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Stamford Hospital v. Schwartz

Court of Appeals of Connecticut

May 21, 2019


          Argued February 4, 2019

         Procedural History

         Action to collect a debt, and for other relief, brought to the Superior Court in the judicial district of Stamford-Norwalk, where the matter was referred to an attorney trial referee, who filed a finding of facts and recommended judgment for the plaintiff; thereafter, the trial court, A. William Mottolese, judge trial referee, rendered judgment for the plaintiff; subsequently, the attorney trial referee filed a supplemental memorandum of decision; thereafter, the court granted the plaintiff's motions for a special finding of bad faith and for attorney's fees and awarded the plaintiff attorney's fees, and the defendants appealed to this court. Affirmed.

          Chaim T. Schwartz, self-represented, with whom, on the brief, was Rena E. Gelb, self-represented, the appellants (defendants).

          Vimala Ruszkowski, with whom, on the brief, were Eric J. Stockman and Simon I. Allentuch, for the appellee (plaintiff).

          Lavine, Prescott and Elgo, Js.


          LAVINE, J.

         This appeal arises from the defendant parents' refusal to pay for medical care and treatment rendered to their minor child by the plaintiff hospital and the transparently disingenuous machinations they employed in an effort to avoid liability for the debt. We affirm the judgment of the trial court.

         The self-represented defendants, Chaim Schwartz and Rena Gelb, [1] appeal from the judgment of the trial court rendered in favor of the plaintiff, Stamford Hospital. On appeal, the defendants have raised twenty-three claims challenging the underlying factual findings of the attorney trial referee (referee)[2] and the legal conclusions of the trial court. In response, the plaintiff argues that there are only two issues relevant to the appeal: were the defendants indebted to the plaintiff and did they exhibit bad faith in defense of the action. We agree with the plaintiff that the judgment should be affirmed.

         The following facts, as found by the referee, the court's legal conclusions, and the procedural history are relevant to our resolution of the defendants' appeal. The plaintiff commenced the present action against the defendants on January 21, 2015. In count one of its two count complaint, the plaintiff alleged that, at the request of the defendants, it provided medical services to their minor child from March 5 to March 6, 2013. The child resided in the defendants' home, and, therefore, pursuant to General Statutes § 46b-37 (b), [3] the defendants are liable for the cost of the medical services rendered by the plaintiff. The plaintiff billed the defendants for the services it provided to the child, the reasonable value of which was $14, 051.99. Despite having made demand on the defendants for payment, a balance of $8076.25 remained due and owing, which the defendants have refused to pay.[4] In count two, the plaintiff realleged the allegations of count one and that Gelb had signed a patient authorization and agreement (authorization) in which she agreed to pay the plaintiff for the services it rendered to the child plus the costs of collection, including attorney's fees. Despite having made demand on Gelb, she refused to pay the balance of $8076.25. In its prayer for relief, the plaintiff sought money damages, reasonable attorney's fees and costs, and statutory prejudgment and postjudgment interest. On May 12, 2015, the defendants filed amended answers denying the material allegations of the complaint, including that the defendants were the child's parents, and each pleaded fourteen identical special defenses, including accord and satisfaction.

         The parties tried the case to the referee pursuant to General Statutes § 52-549[5] and Practice Book § 23-53.[6]The referee issued a memorandum of decision on October 5, 2016, in which he found the following facts. On March 5, 2014, Gelb took the child to the hospital with symptoms of a stomach virus and because the child had had a seizure.[7] The child was admitted overnight during which time a series of tests were performed that resulted in costs of which $8076.25 remained due. The defendants contend that they are not responsible for the outstanding medical costs on the basis of theories such as accord and satisfaction, lack of notice, lack of need for the services rendered, fair and reasonable value of the services rendered, lack of disclosure of the risks and costs, and the parental liability for the costs of care for a minor child.

         The referee found the testimony of the plaintiff's witnesses to be overwhelming with detail regarding the services rendered and their cost, including the medical and insurance review of the costs assessed to the defendants. According to Letitia Borras, a pediatrician, the medical treatment provided was necessary and performed as a standard course of action given the symptoms with which the child presented. The procedures were reviewed with Gelb, who did not object to them. According to Cecelia Rasines, the plaintiff's billing rates are audited and determined by the defendants' insurer and are compared with rates charged for similar treatment by other medical institutions. Nurse auditors audited the defendants' bill by comparing the billing rates and services rendered to the medical records and found the billing statement was accurate.[8]

         The defendants both testified. When counsel for the plaintiff questioned Gelb about her responsibility to pay for the services rendered to her child, Gelb responded that she was not certain that she was the child's biological mother because, although she had given birth, she was not with the child constantly throughout her maternity stay. She, therefore, could not confirm that the child she took home was, in fact, the child to whom she had given birth. Thereafter, the referee questioned Gelb whether her prior testimony regarding her uncertainty as to whether she was the child's biological mother was truthful. The referee found that ‘‘Gelb admitted lying on the witness stand and committing perjury, stating that the minor child is in fact her biological child and that she only testified of her uncertainty as a method of assisting both of the defendants against the plaintiff's claims.''

