Opinion ID: 1994775
Heading Depth: 1
Heading Rank: 3

Heading: Hunter's Breach-of-Contract Claim.

Text: The breach-of-contract claim by Hunter is premised on the argument that the DMMHA was required to provide a notice to cure under Iowa Code section 562A.27(1) before terminating the lease. The district court in this proceeding determined the statute did not require a notice to cure, while the district court in the prior FED decisions held a notice to cure was required. The court of appeals determined the prior FED decisions were res judicata, which precluded the DMMHA from asserting in this proceeding that it was not required to provide a notice to cure under section 562A.27(1). Issue preclusion generally applies when four elements are present: (1) the issue concluded must be identical; (2) the issue must have been raised and litigated in the prior action; (3) the issue must have been material and relevant to the disposition of the prior action; and (4) the determination made of the issue in the prior action must have been necessary and essential to the resulting judgment. Grant v. Iowa Dep't of Human Servs., 722 N.W.2d 169, 174 (Iowa 2006) (citation omitted). The rule serves two important goals of providing fairness to the successful party in the first case and promoting efficient use of court resources by prohibiting repeated litigation over the same issue. State ex rel. Casas v. Fellmer, 521 N.W.2d 738, 740-41 (Iowa 1994) (citing Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326, 99 S.Ct. 645, 649, 58 L.Ed.2d 552, 559 (1979)). The court of appeals applied this general rule to conclude that the district court in this action was precluded from relitigating the prior rule of law enunciated by the district court in the FED litigation that the DMMHA was required to provide Hunter with a notice to cure. Even when the requirements of the general issue preclusion rule are present, courts are required to consider if special circumstances exist that make it inequitable or inappropriate to prevent relitigation of the issue previously determined in the prior action. [4] Nat'l R.R. Passenger Corp. v. Pa. Pub. Util. Comm'n, 288 F.3d 519, 528 (3d Cir.2002); Grant, 722 N.W.2d at 174 (applying third exception to collateral estoppel doctrine). The exceptions share the same goal of fairness as the general rule and have been summarized in the Restatement (Second) of Judgments § 28 (1982). The second of five recognized exceptions provides: Although an issue is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, relitigation of the issue in a subsequent action between the parties is not precluded in the following circumstances: . . . . 2. The issue is one of law and (a) the two actions involve claims that are substantially unrelated, or (b) a new determination is warranted in order to take account of an intervening change in the applicable legal context or otherwise avoid inequitable administration of the laws. . . . We turn to the first alternative of the second exception that permits relitigation when [t]he issue is one of law and the two actions involve claims that are substantially unrelated. We have not previously considered the application of this exception. [5] This exception was first discussed by the United States Supreme Court in United States v. Moser, 266 U.S. 236, 45 S.Ct. 66, 69 L.Ed. 262 (1924). In that case, the Court observed that the doctrine of res judicata does not apply to unmixed questions of law. Id. at 242, 45 S.Ct. at 67, 69 L.Ed. at 264. That is, when a court has enunciated a rule of law in deciding a case between two parties, the same parties are not estopped from insisting that the law is otherwise, in a subsequent action between them. Id. Yet, a fact, question or right distinctly adjudged in the original action cannot be disputed in a subsequent action, even though the determination was reached upon an erroneous view or by an erroneous application of the law. Id. (emphasis added). The Court has subsequently acknowledged the uncertainty that can be presented in the application of this exception, but has attempted to elucidate the exception through a two-step process. United States v. Stauffer Chem. Co., 464 U.S. 165, 104 S.Ct. 575, 78 L.Ed.2d 388 (1984); see also Restatement (Second) of Judgments § 28, reporter's note to cmt. b. (The distinction suggested in the Moser case, no matter how formulated, is difficult of application.). First, a court must determine if an issue of fact or an issue of law is sought to be relitigated. Stauffer Chem. Co., 464 U.S. at 171, 104 S.Ct. at 579, 78 L.Ed.2d at 393. Second, a court must decide whether the issue of law is presented in a successive case that is so unrelated to the prior case that relitigation of the issue is warranted. Id. Yet, even if the issue is one of law, estoppel applies to prevent relitigation [w]hen the claims in the two separate actions between the same parties are the same or are closely related. Id. (quoting Restatement (Second) of Judgments § 28 cmt. b ). On one hand, this approach signals a rather straightforward rule that collateral estoppel ordinarily applies when two cases present the same legal issue. See 18 Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 4425, at 658 (1981) [hereinafter Charles Alan Wright]. On the other hand, the approach sounds a note of caution where the issue involved is the choice or formulation of the governing rule of law. Nat'l R.R. Passenger Corp., 288 F.3d at 530. Thus, [w]here the same legal issue is presented in two suits but the second suit calls for application of the previously selected rule of law in a significantly different context, it may be inappropriate to preclude a party from contending that the governing rule of law applied in the first was erroneously chosen or formulated. Id. The rationale for this rule is explained in comment b to section 28 of Restatement (Second) of Judgments. When claims between the same parties are closely related, preclusion applies to issues that were litigated in the first action because it is unfair to the winning party and an unnecessary burden on the courts. Restatement (Second) of Judgments § 28 cmt. b. Yet, if the claims in the two actions are substantially unrelated, the more flexible principle of stare decisis is sufficient to protect the parties and the court from unnecessary burdens. The rule of law declared in an action between two parties should not be binding on them for all time, especially as to claims arising after the first proceeding has been concluded, when other litigants are free to urge that the rule should be rejected. Such preclusion might unduly delay needed changes in the law and might deprive a litigant of a right that the court was prepared to recognize for other litigants in the same position. Id. The decision [w]hether the context in which the legal issue is presented in the second suit is sufficiently unrelated to that in the first to counsel against preclusion . . . should be made with reference to the consequences of preclusions for the precluded party and the administration of justice. Nat'l R.R. Passenger Corp., 288 F.3d at 530. One reason a different context can preclude relitigation is that it may make it more likely that the second suit and the stake there at issue were not foreseeable at the time of the first suit. Id. ; see Charles Alan Wright, at 244. [6] Applying these principles to the case at hand, it is clear that the question whether a statute requires a landlord to give a notice to cure before terminating a month-to-month tenancy is one of law. The district court previously decided the issue in the context of whether it had jurisdiction or authority to hear an FED action. The district court did not distinctly adjudge a fact, question or right between the parties, but instead enunciated a rule of law in the course of deciding its jurisdiction to adjudicate the rights of the parties. In this case, the same legal issue is presented as in the prior case between the parties, but in an entirely different context. Here, the issue is presented in the course of deciding whether a tenant is entitled to damages from a landlord for failing to provide a notice to cure under claims of abuse of process and breach of contract. These claims are unrelated to a claim to remove a tenant from leased property. It is unlikely the district court in the first action foresaw that the rule of law would be applied to a damage claim in a second lawsuit, and it is equally unlikely a second lawsuit was considered when an appellate court denied the DMMHA's request for discretionary review of the legal ruling. The different contexts of the two cases make it fair to permit the DMMHA to challenge the legal precept previously established by the district court in the first case. Significantly, the DMMHA is not challenging the application of the law to the circumstances of the first case, but the rule of law itself. The reporter's notes to the Restatement exception provide: Subsection (2) recognizes . . . that a rule of law declared in a proceeding between two litigants is not binding on them for all time with respect to all claims that may arise between them . . . where, for example, a court deciding a case has enunciated a rule of law, the parties in a subsequent action upon a different demand are not estopped from insisting that the law is otherwise, merely because the parties are the same in both cases. Restatement (Second) of Judgments § 28, reporter's note to cmt. b. Under the circumstances of this case, the DMMHA should not be estopped from insisting that the law is otherwise. Id. The circumstances fall within the exception and warrant relitigation. The common question is purely one of law, and the two claims, while factually related, are based upon different demands. Clearly, the illustrations and examples provided by the Restatement to support relitigation under the exception are more closely aligned to the facts of this case than the provided examples of situations that fall outside of the exception. See generally id. cmt. b & rptrs. ns. As a result, the findings by the district court in the prior FED actions are not binding on this proceeding. Moreover, there is nothing else that prohibits us on further review from determining whether a notice to cure was required to be given. The issue has been argued and appealed throughout these proceedings. Therefore, we proceed to analyze whether the DMMHA was required to provide a notice to cure under section 562A.27(1) of the Iowa Code. We begin by recognizing the termination of the lease in this case was governed by multiple sourcesnot just the Iowa Code. The rental agreement, federal law, and our state law all address the subject of termination of the lease. Hunter's claim in this case, of course, is that the DMMHA breached the lease by failing to provide a notice to cure pursuant to section 562A.27(1) of Iowa's Uniform Residential Landlord and Tenant Act (IURLTA). See generally Russell E. Lovell II, The Iowa Uniform Residential Landlord & Tenant Act & the Iowa Mobile Home Parks Residential Landlord & Tenant Act, 31 Drake L.Rev. 253 (1981) [hereinafter Lovell]. While the IURLTA was not specifically enacted to govern federally subsidized low-income housing, it does not exclude such leases from its reach. See Iowa Code § 562A.5 (stating the scope and jurisdiction of chapter 562A). Instead, the IURLTA was made applicable to rental agreements entered . . . after January 1, 1979. Id. § 562A.37. Consequently, the lease between the DMMHA and Hunter must comply with the IURLTA's provisions. As a result, the DMMHA would be required to give a notice if required under the IURLTA. The IURLTA imposes certain requirements for the termination of a residential lease, generally depending on the type of tenancy and the reasons and timing of the termination. See Lovell, 31 Drake L.Rev. at 329-37 (discussing termination under the IURLTA). One set of rules requires written notice of termination for periodic tenancies. For example, if the tenancy is month-to-month, the landlord or tenant is required to give written notice to the other at least thirty days prior to the end of the monthly tenancy. Iowa Code § 562A.34(2). A separate set of rules govern