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Wainscott v. Centura Health Corp.

Court of Appeals of Colorado, First Division

August 14, 2014

Jeffrey L. Wainscott, Personal Representative of the Estate of Donald L. Wainscott; and Rena Wainscott, Plaintiffs-Appellees and Cross-Appellants,
Centura Health Corporation, d/b/a Centura Health, Defendant-Appellant and Cross-Appellee

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City and County of Denver District Court No. 12CV749. Honorable R. Michael Mullins, Judge.


Purvis Gray, LLP, John A. Purvis, Boulder, Colorado, for Plaintiffs-Appellees and Cross-Appellants.

Polsinelli PC, Sean R. Gallagher, Megan E. Harry, Denver, Colorado, for Defendant-Appellant and Cross-Appellee.

Opinion by JUDGE NAVARRO. Taubman and Bernard, JJ., concur.



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[¶1] In this case, we consider whether substantial compliance may be sufficient to satisfy the filing and notice provisions of Colorado's hospital lien statute. Because minor filing and notice deficiencies should not invalidate an otherwise valid hospital lien, we conclude that substantial compliance suffices. A lienholder substantially complies when it satisfies the statute's purposes through timely actual notice of the lien to those against whom the lienholder attempts to enforce the lien.

[¶2] Defendant, Centura Health Corporation (Centura), appeals the district court's partial summary judgment in favor of plaintiffs, Jeffrey L. Wainscott (as personal representative of the Estate of Donald L. Wainscott) and Rena Wainscott (collectively, the Wainscotts). The court declared that Centura's failure to strictly comply with the hospital lien statute rendered its lien unenforceable. We reverse because we are persuaded that Centura's notice fulfilled the purposes of the statute, resulting in substantial compliance.

[¶3] The Wainscotts cross-appeal the district court's order dismissing their claims under the Colorado Consumer Protection Act and for fraudulent concealment. We affirm the dismissals because the Wainscotts failed to state claims upon which relief can be granted.

I. Background

[¶4] Donald Wainscott was injured in an auto accident caused by third parties (the tortfeasors). He received treatment at St. Anthony Central Hospital, which is managed and operated by Centura.

[¶5] To secure payment of these medical expenses, Centura asserted a statutory hospital lien against any settlement or judgment that Donald Wainscott might receive as a result of the accident. But Centura did not comply with all of the statute's filing and notice requirements. See § 38-27-102, C.R.S. 2013. Specifically, Centura did not identify in its lien filing the tortfeasors responsible for Donald Wainscott's injuries and did not serve a copy of the notice on them. But Centura did identify and serve the tortfeasors' insurer as well as Donald Wainscott.

[¶6] Nearly two years after Centura had asserted its lien, Donald Wainscott and his wife Rena (who claimed loss of consortium) entered into a settlement agreement with the tortfeasors and their insurer. The Wainscotts then sued Centura seeking a declaratory judgment invalidating Centura's lien. They also challenged the lien amount as reflecting unreasonable and unnecessary charges. In addition, they asserted claims for violation of the Colorado Consumer Protection Act (CCPA), § § 6-1-101 to -1121, C.R.S. 2013, fraudulent concealment, negligent misrepresentation, and fraudulent misrepresentation.[1]

[¶7] The district court dismissed the CCPA and fraudulent concealment claims for failure to state a claim. The court then granted partial summary judgment for the Wainscotts on their action for declaratory judgment, and declared the lien invalid.

[¶8] The parties stipulated to dismissal of the remaining claims without prejudice, conditioned on the agreement that these claims would be revived if an appellate court remanded the matter to the district court for any reason. The district court entered judgment on the declaratory relief, CCPA, and fraudulent concealment claims, and certified them for appeal under C.R.C.P. 54(b).

II. Centura's Hospital Lien

[¶9] When a hospital provides medical care to an injured person who later obtains a judgment or settlement against a third party who caused the injury, the hospital has a lien for the costs of the medical care upon the amount payable to the injured person out of the judgment or settlement:

Every hospital . . . which furnishes services to any person injured as the result of the negligence or other wrongful acts of another person . . . shall, subject to the provisions of this article, have a lien for all

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reasonable and necessary charges for hospital care upon the net amount payable to such injured person . . . out of the total amount of any recovery or sum had or collected . . . by such person . . . as damages on account of such injuries.

§ 38-27-101, C.R.S. 2013.

[¶10] To perfect the lien, the hospital must file a lien notice with the secretary of state and send a copy to specified persons:

Such lien shall take effect if, prior to any such judgment, settlement, or compromise, a written notice of lien containing the name and address of the injured person, the date of the accident, the name and location of the hospital, and the name of the person alleged to be liable to the injured person for the injuries received is filed by the hospital in the office of the secretary of state. . . . Within ten days after such filing, the hospital shall mail by certified mail, return receipt requested, a copy of said notice to such injured person at the last address provided to the hospital by such person, to his or her attorney, if known, to the persons alleged to be liable to such injured person for the injuries sustained, if known, and to the insurance carriers, if known, which have insured such persons alleged to be liable against such liability.

