laws §
21-48-18 (Michie 1987)(same); S.D. Codified Laws § 44-10-
10 (Michie 1997)(restricting sale of evidences of debt
pledged to pledgee); S.D. Codified Laws § 47-8-1.1 (Michie
2000)(definition of transacting business); S.D. Codified
Laws § 51A-4-1 (Michie 1990)(powers of banks); and S.D.
Codified Laws § 58-26-3 (Michie 2000)(determining value
of investments by insurance companies).
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We conclude that because the Agreement is not “evidence
of debt” within the meaning of S.D. Codified Laws § 15-
17-39, the attorney fees provision is valid. Accordingly,
we reverse the district court’s decision denying attorney
fees and remand to the district court for a determination
of an award of reasonable attorney fees and collection
costs.
Orion, 281 F3d at 745. 3
[¶14.] Although this Court is not bound by federal court interpretations of
SDCL 15-17-10 and SDCL 15-17-39, Orion provides a well reasoned analysis of the
meaning and purpose of the “evidence of debt” language in SDCL 15-17-39.
Moreover, its rationale is consistent with our cases. Like Assman, Orion recognized
that service agreements are unlike guaranties on promissory notes or sales
contracts that are evidence of debt. A service agreement “does not constitute
evidence of a debt owed by one party to the other, but instead creates mutual
obligations to provide services and payment therefor.” Orion, 281 F3d at 745.
Compare id., with Assman, 411 NW2d at 671 (concluding that the agreement was
only designed to set forth the conditions under which services would be provided
and established the rights, liabilities and obligations of the parties with respect to
those services).
[¶15.] Finally, both this Court’s and the Eighth Circuit’s analysis of the
“evidence of debt” language is consistent with interpretations of similar language in
other jurisdictions. See Hiller v. Olmstead, 54 F2d 5, 7 (6thCir 1931)(concluding
3. All of the statutory cross-references in the quotation from Orion, supra
remain valid with the exception of the reference to SDCL 47-8-1.1, which was
repealed in 2005. See 2005 SDSessL ch 239, § 394.
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that an insurance contract was not converted into “evidence of indebtedness” after a
fire because the phrase refers only to instruments of the same general nature as
bonds, mortgages, notes, and debentures); United States v. Jones, 450 F2d 523, 525
(5thCir 1971)(concluding that the term “evidence of indebtedness” embraced only
such documents as promissory notes which on their face establish a primary
obligation to pay the holders a sum of money); In Re Dvorak, 176 BR 929, 934
(BankrDKan 1994)(concluding that an indemnity agreement was not evidence of
indebtedness because at the time agreement was entered into there was no debt);
O’Brien’s Irish Pub, Inc. v. Gerlew Holdings, Inc., 332 SE2d 920, 923 (GaApp
1985)(concluding that a contract for the sale of a business between a vendor and
broker did not fall within the definition of “evidence of debt,” i.e. “written
instruments or securities for the payment of money, importing on their face the
existence of a debt.”)(quoting Black’s Law Dictionary, Deluxe 4th Ed., 1968).
[¶16.] One further example is T.F. James Co. v. Vakoch, 628 NW2d 298 (ND
2001). In that case, the trial court refused to award attorney’s fees permitted under
a lease agreement. The trial court held that the lease was “evidence of debt” and
the attorney’s fee provision was void under a North Dakota statute similar to SDCL
15-17-39. The North Dakota Supreme Court reversed stating, “[w]e . . . do not
believe ‘evidence of debt’ in N.D.C.C. § 28-26-04 is intended ‘to be viewed as a
catchall rubric embracing any and all writings, not otherwise specifically listed,
which represent an obligation on the part of the writer to do something for the
holder.’” T.F. James Co., 628 NW2d at 302 (quoting Jones, 450 F2d at 524). The
North Dakota Court reasoned that:
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“[E]vidence of debt,” as contemplated by N.D.C.C. § 28-26-
04, relates to a written instrument importing on its face
the existence of debt, an acknowledgement of that debt,
and a promise of payment. The general term, “evidence of
debt,” “despite its seeming breadth,” includes only
instruments similar to those specifically listed in
N.D.C.C. § 28-26-04: a note, bond, mortgage, or security
agreement. See Black’s Law Dictionary 535 (7th ed.
