Case Name: CHRYSLER FINANCIAL COMPANY, Appellee, v. Jon BERGSTROM, Appellant
Court: Iowa Supreme Court
Jurisdiction: Iowa
Decision Date: 2005-09-09
Citations: 703 N.W.2d 415
Docket Number: No. 04-0582
Parties: CHRYSLER FINANCIAL COMPANY, Appellee, v. Jon BERGSTROM, Appellant.
Judges: All justices concur except STREIT, TERNUS, and WIGGINS, JJ., who dissent.
Reporter: North Western Reporter 2d
Volume: 703
Pages: 415–426

Head Matter:
CHRYSLER FINANCIAL COMPANY, Appellee, v. Jon BERGSTROM, Appellant.
No. 04-0582.
Supreme Court of Iowa.
Sept. 9, 2005.
Ray Johnson of Johnson Law Firm, West Des Moines, for appellant.
Becky J. Petersen and Phil Watson of Phil Watson, P.C., Des Moines, for appel-lee.

Opinion:
CADY, Justice.
The Iowa Consumer Credit Code provides remedies for Iowa consumers against creditors who violate certain provisions of the Code. See Iowa Code § 537.5201-.5203 (2003). This appeal concerns a violation involving filing a lawsuit against a consumer in the wrong venue and the statutory defense that relieves the creditor of liability for the violation if the creditor shows the violation was unintentional and was the result of a bona fide error that occurred even though the creditor had a procedure in place "reasonably adapted to avoid the error." Id. § 537.5201(7). We vacate the decision of the court of appeals and affirm the decision of the district court.
I. Background Facts and Proceedings
Jon Bergstrom leased a vehicle from Chrysler Financial Company in 1997. He subsequently fell behind on his lease payments, and Chrysler gave him notice of his right to cure the default. See id. § 537.5110 (providing for consumer's right to cure default and stating that giving notice of the right to cure default is a prerequisite to suit); id. § 537.5111 (requiring creditor to give consumer notice of right to cure default). Bergstrom did not cure the default within the time he was allowed to cure. See id. (stating consumer has twenty days from receiving notice of the right to cure to pay the delinquency). Thus, Chrysler accelerated the debt, sold the vehicle following repossession, and filed an action against Bergstrom for a deficiency judgment of $7690.46.
Under the consumer credit code, Chrysler was required to bring the action in the county of Bergstrom's residence. Id. § 537.5113. Bergstrom resided just outside Riceville, Iowa, but Riceville was his designated city of residence.
Riceville is located on the border of Howard and Mitchell Counties in northeast Iowa. The western portion of Riceville is in Mitchell County, and the eastern portion of Riceville is in Howard County. Bergstrom lives near the portion of Rice-ville that lies in Mitchell County. However, Chrysler filed the action in Howard County.
Bergstrom filed a motion for a change of venue to Mitchell County and requested attorney fees and costs for the motion. Chrysler consented to transferring the case to Mitchell County. However, it contested Bergstrom's claim for attorney fees and costs on the basis that it "exercised due diligence in attempting to ascertain the proper venue, the error was harmless and the Defendant was not unduly prejudiced" by the mistake. The district court in Howard County transferred the case to Mitchell County, ordered Chrysler to pay Bergstrom's court costs, and held the issue of attorney fees in abeyance.
After the transfer to Mitchell County, Bergstrom filed an answer to Chrysler's petition, along with a counterclaim. The counterclaim alleged Chrysler violated the consumer credit code by bringing the action in the wrong county. It sought, among other items, statutory damages under Iowa Code section 537.5201. Chrysler replied to Bergstrom's counterclaim, asserting that its violation of the consumer credit code was not intentional and resulted from a bona fide error. On that basis, it claimed it could not be held liable for statutory damages. The case proceeded to a bench trial.
