Title: Public Finance Co. v. Van Blaricome

State: iowa

Issuer: Iowa Supreme Court

Document:

324 N.W.2d 716 (1982) PUBLIC FINANCE COMPANY, Appellee, v. John E. VAN BLARICOME and Debbie Van Blaricome, Appellants. No. 67104. Supreme Court of Iowa. September 29, 1982. *717 Edwin F. Kelly and Barry D. Farmer, of Kelly & Morrissey, Fairfield, for appellants. Michael R. Brown, Fairfield, for appellee. Considered by REYNOLDSON, C.J., and LeGRAND, UHLENHOPP, McGIVERIN and CARTER, JJ. UHLENHOPP, Justice. The main question before us in this appeal of a law action tried to the court is whether proof of mailing must be established by testimony of the person who deposited the item in a United States post office box or may be established by testimony as to office custom. In May 1978 plaintiff Public Finance Company extended credit of $4200 to defendant John and Debbie Van Blaricome under the terms of an installment note and security agreement, with a 1973 automobile as collateral. The Van Blaricomes were to make twenty-four monthly payments of $175 each on the loan, and evidently did make some payments in 1978 and 1979. The monthly payments to Public Finance had stopped, however, by August of 1979. In December 1979, Public Finance filed suit against the Van Blaricomes claiming that they had defaulted on their obligation. The Van Blaricomes filed an answer admitting that they executed the note and security agreement but denying the service of a notice of default and right to cure. At trial, copies of default notices, alleged by Public Finance to have been mailed to the Van Blaricomes, were introduced into evidence by Public Finance over the Van Blaricomes' objection. The Van Blaricomes claimed no proper foundation for the admission or proof of mailing had been made. Steve Kvale, credit manager of Public Finance, *718 testified that he personally prepared the notices of default and placed them in the company's outgoing mailbox, and he explained the office custom of mailing items from the mailbox. He could not personally testify, however, that someone actually placed that outgoing mail in a United States post office. The trial court found the Van Blaricomes liable on the installment note. The Van Blaricomes ask us to hold the trial court erred in admitting the copies of default notices into evidence and in granting judgment against them on the petition. The Van Blaricomes also appeal the trial court's dismissal of their counterclaim alleging Public Finance violated provisions of the Iowa Debt Collection Practices Act, Iowa Code §§ 537.7101.7103 (1979). Relatives of both John and Debbie Van Blaricome testified that Steve Kvale had telephoned them in order to locate the Van Blaricomes, and referred to their debt. The trial court held, however, that the Van Blaricomes failed to prove by a preponderance of the evidence that Public Finance, through its agent Kvale, intentionally violated the Iowa Debt Collection Practices Act. Our review is on error. The trial court's fact findings have the effect of a special verdict; if supported by substantial evidence they are binding on us. State v. Hall, 287 N.W.2d 564, 565 (Iowa 1980); Herman Ford-Mercury v. Betts, 251 N.W.2d 492, 493 (Iowa 1977). We can interfere with the trial court's determination of evidentiary insufficiency against the party having the burden of proof only if the evidence is so overwhelming that the party carried the burden as a matter of law. First National Bank of Lennox v. Claiser, 308 N.W.2d 1, 3 (Iowa 1981). I. Custom as sufficient proof of mailing. The Van Blaricomes objected at trial to the admission of copies of default notices. Public Finance claims to have sent notices to the Van Blaricomes; the Van Blaricomes, however, deny receipt. The importance of giving notice is found in section 537.5110 of the Iowa Code, which provides: Notice of default and right to cure must be given before a creditor is entitled to bring suit on the obligation. Farmers Trust & Savings Bank v. Manning, 311 N.W.2d 285, 290 (Iowa 1981); First Northwestern National Bank v. Crouch, 287 N.W.2d 151, 154 (Iowa 1980). The creditor has the burden of proving that notice was given. Farmers Trust and Savings Bank, 311 N.W.2d at 290. A creditor gives notice to the consumer "when he delivers the notice to the consumer or mails the notice to him at his residence. . . ." Iowa Code § 537.1201(4) (1979). The Van Blaricome's complaint is that Public Finance failed to meet its burden of proof in establishing that a notice of default and right to cure was in fact mailed. The Van Blaricomes point to Iowa cases setting out the requirements