Graham v. Baker

• Decision Date: 18 October 1989
• Docket Number: No. 88-1087,88-1087
• Citation: 447 N.W.2d 397
• Parties: William E. GRAHAM and Velda Irene Graham, Appellees, v. John BAKER, Betty Brown, Iowa Farmer/Creditor Mediation Service, Inc., Defendants, Allen E. Henry and Cindy J. Henry, Appellants, and Thomas J. Miller, Attorney General of Iowa, Intervenor.
• Court: Iowa Supreme Court

Page 397

447 N.W.2d 397

58 USLW 2261

William E. GRAHAM and Velda Irene Graham, Appellees, v. John BAKER, Betty Brown, Iowa Farmer/Creditor Mediation Service, Inc., Defendants Allen E. Henry and Cindy J. Henry, Appellants and Thomas J. Miller, Attorney General of Iowa, Intervenor.

No. 88-1087.

Supreme Court of Iowa.

Oct. 18, 1989.

Jerrold Wanek of Garten & Wanek, Des Moines, for appellants.

Jeffrey G. Flagg, Des Moines, for appellees.

Considered by McGIVERIN, C.J., and HARRIS, SCHULTZ, NEUMAN, and SNELL, JJ.

SNELL, Justice.

In 1979, the Henrys purchased a parcel of agricultural land from the Grahams under a real estate contract requiring annual payments. During the course of the next several years, as commodity prices fell and the farm economy worsened, it became increasingly more difficult for the Henrys to make those annual payments. As a result, the parties agreed to some minor adjustments to the contract that allowed the Henrys to maintain their end of the bargain until December 1, 1987, when they were unable to make their annual payment.

The Grahams enlisted the services of attorney George Flagg, granting him a power of attorney in relation to the contract. On December 29, 1987 Flagg served the Henrys with notice of forfeiture. Iowa Code section 654A.6 (1987) requires a creditor to request mediation and obtain a mediation release before undertaking forfeiture proceedings. For this reason the notice of forfeiture was withdrawn and a mediation session eventually was held on February 19, 1988.

At that session, Flagg refused to cooperate with the mediator, denying the Henrys any opportunity to put forward their proposals for resolving the situation, and demanding that he be given a mediation release. It was clear that Flagg was hostile to the Henrys, the mediator, and the mediation process. He issued an ultimatum that the Henrys either sell the land within thirty days and remit the balance due on the contract to the Grahams or acquiesce in its forfeiture. As the meeting went on, Flagg became increasingly more agitated and belligerent, seizing upon statements made by the Henrys' attorney to accuse them of bad faith in failing to pay and continuing to demand that his client be given a mediation release.

Basing its decision on Flagg's behavior, the mediation service refused to issue the Grahams a release, granting instead an extra thirty days to attempt mediation. In spite of the fact that no release had been issued, Flagg filed and served a second notice of forfeiture on the Grahams' behalf shortly after the February 19 mediation session. The Henrys brought suit to enjoin the Grahams from continuing forfeiture proceedings, based upon the Grahams' failure to obtain a mediation release. The district court granted the Henrys an injunction, and the Grahams went to court seeking what they characterized as a writ of mandamus to force the mediation service to issue the release. After a hearing, the court ordered that a release be granted and the Henrys appealed.

The district court based its decision to grant the Grahams' request for a mediation release on two distinctly different procedural theories. In the first, the court relied upon our decision in Salsbury Laboratories v. Iowa Department of Environmental Quality, 276 N.W.2d 830, 835 (Iowa 1979), to recharacterize the Grahams' petition as an appeal for review of agency action pursuant to Iowa Code chapter 17A (1987). As an alternative theory for its decision, the court adopted the Grahams' characterization of their action as an application for writ of mandamus.

Which of these characterizations is correct is important because jurisdictional questions will have an impact upon our scope of review, and upon which provisions of the Code apply to the facts of the case. If this action is in fact a petition for judicial review of an agency decision, our review will be at law. See e.g., Iowa Bankers Ass'n v. Iowa Credit Union, 335 N.W.2d 439, 448 (Iowa 1983); Iowa Ind. Comm'r v. Davis, 286 N.W.2d 658, 660 (Iowa 1979); Community Action Research Group v. Iowa State Commerce Comm'n, 275 N.W.2d 217, 218-19 (Iowa 1979). If the Grahams' suit was correctly filed as an application for writ of mandamus, invoking the original jurisdiction of the trial court, our review will be de novo. Osborn v. City of Cedar Rapids, 324 N.W.2d 471, 474 (Iowa 1982).