The district court ultimately entered a deficiency judgment for $7690.46 for Chrysler against Bergstrom. However, the focus in this appeal is solely on Berg-strom's counterclaim against Chrysler. In response to the counterclaim, Chrysler presented evidence at trial of the filing practices and procedures of the Des Moines law firm it retained to initiate the action. Karen Brewer, a legal secretary at the firm, testified that she was responsible for preparing cases, including consumer credit cases, for filing. She was instructed that consumer credit cases were required to be filed in the county of the defendant's residence. The firm's procedure for ascertaining the defendant's county of residence was to consult the United States Postal Service (USPS) city-county directory. The directory provided a list of cities in Iowa and, next to each city, listed the county in which the city was located. Brewer had previously compared the listings in the USPS directory with those in a city-county directory she obtained from the Iowa Department of Transportation and found them to be identical. Brewer testified she had used the USPS directory "hundreds" of times to find the defendant's county and had never encountered a problem until this case. In this case, Brewer obtained Bergstrom's address from the Chrysler file, which showed Riceville as the city of his address. She then used the directory to ascertain his county of residence. The directory indicated Riceville was in Howard County.
The district court entered a deficiency judgment for Chrysler in the amount of $7690.46. It also found that the error of filing the lawsuit in the wrong county was unintentional and "eonstitute[d] a bona fide error pursuant to section 537.5201(7)." The court denied Bergstrom's counterclaim against Chrysler. It did, however, award Bergstrom attorney fees of $525 as costs incurred in changing venue. See Iowa R. Civ. P. 1.806.
Bergstrom filed a timely notice of appeal from the court's judgment denying his counterclaim. He did not appeal from the $7690.46 judgment entered against him by the district court. We transferred the case to the court of appeals. The court of appeals reversed the district court's judgment. It held that Chrysler's "bona fide error defense to the counterclaim should have failed as a matter of law" and remanded the ease to the district court to determine the amount of statutory damages and attorney fees. We granted further review.
II. Principles of Review
We review the judgment of a district court following a bench trial in a law action for correction of errors at law. Wolf v. Wolf, 690 N.W.2d 887, 892 (Iowa 2005). The district court's findings of fact have the force of a special verdict and are binding on us if supported by substantial evidence. Nathan Lane Assocs., L.L.P. v. Merchants Wholesale of Iowa, Inc., 698 N.W.2d 136, 138 (Iowa 2005). Evidence is substantial if a reasonable person would accept it as adequate to reach a conclusion. Hansen v. Seabee Corp., 688 N.W.2d 234, 238 (Iowa 2004) (citing Amevik v. Univ. of Minn. Bd. of Regents, 642 N.W.2d 315, 318 (Iowa 2002)). " 'Evidence is not insubstantial merely because we may draw different conclusions from it; the ultimate question is whether it supports the finding actually made, not whether the evidence would support a different finding.' " Fischer v. City of Sioux City, 695 N.W.2d 31, 33-34 (Iowa 2005) (quoting Raper v. State, 688 N.W.2d 29, 36 (Iowa 2004)); accord 5 Am.Jur.2d Appellate Review § 666, at 340 (1995). In determining whether substantial evidence exists, we view the evidence in the light most favorable to the district court's judgment. Gacke v. Pork Xtra, L.L.C., 684 N.W.2d 168, 179 (Iowa 2004). If the district court's "findings are ambiguous, they will be construed to uphold, not defeat, the judgment." Johnson v. Raster, 6B7 N.W.2d 174, 177 (Iowa 2001) (citing Byers v. Contemporary Indus. Midwest, Inc., 419 N.W.2d 396, 397 (Iowa 1988)). Finally, if a district court fails to make a specific fact finding on an issue, and a party files a rule 1.904(2) motion requesting a finding on the issue, and the district court summarily denies the motion, we will assume the court found against the party on that issue. See Kennedy v. State, 688 N.W.2d 473, 478 (Iowa 2004).