for proof of mailing. The court set out a six-pronged test for meeting the burden of proof in Central Trust Co. v. City of Des Moines, 205 Iowa 742, 218 N.W. 580 (1928). Evidence must be introduced: Id. at 746, 218 N.W. at 582. See also Reserve Insurance Co., 260 Iowa at 744, 150 N.W. at 635; Forrest v. Sovereign Camp Woodmen of the World, 220 Iowa 478, 480-81, 261 N.W. 802, 804 (1935). In their brief, the Van Blaricomes challenge the sufficiency of proof as to the fourth (address), fifth (postage), and sixth (mailing) prongs of the test. At trial, their attorney unsuccessfully objected to the admission of the notices of default on the basis that "no proper foundation has been laid for their admission, nor testimony as to their actual physical mailing. . . ." At the close of their case, defense counsel moved for dismissal stating "again our objection is to the notice of the right to cure." When a party seeks to exclude evidence, the specific grounds of objection must be indicated to the trial court. This is to alert the court to the question raised and to enable opposing counsel to take proper corrective measures to remedy the alleged defect. State v. Pardock, 215 N.W.2d 344, 348 (Iowa 1974). This court has held that where the objection to evidence is based on a claim of "no proper foundation" but does not state in what respect the foundation is lacking, the objection is insufficient to provide a basis for review on appeal. Thompson v. Bohlken, 312 N.W.2d 501, 509 (Iowa 1981); Shinrone, Inc. v. Tasco, Inc., 283 N.W.2d 280, 288 (Iowa 1979). In the case before us, the Van Blaricomes waived their right to challenge the sufficiency of evidence as to proper postage and addresses; those objections were not specifically raised at trial. They did, however, preserve error as to the question of actual mailing. The real point of contention is whether notices to the Van Blaricomes were actually deposited in the United States mail. This court has found the proof insufficient where the only evidence was that a supervisor had signed the letter in question, but was without personal knowledge of whether the letter had ever been deposited in the mail. Forrest v. Sovereign Camp Woodmen of the World, 220 Iowa 478, 261 N.W. 802 (1935). Testimony as to a secretary's regular office routine after letters were signed, which included depositing them in the mail, was held insufficient to prove mailing. Id. at 481, 261 N.W. at 804. The Eighth Circuit Court of Appeals also refused to admit evidence in a situation somewhat similar to Forrest. Leasing Associates, Inc. v. Slaughter & Sons, Inc., 450 F.2d 174 (8th Cir. 1971). In Leasing a supervisor testified that after signing a letter he had dictated to his secretary, he put it in his out box for the mail clerk to pick up and mail. Absent testimony from the mail clerk to verify either that he mailed the particular letter or that it was his custom to do so, the court refused to indulge in a presumption of mailing. Id. at 179. Some state courts adhere to this viewallowing mailing to be proved by evidence of an office custom, only if corroborated by evidence showing the custom was followed in the particular instance. Employers National Insurance Co. v. Parker, 286 Ala. 42, 236 So. 2d 699 (1970); Commonwealth Edison Co. v. Property Tax Appeal Bd., 67 Ill.App.3d 428, 23 Ill.Dec. 710, 384 N.E.2d 504 (1979); Harris v. Georgia-Pacific Corp., 395 So. 2d 856 (La.App.1981); Nafstad v. Merchant, 303 Minn. 569, 228 N.W.2d 548 (1975); Matsko v. Dally, 49 Wash. 2d 370, 301 P.2d 1074 (1956). McCormick notes that some courts, possibly a majority, require the employee who did the actual mailing to testify the item in question was mailed. McCormick on Evidence (2d Ed.) § 195 at 464 n.18. He states however: Id. Several federal and state courts apply the latter view. In a federal case a bank officer *720 testified he dictated a letter and signed it after his secretary had typed it. He also testified that his secretary's practice was to send out all dictated letters by mail. Further testimony showed the letter had been placed in an envelope and put it in an outbox for mailing and that mail boys customarily picked up mail in the office outbox, ran it through a postage meter, bagged it, and placed it in the neighborhood post office. The court held mailing could properly be proved by this office custom without testimony from the person who personally placed the letter in the post office. United States v. Joyce, 499 F.2d 9 (7th Cir.), cert. denied, 419 U.S. 1031, 95 S. Ct. 512, 42 L. Ed. 2d 306 (1974). In another case a manager described the