1999)(discussing the principle of ejusdem generis, and
stating “seeming breadth” is not given effect). Evidence of
debt is not a “catchall rubric embracing any and all
writings” including those such as the commercial lease
agreement in this case. Jones, 450 F2d at 524.
T.F. James Co., 628 NW2d at 303.
[¶17.] Applying the principles embodied in all of these cases, we conclude
that the trial court erred as a matter of law in its denial of attorney’s fees. Pesicka’s
consent form is not a note, bond or mortgage nor is it a written instrument
importing on its face the existence of a debt. Rather, like the financing agreement
in Assman, the employment agreement in Overholt, and the service agreement in
Orion, Pesicka’s agreement only describes the conditions under which certain
services will be provided and it sets forth the rights, liabilities, and obligations of
the parties with respect to those services. Therefore, the consent form is not
“evidence of debt” within the meaning of SDCL 15-17-39. 4
4. Under directly controlling authority, the dissent’s position regarding a lack of
“fair negotiation” over the attorney’s fee agreement may not be addressed in
this appeal. That question must be left for another day.
The dissent relies on Vanderwerff, 1997 SD 32 at ¶18, 561 NW2d at 27.
Ironically, Vanderwerff considers the “fair negotiation” argument, but
specifically instructs that we may not consider the argument because it
was not raised before the trial court. More specifically, Vanderwerff
recognized in dictum that an agreement concerning attorney’s fees
should be “fairly negotiated.” However, the Court concluded that we
(continued . . .)
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________________________
(. . . continued)
should not address such issues for the first time on appeal. The Court
further concluded that that argument was waived because the trial
court made no findings regarding negotiation of attorney’s fees.
The same is true here. Pesicka did not appear or respond to the motion for
attorney’s fees. Pesicka specifically failed to object or propose findings of fact
and conclusions of law on the issue of fair negotiation.
Consequently, the trial court entered no findings of fact or conclusions of law
on the issue. The only trial court language that related to that issue was a
comment in the memorandum decision that “[t]here was no testimony that
there was any discussion or negotiation of the attorney’s fee clause,” and it
was “unlikely” that it was fairly negotiated. However, the trial court never
ruled on this issue. Ultimately, it resolved the matter of attorney’s fees solely
on the basis of the “evidence of debt” issue we address.
Notwithstanding this record, the dissent alleges “fair negotiation” was an
alternative ruling that we should adopt. As is pointed out above, it was not
an alternative ruling. However, even if it were, the trial court’s mere
speculation concerning that subject is not reviewable because the
memorandum was not incorporated in its findings of fact and conclusions of
law. See Poindexter v. Hand County Bd. of Equalization, 1997 SD 71, ¶18,
565 NW2d 86, 91 (stating that the Supreme Court does not review a
memorandum opinion unless it is expressly incorporated into the findings of
fact and conclusions of law).
Finally, it must be noted that Pesicka filed no brief in this appeal. Therefore,
there is no issue of fair negotiation for us to review.
For all of these reasons, and under the dissent’s own authority, we may not
consider this issue. Vanderwerff, 1997 SD 32, ¶18, 561 NW2d at 27 (noting
that: the issue of fair negotiation was never presented to the trial court; “[a]s
we have stated numerous times, ‘issues not addressed or ruled upon by the
trial court will not be addressed by this Court for the first time on appeal’”;
and therefore, the issue of fair negotiation was waived)(citing Watertown v.
Dakota, Minn. & E. R.R. Co., 1996 SD 82, ¶26, 551 NW2d 571, 577 (citing
Keegan v. First Bank, 519 NW2d 607, 615 (SD 1994); Fullmer v. State Farm
Ins. Co., 514 NW2d 861, 866 (SD 1994); Hawkins v. Peterson, 474 NW2d 90,
95 (SD 1991); Bottum v. Herr, 83 SD 542, 548, 162 NW2d 880, 883 (1968);
Schull Constr. Co. v. Koenig, 80 SD 224, 229, 121 NW2d 559, 561 (1963))). In
light of this directly controlling authority, and considering our standard of
review, we have no authority to, sua sponte, raise and decide this issue.
