Elyse De Stefano v. Apts. Downtown, Inc. , 879 N.W.2d 155 ( 2016 )

IN THE SUPREME COURT OF IOWA
No. 14–0820
Filed May 6, 2016
ELYSE DE STEFANO,
Appellant,
vs.
APTS. DOWNTOWN, INC.,
Appellee.
Appeal from the Iowa District Court for Johnson County, Nancy A.
Baumgartner, Judge.
A tenant appeals and a landlord cross-appeals a district court
ruling affirming in part and reversing in part a small claims court
decision in a residential landlord–tenant dispute. AFFIRMED IN PART,
REVERSED IN PART, AND REMANDED.
Christopher S. Warnock, Iowa City, and Christine E. Boyer, Iowa
City, for appellant.
Robert M. Hogg and James W. Affeldt of Elderkin & Pirnie, P.L.C.,
Cedar Rapids, and C. Joseph Holland, Iowa City, for appellee.
2
APPEL, Justice.
This case is a landlord–tenant dispute that was initially tried as a
small claims matter. The case presents a preliminary question of first
impression, namely, whether an award of attorneys’ fees should be
considered as part of the “amount in controversy” for purposes of
determining the jurisdiction of the small claims court. If there is subject
matter jurisdiction, the case includes several important issues under the
Iowa Uniform Residential Landlord and Tenant Act (IURLTA), including
(1) whether a landlord may enter into a contract with a tenant that
requires the tenant to assume the cost of making repairs necessary to
maintain the premises in a fit and habitable condition, (2) whether a
landlord can refuse to approve a sublease based upon the refusal of the
tenant to assume the cost of maintaining the premises in a fit and
habitable condition, (3) whether a landlord may automatically deduct a
fee for carpet cleaning at the conclusion of the lease term, and
(4) whether statutory punitive damages are available for willful violation
of the IURLTA in this case.
The landlord rented a four-bedroom home to four students in the
college community of Iowa City. An exterior door and door lock to the
premises were damaged due to third-party vandalism, requiring repair in
order to maintain a fit and habitable premises. When the landlord was
informed of the damaged door, the landlord repaired it but billed the
tenants for the cost. The tenants refused to pay. When the tenants
subsequently sought to sublease the apartment for two summer months,
the landlord refused to approve the sublease on the ground that the
tenants had failed to pay for the repairs and the penalties assessed for
nonpayment. The tenants still refused to pay. As a result, the landlord
3
refused to approve the sublease, and the premises was vacant for the last
two months of the lease term.
At the conclusion of the lease term, the landlord then withheld the
tenants’ rental deposit. The landlord withheld the rental deposit by
asserting that (1) the tenants owed the landlord for the cost of repairing
the damaged door, (2) the tenants incurred penalties under the lease for
failing to timely pay for the damaged door, (3) the tenants were
automatically obligated to pay the landlord for the cost of cleaning the
carpet upon their surrender of the premises at the end of the lease term
regardless of the condition of the carpet, and (4) the tenants owed the
landlord various other relatively minor fees and costs of no relevance to
this appeal.
One of the tenants, Elyse De Stefano, sued in small claims court,
claiming that the landlord improperly withheld the rental deposit. The
magistrate held for the tenant on most issues and awarded damages of
$4720. The magistrate did not award attorneys’ fees to De Stefano
because no attorney fee affidavits were filed. The landlord appealed to
district court.
On appeal, the district court upheld some but not all of the
magistrate’s decision. The district court concluded that under the terms
of the lease, the landlord could charge the tenant for the replacement of
the exterior door that had been vandalized by a person or persons
unknown. The district court also found the landlord properly refused to
allow the proposed sublease in light of the tenant’s refusal to pay for the
exterior door. As a result, the tenant was liable to the landlord for rent
during the two summer months when the premises was vacant. The
district court found, however, that the landlord’s automatic deduction
from the rental deposit for carpet cleaning violated the IURLTA and that
4
certain late fees imposed by the landlord were improper. In the end, the
district court awarded De Stefano $651.54 for the balance of the deposit
improperly withheld and $200 in statutory punitive damages.
After trial, the attorneys for De Stefano sought fees under the
terms of the IURLTA and submitted two separate fee affidavits supporting
the fee claims. The district court awarded $1160 in attorneys’ fees, the
sum claimed in a fee affidavit submitted by attorney Christine Boyer.
The district court declined to award attorneys’ fees claimed in a fee
affidavit submitted by attorney Christopher Warnock for $5466.
Both parties appealed, and we granted discretionary review. For
the reasons that follow, we affirm in part and reverse in part the decision
of the district court on tenant’s appeal. We affirm in part and reverse in
part the district court’s ruling on the landlord’s cross-appeal. We reverse
and remand the case to the district court.
I. Background Facts and Proceedings.
In July 2010, four University of Iowa students—Elyse De Stefano,
Hillary Block, Meghan Crotty, and Jennifer Connelly—rented a four-
bedroom home in Iowa City from Apts. Downtown, Inc., (Apartments
Downtown) under a written lease agreement. The period of the lease was
from July 31, 2010, to July 26, 2011. The collective rent was $1635 per
month, and the tenants paid a rental deposit of one month’s rent.
The preprinted lease contained seventy tightly-spaced paragraphs
featuring many subparts and considerable detail. In paragraph 30 the
lease provided, “Tenants agree to pay for all damages to the apartment
windows, screens, and doors, including exterior unit doors (including
random acts of vandalism).” The lease also provided in paragraph 33,
“Unless the Landlord is negligent, Tenants are responsible for the cost of
all damages/repairs to windows, screens, doors, carpet, and walls,
5
regardless of whether such damage is caused by residents, guests or
others.” Additionally, the lease contained a $452–$690 estimated cost
for the repair or replacement of a prehung entry door.
The lease further provided that Iowa City Maintenance would
perform all repairs “unless written authorization is secured from [the]
Landlord.” It stated that Iowa City Maintenance charges $70 per hour
during regular business hours and $90 per hour during nights and
weekends, with a minimum of one hour per service call. Iowa City
Maintenance is an alter ego of Apartments Downtown.
Furthermore, the lease included an automatic charge for carpet
cleaning at the conclusion of the lease term. Specifically, the lease stated
as follows:
The carpets throughout the building are professionally
cleaned each time apartments turn over occupancy. Tenants
agree to a charge starting at $95 (efficiency) not to exceed
$225 (6+ bedrooms) being deducted from the deposit for
professional cleaning at the expiration of the Lease.
The four student tenants, including De Stefano, took possession
and paid the regular rent on a monthly basis for the duration of the
lease, including for the months of June and July, 2011 after failing to
receive Apartments Downtown’s approval for a sublease.
On August 25, 2011, the student tenant whose forwarding address
had been provided to the landlord received a “Security Deposit Statement
2011” 1 from Apartments Downtown detailing the following charges to the
tenants’ rental account:
Carpet Cleaning: $ 191.00
Cleaning Charges: $ 280.00
1This opinion follows Iowa Code section 562A.12(3) in referring to this as a
“rental deposit,” but we consider any reference to a “security deposit” to be
synonymous.
6
Past Due Rent & Fees on Acct: $1,308.45
Lawn Clean Up: $ 60.00
Screens (Kitchen, BR 2): $ 150.00
Blinds (BR 2, 4): $ 99.00
Removal & Disposal of Tenants Items
(Bed mattress in front lawn): $ 50.00
Total Deductions (-) $2,138.45
Total Due: $ (503.45)
The past-due rent and fees in the amount of $1308.45 consisted of
charges of $210 for lawn care in June 2011; $598.46, the total cost for a
replacement exterior door; $150 of late fees for failure to timely pay for
the replacement door; and $349.99, the cost of replacing a refrigerator
gasket and two broken screens found during a June 2011 maintenance
inspection. The statement instructed the tenants to pay the $503.45 due
on the account within thirty days.
The door replacement charge and the subsequent late fees
stemmed from a burglary that occurred at De Stefano’s residence in
October 2010. De Stefano and the other tenants filed a police report
with the Iowa City Police Department. The report stated that the
burglary had left the exterior doorframe damaged and the door lock
broken. 2 Apartments Downtown was called to repair the door on
October 11. It arranged for Iowa City Maintenance, its in-house
maintenance group, to replace the kicked-in door, and the charges were
billed to De Stefano and her roommates. The total cost of the repair and
replacement was $598.46, which included $318.46 for the replacement
door and $280 for four hours of labor. Upon receipt of this charge, one
of De Stefano’s cotenants sent a letter dated November 2 to Apartments
Downtown, contesting the charge and advising that the damage was not
2The front door was split for a length of approximately twelve inches around the
latch and deadbolt, and the frame was damaged as a result of being “kicked in” during
a burglary. This damage rendered the front door of the house unlockable.
7
caused by any of the tenants and the police investigation was ongoing.
The student tenant, in a letter apparently written with the advice of
counsel, referenced paragraph 30 of the lease agreement which stated:
“Tenants agree to pay all damages to the apartment windows, screens,
and doors, including exterior unit doors (including random acts of
vandalism).” The tenant said she believed this lease provision to be
unconscionable and thus unenforceable by a court.
Apartments Downtown responded on November 17,
By signing the lease agreement you agree to pay for all
damages to the apartment windows, screens, and doors,
including exterior unit doors, including random acts of
vandalism. If . . . the door was broken down during a
burglary, the destruction of the door is considered vandalism
. . . . Even though the door was damaged during the break
in, and not by a guest of the tenants, it still falls under the
basis o[f] a visitor, whether they were a known guest or
not. . . . [I]f the police investigation results in the finding of
the guilty party that was responsible for the damage, then at
that time we would be more than happy to charge said
person(s) for the damage. Until then however, the damage
incurred to the property fall[s] under the responsibility of the
leased tenants. At this time you currently still have an
outstanding balance of 598.46 on your account, if this would
happen to still be current when December[’]s rent comes
due, it will accumulate the standard $40.00 late charge.
On December 2, De Stefano emailed Apartments Downtown and
indicated that on the advice of counsel the tenants would not be paying
for the door and that if Apartments Downtown held back their deposit
they would take legal action. Apartments Downtown, apparently
believing the email to be a request that the $598.46 be taken from the
tenants’ damage deposit at the end of the rental term, responded by
email and referred De Stefano to a provision in the lease agreement
stating that charges needed to be paid immediately or else late fees
would accumulate. The email stated,
8
[I]f you do not pay this bill, a $40 late charge will be applied
to your rental account balance, which from now until the
end of you[r] lease term would amount to an additional
$320.00 in addition to the door balance.
In May 2011, De Stefano and the other tenants sought to sublet
their apartment for the summer months. They located individuals
interested in subleasing their rental property and contacted Apartments
Downtown per the lease agreement, which stated, “[T]enants shall not
sublet the dwelling unit . . . without the written consent of Landlord.”
The lease also provided, however, “Only apartments whose rental
accounts are in good standing may sublease. All rent/fees on the
account must be paid before Landlord consents to a sublease.” Thus,
Apartments Downtown refused to consent to any sublease because the
tenants’ rental account carried an unpaid balance consisting of the
charges for the replacement door and subsequent late fees for
nonpayment. De Stefano and the other tenants were not able to sublet
their rental property.
On June 22, Apartments Downtown entered the tenants’ rental
property without proper notice to conduct an annual maintenance tour.
Iowa City Maintenance employees repaired two bent window screens at a
cost of $150 and replaced a torn refrigerator gasket at a cost of $129.99.
Apartments Downtown added the total charge of $349.99 to the tenants’
rental account, and it eventually became part of the “Past Due Rent and
Fees.”
A month later, De Stefano and the other tenants received an email
from Apartments Downtown containing move-out and inspection
information. The email also told the tenants, in bolded and capital
letters, “Tenants Only Need to Vacuum Carpet!” Below, it stated, “As
agreed to in the lease’s addendum there will be a charge of $95-$225
9
deducted from the tenant’s deposit to pay for professional carpet cleaning
at the expiration of the lease.” On July 26, Apartments Downtown
performed a checkout inspection at the residence. After the inspection,
the company arranged for carpet cleaning to be performed by a local
company for a cost of $191.
On August 25, Apartments Downtown sent out its statement
disclosing the amounts withheld from the rental deposit and the balance
still owed. De Stefano responded with an email asking for the return of
the deposit and characterizing the landlord’s charges against the account
as illegal and unreasonable. Apartments Downtown countered with a
letter dated September 8, asserting that the deductions from the rental
deposit complied with Iowa Code chapter 562A, which authorizes
deductions from a rental deposit either for a tenant’s default in payment
of rent or to restore a unit to the condition it had been in at the
commencement of the tenancy. The letter provided a reason for each
charge and declined to remove any of the charges. The landlord’s letter
further requested that the tenants pay the balance on the account by
September 25 to avoid future collections action. On September 19, the
Apartments Downtown Department of Collections and Litigation sent
De Stefano and the other former tenants individual letters demanding
payment of the claimed $503.45 balance due on the rental account.
On October 4, De Stefano brought a small claims action against
Apartments Downtown. 3 De Stefano’s notice requested $5000 from
Apartments Downtown as well as attorneys’ fees and court costs. On
October 28, De Stefano’s case was stayed and consolidated with a
3De Stefano’s standing to assert claims on behalf of herself and her three
cotenants is not disputed.
10
different case pending against Apartments Downtown in the district
court. The district court denied De Stefano’s motion for partial summary
judgment in the consolidated case on May 17, 2012. De Stefano then
moved to transfer the case back to the small claims division, and the
district court granted the motion on June 8.
On July 18, the parties appeared for trial in small claims court.
De Stefano presented a number of claims, including (1) that the
automatic carpet-cleaning charges in the lease were illegal, (2) that the
charges for replacement of a door that had been wrecked during the
burglary of the tenants’ residence were unlawful, (3) that the tenants lost
two months’ rent because the landlord wrongfully refused to consent to
their proposed sublease, (4) that punitive damages should be awarded
under the IURLTA for the willful withholding of the rental deposit, and
(5) that reasonable attorneys’ fees should be awarded under the IURLTA.
The small claims court found that the carpet-cleaning provision in
the lease was unenforceable, the lease provisions making tenants
responsible for the damage to the door caused by a burglary were
unconscionable and thus unenforceable, and punitive damages were
warranted. The court applied various other deductions to the rental
deposit not relevant to this appeal. The court awarded De Stefano $4520
in damages and $200 in statutory punitive damages for a total of $4720.
After the trial, De Stefano’s cocounsels Warnock and Boyer filed
two separate affidavits requesting attorney fees in the amounts of $5466
and $1160 be added to the judgment nunc pro tunc. Apartments
Downtown resisted on the ground that the attorney fee applications were
untimely and would result in damages in excess of the jurisdictional
limits of the small claims court. The court declined to rule on the
11
applications because by then Apartments Downtown had appealed to the
Johnson County District Court.
On appeal, the district court reversed in part and affirmed in part.
The district court entered a number of holdings relevant to this appeal.
First, the district court held that Apartments Downtown and its tenants
“were free to reach an agreement holding the tenants financially
responsible for repair of a door damaged by an alleged criminal act” and
reversed that aspect of the small claims court’s ruling. Second, “because
the lease provision regarding the tenant’s financial responsibility for
damage to exterior doors . . . was not prohibited,” the district court found
that Apartments Downtown was free to refuse to consent to the proposed
sublease due to tenants’ failure to pay the door charge, and the court
accordingly reversed on that issue as well. Third, the district court held
that the automatic carpet-cleaning provision in its lease was “an illegal
provision because it does not require the landlord to prove any specific
damage to the carpet” and affirmed the small claims court on that
ground. Fourth, the district court agreed with the small claims court
that late fees for nonpayment of rent were not supported by actual
evidence. Fifth, the district court concluded that “there was a bad faith
retention of the security deposit based on, at a minimum, [Apartments
Downtown]’s inclusion of the carpet-cleaning fee in the lease.” The court
additionally found that Apartments Downtown retained the rental
deposit in bad faith by assessing late fees for nonpayment of the cost of
the replacement door, when “late fees were only permitted for non-
payment of rent.”
The court’s holdings reduced the award to De Stefano to $851.54.
This figure was calculated by taking the $1635 deposit and reducing it
by $385 (the deductions authorized by the small claims court and not
12
challenged by De Stefano on appeal) and $598.46 (the charge for the
door replacement), then adding on $200 in punitive damages. Finally,
the district court awarded De Stefano $1160 in attorney fees because
Iowa Code section 562A.12(8) allows for the award of reasonable attorney
fees to the prevailing party. We granted both parties’ requests for
discretionary review and retained the appeal.
