Catherine M. BONDANZA et al., Plaintiffs and Appellants, v. PENINSULA HOSPITAL et al., Defendants and Respondents.
Plaintiffs, who are respectively a patient and two parents of patients treated at defendant hospital, have appealed from an order denying their motions to certify a class action and for summary judgment, and from a judgment, entered following the granting of the motion of defendant hospital and its collection agency for summary judgment.1 That judgment granted plaintiffs some partial relief. For reasons set forth below we conclude that the trial court did not err in denying the plaintiffs' motion for certification of the action as a class action. They received all the relief to which they were entitled when the court, in granting the defendants' motion for summary judgment, provided that the defendants were each permanently enjoined and restrained from imposing upon or collecting, directly or indirectly, any collection fee or charge from any of plaintiffs.
By their amended complaint for declaratory and equitable relief the plaintiffs sued on behalf of themselves and all other individuals who, in the three years preceding the filing of the complaint, had signed form agreements with the hospital requiring them to pay reasonable collection costs if their medical bills were turned over to a collection agency, and who were assessed collection costs equal to one-third or greater of the amount due on their medical bills. They sought to enjoin the hospital from using the form of admission agreement reviewed below.2 The plaintiffs alleged, and the record establishes, that each signed an agreement, providing in pertinent part as follows: “FINANCIAL AGREEMENT: In consideration of the services to be rendered to the patient, he will be individually obligated himself and the patient (if he is acting as an agent of the patient) to pay the account of the patient in accordance with the current rates of the hospital. The account will be due and payable in full on the date on which the patient is discharged from the hospital, and time is of the essence with respect to such due date. Should the account be referred to a collection agency or an attorney for collection, the undersigned shall pay reasonable attorney's fees and collection expense.” None of the plaintiffs made any payment upon the discharge of the patient who was treated, and each was ultimately billed for a sum representing the balance due plus one-third of that sum as a collection fee. In their first cause of action plaintiffs alleged that the imposition of the collection charge was an unfair business practice under the provisions of section 3369 of the Civil Code. In their next three causes of actions plaintiffs contended that the collection costs were void and unenforceable because based on a liquidated damages provision within the meaning of sections 1670 and 1671 of the Civil Code, because based on a forfeiture provision within the meaning of section 3275 of the Civil Code, and because the provision for payment of such costs imposed, in an adhesion contract, an unreasonable penalty that was contrary to the public policy of this state. A fifth cause of action sought a declaration concerning the respective rights and obligations of plaintiffs and the hospital and its collection agency, and the sixth cause of action sought equitable relief from attempts to impose the collection fees on plaintiffs.
The facts of the matter were presented to the trial court through the defendant hospital's answers to interrogatories, the affidavits of plaintiffs, a so-called “affidavit” of the attorney for plaintiffs, which appears to marshall the facts in support of certification as a class action, and hospital billing records admitted by stipulation. It appears that the collection procedure normally followed by the hospital was as set forth in the margin.3 By arrangement with the collection agency the hospital, as evidenced by a listing sheet assigning the claims for collection, agreed to pay the collection agency a commission of 331/2 percent of any amount collected, up to that percentage of the total amount due when the account was assigned. Payment was made by the hospital subsequent to the collection of any such assigned account.
With respect to the particular plaintiffs involved in this case the record reflects as follows:
Plaintiff Bondanza entered the hospital on September 18, 1973. She signed the form agreement because she thought that she was required to do so in order to be admitted. She was discharged from the hospital on September 23, 1973. On that date she incurred a debt to the hospital of $477.36. On December 3, 1973, Ms. Bondanza filled out and returned forms which the hospital had sent her in order that the hospital could bill her insurer, John Hancock. On December 18, 1973, Ms. Bondanza's physician sent the hospital a copy of a letter that he had sent to Blue Cross, Ms. Bondanza's other insurer, contesting Blue Cross' preliminary determination that her stay in the hospital was not covered by the insurance. From the date of discharge until March 27, 1974, the hospital contacted Ms. Bondanza by telephone four times and wrote her eight times, including an itemized statement mailed three days after discharge and five further itemized statements mailed monthly, in the attempt to collect the debt. The remaining two letters sent by the hospital to Ms. Bondanza were form letters bearing business headings of the defendant collection agency under the name “Credit Bureau,” (the two “pre-collection assignment letters” referred to in “step 5” of the hospital collection procedure outlined above in footnote 3). In February, Ms. Bondanza telephoned the hospital to explain that she was having difficulty in obtaining payments from her insurers and that, her sole income being $247 a month from social security and SSI, she was personally unable to pay the debt. On March 27, 1974, the hospital assigned the debt to the collection agency, as its agent for collection. On May 9, 1974, Ms. Bondanza's insurer, John Hancock, paid the hospital $410.36 on her account. On May 14, 1974, Ms. Bondanza wrote the hospital stating that she would pay the balance as soon as possible. About three weeks thereafter, she received a “Final Notice” from the collection agency stating that she owed the hospital $242.80. When she telephoned the collection agency she was told that $67 of this amount represented the balance of the medical bill, while $175.80 represented collection costs and interest. On July 1, 1974, Ms. Bondanza sent $67 either to the collection agency or to the hospital. On or about July 18, 1974, she received another letter from the collection agency stating that she owed $175.80. The hospital paid the collection agency $159.12 pursuant to their agreement, that is 331/3 percent of $477.36, the amount paid after assignment of the debt. When this action was brought, the hospital claimed that $159.12 remained due and owing for the collection costs on Ms. Bondanza's account, but alleged that, due to the hospital's policy of not pursuing such charges after payment in full of the outstanding medical bills, no action had been or would be taken to collect that amount.
Plaintiff Arrellano incurred a debt of $281.30 to the hospital on August 5, 1973, for medical services rendered to his daughter. He had signed the form agreement upon her admission. From the date of discharge until February 26, 1974, the hospital contacted Arrellano once in person and wrote him eight times, including an itemized statement mailed three days after discharge, and five further itemized statements mailed monthly. The remaining two letters sent by the hospital to Arrellano were form letters bearing business headings of the collection agency. In response to one of these letters, Arrellano, who had been unemployed since November, told the hospital that he would attempt to obtain payment from his insurer. On February 26, 1974, the hospital assigned the debt to the collection agency as its agent for collection. On or about June 1974, Arrellano explained to representatives of the collection agency that the forms which he had sent to his insurer had been lost, and that he and his physician had filled out new forms. In August 1974, Arrellano received a notice from the collection agency stating that he owed “$545.34” comprising $281.30 for medical services and “$107.34” in collection costs and interest. When this action was brought, the hospital claimed that $281.30 for medical services and $93.76 (331/3 percent of $281.30) were due and owing from Arrellano.
Plaintiff Rivera incurred a debt of $577.34 to the hospital on January 4, 1974, for medical services rendered to his sons. He had signed the form agreement upon their admission because he thought that he was required to do so in order that they might be admitted. From the date of discharge until July 23, 1974, the hospital contacted Rivera twice by telephone and wrote him seven times, including an itemized statement four days after discharge, and four further itemized statements mailed monthly. The two remaining letters sent by the hospital to Rivera were form letters bearing business headings of the collection agency. In January and February 1974, Rivera's insurer paid the hospital $472.94, and in March he received a bill for the remaining $104.40. In April 1974, Rivera suffered a stroke and became dependent on disability payments and aid to family with dependent children, all of which he explained when the hospital telephoned regarding his bill. On or about April 20, 1974, Rivera sent the hospital $26, leaving a balance due of $78.40. On July 26, 1974, the hospital assigned the debt to the collection agency as its agent for collection. In June and July of 1974, Rivera received telephone calls from persons identifying themselves as representatives of the collection agency, and requesting payment of $107.29 claimed owing to the hospital. To these persons, and again to the hospital business office in July 1974, Rivera explained his financial situation. In November 1974, he received a notice from the collection agency stating that he owed the hospital $107.29, of which $78.40 represented the balance due on the medical bill, and $28.29 collection costs and interest. When this action was brought the hospital claimed that (a further payment of $26 having apparently been made), $52.40 was due and owing from Rivera for medical services and $17.47 (331/3 percent of $52.40) for collection costs.
