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Credit Bureau Enterprises, Inc. v. Pelo

Supreme Court of Iowa
608 N.W.2d 20 (2000)
ELI5:

Rule of Law:

A person who receives necessary medical services while involuntarily committed to a private hospital is liable for the reasonable value of those services under the doctrine of a contract implied in law (quasi-contract), even if they expressly refuse treatment, because their mental state renders their consent immaterial.


Facts:

  • After an argument with his wife, Russell N. Pelo left his home, checked into a motel, purchased a shotgun, and made threats of self-harm.
  • Police were notified and took Pelo to Ellsworth Municipal Hospital, a private hospital.
  • A magistrate issued an emergency hospitalization order, finding probable cause that Pelo was seriously mentally impaired and likely to physically injure himself.
  • Pelo was involuntarily detained and treated at the hospital from January 8 to January 13, 1995.
  • Upon admission, Pelo initially refused to sign a form agreeing to pay for the services.
  • He later signed the form after a nurse allegedly told him the hospital could not ensure the safety of his personal items otherwise.
  • A hospitalization referee ultimately found that while Pelo had a bipolar disorder and needed treatment, the legal requirements for further involuntary hospitalization were not met, and he was released.
  • Pelo refused to pay the $2,775.79 bill for the services rendered during his hospitalization, and the hospital assigned the claim to Credit Bureau Enterprises, Inc.

Procedural Posture:

  • Credit Bureau Enterprises, Inc. sued Russell N. Pelo in a small claims action in district court to recover the cost of hospital services.
  • The district associate judge entered judgment in favor of Credit Bureau against Pelo.
  • Pelo, the defendant, appealed the judgment to a district court judge.
  • The district court judge affirmed the lower court's decision, finding Pelo liable on theories of both express and implied contract.
  • Pelo, now the appellant, sought and was granted discretionary review by the Supreme Court of Iowa.

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Issue:

Is a person who is involuntarily committed to a private hospital for mental health treatment legally obligated to pay for the cost of those services under a theory of a contract implied in law?


Opinions:

Majority - McGiverin, Chief Justice

Yes. A person is legally obligated to pay for necessary medical services provided during an involuntary commitment under a quasi-contract theory to prevent unjust enrichment. The court first identified a gap in Iowa's statutory scheme, which details payment responsibility for commitment in state hospitals but is silent regarding private hospitals. Turning to common law, the court applied the doctrine of a contract implied in law, or quasi-contract, which is a legal fiction created to prevent unjust enrichment. Citing the Restatement of Restitution § 116, the court reasoned that when a person's mental impairment makes their consent immaterial, they are still liable for necessary services rendered for their benefit. The court-ordered emergency hospitalization established Pelo's lack of capacity to make responsible decisions, rendering his refusal to consent irrelevant. The court concluded Pelo received a clear medical benefit from the evaluation and care, and therefore must pay for it.



Analysis:

This case clarifies financial responsibility for involuntary mental health care in private facilities where statutes are silent. It strongly affirms the quasi-contract doctrine, allowing providers to recover costs for necessary medical services rendered to non-consenting patients whose capacity is legally deemed impaired. The decision prioritizes preventing unjust enrichment over a patient's subjective refusal of care, establishing that a court order for commitment effectively negates the patient's ability to refuse financial responsibility. This precedent solidifies the legal grounds for healthcare providers to seek compensation for emergency services provided to incapacitated individuals.

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