IN THE SUPREME COURT OF IOWA
No. 15–1348
Filed May 19, 2017
Amended July 19, 2017
JOAN WALTON,
Appellee,
vs.
MARTIN GAFFEY,
Appellant.
Appeal from the Iowa District Court for Johnson County, Patrick R.
Grady, Judge.
A landlord appeals a district court’s ruling on summary judgment
that certain lease provisions are prohibited under the Iowa Uniform
Residential Landlord and Tenant Act and that certified a class of tenants.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
James W. Affeldt and Nicholas J. Kilburg of Elderkin & Pirnie,
P.L.C., Cedar Rapids, for appellant.
Christopher Warnock of The Iowa Tenants’ Project, Iowa City, and
Christine Boyer of The Iowa Tenants’ Project, Iowa City, for appellee.
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HECHT, Justice.
A tenant brought this action alleging her lease included several
provisions known by the landlord to be prohibited under the Iowa
Uniform Residential Landlord and Tenant Act (the Act). Claiming status
as an appropriate representative of other similarly situated residential
tenants, the tenant requested certification of a class. On interlocutory
appeal challenging a summary judgment in favor of the tenant and an
order certifying a class of tenants, the landlord contends (1) the lease
provisions are not prohibited under the Act; (2) the tenant has no claim
for damages because even if the lease provisions are prohibited under the
Act, the landlord did not enforce them against the tenant; and (3) the
district court erred in certifying the class. Upon review, we conclude
some, but not all, of the challenged lease provisions are prohibited under
the Act and we reverse and remand on class certification.
I. Background Facts and Proceedings.
Tenant Joan Walton entered into a rental agreement with landlord
Martin Gaffey on March 14, 2014, for a lease term that ended on July 29,
2015. The agreement included provisions imposing fees, charges, and
liquidated damages in the event of various occurrences. Paragraph 7
prescribed a charge of $35 if the tenant’s check was returned for
insufficient funds. Paragraph 8 imposed a “processing administrative
fee” of $35 for “issue and service of each 3-DAY NOTICE TO PAY UNPAID
RENT.” Paragraph 12 established an administrative fee of $40 if the
tenant failed to register utilities in her name. Paragraphs 13 and 27
prescribed a fee in the same amount in the event the tenant failed to
keep the utilities registered in her name until the end of the lease term.
A fine of $500 was imposed under paragraph 22 of the agreement if the
tenant was “caught smoking in [the] dwelling unit or interior common
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area” of the property. Service calls precipitated by noise complaints,
trash removal, parking violations, unauthorized pets, or posting notices
to the tenant would result in a “minimum trip charge” of $50 payable by
the tenant under paragraph 24 of the agreement. A minimum service
charge of $50 was established in paragraph 25 in the event the tenant
was locked out of the abode and requested the landlord’s assistance in
regaining access after normal working hours. An administrative fee of
$40 for each new approved occupant and a fee of $100 for each
unapproved new occupant were prescribed in paragraph 26. A fee of
$200 was charged in paragraph 27 in the event the tenant should
sublease the unit. A fee of $500 for keeping an unauthorized animal in
the unit was established under paragraph 28 of the agreement. A fee of
$100 was imposed in paragraph 37 for each inspection attempted by the
landlord as a result of the tenant’s failure to vacate the premise after
termination of the agreement.
The agreement also included provisions purporting to limit the
landlord’s liability or exculpate him entirely for some types of damages or
losses. For example, paragraph 16 provided as follows:
Subject to other remedies at law, if LANDLORD is unable to
give TENANT possession at the beginning of the term, the
rent shall be rebated on a pro rata basis until possession
can be given, which rebated rent shall be accepted by
TENANT as full settlement of all damages occasioned by said
delay, and if possession can not be delivered within ten days
of the beginning of said term, this lease may be terminated
by giving prior written notice of such termination.
Paragraph 20(e) addressed the landlord’s liability for appliance failures.
This provision provided in relevant part:
In the event of the failure of an appliance that is furnished
by LANDLORD under this rental agreement, LANDLORD’S
sole responsibility shall be the repair or replacement of the
appliance at the LANDLORD’S sole discretion. In no event or
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circumstance will LANDLORD be responsible for any loss of
use or consequential damages caused by said appliance
failure.
