Appeals court upholds officer repayment contract

In City of Creston v. Barney, No. 1-951 / 11-1154 (Iowa Ct. App., Filed February 15, 2012), the Iowa Court of Appeals affirmed a summary judgment in favor of the City of Creston requiring an officer to repay the city for training expenses. The officer challenged the contract on the grounds that it had been improperly executed. The appeals court rejected the challenge.

The city had approved a resolution authorizing the policy of agreements, but not the particular agreement. The police chief signed the agreement with the officer, but the chief had no power to bind the city. The city council later ratified the particular agreement. Then, of course, the officer quit, and the city sued for reimbursement.

The Court of Appeals agreed with the city that the contract was voidable, not void. The Court said, “This case does not involve an instance where there was a lack of power to enter into a contract. The resolution created the power to enter into the contract. Instead, the power to enter into the contract was irregularly or defectively exercised because the contract was signed by the chief of police, who did not have the authority under the resolution to sign the contract.”

The Court went on to say “voidable contracts may be cured by ratification.” The elements of ratification are: “(1) existence of a principal; (2) an act done by an agent; (3) the principal’s full knowledge of material facts; and (4) express or implied intent by the principal to ratify the acts of the agent.” All of these elements were present, and importantly, a city council can effectively fulfill these elements to cure a voidable contract.

Refinanced purchase money mortgage trumps dower

In another of the series of cases dealing with the spouse’s rights in real property against a mortgage lender, the Iowa Court of Appeals ruled on January 19, 2012, that the lender under a refinanced purchase money mortgage held an interest superior to the spouse’s dower interest. Metabank v. Estate of Bosen, No. 0-980 (Iowa App. 1/19/2012). As with the purchase money mortgage, the court reasoned, the spouse could not succeed to an interest greater than that held by the deceased spouse. Consequently, even a new lender who refinances and pays off the original purchase money mortgagee can foreclose as against the spouse’s dower interest.

Not surprisingly, the Court of Appeals decision closely tracks and relies heavily upon the decision in Freedom Financial Bank v. Estate of Bosen, No. 09-0397 (Iowa 11/18/2011). See Purchase Money Mortgage Trumps Dower for additional discussion.

Iowa Lawyer Weekly

The land records report is featured in the January 4 edition of The Iowa Lawyer Weekly by the Iowa State Bar Association.

Tax day: April 17

IRS announced that the deadline is April 17, 2012. See: http://www.irs.gov/newsroom/article/0,,id=251825,00.html. “April 15 falls on a Sunday, and Emancipation Day, a holiday observed in the District of Columbia, falls this year on Monday, April 16. According to federal law, District of Columbia holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have two extra days to file this year.”

Land Records Report Published

The County Land Record Information System, Electronic Services Coordinating Committee, and the Iowa County Recorders Association delivered a report to the General Assembly on the status of the Iowa Land Records internet service. The report is here: Legislative Report Final. The appendices are here: Legislative Report Appendix Final. The following is quoted from the “Executive Summary”:

The key findings and conclusions which may be summarized from the report are as follows:

• The comprehensive redaction project authorized by the General Assembly has been carried out as proposed and within the authorized budget. Eighty-five percent of the more than 11.5 million
  documents have been processed, and the remainder will be completed by the end of fiscal year 2012.
• Registered users of the Iowa Land Records web site can again access more than 6.2 million documents recorded since 2003.
• More documents will be made accessible following the completion of various quality assurance activities, because commercial redaction services are not perfect. A redaction accuracy rate of 97% is expected. Registered users have been enlisted to help report any private information which may have been missed by the redaction process.
• The county land record information system has been reconfigured to segregate and prevent the disclosure of private information. Additional security measures have been implemented to monitor the activity of registered users who have access to document images.
• Financial resources for the redaction project and funding for the core operation of the county land record information system have been appropriately managed. The ESS Coordinating Committee has provided active oversight for all project resources, and the business of the Electronic Services System has been transparent and open.
• Financial transactions have been subjected to an annual audit since the beginning of the Iowa Land Records E-Submission service (electronic recording). The audit includes all physical assets such as the servers and data storage equipment used to operate the system.
• Project resources are being managed to provide for long-term sustainability for the county land record information system. However, substantial risks exist including concerns about funding for county system maintenance fees.
• The adoption of a permanent $2.00 document fee structure would ensure long-term sustainability, reduce the financial burden on individual county budgets, and permit improved service and lower service fees for electronic recording.
• The State of Iowa and Iowa County Recorders are recognized as national leaders in the adoption of electronic document management systems.
• The Electronic Services System and the county land record information system are committed to the principles of adopting standards, policies and procedures to ensure consistent and high quality services throughout Iowa.
• The enforcement of standards, policies and procedures, including a requirement for participation by all Iowa counties will be an ongoing challenge for a system dependent on the cooperation of many individual County Officials and technical service providers. The General Assembly may wish to reinforce the importance of participating in a statewide system and following established policies and best practices.
• Current policies governing the batch transfer of electronic documents may create unintended outcomes as County Recorders and their customers seek to exchange information in a timely fashion while also conforming to expected privacy standards. The General Assembly may wish to examine these policies.

The General Assembly has explicitly requested an analysis and recommendation regarding the continuance or discontinuance of the fee collected under section 331.604, subsection 3. The recommendation to the General Assembly is as follows.

1. Continue the base level $1.00 electronic transaction fee under section 331.604, subsection 3. This fee is the minimum level of financial support required to sustain the core services of the county land record information system.
2. Consider increasing the electronic transaction fee to $2.00 to ensure the long-term sustainability of the county land record information system and to provide necessary resources for ongoing system enhancements. A comparison of recording fees with neighboring states shows that Iowa recording fees would remain among the lowest – notwithstanding a $1.00 fee adjustment.

The ESS Coordinating Committee and the Iowa County Recorders Association wish to express appreciation to the Iowa General Assembly for the passage of Senate File 465 in 2009, and for the opportunity to carry out the redaction project while restoring an important service to the Iowa real estate industry.

Covenant not to compete upheld

In Sutton v. Iowa Trenchless, L.C., No. 1-582 / 10-2114 (Filed 11/23/2011), the Iowa Court of Appeals upheld seven-year, 350-mile radius covenant not to compete. The main issue on appeal was whether there is a different standard for noncompete agreements between owners than there is between an employer and an employee.

Citing cases from 1945 to 1975, the Court confirmed that this is not a new issue and affirmed existing law:

A much greater “scope of restraint” is allowed between business owners. Baker v. Starkey, 259 Iowa 480, 491, 144 N.W.2d 889, 895 (1966). See also Thomas v. Thomas Truck & Caster Co., 228 N.W.2d 52, 55 (Iowa 1975) (“In the sale-related covenant not to compete cases we do not apply a ‘strict construction’ as appellee asserts, but do hold the contract, being in restraint of trade and personal liberty, should not be construed beyond its fair import.”).

There is greater deference to the scope of the noncompete agreement because (a) the noncompete agreement adds value to the business and (b) the parties typically have greater bargaining power. Although there may be more indulgence for the scope of the covenant, the Court confirmed —

the following three-pronged test in an employee-employer covenant not to compete: “(1) [i]s the restriction reasonably necessary for the protection of the employer’s business; (2) is it unreasonably restrictive to the employee’s rights; and (3) is it prejudicial to the public interest?”

New employee rights posting required by January 31

From the National Labor Relations Board web site:

As of January 31, 2012, most private sector employers are required to post a notice advising employees of their rights under the National Labor Relations Act. The notice should be posted in a conspicuous place, where other notifications of workplace rights and employer rules and policies are posted. Employers also should publish a link to the notice on an internal or external website if other personnel policies or workplace notices are posted there.

For further information about the posting, including a detailed discussion of which employers are covered by the NLRA, and what to do if a substantial share of the workplace speaks a language other than English, please see our Frequently Asked Questions.

http://www.nlrb.gov/poster. The full-size poster in a PDF is here.