II. Standard of Review.
“In a discretionary review of a small claims decision, the nature of
the case determines the standard of review.” GE Money Bank v. Morales,
773 N.W.2d 533, 536 (Iowa 2009). Our review of small claims actions
tried at law is for correction of errors at law. Midwest Check Cashing,
Inc. v. Richey, 728 N.W.2d 396, 399 (Iowa 2007). “A review of statutory
construction is at law.” GE Money Bank, 773 N.W.2d at 536. The
district court’s factual findings, however, are binding upon this court if
supported by substantial evidence. Id.; Barnhill v. Iowa Dist. Ct., 765
N.W.2d 267, 272 (Iowa 2009). We review the district court’s award of
attorneys’ fees for abuse of discretion. GreatAmerica Leasing Corp. v.
Cool Comfort Air Conditioning & Refrigeration, Inc., 691 N.W.2d 730, 732
(Iowa 2005).
III. Preliminary Small Claims Court Jurisdictional Analysis.
A. Introduction. Apartments Downtown challenges the subject
matter jurisdiction of the small claims court. See Tigges v. City of Ames,
356 N.W.2d 503, 511 (Iowa 1984) (noting that “[s]ubject matter
jurisdiction should be considered before the court looks at other matters
involved in the case”). “Subject matter jurisdiction is the power ‘of a
court to hear and determine cases of the general class to which the
proceedings in question belong, not merely the particular case then
occupying the court’s attention.’ ” Klinge v. Bentien, 725 N.W.2d 13, 15
13
(Iowa 2006) (quoting Christie v. Rolscreen Co., 448 N.W.2d 447, 450 (Iowa
1989)). Jurisdiction over the subject matter of a claim must be conferred
by a constitutional or statutory grant. Id. “The parties themselves
cannot confer subject matter jurisdiction on the court.” Schott v. Schott,
744 N.W.2d 85, 87 (Iowa 2008).
At the outset, it is important to precisely define the legal issue
behind the subject matter jurisdictional challenge. The question is not a
broad, freewheeling, hermeneutic issue of the meaning of “amount in
controversy” or “cost.” Instead, the issue is narrow. The issue is
whether attorneys’ fees that may be awarded pursuant to the IURLTA
should be considered in determining whether the jurisdictional
limitations of small claims proceedings are exceeded when the issue is
not expressly addressed in the statutes.
B. Relevant Statutory Provisions. We begin our jurisdictional
analysis with an overview of relevant statutory provisions. The small
claims court has jurisdiction over those “civil action[s] for a money
judgment where the amount in controversy is . . . five thousand dollars
or less . . . exclusive of interest and costs.” Iowa Code §§ 631.1(1), .2(1)
(2011). 4 The legislature created this scheme for small claims because it
“thought it was in the public interest to provide a simpler, easier, and
less expensive procedure than was afforded in district court under the
Rules of Civil Procedure.” Barnes Beauty Coll. v. McCoy, 279 N.W.2d
258, 259 (Iowa 1979); see Iowa Legis. Ct. Study Comm’n, Report to 62d
Iowa General Assembly pt. I, at 4 (1967) (proposing to the legislature a
new court division that would hear claims using a “simple, expeditious,
and inexpensive” procedure).
4All Code references are to 2011 unless otherwise indicated.
14
In small claims court, no pleadings are required—a claimant can
begin an action by filling out a simple form. Iowa Code §§ 631.3, .7(1);
Barnes, 279 N.W.2d at 259. Jurisdiction over the case is determined at
the time set for the hearing of the small claim. Iowa Code § 631.9. If at
any time a claim is joined that is not a small claim, the small claims
court may order the entire action tried by regular procedure. Id.
§ 631.8(4). In the alternative, the court may separate the claims and try
the small claims itself while transferring the others to the district court.
Id.; see also Wilson v. Iowa Dist. Ct., 297 N.W.2d 223, 225 (Iowa 1980)
(noting that the small claims court properly ordered a case transferred
when “the amount in controversy on one side of the case exceeded [the
jurisdictional limit]” and the claims arose out of the same transaction).
Iowa Code chapter 631 does not provide a statutory definition of
“amount in controversy” or “costs.” There is a section in the chapter
stating that certain “fees and costs” shall be collected in advance by the
clerk of the district court. See Iowa Code § 631.6. The statute also
provides that these items “shall be assessed as costs.” Id. The items are
fees for filings, fees for service of notice, postage, and fees for personal
service. Id. The Code section simply lists items collected in advance by
the clerk which are later assessed as costs under the statute. Attorneys’
fees are not costs incurred in advance and later assessed in litigation,
and as a result, it is not surprising that attorneys’ fees are not mentioned
in this Code provision.
The IURLTA has a number of provisions related to attorneys’ fees.
Iowa Code section 562A.12(8) provides that “[t]he court may, in any
action on a rental agreement, award reasonable attorney fees to the
prevailing party.” Iowa Code section 562A.11 also has an attorneys’ fee
provision. “If a landlord willfully uses a rental agreement containing
15
provisions known by the landlord to be prohibited, a tenant may recover
actual damages sustained by the tenant and not more than three
months’ periodic rent and reasonable attorney fees.” Id. § 562A.11(2)
(emphasis added). This section distinguishes between actual damages
and attorneys’ fees that may be awarded by the district court.
C. Positions of the Parties. Apartments Downtown did not
challenge subject matter jurisdiction in either the small claims court or
on appeal in the district court. 5 It now maintains, however, that the
judgment below must be vacated because the amount in controversy
exceeded small claims jurisdiction as soon as De Stefano filed attorney
fee applications specifically requesting more than $280 on top of her
$4720 damage award.
De Stefano sees things differently. She contends that attorneys’
fees do not count against the $5000 jurisdictional limit in small claims
court. De Stefano has two theories for why attorneys’ fees do not count
against the jurisdictional limit. First, she urges the IURLTA specifically
authorizes attorneys’ fees. The IURLTA provides, “The court may, in any
action on a rental agreement, award reasonable attorney fees to the
prevailing party.” Id. § 562A.12(8). She looks to the IURLTA for support
for her attorneys’ fee argument.
Alternatively, however, De Stefano argues that the small claims
statute should be interpreted as excluding attorneys’ fees in determining
the amount in controversy. According to Iowa Code section 631.1(1), a
small claims action is a “civil action for money judgment where the
5Apartments Downtown did oppose De Stefano’s attorney fee applications on the
ground that they would result in an award in excess of small claims jurisdiction, but
prior to this appeal never asserted that the small claims court (or the district court on
appeal) had actually lost jurisdiction.
16
amount in controversy is . . . five thousand dollars or less . . . exclusive
of interest and costs.” De Stefano maintains the exclusion for “costs”
applies here because attorneys’ fees should be considered costs under
the statute. De Stefano further argues that, as a practical matter, judges
are reluctant to award attorneys’ fees in landlord–tenant actions, and in
any case such fees would rarely be awarded in amounts which would
cause the total to exceed $5000 except in cases of an egregious violation
of the IURLTA.
D. Caselaw from Other Jurisdictions. As indicated above, the
precise issue in this case is whether attorneys’ fees awarded pursuant to
the IURLTA should be considered for purposes of determining the
jurisdiction of small claims courts when the underlying statutes do not
expressly address the issue. There are a number of cases from other
states which address the question.
A leading case supporting the view that attorneys’ fees should not
be considered in determining the jurisdiction of New Jersey’s version of
small claims court is Lettenmaier v. Lube Connection, Inc., 741 A.2d 591
(N.J. 1999). In that case, the question was whether an award of
attorneys’ fees under a New Jersey consumer fraud statute should be
considered as part of the amount in controversy in New Jersey’s version
of small claims court. Id. at 591. The New Jersey Supreme Court,
among other things, pointed to the underlying provision of the consumer
fraud statute, which grouped attorneys’ fees with “filing fees and costs.”
Id. at 594. In addition, the Lettenmaier court noted that “a majority of
the out-of-state cases which have addressed the issue have held that
counsel fees, not otherwise characterized, are to be considered as costs.”
Id. at 595.
 17
Interestingly, the Lettenmaier court cited two Iowa cases as
standing for the proposition that attorneys’ fees cannot be considered in
determining whether jurisdictional limits have been exceeded because
attorneys’ fees are “separate and distinct” events that cannot be assessed
before liability is established. Id. (citing Ayala v. Ctr. Line, Inc., 415
N.W.2d 603 (Iowa 1987); Maday v. Elview-Stewart Sys., Co., 324 N.W.2d
467 (Iowa 1982)). The Lettenmaier court distinguished federal diversity
cases where the question is whether attorneys’ fees should be considered
in order to reach the jurisdictional minimum. Id. The court noted that
the analogy to federal diversity cases “loses its persuasive power entirely
when it is applied to circumscribe a litigant’s access to a court that is
especially suited to his or her claims.” Id. at 596.
The Lettenmaier court also considered practical implications of a
contrary rule. The court noted that plaintiffs seeking a quick and
relatively inexpensive resolution in small claims courts could face
defense tactics of piling on attorneys’ fees to exceed the jurisdictional
maximum. Id. More importantly, the court feared that including
attorneys’ fees as part of the amount in controversy would put plaintiffs
in the position of foregoing counsel fees in order to maintain the
expedited process. Id.
A case from the Ohio Court of Appeals also supports leaving
attorneys’ fees out of the “amount in controversy” for jurisdiction—Drake
v. Menczer, 425 N.E.2d 961 (Ohio Ct. App. 1980). This case involved a
small claim brought under the Ohio Landlords and Tenants Act (OLTA),
Ohio Revised Code chapter 5321. Id. at 962. Like Lettenmaier, the
Drake court noted that “[t]raditionally, when a statute authorizes the
award of attorneys’ fees, it does so by allowing the fees to be taxed as
costs.” Drake, 425 N.E.2d at 963. The Drake court also focused on the
18
language of the OLTA, noting that its fee-shifting provisions provided for
“actual damages together with reasonable attorneys’ fees.” Id. (quoting
Ohio Rev. Code Ann. § 5321.02). The Ohio court concluded that the
legislature intended damages and attorneys’ fees to be separate items,
and attorneys’ fees should be taxed as costs. Id. at 964; see also Bittner
v. Tri-Cty. Toyota, Inc., 598 N.E.2d 925, 928 (Ohio Mun. Ct. 1992)
(attorneys’ fees arising from consumer protection statute are considered
costs and not damages for purposes of jurisdictional limitation in
municipal courts).
In Arabian v. Kearns, the Oregon appellate court considered
whether attorneys’ fees should be considered in determining the amount
in controversy under an Oregon small claims statute. 667 P.2d 1038,
1039 (Or. Ct. App. 1983) (en banc). The Oregon court concluded that
attorneys’ fees should not be included in determining the jurisdictional
limit. Id. at 1040. Among other reasons, the Oregon court stressed that
attorneys’ fees are not a matter of proof during trial, but are instead
determined after trial and are procedurally treated like costs and
disbursements. Id. This reasoning is close to that in Lettenmaier, where
the New Jersey Supreme Court relied on Iowa cases making that point.
A Wisconsin appellate court considered the issue in Reusch v.
Roob, 610 N.W.2d 168 (Wis. Ct. App. 2000). In that case, the Wisconsin
appellate court considered whether statutory attorneys’ fees awarded
under a Wisconsin consumer protection statute should be included for
purposes of determining the jurisdiction of a small claims court. Id. at
178. The Reusch court concluded that statutory attorneys’ fees should
not be included. Id. at 179. The court reasoned that the attorneys’ fees
awarded pursuant to consumer protection statutes were not designed to
19
compensate victims for damages but instead to compensate attorneys for
their services. Id.
The Reusch case was cited with approval by the Wisconsin
Supreme Court in Roehl Transport, Inc. v. Liberty Mutual Insurance Co.,
784 N.W.2d 542 (Wis. 2010). In a footnote, the Wisconsin Supreme
Court, citing prior precedent, noted the “subtle but significant difference
between attorney[s’] fees attributable to bringing a lawsuit and those
recoverable as damages resulting from a tort.” Id. at 572 n.65. The
court emphasized that attorneys’ fees attributable to bringing a lawsuit
are “intended to compensate the attorneys, whereas [damages are]
intended to compensate the victims.” Id.
There are cases that seem to stand for the contrary. For example,
Texas courts have generally held that in determining the amount in
controversy for jurisdictional purposes, actual damages, exemplary
damages, and attorneys’ fees are included. See Villarreal v. Elizondo, 831
S.W.2d 474, 476 (Tex. App. 1992). This rule is qualified, however, by the
notion that a plaintiff may seek additional damages exceeding the
jurisdictional limits if they have occurred as a result of the passage of
time. Id. Similarly, in Pinnacle Properties v. Saulka, an Indiana appellate
court held that attorneys’ fees should be included in determining the
amount sought for purposes of determining the jurisdiction of a small
claims court. 693 N.E.2d 101, 106 (Ind. Ct. App. 1998). The Indiana
court noted that the small claims statute did not explicitly distinguish
between attorneys’ fees and damages. Id.
E. Iowa Caselaw. There is no Iowa caselaw directly on point on
the narrow jurisdictional question presented here. There are two cases,
however, that were cited by Lettenmaier that may have bearing on the
20
question of whether attorneys’ fees should be considered in determining
the amount in controversy for purposes of jurisdictional limitations.
In Maday, we considered a question of attorneys’ fees in the
context of Iowa Code chapter 91A, the Wage Payment Act. 324 N.W.2d at
468. The precise question posed was whether attorneys’ fees should be
determined by a judge or jury in proceedings brought under the statute.
Id. at 469. In Maday, we sided with authorities treating statutory
allowance of attorneys’ fees as costs logically assessable by the court. Id.
at 469–70.
We reached a similar result in Ayala. There, the question was
whether a judge or jury should determine an award of attorneys’ fees
under the Iowa Civil Rights Act. Ayala, 415 N.W.2d at 604. We observed
that “an award of attorney fees is more in the nature of an equitable
remedy than an award of actual damages.” Id. at 605. We further noted
the assessment of attorneys’ fees, like the assessment of court costs,
cannot be done until liability is established. Id. at 606. We therefore, as
in Maday, determined the question of attorneys’ fees should be handled
in the same manner as costs, namely, decided by the court after trial of
the underlying matter. Id.
We have also considered whether costs includes attorneys’ fees in
significantly different contexts than what we face in this case. For
instance, in Weaver Construction Co. v. Heitland, we held that the term
“costs” in Iowa Code chapter 677 could not be interpreted as including
attorneys’ fees. 348 N.W.2d 230, 233 (Iowa 1984). Similarly, in Turner v.
Zip Motors, we held that the use of the term “costs” in Iowa Code section
625.1 should not be interpreted to include attorneys’ fees. 245 Iowa
1091, 1100, 65 N.W.2d 427, 432 (1954). These cases, however, deal with
the question of whether the term “cost” or “costs” is sufficient to create a
21
substantive fee-shifting provision contrary to the ordinary American rule
that each party bears the expense of fees charged by their attorneys.
These cases simply do not address the question of whether a reference to
costs in a jurisdictional statute includes attorneys’ fees when there is a
separate statutory authority to shift the costs of attorneys’ fees to the
other party.
F. Analysis. In interpreting section 631.1, we begin with the
statutory language. See In re Marriage of Thatcher, 864 N.W.2d 533, 538
(Iowa 2015). “Words or phrases that are undefined in the statute or for
which there is no established legal meaning are given their common,
ordinary meaning in the context within which they are used.” Bank of
Am., N.A. v. Schulte, 843 N.W.2d 876, 880 (Iowa 2014). If the statute is
unambiguous, we will look no further than the language chosen by the
legislature. In re J.C., 857 N.W.2d 495, 500 (Iowa 2014). “Under the
pretext of construction, we may not extend a statute, expand a statute,
or change its meaning.” Bank of Am., 843 N.W.2d at 880.
Yet, we have cautioned that courts “should be circumspect
regarding narrow claims of plain meaning and must strive to make sense
of [a statute] as a whole.” Rolfe State Bank v. Gunderson, 794 N.W.2d
561, 564 (Iowa 2011). The meaning of language is often not self-evident.
“Whether or not the words of a statute are clear is itself not always
clear.” Barbee v. United States, 392 F.2d 532, 535 n.4 (5th Cir. 1968).
When a statute is ambiguous, we may look to a wide variety of intrinsic
and extrinsic aids to discover the meaning of the legislative language.
State v. McIver, 858 N.W.2d 699, 704 (Iowa 2015). We recognize,
however, that use of various resources and interpretive aids do not
mechanically and automatically produce inescapable answers. See 2A
22
Norman J. Singer & Shambie Singer, Statutes and Statutory Construction,
§ 45.13, 137–38 (7th ed. rev. 2014).
