Amjad T. Tufail v. Midwest Hospitality, LLC

2013 WI 62SUPREME COURT OF WISCONSIN
CASE NO.: 2011AP1451
COMPLETE TITLE: Amjad T. Tufail,
Plaintiff-Respondent-Petitioner,
v.
Midwest Hospitality, LLC, d/b/a Midwest
Hospitality (WI),
LLC,
Defendant-Appellant,
Aslam Khan, d/b/a Midwest Hospitality,
Defendant.
REVIEW OF A DECISION OF THE COURT OF APPEALS
Reported at 344 Wis. 2d 297, 821 N.W.2d 412(Ct. App. 2012 – Unpublished)
OPINION FILED: July 10, 2013
SUBMITTED ON BRIEFS:
ORAL ARGUMENT: April 11, 2013
SOURCE OF APPEAL:
COURT: Circuit
COUNTY: Milwaukee
JUDGE: William S. Pocan
JUSTICES:
CONCURRED:
DISSENTED: PROSSER, J., dissents. (Opinion filed.)
NOT PARTICIPATING:
ATTORNEYS:
For the plaintiff-respondent-petitioner, there were briefs
by Douglas W. Rose, Lora L. LoCoco, and Rose & deJong, S.C.,
Milwaukee, and oral argument by Douglas W. Rose.
For the defendant-appellant, there was a brief by
Christopher T. Hale, Andrew G. Frank, and Hale and Wagner, S.C.,
Milwaukee, and oral argument by Christopher T. Hale.
2013 WI 62NOTICE
This opinion is subject to further
editing and modification. The final
version will appear in the bound
volume of the official reports.
No. 2011AP1451
(L.C. No. 2009CV13848)
STATE OF WISCONSIN : IN SUPREME COURT
Amjad T. Tufail,
Plaintiff-Respondent-Petitioner,
v.
Midwest Hospitality, LLC, d/b/a Midwest
FILED
Hospitality (WI), LLC,
JUL 10, 2013
Defendant-Appellant,
Diane M. Fremgen
Clerk of Supreme Court
Aslam Khan, d/b/a Midwest Hospitality,
Defendant.
REVIEW of a decision of the Court of Appeals. Reversed and
remanded. The judgment of the circuit court is thereby
affirmed.
¶1 ANN WALSH BRADLEY, J. This is a review of an
unpublished opinion of the court of appeals, which reversed the
circuit court's judgment awarding damages in favor of Amjad
Tufail (Tufail). The case before us involves a contract dispute
No. 2011AP1451
between the landlord, Tufail, and the tenant, Midwest
Hospitality, LLC (Midwest Hospitality) over the terms of a
commercial lease of property.1
¶2 Tufail, the petitioner, asserts that the court of
appeals erred when it determined that Midwest Hospitality's
early termination of the lease was justified by Tufail's
misrepresentation. Although he acknowledges that the lease
unambiguously provides a representation that Midwest Hospitality
may not be prevented from using the property for certain
specified purposes, Tufail argues that operation of a fast-food
restaurant with a drive-through is not among the purposes listed
in the lease. He further asserts that all of the uses
identified in the lease are permitted uses of the premises under
the City of Milwaukee zoning code.
¶3 Additionally, Tufail contends that the representation
was not false given that the City of Milwaukee granted a special
use permit allowing the operation of a Church's Chicken
restaurant, including the operation of a Church's Chicken fast-
food restaurant with a drive-through.
¶4 We conclude that the representation does not include
any use of the property as a Church's Chicken fast-food
restaurant with a drive-through. Additionally, there is no
indication that any of the uses identified in the lease were
prevented under the City of Milwaukee zoning code.
1
Tufail v. Midwest Hospitality, LLC, No. 2011AP1451,
unpublished slip op. (Ct. App. Aug. 1, 2012), reversing the
circuit court, William S. Pocan, J., presiding.
2
No. 2011AP1451
¶5 We further conclude that the representation was not
false because the circuit court found that Midwest Hospitality
was not prevented from using the property for the uses specified
in the lease, and its finding is not clearly erroneous.
Therefore, Tufail did not breach the lease. Accordingly, we
reverse the court of appeals and remand, and the judgment of the
circuit court is thereby affirmed.
I
¶6 The contract dispute in this case concerns the terms
of a commercial lease for a property located on West North
Avenue in Milwaukee, Wisconsin. Tufail had previously operated
a restaurant called "New York Chicken" on the property before
leasing the property to Midwest Hospitality.2
¶7 After purchasing the property in 2000, Tufail
submitted a request to the City of Milwaukee Development Center
for a permit to operate a fast-food restaurant. His application
was denied, but Tufail appealed to the City of Milwaukee Board
of Zoning Appeals. On November 9, 2000, the Board of Zoning
Appeals granted Tufail's request for a permit to operate a fast-
food restaurant for a ten-year period. Under the terms of the
permit, the New York Chicken restaurant was allowed to remain
open until 4:00 a.m.
¶8 Sometime before the New York Chicken restaurant ceased
operations in 2007 and again after operations ceased, Midwest
2
Tufail described the New York Chicken restaurant as "a
chicken place" that was similar in nature to a Church's Chicken
restaurant but with a different name.
3
No. 2011AP1451
Hospitality approached Tufail and inquired about opening a
Church's Chicken restaurant on the property. Prior to
negotiating the lease, Midwest Hospitality visited the former
New York Chicken restaurant and conducted a walk-through of the
property. It then prepared a written lease and the parties
negotiated its terms.
¶9 Tufail and Midwest Hospitality formally executed the
lease in March 2008. It was to be in effect for a five-year
period beginning on April 1, 2008 and ending on March 31, 2013.
Midwest Hospitality agreed to pay rent in the amount of $35,000
for the first year, which was to be paid in equal installments
on a monthly basis.
¶10 Paragraph 5 of the lease specified the intended
purposes for which the property may be used:
5. Use of Premises. Tenant may use and occupy the
Premises for any lawful purposes, including, but not
limited to, the retail sales, consumption, and
delivery of food and beverages which shall include,
but not be limited to, Chicken products, Fish
products, bread products, salads, sandwiches, dessert
items, promotional items, and any other items sold by
any Church's Chicken store.