office practice for mailing credit cards. The court found this to be sufficient evidence of mailing, and thought that to require further testimony by employees charged with subsequent ministerial tasks in the mailing process would be cumulative. The court also recognized that those employees could not be expected to recall processing specific cards. United States v. Matzker, 473 F.2d 408, 411 (8th Cir. 1973). Their testimony merely would have affirmed the manager's description of office procedure and statement that it was invariably followed. Id. at 411. Other federal decisions holding evidence of business custom sufficient proof of mailing include United States v. Vandersee, 279 F.2d 176 (3rd Cir. 1960); Citizens Bank & Trust Co. of Middlesboro, Ky. v. Allen, 43 F.2d 549 (4th Cir. 1930); and Myers v. Moore-Kile Co., 279 F. 233 (5th Cir. 1922). Several state courts also have adopted this rationale. The Florida Supreme Court recognized that requiring evidence as to the actual mailing of the particular letter would be unreasonable. The court adopted a presumption that, absent proof to the contrary, a showing of a general office practice would lead to the conclusion of mailing in a particular instance. Brown v. Giffen Industries, Inc., 281 So. 2d 897, 900 (Fla.1973). In another case an insurance company refused to pay a claim alleging the policy had been cancelled; the insured party, however, denied receipt of any cancellation notice. The company's procedure for sending cancellation notices was explained at trial by a supervisor who oversaw this procedure. No evidence was presented by employees who performed the detailed mailing functions as to whether they complied with office mailing procedures on the days in question. In holding the testimony sufficient to constitute proof of mailing the court noted: Good v. Detroit Automobile Inter-Insurance Exchange, 67 Mich.App. 270, 275, 241 N.W.2d 71, 74 (1976). A number of other state courts have held testimony of office custom to constitute sufficient proof of mailing, even absent evidence that the custom was followed on a particular occasion. Consolidated Motors, Inc. v. Skousen, 56 Ariz. 481, 486, 109 P.2d 41, 43, cert. denied, 314 U.S. 631, 62 S. Ct. 64, 86 L. Ed. 507 (1941); Swink & Co., Inc. v. Carroll McEntee & McGinley, 266 Ark. 279, 291, 584 S.W.2d 393, 400 (1979); Lucas v. Hesperia Golf & Country Club, 255 Cal. App. 2d 241, 247, 63 Cal. Rptr. 189, 193 (1967); Canyon Crest Villas South v. Board of County Commissioners, 36 Colo.App. 409, 411, 542 P.2d 395, 396 (1975); Milros-Sans Souci, Inc. v. Dade County, 296 So. 2d 545, 547 (Fla.Dist.Ct.App.1974); J.I. Case Co. v. Sinning Bros. Motor Co., 137 Kan. 581, 583, 21 P.2d 328, 330 (1933); Pence Mortgage Co. v. Stokes, 559 S.W.2d 500, 507 (Ky.Ct. App.1977); Mohr v. Universal C.I.T. Credit Corp., 216 Md. 197, 203-04, 140 A.2d 49, 52 *721 (1958); Meehan v. North Adams Savings Bank, 302 Mass. 357, 363, 19 N.E.2d 299, 302 (1939); First National Bank of Independence v. Mid-Century Insurance Co., 559 S.W.2d 50, 52 (Mo.Ct.App.1977); Crissey v. State Highway Comm., 147 Mont. 374, 379, 413 P.2d 308, 312 (1966); Start v. Shell Oil Co., 202 Or. 99, 126, 273 P.2d 225, 230 (1954); Campbell v. Royal Indemnity Co. of New York, 256 Pa.Super. 312, 318, 389 A.2d 1139, 1144 (1978); Christie v. Open Pantry Marts, Inc. of Delaware Valley, 237 Pa.Super. 243, 246, 352 A.2d 165, 167 (1975); Southern Region Industrial Realty, Inc. v. Chattanooga Warehouse & Cold Storage Co., Inc., 612 S.W.2d 162, 164 (Tenn.Ct.App. 1980); Smith v. F.W. Heitman Co., 44 Tex. Civ.App. 358, 362-63, 98 S.W. 1074, 1077 (1907); Whitney Wagon Works v. Moore, 61 Vt. 230, 239, 17 A. 1007, 1010 (1889). In the case before us, the credit manager of Public Finance, Steve Kvale, testified he personally put default notices to the Van Blaricomes in the office outgoing mail box. He also testified that standard office procedure was for his cashier to pick up all mail in the outgoing box and drop it in the local post office box just prior to five o'clock each evening. Testimony from other employees as to the same office procedures would have been repetitive. The cashier would not likely recall that she deposited the mail in the post office on a particular day a year or so previously. She could only say that was her customwhich the supervisor has already testified. We therefore hold Kvale's testimony of office custom to be sufficient, absent proof to the contrary, to raise a presumption that the notices of default were mailed. The trial court correctly received copies of these notices into evidence. We approve