We have little trouble noting that the meaning of the terms
“amount in controversy” and “costs” for purposes of determining the
limits of small claims jurisdiction under Iowa Code section 631.1 cannot
be resolved by simply declaring a plain meaning. Both terms are open-
textured and can include and exclude a wide variety of items, depending
on context. The ambiguity of the statutory terms is demonstrated by
legislative usage. In some contexts, the legislature has expressly said
that costs includes attorneys’ fees. For example, Iowa Code section
6B.33 authorizes payment of all costs in appeals of condemnation
proceedings “including reasonable attorney fees.” 6 In other contexts, the
6See, e.g., Iowa Code § 207.14(5) (2015) (allowing court to assess “all reasonable
costs and expenses, including reasonable attorney fees” in administrative proceeding
regarding coal mining inspection); id. § 421B.10 (awarding “costs of suit, including
reasonable attorney fees” to plaintiffs for established violations of cigarette sales
statutes); id. § 455B.111(4) (authorizing award of costs including attorney fees to any
party in action for natural resources statute violations); id. § 501A.801(4)(h) (allowing
court to order payment of “party’s reasonable costs, including reasonable attorney fees”
in suits over the inspection of business records); id. § 504.1604(3) (requiring any court
ordering nonprofit corporation to allow the inspection of its records by a member to also
“pay the member’s costs, including reasonable attorney fees”); id. § 507C.46(2) (stating
that any applicant for assets in insurer liquidation “shall pay the costs and expenses of
the liquidator in resisting the application including a reasonable attorney fee”); id.
§ 533C.705 (assessing costs including reasonable attorney fees against persons who
violate the Uniform Money Services Act); id. § 535B.13(3) (allowing court to order that
unlicensed banker “pay the costs for the investigation and prosecution of the
enforcement action including attorney fees”); id. § 552A.5(3) (stating that persons
injured by violations of statutory prescriptions for sale of club memberships may
recover “costs, including reasonable attorney fees”); id. § 553.12(4) (allowing injured
person or state to “[r]ecover the necessary costs of bringing suit, including a reasonable
attorney fee” under Iowa competition law); id. § 598.24 (levying costs, including attorney
fees against a party in contempt in a divorce proceeding); id. § 600B.25 (allowing court
to award prevailing party in a paternity suit “the reasonable costs of suit, including but
not limited to reasonable attorney fees”); id. §§ 633.551(5), .673 (assessing the costs,
including attorney fees, of a guardianship against ward or ward’s estate); id.
§ 633A.4507 (permitting court to award costs including reasonable attorney fees to any
party in a proceeding on the administration of a trust); id. § 654.17(2) (allowing
mortgagee to charge mortgagor “the costs, including reasonable attorney fees, of
23
legislature had declared that the court may tax “as costs” a reasonable
attorney fee. For instance, in Iowa Code section 625.22 the general
assembly provided that “[w]hen judgment is recovered upon a written
contract containing an agreement to pay an attorney fee, the court shall
allow and tax as part of the costs a reasonable attorney fee to be
determined by the court.” 7 This legislative language plainly suggests
that, at least in some contexts, the simple term “costs” is broad enough
to include attorney fees.
Yet, in other statutes, the legislature has referred to attorneys’ fees
and costs as separate and distinct items. 8 In addition, although the
_________________________
foreclosure and rescission”); id. § 714.16(11) (entitling attorney general to recover costs
of court action, including reasonable attorneys’ fees, in consumer fraud action); id.
§ 714.16B(1)(b)(3) (providing for recovery of attorney fees as part of reasonable costs of
bringing a civil action for identity theft); id. § 715A.2A(3)(b) (assessing against any
employer that accommodates fraud the costs of an enforcement action including
attorney fees).
7See, e.g., Iowa Code § 202B.401(2)(b) (2015) (awarding attorney fees that are
“taxed as part of the costs of the action” to parties prevailing in actions for agricultural
processing violations); id. § 202C.3(1) (taxing attorney fees as part of the costs of a legal
action for breaching a sales agreement); id. § 257B.33 (awarding compensation for
attorney fees to be taxed as costs in actions by school boards to recover debts); id.
§ 327D.16 (allowing court to tax as “costs in the case,” the costs of suit and a
reasonable attorney fee); id. § 479.46(6) (prescribing that pipeline company pay all costs
of appealing an assessment of installation damages “including reasonable attorney fees
to be taxed by the court”); id. § 479B.30(6) (same for construction damages); id.
§ 502.509(5) (awarding attorney fees taxed as court costs to clients maintaining actions
against unregistered investment advisers); id. § 573.21 (allowing court to tax, as costs,
attorney fees for parties establishing a claim for labor or materials on public
improvements); id. § 717A.3(2)(b) (awarding “reasonable attorney fees, which shall be
taxed as part of the costs of the action,” to prevailing plaintiffs in actions for damage to
crops); Iowa R. Civ. P. 1.1225 (“On partition of real estate, but not of personal property,
the court shall fix, and tax as costs, a fee in favor of plaintiff’s attorney . . . .”).
8See, e.g., Iowa Code § 21.6(3)(b) (2015) (requiring a court to “order the payment
of all costs and reasonable attorney fees” to a person prevailing on an open meetings
claim); id. § 22.10(3)(c) (providing that a court shall “order the payment of all costs and
reasonable attorney fees” to a person prevailing on an open records claim); id.
§ 80A.16A(2) (authorizing costs and reasonable attorney fees as part of recovery for
persons injured by actions of bail enforcement agents); id. § 91A.8 (making an employer
that intentionally fails to pay wages liable for “court costs and any attorney’s fees
incurred in recovering the unpaid wages”); id. §§ 216.15(9)(a)(8), .17A(6)(11) (allowing
24
context is different, we have not interpreted the word “costs” when used
alone in a statute to be inclusive of attorney fees. See Weaver, 348
_________________________
plaintiff in discriminatory housing or wage action to recover reasonable attorney’s fees
and court costs); id. § 217.31 (providing that any entity that disseminates confidential
records is liable for “court costs, expenses, and reasonable attorney fees”); id.
§ 252B.13A(1) (stating that child “support payments do not include attorney fees [or]
court costs”); id. § 252K.313(3) (“The tribunal shall order the payment of costs and
reasonable attorney’s fees if it determines that a hearing was requested primarily for
delay.”); id. § 322G.8(3) (allowing consumer to recover pecuniary loss, “reasonable
attorney’s fees, and costs” in action over defective motor vehicle); id. § 327C.21
(permitting court to “render judgment for costs, and attorney’s fees for counsel
representing the state” in actions against railroads for violations of duties owed to the
public); id. § 502.509(2)(c), (3)(c) (permitting award of costs and reasonable attorney fees
in securities actions); id. § 523D.7(1) (permitting recovery of “court costs and reasonable
attorney fees” from provider of continuing care for violations of chapter 523D); id.
§ 523H.13 (creating liability for both costs and reasonable attorney fees for violators of
chapter regarding franchises); id. §§ 535.8(4)(d), .11(8) (allowing for recovery of both
costs and attorney fees from lender or creditor who collects an unlawful charge); id.
§ 535A.6(2) (permitting court to award actual damages, court costs, and attorney fees if
financial institution committed a “red-lining” violation); id. § 537.3621 (authorizing a
consumer’s recovery of attorney fees and court costs); id. § 551A.8 (authorizing awards
of reasonable attorney fees and court costs for violations of disclosure in business
opportunity promotions); id. § 572.32(1) (permitting prevailing plaintiff to recover
reasonable attorney fees in action to enforce mechanic’s lien); id. § 598B.312(1)
(awarding to prevailing parties seeking child support costs and attorney fees along with
other expenses of proceedings); id. § 633.713(4) (stating that court may assess expenses
including attorney fees and court costs against party engaging in unjustifiable conduct
regarding guardianship proceeding); id. § 649.5 (permitting court to “assess, in addition
to the ordinary costs of court, an attorney fee” to a successful plaintiff in an action to
quiet a title); id. § 663A.1(6)(a) (listing as part of the damages recoverable by a
wrongfully imprisoned person “court costs imposed and paid and any reasonable
attorney’s fees”); id. § 685.3(6)(b) (enabling recovery of “litigation costs and reasonable
attorney fees” by certain whistleblowers); id. § 692.6 (making entities disseminating
criminal history information in violation of chapter liable for “court costs, expenses, and
reasonable attorney fees”); id. § 714B.8(2) (providing for recovery of “[c]osts and
reasonable attorney fees” when a person suffers pecuniary loss because of a violation of
the prize promotion law); id. § 714D.6(1)(c) (allowing for recovery of “[c]osts and
reasonable attorney fees” in an action by a consumer against a telecommunications
provider for fraud); id. § 714G.11 (permitting attorney general to seek “a monetary
award for civil penalties, attorney fees, and costs” for consumer credit violations); id.
§ 729.6(8) (awarding as part of relief to an aggrieved party under genetic testing laws
attorney fees and court costs); id. § 729A.5 (providing that hate crime victims may bring
an action for “reasonable attorney fees[] and costs”); id. § 809A.12(7) (requiring agency
bringing forfeiture action to pay reasonable attorney fees and costs); id. § 910.2(1)
(listing “court costs” and the “court-appointed attorney fees” as separate charges to be
payable by any convicted offender).
25
N.W.2d at 233 (“We do not agree, however, that the word ‘costs’ [in
chapter 677] should be so liberally stretched as to include attorney
fees.”); Turner, 245 Iowa at 1100, 65 N.W.2d at 432 (“[Section 625.1] has
always been held to mean the ordinary costs, not including attorney
fees.”).
We should be careful not to extrapolate too much from the
foregoing statutes and authorities. They do suggest, however, that the
threshold test of ambiguity has been crossed and that we may resort to
interpretive tools to guide us in determining the narrow issue presented
here. 9
In order to aid us in determine the meaning of costs in the small
claims statute where a substantive statute authorizes the payment of
attorneys’ fees, we turn to historical precursors of our current small
claims statute. Before the passage of the Unified Trial Court Act in
1972—1972 Iowa Acts chapter 1124—Iowa had justice-of-the-peace
courts with limited amount-in-controversy jurisdiction. See Iowa Code
§§ 602.1–.56 (1971). The legislature created the small claims division of
the Iowa district courts to replace the justice-of-the-peace courts and the
other inferior courts that had previously resolved small civil disputes.
Suzanne E. Elwell & Christopher D. Carlson, The Iowa Small Claims
Court: An Empirical Analysis, 75 Iowa L. Rev. 433, 453–60 (1990)
[hereinafter Elwell]. Under the former system, we viewed contractual
9Prior
to 1980, contractual attorneys’ fees were a percentage of the recovery.
See Iowa Code § 625.22 (1979) (authorizing court to tax as costs an attorney fee set as a
percentage of the amount recovered). Thereafter, courts were authorized to award
reasonable attorneys’ fees. See Iowa Code § 625.22 (1981) (authorizing court to award a
reasonable attorney fee). One could argue that once courts were given authority to
determine reasonable attorneys’ fees, it no longer became possible to tax them in the
same mechanical manner that costs were taxed. Yet the “tax” terminology remained in
the statute.
26
attorneys’ fees as equivalent to costs for amount-in-controversy purposes
and thus excluded them in computing the jurisdictional limit:
One question certified and argued seems properly to arise
from the record, and is of a determinative character; and
that is, as to whether, in determining the jurisdiction of the
justice, where a question is made as to the amount in
controversy, an attorney’s fee provided for in the note is to be
considered a part of the amount in controversy, or treated as
costs.
The statute expressly declares that it shall be treated
as a part of the costs. Section 2 of act above cited. The
amount in controversy, then, was not more than $100, and
the justice had jurisdiction.
Spiesberger Bros. v. Thomas, 59 Iowa 606, 609, 13 N.W. 745, 746 (1882).
Fifty years later, we reiterated this point:
[W]e know of no case holding that in determining the
question of jurisdiction, the prayer for costs is taken into
consideration in determining the amount in controversy.
The right to recover costs is a statutory one, and an incident
of the litigation. It is equally true that contracts may provide
for attorney’s fees, and courts have recognized the right to so
provide; but the statute provides they should be taxed as a
part of the costs. The amount thereof is fixed by statute,
and therefore is not a matter of controversy between the
parties. They are in the same category as any other
statutory costs incident to litigation, and cannot be taken
into consideration in determining the amount in controversy
between the parties. In other words, the claim of $50 for
attorney’s fees made by the plaintiff is simply a claim for
costs, the same as for any other costs incident to the
litigation.
Johnson v. Boren, 215 Iowa 453, 455–56, 245 N.W. 711, 712–13 (1932).
Given that the 1972 legislation did not explicitly address how
attorneys’ fees were to be handled for jurisdictional amount purposes,
apart from stating that costs should be excluded, we think it is fair to
infer the general assembly intended a continuation of prior law. See
Iowa Farm Bureau Fed’n v. Envtl. Prot. Comm’n, 850 N.W.2d 403, 434
(Iowa 2014) (“The legislature is presumed to know the state of the law,
27
including case law, at the time it enacts a statute.” (quoting Welch v.
Iowa Dep’t of Transp., 801 N.W.2d 590, 600 (Iowa 2011))). The cost
exclusion for jurisdictional amount purposes therefore would extend to
contractual attorneys’ fees.
Of course, this does not directly answer the question of how
noncontractual attorneys’ fees should be treated. The existence of “a
written contract containing an agreement to pay an attorney’s fee” upon
which a judgment has been recovered is a clear condition precedent to
the application of section 625.22. See, e.g., Bankers Trust Co. v. Woltz,
326 N.W.2d 274, 277–78 & n.4 (Iowa 1982) (applying section 625.22 to a
surety contract). So, section 625.22 does not apply here.
We have previously stated, however, that statutory, noncontractual
attorneys’ fees are likewise taxed and treated as costs:
When a statute provides for attorney fees but is silent as to
their ascertainment, we find the better rule to be that
“[w]here attorneys’ fees are allowed to the successful party,
they are in the nature of costs and are taxable and treated as
such.”
Maday, 324 N.W.2d at 469 (quoting 20 Am. Jur. 2d Cost § 72 (1965));
see also Ayala, 415 N.W.2d at 605. As indicated above, Maday and
Ayala were cited in Lettenmaier in support of its holding that attorneys’
fees are not included within the amount in controversy for purposes of
determining the jurisdictional limits of small claims courts.
As noted above, prior to the 1972 Unified Court Act, we had made
clear that because contractual fees were taxed as costs, they were
therefore excluded from the amount-in-controversy calculation. Since
other attorneys’ fees authorized by statute are likewise taxed as costs, it
seems incongruous they would be treated differently—i.e., deemed part of
the amount in controversy. This would go against the holdings of
28
Spiesberger and Johnson that amounts taxed as costs do not count
against the jurisdictional limit. Johnson, 215 Iowa at 455–56, 245 N.W.
at 712–13; Spiesberger, 59 Iowa at 608, 13 N.W. at 746. Treating such
fees as costs for section 631.1 purposes avoids a seemingly odd situation
where attorneys’ fees sometimes would and sometimes would not count
toward the amount in controversy, depending on the basis for those fees.
Further, we think the reasoning contained in the out-of-state
caselaw declining to include attorneys’ fees awarded pursuant to statute
in determining the limits of small claims jurisdiction is persuasive. As
pointed out in Reusch, the purpose of statutory fees is not to compensate
plaintiffs for their damages, but to compensate attorneys. 610 N.W.2d at
179. This reasoning suggests that an award of statutory attorneys’ fees
should not be included for small claims jurisdictional purposes. See id.
As suggested in Lettenmaier and Arabian, the fact that statutory
attorneys’ fees are ordinarily not determined by the fact finder, but are
treated like other costs, indicates that when there is a statutory basis for
awarding attorneys’ fees they should be treated as costs and not as an
amount in controversy under a small claims statute. See Lettenmaier,
741 A.2d at 596; Arabian, 667 P.2d at 1040. Further, the Lettenmaier
court looked to the underlying fee-shifting statute, noting that attorneys’
fees were grouped with filing fees and costs. Lettenmaier, 741 A.2d at
594; see also Drake, 425 N.E.2d at 963–64 (looking to language of
underlying fee-shifting statute to determine if attorneys’ fees are to be
included in determining small claims jurisdiction). Here, the underlying
statute clearly distinguishes between damages and attorney fees. Iowa
Code § 562A.12(3), (7), (8).
We acknowledge that the treatment of costs under the federal
diversity statute seems inconsistent with our view at first blush. Under
29
the federal diversity statute, federal courts have jurisdiction over
disputes between citizens of different states when the amount in
controversy exceeds $75,000, “exclusive of interest and costs.” 28 U.S.C.
§ 1332 (2012). Contractual and statutory attorneys’ fees generally count
against the jurisdictional limit, see 14AA Charles A. Wright et al., Federal
Practice and Procedure § 3712, at 806–12 (2011), and our legislature
employed the same phrase—“exclusive of interest and costs”—in the
Unified Court Act in 1972. 1972 Iowa Acts ch. 1124, § 60 (codified at
Iowa Code § 631.1 (1973)). Yet, as noted in Lettenmaier, including
attorneys’ fees against the jurisdictional limit in the context of the federal
diversity statute is designed to expand access to the federal court for
substantial cases, not contract access to small claims court where
matters are efficiently and expeditiously resolved. 741 A.2d at 596.