Tufail also made representations in Paragraph 33 of the lease,
which provide as follows, in relevant part:
Landlord represents and warrants to Tenant that:
. . . .
(g) no existing restrictions, building and zoning
ordinances, or other laws or requirements of any
governmental authority prevent the use of the Premises
for the purposes set forth in Paragraph 5 . . . .
4
No. 2011AP1451
Landlord hereby acknowledges that Tenant is relying
upon all of the foregoing representations and
warranties in executing this Lease and that matters so
represented and warranted are material ones, and
Landlord accordingly agrees that any misrepresentation
or breach of such warranty will be reason for Tenant
to terminate this Lease.
Furthermore, the lease contained an integration clause providing
that the written lease set forth all understandings between
Tufail and Midwest Hospitality:
This Lease, the exhibits, rider and addendum, if any,
attached hereto and forming a part hereof set forth
all the covenants, promises, agreements, conditions,
terms, provisions and understandings by and between
the Landlord and Tenant concerning the Premises.
There are no other such matters, whether oral or
written, between Landlord and Tenant other than are
set forth herein. No change, modification,
alteration, amendment, addition or deletion to this
Lease shall be binding upon Landlord or Tenant unless
it is in writing and executed by the person to be so
charged with the same. Landlord and Tenant have
negotiated the terms of this Lease; therefore, this
Lease shall not be interpreted or construed against or
in favor of any party.
¶11 After the lease was executed, Midwest Hospitality
entered the property and began renovation. It completed some
initial preparation work, but did not ultimately complete the
renovations.
¶12 The renovation work ended in May 2008 when Midwest
Hospitality was informed that it needed to obtain a special use
permit in order to operate a fast-food restaurant with a drive-
through at the property. A special use permit is a particular
type of permit required by the City of Milwaukee in order to use
a property for certain purposes under the zoning code. Although
5
No. 2011AP1451
a sit-down restaurant3 is classified as a "Permitted Use," a
fast-food restaurant4 is classified as a "Limited Use" requiring
a special use permit.
¶13 Upon being advised of the permit requirement, Midwest
Hospitality applied for a special use permit to operate a
Church's Chicken fast-food restaurant with a drive-through on
the property. The application was met with opposition by
community groups that opposed adding a Church's Chicken
restaurant to the neighborhood.5
¶14 Despite the opposition, the City of Milwaukee Board of
Zoning Appeals ultimately approved Midwest Hospitality's
application for a special use permit in a written decision
issued on September 22, 2008. The special use permit was issued
3
A "sit-down restaurant" is defined in the zoning code as
"a restaurant where the food or beverages sold are consumed at
tables located on the premises, where taking food or beverages
from the premises is purely incidental, where food or beverages
are normally served utilizing nondisposable containers and
utensils and where the consumption of food or beverages in
vehicles on the premises in which the building is located does
not regularly occur . . . ."
4
A "restaurant, fast-food/carryout" is defined in the
zoning code as "a restaurant other than a sit-down restaurant
where the manner of preparation, packaging and serving of food
or beverages encourages their consumption outside the building."
5
Midwest Hospitality in its brief describes those
individuals or groups opposing its application as "neighbors,
physicians, Walnut Way Conservation Corporation (a local
neighborhood association) and even a Wisconsin State
Representative."
6
No. 2011AP1451
subject to certain conditions, which are set forth in relevant
part as follows:
10. That this use, both fast-food/carry-out and drive-
through, closes by 9:00 p.m.
11. That this Special Use is granted for a period of
one (1) year, commencing with the date hereof.
At trial, a Midwest Hospitality representative testified that
the conditions in the special use permit changed the business's
profitability forecast and rendered the operation of a Church's
Chicken restaurant on the property not worth the investment:
Q. And now could you have run the Church's Chicken at
1635 West North with restrictions on the evening hours
to 9:00 p.m. and a new review by [the Board of Zoning
Appeals] every year?
A. No way. It would just be impossible. It wouldn't
even be worth the investment. . . . [The 9:00 closing
restriction] changed our forecast that we had in mind
for the profitability of this business . . . .
¶15 After the special use permit was approved, Midwest
Hospitality notified Tufail that it would stop paying rent. It
sent a letter to Tufail arguing that it was not responsible for
the lease payments because a special use permit was required to
operate a Church's Chicken fast-food restaurant with a drive-
through. It therefore contended that Tufail made a false
representation and that it was entitled to terminate the lease
before the five-year term expired.
¶16 Tufail, in turn, commenced the present action. He
alleged a breach of contract claim, an anticipatory breach of
contract claim, and a claim for breach of the duty of good faith
and fair dealing. Midwest Hospitality later pled counterclaims
7
No. 2011AP1451
alleging a breach of contract, deceptive advertising contrary to
Wis. Stat. § 100.18 (2009-10), and unjust enrichment.
¶17 The circuit court presided over a three-day bench
trial, which took place in March 2011. At the conclusion of the
trial, the circuit court made findings of fact relating to the
claims advanced in the pleadings. It found that the "vast
majority of Church's Chicken restaurants have drive-through
operations, but not all." Additionally, "Midwest Hospitality's
application for a special use permit to use the subject property
for a fast-food restaurant with a drive-through was approved by
the City of Milwaukee," and it was not "prevent[ed], in any way,
[] from opening a Church's Chicken restaurant at the subject
property with a drive-through and as a fast food restaurant."6
¶18 Turning to examine the text of the lease, the circuit
court determined that it unambiguously failed to set forth any
use as a fast-food restaurant with a drive-through. It
concluded that "Midwest Hospitality was able to use the subject
property for its intended use as set forth in the lease."
Furthermore, it determined that "even if the subject lease was
interpreted to include as an intended use a fast food restaurant
with a drive-through, that intended use was allowed by the City
of Milwaukee." Ultimately, there was "no evidence presented
that [Tufail's] representations and warranties were not true."