III. Merits
It is a violation of the consumer credit code to institute an action against a consumer in the wrong county. Iowa Code § 537.5113. Yet, when a violation of the consumer credit code was not intentional and resulted from a bona fide error, a violator may avoid liability to a consumer under a standard established in section 537.5201(7), which is often referred to as the "bona fide error" defense. The section provides:
A person may not be held liable in any action brought under this section for a violation of this chapter if the person shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid the error.
Id. § 537.5201(7).
The application of this standard requires that three questions be answered. See id. First, was the violation unintentional and the result of a bona fide error? Id. Second, if the violation was unintentional and resulted from a bona fide error, did the violator maintain a procedure to avoid the error? Id. Third, if the procedure was in place, was it reasonably adapted to avoid the error? Id.
The first question is fairly straightforward. The inquiry is simply whether the violator intended to do the act that constituted a violation of the act, not whether the violator intended to violate the law. Cf 47 C.J.S. Interest & Usury § 499, at 598 (2005) (construing the bona fide error defense in Truth in Lending Act, 15 U.S.C. § 1640(c), which contains language identical to Iowa Code section 537.5201(7)). Thus, in this case, the inquiry is whether Karen Brewer intended to file the lawsuit in the wrong county. "The determination of whether a violation was not intentional and resulted from a bona fide error is one of fact." Id. § 499, at 599. The district court found that she did not intend to file a lawsuit in the wrong county, and there is substantial evidence to support that finding. See Nathan Lane Assocs., L.L.P., 698 N.W.2d at 138 (stating district court's findings are binding on appeal if supported by substantial evidence). Brewer testified at trial that she intended to file the action in the county of Berg-strom's residence. Thus, her intent was to follow the venue requirement of the consumer credit code. See Iowa Code § 537.5113.
In addressing the second question, it is important to understand that the error the procedure must be aimed at avoiding is the statutory violation at issue in the given case. In this case, the error at issue was the institution of the lawsuit against a consumer in the wrong county. See id. Thus, the question is whether Chrysler had a procedure in place to avoid suing a consumer in the wrong county. It is not whether the violator had a procedure in place to avoid suing, specifically, a consumer who lives in a community that extends into two or more counties in the wrong county. The existence of a procedure only pertains to the code violation — suing a consumer in the wrong county. The district court found Chrysler had such a procedure in place, and there was substantial evidence to support this finding. The evidence was that a legal secretary verified the consumer's county of residence with the USPS city-county directory.
The third question, the fighting issue in this appeal, is whether the procedure maintained was reasonably adapted to avoid the error. Again, the focus is on whether the procedure was reasonably adapted to avoid the error that constituted a violation of the statute — in this ease, institution of an action in the wrong county, not specifically avoiding this error in the context of a consumer who lives in a city straddling two counties. Thus, we must decide whether substantial evidence supports the district court finding that the USPS directory procedure was reasonably adapted to avoid suing a consumer in the wrong county. See id. § 537.5201(7).
The court of appeals held the procedure of using the USPS directory was not reasonably adapted to avoid suing a consumer in the wrong county as a matter of law because the directory only designated one county for each city and did not include information to show those cities that extended into multiple counties. In other words, the procedure did not eliminate all chances of avoiding the error.