We recognize that small claims court is meant to provide a simple
and streamlined judicial process with limited dollar amounts at stake.
See Barnes, 279 N.W.2d at 259. Attorneys’ fees, unlike traditional court
costs and interest, can have a substantial impact on financial risks
posed by the litigation. If attorneys’ fees are not included in calculating
the small claims jurisdictional limits, fee shifting can have the effect of
significantly raising defendants’ exposure.
There can be little question, however, that landlord–tenant
disputes are ordinarily the kind of dispute that should be resolved in
small claims court. Tenants are generally quite mobile, and drawn-out
proceedings could impair the ability of tenants to vindicate their
statutory rights. Small claims court will often be the most preferable
forum.
30
Yet, without a lawyer, it will often be very difficult for tenants to
litigate these small claims. 10 This case is a good example of the kind of
case that simply could not realistically have been prosecuted by student
tenants on a pro se basis. We want to encourage the use of small claims
procedure for landlord–tenant disputes, not put the preferred forum at
risk simply because tenants are represented by competent and zealous
counsel.
For all the reasons stated above, we are persuaded that the
exclusion of costs in Iowa Code section 631.1 applies to amounts “taxed
as costs,” i.e., attorneys’ fees when separately authorized. Accordingly,
the small claims court had jurisdiction to hear this case. Our opinion is
limited to section 631.1 and should not be taken as expressing a view
that when the term “costs” is used in other contexts, it encompasses
attorneys’ fees.
IV. Duties of Landlord and Tenant Regarding Damaged
Exterior Door.
A. Development of the Implied Warranty of Fitness and
Habitability.
1. Historical overview. The law related to landlord–tenant
relationships has evolved over time. For centuries, landlord–tenant law
was governed by property law. See Russell E. Lovell, The Iowa Uniform
Residential Landlord and Tenant Act and the Iowa Mobile Home Parks
Residential Landlord and Tenant Act, 31 Drake L. Rev. 253, 256–57
(1981) [hereinafter Lovell]; see also Mease v. Fox, 200 N.W.2d 791, 793
10According to one source, landlords are represented by counsel in twenty-five
percent of the small claims cases. See Elwell, 75 Iowa L. Rev. at 471. Consultation
with attorneys appears to occur between thirty-four percent for plaintiffs and thirty-one
percent for defendants in tenant claims. Id. at 490, Table J.
31
(Iowa 1972). The right to possess land for agricultural purposes was
thought to be at the heart of the transaction, and as a result, the
landlord had no obligation to repair structures located on the property.
See Mease, 200 N.W.2d at 793. Further, the common law recognized an
independent doctrine under which the tenant’s obligation to pay rent was
independent of the landlord’s obligation to the tenant. Donald E.
Campbell, Forty (Plus) Years After the Revolution: Observations on the
Implied Warranty of Habitability, 35 U. Ark. Little Rock L. Rev. 793, 796–
97 (2013) [hereinafter Campbell].
With industrialization and urbanization, however, common law
courts began to take a second look at the traditional no-repair doctrine.
See id. at 797. In the modern age, many landlord–tenant relationships
involved residences in which the core interest of the tenant was
appropriate living space, not sprawling land for crop production. See id.
at 799. While the yeoman farmer could generally maintain land for
agricultural purposes as well as the landlord, modern city dwellers
lacked the ability to make necessary repairs of residential property. See
Lovell, 31 Drake L. Rev. at 259. Further, many courts noted the
disparity of bargaining power between landlords and tenants. See, e.g.,
Knight v. Hallsthammar, 623 P.2d 268, 271 (Cal. 1981) (en banc); Park
W. Mgmt. Corp. v. Mitchell, 391 N.E.2d 1288, 1292 (N.Y. 1979).
As a result of these changed social and economic circumstances,
courts began to change the prevailing legal regime surrounding the
landlord–tenant relationship. Many courts departed from the traditional
no-repair rule through implying what was labeled a warranty of fitness
and habitability in a residential lease. By the early 1970s, a majority of
state courts, including Iowa, provided common law protection for
residential tenants to ensure habitability of the premises. See, e.g.,
32
Mease, 200 N.W.2d at 796 (citing cases). These cases abandoned the
doctrine of independency and imposed mutual obligations whereby the
landlord’s right to receive rent was inseparable from the landlord’s
obligation to provide a fit and habitable premises.
2. Eclectic analytic underpinnings of doctrine. The analytic bases
for the implied warranty of habitability were eclectic. Some courts drew
an analogy to contract law in general and the implied warranties under
the Uniform Commercial Code (UCC) in particular. See, e.g., Javins v.
First Nat’l Realty Corp., 428 F.2d 1071, 1075 (D.C. Cir. 1970); Park W.,
391 N.E.2d at 1292; Mary Ann Glendon, The Transformation of American
Landlord–Tenant Law, 23 B.C. L. Rev. 503, 547 (1982) [hereinafter
Glendon]. This conceptualization had the merit of freeing landlord–
tenant law from the law of property, but as some have observed, it is a
“strained one” and has a “small resemblance” to implied warranties in
the sale of goods. Campbell, 35 U. Ark. Little Rock L. Rev. at 829–30,
830 n.208; Glendon, 23 B.C. L. Rev. at 546–47.
Indeed, the common law implied warranty of habitability has a
number of features materially different from contractual theory and the
UCC. Unlike under the UCC, the common law warranty of implied
habitability ordinarily applies even when the defects are obvious to the
tenant at the time of “sale” and even though the tenant reasonably could
have discovered the defect by inspection. See Glendon, 23 B.C. L. Rev.
at 547 & n.285. The UCC allows “as is” transactions, while the majority
of courts refuse to allow “as is” transactions in a residential lease as
contrary to the implied warranty of habitability. See id. at 547
& nn.286–88. The buyer under the UCC has the choice of rejecting the
goods or keeping them and suing for damages, while under the implied
warranty of habitability the tenant may stay in possession and still not
33
pay rent. See id. at 547 & nn.289–90. In addition, the landlord–tenant
relationship is an ongoing relationship. Thus, the analogy comparing the
implied warranty of habitability with contract law or the UCC has limited
utility and may well be “misnamed.” See Edward H. Rabin, The
Revolution in Residential Landlord–Tenant Law: Causes and
Consequences, 69 Cornell L. Rev. 517, 521 (1984) [hereinafter Rabin].
See generally Campbell, 35 U. Ark. Little Rock L. Rev. at 829–31;
Glendon, 23 B.C. L. Rev. at 547–48.
Further, the common law warranty of habitability is implied in law,
not in fact. Kline v. Burns, 276 A.2d 248, 252 (N.H. 1971). The doctrine
just does not rest on the unstated expectations of the parties, or even
one of them, but rather on public interests in health and safety. See
Campbell, 35 U. Ark. Little Rock L. Rev. at 829–31; Glendon, 23 B.C. L.
Rev. at 547–48. As a doctrine, implied in law is more in the domain of
public law than private ordering. See Berman & Sons, Inc. v. Jefferson,
396 N.E.2d 981, 986 n.11 (Mass. 1979) (noting implied warranty caselaw
removing the landlord’s duty from the “realm of private ordering”); see
also Glendon, 23 B.C. L. Rev. at 505.
Aside from theory, a review of the cases demonstrates the public
law aspects of the common law implied warranty of habitability. One of
the important underlying impetuses of the development in the common
law of the implied warranty was the public policy embraced in the
enactment of housing codes by state and local authorities to protect
tenants and ensure a safe and sanitary housing stock. 11 See Javins, 428
11Although the legislative policy behind housing codes—promoting safe and
healthy housing—is clear, the housing codes were an ineffective means of advancing the
policy. Code enforcement has often been lax if not inconsistent, and the sanctions for
violations have been characterized as comparatively mild. Joel R. Levine, The Warranty
of Habitability, 2 Conn. L. Rev. 61, 73 (1969). According to one commentator,
34
F.2d at 1080 (finding housing code requires warranty of habitability be
implied); Boston Housing Auth. v. Hemingway, 293 N.E.2d 831, 840
(Mass. 1973) (emphasizing role of housing codes in stimulating common
law development); Pines v. Perssion, 111 N.W.2d 409, 412–13 (Wis. 1961)
(following old rule of caveat emptor is “inconsistent with the current
legislative policy regarding housing standards”). See generally Glendon,
23 B.C. L. Rev. at 505. As a result, it is not surprising that the leading
cases establishing an implied warranty of habitability repeatedly justify
the rule by reference to the public interest. See Foisy v. Wyman, 515
P.2d 160, 164 (Wash. 1973) (en banc) (“We believe this type of bargaining
by the landlord with the tenant is contrary to public policy and the
purpose of the doctrine of [the] implied warranty of habitability.”). See
generally Lawrence Berger, The New Residential Tenancy Law—Are
Landlords Public Utilities?, 60 Neb. L. Rev. 707 (1981); Roger A.
Cunningham, The New Implied and Statutory Warranties of Habitability in
Residential Leases: From Contract to Status, 16 Urb. L. Ann. 3 (1979)
[hereinafter Cunningham].
3. Remedies by tenants for breaches of implied warranty of
habitability. Once courts determined that an implied warranty of
habitability existed as a matter of substantive law, questions of remedy
inevitably arose. One strand of cases involved the ability of tenants to
make necessary repairs and then recover the reasonable cost of labor
and materials from the landlord. For instance, in Pines, the court held
_________________________
“[h]ousing code enforcement has been notoriously unsuccessful.” Id. Common law
courts adopted the implied warrant of habitability to advance the policies behind
housing codes by offering a potentially more effective remedy. Creating a private right
of action for violation of public wrongs has solid legal provenance. See Altz v. Lieberson,
134 N.E. 703, 704 (N.Y. 1922) (Cardozo, J.); Ezra Ripley Thayer, Public Wrong and
Private Action, 27 Harv. L. Rev. 317, 320 (1914).
35
that tenants were entitled to the return of rental deposits plus the costs
of labor for making such repairs. 111 N.W.2d at 413. Similarly, in
Marini v. Ireland, the court approved a recovery when the tenant repaired
a cracked toilet and associated water leak. 265 A.2d 526, 528, 535 (N.J.
1970). In Jackson v. Rivera, a case that is somewhat similar to the facts
of this dispute, the court considered a similar tenant repair remedy, but
found, as a matter of fact, that the tenant failed to prove that she paid a
certain sum for a new front door and had been required to pay for a
window not broken by her. 318 N.Y.S.2d 7, 11 (Civ. Ct. 1971). The
notion the tenant may, under some circumstances, perform the repairs
needed to bring housing into compliance with the implied warranty is
well-established in the caselaw.
4. Development of Iowa common law implied warranty of
habitability. In Fetters v. City of Des Moines, we observed that “the rule
of caveat emptor ordinarily applies as between lessor and lessee.” 260
Iowa 490, 496, 149 N.W.2d 815, 819 (1967), overruled in part by Mease,
200 N.W.2d at 794, 796. Five years later, however, in Mease, we
embarked on a new course notwithstanding the landlord’s stentorian
proclamation that a departure from precedent would “wreck our way of
life.” 200 N.W.2d at 797. Iowa then embraced a common law implied
warranty of fitness and habitability in residential leases in Mease. Id. at
796.
In holding that every lease implied a warranty of habitability, we
relied on the seminal case of Javins. Id. at 795. 12 We noted that the
12Javins has been compared to Goldberg v. Kelly, 397 U.S. 254, 90 S. Ct. 1011,
25 L. Ed. 2d 287 (1970), in its importance to protecting low-income people. See David
A. Super, The Rise and Fall of the Implied Warranty of Habitability, 99 Cal. L. Rev. 389,
391 (2011) [hereinafter Super].
36
Javins court emphasized, among other things, that many tenants lack
the ability to repair structures and that “[l]ow and middle income tenants
. . . would be unable to obtain any financing for major repairs since they
have no long-term interest in the property.” Id. (quoting Javins, 428 F.2d
at 1078–79). We favorably cited a passage in Pines for the propositions
that public policies manifested in housing standards and the need and
desirability for adequate housing were “too important to be rebuffed by
[the] obnoxious legal cliché, caveat emptor.” Id. at 794 (quoting Pines,
111 N.W.2d at 413). We further recognized that because of inequality of
bargaining power, “the potential lessee is in no position to dicker about
even the most basic necessities.” Id. at 794–95.
We thus recognized in Mease a common law warranty of
habitability and declared that under the implied warranty the leased
premises “shall remain during the entire term in such condition to
maintain the habitability of the dwelling.” Id. at 796. While we
recognized that we had upheld the doctrine of caveat emptor in prior
cases, we noted that “this court reject[s] application of stare decisis to
avoid perpetuating decisional law made obsolete by time.” Id. at 797–98;
see Haynes v. Presbyterian Hosp. Ass’n, 241 Iowa 1269, 45 N.W.2d 151
(1950). The Mease opinion is written with confidence, and even verve, on
the question of whether to adopt a common law implied warranty of
habitability in Iowa.
5. The issue of waiver of the implied warranty of habitability. The
Mease court, however, did not expressly decide whether the implied
warranty of fitness and habitability could be waived or overridden by
agreement of the parties. The Mease court did provide a list of factors
pertinent in “testing the effect and materiality of the alleged breach.” Id.
at 797. It is not explicit in Mease whether the factors were germane to
37
breach or to remedy. According to Mease, factors pertinent in “testing
the effect and materiality” of an alleged breach include “whether tenant
voluntarily, knowingly and intelligently waived the defects, or is estopped
to raise the question of the breach.” Id.
The precise meaning of this factor, and its relationship to other
factors listed by the court, is not elaborated upon in Mease or developed
in subsequent caselaw. The “testing the effect and materiality” language,
however, suggests that there must be a present specific defect before the
question of waiver or estoppel may be considered. At least one court has
ruled that common law warranty of habitability cannot be waived yet still
had a list of factors to determine the materiality of the alleged breach.
See Hemingway, 293 N.E.2d at 843–44.
In any event, the majority of courts in other jurisdictions that have
taken the issue head on have held that the common law implied
warranty of habitability cannot generally be waived. These nonwavier
courts emphasized the public policy purposes of the implied warranty
and the inability of most tenants to effectively bargain with their
landlords. For example, in the leading case of Javins, the court stressed
that “the old no-repair rule cannot coexist with the obligations imposed
on the landlord by a typical modern housing code.” 428 F.2d at 1076–
77. Following the rationale of Javins, the court in George Washington
University v. Weintraub, held that public policy considerations, including
inequality of bargaining power and scarcity of housing, prohibited waiver
by private agreement of the parties. 458 A.2d 43, 47 (D.C. Ct. App.
1983). Similarly, in Green v. Superior Court, the California Supreme
Court emphasized that “public policy requires that landlords generally
not be permitted to use their superior bargaining power to negate the
warranty of habitability rule.” 517 P.2d 1168, 1173 n.9 (Cal. 1974) (en
38
banc). Other cases offer similar rationales for nonwaiver of the implied
warranty of habitability. See Knight, 623 P.2d at 273 (stating the
“reasons which imply the existence of the warranty of habitability . . .
compel the conclusion” that the warranty cannot be waived); Fair v.
Negley, 390 A.2d 240, 245 (Pa. Super. Ct. 1978) (emphasizing that
“[w]ere we to permit waiver of the implied warranty by an express
provision in the lease, it would be a rare lease in which the waiver would
not appear”); Foisy, 515 P.2d at 164–65 (rejecting bargaining between
landlord and disadvantaged tenant over habitability); Teller v. McCoy,
253 S.E.2d 114, 130–31 (W. Va. 1978) (holding waivers of warranty are
against public policy); see Shelby D. Green, Paradoxes, Parallels and
Fictions: The Case for Landlord Tort Liability Under the Revised Uniform
Residential Landlord-Tenant Act, 38 Hamline L. Rev. 407, 446 (2015).
There are, however, a few squishy cases which, like Mease,
ambiguously suggest that whether a tenant had “waived the defect”
might be a factor to be considered somewhere along the line in the
analysis. See Kline, 276 A.2d at 252 (stating that “whether the tenant
waived the defects” is a factor in “deciding if there has been a breach”);
Berzito v. Gambino, 308 A.2d 17, 22 (N.J. 1973) (citing a laundry list of
nonexhaustive factors for determining whether there “has been a breach
of the covenant of habitability” by the lessor, including “[c]an the tenant
be said to have waived the defect or be estopped to complain?”). Whether
and under what conditions a waiver would outweigh the other factors is
not explained. Further, the precise requirements for such a waiver, such
as whether it must be supported by consideration independent of the
rental agreement, whether it arises solely from after-the-fact settlement
agreements, whether the defect is waived only when there is a failure of
the tenant to give the landlord timely notice of the problem and a
39
reasonable opportunity to repair, or whether there must be evidence of
actual and balanced bargaining related to the waiver, is not explored in
the cases.