6
Additional discussion of the circuit court's findings of
fact may be found at ¶¶39-41, infra.
8
No. 2011AP1451
¶19 Because Tufail did not breach the lease, the circuit
court concluded that Midwest Hospitality's early termination of
the lease was itself a breach of contract. It proceeded to
enter a judgment awarding Tufail $90,033.21 in damages.
¶20 Midwest Hospitality appealed and the court of appeals
reversed the circuit court. Tufail v. Midwest Hospitality, LLC,
No. 2011AP1451, unpublished slip op. (Ct. App. Aug. 1, 2012).
It concluded that the "early termination of the lease was
justified by Tufail's misrepresentation," stating that Tufail's
representation that "no zoning laws restricting [Midwest
Hospitality's] operation of a Church's Chicken fast-food
restaurant on the leased premises" was "false from the moment
the parties signed the lease." Id., ¶¶1, 9.
¶21 The court of appeals rejected Tufail's argument that
he did not make a false representation because the lease does
not set forth a use as a fast-food restaurant with a drive-
through. Id., ¶8. It concluded that by reference to "Church's
Chicken," Paragraph 5 of the lease "allowed the operation as a
Church's Chicken" and that it was "not necessary for the use
provision in the lease to include additional words allowing
operation of a fast-food restaurant. A Church's Chicken is a
fast-food restaurant." Id.
II
¶22 This case requires us to determine whether Tufail
breached the lease, a written contract, by making a false
representation. The interpretation of a contract presents a
9
No. 2011AP1451
question of law, which we determine independently of the
conclusions rendered by the circuit court and the court of
appeals. Ehlinger v. Hauser, 2010 WI 54, ¶47, 325 Wis. 2d 287,
¶47, 785 N.W.2d 328.
¶23 Here, the circuit court presided over a three-day
bench trial and made findings of fact. We accept the circuit
court's findings of fact unless they are clearly erroneous.
Phelps v. Physicians Ins. Co. of Wisconsin, Inc., 2009 WI 74,
¶34, 319 Wis. 2d 1, 768 N.W.2d 615.
III
¶24 The sole question presented on review is whether
Tufail breached the lease by making a false representation. The
lease is a written contract and our analysis is controlled
entirely by well-established canons of contract interpretation.
Accordingly, as a preface to addressing the question presented,
it is helpful to review those basic principles of contract
interpretation relevant to the issue before us.
¶25 Contract interpretation generally seeks to give effect
to the parties' intentions. Seitzinger v. Community Health
Network, 2004 WI 28, ¶22, 270 Wis. 2d 1, 676 N.W.2d 426.
However, "subjective intent is not the be-all and end-all."
Kernz v. J.L. French Corp., 2003 WI App 140, ¶9, 266 Wis. 2d
124, 667 N.W.2d 751. Rather, "unambiguous contract language
controls contract interpretation." Id.¶26 Where the terms of a contract are clear and
unambiguous, we construe the contract according to its literal
10
No. 2011AP1451
terms. Maryland Arms Ltd. Partnership v. Connell, 2010 WI 64,
¶23, 326 Wis. 2d 300, 786 N.W.2d 15 (quoting Gorton v. Hostak,
Henzl & Bichler, S.C., 217 Wis. 2d 493, 506, 577 N.W.2d 617(1998)). "We presume the parties' intent is evidenced by the
words they chose, if those words are unambiguous." Kernz, 266
Wis. 2d 124, ¶9.
¶27 If the terms of the contract are ambiguous, evidence
extrinsic to the contract itself may be used to determine the
parties' intent. Seitzinger, 270 Wis. 2d 1, ¶22. "A contract
provision is ambiguous if it is fairly susceptible of more than
one construction." Mgm't Computer Servs., Inc. v. Hawkins, Ash,
Baptie & Co., 206 Wis. 2d 158, 177, 557 N.W.2d 67 (1996).
¶28 Contract language is construed according to its plain
or ordinary meaning, Huml v. Vlazny, 2006 WI 87, ¶52, 293 Wis.
2d 169, 716 N.W.2d 807, consistent with "what a reasonable
person would understand the words to mean under the
circumstances." Seitzinger, 270 Wis. 2d 1, ¶22. For a business
contract, that is "the manner that it would be understood by
persons in the business to which the contract relates." Columbia
Propane, L.P. v. Wisconsin Gas Co., 2003 WI 38, ¶12, 261 Wis. 2d
70, 661 N.W.2d 776.
¶29 The court construes contracts "as they are written."
Id., ¶12. Ultimately, "the office of judicial construction is
not to make contracts . . . but to determine what the parties
contracted to do." Marion v. Orson's Camera Centers, Inc., 29
Wis. 2d 339, 345, 138 N.W.2d 733 (1966) (quoting Wisconsin
11
No. 2011AP1451
Marine & Fire Ins. Co. Bank v. Wilkin, 95 Wis. 111, 115, 69 N.W.
354 (1897).
¶30 Additionally, as this court recently stated, courts
may not consider evidence of prior or contemporaneous oral or
written agreements between the parties if a contract is fully
integrated:
A contract that represents the final and complete
expression of the parties' agreement is considered
fully "integrated." If the contract is integrated,
absent the existence of fraud, duress, or mutual
mistake, the court construing the contract may not
consider evidence of any prior or contemporaneous oral
or written agreement between the parties.
Town Bank v. City Real Estate Development, LLC, 2010 WI 134,
¶37, 330 Wis. 2d 340, 793 N.W.2d 476. If a contract contains
"an unambiguous merger or integration clause, the court is
barred from considering evidence of any prior or contemporaneous
understandings or agreements between the parties, even as to the
issue of integration." Id., ¶39; Peterson v. Cornerstone
Property Development, LLC, 2006 WI App 132, ¶31, 294 Wis. 2d
800, 720 N.W.2d 716 (quoting Ziegler Co. v. Rexnord, Inc., 139
Wis. 2d 593, 608-09 n.11, 407 N.W.2d 873 (1987)) (courts may not
consider extrinsic evidence to "vary or contradict the terms of
a writing" when the contract is fully integrated).