Other facts bearing on the issue of certification as a class action are set forth in connection with part IV below.
The trial court was apparently concerned with the failure of the admission agreement to give notice of the amount of the contingent collection charges,4 and also the manner in which collection charges were imposed despite the fact the debtor was not recalcitrant in failing to make payment, and had advised the hospital of his inability to pay. (See paragraph “b” of prayer as amended in footnote 2 above.) It did restrain collection of the charges from each of the plaintiffs in its final judgment.
Plaintiffs contend that the court erred in denying their motion for summary judgment, and in granting that of the defendants, because the collection expense provision is a void liquidated damage provision and/or a void penalty provision, and therefore an unfair business practice under the former provisions of section 3369 of the Civil Code.5 Examination of the record reflects that the provision formerly contained in the admission agreement (cf. fn. 4) is itself innocuous, that it can only be attacked in connection with the manner in which it had been applied, and that, so far as it was improperly applied against the plaintiffs, they have received all of the relief to which they are entitled.
In Barquis v. Merchants Collection Assn. (1972) 7 Cal.3d 94, 101 Cal.Rptr. 745, 496 P.2d 817, the court made it clear that the scope of the provisions formerly found in section 3369 extended to more than practices between competing businesses. After alluding to Congress' concern for consumers by amendment of federal law, the court continued: “Section 3369's parallel broad proscription of ‘unlawful (or) unfair . . . business practice(s)’ illustrates no less a concern for wronged consumers. Moreover, the section demonstrates a clear design to protect consumers as well as competitors by its final clause, permitting inter alia, any member of the public to sue on his own behalf or on behalf of the public generally. If the Legislature had been solely concerned with protection against the evil of unfair competitive advantage, it would certainly have more narrowly circumscribed the class of persons permitted to institute such actions.” (7 Cal.3d at p. 110, fn. omitted, 101 Cal.Rptr. at p. 756, 496 P.2d at p. 828. See also, American Philatelic Soc. v. Clairbourne (1935) 3 Cal.2d 689, 698, 46 P.2d 135; Payne v. United California Bank (1972) 23 Cal.App.3d 850, 855-856, 100 Cal.Rptr. 672; People ex rel. Mosk v. National Research Co. of Cal. (1962) 201 Cal.App.2d 765, 771, 20 Cal.Rptr. 516; and Athens Lodge No. 70 v. Wilson (1953) 117 Cal.App.2d 322, 325, 255 P.2d 482.)
In Barquis the court found that a pattern of repeated violations of specific statutory provisions of both the Code of Civil Procedure and the Civil Code constituted “unlawful” conduct which could be enjoined as a business practice (7 Cal.3d at p. 113, 101 Cal.Rptr. 745, 496 P.2d 817). The opinion also recognizes, “The language of section 3369, however, does not limit its coverage to such ‘deceptive’ practices (as defraud consumers), but instead explicitly extends to any ‘unlawful, unfair or deceptive business practice’; the Legislature, in our view, intended by this sweeping language to permit tribunals to enjoin on-going wrongful business conduct in whatever context such activity might occur.” (Id., p. 111, 101 Cal.Rptr., p. 757, 496 P.2d, p. 829. See also, American Philatelic Soc. v. Clairbourne, supra, 3 Cal.2d 689, 698-699, 46 P.2d 135.) In the latter case the court stated: “When a scheme is evolved which on its face violates the fundamental rules of honesty and fair dealing, a court of equity is not impotent to frustrate its consummation because the scheme is an original one.” (3 Cal.2d at pp. 698-699, 46 P.2d at p. 140.)
That the protection afforded the consuming public extends to delinquent debtors is evidenced by both the Barquis and National Research Co. cases, supra. We further note that a right to injunctive relief may exist even though a class action will not lie for monetary relief. (See Chern v. Bank of America (1976) 15 Cal.3d 866, 874-875 and 875-877, 127 Cal.Rptr. 110, 544 P.2d 1310. Note, People v. Pacific Land Research Co. (1977) 20 Cal.3d 10, 16-20, 141 Cal.Rptr. 20, 569 P.2d 125.) In fact plaintiffs acknowledge that if this court finds they are entitled to relief under the provisions formerly found in section 3369, it need not consider the question of whether the trial court erred in denying them the right to pursue a class action.
Before examining plaintiffs' right to relief under the foregoing principles it is important to establish just what business practice is to be reviewed. The amended complaint attacked the agreement itself because it “(a) does not specify the amount of the collection costs; (P) (b) does not specify the method of computation of the collection costs, although known in advance to defendants herein; and (P) (c) does not specify the length of time to elapse before the defendants will consider a medical bill to be in default.” (Cf. fn. 4 above.) The original prayer of the amended complaint, however, did not attack the agreement itself, but merely the collection of alleged punitive sums under its terms. As ultimately amended the prayer referred to the form agreement as providing the basis for the improper charges (see fn. 2 above).
The form involved purports to create an obligation to “pay reasonable attorney's fees and collection expense.” No specific sum appears on the face of the agreement. It is well established that a provision to pay such fees and costs is valid. In fact since the adoption of the provisions of the Uniform Negotiable Instruments Law, the law has not only authorized such provisions, but has expressly ruled that a provision for the payment of such costs and fees on maturity or default will not destroy the negotiability of a promissory note. (See Cal.U.Com.Code, s 3106, subd. (1)(e); former Civ.Code, s 3083, subd. (5); Adolph Ramish, Inc. v. Woodruff (1934) 2 Cal.2d 190, 194-195, 40 P.2d 509; Anaheim Nat. Bank v. Dolph (1927) 201 Cal. 17, 20, 255 P. 184; and Pugh v. Dawson (1928) 95 Cal.App. 505, 513, 273 P. 39.)
Recent cases have examined the validity of provisions for late charges in instalment loans. In Garrett v. Coast & Southern Fed. Sav. & Loan Assn. (1973) 9 Cal.3d 731, 108 Cal.Rptr. 845, 511 P.2d 1197 (hereinafter Garrett ), the court reversed and remanded a case in which judgment had been entered following the sustaining of a demurrer to a complaint which sought to recover, in a class action, late charges, designated as “additional interest” computed at 2 percent per annum on the unpaid principal balance of the obligation (9 Cal.3d at p. 735, 108 Cal.Rptr. 845, 511 P.2d 1197). The court found that the charge was void when scrutinized under the provisions of sections 1670 and 1671 of the Civil Code, because it was not reasonably calculated to merely compensate the injured lender, and did not represent a reasonable endeavor to estimate a fair compensation for a loss which would be sustained on default in payment of an instalment. (Id., at p. 740, 108 Cal.Rptr. 845, 511 P.2d 1197. See also Clermont v. Secured Investment Corp. (1972) 25 Cal.App.3d 766, 769, 102 Cal.Rptr. 340.) The court in Garrett added, “We do not hold herein that merely because the late charge provision is void and thus cannot be used in determining the lender's damages, the borrower escapes unscathed. He remains liable for the actual damages resulting from his default. The lender's charges could be fairly measured by the period of time the money was wrongfully withheld plus the administrative costs reasonably related to collecting and accounting for a late payment. (See Farthing v. San Mateo Clinic (1956) 143 Cal.App.2d 385 . . . )” (9 Cal.3d at pp. 740-741, 108 Cal.Rptr. at pp. 851-852, 511 P.2d at pp. 1203-1204. See also Clermont v. Secured Investment Corp., supra, 25 Cal.App.3d at p. 771, 102 Cal.Rptr. 340.)