Paragraph 23 of the agreement further provided that “LANDLORD shall
not be liable for damage or loss of any of the TENANT’S personal property
for any cause whatsoever.”
The agreement also addressed the subject of carpet cleaning.
Paragraph 29 provided in relevant part that “LANDLORD shall have all
carpeting professionally shampooed, paid out of tenants security
deposit.” 1
Walton filed this action against Gaffey seeking a declaration that
each of the lease provisions mentioned above violated the Act. In
particular, Walton alleged the provisions imposing fees, charges, and
liquidated damages in the event of various occurrences violated Iowa
Code sections 562A.11(1), 562A.27, and 562A.32 (2015) because a
landlord may recover only actual damages under the Act. Walton’s
petition further asserted the various provisions limiting or exculpating
Gaffey’s liability violated section 562A.11(1). In addition, the petition
alleged the lease provisions allocating to her the cost of carpet cleaning
are prohibited under the Act because they purport to impose the cost of
carpet cleaning whether or not cleaning was necessary to restore the
dwelling to its condition at the commencement of the lease, ordinary
wear and tear excepted, and because they authorized withholding the
cost of such cleaning from the security deposit. 2 The petition sought
1Gaffey’s “Tenant Rules and Regulations” also addressed the subject of carpet
cleaning, stating that the “[c]arpet has been cleaned prior to move-in and is required to
be cleaned at move out and at TENANT’S expense only by approved or authorized firms.
At time of move-out a copy of the receipt for cleaning is to be provided to LANDLORD.”
2Although Walton’s petition challenged other lease provisions as well, we confine
our discussion to those provisions that were addressed in the district court’s summary
judgment ruling.
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judgment for actual and punitive damages, injunctive relief, and attorney
fees. Gaffey’s answer denied the agreement’s provisions violate the Act
and urged dismissal of the action.
A. Motion for Partial Summary and Declaratory Judgment.
Walton filed a motion for partial summary and declaratory judgment.
The motion sought a declaration that the above-mentioned lease
provisions imposing charges, fines, penalties, liquidated damages, or
other fees are prohibited because, Walton contended, a landlord can
recover only actual damages from tenants under the Act. Walton further
urged the court to enter summary judgment declaring that the lease
provision imposing an automatic carpet-cleaning charge and withholding
it from her security deposit violates the Act. 3 Walton’s motion also
sought a summary declaration that paragraphs 20 and 23 of the lease
violate section 562A.11(1)(d) of the Act because they purport to limit or
exculpate Gaffey’s liability arising under law. In addition, Walton urged
the court to declare that Gaffey is liable under the Act as a matter of law
for willfully using the prohibited lease provisions even if he did not
attempt to enforce them against her.
In his resistance to the tenant’s motion for partial summary
judgment, Gaffey contended the contested provisions are neither
prohibited under Iowa Code section 562A.11(1) nor unconscionable
under section 562A.7(1)(a). In the alternative, Gaffey asserted that
Walton has asserted no claim that is ripe for adjudication because the
3Walton’s motion for summary judgment asserted that whether the cost of
carpet cleaning is withheld from her security deposit or paid to an authorized cleaner,
the Act does not permit Gaffey to impose—without inspection—the cost of cleaning a
carpet that is not in need of cleaning.
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challenged provisions were not enforced against her. 4 The landlord
further asserted that even if any of the challenged provisions is
determined to be prohibited under the Act, the record does not support a
finding that he willfully used it with knowledge of its prohibition. Based
on these assertions, Gaffey urged the motion for summary judgment be
denied.
B. Motion for Class Certification. Walton also filed a motion
requesting she be certified as representative of a class consisting of all of
Gaffey’s tenants who signed “the same or substantially similar standard
leases and lease rules.” 5 The motion requested the court adjudicate for
the entire class (1) whether the terms of the lease violated the Act, and
(2) whether Gaffey knowingly and willfully used a rental agreement
containing prohibited provisions.
Gaffey resisted the certification of the proposed class of tenants,
contending Walton is not a proper representative of the purported class
because the challenged lease provisions were not enforced against her.