It is possible, however, to partially reconcile the cases. The
nonwaiver cases generally stand for the proposition that categorical
waivers of the implied warranty of habitability prior to the actual damage
that requires repair are barred. Thus, detailed anticipatory language in a
form lease agreement waiving the implied warranty of habitability is
barred. Once a potential breach occurs, however, the parties may then
separately negotiate for the repair, provided that any subsequent
agreement is fairly bargained, is supported by consideration independent
of the underlying lease, and resolves the underlying habitability problem.
The Restatement (Second) of Property: Landlord and Tenant,
however, appears to have taken the view that the implied warranty of
habitability was subject to negotiation between the landlord and tenant.
The Restatement (Second) provides that “[e]xcept to the extent the parties
to a lease validly agree otherwise,” a landlord breaches his or her duties
if the residential premises is not suitable for residential use.
Restatement (Second) of Prop.: Landlord & Tenant § 5.5(1), at 205 (1977
& Supp. 2015) [hereinafter Restatement (Second)]; see also id. at § 5.6, at
215. 13 What constitutes a “valid agreement,” however, is not explored.
See id. § 5.5(1), at 205. Further, Restatement (Second) section 5.3,
comment c states, “The tenant as a matter of law is unable to waive any
remedies available to him at the time of entry, if at the time of entry it
13If the Restatement (Second) is viewed as generally permitting waivers of the
implied warranty of habitability by contract in states that have recognized the common
law implied warranty of habitability, it represents a minority position. If, however, the
Restatement (Second) recognized that a valid contractual provision cannot be contrary
to the public policy embraced in the implied warranty cases, it is on firmer ground.
40
would be unsafe or unhealthy to use the leased property in the manner
contemplated by the parties.” Id. § 5.3 cmt. c, at 190. Additionally, a
Reporter’s Note states, “The rule of this section does not allow waiver of
housing code violations [because of] public policy considerations.” Id.
§ 5.3, reporter’s note 3; see also Cunningham, 16 Urb. L. Ann. at 96–97.
As with the caselaw, academic authorities come to varied
conclusions regarding the waivability of the common law implied
warranty of habitability. One authority notes that if the implied warranty
of habitability read into leases could be waived by the landlord inserting
exculpatory language into the same lease, very little would be
accomplished. See Ted L. Hansen, Current Interest Areas of Landlord-
Tenant Law in Iowa, 22 Drake L. Rev. 376, 388 (1973) (“[T]he same
reasons that necessitate an implied warranty of habitability would also
necessitate prohibition against waiver of that warranty.”).
Another leading authority noted that “[a]lthough one might be
tempted to conclude that if the tenant read, understood, and signed the
lease the repugnant clause should be enforced, this conclusion is
erroneous.” Rabin, 69 Cornell L. Rev. at 582. Because of the market
defects including heavy transaction and information costs and the
practical absence of competition among landlords concerning such
terms, courts should refuse to enforce such exculpatory clauses absent
“truly effective bargaining.” Id. at 583.
B. Provisions of the Iowa Uniform Residential Landlord and
Tenant Act. In 1972, the Uniform Law Commission promulgated the
Uniform Residential Landlord and Tenant Act. Unif. Residential
Landlord & Tenant Act, 7B U.L.A. 289 (2001). In 1978, Iowa adopted its
version of the Uniform Act. 1978 Iowa Acts ch. 1172 (codified at Iowa
Code ch. 562A (1981)). As was noted by a leading contemporary
41
commentator, the Iowa statute was a close facsimile of the URLTA. See
Lovell, 31 Drake L. Rev. at 255.
The IURLTA’s first substantive provision is a statement of purposes
of the Act. Iowa Code § 562A.2. Noteworthy is Iowa Code section
562A.2(2)(c), which describes one of the purposes as being “[t]o [e]nsure
that the right to the receipt of rent is inseparable from the duty to
maintain the premises.” Id. § 562A.2(2)(c). Thus, the statute emphasizes
that the obligations of landlords are inextricably intertwined with the
right to receive rent. See id. Further, the chapter is to be “liberally
construed and applied” to promote this underlying purpose. Id.
§ 562A.2(1).
The IURLTA language regarding the duty of the landlord to
maintain premises is similar to the URLTA. Iowa Code section
562A.15(1) imposes six categories of duties on landlords, including the
duty to “[m]ake all repairs and do whatever is necessary to put and keep
the premises in a fit and habitable condition.” Id. § 562A.15(1)(b). With
respect to two categories (landlord’s duty to provide trash services and to
supply running water and heat), the landlord and tenant of a single-
family residence may agree in writing to have the tenant perform the
landlord’s duties. Id. § 562A.15(2). In addition, the landlord and tenant
may enter into written agreements that the tenant perform “specified
repairs, maintenance tasks, alterations, and remodeling, but only if the
transaction is entered into in good faith.” Id.
The IURLTA also has a strong antiwaiver provision. Iowa Code
section 562A.11(1)(a) provides that a lease provision in which a party
“[a]grees to waive or to forgo rights or remedies,” id. § 562A.11(1)(a),
under the Act are “prohibited,” id. § 562A.11(2). This provision ensures
42
that heavily lawyered form leases cannot override the substantive
provisions of the IURLTA.
C. Whether the Terms of the Lease Agreement Complies with
the IURLTA. The relationship between the statutory duty of the
landlord to “[m]ake all repairs and do whatever is necessary to put and
keep the premises in a fit and habitable condition,” the statutory
provision prohibiting waivers, and the statutory provision allowing a
landlord and tenant to enter into written agreements that “the tenant
perform . . . specified repairs,” provides the grist for an important issue
in this appeal. See id. §§ 562A.11(1)(a), .15(1)(b), .15(2). It has been
characterized as “[t]he most difficult area” in residential landlord–tenant
law. Rabin, 69 Cornell L. Rev. at 582.
On the one hand, the landlord argues that the specified-repairs
provision recognizes the ability of the landlord and tenant to freely enter
into agreements allocating the duties and responsibilities of the parties
as in any arm’s-length contract. The landlord draws support from
language in Mease suggesting that contractual provisions were a factor
in determining the effect or materiality of the alleged breach. 200 N.W.2d
at 797.
On the other hand, the tenant counters that if landlords may put
contractual provisions in leases requiring tenants to assume what would
otherwise be the responsibility of the landlord to make repairs to keep
the premises fit and habitable, the substantive protection of the statutory
duty of the landlord to provide and maintain a fit and habitable premise
would be largely eviscerated. The tenant could end up with “the right to
pay rent and precious little else.” Lovell, 31 Drake L. Rev. at 254 & n.1
(quoting Julian H. Levi, The Legal Needs of the Poor: Problems Relating to
Real Property 2 (1964)); see also Javins, 428 F.2d at 1080–81
43
(emphasizing landlords have a continuing obligation during the lease
term to maintain the premises in a fit and habitable condition); Green,
517 P.2d at 1173 n.9 (“[P]ublic policy requires that landlords generally
not be permitted to use their superior bargaining power to negate the
warranty of habitability rule.”); Moity v. Guillory, 430 So. 2d 1243, 1245
(La. Ct. App. 1983) (noting tenant signs one-sided agreement to make
repairs when premises in poor condition).
The leading contemporary commentator on the Iowa Act took the
latter position. Professor Lovell emphasized that the IURLTA prohibits
waiver of rights. Lovell, 31 Drake L. Rev. at 290; see also Iowa Code
§ 562A.11(1)(a). According to Professor Lovell,
The legislature has unequivocally spoken. The warranty of
habitability and other rights afforded tenants under both
Acts cannot be overcome by the inclusion of waiver clauses
in a form lease. This legislation clearly overrides the vague
language in Mease v. Fox which suggested that the warranty
of habitability could be waived.
Lovell, 31 Drake L. Rev. at 290.
Professor Lovell’s interpretation is certainly plausible. While the
implied warranty of habitability protects tenants substantially, it limits
but does not eviscerate the contracting-out provision of Iowa Code
section 562A.15(2). A landlord and tenant, for instance, might agree that
a tenant perform specified repairs as a handy man, but the obligation to
pay the costs remains with the landlord. Or, specific repairs could be
limited to minor repairs that do not affect the landlord’s duty to provide a
habitable premises. But is Professor Lovell’s contemporary interpretation
the best approach to the Iowa statute?
We note that versions of other states’ URLTAs often avoid any
ambiguity regarding the scope of any potential contractual waiver by the
tenant. For instance, Minnesota law expressly provides that specified
44
repairs do not include repairs necessary to keep “the premises and all
common areas . . . fit for their use intended by the parties.” Minn. Stat.
§ 504B.161(1), (2) (2015). On the other hand, some states expressly
authorize open-ended contractual opt-out provisions in unmistakable
terms. For example, the Wyoming statute specifically states that “[a]ny
duty or obligation in this article may be . . . modified by explicit written
agreement signed by the parties.” Wyo. Stat. Ann. § 1-21-1202(d) (West,
Westlaw current through 2015 Gen. Sess.). Similarly, Mississippi law
provides that “the landlord and tenant may agree in writing that the
tenant perform some or all of the landlord’s duties under this section,
but only if the transaction is entered into in good faith.” Miss. Code Ann.
§ 89-8-23(3) (West, Westlaw current through 2016 1st Extraordinary
Sess.). The Iowa legislature did not take either approach.
Yet, when we read the Iowa statute in context, a substantial
limitation on the ability of the parties to waive basic protections of the
Iowa Act as suggested by Professor Lovell may make sense. The IURLTA
generally imposes six affirmative statutory duties upon a landlord
regarding the leased premises. Iowa Code § 562A.15(1). Specifically, the
landlord is required to,
a. Comply with the requirements of applicable
building and housing codes materially affecting health and
safety.
b. Make all repairs and do whatever is necessary to
put and keep the premises in a fit and habitable condition.
c. Keep all common areas of the premises in a clean
and safe condition . . . .
d. Maintain in good and safe working order and
condition all electrical, plumbing, sanitary, heating,
ventilating, air-conditioning, and other facilities and
appliances . . . .
e. Provide and maintain appropriate receptacles and
conveniences . . . for the central collection and removal of
ashes, garbage, rubbish, and other waste . . . .
45
f. Supply running water and reasonable amounts of
hot water at all times and reasonable heat . . . .
Id.
The statute provides that the landlord and tenant may agree in
writing that the tenant perform the landlord’s duties specified in (e) and
(f) above. Id. § 562A.15(2). The statute further provides that the
landlord and tenant may agree in writing to have the tenant “perform . . .
specified repairs, maintenance tasks, alterations, and remodeling, but
only if the transaction is entered into in good faith.” Id.
Under Apartment Downtown’s approach to the “specified repairs”
section, however, the landlord’s obligation to provide a fit and habitable
premises under section 562A.15(1)(b) can be undermined by a stock
laundry list of specified repairs. Under the approach of the landlord, the
entire listing of statutory obligations related to the fitness of the
premises—and not just the obligations under (e) and (f) above—may be
contracted away. Further, a tenant could be liable for highly expensive
repairs that occur at the end of the term of the lease even though the
tenant did not cause the uninhabitable condition to arise.
Apartment Downtown’s sweeping approach is arguably
inconsistent with what the legislature has declared is one of the main
purposes of the IURLTA, namely, “[t]o [e]nsure that the right to the
receipt of rent is inseparable from the duty to maintain the premises.”
Id. § 562A.2(2)(c) (emphasis added). Indeed, the statement of purpose
reflects the view that the common law doctrine of independency of
landlord and tenant duties has been abandoned. And, the legislature
has directed us that in our consideration of matters under the IURLTA,
the statute should be “liberally construed and applied” to promote its
purposes, certainly including ensuring that “the right to the receipt of
46
rent is inseparable from the duty to maintain the premises.” Id.
§ 562A.2(1)–(2).
Under the landlord’s interpretation, however, the right to receipt of
rent in the context of single-family dwellings can be severed from the
duty to maintain the premises through a detailed and well-lawyered form
contract exhaustively listing specified repairs. If the landlord’s position
in this case is followed, the statute ensures very little with respect to
maintaining the premises and does not ensure the receipt of rent is
inseparable from the duty to maintain the premises.
Indeed, under the freedom-of-contract approach, the duty to
maintain the premises is quite separable. While the landlord’s duty to
maintain a habitable premises has been characterized as critical and
central to landlord–tenant law, it would be undermined under the
landlord’s approach. See Campbell, 35 U. Ark. Little Rock L. Rev. at 807;
see also Lovell, 31 Drake L. Rev. at 310; Richard L. Costella &
Christopher S. Morris, West Virginia Landlord and Tenant Law: A
Proposal for Legislative Reform, 100 W. Va. L. Rev. 389, 419 (1997).
Further, as noted in the caselaw regarding the common law
implied warranty of habitability, the duty is rooted substantially in public
policy. Comment to section 2.104(d) of the URLTA notes that
“[s]tandards of habitability dealt with in this section are a matter of
public police power rather than the contract of the parties or special
landlord-tenant legislation.” Unif. Residential Landlord & Tenant Act
§ 2.104(d) cmt., 7B U.L.A. 326–28. The comment recognizes that
interests beyond the parties are implicated by the implied warranty.
Glendon, 23 B.C. L. Rev. at 553. This comment plainly cuts against
shifting of the duty to the tenant to provide a fit and habitable premises
in lease documents.
47
It thus could be argued that the legislature’s stated purpose that
the rent paid by the tenant is inseparable from the landlord’s duty to
provide a fit and habitable premises is best promoted by limiting, in the
case of single-family dwellings, the ability of the landlord to shift its
duties to the tenant by contract to subsections (e) and (f). Iowa Code
§ 562A.15(1)(e)―(f), (2). We recognize the rule of construction that the
“legislative intent is expressed by omission as well as inclusion, and the
express mention of one thing implies the exclusion of others not so
mentioned.” Kucera v. Baldazo, 745 N.W.2d 481, 487 (Iowa 2008)
(quoting Meinders v. Dunkerton Cmty. Sch. Dist., 645 N.W.2d 632, 637
(Iowa 2002)). Applying this rule of construction, the expression of
contracting authority with respect to subsections (e) and (f) arguably
implies the exclusion of contracting authority with respect to earlier
listed obligations of the landlord. Then, looking to the relationship
between associated words and phrases, see T & K Roofing Co. v. Iowa
Dep’t of Educ., 593 N.W.2d 159, 163 (Iowa 1999), the term “specified
repairs” could be interpreted to involve matters not affecting the
landlord’s obligations to provide a fit and habitable premises such as
“maintenance tasks, alterations, and remodeling.” Iowa Code
§ 562A.15(2); see also Acad. Spires, Inc. v. Brown, 268 A.2d 556, 559
(Essex County Ct. 1970) (listing repairs not within the scope of the
implied warranty of habitability); Myron Moskovitz, The Implied Warranty
of Habitability: A New Doctrine Raising New Issues, 62 Cal. L. Rev. 1444,
1455–63 (1974) (providing examples).
It is not necessary to reach the question of whether the duty of the
landlord related to fitness and habitability can be waived by contract.
Iowa Code section 562A.15(2) only authorizes the landlord and tenant to
agree that the tenant will perform certain “specified repairs, maintenance
48
tasks, alterations, and remodeling” of the premises. This view is
advocated by an academic commenter, who interprets the specific-
repairs provision of the URLTA to authorize the parties to “enter into a
separate written agreement, for adequate consideration, to shift at least
some maintenance duties from the landlord to the tenant.”
Cunningham, 16 Urb. L. Ann. at 96. Such an approach would be
consistent with prior caselaw in which tenants made repairs and charged
the landlords for the labor and materials. See, e.g., Marini, 265 A.2d at
535; Jackson, 318 N.Y.S.2d at 11; Pines, 111 N.W.2d at 413.
Here, the tenant did not perform the repairs. Instead, the landlord
performed the repairs and attempted to charge the tenant for them.
Section 562A.15(2) permits tenants to agree to make certain repairs, but
it does not authorize the landlord to make repairs and then shift the
costs to the tenants. Iowa Code § 562A.15(2). As a result, even if Iowa
Code section 562A.15(2) allows the landlord and tenant to enter into
agreements related to a single-family dwelling in which the tenant agrees
to make repairs affecting the fitness and habitability of the premises, the
landlord cannot prevail in this case on this theory because the landlord,
and not the tenant, made the repairs to the door.