         As to the child's medical care, Gelb testified that she had not consented to certain procedures before they were performed, but she admitted that the child's pediatrician explained the procedures to her, including the need for a computerized axial tomography scan given the child's seizures. Gelb agreed to the plan and signed an authorization for the medical procedures and agreed to be responsible for costs not paid by insurance. Gelb claimed that she signed the authorization while she was under duress in the plaintiff's emergency department. The plaintiff placed into evidence documents Gelb had signed for the services rendered to the child in the present matter and for the maternity services the plaintiff had provided to her when her children were born. Gelb admitted to having signed each of the documents that evidenced her acceptance of responsibility for the child.[9]

         Following some initial equivocation, Schwartz too admitted that he is the child's biological father and that he had no reason to believe that the child is not his. He recognized his responsibility to pay for the costs associated with the medical services provided to the child. Schwartz personally had applied for the insurance plan that was used to pay the plaintiff. He admitted that he was responsible for paying the insurance deductible and that he was aware of the amount of the deductible.

         The defendants did not pay for the medical services rendered to the child because they claimed the services were not necessary. They sent a letter to the plaintiff disputing its bill and to the state Department of Public Health (department). Schwartz received a telephone call from someone at the department advising him that the department had performed a full investigation and ‘‘ ‘everything was found to be [okay].' '' According to Schwartz, the present case was not the first billing dispute in which he has been involved. In other instances in which he did not pay, the matter remained in collection for a period of time, and then the business ‘‘simply [wrote] it off.'' He did not think that the present matter would result in litigation.

         With respect to their special defense of accord and satisfaction, the defendants put three documents into evidence. The documents demonstrate that they had paid $112.48 toward the outstanding balance they owed the plaintiff. They sent the plaintiff a correspondence with the payment, stating that the amount was in full satisfaction of the outstanding balance. The defendants argued that by accepting the payment, the plaintiff forgave the remaining balance due under the law of accord and satisfaction.

         The referee set out the relevant provisions of General Statutes § 42a-3-311 titled ‘‘Accord and satisfaction by use of instrument''[10] and analyzed the evidence. The plaintiff's billing statement indicated that payments were to be mailed to P.O. Box 120048, Stamford, and that correspondence regarding financial options was to be mailed to P.O. Box 9317, Stamford. The defendants mailed both their payment and correspondence regarding accord and satisfaction to the payment address at P.O. Box 120048. Rasines explained that payments mailed to P.O. Box 120048 do not go to the plaintiff, but, instead, go to a lock box at a Wells Fargo bank. None of the plaintiff's personnel, therefore, would have seen the payment or the defendants' correspondence. Furthermore, on May 12, 2015, more than ninety days after they had filed their original answers and special defenses, the defendants amended their answers and added special defenses of accord and satisfaction. According to Schwartz, the defendants purposely waited more than ninety days before amending their answers to include the accord and satisfaction special defenses, presumably to avoid giving the plaintiff notice of the defense and an opportunity to conform to § 42a-3-311 (c) (2).[11]

         On the basis of his factual findings, the referee concluded that the plaintiff had established that there was no legitimate basis for the defendants to fail to pay the plaintiff the balance of the moneys owed for the services rendered to the child. The referee recognized that the trier of fact may accept or deny all or part of any testimony from a witness. He found that Gelb's perjured testimony and her subsequent admission of the same, degraded her testimony. The referee was ‘‘strained to accept any testimony provided by either defendant as truthful, '' as both of the defendants admitted to lies and deceitful actions under the guise of trial strategy or their lack of knowledge of trial procedure. As to the defendants' claim regarding the legitimacy and necessity of the medical services rendered to the child, the referee found that the defendants had failed to produce any admissible evidence that contradicted the plaintiff's evidence. The referee, therefore, found the defendants' defenses to be disingenuous.