Contending Walton has suffered no injury as a consequence of the
inclusion of the challenged provisions in the lease agreement, Gaffey
posited that Walton lacks standing to proceed with her claims and is
therefore not a proper class representative. Certification should also be
denied in this instance, Gaffey asserted, because individual claims and
defenses predominate over common issues across the putative class.
4In an affidavit filed in support of his resistance to the motion for summary
judgment, Gaffey attests that he does not invoke the carpet-cleaning provision in every
case and instead makes a case-by-case determination whether cleaning is required.
5Gaffey has admitted in this case that the lease provisions that are the subject of
this case were part of his rental agreements with more than fifty tenants.
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C. District Court’s Summary Judgment Ruling. The district
court granted Walton’s motion for partial summary judgment. Reasoning
that Gaffey owes his tenant a duty of due care to protect them from
injury, the court declared that paragraph 20(e) (limiting landlord’s
liability for any loss of use or consequential damages arising from
appliance failure) and paragraph 23 (landlord not liable for damage or
loss of any of the tenant’s personal property for any cause whatsoever) of
the agreement purport to exculpate or limit the landlord’s liability in
violation of Iowa Code section 562A.11(1)(d).
The district court further concluded the lease provisions imposing
the fees, charges, and liquidated damages detailed above were prohibited
under the Act. Citing our decision in D.R. Mobile Home Rentals v. Frost,
545 N.W.2d 302 (Iowa 1996) (per curiam), the district court concluded
the Act allows landlords to recover only actual damages from their
tenants. Because the fees, charges, and liquidated damages were set
“without any consideration of what the landlord’s actual damages and
fees would be in each situation,” the court concluded the lease provisions
violate the Act.
The court also decided the carpet-cleaning provision was
prohibited under the Act because it automatically imposed on Walton a
fee without regard to whether the carpet was clean at the end of the lease
term and because it authorized Gaffey to withhold the cost of the
cleaning from the security deposit without proof that such cleaning was
necessary to restore the dwelling unit to its condition at the
commencement of the tenancy, ordinary wear and tear excepted. The
court concluded, however, that the question of whether Gaffey willfully
used the prohibited provisions is a disputed question of fact for the fact
finder.
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In reaching its summary judgment conclusions, the district court
relied on an unpublished decision of our court of appeals in Staley v.
Barkalow, No. 12–1031, 2013 WL 2368825 (Iowa Ct. App. May 30, 2013).
In Staley, the plaintiffs were tenants who alleged their landlord used
several lease provisions prohibited under Iowa Code section 562A.11(1).
Staley, 2013 WL 2368825, at *2. The tenants in that case challenged the
lease provisions on the grounds they constituted illegal indemnity and
exculpatory clauses, required tenants to pay rent even if the landlord
failed to deliver possession of the premises at the commencement of the
lease term, and illegally required tenants to pay for maintenance and
repair of the premises, carpet cleaning, and property damages caused by
third-party vandals. Id. at *2–3. The defendant landlord contended it
had no liability to the tenants under chapter 562A for lease provisions
that were included in the lease but not enforced. Id. at *4–5. The district
court denied the Staley tenants’ motion for partial summary judgment,
concluding the landlord had no liability to the tenants under section
562A.11(2) for including any lease provisions that were not enforced
against them, and denied a motion to certify a class of similarly situated
plaintiffs. Id. at *5–6. Our court of appeals reversed, concluding a
landlord “willfully uses” a lease provision prohibited under the Act by
willfully including it in a lease. Id. at *8. The court of appeals also found
the district court abused its discretion in refusing to certify the class of
tenants. Id. at *12.
We granted Gaffey’s application for interlocutory review.
II. Scope and Standards of Review.
The relevant scope and standards of review are detailed in another
of this court’s opinions, filed today. In Kline v. Southgate Property
Management, L.L.C., a case involving similar issues, we said,
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Generally, our standard of review for a declaratory
judgment ruling depends on whether the action was tried at
law or in equity in the district court. When we review a
declaratory ruling entered on summary judgment, however,
our scope of review is for correction of errors at law.