D. Whether the Landlord Complied with the Statutory Duty of
Providing a Fit and Habitable Premises in This Case. The question
remains whether the landlord, even if it cannot rely on the provisions of
its lease under Iowa Code section 562A.15(2), nonetheless still met its
statutory duty to provide a premises in a fit and habitable condition.
There is no dispute in this case that without repairing the door, the
leased premises would not be in “a fit and habitable condition.” Id.
§ 562A.15(1)(b). The landlord suggests the duty to provide a fit and
49
habitable condition is satisfied if repairs are performed, but the costs are
shifted to the tenant.
We reject this approach. The scope of a legal duty surely depends
upon its context. For example, an insurer does not meet its duty to
defend by providing counsel and billing the insured. See, e.g., Chem.
Leaman Tank Lines, Inc. v. Aetna Cas. & Sur. Co., 177 F.3d 210, 223 n.17
(3d Cir. 1999). A duty to support a child or spouse does not allow the
party with the obligation to provide physical support and bill the other
spouse or child for the costs. Likewise, we do not think the duty of the
landlord to provide a habitable premises is so narrow that a landlord
may utilize the duty to in effect vest in the landlord a monopolistic right
to provide marked up services to the tenant to maintain habitability. If
the IURLTA were so interpreted, the statutory duty of the landlord to
provide a habitable premises would be eviscerated by allowing a landlord
to escape financial obligations through a well-lawyered lease provision.
In light of the history of the development of landlord–tenant law, we do
not think it can be fairly concluded that the legislature intended the
statutory duty of the landlord to “make all repairs and do whatever is
necessary to put and keep the premise in a fit and habitable condition”
to be satisfied by merely making repairs and shifting the costs to the
tenant pursuant to categorical provisions in the original lease agreement.
V. Damages for Failure to Permit Sublease.
The landlord–tenant agreement in this case requires the
permission of the landlord before the tenant may sublease the premises.
The provision is a silent clause in that it does not expressly require that
the landlord act in a reasonable or nonarbitrary fashion. Although there
is older authority to the contrary, the modern trend is toward recognition
of an implied standard of reasonableness in such an agreement. See
50
Mark S. Dennison, Landlord’s Unreasonable Refusal to Consent to
Assignment or Sublease, 102 Am. Jur. Trials 277 § 5, Westlaw (database
updated Apr. 2016); see also Homa-Goff Interiors, Inc. v. Cowden, 350
So. 2d 1035, 1037–38 (Ala. 1977); Laura Hunter Dietz, et al., 49 Am.
Jur. 2d Landlord and Tenant § 991, at 905 (2006); Restatement (Second)
§ 15.2, at 100–13.
Based on these authorities, we conclude the landlord did not act
reasonably when it refused to allow the sublease of the premise when it
attempted to enforce an unlawful provision in the lease. As a result, the
district court erred in not allowing damages as a result of the landlord’s
refusal to allow the tenant to sublease the premises.
VI. Automatic Cleaning Deductions From Rental Deposits
Under IURLTA.
A. Lawfulness of Automatic Carpet-Cleaning Provision. This
brings us to Apartments Downtown’s cross-appeal on the merits. The
company argues the district court erred in holding the automatic carpet-
cleaning provision violated section 562A.12 of the IURLTA.
This lease provision reads as follows:
The carpets throughout the building are professionally
cleaned each time apartments turn over occupancy. Tenants
agree to a charge starting at $95 (efficiency) not to exceed
$225 (6+ bedrooms) being deducted from the deposit for
professional cleaning at the expiration of the Lease.
Iowa Code section 562A.12(3) authorizes only three grounds for
withholding amounts from a rental deposit: (1) “[t]o remedy a tenant’s
default in the payment of rent or of other funds due to the landlord
pursuant to the rental agreement”; (2) “[t]o restore the dwelling unit to its
condition at the commencement of the tenancy, ordinary wear and tear
excepted”; and (3) “[t]o recover expenses incurred in acquiring possession
of the premises from a tenant” who does not surrender and vacate the
51
premises in compliance with the rental agreement. Iowa Code
§ 562A.12(3)(a)–(c).
The problem with the carpet-cleaning provision is that it generates
an automatic deduction from the rental deposit even when none of the
conditions of section 562A.12(3) have been met. For example, suppose a
tenant had Mary Poppins and her magical “Spoonful of Sugar” team
restore the carpet to a pristine state at the end of the leasehold.
Certainly, an additional carpet cleaning would not be necessary.
Nonetheless, the charge would still apply.
We are not the first jurisdiction to address the legality of provisions
providing for automatic deductions for carpet cleaning in lease
agreements. For instance, in Ohio, which has also adopted the Uniform
Residential Landlord and Tenant Act, it is “well-settled” that a provision
in a lease agreement providing for an automatic reduction from the
rental deposit to pay for professional carpet cleaning is unenforceable.
Chaney v. Breton Builder Co., 720 N.E.2d 941, 943 (Ohio Ct. App. 1998),
abrogated in part on other grounds by Parker v. I & F Insulation Co., 730
N.E.2d 972, 977–79 (Ohio 2000). In another case, an Ohio court said,
In the absence of an affirmative showing, by way of
itemization that there was a specific need to clean the carpet,
[landlord]’s unilateral deduction was improper. A lease
provision regarding carpet cleaning that is inconsistent with
[the Ohio provision regarding rental deposits] is
unenforceable.
Albreqt v. Chen, 477 N.E.2d 1150, 1153 (Ohio Ct. App. 1983) (citation
omitted). A court in another jurisdiction held that required carpet
cleaning at the conclusion of a lease did not amount to “tenant damages,
waste or neglect of property” that could be deducted from the rental
deposit and thus had to be supported by a separate writing. King v.
Farkas, No. 82-2076, 1983 WL 161598, at *2 (Wis. Ct. App. Aug. 9,
52
1983). By contrast, in Indiana, an appellate court concluded the
landlord could require tenants to steam-clean carpets upon the
termination of the lease and deduct cleaning charges from the rental
deposit, including charges to pay for professional carpet cleaning.
Castillo-Cullather v. Pollack, 685 N.E.2d 478, 483 (Ind. Ct. App. 1997),
abrogated in part on other grounds by Mitchell v. Mitchell, 695 N.E.2d
920, 923 (Ind. 1998). Indiana law, however, unlike Iowa law, allows the
landlord to deduct damages for any breach of the lease from the rental
deposit, and the court reasoned that the parties were free to define in the
lease the condition to which the premises had to be restored at the
conclusion of the lease agreement. Id. at 483 & n.4.
We decline to modify the stated statutory purpose behind rental
deposits. Their purpose is to ensure the tenant faithfully executes her or
his duties under the lease agreement. See Iowa Code § 562A.6 (defining
a rental deposit as “a deposit of money to secure performance of a
residential rental agreement”). The rental deposit is not designed to
serve as an advance payment of amounts that will always be due under
the lease. Cf. Steenes v. MAC Prop. Mgmt., LLC, 16 N.E.3d 243, 251 (Ill.
App. Ct. 2014) (finding that a move-in fee, as “a one-time upfront
charge,” paid by the tenant with actual knowledge that it was
nonrefundable was not a security deposit); Kopp v. Associated Estates
Realty Corp., No. 09AP–719, 2010 WL 1510196, at *5–6 (Ohio Ct. App.
Apr. 15, 2010) (determining that nonrefundable pet fee and redecorating
fee were not rental deposits because they did not secure obligations of
the parties, were not intended to be applied toward damages, and were
not deducted from the deposit); Gartz v. J & J Ass’n Holding, LLC,
No. 03–1978, 2004 WL 202876, at *5 (Wis. Ct. App. Feb. 4, 2004) (noting
that a landlord’s carpet-cleaning fee was permissible under Wisconsin
53
law because the lease did not provide that the cost would be deducted
from the rental deposit).
It is possible that a landlord may be able to impose a
nonrefundable charge on tenants for automatic carpet cleaning. See
Stutelberg v. Practical Mgmt. Co., 245 N.W.2d 737, 741 (Mich. Ct. App.
1976) (finding a nonrefundable cleaning fee not part of the rental
deposit); Holmes v. Canlen Mgmt. Corp., 542 S.W.2d 199, 201–02 (Tex.
Civ. App. 1976). Additionally, the statute clearly authorizes the
deduction of carpet-cleaning costs from rental deposits if necessary to
restore the dwelling unit to the condition at the commencement of the
tenancy, beyond the ordinary wear and tear. Iowa Code § 562A.12(3)(b).
What a landlord cannot do, however, is impose an automatic
carpet-cleaning fee and deduct such charges from a rental deposit. See
Chaney, 720 N.E.2d at 944; Albreqt, 477 N.E.2d at 1153. Under the
IURLTA, “[i]f the rental deposit or any portion of a rental deposit is
withheld for the restoration of the dwelling unit,” the landlord must
provide notice and the tenant must have an opportunity to contest actual
damages. Iowa Code § 562A.12(3). A landlord cannot by contract
extract a waiver of the notice and opportunity to contest provisions when
funds are withheld from the rental deposit. Id. § 562A.11.
There is one case arguably to the contrary. In Schaefer v.
Murphey, funds held in a rental deposit were characterized as
nonrefundable by contract and the refunded amount of the rental deposit
would be reduced by deducting the automatically nonrefundable fee.
640 P.2d 857, 859 (Ariz. 1982). In other words, Schaefer stands for the
proposition if rental deposits were comingled with funds that the
landlord had an unqualified right to receive, the amount of the rental
deposit would be reduced by the nondiscretionary payment. The Iowa
54
IURLTA, however, prohibits commingling of landlord funds with rental
deposits. Iowa Code § 562A.12(2). Additionally, Schaefer’s reasoning is
inconsistent with our statutory scheme, which limits the uses of rental
deposits and provides a process for challenging a landlord’s asserted
right to retain them. Id. § 562A.12. Under Iowa law, rental deposits may
only be used for the purposes outlined in Iowa Code section 562A.12. A
landlord may not use a tenant rental deposit for any purpose other than
those listed in the statute. Smolen v. Dahlmann Apartments, Ltd., 338
N.W.2d 892, 894–95 (Mich. Ct. App. 1983) (holding a landlord may not
withhold a tenant rental deposit for any purpose not provided for in the
statute). Under Iowa Code section 562A.12(3), “If the rental deposit or
any portion of the rental deposit is withheld for the restoration of the
dwelling unit, the statement shall specify the nature of the damages.”
The landlord may then withhold only those amounts necessary to restore
the dwelling unit to its prior condition. Iowa Code § 562A.12(3).
The carpet-cleaning provision providing for automatic deductions
from the rental deposit is thus unenforceable under law for the reasons
stated above, and the district court’s decision relating to it is upheld.
Since we hold the provision violates the IURLTA, we need not address the
small claims court’s determination that the provision was
unconscionable. See id. § 562A.7(1)(a) (discussing unconscionability). 14
14At trial in the small claims court, the witness for Apartments Downtown
testified that notwithstanding the lease language, the company does not automatically
deduct for carpet cleaning at the end of the lease term, but makes an individualized
assessment of carpet cleanliness. In other words, Apartments Downtown argues that
as a matter of grace, it does not enforce its otherwise impermissible lease provision.
Both the small claims court and the district court treated the charge as an automatic
one, and we think this finding is supported by substantial evidence. Notably,
Apartments Downtown’s deposit statement—which included the $191 carpet-cleaning
deduction—did not describe the condition of the carpet, but simply referred to the
automatic charge provision in the lease. Nor are we persuaded that a landlord can
defend an improper charge by arguing it could have assessed the same charge in a
55
B. Bad-Faith Penalty. Apartments Downtown next challenges
the $200 in punitive damages the small claims court awarded under the
IURLTA, which the district court upheld. Iowa Code section 562A.12(3)
requires a landlord to return a tenant’s rental deposit within thirty days
from the end of the tenancy and receipt of the tenant’s mailing address
or to furnish the tenant with a written statement explaining the specific
reason for withholding the rental deposit or any portion of it. Under
section 562A.12(7),
The bad faith retention of a deposit by a landlord, or any
portion of the rental deposit, in violation of this section shall
subject the landlord to punitive damages not to exceed two
hundred dollars in addition to actual damages. 15
Id. § 562A.12(7).
The landlord argues that the controversies in this case are good-
faith disputes and that, as a result, the $200 penalty under Iowa Code
section 562A.12(7) must be reversed. The tenant responds by citing Ikari
v. Mason Properties, 731 N.E.2d 975 (Ill. App. Ct. 2000). In that case, an
Illinois appellate court assessed double damages for withholding a rental
deposit in bad faith for repair and cleaning after the tenants had left
their unit. Id. at 980–81. Here, the tenant argues that the retention of
the deposits was not “a simple error in computation or confusion over
dates.” The tenant further notes that the district court found the
automatic carpet-cleaning and repair provisions as well as the charges
_________________________
different, proper way. We are not called upon to address the issue of whether a
landlord could require the tenant to pay in advance for a carpet cleaning as a separate
charge, not included within the rental deposit. We leave that issue for another day.
15The legislature has since amended the subsection authorizing punitive
damages for the bad-faith retention of a rental deposit. See 2013 Iowa Acts ch. 97, § 4.
It currently provides for “punitive damages not to exceed twice the monthly rental
payment in addition to actual damages.” Iowa Code § 562A.12(7) (2015).
56
under them were unconscionable, thereby supporting punitive
damages. 16
Regardless of the legality or enforceability of the underlying
contract provisions, Iowa Code section 562A.12(7) permits an award of
punitive damages only for bad-faith retention of the deposit or any
portion of the rental deposit. The IURLTA does not define bad-faith
retention of deposit by the landlord. This is problematic as bad faith can
mean a number of different concepts, depending on context. See
Austrum v. Fed. Cleaning Contractors, Inc., ___ F. Supp. 3d ___, ___ 2016
WL 93404, at *6 (S.D. Fla. Jan. 8, 2016) (“ ‘Bad faith’ is an often
inconsistently used phrase that has different meanings in different legal
contexts.”); Staves v. Johnson, 44 A.2d 870, 871 (D.C. 1945) (noting that
good faith is “not susceptible of exact definition”).
In some landlord–tenant cases involving rental deposits, bad faith
has been defined somewhat broadly as including “vexatious,
unreasonable, or outrageous conduct.” Ikari, 731 N.E.2d at 980.
Similarly, in McGrath v. Mishara, the court noted that bad faith could be
shown when the landlord “knew or should have known” that the rental
deposit should not have been withheld from the tenant. 434 N.E.2d
1215, 1219–20 (Mass. 1982). Using language like “should have known”
and “unreasonable,” bad faith in Ikari and McGrath seems to have an
objective dimension. In another case, a Texas appellate court declared
that bad faith for purposes of withholding a rental deposit is defined as
16Iowa Code section 562A.7 prohibits an unconscionable provision in a rental
agreement. This Code provision provides that a court may refuse to enforce an
unconscionable provision or limit its application to avoid an unconscionable result.
Iowa Code § 562A.7(1)(a). There is no provision for imposition of a penalty for
unconscionable provisions in Iowa Code section 562A.7. If a penalty is to be imposed
for use of an unconscionable provision, it must be pursuant to Iowa Code section
562A.11(2).
57
“a breach of faith; willful failure to respond to plain, well understood
statutory or contractual obligations; lack of good faith; [or] improper
motive.” Hogg v. Jaeckle, 561 S.W.2d 568, 572 (Tex. App. 1978).
In contexts other than landlord–tenant relationships, bad faith can
have an expansive meaning. Bad faith in the insurance context means
“the absence of a reasonable basis for denying benefits of the policy and
defendant’s knowledge or reckless disregard of the lack of a reasonable
basis for denying the claim.” Kiner v. Reliance Ins. Co., 463 N.W.2d 9, 12
(Iowa 1990) (quoting Dolan v. Aid Ins. Co., 431 N.W.2d 790, 794 (Iowa
1988)). In the context of fiduciary duty, bad faith has been described as
including “purposeful obliviousness of the known facts suggesting
impropriety.” N.J. Title Ins. Co. v. Caputo, 748 A.2d 507, 514 (N.J. 2000).
While there is no definition of bad faith in the IURLTA, there is a
definition of good faith. Under the IURLTA, good faith is “honesty in fact
in the conduct of the transaction concerned.” Iowa Code § 562A.6(4).
Although the definition of good faith under Iowa Code section 562A.6(4)
is similar to that found in the Uniform Commercial Code, there is a
notable difference. Under Iowa Code section 554.1201(2)(t), good faith is
defined as “honesty in fact and the observance of reasonable commercial
standards of fair dealing.” Under Iowa Code section 562A.6(4), however,
there is no mention of the objective concept of reasonable commercial
standards of fair dealing. Good faith under the IURLTA is limited to
“honesty in fact.” It is entirely subjective.
It seems that if good faith amounts to “honesty in fact” under the
statute, bad faith should be the opposite, or “dishonesty in fact.”