the termination of a lease by a landlord prior to the termination date in the lease agreement for noncompliance with the lease terms. See id. §§ 562A.27-.27A; see also id. § 562A.21 (stating the general and similar rules tenants must follow when terminating a lease because of landlord noncompliance). Section 562A.27(1) is one of these rules. It allows the landlord to terminate the lease agreement before its stated termination date when there is a material noncompliance by the tenant with the rental agreement. Id. § 562A.27(1). In order to pursue this special remedy, the landlord must follow the statutory procedure. This procedure requires the landlord to deliver a written notice to the tenant specifying the acts and omission constituting the breach and additionally provide the tenant with a notice to cure, which must allow the tenant seven days to cure the breach. Id. If the breach is not cured by that date, the lease terminates as stated in the notice. Id. The lease does not terminate if the breach is cured within seven days. Id. However, if a similar breach recurs within six months, then the landlord may terminate the lease with seven days' notice. Id. Thus, the law creates a special remedy because it permits the landlord to terminate a tenancy before the end of the period of possession agreed under the lease or established by operation of law. At the same time, the law permits the tenant to ameliorate the harshness of the landlord's remedial action by allowing the tenant to stop the termination by curing the breach that gave rise to the exercise of the remedy by the landlord. In addition to the statutory rules for terminating a lease, the IURLTA permits the landlord and tenant to impose their own terms if not prohibited by the IURLTA or any other law. Id. § 562A.9 (1). Thus, the terms of a lease must also be examined to determine if the landlord and tenant have agreed to terms in addition to those provided by law. We begin by first examining whether the IURLTA required the DMMHA to give a notice to cure. The IURLTA rules governing the termination of a month-to-month tenancy at the end of the tenancy do not include a notice to cure. Unlike the termination of a lease prior to the end of the tenancy, the tenant has nothing to cure when a landlord decides to end a month-to-month tenancy at the conclusion of the tenancy period. A notice to cure is only required to be given by the landlord in order to terminate a tenancy prior to the end of the period of occupancy, when a tenant violates a term of the lease, to give the tenant an opportunity to remain in the dwelling until the end of the tenancy period by remedying the breach. See id. § 562A.27(1) (tenancy does not terminate if tenant adequately remedies breach before time established by landlord). A notice to cure is not required under the IURLTA when a landlord seeks to terminate a tenancy at the end of a tenancy period. In this case, the DMMHA would only need to invoke the special self-help termination remedy and include the notice to cure found in section 562A.27(1) if it sought to terminate Hunter's lease prior to the termination date without thirty days' notice, or the notice was otherwise required under the terms of the lease. [7] See Lovell, 31 Drake L.Rev. at 330 (The basic self-help termination remedy [found in Iowa Code section 562A.21 (for tenants) and section 562A.27 (for landlords)] will seldom be of importance to the tenant who has a month-to-month tenancy, the most common situation for the residential low-income tenant, as he [or the landlord] can always terminate without cause by giving thirty days notice.). The lease agreement in this case clearly created a month-to-month tenancy. [8] The original term of the lease was thirty days, and the tenancy automatically renewed for successive monthly terms under the lease agreement. Consequently, as a month-to-month tenancy, the IURLTA did not require a notice to cure in the event the landlord desired to terminate the lease at the end of the tenancy. The IURLTA only required thirty days' written notice of termination. Thus, we turn to consider whether the lease terms imposed a notice-to-cure requirement. The terms of the lease permitted the DMMHA to terminate the lease at the end of the tenancy only if the tenant engaged in serious or repeated violations of material terms of the lease. Of course, under the IURLTA, the parties were permitted to agree to this additional requirement of termination because it was not prohibited by law. See Iowa Code § 562A.9(1). The notices of termination sent by the DMMHA informed Hunter her lease would terminate thirty days after the current month's term ended. The DMMHA's second notice of termination was specifically entitled Notice of Termination of Month to Month Tenancy and Nonrenewal of Lease Term. The DMMHA was not attempting to terminate the lease before the end of the lease period. Moreover, these notices complied with the IURLTA, as well as with the terms of the lease. They stated Hunter had violated certain lease terms, which permitted the landlord to terminate the tenancy with thirty days' notice. Yet, this notice was not required under the IURLTA and did not transform the proceeding into a special remedy under section 562A.27(1). This notice was derived only from the terms of the lease, and those terms did not further require a notice to cure. Thus, under the lease the DMMHA was required to prove noncompliance in order to terminate Hunter's lease, even if the DMMHA simply did not want to renew Hunter's lease for another month. Yet, the lease imposed no additional notice-to-cure requirement. Moreover, all the IURLTA required was for the DMMHA to provide thirty days' notice of termination. Id. § 562A.34(2). The notices clearly met these requirements, and there is nothing to indicate the notice of termination otherwise breached the lease or was contrary to any federal or state law. See 24 C.F.R. § 966.4( l ). As a result, Hunter's claim for breach of contract must fail. The district court properly granted the DMMHA's motion for summary judgment on Hunter's breach-of-contract claim.