¶31 In this case, as quoted above, the lease at issue
contains an integration clause. It states that the entire
agreement between the parties has been reduced to writing. It
plainly states without qualification that "all" of the
understandings between the parties are set forth in the lease
12
No. 2011AP1451
and any attached exhibits, riders, or addendums. Therefore, we
are guided by the text of the lease, not by any extrinsic,
unwritten understandings that may have existed between the
parties.7 Id.; Peterson, 294 Wis. 2d 800, ¶31 (quoting Ziegler
Co., 139 Wis. 2d at 608-09 n.11).
¶32 Having reviewed the relevant canons of contract
interpretation, we turn now to address the question of whether
Tufail breached the lease by making a false representation. Our
inquiry hinges first on the meaning of Tufail's representation
as it is written in the lease, and second, on whether the
representation is false under the facts of this case. The
representation states as follows:
Landlord represents and warrants to Tenant that:
. . . .
7
Contrary to the unambiguous integration clause, Midwest
Hospitality urges us to consider the parties' unwritten
"understanding of Church's Chicken" as a fast-food restaurant.
It contends that "Church's Chicken was understood to be a fast-
food restaurant by all parties," and that understanding is
"inherent in interpreting [the lease's references to] 'Church's
Chicken' . . . regardless of the absence of 'fast-food' in the
Use of Premises provision." In effect, it contends that "there
is no such thing" as a sit-down Church's Chicken restaurant.
Here, however, the parties have expressly stated that
"[t]his Lease . . . set[s] forth all the . . . understandings by
and between the Landlord and Tenant concerning the Premises."
In light of the parties' unambiguous statement that no
additional understandings existed between them concerning the
lease, we decline to consider Midwest Hospitality's
"understanding of Church's Chicken" as a particular type of
fast-food restaurant when such an understanding is not presented
in the text of the lease.
13
No. 2011AP1451
(g) no existing restrictions, building and zoning
ordinances, or other laws or requirements of any
governmental authority prevent the use of the Premises
for the purposes set forth in Paragraph 5 . . . .
Paragraph 5 of the lease, in turn, provides that:
5. Use of Premises. Tenant may use and occupy the
Premises for any lawful purpose, including, but not
limited to, the retail sales, consumption, and
delivery of food and beverages which shall include,
but not be limited to, Chicken products, Fish
products, bread products, salads, sandwiches, dessert
items, promotional items, and any other items sold by
any Church's Chicken store.
¶33 Tufail acknowledges that the lease unambiguously
provides that Midwest Hospitality may not be prevented from
using the property for certain specified purposes. He advances,
however, that a fast-food restaurant with a drive-through is not
among the "purposes set forth in Paragraph 5." Furthermore, he
asserts that all of the uses identified in Paragraph 5 are
permitted uses of the premises under the City of Milwaukee
zoning code. Given that the City of Milwaukee granted a special
use permit allowing the operation of a Church's Chicken
restaurant, including the operation of a Church's Chicken fast-
food restaurant with a drive-through, he contends that the
representation was not false.
¶34 Midwest Hospitality likewise acknowledges the
unambiguous text of the lease, but further argues that the lease
14
No. 2011AP1451
incorporates the fact that "Church's Chicken was understood to
be a fast-food restaurant by all parties."8
¶35 We construe the contract as it is clearly written.
Midwest Hospitality may not be prevented from using the property
for the purposes specifically identified in Paragraph 5.
Paragraph 5 then identifies the various products which may be
consumed, sold, distributed, or otherwise used on the property.
¶36 Among the products identified in Paragraph 5 is
counted "any other items sold by any Church's Chicken store."
Midwest Hospitality argues, and the court of appeals concluded,
that the reference to a "Church's Chicken" in Paragraph 5
requires that a Church's Chicken fast-food restaurant with a
drive-through may be operated on the property. We reject that
argument.
8
Tufail states in his brief that "[t]he lease is
unambiguous," while Midwest Hospitality argues that Tufail
"unambiguously warrantied that there were no zoning restrictions
preventing . . . the contemplated use of the Property." Their
respective "unambiguous" constructions of the lease diverge
greatly in scope.
That the parties have construed the representation
differently does not alone render it ambiguous. Ambiguity is
found where a contract "is fairly susceptible of more than one
construction," not necessarily where different constructions are
argued. Mgm't Computer Servs., Inc. v. Hawkins, Ash, Baptie &
Co., 206 Wis. 2d 158, 177, 557 N.W.2d 67 (1996). We must
interpret the lease "as it stands, even though the parties may
have placed a different construction on it." Cernohorsky v.
Northern Liquid Gas Co., 268 Wis. 586, 593, 68 N.W.2d 429(1955); see also Brew City Redevelopment Group, LLC v. The
Ferchill Group, 2006 WI App 39, ¶3, 289 Wis. 2d 795, 714 N.W.2d
582.
15
No. 2011AP1451
¶37 A mere reference to products used by a "Church's
Chicken store" does not represent that Midwest Hospitality may
operate a Church's Chicken fast-food restaurant with a drive-
through. The lease plainly provides that Midwest Hospitality
may not be prevented from using the property for certain,
specified purposes. Notably absent from that list is any
requirement that the property may be used as a fast-food
restaurant with a drive-through.9
¶38 Accordingly, we conclude that Tufail's representation
requires simply that Midwest Hospitality may not be prevented
from using the property for the purposes specifically identified
in Paragraph 5. Having ascertained the plain meaning of the
representation, all that remains is to determine whether the
representation is false under these facts.
9
Likewise, the lease does not set forth any requirements
regarding the conditions specified in the special use permit
relating to the hours of operation or the time period in which
any permit must be renewed. Despite the lack of reference to a
fast-food restaurant or to the conditions set forth in the
special use permit, the dissent interprets the lease to mean
that Tufail "warrant[ied] that there were no zoning requirements
with which Midwest had to comply in order to sell Church's
Chicken products in a fast-food restaurant." Dissent, ¶78; see
also dissent, ¶¶94, 101.