Baldwin Cty. Hosp. Auth. v. Trawick, 504 S.E.2d 708, 710 (Ga. Ct. App.
1998) (“ ‘[B]ad faith’ is the opposite of ‘good faith.’ ”); accord Nelson v.
Lindaman, 867 N.W.2d 1, 13 (Iowa 2015). If so, the test of bad faith is a
58
subjective test based upon dishonesty in fact by the landlord in the
landlord–tenant relationship. See Minor v. Adams, 694 S.W.2d 148, 151
(Tex. App. 1985) (“The test of bad faith is whether a person acted in
dishonest disregard of the rights of the person concerned.”).
Under this approach, intentional or deliberate acts alone do not
establish bad faith, but the landlord’s intention must also be dishonest.
Leskinen v. Burford, 892 S.W.2d 135, 136 (Tex. App. 1994). A mere
mistake does not establish dishonesty in fact. See H-L Apartments v. Al-
Qawiyy, 440 N.W.2d 371, 373 (Iowa 1989). Further, the presence of
conflicting evidence on a disputed question of fact does not establish bad
faith. Alltex Constr., Inc. v. Alareksoussi, 685 S.W.2d 93, 95–96 (1984).
We think the dishonesty-in-fact approach to bad faith in the
IURLTA under Iowa Code section 562A.12(7) is the best approach in light
of the definition of good faith under Iowa Code section 562A.6(4). There
is no objective element in bad faith in Iowa Code section 562A.12(7)
because there is no objective element in good faith as defined in section
562A.6(4). The burden of proving bad faith, or dishonesty in fact, rests
with the tenant. Lewis v. Jaeger, 818 N.W.2d 165, 187 (Iowa 2012). Bad
faith, being a state of mind, may be established by substantial
circumstantial evidence as well as by substantial direct evidence. Roeder
v. Nolan, 321 N.W.2d 1, 5 (Iowa 1982).
Upon our review of the factual record in this case, we do not find
substantial evidence of dishonesty in fact in connection with the use of
the unlawful automatic carpet-cleaning charge. We have held that the
landlord improperly structured the automatic cleaning charge by linking
payment of the mandatory fee to the rental deposit. But while the
landlord has used a lease provision that we have found illegal, there is no
evidence of subjective dishonesty in fact in this record. The landlord did
59
not make any misrepresentations to the tenant, but simply used a
structure that we have concluded is prohibited by the IURLTA. By
simply raising rental rates, the landlord could have obtained the amount
of funds sufficient to offset any discretionary decision by the landlord to
automatically clean the carpet in an apartment at the end of a tenancy.
Under all the facts and circumstances, we cannot say on the current
record that there is substantial evidence that the landlord’s use of the
fully disclosed automatic cleaning charge amounted to dishonesty in fact
under Iowa Code section 562A.12(7).
In the alternative, the tenant asserts that the landlord’s retention
of late fees from the deposit for nonpayment of the cost of the door
repair, which it characterized as rent, was in bad faith. The landlord
does not challenge the conclusion of the district court that the imposition
of these late fees was improper. The landlord does assert, however, that
(1) the unpaid maintenance charges under the lease when they are due
become a payment owed to the landlord, (2) as a payment due to the
landlord, the unpaid maintenance charge is considered part of rent―see
Iowa Code section 562A.6(9) (defining “rent” as “a payment to be made to
the landlord under the rental agreement”),―and (3) as rent, the landlord
was entitled to deduct the entire amount owed from the rental deposit
under Iowa Code section 562A.12(3)(a) (authorizing deduction from
rental deposits of to cure default of the tenant “in the payment of rent or
of other funds due to the landlord pursuant to the rental agreement”). In
any event, as with the automatic carpet-cleaning deposit, no one has
claimed that the lease provisions were misrepresented in any way or that
the provisions were not fully disclosed in the lease. Although the
landlord’s argument may be unpersuasive on the merits, we do not think
there is substantial evidence in the record to support a conclusion that
60
the landlord engaged in subjective dishonesty in fact under Iowa Code
section 562A.12(7) with respect to the issues raised in connection with
deduction of the door-repair expenses.
This is not to say that a tenant has no remedy for use of unlawful
provisions in a rental agreement, at least under some circumstances.
Iowa Code section 562A.11(2) provides that a landlord may not willfully
use a lease provision known by the landlord to be prohibited under the
IURLTA. The statute provides for actual damages “and not more than
three months’ periodic rent and reasonable attorney fees” for knowing
use of an illegal provision. Id.; see Caruso v. Apts. Downtown, Inc., ___
N.W.2d ___, ___ (Iowa 2016). No claim, however, has been presented in
this case under this statutory provision. 17
VII. Attorneys’ Fees.
In this case, the tenant submitted two affidavits related to
attorneys’ fees to the magistrate after the matter was submitted. Lead
counsel Warnock submitted an affidavit. So did second-chair counsel
Boyer. The landlord resisted on grounds of lateness and that granting
the fees would cause the small claims court to lack jurisdiction of the
case. Before the magistrate could rule on the question, the landlord
17There is an argument that the penalty provisions of Iowa Code section
562A.11(2) and Iowa Code section 562A.12(7) are mutually exclusive. Iowa Code
section 562A.11(2) is arguably directed at the use of unlawful statutory provisions and
requires that the provision is known by the landlord to be unlawful. Iowa Code section
562A.12(7) is arguably directed not at illegal provisions in a lease but instead toward
factual disputes associated with retention of rental deposits. Each provision has its
own statutory penalties. One may question whether the legislature intended the
penalty provisions to be cumulative. For example, if a landlord utilizes a provision
known to be illegal and is thus subject to penalties under Iowa Code section 562A.11(2),
does that expose the landlord to bad-faith penalties under Iowa Code section 562A.12(7)
as well? This seems like double dipping. The parties have not raised the question of
the relationship between penalty provisions in Iowa Code section 562A.11(2) and
section 562A.12(7) in this case. In any event, it is not necessary to consider the
relationship in light of our disposition of the contested issues on other grounds.
61
appealed to district court and the magistrate did not enter a ruling on
the attorneys’ fee issue. On appeal, the district court concluded that
the attorney fee affidavit filed by Attorney Christine Boyer on
June 21, 2013 includes [a] sufficient breakdown of the
attorneys’ fees sought by Plaintiff’s counsel such that the
court can, and does, determine that the fees sought are
reasonable.
The district court did not specifically mention the fees of lead counsel
Warnock.
On appeal to this court, tenant seeks an award of the attorneys’
fees of lead counsel Warnock. The landlord concedes error was
preserved on the issue. The landlord argues the district court was in the
best position to evaluate the work of counsel and that the fees sought by
lead counsel were excessive. The landlord also argues the district court
lacked jurisdiction to hear the matter because the claim, with attorneys’
fees, exceeded the $5000 jurisdictional limit of small claims court.
Finally, the landlord also contends that the tenant was not a prevailing
party in the litigation and is therefore not entitled to attorneys’ fees. We
have rejected these last two claims. Thus, the only remaining issue
raised is whether the fees sought by the tenant were excessive, as
claimed by the landlord, or reasonable, as claimed by the tenant. See
Iowa Code § 562A.12(8).
As a preliminary matter, however, we consider a question of
whether the tenant was required to file in the district court a motion to
enlarge or expand under Iowa Rule of Civil Procedure 1.904 in order to
preserve the issue. We have held that because Iowa Code chapter 631
contains no express provision for posttrial motions with respect to
appeals to the district court, posttrial motions are not available at this
stage of the proceeding. See Midwest Recovery Servs. v. Cooper, 465
62
N.W.2d 855, 856 (Iowa 1991). This case is in a slightly different posture,
as it does not involve an appeal from a magistrate to the district court
but instead a discretionary appeal from the district court to this court.
We have cited Midwest Recovery, however, in support of the proposition
that there are no posttrial motions on appeal from a small claims court
judgment. See GE Money Bank, 773 N.W.2d at 539.
The principle embraced in Midwest Recovery is fully applicable
here. The trial of the matter occurred before the magistrate in this case.
The case was then appealed to the district court. Midwest Recovery
makes clear that a motion for expanded findings is not available when
the case is tried under Iowa Code chapter 631. 465 N.W.2d at 855–57.
If so, logic dictates there is no basis for a rule 1.904 motion after the
district court has determined the small claims appeal.
Aside from our caselaw and the lack of authorization of posttrial
motions in Iowa Code chapter 631, grafting rule 1.904(2) into small
claims proceedings would be poor policy. The parties in small claims
court are often unrepresented by attorneys. Our caselaw, however,
demonstrates that Iowa Rule of Civil Procedure 1.904 can be
complicated. In close cases, even a skilled lawyer has difficulty
determining whether a rule 1.904 motion should be filed. A misstep,
however, may result in waiver of a claim or even loss of an appeal.
Requiring small claims litigants to understand the intricacies of Iowa
Rule of Civil Procedure 1.904(2) cuts against the policy of Iowa Code
chapter 631 of providing a swift and simple procedure for determining
disputes. Further, the complexity of trial procedure is one of the reasons
the implied warranty of habitability has been ineffective. See Super, 99
Cal. L. Rev. at 440. Small claims court is, after all, “the people’s court”
where emphasis belongs on simplicity and fairness for pro se litigants.
Kimble v. Kimble, 264 P.3d 1229, 1231–32 (Okla. 2011).
63
With that necessary digression, we now turn to the issue the
parties have asked us to decide, namely, whether the fees of lead counsel
are excessive. While we could, perhaps, decide the issue on appeal, we
think the better approach at this stage is to remand the question of
Warnock’s attorney’s fees to the district court to allow the district court
in the first instance to consider the reasonableness of the fee request of
lead counsel. We review the district court’s award of attorneys’ fees for
abuse of discretion. GreatAmerican, 691 N.W.2d at 732. As a result, the
district court should evaluate Warnock’s fee application in the first
instance. On remand, the district court should further determine the
merits of any claim for appellate attorneys’ fees. See Ayala, 415 N.W.2d
at 606; Crouch, 287 N.W.2d at 154.
VIII. Conclusion.
For the above reasons, we affirm the district court in favor of the
tenant on the issue of jurisdiction and cleaning costs. We reverse the
decision of the district court adverse to the tenant on the issue of liability
for the door repair and on the claim for damages for failure to permit the
tenants from subleasing the apartment. We also reverse the district
court decision on punitive damages adverse to the landlord under Iowa
Code section 562A.12(7).
On the issue of attorneys’ fees, we affirm the judgment of the
district court as to the reasonableness of fees awarded attorney Boyer,
but remand for a determination of reasonable attorney fees in connection
with attorney Warnock’s work on this case and for consideration of any
claim for appellate attorneys’ fees. Costs are assessed to Apartments
Downtown.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
All justices concur except Mansfield, Waterman, and Zager, JJ.,
who concur in part and dissent in part.
64
#14–0820, De Stefano v. Apartments Downtown, Inc.
MANSFIELD, Justice (concurring in part and dissenting in part).
I respectfully concur in part and dissent in part because I disagree
with two conclusions reached by the court. In particular, I do not think
small claims courts can award unlimited attorneys’ fees without regard
to the $5000 jurisdictional limit. Nor do I think the Iowa Uniform
Residential Landlord and Tenant Act (IURLTA) makes it illegal for the
landlord and the tenant of a single-family home to agree that the tenant
will be financially responsible for a repair to an exterior door that is
vandalized during the tenancy.
I. Small Claims Jurisdiction.
I would hold that attorneys’ fees count against the jurisdictional
limits of the small claims court. The statute provides that the small
claims court has jurisdiction over those “civil action[s] for a money
judgment where the amount in controversy is . . . five thousand dollars
or less . . . exclusive of interest and costs.” Iowa Code § 631.1(1) (2011).
So, the question is whether attorneys’ fees are costs or not. This is an
important question because what’s good for the goose is good for the
gander. If a college student represented by a legal aid agency can recover
her attorneys’ fees from a landlord in small claims court, so can a debt
collector suing an indigent working single parent.
We are interpreting one term, “costs,” in one statute, Iowa Code
section 631.1. We cannot have the term mean one thing for plaintiffs
who are tenants and something different for other plaintiffs. And
although the matter is not free from doubt, I believe the majority’s view of
the matter is erroneous for several reasons.
First, as the court acknowledges, we have consistently interpreted
statutes that use the term “costs” alone to exclude attorney fees. See
65
Weaver Constr. Co. v. Heitland, 348 N.W.2d 230, 233 (Iowa 1984) (“We do
not agree, however, that the word ‘costs’ [in chapter 677] should be so
liberally stretched as to include attorney fees.”); Turner v. Zip Motors, 245
Iowa 1091, 1100, 65 N.W.2d 427, 432 (1954) (“[Section 625.1] has
always been held to mean the ordinary costs, not including attorney
fees.”). I am not aware of a single contemporary Iowa statute lacking the
phrase “attorney fees” while using the term “costs” alone that has been
interpreted to award attorney fees as costs. Why start here?
Second, I am not persuaded that when the general assembly
enacted the Unified Court Act in 1972, it intended to adopt caselaw from
1882 and 1932 relating to the old court system. The statute setting forth
the jurisdictional limits in the old system was worded differently. See
Iowa Code § 601.2 (1971) (stating that justice-of-the-peace courts had
jurisdiction “where the amount in controversy does not exceed one
hundred dollars”).
As the majority recognizes, the whole idea of the Unified Court Act
was to create a new and better system than what had gone before. And
when the legislature did so, it seems to have consciously borrowed from
the federal diversity statute. See 28 U.S.C. § 1332 (2012) (“The district
courts shall have original jurisdiction of all civil actions where the matter
in controversy exceeds the sum or value of $75,000, exclusive of interest
and costs . . . .”); 1972 Iowa Acts ch. 1124, § 60 (codified at Iowa Code
§ 631.1 (1973)) (“A small claim is a civil action for money damages where
the amount in controversy in money is one thousand dollars or less,
exclusive of interests and costs . . . .”).
Under the federal diversity statute, it was well understood that
attorneys’ fees were separate from “interest and costs.” See, e.g., Mo.
State Life Ins. Co. v. Jones, 290 U.S. 199, 202, 54 S. Ct. 133, 134, 78
66
L. Ed. 267, 269 (1933); 14AA Charles A. Wright, Arthur R. Miller &
Edward H. Cooper, Federal Practice and Procedure § 3712, at 806 (4th ed.
2011). So I would be more inclined to follow the federal interpretations of
the diversity statute as a guide to interpreting Iowa Code section 631.1.
See Peoples Trust & Sav. Bank v. Armstrong, 297 N.W.2d 372, 373–75
(Iowa 1980) (noting the resemblance between the wording of Iowa Code
section 631.1(1) and that of the federal diversity statute and applying
federal diversity precedents to determine when interest counts against
the small claims jurisdictional limit).
Furthermore, in the original 1972 Unified Court Act, when the
word “costs” was used in other contexts, it clearly did not include
attorneys’ fees. See 1972 Iowa Acts ch. 1124, § 65 (codified at Iowa Code
§ 631.6 (1973)) (“Fees and costs shall be one-half of fees and costs in
regular civil actions in district court.”). “When the same term appears
multiple times in the same statute, it should have the same meaning
each time.” State v. Paye, 865 N.W.2d 1, 7 (Iowa 2015).
Another reason to interpret costs in the small claims jurisdictional
statute as something different from attorneys’ fees is that it furthers the
legislature’s goal of “a simpler, easier, and less expensive procedure” in
which the parties “need not retain an attorney unless they wished.”
Barnes Beauty Coll. v. McCoy, 279 N.W.2d 258, 259–260 (Iowa 1979).
Plainly, if attorneys’ fees don’t count against the jurisdictional limit, that
is an incentive for parties to use attorneys in small claims court. And
the presence of an attorney, while generally desirable if the matter is
significant, tends to undermine the informality of the proceeding. 18 From
18The majority uses the apt phrase: “the people’s court.” Thus, our court
declined to give “preclusive effect to small claims adjudications in subsequent regular
district court trials [because to do so] would be inconsistent with maintaining the
67
the very beginning, the legislature made clear that small claims cases
don’t need attorneys. See 1972 Iowa Acts ch. 1124, § 70 (codified at
Iowa Code § 631.11 (1973)).
Under the majority’s approach, some small claims defendants may
be subject to substantial judgments—but without the procedural
protections afforded in district court. It is antithetical to the purpose of
small claims court to allow potentially open-ended attorney-fee recoveries
that could dwarf the stated small claims jurisdictional limit.
Finally, I am not persuaded that the out-of-state authority on
which the court relies—particularly Lettenmaier v. Lube Connection, Inc.,
741 A.2d 591 (N.J. 1999)—has any bearing on this issue. The New
Jersey court rule involved in Lettenmaier has different wording from
Iowa’s statute. See id. at 593 (quoting New Jersey Rule 6:1–2(a)(1),
which mentions only “the amount in controversy”).