The statute does not define "reasonably adapted." See generally id. eh. 537. Moreover, we have never interpreted the phrase. In Monahan Loan Service Inc. v. Janssen, 349 N.W.2d 752, 754 (Iowa 1984), we held that statutory damages were available for violating the consumer credit code for filing an action in the wrong county, but we did not have the opportunity to address the elements of the bona fide error defense. Yet, in other contexts, we have said that questions of reasonableness are best resolved by the fact finder. See St. Ansgar Mills, Inc. v. Streit, 613 N.W.2d 289, 295 (Iowa 2000) ("Generally, the determination of the reasonableness of particular conduct is a jury question." (citing Pirelli-Armstrong Tire Co. v. Reynolds, 562 N.W.2d 433, 436 (Iowa 1997); Harvey v. Great Atl. & Pac. Tea Co., 388 F.2d 123, 125 (5th Cir.1968)); Hepp v. Zinnel, 199 N.W.2d 68, 69 (Iowa 1972) ("[W]hat is 'reasonable' is not black or white. Such an issue is peculiarly for the fact finder." (citing Appling v. Stuck, 164 N.W.2d 810, 814 (Iowa 1969)); cf. Mcllra-vy v. N. River Ins. Co., 653 N.W.2d 323, 333 (Iowa 2002) (opining "reasonableness of the denial of a workers' compensation claim by an insurer" is ordinarily a question of fact); State v. Arnold, 543 N.W.2d 600, 604 (Iowa 1996) (stating "reasonableness or excessiveness of the punishment was a question for the jury" (citation omitted)); Hoekstra v. Farm Bureau Mut. Ins. Co., 382 N.W.2d 100, 106 (Iowa 1986) (holding the question of whether insurance company's requests were "reasonable" under policy language was a fact question); Zohn v. Menard, Inc., 598 N.W.2d 323, 326 (Iowa Ct.App.1999) ("The issue of the existence of reasonable grounds for detention by a shopkeeper is generally a question of fact for the jury." (Citation omitted.)); 1 Dan B. Dobbs, The Laiv of Torts § 148, at 354 (2001) (stating determining whether a risk was unreasonable is a jury function). There is no reason to approach the bona fide error defense in any other manner. See Narwick v. Wexler, 901 F.Supp. 1275, 1282 (N.D.Ill.1995) (addressing the bona fide error defense under the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692k(c), which contains the same "reasonably adapted" language as section 537.5201(7), and observing, "[t]he inquiry into whether given procedures are reasonable is, by its nature, fact-intensive, and should therefore typically be left to the" fact finder). Thus, we must decide if there was substantial evidence of reasonableness. Our law has never considered reasonableness to be perfect or foolproof.
One common way to analyze whether a party's conduct is reasonable is to balance the utility of the party's act against the magnitude of the risk of harm to others. Restatement (Second) of Torts § 291, at 54 (1965). Thus, even if Chrysler should have foreseen that its procedure could result in a consumer being sued in the wrong county in those instances when a consumer resides in a city that spans two counties, the magnitude of the risk of harm must be considered to fully determine the reasonableness of the procedure. As the magnitude of the risk increases, so too should the degree of care required to avoid the risk. Factors to consider in determining the magnitude of the risk include:
(a) the social value which the law attaches to the interests which are imperiled; (b) the extent of the chance that the actor's conduct will cause an invasion of any interest of the other .; (c) the extent of the harm likely to be caused to the interests imperiled; (d) the number of persons whose interests are likely to be invaded if the risk takes effect in harm.
Id. § 293, at 58.
As to the factor (a), it is clear the law views an individual's interest in not being sued in the wrong county as an important social value. See Panhandle E. Pipe Line Co. v. Fed. Power Comm'n, 324 U.S. 635, 639, 65 S.Ct. 821, 823-24, 89 L.Ed. 1241, 1246 (1945) ("Venue relates to the convenience of litigants." (citing Neirbo Co. v. Bethlehem Shipbuilding Corp., 308 U.S. 165, 60 S.Ct. 153, 84 L.Ed. 167 (1939)); State ex rel. Klabacka v. Charles, 36 Wis.2d 122, 152 N.W.2d 857, 861 (1967) (stating the purpose of venue statutes "is to prevent the hardship and inconvenience to which a defendant may be subjected by having to defend himself in the county in which he is not a resident"). Yet, it is reasonable to believe that this value is greater when the incorrect venue is at a great distance from the debtor's residence. See Dutton v. Wolhar, 809 F.Supp. 1130, 1139. (D.Del.1992) (one purpose of venue provision under FDCPA was to prevent collection actions in forums "located at great distances from debtors' residences").