In relying on words that cannot be found in the lease, the
dissent appears to rewrite it. The representation in the lease
simply states that no existing restrictions, building and zoning
ordinances, or other laws or requirements prevent Midwest
Hospitality from using the property for the purposes identified
in Paragraph 5. It focuses on whether Midwest Hospitality is
prevented from using the property for certain purposes, not on
whether Midwest Hospitality had to comply with various
governmental regulations.
16
No. 2011AP1451
¶39 In this case, the circuit court made extensive
findings of fact at the conclusion of a three-day bench trial.
It found that "[t]he vast majority of Church's Chicken
restaurants have drive-through operations, but not all." There
was "no evidence" showing that Tufail knew about the many other
Church's Chicken restaurants, whether or not they had drive-
through operations, or about Church's Chicken franchise
requirements such as closing times.
¶40 The circuit court also found that the parties "entered
into a written lease in March of 2008," which was, by its own
terms, to last for a five-year period. After the lease was
signed and Midwest Hospitality took occupancy, it discovered
that a special use permit was required from the City of
Milwaukee "so that it could have a drive-through as part of the
restaurant."
¶41 Furthermore, the circuit court found that "Midwest
Hospitality's application for a special use permit to use the
subject property for a fast food restaurant with a drive-through
was approved by the City of Milwaukee." Although it observed
that the approval "was not exactly as Midwest Hospitality may
have wanted" due to the conditions in the special use permit, it
found that Midwest Hospitality was not prevented, "in any way,
[] from opening a Church's Chicken restaurant at the subject
property." The special use permit allowed operation "with a
drive-through and as a fast food restaurant":
But the special use permit as approved by the City of
Milwaukee did not prevent, in any way, Midwest
17
No. 2011AP1451
Hospitality from opening a Church's Chicken restaurant
at the subject property with a drive-through and as a
fast food restaurant. Therefore, the Court finds that
even if the subject lease was interpreted to include
as an intended use a fast food restaurant with a
drive-through, that intended use was allowed by the
City of Milwaukee. The representations and warranties
of Mr. Tufail contained in the lease itself are for
the intended use as specifically set forth in the
lease in paragraph five, and there was no evidence
presented that those representations and warranties
were not true.
Accordingly, the circuit court determined that "the claim that
Mr. Tufail made misrepresentations was not established."
¶42 No one argues that the findings of the circuit court,
to the extent that they set forth the dispositive facts of this
case, are clearly erroneous. Phelps, 319 Wis. 2d 1, ¶34. We
likewise see no indication that its findings are clearly
erroneous. Therefore, we are bound to accept those findings,
including the circuit court's finding that Midwest Hospitality
was not in fact prevented from opening a Church's Chicken
restaurant at the subject property.
¶43 Given the lack of any reference in the lease to a
fast-food restaurant with a drive-through, there is no
indication in the facts that the uses of the property, as they
are stated in Paragraph 5 of the lease, were prevented. There
is no indication that any of the uses specified in Paragraph 5
cannot be performed at a sit-down restaurant, which is a
permitted use under the City of Milwaukee zoning code. Rather,
the fact that Midwest Hospitality was granted a special use
permit specifically allowing use of the property as a Church's
Chicken restaurant soundly refutes the premise that Midwest
18
No. 2011AP1451
Hospitality was prevented from using the property for any of the
purposes stated in Paragraph 5.
¶44 We further observe that even if we accepted Midwest
Hospitality's argument that there is an "undisputed
understanding of Church's Chicken" as a fast-food restaurant
with a drive-through and that the representation incorporates
that "undisputed understanding," the representation is still not
false under these facts. The circuit court expressly found that
when the special use permit was granted by the City of
Milwaukee, Midwest Hospitality was allowed to operate a Church's
Chicken fast-food restaurant with a drive-through.
¶45 The facts of this case indicate that although Midwest
Hospitality was not prevented from using the property for the
purposes identified in Paragraph 5 of the lease, those purposes
alone did not necessarily ensure that the proposed Church's
Chicken restaurant was worth Midwest Hospitality's investment.
However, as the circuit court observed, "[t]here was nothing to
prevent Midwest Hospitality from putting contingencies in the
lease about hours of operation, a drive-through or anything else
deemed necessary. It did not." We interpret only the contract
to which the parties agreed. Marion, 29 Wis. 2d at 345.
¶46 Ultimately, the result of this case is compelled by
basic principles of contract interpretation and by the circuit
court's findings of fact following a three-day bench trial.
Tufail explicitly represented in paragraph 33 of the lease that
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No. 2011AP1451
Midwest Hospitality would not be prevented from using the
property for the listed purposes.
¶47 The circuit court found that there was no evidence to
support the argument that the representations were untrue.
Additionally, it found that Midwest Hospitality was not
prevented "in any way" from opening a Church's Chicken
restaurant at the leased property.
• "The representations and warranties of Mr. Tufail
contained in the lease itself are for the intended use
as specifically set forth in the lease in paragraph
five, and there was no evidence presented that those
representations and warranties were not true."
• "[T]he special use permit as approved by the City of
Milwaukee did not prevent, in any way, Midwest
Hospitality from opening a Church's Chicken restaurant
at the subject property with a drive-through and as a
fast food restaurant."
¶48 Importantly, the circuit court specifically found that
even if the lease was interpreted to include uses not explicitly
listed in its terms——uses as a fast-food restaurant with a
drive-through——that the evidence showed that such uses were not
prevented.
• "Therefore, the Court finds that even if the subject
lease was interpreted to include as an intended use a
fast food restaurant with a drive-through, that
intended use was allowed by the City of Milwaukee."
20
No. 2011AP1451
¶49 There has been no showing that the circuit court's
dispositive findings of fact are clearly erroneous. No party
has even attempted to advance such an argument. Accordingly, we
conclude that Tufail did not breach the lease by making a false
representation.
IV
¶50 In sum, we conclude that the representation does not
include any use of the property as a Church's Chicken fast-food
restaurant with a drive-through. Additionally, there is no
indication that any of the uses identified in the lease were
prevented under the City of Milwaukee zoning code.