§ 38-27-102.

[¶11] One who has received notice of the lien has a duty not to impair the hospital's rights thereunder. Section 38-27-103, C.R.S. 2013, states, in relevant part:

Any person . . . who pays over any money to any such injured person, his attorney, heirs, assigns, or legal representatives against whom there is a lien as provided in this article of which he has received notice as provided in this article is liable to the hospital having such lien for the amount thereof not exceeding the net amount paid to such injured person, his heirs, assigns, or legal representatives.

Thus, if a person pays settlement funds to the injured person despite notice of a hospital lien, he or she may be liable to the hospital. Id.; see Trevino v. HHL Fin. Servs., Inc., 945 P.2d 1345, 1349 n.8 (Colo. 1997) (" [B]y filing and giving notice of a proper hospital lien, [the defendants] were able to hold any person against whom there was such a lien and who paid any money to [the injured person] liable for the amount of the hospital lien up to the net amount paid." ).

A. Standing

[¶12] The Wainscotts asked the district court to declare that Centura's lien was not valid because Centura did not comply with the notice provisions of section 38-27-102. Centura contends that the Wainscotts lack standing to contest the lien because they suffered no injury from the deficiency in the notice (given that they had actual notice of the lien).

[¶13] Standing presents a threshold jurisdictional question. City of Greenwood Vill. v. Petitioners for Proposed City of Centennial, 3 P.3d 427, 436 (Colo. 2000). Whether a plaintiff has standing to sue is a question of law that we review de novo. Barber v. Ritter, 196 P.3d 238, 245 (Colo. 2008).

[¶14] In Colorado, the definition of standing is broad and " has traditionally been relatively easy to satisfy." Ainscough v. Owens, 90 P.3d 851, 856 (Colo. 2004). To have standing, a plaintiff must have suffered an injury in fact to a legally protected interest. Id. at 855. To assess whether a plaintiff has suffered an injury in fact, we accept as true the allegations of the complaint. Id. at 857.

[¶15] The Wainscotts sought relief under the Uniform Declaratory Judgments Law, § § 13-51-101 to -115, C.R.S. 2013. Under this law, any person whose rights, status, or other legal relations are affected by a statute " may have determined" any question of construction or validity arising under the statute and may " obtain a declaration of rights, status, or other legal relations thereunder." § 13-51-106, C.R.S. 2013; C.R.C.P. 57(b).

[¶16] The purpose of the declaratory judgment law is to afford parties judicial relief from uncertainty and insecurity with respect to their legal relations. § 13-51-102, C.R.S. 2013. Because it is a remedial statute, it must be " liberally construed and administered" to accomplish its purpose. Id.; see Mt. Emmons Min. Co. v. Town of Crested

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Butte, 690 P.2d 231, 240 (Colo. 1984). Thus, " the required showing of demonstrable injury is somewhat relaxed in declaratory judgment actions." Mt. Emmons, 690 P.2d at 240; see also § 13-51-105 (Courts " have power to declare rights, status, and other legal relations whether or not further relief is or could be claimed." ); C.R.C.P. 57(a) (same).

[¶17] A declaratory judgment action is appropriate " when the rights asserted by the plaintiff are present and cognizable ones." Farmers Ins. Exch. v. Dist. Court, 862 P.2d 944, 947 (Colo. 1993); see also Bd. of Cnty. Comm'rs v. Bowen/Edwards Assocs., Inc., 830 P.2d 1045, 1053 (Colo. 1992) (Standing requires " an existing legal controversy that can be effectively resolved by a declaratory judgment." ). " [T]he essential requirement is that all relevant events have occurred, so that the court is addressing a present dispute." Villa Sierra Condo. Ass'n v. Field Corp., 878 P.2d 161, 165 (Colo. App. 1994).

[¶18] The Wainscotts alleged that they had reached a settlement agreement with the tortfeasors and their insurer, and that Centura had asserted a lien against the settlement funds before disbursement. If the lien were valid, the tortfeasors' insurer would be compelled to disburse a portion of the settlement funds directly to Centura, or else risk liability to Centura. According to the complaint, the tortfeasors' insurer had not disbursed the settlement funds to the Wainscotts due to the dispute about the lien.

[¶19] The validity of Centura's hospital lien thus dictates whether the Wainscotts will receive the settlement funds. If the lien is valid, the Wainscotts might never receive any of the funds. But, if the lien is not valid, they will receive more than $600,000 that will remain after satisfaction of their attorney's lien, and Centura will have only its cause of action ...

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