Furthermore, unlike my colleagues, I would not even give minimal
weight to Lettenmaier’s citation of two Iowa cases because it miscited
them. See id. at 594–95 (citing Ayala v. Ctr. Line, Inc., 415 N.W.2d 603
(Iowa 1987); Maday v. Elview-Stewart Sys. Co., 324 N.W.2d 467 (Iowa
1982)). Lettenmaier cited Maday for “examining structure of statute
allowing counsel fees and concluding that, because such fees were
grouped with costs, they were costs.” Id. at 594. Lettenmaier cited Ayala
for “refusing to consider attorney fees in determining whether
jurisdictional limit had been exceeded because they are separate and
distinct events giving rise to cause of action and cannot be assessed until
_________________________
simplicity and informality of small claims procedures.” Village Supply, Inc. v. Iowa
Fund, Inc., 312 N.W.2d 551, 554 (Iowa 1981).
68
liability is established.” Id. at 595. I can’t find those propositions
anywhere in Maday and Ayala. 19
II. Lease Provisions Making Tenants Responsible for Costs of
Repairing an Exterior Door Damaged by Third-Party Vandalism.
The lease between Apartments Downtown—on the one hand—and
Elyse De Stefano and her housemates—on the other hand—is three
pages long. De Stefano testified she did not read the lease before signing
it, but she does not dispute that she assented to its terms. She testified
that no one misrepresented what was in the lease.
In paragraph 30, the lease provides, “Tenants agree to pay for all
damages to the apartment windows, screens, and doors, including
exterior unit doors (including random acts of vandalism).” The lease also
provides in paragraph 33, “Unless the Landlord is negligent, Tenants are
responsible for the cost of all damages/repairs to windows, screens,
doors, carpet, and walls, regardless of whether such damage is caused by
residents, guests or others.” Additionally, the lease contains a $452–
$690 estimated cost for the repair or replacement of a prehung entry
door.
The lease further provides that the landlord’s Iowa City
Maintenance would perform all repairs “unless written authorization is
secured from Landlord.” It states that Iowa City Maintenance charges
$70 per hour during regular business hours and $90 per hour during
nights and weekends, with a minimum of one hour per service call. Iowa
City Maintenance is an alter ego of Apartments Downtown.
19Tobe clear, I have no quarrel with how my colleagues have summarized
Maday and Ayala in their majority opinion. But it is wrong to give the Lettenmaier
decision any credence because it happens to cite to Maday and Ayala.
69
The three-page lease has some circling and other marks on it.
Some of the marks are in the vicinity of the foregoing provisions.
According to the business manager of Apartments Downtown, the
presence of these markings confirmed that specific provisions of the lease
were actually reviewed with the tenants before they signed it. As
summarized by the district court, “The Court finds no evidence in the
record that there was a lack of honesty in fact in the conduct of the
transaction concerned.”
The door replacement charge and the subsequent late fees
stemmed from a burglary that occurred at De Stefano’s residence in
October 2010. De Stefano and the other tenants filed a police report
with the Iowa City Police Department. The report stated that the
burglary had left the exterior doorframe and the door lock damaged, and
the tenants reported two or three cans of beer as well as a bottle of
flavored vodka stolen. Apartments Downtown was called to repair the
door on October 11—presumably by De Stefano or one of her cotenants.
Apartments Downtown arranged for Iowa City Maintenance to
replace the kicked-in door, and the charges were billed to De Stefano and
her roommates. The total cost of the repair and replacement was
$598.46, which included $318.46 for the replacement door and $280 for
four hours of labor. Upon receipt of this charge, one of De Stefano’s
housemates sent a letter dated November 2 to Apartments Downtown,
contesting the charge and advising that the damage was not caused by
any of the tenants and that the police investigation was ongoing. In her
letter, the tenant referenced paragraph 30 of the lease agreement, which
stated, “Tenants agree to pay all damages to the apartment windows,
screen, and doors, including exterior unit doors (including random acts
70
of vandalism).” Yet the tenant said she believed this lease provision to be
unconscionable and thus unenforceable by a court.
Apartments Downtown responded on November 17,
By signing the lease agreement you agree to pay for all
damages to the apartment windows, screens, and doors,
including exterior unit doors, including random acts of
vandalism. If . . . the door was broken down during a
burglary, the destruction of the door is considered vandalism
. . . . Even though the door was damaged during the break
in, and not by a guest of the tenants, it still falls under the
basis o[f] a visitor, whether they were a known guest or not
. . . . [I]f the police investigation results in the finding of the
guilty party that was responsible for the damage, then at
that time we would be more than happy to charge said
person(s) for the damage. Until then however, the damage
incurred to the property fall[s] under the responsibility of the
leased tenants. At this time you currently still have an
outstanding balance of 598.46 on your account, if this would
happen to still be current when December[’]s rent comes
due, it will accumulate the standard $40.00 late charge.
A principal bone of contention between the parties is whether the
IURLTA permits the lessor and the lessee of a single-family home to agree
in writing that the lessee will be responsible for the repair of a door
damaged by third-party vandalism during the lessee’s tenancy. My
colleagues ultimately do not decide this issue, but they frame the issue
in such one-sided terms that I feel obligated to respond.
Section 562A.15(1) of the IURLTA imposes a warranty of
habitability on the landlord. Iowa Code § 562A.15(1) (2011) Among
other things, the landlord shall “[c]omply with the requirements of
applicable building and housing codes materially affecting health and
safety” and “[m]ake all repairs and do whatever is necessary to put and
keep the premises in a fit and habitable condition.” See id.
§ 562A.15(1)(a)–(b). However, the duties in subsection (1) of section
562A.15 are immediately qualified by subsection (2):
71
The landlord and tenant of a single family residence may
agree in writing that the tenant perform the landlord’s duties
specified in paragraphs “e” and “f” [relating to waste removal
and the provision of water, hot water, and heat], and also
specified repairs, maintenance tasks, alterations, and
remodeling, but only if the transaction is entered into in
good faith.
Id. § 562A.15(2) (emphasis added.)
My colleagues present a lengthy argument as to why subsection (2)
affects only paragraphs (e) and (f) of subsection (1) and not the rest of the
subsection. In other words, according to this argument, the tenant of a
single-family residence may not agree to assume any responsibilities
relating to the implied warranty of habitability except those covered by
paragraphs (e) and (f). The majority does not ultimately adopt this
position, but it does not acknowledge or even mention the
counterarguments against this view.
The biggest problem with this interpretation of the IURLTA is that
it gives no effect to the language after “and also” in subsection (2). See
id. § 4.4(2) (setting forth the presumption that “[t]he entire statute is
intended to be effective”).
Clearly, the language “and also specified repairs, maintenance
tasks, alterations, and remodeling” must refer to landlord duties other
than those set forth in paragraphs (e) and (f). Otherwise, the language
would be totally superfluous. Driving this point home is that our
legislature used the separator “and also,” indicating that what followed
“and also” was going to be something different from what preceded it.
Furthermore, it is difficult to conceive of alterations and remodeling that
would be needed to provide waste removal, water, hot water, or heat, if
indeed the entire subsection only applied to the duties in paragraphs (e)
and (f).
72
Equally clearly, the language “and also specified repairs,
maintenance tasks, alterations, and remodeling” must relate to landlord
duties covered by paragraphs (1)(a), (1)(b), (1)(c), or (1)(d). For one thing,
section 562A.15(2) is placed within the statute and written as if it were a
qualifier to section 562A.15(1) as a whole. Moreover, if the terminology
“specified repairs, maintenance tasks, alterations, and remodeling” did
not relate to matters that would otherwise be landlord duties under
paragraphs (1)(a), (1)(b), (1)(c), or (1)(d), the language would again be
totally superfluous. Under a separate section of the IURLTA, landlords
and tenants can always agree to various things in their leases if their
agreements are not contrary to the terms of the IURLTA—and there is no
“good faith” requirement. See id. § 562A.9(1) (stating that “[t]he landlord
and tenant may include in a rental agreement, terms and conditions not
prohibited by this chapter or other rule of law”). The legislature did not
need to include the verbiage after “and also” to authorize the same thing.
Furthermore, the term “specified repairs” in subsection (2)
seemingly corresponds with language in paragraph (1)(b) requiring the
landlord to “[m]ake all repairs and do whatever is necessary to put and
keep the premises in a fit and habitable condition.” Iowa Code
§ 562A.15(1)(b), .15(2). Under the argument offered by the majority,
repairs has to mean something different in two subsections of the same
statute. That seems unlikely. See Paye, 865 N.W.2d at 7 (indicating that
the same term should have the same meaning when it appears multiple
times in the same statute).
Oddly, after scouring the country for out-of-state caselaw to
support its interpretation of Iowa’s sui generis small claims jurisdictional
statute, including the aforementioned New Jersey case, the majority
73
omits discussion of pertinent out-of-state caselaw here—even though we
are talking about a uniform act adopted in many jurisdictions.
Existing caselaw interpreting the URLTA undermines the argument
presented by the majority. In Sullivan v. Subramanian, 2 P.3d 66 (Alaska
2000), the court referenced the duties in Alaska’s counterpart to
paragraphs (1)(a), (1)(b), (1)(c), and (1)(d), and then added, “Barring
circumstances that do not exist here, landlords are prohibited from
shifting these duties to their tenants.” Id. at 69–70 (emphasis added). In
a footnote, the court then revealed the circumstances under which those
duties could be shifted by citing the “specified repairs, maintenance
tasks, alterations, or remodeling” language in Alaska’s counterpart to
section 562A.15(3). Id. at 70 n.8. The court also cited a prior Alaska
case, see id., which indicated that Alaska’s counterpart to section
562A.15(3) “governs landlords’ attempts to shift duties such as the
maintenance of common areas [found in the counterpart to Iowa Code
section 562A.15(1)(b)] to tenants,” Coburn v. Burton, 790 P.2d 1355,
1357 (Alaska 1990).
Similarly, in L & M Investments Co. v. Morrison, 605 P.2d 1347,
1350 (Or. Ct. App. 1980), the court cited Oregon’s counterpart to section
562A.15(1) and said, “[I]t is presumed that the stated rental is for
premises in a habitable condition and the landlord is estopped from
contending otherwise, at least in the absence of an express written
agreement pursuant to [Oregon’s counterpart to section 562A.15(3)].”
In Graber v. Engstrom, 384 N.W.2d 307, 308 (N.D. 1986), there was
a scenario like the present one where the landlord of a single-family
residence (a mobile home) argued that the lease had transferred certain
habitability obligations to the tenant including the obligation to repair a
broken window. Discussing North Dakota’s counterpart to Iowa Code
74
section 562A.15, the court indicated this shifting of responsibility would
be lawful:
Section 47–16–13.1(1), N.D.C.C., among other things,
requires a landlord of a residential dwelling unit to comply
with the requirements of applicable building and housing
codes materially affecting health and safety; to make all
repairs and do whatever is necessary to put and keep the
premises in a fit and habitable condition; and to maintain in
good and safe working order and condition all electrical,
plumbing, sanitary, heating, and other facilities and
appliances supplied or required to be supplied by the
landlord. Section 47–16–13.1(4), N.D.C.C., however, allows
the landlord and tenant of a single-family residence to agree
in writing that the tenant perform the landlord’s duties
concerning specified repairs, maintenance tasks, alterations
and remodeling if the transaction is entered into in good
faith.
Id. at 308–09 (citation omitted). However, the court found the lease
provision in question was “vague as to the specific maintenance tasks
intended to be delegated to” the tenant and therefore upheld the lower
court’s fact determination that they did not include the matters at issue.
Id. at 309–10.
Also, the Rhode Island Supreme Court, interpreting a statute
somewhat different from the uniform act but with nearly identical
wording in relevant part to Iowa Code section 562A.15(2), said,
It is . . . clear that the landlord may shift the responsibility
for performing ordinary specified repairs and maintenance of
the rented dwelling premises to the tenant, provided that the
parties act in good faith; the parties agree in writing; the
agreement is supported by adequate consideration; and the
agreement is not in violation of [the Rhode Island statute
governing landlord’s maintenance duties and the landlord’s
ability to contract them away].
State Water Res. Bd. v. Howard, 729 A.2d 712, 715 (R.I. 1999) (per
curiam). In that case, the state leased residential properties to tenants
on condition that tenants assumed the responsibility for all necessary
maintenance and repairs in exchange for a deduction from the fair
75
market value of rent. Id. at 713. Because the leases did not “shift the
responsibility to cure existing or past violations of the applicable housing
and building codes to the tenants” and the state had attempted to
negotiate the repair-shifting provisions in good faith, the challenged
provisions were upheld under Rhode Island law. Id. at 715.
I agree that an operating lock on an exterior door is one aspect of
habitability. See Brichacek v. Hiskey, 401 N.W.2d 44, 47 (Iowa 1987)
(“On the record of this case we believe that a landlord is under a duty to
provide a front door lock as a part of his overall duty of providing
habitable quarters.”). And I assume that the burglary here, like most
burglaries, resulted in the damaged side-entry door no longer being
secure. However, Iowa Code section 562A.15(2) does not provide an
exception for “specified repairs so long as they do not relate to
habitability.” Instead, the exception is simply for specified repairs.
Furthermore, if the parties’ ability to contract regarding specified repairs
were limited by the landlord’s duty to perform any repair that relates to
habitability, it is easy to foresee that many disputes would arise. Some
door and window repairs relate to habitability; some do not. Thus, I
believe the IURLTA allows a landlord and a tenant of a single-family
home to agree that the tenant will perform specified repairs, where the
subject matter is specified and the task to be performed can be fairly
characterized as a repair. That is what section 562A.15(2) says.
Tenants living in a single-family residence may be in a better
position than a landlord who is not on the scene to safeguard doors,
screens, and windows from outside harm. Note that the argument
bruited by the majority applies to all landlords and tenants of single-
family residences. Thus, a lifelong Iowan who rents her home upon
76
retiring to Florida could not contract that the renter would be responsible
for repairing the doors to the home.
The court ultimately finds for De Stefano on an alternative,
narrower ground. The court reasons that even if De Stefano might be
required to perform specified repairs under section 562A.15(2), she
cannot be required to pay for such repairs when performed by the
landlord. While this ground is more plausible, I do not believe the
IURLTA draws such a fine line. The IURLTA allows any provision “not
prohibited by this chapter or other rule of law,” Iowa Code § 562A.9(1),
while disallowing any provision that “waive[s] . . . rights or remedies
under this chapter,” id. § 562A.11(1)(a). Here, the lease provision merely
imposed on the tenant the duty to pay for a repair that the law
authorized the parties to agree would be the tenant’s responsibility.
Significantly, this is not a case where the tenant sought to perform the
repair herself or himself and was denied permission to do so. Rather, the
lease provided that repairs would be performed by Iowa City Maintenance
unless the tenants obtained written authorization from the landlord. The
tenants never sought such authorization.
For these reasons, I would hold that Iowa law does not prohibit a
landlord and a tenant of a single-family residence from agreeing in the
lease that the tenant will pay for the costs of repairing damage to a door
resulting from third-party vandalism when the damage occurs during the
lease term and is not due to the landlord’s negligence. I further note that
other provisions in the IURLTA protect the tenant in other, more serious
circumstances than a vandalized door. See id. § 562A.25 (authorizing
the tenant to vacate all or part of the premises and terminate the lease or
receive a rent reduction when “the dwelling unit or premises are
damaged or destroyed by fire or casualty to an extent that enjoyment of
77
the dwelling unit is substantially impaired”); see also 49 Am. Jur. 2d
Landlord and Tenant § 704, at 679 (2006) (noting that even a general
covenant to repair “merely binds the lessee to make ordinary repairs, as
opposed to extensive structural repairs”). 20
III. Conclusion.
I agree with the court’s resolution of the automatic carpet-cleaning
deduction, the bad-faith penalty, and attorneys’ fees. However, in my
view, attorneys’ fees are included in the $5000 maximum amount in
controversy recoverable in small claims. In addition, I do not believe
Iowa law forbids lease provisions requiring the tenant of a single-family
home to pay the costs of repairing door vandalism that occurs during the
tenancy. If I were deciding this case, I would affirm the thorough order of
the district court except I would reverse the decision on punitive
damages and remand for consideration of Attorney Warnock’s fees
subject to the overall $5000 jurisdictional limit.
Waterman and Zager, JJ., join this concurrence in part and
dissent in part.
20A lessee of real property generally has an insurable interest in the leased
property. See Neubauer v. Hostetter, 485 N.W.2d 87, 89–90 (Iowa 1992). In this case,
the record indicates that the landlord had insurance for the premises, but cost of the
door repair was below the deductible.