¶51 We further conclude that the representation was not
false because the circuit court found that Midwest Hospitality
was not prevented from using the property for the uses specified
in the lease, and its finding is not clearly erroneous.
Therefore, Tufail did not breach the lease. Accordingly, we
reverse the court of appeals and remand, and the judgment of the
circuit court is thereby affirmed.
By the Court.—The decision of the court of appeals is
reversed and remanded. The judgment of the circuit court is
thereby affirmed.
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No. 2011AP1451.dtp
¶52 DAVID T. PROSSER, J. (dissenting). Amjad Tufail
(Tufail) and Midwest Hospitality, LLC (Midwest) entered into a
lease in which Tufail unambiguously warranted that there were no
local ordinances that would prevent Midwest from operating a
fast-food Church's Chicken restaurant on Tufail's property. The
majority opinion concludes that Tufail did not breach this
warranty because the lease did not define "Church's Chicken" as
a fast-food restaurant. However, the only reasonable meaning of
"Church's Chicken" is a fast-food restaurant.
¶53 Even if the lease were deemed ambiguous, the extrinsic
evidence demonstrates that Church's Chicken is a fast-food
restaurant, and both parties were aware of that fact when they
signed the lease. Tufail's warranty that no ordinances
prevented the operation of a Church's Chicken was false because
the Milwaukee zoning code requires any freestanding fast-food
restaurant to have a special use permit. Therefore, Tufail
breached the lease.
¶54 The majority opinion employs a sterile, technical
interpretation of the lease that abandons the basic principles
of contract interpretation. When interpreting a contract, the
court's goal has always been to effect the intent of the parties
as it is expressed in the language of the contract. The
importance of upholding this principle cannot be overstated
because people in business use contracts to try to minimize
uncertainty in relation to their reasonable expectations.
¶55 Parties generally enter agreements to advance their
economic interests. Risks, of course, are inevitable. But if
1
No. 2011AP1451.dtp
one party is able to frustrate the basic purpose of a contract
through an unreasonable interpretation of its terms and
commitments, instability will follow, and we will be left with a
system of law that rewards the more cunning party and disregards
mutual intent. Because the majority opinion supports an
implausible interpretation of the lease contract in this case, I
must respectfully dissent.
I
¶56 In 2000 Tufail purchased a property with a
freestanding building located at 1635 West North Avenue (the
Property) in Milwaukee. The Property was operated as a New York
Chicken fast-food restaurant, and Tufail continued that
operation until the fall of 2007. The Property had formerly
been a Church's Chicken. In fact, Tufail later testified that
"it was an old design Church's Chicken which [he] was running."
Tufail was not inexperienced in the restaurant business; he
owned four other restaurants.
¶57 When he acquired the Property in 2000, Tufail wanted
to continue operating the fast-food restaurant. His request was
denied by a city plan examiner. Tufail was told that a fast-
food restaurant was a special use under the zoning code and he
would need to obtain a special use permit. He eventually
acquired a ten-year special use permit from the Milwaukee Board
of Zoning Appeals (BOZA). When Tufail temporarily closed the
restaurant in or about October of 2007, he had approximately
three years left on his ten-year special use permit before it
would have to be renewed.
2
No. 2011AP1451.dtp
¶58 Midwest approached Tufail about opening a Church's
Chicken restaurant at the Property both before and after Tufail
shut down operation of his New York Chicken. Midwest is a
corporate entity that operates Church's Chicken restaurants and
is owned by Aslam Khan (Khan). Munshi Ali, a Church's Chicken
manager at a different location, approached Tufail four or five
times and stated that Khan wanted to lease Tufail's property to
operate a Church's Chicken. Khan himself eventually visited the
Property with several other people affiliated with Church's
Chicken. Khan stated that he owned many Church's Chicken
restaurants in the Midwest and said that Tufail's property value
would go up if Church's Chicken moved in.
¶59 Two or three days after Khan visited the Property,
Khan sent an agent, Tariq Malik (Malik), to Tufail with a lease
drafted by Midwest. Malik and Tufail went to Tufail's attorney,
who made some changes to the lease. However, the attorney did
not alter Paragraph 5, which contained the provisions regarding
the use of the premises. At some point before he signed the
lease, Tufail visited a Church's Chicken at another location to
see how Midwest would alter the Property.
¶60 Tufail and Midwest entered into a five-year lease (the
Lease) for the Property in March 2008. The "Use of Premises"
section in Paragraph 5 of the Lease stated:
Tenant may use and occupy the Premises for any
lawful purpose, including, but not limited to, the
retail sales, consumption, and delivery of food and
beverages which shall include, but not be limited to,
Chicken products, Fish products, bread products,
salads, sandwiches, dessert items, promotional items,
3
No. 2011AP1451.dtp
and any other items sold by any Church's Chicken
store.
¶61 The "Representations and Warranties" section of the
Lease, in Paragraph 33(g), stated that the landlord represents
and warrants that "no existing restrictions, building and zoning
ordinances, or other laws or requirements of any governmental
authority prevent the use of the Premises for the purposes set
forth in Paragraph 5."
¶62 The Lease also stated at the end of the
"Representations and Warranties" section that the
representations and warranties "are material ones, and Landlord
accordingly agrees that any misrepresentation or breach of such
warranty will be reason for Tenant to terminate this Lease."
¶63 Regarding interpretation of these provisions,
Paragraph 38 of the Lease said, "This Lease shall be interpreted
to the broadest extent possible to give full and fair meaning to
the intentions of the parties hereto." (Emphasis added.)
¶64 Midwest entered the Property and began remodeling it
in May 2008. According to Midwest, the Property required a
substantial amount of cleaning and repair work. However,
Midwest suspended the renovation when it was denied a building
permit.