As to factors (b) and (d), there was no evidence presented at trial as to either the chance of someone being sued in the wrong county using the USPS city-county directory procedure, or the number of persons at risk of being sued in the wrong county using this procedure — i.e., how many people live in Iowa cities that span the border between two counties. Notwithstanding, we must base our inquiry into whether substantial evidence supports the district court's finding that Chrysler's procedure was reasonably adapted to avoid suing consumers in the wrong county on the evidence that was actually presented at trial, and we cannot speculate about the number of consumers that could be adversely affected or the chances of a consumer's interest would be invaded simply because we may conceive that some consumers could be adversely affected by the procedure. Our role is not to search for evidence to defeat the district court's judgment, but rather, to broadly construe the court's findings and view the evidence in the light most favorable to upholding the judgment. Johnson, 637 N.W.2d at 177. However, what we do know from the evidence is that the procedure has been used "hundreds" of times by Chrysler in the past without knowledge that it adversely affected the venue rights of litigants. This evidence would support a finding that the chance of invading the protected interest and the number of people likely to be adversely affected is minimal.
The final factor in considering reasonableness is the extent of the potential harm. Restatement (Second) of Torts § 293, at 58; Vaughn v. Ag Processing, Inc., 459 N.W.2d 627, 634 (Iowa 1990) (holding factor to consider in determining whether employer took "reasonable steps to remedy" discrimination in the workplace was the gravity of the harm). In considering this factor, it is important to recognize that the potential error at issue in this case, if it occurs, only means the consumer is required to defend the lawsuit in a neighboring county. See Dutton, 809 F.Supp. at 1139 (purpose of venue provision under FDCPA was to prevent collection suits in forum "located at great distances from debtors' residences" and to "prevent forum abuse"). Furthermore, the potential error mostly affects consumers who live relatively close to the neighboring county. Thus, any additional distance from a consumer's residence imposed on a consumer by the error will not be significant, and in some cases, the neighboring county may even be a more convenient forum for the consumer. See Iowa R. Civ. P. 1.808(1) ("An action brought in the wrong county may be prosecuted there until termination, unless a defendant, before answer, moves for change to the proper county."); see also Dove v. Gold Kist, Inc., 314 S.C. 235, 442 S.E.2d 598, 600 (1994) ("A court sitting where venue is improper may nevertheless render judgment provided the party who possesses the venue right consents, either expressly or impliedly." (Citation omitted.)). Additionally, once the error is discovered, a prompt and fair procedure exists under our rules of practice to correct the error and provide compensation to the consum er for any trouble and expense imposed. See Iowa R. Civ. P. 1.808(1) (upon motion, court is required to change venue when a petition is filed in the wrong county and may award compensation for the defendant's trouble and expense).- In fact, it is fair to say that a simple phone call from one attorney to the other attorney would normally be enough to correct the problem. Thus, from a practical standpoint, the potential harm of being sued in an adjoining county is minimal, if it exists at all. This means the procedure designed to avoid this particular error need not be highly stringent in order to be deemed "reasonably adapted to avoid the error."
Moreover, reasonableness must be evaluated. based on the circumstances as the actor knew them at the time, not with the benefit of hindsight. See W. Page Keeton et al., Prosser and Keeton on the Law of Torts § 31, at 170 (5th ed. 1984) ("The actor's conduct must be judged in the light of the possibilities apparent to him at the time, and not by looking backward 'with the wisdom born of the event.' "). At trial, there was nothing to suggest that the USPS directory was not a reliable document at the time it was used. The past success of the procedure used by Chrysler is evidence that the district court could rely upon to conclude that it was reasonably adapted to avoid suing a consumer in the wrong county.
IV. Conclusion
We conclude substantial evidence exists to support the district court's findings that the petition in this case was filed in the wrong county unintentionally, as the result of a bona fide error. Substantial evidence also exists that the action was filed in the wrong county notwithstanding the maintenance of a procedure reasonably adapted to avoid this error. All the elements of the bona fide error defense under Iowa Code section 537.5201(7) are satisfied. Therefore, Chrysler cannot be held liable for a violation of the consumer credit code. See Iowa Code § 537.5201(7). Accordingly, the district court's denial of Berg-strom's counterclaim against Chrysler was correct, and we affirm the district court's judgment and vacate the decision of the court of appeals.