From the foregoing it is clear that there is nothing invalid in the terms of the agreement. The plaintiffs' right to relief, if any, must depend on some unlawful or unfair practice in the collection procedures used under the terms of the agreement.
We have seen the agreement itself does not purport to fix any certain amount of damages for failure to pay promptly. As the defendants point out, the plaintiffs' cause of action is predicated upon the practice of the hospital and the collection agency in demanding an additional one-third of the amount due when the amount is referred to the collection agency, because the contract between the two provides for a fee based on a one-third contingency basis. The result is that all delinquent obligations are assessed a collection fee measured by a percentage of the amount due, irrespective of the costs of collecting the individual account. Plaintiffs contend that if the hospital itself engaged in that practice it would be subject to attack.
Section 1670 of the Civil Code provided: “Every contract by which the amount of damage to be paid, or other compensation to be made, for a breach of obligation, is determined in anticipation thereof, is to that extent void, except as expressly provided in the next section.”6
In Pugh v. Dawson, supra, the note provided for the payment of the fees of an attorney of “ten percent on the amount then unpaid, if placed in the hands of an attorney for collection,” or if suit were commenced for enforcing payment. No question was raised as to the validity of that sum, which would be liquidated by computation (95 Cal.App. at p. 513, 273 P. 39). In Eastman v. Sunset Park Land Co. (1917) 35 Cal.App. 628, 170 P. 642, where the court similarly upheld a note providing for the payment of “such additional sum as the court may adjudge reasonable as attorney's fees” in the event of suit to collect the note, a distinction was made. The court, in answer to the contention that a fixed sum should have been used to make this note certain, stated as follows: “Even if the note had provided for attorney's fees in a stated sum, the amount would remain uncertain, since that would be only the maximum sum, and the court might allow only a smaller amount, if the sum stated in the note exceeded reasonable limits. This conclusion results from the fact that expenditures made for attorney fees in an action based upon a contract containing a stipulation for such fees are in the nature of special damages incidental to the breach of the contract and which, according to the terms of the contract, are to be compensated for in addition to recovery of the principal sum due. (Citation.) It cannot be said that from the nature of the case it would be impracticable or extremely difficult for the court, in the event of a breach of the contract and an action thereon, to fix the actual damage thus suffered by the holder of the note. Therefore an agreement attempting to determine the amount of such damage in anticipation of a breach of the obligation is not enforceable.” (35 Cal.App. at p. 630, 170 P. at p. 643.)
In similar vein, in Beckjord v. Slusher (1937) 22 Cal.App.2d 678, 72 P.2d 563, the court ruled that a provision in an indemnity bond, whereby the indemnitor undertook to indemnify the indemnitees, being the sheriff and the mortgagee of property attached by the indemnitor “of and from all and every damages, expenses, costs and charges, including all counsel fees for which (the indemnitees) may incur in consequence of the legal enforcement of the payment of the penalty of this bond,” only entitled the indemnitee to the reasonable value of the services actually performed, and that the sum which the indemnitee paid or agreed to pay his attorney was not conclusive evidence of the value of such services, but only an item of evidence of the reasonable value of such services. (22 Cal.App.2d at p. 682, 72 P.2d 563. See also Greenbach Bros., Inc. v. Burns (1966) 245 Cal.App.2d 767, 771, 54 Cal.Rptr. 143.)
The Garrett opinion laid down the following criteria in regard to late charges, “Late charges in home loan contracts are presumably imposed because borrowers fail to make timely payments of their obligations. Such charges serve a dual purpose: (1) they compensate the lender for its administrative expenses and the cost of money wrongfully withheld; and (2) they encourage the borrower to make timely future payments. Whether late charges represent a reasonable endeavor to estimate fair compensation depends upon the motivation and purpose in imposing such charges and their effect. If the sum extracted from the borrower is designed to exceed substantially the damages suffered by the lender, the provision for the additional sum, whatever its label, is an invalid attempt to impose a penalty inasmuch as its primary purpose is to compel prompt payment through the threat of imposition of charges bearing little or no relationship to the amount of the actual loss incurred by the lender. (Citations.)” (9 Cal.3d at pp. 739-740, fn. omitted, 108 Cal.Rptr. at pp. 850, 851, 511 P.2d at pp. 1202, 1203.)
From the foregoing we would conclude that the imposition in the original contract of an arbitrary sum to be paid the creditor on default, whether a stated figure, or computed as a percentage of the obligation due is proscribed by the provisions of section 1670 as construed in Garrett.
Generally the payment of interest is regarded as compensation for the wrongful withholding of money due under an express or implied obligation. (Civ.Code, s 3302. See Garrett, supra, 9 Cal.3d 731, 741, fn. 11, 108 Cal.Rptr. 845, 511 P.2d 1197.) Nevertheless, the cases referred to above which recognize the right to recover reasonable attorney's fees demonstrate that an obligee may contract with the obligor for the recovery from the obligor of the reasonable costs attendant to collecting the obligation. In Garrett, supra, that right was recognized in the quotation set forth above. (9 Cal.3d at pp. 740-741, 108 Cal.Rptr. 845, 511 P.2d 1197, part I-A above.)
It is obvious that it is impracticable or extremely difficult to fix the actual costs of collection of any particular delinquent account. The defendant hospital is apparently willing to absorb those costs up to a certain point in the collection process. (See fn. 3 above.) It is, therefore, unnecessary to examine the difficulties that might arise in allocating its general office collection expense to any particular delinquent account. The hospital contends that it is reasonable for it to contract for the collection of accounts which remain unpaid, and that since the collection agency imposes the 331/3 percent charge, it is likewise reasonable for the hospital to seek indemnity by authorizing the collection agency to demand its fee from the debtor. In other words, section 1670 is not applicable to it, because the actual damages are ascertainable and recoverable. There is some authority for the proposition that an agreement to pay attorney's fees or other collection expenses in the event of a breach, is an agreement to indemnify the creditor. (See, United States v. Reed (Mun.Ct.App., D.C.1942) 31 A.2d 673, 675-676; Jones v. First Nat. Bank (1973) 74 Colo. 140, 219 P. 780, 781; and Annotation, Attorneys' Fees Based on Percentage (1951) 17 A.L.R.2d 288, s 8, pp. 298-303.) Nevertheless in those authorities, on which defendants rely, and in this state, as we have seen above, an agreement to pay attorney's fees will not be enforced to the extent an obligee attempts to impose a fixed charge for such fees (see Eastman v. Sunset Park Land Co., supra, 35 Cal.App. 628, 630, 170 P. 642); nor can it be enforced for whatever sum the obligee and the attorney may agree upon (see Beckjord v. Slusher, supra, 22 Cal.App.2d 678, 682, 72 P.2d 563). It is only reasonable attorney's fees that may be allowed when the obligation involved is to pay a debt to the obligee. (See Annotation, supra, 17 A.L.R.2d s 10, pp. 307-311.) Different considerations may be involved when there is an obligation to reimburse and indemnify the obligee, arising from a failure to furnish a defense. (See Civ.Code, ss 2772 and 2778, subds. 3 and 5; and Arenson v. National Auto & Cas. Ins. Co. (1957) 48 Cal.2d 528, 537-540, 310 P.2d 961. Note, Ruth v. Lytton Sav. & Loan Assn. (1968) 266 Cal.App.2d 831, 844-845, 72 Cal.Rptr. 521.)