         According to the referee, the defendants also failed to establish the requirements of accord and satisfaction under § 42a-3-311. The ninety day requirement of § 42a-3-311 (c) (2) passed only by virtue of the defendants' purposefully deceitful tactics during the pleading stage of the litigation, and the defendants were perhaps calculated when they made the payment itself. The plaintiff's billing statement set forth two distinct addresses to be used for payments and communications. Because the defendants failed to send their communication to the proper address, the plaintiff never received the alleged accord and satisfaction notice. The referee found that the plaintiff had established that, under § 46b-37 (b), no legitimate basis existed for the defendants' failure to pay the moneys they owed the plaintiff.

         The referee considered the plaintiff's request for statutory prejudgment and postjudgment interest. General Statutes § 37-3a (b) provides: ‘‘In the case of debt arising out of services provided at a hospital, prejudgment and postjudgment interest shall be no more than five percent per year. The awarding of interest in such cases is discretionary.'' The plaintiff provided the defendants with a billing statement dated June 19, 2014, in the amount of $8076.25, and the defendants paid only $112.48 of that amount. A net balance of $7963.77 remains due and owing the plaintiff. Pursuant to § 37-3a (b), the balance of $7963.77 is subject to statutory prejudgment and postjudgment interest from June 19, 2014, until the balance is paid in full at a rate of 5 percent per year. The referee reserved the plaintiff's request for attorney's fees and costs to be heard by the trial court after a judgment was rendered on the substantive issue.

         The defendants filed an objection to the referee's memorandum of decision, to which the plaintiff responded. The trial court held a hearing on the defendants' objection on January 4, 2017, and issued a memorandum of decision on January 19, 2017.

         The court first addressed the defendants' challenge to the referee's jurisdiction. The defendants argued that when they incurred the debt, it was indefinite as to amount because neither defendant knew the cost of the plaintiff's services, and, therefore, the referee lacked jurisdiction to render a decision. The plaintiff countered that neither § 52-549n nor Practice Book § 23-58 requires a definite amount be included within the agreement between the parties; all that is necessary is that the complaint seek a definite sum on the basis of the agreement.

         The court explained that referees have jurisdiction over claims for unpaid hospital services. Section 52-549n confers jurisdiction to referees to act in a contract action when the Superior Court refers the matter to the referee pursuant to certain statutory criteria. A claim may be referred to a referee if the claim is predicated on a sum of money that is ‘‘capable of reduction to certainty.'' (Internal quotation marks omitted.) Housing Authority v. Melvin, 12 Conn.App. 711, 715, 533 A.2d 1231 (1987), cert. denied, 207 Conn. 804, 540 A.2d 74 (1988).

         The court recognized that our Supreme Court has acknowledged the special nature of a contract between a medical provider and the parents of a minor child. ‘‘[W]hen a medical service provider renders necessary medical care to an injured minor, two contracts arise: the primary contract between the provider and the minor's parents; and an implied in law contract, between the provider and the minor himself. The primary contract between the provider and the parents is based on the parents' duty to pay for their children's necessary expenses, under both common law and statute. Such contracts, where not express, may be implied in fact and generally arise both from the parties' conduct and their reasonable expectations.'' (Footnotes omitted.) Yale Diagnostic Radiology v. Estate of Fountain, 267 Conn. 351, 359, 838 A.2d 179 (2004). The court, therefore, concluded that the referee had jurisdiction to adjudicate the present case.

         The court noted the law controlling its review of the referee's decision. ‘‘Attorney [fact finders] are empowered to hear and decide issues of fact.'' (Internal quotation marks omitted.) Beucler v. Lloyd, 83 Conn.App. 731, 735, 851 A.2d 358 (2004), appeal dismissed, 273 Conn. 475, 870 A.2d 468 (2005). In a contract action, findings of fact should be overturned only when they are clearly erroneous. See Pomarico v. Gary Construction, Inc., 5 Conn.App. 106, 112, 497 A.2d 70, cert. denied, 197 Conn. 816, 499 A.2d 1336 (1985). The court reviewed the record and found that the referee's numerous findings of fact were amply supported by the evidence and were not clearly erroneous, and that the principles of law that the referee applied to those facts were legally and logically correct.

         As to credibility, the court noted the referee's findings with respect to the testimony of the witnesses and that the referee was strained to accept any testimony from the defendants as truthful. The court recognized that a finder of fact is the sole arbiter of the credibility of witnesses and the weight to afford their testimony. See, e.g., Cadle Co. v. D'Addario, 268 Conn. 441, 462, 844 A.2d 836 (2004).

