State Ins. Fund v. GREAT PLAINS CARE CENTER, 96,024.

• Decision Date: 30 September 2003
• Docket Number: No. 96,024.,96,024.
• Citation: 2003 OK 79,78 P.3d 83
• Parties: STATE of Oklahoma, ex rel. STATE INSURANCE FUND, Plaintiff/Appellant/Counter-Appellee, v. GREAT PLAINS CARE CENTER, INC., Defendant/Appellee/Counter-Appellant.
• Court: Oklahoma Supreme Court

78 P.3d 83

2003 OK 79

STATE of Oklahoma, ex rel. STATE INSURANCE FUND, Plaintiff/Appellant/Counter-Appellee, v. GREAT PLAINS CARE CENTER, INC., Defendant/Appellee/Counter-Appellant.

No. 96,024.

Supreme Court of Oklahoma.

September 30, 2003.

W. Rogers Abbott, II, Oklahoma City, OK, for Plaintiff/Appellant.

Clifford A. Wright, T. Carter Steph, Oklahoma City, OK, for Defendant/Appellee.

SUMMERS, J.

¶ 1 The controversy involves an action brought by the State Insurance Fund¹ against Great Plains Care Center, a nursing home, to recover workers' compensation premiums of approximately $52,000, allegedly owed on behalf of various contractors who performed services for the nursing home between 1994 and 1996. The matter went to bench trial in the District Court of Oklahoma County, and the court sustained the nursing home's demurrer to the evidence. The nursing home then made a post-judgment motion for attorney's fees and costs, which motion was denied.

¶ 2 The State Insurance Fund appealed the trial court's order sustaining the demurrer. The nursing home (Great Plains) counter-appealed the denial of attorney's fees and costs. The Court of Civil Appeals, Division II, affirmed the judgment of the District Court, and affirmed the post-judgment order denying attorney's fees and costs. Great Plains then sought certiorari in this Court on whether the trial court erroneously denied the post-judgment motion for attorney's fees.²

¶ 3 The appellate adjudication by the Court of Civil Appeals affirming the trial court's judgment on the demurrer to the evidence is left undisturbed by our opinion today. We thus vacate only that part of the opinion by the Court of Civil Appeals addressing the trial court's order on attorney's fees and costs. The sole questions before us on certiorari are whether Great Plains was entitled to an award of attorney's fees and/or costs against the State Insurance Fund.

¶ 4 Great Plains argues that inasmuch as it was prevailing party in a contract action for open account or statement of account, it is entitled to attorney's fees under 12 O.S.2001 § 936, and further that if § 936 be held not applicable, it would be entitled to fees under § 941 for successfully defending a frivolous suit brought by a state agency.

I. Section 936 and Insurance Contracts

¶ 5 The underlying nature of the cause of action determines the applicability of § 936. Natkin & Co. v. Midwesco, Inc., 1993 OK 143, 863 P.2d 1222, 1225. The State Insurance Fund alleged the existence of a contract for insurance and an unpaid premium. May § 936 fees be awarded on an action to recover an insurance premium as asserted by Great Plains?³ Remarkably, this issue has never been squarely addressed by this Court. We answer in the negative, as we now explain.

Section § 936 states as follows:⁴ In any civil action to recover on an open account, a statement of account, account stated, note, bill, negotiable instrument, or contract relating to the purchase or sale of goods, wares, or merchandise, or for labor or services, unless otherwise provided by law or the contract which is the subject to the action, the prevailing party shall be allowed a reasonable attorney fee to be set by the court, to be taxed and collected as costs.

12 O.S.2001 § 936.

In Kay v. Venezuelan Sun Oil Co., 1991 OK 16, 806 P.2d 648, we said the following:

As originally enacted, § 936 authorized the award of attorney fees for collection on an open account, and was subsequently amended to include seven additional specific categories evidencing contractual indebtedness sought to be recovered. Our strict application rule preserves the obvious legislative intent to authorize awards of attorney fees to the prevailing parties in actions for money judgments for debts created by the contracts enumerated in the statute.

Id. 806 P.2d at 651-652, note omitted.

We explained that the history of amendments to § 936 resulted in authorizing attorney's fees for different types of actions: (1) open accounts, (2) statements of account, (3) accounts stated, (4) bills, (5) contracts relating to the purchase or sale of goods, wares, or merchandise, (6) notes, (7) negotiable instruments, and (8) labor and services. Id. 806 P.2d at 651, n. 11.

¶ 6 We defined an open account in Office of Governor Dept. of Indus. Development v. Dalton, 1977 OK 34, 560 P.2d 971.