DECISION OF COURT OF APPEALS VACATED; DISTRICT COURT JUDGMENT AFFIRMED.
All justices concur except STREIT, TERNUS, and WIGGINS, JJ., who dissent.
. Bergstrom asserted that Chrysler's filing the action in the wrong county was a prohibited debt collection practice under Iowa Code section 537.7103(1)00. Section 537.7103(1)00 prohibits any "action prohibited by this chapter or any other law." Because filing an action against a consumer in the wrong county is prohibited under section 537.5113, which is in chapter 537, Bergstrom claimed Chrysler's action constituted a prohibited debt collection practice. See id. § 537.7103(1)00. Bergstrom needed to weave this extra layer into his argument in order to claim statutory damages from Chrysler. Section 537.5201 provides that a consumer may recover damages between one hundred and one thousand dollars from a creditor who has committed certain violations of the consumer credit code. Id. § 537.5201(1). The section provides a list of twenty-seven violations for which statutory damages are recoverable. Id. § 537.5201(l)(a )-{aa). Bringing an action in the wrong county, in violation of section 537.5113, is not a violation enumerated on the list. Id. However, "unfair debt collection practices under section 537.7103" are on the list. Id. § 537.5201(l)(y). Pursuant to this analysis, we have held that statutory damages are available for filing a consumer credit action in the wrong county, if such filing constitutes a violation of the consumer credit code. See Monahan Loan Serv., Inc. v. Janssen, 349 N.W.2d 752, 754 (Iowa 1984).
. After discussing the evidence in its written ruling in this case, the district court specifically found the error in filing the lawsuit in the wrong county constituted "a bona fide error pursuant to section 537.5201(7)." Bergstrom filed a motion under Iowa Rule of Civil Procedure 1.904(2) following the district court decision. He argued there was no evidence to support a finding that Chrysler had a procedure in place that was reasonably adapted to avoid the error. The district court denied the motion, stating that "the issues raised by the motion were identical to the issues raised at trial, which led to the court's findings and conclusion." On appeal, Berg-strom argued that the district court did not make any finding under the "bona fide error" defense that the procedures used by Chrysler were reasonably adapted to avoid the error. Clearly, this background reveals the district court made the requisite finding when it concluded that the "bona fide error" defense pursuant to section 537.5201(7) was established. Consequently, the question on appeal is whether there was substantial evidence to support the finding.
. Bergstrom argues that Chrysler must prove the additional element that the procedure was "maintained" over a period of time and was "followed time in and time out." He cites Mirabal v. Gen. Motors Acceptance Corp., 537 F.2d 871, 879 (7th Cir.1976), overruled on other grounds by Brown v. Marquette Sav. & Loan Ass'n, 686 F.2d 608, 615 (7th Cir.1982), for this proposition. We decline to adopt the Seventh Circuit's definition of "maintenance" under the Truth in Lending Act. The consumer credit code does not define the word "maintenance." See generally Iowa Code ch. 537. Thus, we give the word its plain and ordinary meaning. Nash Finch Co. v. City Council of City of Cedar Rapids, 672 N.W.2d 822, 826 (Iowa 2003). We do not think the ordinary meaning of "maintenance" is "following] time in and time out." Mirabal, 537 F.2d at 879. Rather, we think it means, in the context of section 537.5201(7), "to have in place."
Moreover, even if we assume, arguendo, that a procedure must be followed time in and time out to satisfy the alleged "maintenance" element of the bona fide error defense, we find there is substantial evidence that the USPS directory was used time in and time out. Karen Brewer testified at trial that she "always" used the USPS directory proce dure to determine a consumer's county of residence, that she had used it "hundreds" of times, and that she never used any other method — she "just used that list."
. We emphasize that we are not ruling on what may or may not be a procedure reasonably adapted to avoid any error other than the error specifically at issue in this case.