         The court observed the defendants' exceptional acumen in researching the law and fashioning legal arguments, but found that they had ‘‘overlooked'' Connecticut's presumption of legitimacy rule, which provides that a child born in wedlock is presumed to be the issue of the mother and her husband. See Weidenbacher v. Duclos, 234 Conn. 51, 63, 661 A.2d 988 (1995). Through their testimony, the defendants impermissibly had attempted to shift the burden of proof of the child's parentage to the plaintiff. The court, therefore, concluded that the referee had ample grounds to disbelieve the defendants' testimony.

         Turning to the defendants' special defenses of accord and satisfaction, the court concluded that the referee correctly determined that the defendants' tender of a check in the amount of $112.48 accompanied by a correspondence stating that it was payment in full satisfaction of the plaintiff's invoice of $8076.25 was not an accord and satisfaction for two reasons. First, the defendants intentionally sent the check and correspondence to an address that the plaintiff's billing statement specified was for payment, rather than to an address specified for correspondence. As a result, the plaintiff's personnel never saw the correspondence. Second, the defendants acted deceitfully when, during the pleading stage of the litigation, they waited more than ninety days as specified in § 42a-3-311 (c) (2) to raise the special defense of accord and satisfaction in their amended answers dated May 11, 2015. See footnote 11 of this opinion.

         Given the referee's characterization of the defendants' conduct as deceitful, the court identified additional support for the referee's rejection of the defendants' accord and satisfaction defense. The threshold requirement of § 42a-3-311 is that the tender of the check must be made in good faith. Uniform Commercial Code comment (4) to the statute states: ‘‘Good faith in subsection (a) (i) is defined as not only honesty in fact, but also the observance of reasonable commercial standards and fair dealing.'' (Internal quotation marks omitted.) General Statutes Annotated § 42a-3-311, comment (4) (West 2009).[12] The amount the defendants tendered, $112.48, represents 1.39 percent of the debt they owed.

         The court made the following observations regarding bad faith. In Connecticut bad faith is defined as the absence of good faith.[13] ‘‘Bad faith in general implies both actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, and not prompted by an honest mistake as to one's rights or duties, but by some interest or sinister motive. . . . Bad faith means more than mere negligence, it involves a dishonest purpose.'' (Citation omitted; internal quotation marks omitted.) Habetz v. Condon, 224 Conn. 231, 237, 618 A.2d 501 (1992). ‘‘It is the burden of the party asserting the lack of good faith to establish its existence and whether that burden has been satisfied in a particular case is a question of fact.'' (Internal quotation marks omitted.) Kronberg Bros., Inc. v. Steele, 72 Conn.App. 53, 63, 804 A.2d 239, cert. denied, 262 Conn. 912, 810 A.2d 277 (2002). ‘‘Courts do not generally find contracts unconscionable where the parties are business per-sons.'' Emlee Equipment Leasing Corp. v. Waterbury Transmission, Inc., 31 Conn.App. 455, 464, 626 A.2d 307 (1993).

         In the present case, the court stated that both of the defendants hold graduate business degrees and are commercially sophisticated. Regardless of the definition of bad faith, the court found that the defendants acted in bad faith in tendering $112.48 to the plaintiff and, therefore, are not entitled to the benefit of accord and satisfaction conferred by § 42a-3-311.

         The court next addressed the defendants' claim that the authorization was invalid because it was an ‘‘unenforceable adhesion contract.'' The court again noted the controlling legal principle. The question of unconscionability is one of law to be decided by the court on the basis of all the facts and circumstances. Iamartino v. Avallone, 2 Conn.App. 119, 125, 477 A.2d 124, cert. denied, 194 Conn. 802, 478 A.2d 1025 (1984). The court noted that ‘‘[t]he most salient feature [of adhesion contracts] is that they are not subject to the normal bargaining process of ordinary contracts, and that they tend to involve a standard form contract prepared by one party, to be signed by the party in a weaker position, [usually] a consumer, who has little choice about the terms . . . .'' (Internal quotation marks omitted.) Rear-don v. Windswept Farm, LLC, 280 Conn. 153, 162-63, 905 A.2d 1156 (2006). The classic definition of an unconscionable contract is one which no person not under delusion would make, and which no fair and honest person would accept. Smith v. Mitsubishe Motors Credit of America, Inc., 247 Conn. 343, 349, 721 A.2d 1187 (1998). This definition is divided ‘‘into two aspects of unconscionability, one procedural and the other substantive, the first intended to prevent unfair surprise and the other intended to prevent oppression.'' Id.