We then, in this case, must examine the charges of the collection agency. It must be assumed that the charges of the collection agency can be no lower than what is necessary to keep it in business. On the high side, insofar as it charges more than the traffic should bear, it leaves itself open to the threat of competition and regulation. From its nature the collection agency cannot apportion its charges to the actual expense of each individual collection. It must apportion all of its expenses, incurred in successfully or unsuccessfully attempting to collect delinquent accounts, for all of the creditors it serves, over those accounts which it actually collects. If it only charged the latter the actual costs of the individual collection, it would soon be out of business, as conversely would be the insurance company which returned all the premiums to those insureds who suffered no loss. We cannot say as a matter of law that the percentage fee is an unreasonable way for the collection agency to run its business. If reform is needed it should be through existing regulation, not by an attempt through the courts to examine the expenses incurred on behalf of the multitude of customers, which the form letters in this case indicates the collection agency serves, and the paying habits of those from who it attempts, successfully or unsuccessfully to collect.
Collection agencies are regulated by the provisions of chapter 8 (ss 6850-6956) of division 3 of the Business and Professions Code. The Director of Consumer Affairs is authorized to “establish and enforce such rules and regulations as may be reasonable or necessary . . . for the conduct of licensees and for the general enforcement of the various provisions of (the) chapter in the protection of the public.” (s 6863.) Article 10 (ss 6925-6949.2) provides for disciplinary action. Section 6947 defines prohibited acts, and provided and provides in pertinent part: “. . . (P) No licensee or employee shall: . . . (P) (i) (prior to Jan. 1, 1978 ‘(j)’; and originally and prior to November 23, 1970 ‘(k)’) Engage in any unfair or misleading practices or resort to any illegal means or methods of collection. . . .” (See also Civ.Code, tit. 1.6C (ss 1788-1788.32) of part 4 of division 3, the “Robbins-Rosenthal Fair Debt Collection Practices Act” as added by Stats.1977, ch. 907, s 1, effective Jan. 1, 1978.)
Under the authority conferred in him the Director has promulgated regulations (Cal.Admin.Code, tit. 16, ch. 7, ss 600-699.7) which include the following: “627. (a) Every licensee and its employees shall deal openly, fairly, and honestly in the conduct of the collection agency business. No licensee or employee shall engage in any unfair or misleading practices or resort to any oppressive, vindictive or illegal means or methods of collection. (P) (b) No licensee or employee shall collect or attempt to collect any interest or other charges, fees, or expenses incidental to the principal obligation unless such interest or incidental fees, charges, or expenses are legally chargeable against the debtor or have been judicially determined. . . .” (See also newly adopted Civ.Code, s 1788.13, subd. (f) and s 1788.14, subd. (b).)
In Opinion No. 60-210 (1961) 38 Ops.Cal.Atty.Gen. 195, the Attorney General opined that when the principal contract between the creditor and the debtor calls for the payment of reasonable costs of collection or words of similar import, proper costs of collection may be collected as determined by the basic fee arrangement between the collection agent and the creditor. The opinion states: “As long as this basic fee meets the test of reasonableness and is commensurate with the competitive rate in the community, then such a fee becomes the ‘cost of collection’ to the creditor and such an amount may properly be collected from the debtor. The purpose of such provisions in contracts is, of course, to make the creditor whole in case of default on the obligation necessitating a collection of the debt which may cause the creditor to incur certain costs. Therefore if costs of collection are properly due the creditor, the collector may collect such costs from the debtor as long as these ‘costs' are reasonable. (cf. section 628, title 16, Adm. Code.)” (38 Ops.Cal.Atty.Gen. at p. 198. See also, Opn. No. CV 73-271, 1974, 57 Ops.Cal.Atty.Gen. 293, 294.)
In the latter opinion it was concluded that the practice of demanding collection costs, amounting to 50 percent of the principal obligation, from defaulting debtors when it was known that courts would see this amount as excessive, constituted a violation of the foregoing regulations (57 Ops.Cal.Atty.Gen. at pp. 293-295. See also Czap v. Credit Bureau of Santa Clara Valley (1970) 7 Cal.App.3d 1, 6, 86 Cal.Rptr. 417.)
In this case there are no allegations or facts which endeavor to show that the collection agency's fees in general fail to meet the test of reasonableness, or are not commensurate with competitive rates in the community. The case is not predicated on the theory that there was a violation of section 6947 of the Business and Professions Code.
It would therefore appear that so far as the hospital is concerned, the charge comes within the “reasonable . . . collection expense” the obligor undertook to pay, and no liquidated damages are involved.
Notwithstanding the foregoing analysis plaintiffs contend that the agreement between the hospital and the patient, or the latter's guarantor, and the agreement between the hospital and the collection agency should be treated as a collective contract whereby the obligor becomes obligated to pay 331/3 percent of the balance due in the event of a failure to pay on the patient's discharge when subsequently the account is assigned for collection. (Cf. fn. 4 and part I-B.) In such a case a question would be raised as to whether the hospital and the agency collectively could collect all of the actual expenses of collection, whether successful or not, or only the costs incurred in collection from the solvent debtors. It should be noted none of the plaintiffs have ever paid or been subjected to suit for the alleged penalty.7
Passing that point, we note section 1671 created an exception to section 1670 in the following language: “The parties to a contract may agree therein upon an amount which shall be presumed to be the amount of damage sustained by a breach thereof, when, from the nature of the case, it would be impracticable or extremely difficult to fix the actual damage.” (See fn. 6.)
Before an obligation to pay a fixed percentage of the amount due as damages may be imposed, three criteria must be satisfied. First, the type of harm flowing from a breach must be difficult to ascertain; second, the bargaining process by which the parties agree to the clause must be a reasonable endeavor to estimate a fair compensation for the breach; and third, the amount of damages must compensate for the actual harm suffered. (See Garrett, supra, 9 Cal.3d 731, 738-739, 108 Cal.Rptr. 845, 511 P.2d 1197; United Sav. & Loan Assn. v. Reeder Dev. Corp. (1976) 57 Cal.App.3d 282, 297-299, 129 Cal.Rptr. 113; Clermont v. Secured Investment Corp., supra, 25 Cal.App.3d 766, 771, 102 Cal.Rptr. 340; and Farthing v. San Mateo Clinic (1956) 143 Cal.App.2d 385, 392-393, 299 P.2d 977.)
The impracticability of apportioning damages or collection costs on individual accounts was recognized in Garrett. There the court stated: “The instant case suggests the impracticability under certain circumstances of fixing actual damages when the amount thereof may be small but the cost of ascertaining the same may well be in excess of a reasonable sum agreed to in advance by the parties as fair compensation. We could not hold as violative of section 1671 a provision for liquidated damages where it is established that the measure of actual damages would be a comparatively small amount and that it would be economically impracticable in each instance of a default to require a lender to prove to the satisfaction of the borrower the actual damages by accounting procedures. If the test of impracticability is met the court should give effect to a liquidated damages provision resulting from the reasonable endeavors of the parties to fix a fair compensation.” (9 Cal.3d at pp. 741-742, fn. omitted, see also p. 739, fn. 7, 108 Cal.Rptr. at p. 852, 511 P.2d at p. 1204.)