Summary judgment rulings based on statutory
interpretation are reviewed for correction of errors at law.
We review a district court’s rulings on certification of a
class for an abuse of discretion. The district court “enjoys
broad discretion in the certification of class action lawsuits.”
Iowa’s “class-action rules are remedial in nature and should
be liberally construed to favor the maintenance of class
actions.” A district court abuses its discretion when its
“grounds for certification are clearly unreasonable.”
895 N.W.2d 429, 436 (2017) (citations omitted) (first quoting Legg v. W.
Bank, 873 N.W.2d 756, 758 (Iowa 2016) and then quoting Anderson
Contracting, Inc. v. DSM Copolymers, 776 N.W.2d 846, 848 (Iowa 2009)).
III. Analysis.
We first address Gaffey’s contention that the district court erred in
concluding a tenant against whom a rental agreement provision has
never been enforced has standing to sue her landlord under chapter
562A. We then turn to Gaffey’s alternative contention that even if such a
tenant could have standing to challenge a prohibited rental agreement
provision, the district court erred in concluding any of the provisions
assailed by Walton are prohibited under section 562A.11(1). Lastly, we
address Gaffey’s assertion that the district court abused its discretion in
certifying a class of tenants in this action.
A. Standing. Because it is undisputed that he has made no
attempt to enforce the challenged lease provisions against Walton, Gaffey
argues the summary judgment record is devoid of evidence of any
injurious effect necessary to sustain standing to sue. Accordingly, Gaffey
suggests, Walton’s claims in this case are purely hypothetical or
academic—not concrete, ripe, and justiciable. We rejected these
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arguments in Kline and reject them here for the same reasons. See
Kline, 895 N.W.2d at 436–37.
B. Fees, Charges, and Liquidated Damages Provisions. The
district court concluded all of the challenged fees, charges, and
liquidated damage provisions in the leases are prohibited under the Act
“because they were set without any consideration of what the landlord’s
actual damages and fees would be in each situation.” As we have already
noted, the district court reached this conclusion because it believed our
decision in Frost required it. See Frost, 545 N.W.2d 302. Gaffey
contends reversal is required on this issue because the fees, charges,
and liquidated damages provisions challenged by the tenant in this case
are not prohibited under the Act. We resolved this issue in the landlord’s
favor in Kline. For the reasons we articulated there, we conclude the
summary judgment ruling in Walton’s favor on this issue must be
reversed. See Kline, 895 N.W.2d at 441.
As in Kline, however, we emphasize that
the district court did not decide whether any of the fees,
charges, and liquidated damage provisions challenged in this
case by the tenants are unconscionable under section
562A.7 or unenforceable penalties under any other principle
of law or equity supplementing the Act.
Id. at 442. Accordingly, those issues remain for resolution in
proceedings on remand.
C. Carpet-Cleaning Provision. The district court concluded the
carpet-cleaning provision in paragraph 29 of Gaffey’s rental agreement is
prohibited because it provides for automatic cleaning whether the carpet
needs cleaning or not and authorizes withholding of the cost of such
cleaning from the security deposit. Gaffey contends the district court
erred on this issue because the record demonstrates the provision is not
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automatically invoked against tenants and because it is properly
understood as the parties’ expression of their expectations of cleanliness
at the beginning and end of the lease term. In other words, Gaffey
explains, the professional carpet-cleaning requirement ensures the
carpet is returned to the condition it was in at the commencement of the
lease term, ordinary wear and tear excepted. See Iowa Code
§ 562A.12(3)(a)(2) (permitting withholding such amounts from a security
deposit as are reasonably necessary “[t]o restore the dwelling unit to its
condition at the commencement of the tenancy, ordinary wear and tear
excepted”).
We addressed the legality of an automatic carpet-cleaning
provision in a residential rental agreement in De Stefano v. Apts.
Downtown, Inc., 879 N.W.2d 155 (Iowa 2016). The agreement in that
case provided,
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.
Id. at 160. We decided that the provision conflicted with the Act because
“it generates an automatic deduction from the rental deposit even when
none of the conditions of section 562A.12(3) have been met.” Id. at 185.