¶65 When Midwest applied for that permit, it was told that
it would have to apply for a special use permit to operate a
fast-food restaurant in a freestanding building. The examiner
for the City, Barbara Jones, stated in her denial letter that
the Milwaukee zoning code did not allow the Property to be used
as a fast-food restaurant. Thus, Midwest unexpectedly learned
4
No. 2011AP1451.dtp
that it was faced with the same obstacles with zoning ordinances
that Tufail had faced roughly eight years earlier. What Midwest
did not know was that Tufail's business had been cited for 21
health code violations by the city in 2007 and had antagonized a
lot of nearby residents.
¶66 On May 29, 2008, Midwest applied for a special use
permit to operate a fast-food restaurant with a drive-through
within 150 feet of residential property. Four sections of the
City of Milwaukee zoning code were in play. Section 295-203-
9.f. defines a sit-down restaurant as:
a restaurant where the food or beverages sold are
consumed at tables located on the premises, where
taking food or beverages from the premises is purely
incidental, where food or beverages are normally
served utilizing nondisposable containers and utensils
and where the consumption of food or beverages in
vehicles on the premises in which the building is
located does not regularly occur, or where the
restaurant is located within a building containing
more than one principal use other than another
restaurant. This term does not include a tavern.
¶67 Section 295-203-9.g. defines a fast-food or carry-out
restaurant as "a restaurant other than a sit-down restaurant
where the manner of preparation, packaging and serving of food
or beverages encourages their consumption outside the building.
This term does not include a tavern." Section 295-603-2.o.
requires that a fast-food restaurant be in a building containing
at least one permitted use, or the restaurant must get a special
use permit. Finally, Section 295-603-2.j.3. states that a
drive-through may not be located within 150 feet of residential
property.
5
No. 2011AP1451.dtp
¶68 Midwest's intended use of the Property was
inconsistent with the definition of a sit-down restaurant. The
city immediately recognized that Church's Chicken, like the
prior New York Chicken, is a fast-food restaurant and it would
likely expect to use the existing drive-through. Thus, without
a special use permit, operating a Church's Chicken on the
Property would violate two separate zoning code provisions: the
prohibition against operating a freestanding fast-food
restaurant and the prohibition against having a drive-through
within 150 feet of residential property.
¶69 In September 2008, approximately six months after it
signed the Lease, Midwest obtained a special use permit to
operate the restaurant. However, the city imposed very
different conditions on Midwest from the conditions it had
imposed on Tufail. Tufail obtained a ten-year permit; Midwest
received a one-year permit with no assurance of renewal. Tufail
was permitted to operate until 4:00 a.m. Midwest could operate
its Church's Chicken until only 9:00 p.m. The city's permit
also required Church's Chicken to pick up all garbage within a
one-block radius of the Property. The president of Falcon
Holdings, which operates Midwest, testified that it would be too
expensive to take care of all the garbage within a block of the
Property and that a Church's Chicken would be less profitable if
it had to close at 9:00 p.m.
¶70 The BOZA chairman stated that Midwest faced a
difficult decision whether to invest "hundreds of thousands of
dollars for a one year approval by this board. There is no
6
No. 2011AP1451.dtp
guarantee of an approval after one year." The local community
appeared to share the chairman's concern, and many city
residents opposed the special use permit.
¶71 Due to the long delay in obtaining any special use
permit and then the severe restrictions added to the permit,
Midwest stopped paying rent.
II
¶72 The plain language of the Lease unambiguously
demonstrates that the parties intended for Midwest to operate a
Church's Chicken fast-food restaurant on the Property. The
court's goal in contract interpretation is to discern the
intentions of the parties as expressed in the language of the
contract. Town Bank v. City Real Estate Dev., LLC, 2010 WI 134,
¶33, 330 Wis. 2d 340, 793 N.W.2d 476. The court will look at
the ordinary meaning of the contractual language, and if it is
unambiguous, the contractual interpretation remains within the
four corners of the contract. Id. A contract is ambiguous when
"it is susceptible to more than one reasonable interpretation."
Id.¶73 The broad language in the Lease unambiguously suggests
that Midwest could have operated almost any lawful business on
the Property. Paragraph 5 of the Lease states that "Tenant may
use and occupy the Premises for any lawful purpose . . . ." It
was not unreasonable for Midwest to assume that it could operate
a freestanding fast-food restaurant because that is a seemingly
lawful purpose and because New York Chicken had operated on the
property in that manner. Moreover, the Lease quickly narrows
7
No. 2011AP1451.dtp
its intent by adding the words "including . . . the retail
sales, consumption, and delivery of food and beverages." Then
the Lease pinpoints its objective by naming "Chicken products,
Fish products, bread products, salads, sandwiches, dessert
items, promotional items, and any other items sold by any
Church's Chicken store." (Emphasis added.)
¶74 The Lease in this case is unambiguous because it uses
"Church's Chicken" according to its ordinary meaning: a fast-
food restaurant.1 The Lease states that Midwest may use the
Property for "retail sales, consumption, and delivery of food
and beverages which shall include . . . Chicken
products . . . and any other items sold by any Church's Chicken
store."
¶75 Courts must interpret a contract "in the manner that
it would be understood by persons in the business to which the
contract relates." Columbia Propane, L.P. v. Wis. Gas Co., 2003
WI 38, ¶12, 261 Wis. 2d 70, 661 N.W.2d 776.2 In the restaurant
business, "Church’s Chicken is a highly recognized brand name in
the Quick Service Restaurant sector and is one of the largest
quick-service chicken concepts in the [w]orld." Church's
Chicken Celebrates Its Southern Hospitality with Kick Off of New
1
Interestingly, the first Church's Chicken restaurant was
called "Church's Fried Chicken-To-Go." One Man, One Chicken
Legacy, Churchs.com, http://www.churchs.com/about.html (last
visited June 25, 2013). Church's Chicken has always been a
fast-food restaurant.
2
See also N. Gate Corp. v. Nat'l Food Stores, 30
Wis. 2d 317, 321, 140 N.W.2d 744 (1966); All-Star Ins. Corp. v.
APS Ins. Agency, Inc., 112 Wis. 2d 329, 333, 332 N.W.2d 828 (Ct.