If we assume it is impracticable administratively to allocate collection costs to each delinquent account, and that the costs assessed and collected reasonably compensate for the harm suffered, the procedure fails to show that there was any bargaining whereby the obligor and obligee made a reasonable endeavor to estimate a fair compensation for the breach at the 331/2 percent figure. That figure only occurs in the arrangement between the hospital and the collection agency. Although the latter cannot jointly defend the arrangement under section 1671, by the same token the plaintiffs' argument that the admission agreement is invalid must fail, because the costs imposed are not the result of that agreement, but of subsequent action by the hospital which is perfectly legal (part I-C above). “It is common knowledge that collection agencies pursue the policy of taking assignments of claims for the purpose of bringing action, and that the only interest the assignee has in the subject-matter is a percentage thereof as his compensation for doing those things ordinarily performed by an attorney at law.” (Koepple v. Morrison (1927) 84 Cal.App. 137, 140, 257 P. 590, 591.)
Plaintiffs correctly point out that the agreement signed on entrance to the hospital is an adhesion contract, which does not permit the signer to bargain about the “Financial Agreement” clause. (See Blank v. Borden (1974) 11 Cal.3d 963, 972, 115 Cal.Rptr. 31, 524 P.2d 127; Tunkl v. Regents of University of California (1963) 60 Cal.2d 92, 101-102, 32 Cal.Rptr. 33, 383 P.2d 441; and Steven v. Fidelity & Casualty Co. (1962) 58 Cal.2d 862, 882, 27 Cal.Rptr. 172, 377 P.2d 284.)
The foregoing principle does not bolster plaintiffs' case. The agreement with the hospital provides for the payment of “reasonable . . . collection expense.” There is nothing unfair about such a bargain, even though it is imposed with only the implied acquiescence of the obligor (part I-A above). The 331/3 percent is imposed without the obligor's consent, but it is fixed, from all that appears, not by agreement between the obligor and the hospital, but by agreement between the hospital and the collection agency on terms dictated by the open market for collection agencies (part I-C above.)
Plaintiffs assert that the collection charge is not a charge to compensate the hospital for harm directly flowing from the obligation to make timely payment. They contend that the obligor is being charged for an expense voluntarily incurred by the hospital because it prefers to have someone else do the business of collecting its accounts. They point out that the reasonableness of the charge must be evaluated as in the case of attorney's fees. It is true that the courts will interpret a clause for attorney's fees strictly against the party in the stronger bargaining position. (See Ecco-Phoenix Electric Corp. v. Howard J. White, Inc. (1969) 1 Cal.3d 266, 272-274, 81 Cal.Rptr. 849, 461 P.2d 33.) In fact one-sided attorney fee clauses have been condemned by decision (Coast Bank v. Holmes (1971) 19 Cal.App.3d 581, 596-597, 97 Cal.Rptr. 30) and statute (Civ.Code, s 1717).
There is a general policy against permitting one party to a contract to have complete discretion to put another party at a disadvantage. (See La Sala v. American Sav. & Loan Assn. (1971) 5 Cal.3d 864, 881-882, 97 Cal.Rptr. 849, 489 P.2d 1113; Hertzka & Knowles v. Salter (1970) 6 Cal.App.3d 325, 335, 86 Cal.Rptr. 23; and Akin v. Business Title Corp. (1968) 264 Cal.App.2d 153, 159, 70 Cal.Rptr. 287.)
The foregoing precedents do not establish plaintiffs' general claims. By obligating the obligor to pay reasonable collection costs, the hospital made it clear that it was not seeking to impose unreasonable costs. There is no decisional or statutory law which prohibits it from contracting with a collection agency to collect its accounts. There is no showing that the contract between the collection agency and the hospital is unreasonable. If there were anything unreasonable in this case, it was in referring the accounts to the collection agency.
As we have seen, indemnification of the creditor for attorney's fees incurred in collecting his own debt, where provided by contract, is limited to such fees as are reasonably incurred. Although there is no showing that the fees charged by the collection agency are unreasonable (part C above), there is a duty on the hospital to mitigate damages. An injured party cannot recover for any detriment which he should have avoided by taking reasonable steps. (See Sackett v. Spinkler (1967) 248 Cal.App.2d 220, 238, 56 Cal.Rptr. 435; Witkin, Summary of Cal. Law (8th ed. 1973) Contracts, ss 670 and 672, pp. 567 and 568.)
In this case the decision and judgment of the trial court may be predicated on its implied finding that under the circumstances disclosed by the record with respect to each of the plaintiffs it was unreasonable to incur the services of the collection agency, and therefore it was proper to enjoin the hospital and the agency from imposing additional charges. (Cf. fn. 2 and fn. 4, and accompanying text above.)
The plaintiffs, having received all the relief to which they could possibly be entitled to, are in no position to complain about the judgment with respect to their own obligations. The questions of whether they were entitled to a broader injunction under Civil Code section 3369, or to maintain a class action, are reviewed below (part III and part IV).
Civil Code section 3275 provides: “Whenever, by the terms of an obligation, a party thereto incurs a forfeiture, or a loss in the nature of a forfeiture, by reason of his failure to comply with its provisions, he may be relieved therefrom, upon making full compensation to the other party, except in case of a grossly negligent, willful, or fraudulent breach of duty.” The section is generally applied to relieve the purchaser of property of a forfeiture of the property, or his down payment, because of a failure to promptly make payments required by the agreement of sale. (Gonzales v. Hirose (1948) 33 Cal.2d 213, 217, 200 P.2d 793; and Bollin v. Petrocchi (1950) 95 Cal.App.2d 589, 593, 213 P.2d 513. Note, McFadden v. Walker (1971) 5 Cal.3d 809, 813-816, 97 Cal.Rptr. 537, 488 P.2d 1353 more (wilful default).)
In relying on the foregoing cases plaintiffs point to a statement in Garrett where the court said: “A penalty provision operates to compel performance of an act (citation) and usually becomes effective only in the event of default (citation) upon which a forfeiture is compelled without regard to the actual damages sustained by the party aggrieved by the breach (citation).” (9 Cal.3d at p. 739, 108 Cal.Rptr. at p. 850, 511 P.2d at p. 1202.) In a case where instalment payments are to be made on a purchase, or to liquidate an obligation, the default and penalty may in fact result in a forfeiture. Here the services have been received, there is no forfeiture by merely adding a penalty to the account. Whatever the rule may be concerning the rights of persons who have paid something out, there has been no forfeiture in this case.