the trial court's finding for Public Finance on its claim of default by the Van Blaricomes. II. Debt Collection Practices Act. Section 537.7102 of the Iowa Code defines a "debt collector" as one who collects a debt for himself or his employer. Steve Kvale was subject to the provisions of the Debt Collection Practices Act. Section 537.7103(3) of the Code provides in part: A. The record indicates that Kvale communicated the fact of the Van Blaricomes' debt to their relatives. Donna Van Blaricome, John's mother, testified that a man identifying himself as Steve from Public Finance Company called her on several occasions in an attempt to locate her son John. Portions of her testimony are as follows: Q. Did he still want to give you information or continue talking about this *722 debt? A. Continued talking to me, made several remarks and I said "Well, I have tried to raise my kids to pay their bills. I always pay my bills and such as that," and I made a reference to it and I said "I can't help it. Anyway, I can't pay his bills for him." Doris Barber, Debbie Van Blaricome's mother, also testified that the fact of the Van Blaricomes' debt was communicated to her. She testified: Gary Barber, Debbie Van Blaricome's brother, testified he received a telephone call from Kvale while answering the telephone at his mother's home. His testimony was as follows: Kvale's own statements corroborate the testimony of these witnesses: Kvale's testimony makes reference to ledger cards that were kept for each consumer loan. Those cards, which were admitted into evidence, bear the following notations: B. The testimony and exhibits demonstrate prohibited practices under the Iowa Debt Collection Practices Act. The Act, however, contains exceptions. First, a communication is permissible if made to "a person who might reasonably be expected to be liable for the debt," Iowa Code § 537.7103(3)(a) (1979), but the testimony of Kvale indicates he knew the Van Blaricomes' relatives were not liable for this debt. A second exception allows communication if the debt collector has written permission to contact others, given by the debtor, after default. Iowa Code § 537.7103(3)(a) (1979). Some evidence appears that John Van Blaricome gave Kvale the Van Blaricome and Barber telephone numbers, but the evidence does not show this was for the purpose of allowing Kvale to communicate the fact of the debt to relatives. Rather, it was to aid Kvale in locating the debtors. In addition, the statute provides such authorization must be written. Iowa Code § 537.7103(3)(a) (1979). Kvale testified he did not receive written permission. A third exception permits a debt collector to contact third persons in order to locate the debtor. Section 537.7103(3)(a) of the Iowa Code provides in part: Locating the Van Blaricomes was the initial reason for Kvale's contacting members of their families, but Kvale exceeded the statutory limits when he talked about their debt. Section 537.5203(3) of the Code provides that a creditor may not be held liable for a violation if he shows by a preponderance of the evidence that it was unintentional. Kvale admitted his company had advised him that communicating the fact of a debt or legal action to other persons would be a violation of the consumer credit laws. He did so anyway. The provisions on unintentional violations is inapplicable. We hold on the record that John and Debbie Van Blaricome established as a matter of law that Kvale violated section 537.7103(3)(a) of the Code by communicating the fact of the Van Blaricomes' debt to third persons. Kvale's acts do not fall within prescribed exceptions. C. The General Assembly adopted the Iowa Debt Collection Practices Act as part of the larger Consumer Credit Code. 1974 Iowa Acts ch. 1250. A death of Iowa law exists interpreting its provisions. Congress passed a Fair Debt Collection Practices Act in 1977 which is similar to the Iowa act. *725 Section 537.7103(3)(a) of the Iowa Code, prohibiting communication of a debt to a third person, has a counterpart in section 1692c(b) of title 15, United States Code (1976). Legislative history of the federal act indicates the underlying purpose of this provision is to protect the consumer's right of privacy by prohibiting the disclosure of his personal affairs to friends, neighbors, or employees. 