         The court explained that in Connecticut, the amount that a hospital may bill for a particular service is controlled by the ‘‘pricemaster, '' citing to chapters 368z and 368aaof the General Statutes. The rates that the plaintiff may have charged the defendants for the services rendered to their child were, thus, available for public inspection. General Statutes § 19a-681 (c) imposes a severe penalty on a hospital for deviation from the ‘‘pricemaster.'' The court concluded that, although it is arguable whether the authorization Gelb signed is procedurally unconscionable, the element of unfair surprise was not present because the pricemaster was publicly available. The pricemaster rates are based on a national database, and there are severe consequences for a hospital if it exceeds those rates. The defendants offered no evidence of comparable rates for the same services rendered at other hospitals. The court concluded, therefore, that there was no basis on which to find that the authorization was substantively unconscionable.

         With respect to Schwartz' special defense that he was not a signatory to the authorization, the court next determined that Schwartz was liable under the authorization pursuant to § 46b-37, regardless of whether he signed the authorization. Section 46b-37 provides in relevant part: ‘‘(b) Notwithstanding the provisions of subsection (a) of this section, it shall be the joint duty of each spouse to support his or her family, and both shall be liable for: (1) The reasonable and necessary services of a physician or dentist; (2) hospital expenses rendered the husband or wife or minor child while residing in the family of his or her parents . . . .'' Accordingly, the court found that the plaintiff had proved that the defendants had breached the authorization as alleged in count two of the complaint.

         In summary, the court stated that it had addressed the remainder of the defendants' fourteen special defenses implicitly in its foregoing analysis or the defenses were otherwise unmeritorious. It rendered judgment in favor of the plaintiff in the amount of $7963.77. The court thereafter found that it was fair and equitable to award the plaintiff prejudgment and postjudgment interest at the rate of 5 percent from June 19, 2014, the date the plaintiff provided the defendants with a billing statement.

         With respect to attorney's fees, the court issued an order permitting the plaintiff to file an itemized affidavit of attorney's fees and the defendants to object, if they wished. Thereafter, the plaintiff filed a motion for a special finding that the denials and defenses pleaded by the defendants were without merit and not brought or asserted in good faith. See General Statutes § 52-226 (a). It also filed a motion for double costs and reasonable counsel fees pursuant to General Statutes § 52-245[14] and a motion for attorney's fees on the basis of the defendants' bad faith. It submitted the affidavit of Vimala B. Ruszkowski, its trial counsel, attesting to attorney's fees of $34, 082.20 and costs of $2059.64. The defendants objected to each of the plaintiff's motions and request for attorney's fees.

         The court responded to the plaintiff's motion seeking a finding of bad faith, on April 13, 2017, stating that it had found bad faith as a matter of law in its decision regarding the defendants' special defenses of accord and satisfaction, and remanded the case to the referee for a finding of whether any other acts of either or both defendants were made in bad faith and, if so, to identify those acts with particularity.[15] On May 30, 2017, the referee submitted a supplemental memorandum of decision.

         The referee identified the special defenses asserted by the defendants and found that all of them were pleaded in bad faith. The referee iterated his findings regarding the defendants' credibility, which alone gave rise to an overall finding of bad faith. Nonetheless, the referee found that specific evidence of bad faith regarding the special defenses was more than abundant at trial so as to affirm his overall finding.

         With respect to special defenses one, three, four, five, seven, nine, ten, and eleven, [16] the referee found that prior to the onset of the litigation, the plaintiff took considerable measures to assist the defendants with their concerns regarding the bill, explaining how medical billing is calculated, and describing state oversight and regulations. The defendants were advised that the department had investigated the matter and found the bill to be accurate. The defendants presented no contrary evidence. The referee, therefore, concluded that the special defenses lacked merit and were not pleaded in good faith.

         Special defenses two and six alleged, respectively, that the plaintiff's agents rendered one or more unnecessary and/or harmful services to the child for which the defendants should not be billed and that there was no proof that the plaintiff's agents performed the service for which it had billed. The referee found that there was abundant evidence that Gelb met with the child's pediatrician and discussed the treatment being provided. Gelb trusted the child's pediatrician and no physician has ever told Gelb that the care and treatment rendered to the child were unnecessary. Gelb never complained about the treatment prior to receiving the plaintiff's bill. The defendants, therefore, had no good faith basis to plead special defenses two and six, and as such, the referee found that the defenses were pursued in bad faith.

         The referee further found that special defenses twelve, thirteen, and fourteen[17] were raised and pursued without any good faith basis. Both defendants were aware of their financial responsibilities for the child. Gelb identified her signature on the authorization. Schwartz made the arrangements for his family's medical insurance and knew what portion of the bill insurance would pay and what portion he would have to pay. The defendants' testimony was in sharp contrast to the special ...

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