The defendants have also resisted the plaintiffs' claims for relief under Civil Code section 3369 on the ground that the relief sought in the plaintiffs' final amended prayer (fn. 2 above) is too indefinite and uncertain, incapable of specific performance, and fails to provide a standard of conduct suitable for such relief. It is generally recognized: “The party bound by an injunction must be able to determine from its terms what he may and may not do; he cannot be held guilty of contempt for violating an injunction that is uncertain or ambiguous . . . just as he may not be held guilty of violating a criminal statute that fails to give him adequate notice of the prohibited acts.” (Brunton v. Superior Court (1942) 20 Cal.2d 202, 205, 124 P.2d 831, 834; Pitchess v. Superior Court, supra, 2 Cal.App.3d 644, 651, 83 Cal.Rptr. 35; Gottlieb v. Superior Court (1959) 168 Cal.App.2d 309, 312, 335 P.2d 714; Griffin v. Lima (1954) 124 Cal.App.2d 697, 700-702, 269 P.2d 191; Mattos v. Superior Court (1939) 30 Cal.App.2d 641, 649, 86 P.2d 1056.) In Pitchess v. Superior Court, supra, the court applied the foregoing principle in issuing a writ of prohibition annulling and vacating certain preliminary injunctions and restraining orders. It added: “An injunction which forbids an act in terms so vague that men of common intelligence must necessarily guess at its meaning and differ as to its application exceeds the power of the court. (Citations.)” (2 Cal.App.3d 644, 651, 83 Cal.Rptr. 35, 40).
Here, as we have seen, there was no ground to enjoin the use of the agreement itself. There was no direct attack on the collection agency's fee practices. The final relief afforded did protect the plaintiffs, but in order to protect others it would be necessary to go into too many generalities (see fn. 2 above). The proposed injunction would require the hospital in each case to determine whether the delinquent obligor was recalcitrant, whether information when furnished showed inability to pay, and whether referral to the collection agency was necessary. As defendants assert, the hospital would be subject to contempt charges for mere errors in judgment.
Plaintiffs claim that they should be able to amend their prayer to make the relief sought more definite and certain. Code of Civil Procedure section 580 authorizes the court to grant the plaintiffs “any relief consistent with the case made by the complaint and embraced within the issue.” (See 3 Witkin, Cal. Procedure (2d ed. 1971) Pleading, s 376, p. 2039.) The defect, however, goes further. Insofar as any patient, or one who has agreed to pay the patient's bill, has been assessed an unreasonable cost of collection, as was found to be the case in the particular circumstances of each of these plaintiffs, he or she has a remedy in self-help by refusing to pay the extra charge, or in resisting its collection if suit is brought. It would impose an unreasonable burden on the court to make it review all accounts falling within the proscription sought by plaintiffs, to determine in each case whether referral was proper. This is particularly true, because it may well be that in a great many of such cases the account in the normal course of events would be written off as a bad debt. It is not every objectionable practice that gives a right to injunctive relief under section 3369. In Payne v. United California Bank, supra, the court stated: “Unquestionably, there may be harm to the public from the enforcement of agreements induced by fraudulent representations and promoted by misleading advertisements; however, this harm is not the focus of the injunctive relief afforded by Civil Code section 3369 and Business and Professions Code section 17535. As indicated above, these sections restrict the drastic remedy to specific types of business practices that are unlawful and unfair per se. Arguably, the use of Civil Code section 3369 urged by plaintiffs could result in the penalty or forfeiture prohibited by the first section, e. g., penalizing the bank for failure to carefully scrutinize and evaluate the contracts financed by its Master Charge system.” (23 Cal.App.3d at pp. 856-857, 100 Cal.Rptr. at pp. 676-677. See also Whitted v. Williams (1964) 226 Cal.App.2d 52, 58-59, 37 Cal.Rptr. 692.) So here we are not disposed to require the defendant hospital to carefully scrutinize and examine each delinquent account before referring it to the collection agency, unless, as in this case, cause has been shown why it should not be referred.
The foregoing considerations also relate to plaintiffs' claims that the court erred in denying their motion to proceed as a class action. Plaintiffs alleged: “The class which plaintiffs represent is composed of those individuals who, in the three years last past from the date of the filing of this complaint, have signed form agreements with Peninsula Hospital requiring them to pay reasonable collection costs if their medical bills are turned over to a collection agency, and who have been assessed collection costs equal to one-third or greater of the amounts due on their medical bills. The persons in the class are so numerous, approximately 42,000, that the joinder of all such persons is impracticable and that the disposition of their claims in a class action is a benefit to the parties and to the court.” The allegation was denied by the defendants. Their answers to interrogatories reflects that during the years 1972 through 1974 approximately 42,000 patients were admitted to the hospital, and that except for those admitted as medical emergencies, an admission form containing the clause under review was signed on the patient's admission. In her affidavit the attorney for the plaintiffs also referred to an answer to interrogatories which indicated that the hospital kept records which would show the collection efforts made by the hospital, and would indicate the accounts referred to the collection agency. Plaintiffs proposed to further define the class “as all those who were assessed collection costs equal to one-third or greater of the amounts due on their medical bills.” We note that the class is not those who paid an additional sum equal to one-third or more of their medical bills on the premise that it was a reasonable collection expense. If so, the plaintiffs would not have been true representatives of the class. (See, Chern v. Bank of America (1976) 15 Cal.3d 866, 874-875, 127 Cal.Rptr. 110, 544 P.2d 1310; City of San Jose v. Superior Court (1974) 12 Cal.3d 447, 463-464, 115 Cal.Rptr. 797, 525 P.2d 701; and Payne v. United California Bank, supra, 23 Cal.App.3d 850, 857-860, 100 Cal.Rptr. 672. Cf. Barquis v. Merchants Collection Assn., supra, 7 Cal.3d 94, 100, fn. 3, 100 Cal.Rptr. 745, 496 P.2d 817; and Clermont v. Secured Investment Corp., supra, 25 Cal.App.3d 766, 770, 102 Cal.Rptr. 340.) We realize that the mere fact that plaintiffs have secured relief would not preclude continuance of the action for the benefit of others similarly situated. (See La Sala v. American Sav. & Loan Assn., supra, 5 Cal.3d 864, 871, 97 Cal.Rptr. 849, 489 P.2d 1113.) But the proposed class is not limited to those who should receive relief similar to plaintiffs. The procedures used by the hospital and collection agency were found to be unfair because the hospital had no reason to believe any of the plaintiffs was recalcitrant in not paying a bill, and in fact, had been advised of the inability to pay of each, and because the hospital had failed to give notice to each, specifying the amount of the fee that would be imposed in the event the obligor failed to supply information necessary to verify his or her inability to pay. (See fn. 2 above.)
In their reply brief, plaintiffs state: “Whether this Court must reach the second issue in this appeal depends upon its ruling on the first issue. There are two possible rulings that would make further review unnecessary: (1) If this Court holds the Patients were entitled to injunctive relief under s 3369, then there is no need to examine the Patients' other causes of action as the same relief is requested therein. At the other extreme: (2) If this Court finds the Patients were not entitled to relief under s 3369 because the collection expense provision is neither illegal nor unfair, then no further review is required as the contract causes of action are based on the illegality or unfairness of the clause.” Since we have held that the collection expense provision itself is neither illegal nor unfair, plaintiffs' admission puts them out of court. We recognize, however, that the plaintiffs were in fact granted relief, and that they sought to extend this relief to others either by injunction or by class suit. We, therefore, examine the principles asserted by plaintiffs, but we conclude that the trial court did not prejudicially abuse its discretion in failing to attempt to extend the relief granted plaintiffs to such of the other 42,000 persons who signed admission agreements, and might have proved to be circumstanced similar to plaintiffs.