Chapter 654A of the Code sets up the "farm mediation service." It initially names the attorney general or the attorney general's designee to serve as a "farm crisis program coordinator." Iowa Code § 654A.2 (1987). It requires that the farm crisis program coordinator contract with a private nonprofit organization to provide the actual mediation services between farmer and creditor. Iowa Code § 654A.3 (1987). The question before us, then, is whether the private organization with which the attorney general contracted to provide this service properly may be characterized as a state agency for purposes of applying the judicial review provisions of Iowa Code section 17A.19 to its decisions.

The term "agency" is defined in the Iowa Administrative Procedures Act as:

[E]ach board, commission, department, officer or other administrative office or unit of the state. "Agency" does not mean the general assembly, the judicial department or any of its components, the office of consumer advocate, the governor or a political subdivision of the state or its offices and units.

Iowa Code § 17A.2(1) (1987).

It is clear that the attorney general or the attorney general's designee, when acting in his or her capacity as farm crisis coordinator, is a state agency for purposes of chapter 17A. The legislature made this explicit in mandating that the coordinator adopt rules for mediation in accordance with chapter 17A. Iowa Code § 654A.14 (1987). It is also a basic tenet of the Iowa Administrative Procedure Act that an agency that acts under the auspices of another agency is subject to chapter 17A. It would be incorrect, however, to assume that all private contractors who perform services authorized by statute under contract with a state agency are themselves state agencies. Thus, even though the private nonprofit organization that is contracted to perform the actual mediation is partially a "creature of the state," it does not necessarily follow that the mediation service is a state agency. In determining whether the service is an "administrative office or unit of the state," we must apply a functional test. See Benson v. Fort Dodge Police Pension Bd., 312 N.W.2d 548, 550 (Iowa 1981).

In Benson, we held that a local pension board was not a state agency, even though it was established by state law. 312 N.W.2d at 550. In making this determination, we considered several factors, including the scope of the putative agency's authority, how it was administered and controlled, the source of its funds, the derivation of its rules, and the selection of its members. Id. at 550. We must balance the fact that state law authorizes a state agency to contract with a private organization for farm debt mediation against these other factors in order to make our determination. Our application of the functional test outlined in Benson leads to the conclusion that the farm mediation service is not a state agency.

The scope of authority granted to the mediation service is minimal. The requirements placed upon creditors by chapter 654A are procedural, adding an additional step in the process required for forfeiture, and do not affect substantive rights. First Nat'l Bank in Lenox v. Heimke, 407 N.W.2d 344, 346 (Iowa 1987). The procedural requirements imposed by the statute mandate only that a creditor request mediation and participate therein. Iowa Code § 654A.6 (1987). The statute grants no coercive authority to the mediation service to impose a solution on the parties. It mandates, instead, that a release not be granted until the creditor has participated in at least one mediation meeting. Iowa Code § 654A.11(3) (1987).

Chapter 654A prescribes no particular type of administrative controls to be placed upon the mediation service. Its status as a private corporation, rather than chapter 17A, governs its administration. In fact, the corporate body that functions as the "farm mediation service" is created pursuant to Iowa Code chapter 504A, rather than chapter 654A. The mediation service derives its funds through a contract with the state, calling for an hourly rate for services performed, rather than via a direct legislative appropriation. Rulemaking authority is granted to the attorney general or the attorney general's designee, not to the mediation service. Iowa Code § 654A.14 (1987). Likewise, employees of the mediation service are not public employees, as the statute itself makes clear. Iowa Code § 654A.3 (1987).

Our next task is to determine whether an action for mandamus properly can be filed against the farm mediation service, a private corporation. Generally, mandamus may issue to compel a person, board, corporation, officer, or inferior court to perform a duty that arises by operation of law. 55 C.J.S. Mandamus § 1 (1948). Our mandamus statute provides that the writ may issue to compel an inferior tribunal, board, corporation, or person to act or not to act. Iowa Code § 661.1 (1987). In this case, the farm mediation service performs a duty which arises as a result of the operation of Iowa Code chapter 654A. We have held that where a duty is imposed by law upon a private corporation, a party seeking to enforce that duty may proceed by an action for mandamus. Middle States Utilities Co. v. City of Osceola, 231 Iowa 462, 1 N.W.2d 643, 645 (1942). In addition, the mediation service's duties, imposed by statute, are affected with a public interest. Where such a public interest is implicated by a corporation's failure to perform its statutorily mandated duty, a mandamus proceeding is proper. Johnson v. Interstate Power Co., 187 F.Supp. 36, 40-41 (D.S.D.1960...