1977 U.S. Code Cong. & Ad. News 1695, 1696. The Federal Trade Commission has enforced this provision by ordering creditors to desist from communicating to third persons the fact of a debt. See In re Hallcraft Jewelers, Inc., 89 F.T.C. 415 (1977) (creditor threatened to inform military-personnel debtor's superior officers of outstanding debts); In re National Account Systems, Inc., 89 F.T.C. 282 (1977) (creditor urged employers to pressure employee-debtors to pay their debts). See also State v. O'Neill Investigations, Inc., 609 P.2d 520 (Alaska 1980) (contacting employers of debtor for assistance in collecting debts held to be unfair practice). The trial court mentioned that the Van Blaricomes failed to prove any actual damages resulting from Kvale's prohibited debt collection practices. Regardless of actual damages, an action against Public Finance is a permissible course for the Van Blaricomes to take. Section 537.5201(1) of the Code provides: This court has previously held that when a consumer proves violations of the Iowa Consumer Credit Code and is thereby entitled to bring a civil action under section 537.5201(1) of the Code, the consumer is entitled to have the trial court assess the statutory penalty even though the consumer fails to prove actual damages. First Northwestern National Bank v. Crouch, 287 N.W.2d 151, 154 (Iowa 1980) (creditor had violated section 537.5110 by failing to give notice of right to cure). In addition we look to federal courts' interpretations of the analogous Federal Fair Debt Collection Practices Act, section 1692, 15 United States Code (1976). Section 1692k(a) of that act provides for civil damages in the amount of: A consumer successfully proved violations of the federal act in Harvey v. United Adjusters, 509 F. Supp. 1218 (D.Or.1981). The court awarded the consumer statutory damages under section 1692k(a)(2)(A) even though no actual damages were shown under section 1692k(a)(1). The court stated: Harvey, 509 F. Supp. at 1222. We adopt the rationale of the Harvey court and reaffirm the Crouch holding that consumers may bring civil actions under section 537.5201(1) of the Code even though they may have suffered no actual damage. By use of the word "penalty" the legislature has placed emphasis on the abusive actions of the debt collector that must be checked if the purpose of the statute is to be effectuated. To allow Public Finance to escape liability in this instance would be *726 tantamount to ignoring the provisions of the Iowa Debt Collection Practices Act in the face of violation of its provisions. See Note, A Choice of Remedies for the Credit ConsumerThe Federal "Fair Debt Collection Practices Act" and the "Iowa Debt Collection Practices Act," 27 Drake L.Rev. 489, 524-26 (1977-78). We further hold that the statutory minimum and maximum limits for penalties are the limits in an action brought under this section. The general rule is that "where the act prohibited is continuing in its nature, only one penalty is incurred up to the time when an action therefor is commenced." 70 C.J.S. Penalties § 3b(2) (1981). See also 36 Am.Jur.2d Forfeitures and Penalties § 65 (1981) ("[A] statute imposing a penalty will be deemed noncumulative unless its language clearly expresses a contrary intent."). The Harvey court held that the federal act's penalty ceiling of $1000 imposed a limitation per action and not for each occurrence of a violation as the consumer in that case argued. The court stated: Harvey, 509 F. Supp. at 1222. In assessing the amount of the penalty, the court may consider the frequency or persistency of the violations. We thus remand this case for further decision on the existing record regarding the amount of the penalty to be paid by Public Finance under section 537.5201(1) of the Iowa Code not exceeding $1000. Penalties awarded to a consumer may be set off against the consumer's obligation to the creditor. Section 537.5201(8) also directs the court to award the successful debtors costs and reasonable attorneys fees for servicesin this case in connection with the counterclaim. The fees are to be determined by the value of time reasonably spent, and not by the amount of the consumer's recovery. Id. We hold that such an award of costs and fees includes those relating to this appeal, insofar as it relates to the counterclaim. This court has previously held that an award of attorneys fees under section 537.5201(8) includes fees for both district court and appellate court services. Sheffield Savings Bank v. Klages, 294 N.W.2d 55, 57 (Iowa 1980); First Northwestern National Bank v. Crouch, 287 N.W.2d 151, 154 (Iowa 1980). On remand the district court is also to fix the attorney fees in both courts and to tax the costs in district court. We tax the costs in this court one-half to Public Finance and one-half to the Van Blaricomes. AFFIRMED IN PART, REVERSED AND REMANDED IN PART. *727 *728