In Vasquez v. Superior Court (1971) 4 Cal.3d 800, 94 Cal.Rptr. 796, 484 P.2d 964, the court concluded: “ . . . (T)wo requirements must be met to sustain a class action. The first is existence of an ascertainable class, and the second is a well-defined community of interest in the questions of law and fact involved.” (4 Cal.3d at p. 809, 94 Cal.Rptr. at p. 801, 484 P.2d at p. 969. See also, Javor v. State Board of Equalization (1974) 12 Cal.3d 790, 796-797, 117 Cal.Rptr. 305, 527 P.2d 1153; Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 704, 63 Cal.Rptr. 724, 433 P.2d 732; Santa Barbara Optical Co. v. State Bd. of Equalization (1975) 47 Cal.App.3d 244, 249, 120 Cal.Rptr. 609; Clermont v. Secured Investment Corp., supra, 25 Cal.App.3d 766, 766-770, 102 Cal.Rptr. 340; Czap v. Credit Bureau of Santa Clara Valley, supra, 7 Cal.App.3d 1, 6, 86 Cal.Rptr. 417; and Barber v. California Emp. Stab. Com. (1954) 130 Cal.App.2d 7, 14, 278 P.2d 762.) There is a recognized distinction between the necessity of establishing the existence of an ascertainable class and the necessity of identifying the individual members of such class as a prerequisite for suit. (See Daar v. Yellow Cab Co., supra, 67 Cal.2d at p. 706, 63 Cal.Rptr. 724, 433 P.2d 732.) It is readily apparent that the plaintiffs could establish and identify from hospital records the 42,000 persons who signed agreements with the hospital in the three years preceding the filing of the complaint, and, also, from the same source, the names of the persons whose delinquent accounts were transferred to the collection agency and were thereby presumably increased by 331/3 percent of the amount of the obligation then due. (See Javor v. State Board of Equalization, supra, 12 Cal.3d 790, 797, 117 Cal.Rptr. 305, 527 P.2d 1153; Vasquez v. Superior Court, supra, 4 Cal.3d 800, 809, 94 Cal.Rptr. 796, 484 P.2d 964; Budget Financial Plan v. Superior Court (1973) 34 Cal.App.3d 794, 799, 110 Cal.Rptr. 302; and Clermont v. Secured Investment Corp., supra, 25 Cal.App.3d 766, 770, 102 Cal.Rptr. 340.) The mere fact that each member of such a class would have to prove his right to relief would not be fatal if such a class had the requisite community of interest. (See Collins v. Rocha (1972) 7 Cal.3d 232, 238, 102 Cal.Rptr. 1, 497 P.2d 225; Vasquez v. Superior Court, supra, 4 Cal.3d 800, 809-810 and 815, 94 Cal.Rptr. 796, 484 P.2d 964; Daar v. Yellow Cab Co., supra, 67 Cal.2d 695, 713, 63 Cal.Rptr. 724, 433 P.2d 732; and Santa Barbara Optical Co. v. State Bd. of Equalization, supra, 47 Cal.App.3d 244, 250, 120 Cal.Rptr. 609.) For a community of interest the questions of law and fact should be common to all members of the class. (See Javor v. State Board of Equalization, supra, 12 Cal.3d 790, 797, 117 Cal.Rptr. 305, 527 P.2d 1153.) Where that is strictly true the members of the class apparently may be ascertained by description rather than by specific identity. (See Daar v. Yellow Cab Co., supra, 67 Cal.2d 695, 714-716, 63 Cal.Rptr. 724, 433 P.2d 732.)
In this case it is clear that the class entitled to relief is not all of the 42,000 who signed the valid admission agreement. (See Czap v. Credit Bureau of Santa Clara Valley, supra, 7 Cal.App.3d 1, 6, 86 Cal.Rptr. 417.) Nor is the class all of those who became delinquent in paying their accounts and whose accounts were assigned to the collection agency. It is obvious that those whose recalcitrance caused the expenditure of more than 331/3 percent of the obligation owed, in an attempt, whether successful or unsuccessful, to collect, have no cause for complaint. In the posture of this case it is only those whose accounts were improperly assigned, as were plaintiffs', who would have the requisite community of interest with plaintiffs. Those requisites cannot be ascertained without examining what was actually done by the hospital in the case of each assigned delinquent account in the light of the financial circumstances of the obligor, which in turn must be probed in the case of each individual. In Weaver v. Pasadena Tournament of Roses (1948) 32 Cal.2d 833, 198 P.2d 514, the court concluded that a class action could not be maintained where the right of each member of the alleged class to recover “would rest on a distinct premise correlative with varying proof as to the facts of his particular case.” (32 Cal.2d at p. 840, and see pp. 838-839, 198 P.2d at p. 518.) In other words, there is a lack of common questions of fact in establishing liability itself, as distinguished from establishing the amount of the claim if liability toward all the members of the class is established.
In City of San Jose v. Superior Court (1974) 12 Cal.3d 447, 115 Cal.Rptr. 797, 525 P.2d 701, the majority opinion commented on the foregoing case as follows: “Holding that a class action cannot be maintained where each member's right to recover depends on facts peculiar to his case, Weaver remains viable in this state. The rule exists because the community of interest requirement is not satisfied if every member of the alleged class would be required to litigate numerous and substantial questions determining his individual right to recover following the ‘class judgment’ determining issues common to the purported class. (32 Cal.2d at pp. 838-840, 842-843, 198 P.2d 514.) (P) This court has consistently recognized the continued validity of this rule. (See Daar v. Yellow Cab Co., supra, 67 Cal.2d 695, 704-705, 707-708, 63 Cal.Rptr. 724, 433 P.2d 732; Chance v. Superior Court, supra, 58 Cal.2d 275, 285, 23 Cal.Rptr. 761, 373 P.2d 849; Vasquez v. Superior Court, supra, 4 Cal.3d 800, 809, 811, 815-816, 94 Cal.Rptr. 796, 484 P.2d 964; Collins v. Rocha, supra, 7 Cal.3d 232, 237-238, 102 Cal.Rptr. 1, 497 P.2d 225.)” (12 Cal.3d at p. 459, 115 Cal.Rptr. at p. 805, 525 P.2d at p. 709. See also, Gerhard v. Stephens (1968) 68 Cal.2d 864, 911-914, 69 Cal.Rptr. 612, 442 P.2d 692; La Sala v. American Sav. & Loan Assn., supra, 5 Cal.3d 864, 882-883, 97 Cal.Rptr. 849, 489 P.2d 1113; Czap v. Credit Bureau of Santa Clara Valley, supra, 7 Cal.App.3d 1, 3, 86 Cal.Rptr. 417; and Barber v. California Emp. Stab. Com., supra, 130 Cal.App.3d 7, 15, 278 P.2d 762.)
We are mindful that the unfair assignment and demand of excessive fees may have caused hardship to some, and that because of the amount involved those persons may not seek relief. This case, however, is not aimed at forcing the defendants to disgorge ill-gotten gains. (Cf. Daar v. Yellow Cab Co., supra, 67 Cal.2d 695, 715, 63 Cal.Rptr. 724, 433 P.2d 732.) Its attack on the hospital's agreement missed the mark. If there is an unfair collection practice in the collection, or threat to collect, excessive collection fees, other remedies are available. (See Bus. & Prof. Code, ss 6947 and 6947.1; and Civ.Code, ss 1788.10-1788.32.) Such an obligor is also entitled to self-help, and to relief in the event an individual action is brought to collect the debt and improper collection fees. In any event an attempt to screen the accounts assigned, in order to determine which debtors shared questions of law and fact similar to those raised by plaintiffs, would unduly proliferate and extend this litigation without producing substantial benefits to either the litigants or the courts. (Cf. Daar v. Yellow Cab Co., supra, 67 Cal.2d 695, 713, 63 Cal.Rptr. 724, 433 P.2d 732.) There was no error in denying the plaintiffs' motion to certify the action as a class action.