[E]xistence of at least three factors are required to establish an open account: (1) An Account based upon running or concurrent dealings; (2) these dealings have not been closed, settled or stated; (3) some term of the contract remains to be settled between parties, or the agreement contemplates further transactions between the parties. Here, we find no account to exist. Although the term `account' may be difficult to define and somewhat flexible in meaning, Black's Law Dictionary, Revised Fourth Edition, p. 34 indicates it involves debts and credits and might include payments, losses, sales, debits, credits, etc. in most cases showing a balance.

Id. 560 P.2d at 972.

Great Plains argued in the trial court that the dealings between the parties were not closed because the premium amounts due were not finalized until the end of the policy period. Premiums paid to the State are calculated at the beginning of the policy period and based upon the employer's estimated expenditure of wages during the policy period.⁵

¶ 7 Historically, both an open account and an account stated were obligations that were enforceable ex contractu although both lacked an express agreement on a particular term required for the existence of a contractual obligation.⁶ Courts came to refer to missing terms of a contract, as well as the contract itself, as being implied.⁷ Thus, one difference between the historical ancestors of the modern open account and account stated on one hand, and the express contract on the other, was the source of the obligation being enforced, i.e., implied versus express promises.

¶ 8 This difference in the source or nature of the obligation enforced is found in our cases. For example, in Globe & Republic Ins. Co. of America v. Independent Trucking Co., 1963 OK 274, 387 P.2d 644, an insured brought an action against the insurer to enforce an insurance policy. We said that "An express contract, which defines the duties and liabilities of the parties, whether it be oral or written, is not, as a rule, an open account." Id. 387 P.2d at 647, quoting, Connor Live Stock Co. v. Fisher, 32 Ariz. 80, 255 P. 996, 57 A.L.R. 196, (1927). See also Epperson v. Halliburton Co., 1967 OK 212, 434 P.2d 877, 880,

(stating rule that express contract defining duties and liabilities is not an open account). In sum, because the obligation enforced arose from an "express contract" we said that it was not an open account.

¶ 9 Three courts have used language similar to that in Globe, and concluded that a suit to recover unpaid insurance premiums is not based upon an open account.⁸ However, one court has concluded that an open account exists when the record shows a pattern of premium billings and payments. Shea v. State Farm Fire & Cas. Co., 198 Ga.App. 790, 403 S.E.2d 81, 82 (1991). In one state an action to recover insurance premiums has been by a suit on a sworn account. Rudi's Automotive Corp. v. Heeth, 509 S.W.2d 428, 429, (Tex.Civ.App.-Houston, 1 Dist., 1974, no writ).

¶ 10 The position advanced by Great Plains would make every contract an open account when the parties have agreed to multiple payments to satisfy a contractually agreed indebtedness. It is true in this case that the exact amount of the premiums may be altered after estimated premiums have been paid. But the formula for the amount that is due does not change for a definite policy period, and that formula is part of the contract. The insurance policy was for a definite period of time and the premium was for a definite amount. We do not have before us the circumstance of a contractually unspecified policy period, a contractually unspecified premium, or a contractually unspecified date that the full amount of the premium is due. We conclude that the action brought was on an express contract of insurance, and not on an open account. Office of Governor Dept. of Indus. Development v. Dalton, supra; Globe & Republic Ins. Co. of America v. Independent Trucking Co., supra.

¶ 11 Great Plains also argued in the alternative that the action was on an account stated. In Webster Drilling Co. v. Sterling Oil of Oklahoma, Inc., 1962 OK 242, 376 P.2d 236, we said that:

An account stated is an agreement, express or implied. The amount or balance so agreed upon constitutes a new and independent cause of action, superseding and merging the antecedent causes of action represented by the particular constituent items.

Webster, 376 P.2d 236, 238.

Thus, Great Plains is, in essence, arguing that a contractual obligation to pay an insurance premium is superceded and merged into a different and subsequent cause of action on an account stated.⁹ ¶ 12 In Mayes County Milk Producers Association v. Hunter, 1957 OK 252, 317 P.2d 736, an action was brought on an account stated for an insurance premium. The defendants asserted that no policy of insurance had been delivered. We said that proof of the policy was unnecessary because "in an action on account stated, the agreed balance constitutes a new cause of action and renders unnecessary proof of an original obligation, or promise, of payment by the defendants, if at the time there appears to have been an indebtedness between the parties...." Id.317 P.2d at 739.

¶ 13 Mayes does not address whether an action to recover unpaid insurance premiums is, as a matter of law, an action on an express contract, an open account, or an account stated. Mayes addressed the issue as framed by the parties, that being an action on an account stated on an agreed balance without proof of an express agreement.

¶ 14 The Court has also used language characterizing a balance due for insurance...