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[¶18.] Reversed and remanded for consideration of the appropriate factors for
awarding attorney’s fees. See Crisman, 2004 SD 103, ¶¶ 27– 30, 687 NW2d at 513–
514.
[¶19.] GILBERTSON, Chief Justice, and KONENKAMP and MEIERHENRY,
Justices, concur.
[¶20.] SABERS, Justice, dissents.
SABERS, Justice (dissenting).
[¶21.] I dissent. There are two independent grounds by which the circuit
court’s decision should be affirmed: First, the section on billing and credit in the
hospital’s “Consent Form” constitutes “other evidence of debt” and violates the
public policy set forth in SDCL 15-17-39; second, the circuit court found that the
clause authorizing attorney’s fees was not fairly negotiated by the parties. The
majority opinion fails to recognize our State’s public policy 5 and errs by narrowly
5. SDCL 15-17-38 sets forth the public policy of the State of South Dakota as to
an award of attorney’s fees. It provides in part:
The compensation of attorneys and counselors at law for
services rendered in civil and criminal actions and special
proceedings is left to the agreement, express or implied, of
the parties. However, attorneys’ fees may be taxed as
disbursements if allowed by specific statute.
The only attorneys’ fees that are allowed by statute are: divorce, annulment
of marriage, determination of paternity, custody, visitation, separate
maintenance, support or alimony.
In case the above statute was not sufficiently clear in its public policy
of prohibiting attorneys fees except where specifically allowed by
statute, SDCL 15-17-39 provides:
(continued . . .)
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construing the words “other evidence of debt.” Additionally, the majority opinion
errs by failing to address the circuit court’s finding that the hospital’s clause
authorizing attorney’s fees was not fairly negotiated.
The circuit court did not abuse its discretion in denying the hospital attorney’s fees
pursuant to SDCL 15-17-39.
[¶22.] The party requesting an award of attorney’s fees has the burden to
show the basis for such an award. Jacobson v. Gulbransen, 2001 SD 33, ¶31, 623
NW2d 84, 91. We will not reverse a circuit court’s decision concerning attorney’s
fees unless we determine the court abused its discretion. In re South Dakota
Microsoft Antitrust Litigation, 2005 SD 113, ¶27, 707 NW2d 85, 97.
[¶23.] “At common law the right to recover attorney’s fees from an opponent
in litigation did not exist.” NBC Leasing Co. v. Stilwell, 334 NW2d 496, 500 (SD
1983). Such an expense is not allowable absent “a statute or rule of court or some
agreement expressly authorizing taxing of attorney’s fees. . . .” Id. at 500-01.
[¶24.] In this case, the hospital’s collection agency is relying on the “Billing
and Credit Policy” clause of its “Consent Form” document as an “agreement”
________________________
(. . . continued)
Any provision contained in any note, bond, mortgage, or
other evidence of debt that provides for payment of
attorneys’ fees in case of default of payment or foreclosure
is against public policy and void, except as authorized by
specific statute.
In other words, SDCL 15-17-39 provides that attorneys’ fees in “other
evidence of debt” are against public policy. How could the public policy
of the State of South Dakota be any clearer?
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between the hospital and Pesicka for attorney’s fees. SDCL 15-17-39 limits the type
of instruments that can contain provisions for attorney’s fees:
Any provision contained in any note, bond, mortgage, or other
evidence of debt that provides for payment of attorneys’ fees in
case of default of payment or foreclosure is against public policy
and void, except as authorized by specific statute.
[¶25.] Our case law concerning this statute has been inconsistent. In Assman
v. J.I. Case Credit Corp., 411 NW2d 668 (SD 1987), we permitted a financing
company to recover attorney’s fees from an implement dealer. The financing
company relied on an attorneys’ fees provision in its “Retail Financing Agreement.”