The judgment is affirmed. The appeal from the order is dismissed.
1. The order denying the plaintiffs' motions for certification of the class action and for summary judgment is not appealable. (See Vasquez v. Superior Court (1971) 4 Cal.3d 800, 806, 94 Cal.Rptr. 796, 484 P.2d 964; and Fraser-Yamor Agency, Inc. v. County of Del Norte (1977) 68 Cal.App.3d 201, 207-208, 137 Cal.Rptr. 118.) Therefore the appeal from the order of January 19, 1976 must be dismissed. The order, however, is reviewable on plaintiffs' appeal from the judgment. (See Code Civ. Proc., s 906; Aas v. Avemco Ins. Co. (1976) 55 Cal.App.3d 312, 323-324, 127 Cal.Rptr. 192; and note, Fanucchi v. Coberly-West Co. (1957) 151 Cal.App.2d 72, 83, 311 P.2d 33.)
2. The prayer of the amended complaint, as finally amended, reads as follows:“WHEREFORE, plaintiffs prayer for relief as follows:“a. That this action be maintained as a class action; and on behalf of the general public;“b. That this Court enjoin defendants from:“1. using the form agreement attached hereto as Exhibit ‘A’ except on the following terms and conditions:“i. No collection agency fee will be charged to a patient unless referral to a collection agency was necessary because the Hospital had reason to believe the patient was recalcitrant in not paying a bill. Mere evidence of non-payment does not constitute recalcitrance.“ii. Notice is sent by the Hospital to the patient before referral to a collection agency stating that the account will be referred to a collection agency and specifying the amount of the fee that will be imposed unless the individual contacts the Hospital's Financial Office, prepared to supply information necessary to verify his/her inability to pay.“2. attempting to collect a collection agency fee from the plaintiffs and the class they represent except on the following terms and conditions:“i. Referral to a collection agency was necessary because the Hospital had reason to believe an individual was recalcitrant in not paying a bill. Mere evidence of non-payment does not constitute recalcitrance.“ii. Notice is sent to all class members that the Hospital is not entitled to collection costs if they informed the Hospital of their inability to pay and did not refuse to supply the Hospital with information necessary to verify their inability to pay.”“c. (deleted).“d. That plaintiffs and the class they represent be awarded reasonable attorneys' fees, and their costs of court; and“e. Such other and further relief as justice may require.”
3. “1. Request payment of patient balance at the time of discharge or arrangements made for payment plan.“2. Submit an itemized statement showing the patient balance within a few days after discharge.“3. Submit follow-up statements at the end of each month for approximately four months.“4. Contact patient directly about 60 to 90 days after discharge if no payment, requesting payment or arrangements for payment plan.“5. If steps 1 through 4 are unsuccessful is (sic) obtaining or starting payments, send two pre-collection assignment letters (Exhibits 1 and 2) about two weeks apart about 150-180 days after discharge.“6. If no payment or arrangements for payment plan thereafter, refer to collection agency about 180 to 210 days after discharge.“Note: above schedule assumes no payments. If partial payment or payment plan are made at any point along the way, the above steps will vary accordingly.”The pre-assignment letters referred to in step five are on the stationery of the collection agency, but they are sent out by the hospital. They direct the debtor to make all payments, and address communications, directly to the creditor hospital. No opinion is expressed as to whether the practice referred to in paragraph 5 above violates the provisions of subdivision (f) of section 6947 of the Business and Professions Code, which refers to the furnishing forms to others by a collection agency license.
4. Apparently pursuant to a suggestion made by the court, the hospital during the proceedings, or after the judgment in this case, amended its admission agreement to read as follows:“FINANCIAL AGREEMENT: It is agreed that in consideration of the services to patient, the patient (and agent if signed by name) is obligated to pay the account due to hospital in accordance with its regular rates and terms, which shall be DUE IN FULL ON DATE OF DISCHARGE (time is of the essence). If unpaid on the due date, such account shall be subject to a DELINQUENCY CHARGE equal to 11/2% per month thereafter. Further, if unpaid within 30 days after written notice, hospital may refer said account to a collection agency or an attorney for collection, and in that event the amount due MAY BE INCREASED by an amount equal to the collection charge payable to such agency (35% of the balance due) or by reasonable attorney's fees (as set by any Court), which the undersigned agrees to pay.”No opinion is expressed covering the validity of that clause. (See Opn. No. 60-210 (1961) 38 Ops.Cal.Atty.Gen. 195, question 1, pp. 196-198.)
5. Civil Code section 3369 provided at the time of the filing of the amended complaint in this action, and at the time of judgment:“1. Neither specific nor preventive relief can be granted to enforce a penalty or forfeiture in any case, nor to enforce a penal law, except in a case of nuisance or unfair competition.“2. Any person performing or proposing to perform an act of unfair competition within this State may be enjoined in any court of competent jurisdiction.“3. As used in this section, unfair competition shall mean and include unlawful, unfair or fraudulent business practice and unfair, deceptive, untrue or misleading advertising and any act denounced by Business and Professions Code Sections 17500 to 17535, inclusive.“4. As used in this section, the term person shall mean and include natural persons, corporations, firms, partnerships, joint stock companies, associations and other organizations of persons.“5. Actions for injunction under this section may be prosecuted by the Attorney General or any district attorney or any city attorney of a city having a population in excess of 750,000, and, with the consent of the district attorney, by a city prosecutor in any city or city and county having a full-time city prosecutor in the name of the people of the State of California upon their own complaint or upon the complaint of any board, officer, person, corporation or association or by any person acting for the interests of itself, its members or the general public.” (Stats.1974, ch. 746, s 1, p. 1654, effective Jan. 1, 1975.)In 1976, effective January 1, 1977, the following sentence was added to subdivision 2: “The court may make such orders or judgments, including the appointment of a receiver, as may be necessary to prevent the use or employment by any person of any practice which constitutes unfair competition, as defined in this section, or as may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition.” Subdivision 6 was added to read: “6. Unless otherwise expressly provided, the remedies or penalties provided by this section and Section 3370.1 are cumulative to each other and to the remedies or penalties available under all other laws of this state.” (Stats.1976, ch. 1005, s 1, p. 398.)In 1977, effective January 1, 1978, the section was amended by deleting everything but the provisions formerly set forth in the first subdivision. (Stats.1977, ch. 299, s 2, p. 1139.) At the same time the provisions found in subdivisions 2, 3, 4, 5 and 6 were substantially reenacted as sections 17203, 17200, 17201, 17204 and 17205 of the Business and Professions Code. Since the legislative purpose was to transfer the provisions, we consider them as reenactments and continuations for the purposes of this case. (See Bus. & Prof. Code, s 2; Sobey v. Molony (1940) 40 Cal.App.2d 381, 384-387, 104 P.2d 868; 45 Cal.Jur.2d Statutes, ss 74 and 92, pp. 594 and 609.)
6. Section 1670 has been repealed and section 1671 has been amended effective January 1, 1978. (Stats.1977, ch. 198, ss 2 and 5.)
7. As we note below, part II, there is a significant difference insofar as forfeiture is concerned between a secured creditor who adds excessive charges on a debt, and an unsecured creditor who may never recover even the principal due, not to mention interest and costs of collection.
SIMS,* Associate Justice. FN* Retired Associate Justice of the Court of Appeal sitting under assignment by the Chairman of the Judicial Council.
RACANELLI, P. J., and ELKINGTON, J., concur.