Friday, September 09, 2005

Fresh Law

Two new opinions from the Iowa Supreme Court.

The short version:
Question: If a business broker does nothing more than inform a buyer that the business is for sale, a fact which the buyer knew anyway, is that a sufficient causal connection between the sale and the brokerage's efforts to support the granting of commission to the brokerage under the extension clause on the listing contract, if the business sells within the year following the expiration of the contract? Answer: Nope.
We adopt the majority rule and hold that a broker seeking to recover under an extension clause must establish some causal connection between the broker’s efforts and the eventual sale. This might include negotiations between the parties or actual assistance in the closing of the sale. In this case, Hawkeye has not shown it was involved in any negotiations or the closing of the sale. As the Nebraska court said in Chapman, a rule that would allow recovery for merely soliciting a buyer without requiring a causal connection with the sale would burden the owner’s right to dispose of his property.

Question: If a creditor checks the United States Postal Service (USPS) city-county directory before filing suit against a debtor, and on it's information files suit in the wrong county, is this a sufficient enough "procedure reasonably adapted to avoid the error" to preclude the debtor from prevailing on a suit against the creditor under the provisions of Iowa's consumer protection law, § 537.5113, on the basis of a bona-fine mistake? Answer: Yep.
We conclude substantial evidence exists to support the district court’s findings that the petition in this case was filed in the wrong county unintentionally, as the result of a bona fide error. Substantial evidence also exists that the action was filed in the wrong county notwithstanding the maintenance of a procedure reasonably adapted to avoid this error. All the elements of the bona fide error defense under Iowa Code section 537.5201(7) are satisfied. Therefore, Chrysler cannot be held liable for a violation of the consumer credit code.

Streit, Ternus, and Wiggins dissented, though, on the grounds that the city-county directory is too inaccurate:
Chrysler’s procedures were not “reasonably adapted” to avoid suing defendants in wrong venues. Merely looking at the USPS directory, looking up what county a city is located in, will inevitably fail too often to be “reasonably adapted.” Chrysler’s attorney’s secretary (hereinafter “Chrysler’s secretary”) testified the directory contained only one county entry for each city listed. This will too often result in the plaintiff filing in the wrong venue, because no small number of Iowa cities are located in two counties. For example, West Des Moines, one of Iowa’s most populous cities, is located in both Polk and Dallas Counties. Moreover, the USPS directory alone cannot account for residents of rural areas who, although they are given a mailing address of a nearby town, may, like Bergstrom, live miles away from the city limits and in another county. This is not inconsequential in Iowa, which has ninety-nine counties. Chrysler’s procedures were not reasonably adapted to avoid suing debtors in the wrong county; the only result of the directory’s use was that suits were filed in the county where city hall happened to be located.

They also point out a bit of an analysis issue with the majority opinion:
In the district court, the fighting issue was not whether Chrysler’s procedures were “reasonably adapted” to avoid mistaken filings, but rather whether Chrysler could escape liability if it simply proved its error was unintentional. Chrysler quoted fromdicta in Monahan Loan Service, Inc. v. Janssen, which opined that a creditor would not be liable if it showed its mistake was “inadvertently drafted, unintentional, or resulted from a bona fide error.” 349 N.W.2d 752, 755 (Iowa 1984). The district court agreed, found Chrysler’s error was unintentional, and dismissed Bergstrom’s counterclaim. This is why the court of appeals spent the bulk of its opinion distinguishing our dicta in Monahan to rightly conclude that “proof of the maintenance of procedures reasonably adapted to avoid the error in addition to proof that the error was unintentional . . . ” was necessary. . . . When the record is viewed in its entirety, it appears the district court did not analyze the “reasonably adapted” procedures element.

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