We acknowledged in De Stefano, however, that Iowa Code section
562A.12 “clearly authorizes the deduction of carpet-cleaning costs from
rental deposits if necessary to restore the dwelling to the condition at the
commencement of the tenancy, beyond the ordinary wear and tear.” Id.
at 186. We expressly left room for the possibility that “a landlord may be
able to impose a nonrefundable charge on tenants for automatic carpet
cleaning” not affecting the rental deposit. Id.
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In Kline, we concluded the district court erred in declaring the
landlord’s carpet-cleaning provision was prohibited under section
562A.12(3). We reasoned that the language of the rental agreement in
that case was not reasonably understood as an authorization for
automatic withholding of the cost of carpet cleaning from a security
deposit. It was, we concluded, instead “a provision establishing a
benchmark for the condition of the carpet—a clean carpet—at the
commencement of each tenancy from which subsequent assessments of
ordinary wear and tear can be measured.” Kline, 895 N.W.2d at 444; see
also De Stefano, 879 N.W.2d at 186.
In this case, the carpet-cleaning provision in paragraph 29 of
Gaffey’s rental agreement with Walton provides: “Landlord shall have all
carpeting professionally shampooed, paid out of tenants’ security
deposit.” It authorizes the landlord to undertake professional carpet
cleaning and deduct the cost from the security deposit without regard to
whether the cleaning is necessary to restore the carpet to its condition at
the commencement of the tenancy. We think this provision is more like
the carpet-cleaning provision in De Stefano than the one in Kline.
Accordingly, we affirm the district court’s determination that the carpet-
cleaning provision in paragraph 29 is unenforceable under law. See
De Stefano, 879 N.W.2d at 186. Our confidence in the conclusion that
the subject provision is unenforceable is not diminished by the
undisputed fact that Gaffey made no effort to enforce the provision
against Walton; neither is it diminished by Gaffey’s assertion—supported
by substantial evidence in the summary judgment record—that he
exercises discretion in enforcing the provision and only does so when
necessary under the circumstances. As written, paragraph 29 amounts
to an agreement by Walton to waive her right to insist that Gaffey
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withhold from the security deposit only such amounts as are reasonably
necessary to restore the carpet to its condition at the commencement of
the tenancy, ordinary wear and tear excepted. See Iowa Code
§ 562A.12(3)(a)(2). We therefore affirm the district court’s conclusion
that the carpet-cleaning provision in paragraph 29 of the rental
agreement is a prohibited provision. 6 See id. § 562A.11(1)(a).
D. Certification of the Class. Gaffey contends the district court
made both procedural and substantive errors in certifying the class of
tenants. In certifying the class, the district court again relied on the
decision of the court of appeals in Staley, a case brought by tenants
making similar claims against a different landlord. Staley, 2013 WL
2368825, at *10. Gaffey contends the district court in this case relied
solely on the certification decision in Staley and assumed—without
performing an independent analysis and making findings of fact as to the
substantive criteria for class certification—that certification is
appropriate in this case and Walton is a suitable representative of the
class.
Today we reversed the certification of a class of tenants in Kline.
See Kline, 895 N.W.2d at 432–33. The certification of a class in this case
is procedurally flawed for the same reasons and must therefore be
reversed. As in Kline, however, our ruling should not be understood as a
determination that Walton cannot establish the grounds for certification
6We acknowledge that under Gaffey’s tenant rules, Walton could avoid the
deduction of the cost of mandatory carpet cleaning from the security deposit by hiring a
professional approved by Gaffey to undertake the cleaning and by providing a receipt
evidencing payment for the service. We conclude, however, that the provision still
violates the Act. An unauthorized deduction from the security deposit does not become
authorized merely because the tenant can avoid it by making a separate payment.
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of a class. On remand, the court should make the findings required
under Iowa Rule of Civil Procedure 1.263(1).
IV. Conclusion.
We affirm the district court’s declaration that paragraphs 20(e), 23,
and 29 of Gaffey’s rental agreement constitute prohibited provisions. We
reverse the district court’s declaration that the other lease and rule
provisions challenged by Walton are categorically prohibited. We also
reverse the class-certification ruling and remand for further proceedings.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.