We held the “Retail Financing Agreement” did not constitute “other evidence of
debt.” Id. at 671. However, about ten years later, we held that a provision
providing for attorney’s fees in an implement dealer’s “Retail Order Form” was
“evidence of other debt” and therefore contrary to public policy. Vanderwerff
Implement Inc. v. McCance, 1997 SD 32, ¶17, 561 NW2d 24, 27.
[¶26.] The hospital attempts to hide behind the fact that its document
deals with consents, authorizations, and releases in addition to debt. The
majority opinion should not be so easily fooled.
[¶27.] The “Billing and Credit Policy” section of the document not only
constitutes “other evidence of debt” but specifies the conditions relating to
debt in six specific ways:
1. All patient accounts will be considered due upon
receipt of your bill.
2. As a courtesy to me, the business office and any
physician of the hospital providing services will
process my insurance if information is provided.
3. It is understood that all insurance deductibles be
paid at the time of dismissal.
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4. I will be billed on the current balance of my account
regardless of the insurance claim status.
5. Accounts over thirty (30) days old may bear
interest at a rate allowed under South Dakota
State Law.
6. Accounts over ninety (90) days old may be referred
to an attorney or an agency for collection at which
time the undersigned shall become responsible for
all attorney’s fees and collection expenses.
The only evidence of debt and conditions relating to debt not specified above is the
ultimate balance due on account. At the time the document was signed, the medical
services had not yet been provided so the final debt amount could not be inserted.
We should not accept form over substance in determining what constitutes other
evidence of debt.
[¶28.] If the public policy of the State prohibits creditors such as banks from
collecting attorney’s fees on notes, bonds, mortgages or other evidence of debt,
certainly a hospital providing health care or its credit collection service should be
equally prohibited. The bargaining position of those in need of medical care is far
inferior to those who borrow money to pay debts or make purchases.
[¶29.] In summary, our case law was inconsistent on what types of
documents constitute “other evidence of debt.” The circuit court examined the
hospital’s document and its provision on “Billing and Credit Policy” and determined
it constituted “other evidence of debt.” Under these circumstances, the court did not
abuse its discretion in denying the hospital attorney’s fees.
The circuit court should be affirmed because the “Billing and Credit Policy”
provision was not negotiated between the parties.
[¶30.] An agreement concerning attorney’s fees should be fairly negotiated
between the parties. Vanderwerff, 1997 SD 24, ¶18, 561 NW2d at 27. In
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Vanderwerff, in addition to holding an attorney’s fees provision void because it was
“other evidence of debt,” we noted:
In this case, there is no evidence of negotiation between
McCance and Vanderwerff on the matter of attorney fees,
as the aforementioned clause is in fine print.
Id. Vanderwerff did not reach the issue of whether the attorney’s fees clause was
negotiated because it had not been addressed by the circuit court.
[¶31.] Unlike Vanderwerff, the circuit court did address whether the
hospital’s provision providing for attorney’s fees was negotiated. In its
memorandum opinion, the circuit court wrote:
The court would point out that the form is captioned as a
“Consent Form” authorizing care and treatment and does not
indicate that the fine print contains a contractual agreement to
pay attorney’s fees. Even the fine print paragraph which
contains this clause is captioned as “Billing and Credit Policy” and
gives no indication that it contains a contractual agreement
to pay attorney’s fees.
There was no testimony that there was any discussion or
negotiation of the attorney’s fee clause and this court concludes
that it was extremely unlikely that this clause was negotiated
between the parties in light of the circumstances under which
the form was signed (Ashford was seeking medical treatment),
the fact that this was a preprinted form, the fine print used, and
the captions on the page and paragraph which do not disclose
that there was an agreement to pay attorney’s fees contained
therein.
[¶32.] In short, even if this Court holds the “Consent Form” does not
constitute “other evidence of debt,” we should affirm the circuit court because the
form’s provision providing for attorney’s fees was not negotiated between the
parties. In which case, the decision of the circuit court was right even if the
majority opinion now concludes it was based on the wrong reason.
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