App. 1983); 17A Am. Jur. 2d Contracts § 337 (2004).
8
No. 2011AP1451.dtp
Advertising Campaign, (Nov. 3, 2011),
http://www.businesswire.com/news/home/20111103005028/en/Church%E
2%80%99s-Chicken-Celebrates-Southern-Hospitality-Kick-
Advertising. Because of Church's Chicken's "highly recognized
brand name," the court of appeals had no trouble asserting that,
"[i]t is undisputed here that a Church's Chicken is a fast-food
restaurant. It was not necessary for the use provision in the
lease to include additional words allowing operation of a fast-
food restaurant. A Church's Chicken is a fast-food restaurant."
Tufail v. Midwest Hospitality, LLC, No. 2011AP1451, unpublished
slip op., ¶8 (Wis. Ct. App. Aug. 1, 2012).
¶76 Even though Tufail is correct that not everyone would
understand what a Church's Chicken is, its reputation in the
restaurant industry demonstrates that those in the business
would know that it is a fast-food restaurant.3 Since the only
reasonable meaning of "Church's Chicken" is a fast-food chicken
restaurant, a paragraph that allows for the sale of "items sold
by any Church's Chicken store" unambiguously contemplates the
operation of the Property as a fast-food restaurant.
¶77 Furthermore, the Lease explicitly calls for broad
interpretation to avoid an unfair reading of the contract and to
"give full and fair meaning to the intentions of the parties."
It would not be reasonable to define "Church's Chicken" in a way
that contradicts its true definition. Midwest persuasively
argues that "Church's Chicken" must refer to a fast-food
3
At trial, Tufail's own expert understood that a Church's
Chicken is a fast-food restaurant and that Midwest intended to
operate a freestanding Church's Chicken on the Property.
9
No. 2011AP1451.dtp
restaurant because all Church's Chicken restaurants are fast-
food restaurants. Since the zoning code did not permit a fast-
food restaurant on the Property and Church's Chicken is a fast-
food restaurant, Tufail's warranty that no ordinances prevented
the operation of a Church's Chicken on the Property was false.4
¶78 The problem with Tufail's warranty is apparent when
compared to another Lease provision. Paragraph 24(b) says, "If
allowed by local governmental authorities, Tenant shall have the
right to erect and maintain exterior free standing sign(s) in
the location set forth on Exhibit 'A'. Landlord agrees to
cooperate fully with Tenant in obtaining all required
governmental permits, licenses, approvals and variances for
Tenant's sign(s)." This paragraph is clear that the tenant
might need to get government permits or variances in order to
erect the desired signage. In contrast, Paragraph 33(g)
provides a broad warranty that there are no "requirements of any
governmental authority" that would prevent the tenant from using
the Property as specified in Paragraph 5. Tufail was not forced
to embrace the broad warranty in Paragraph 33(g). He could have
made a qualified commitment as appears in Paragraph 24(b), or he
could have forthrightly disclosed the zoning regulations and
made the Lease contingent upon receipt of a satisfactory special
4
The majority opinion observes that the circuit court made
a finding of fact that not all Church's Chicken restaurants have
a drive-through. Majority op., ¶39. However, the drive-through
issue is a red herring. Church's Chicken is undeniably a fast-
food restaurant chain. The zoning code prohibited the operation
of a freestanding fast-food restaurant regardless of whether
that restaurant had a drive-through. Tufail warranted against
that obstacle.
10
No. 2011AP1451.dtp
use permit. However, because Tufail warranted that there were
no zoning requirements with which Midwest had to comply in order
to sell Church's Chicken products in a fast-food restaurant,
Tufail must be held to his promise.
III
¶79 Tufail's warranty that no restrictions prevent the
operation of a Church's Chicken is unambiguous, but even if
"Church's Chicken" is deemed ambiguous, the parol evidence
demonstrates that the parties understood Church's Chicken to be
a fast-food restaurant. If a contract is ambiguous, the court
may use parol evidence to explain the ambiguous term. Town
Bank, 330 Wis. 2d 340, ¶38. Tufail admitted that "[t]he
intended purpose of the Lease, as represented by Midwest, was
for it to open a new Church's Chicken restaurant at the Leased
Premises." Tufail had to know that Church's Chicken is a fast-
food restaurant because his New York Chicken restaurant was an
old Church's Chicken. Furthermore, Tufail saw that Church's
Chicken is a fast-food restaurant when he visited one before
signing the Lease.
¶80 Tufail's visit is important because the parties'
course of dealings can clarify contractual ambiguities. See
Martinson v. Brooks Equip. Leasing, Inc., 36 Wis. 2d 209, 219,
152 N.W.2d 849 (1967). In Martinson, the contract for the
construction of a pool was ambiguous because it incorporated
plans for a pool but did not explicitly incorporate plans for a
filter system. Id. at 218-19. However, the evidence showed
that the appellant knew that the filter system was part of the
11
No. 2011AP1451.dtp
plans for the pool. Id. Furthermore, because the plans for the
pool included the plans for the filter system and the contractor
used a single set of plans to construct both, the plans for the
filter system were part of the contract. Id. at 219-20. The
course of dealings in the present case demonstrates that Tufail
knew what the term "Church's Chicken" meant. He had visited
another Church's Chicken fast-food restaurant to see how Midwest
would alter the Property. This visit shows that the parties
knew and intended that Midwest would operate a fast-food
restaurant on the Property.
¶81 Tufail's interpretation of the Lease is also suspect
because it would render the inclusion of "Church's Chicken"
meaningless, and courts avoid interpreting contracts to make
portions superfluous. See DeWitt Ross & Stevens, S.C. v. Galaxy
Gaming & Racing Ltd. P'ship, 2004 WI 92, ¶44, 273 Wis. 2d 577,
682 N.W.2d 839. In DeWitt, a law firm provided services to
Galaxy under a contract that charged interest on untimely
payments, but Galaxy had no assets or income. Id., ¶7.
Galaxy's owner guaranteed full payment, but the guaranty was
silent as to whether the owner would pay interest. Id., ¶43.
It would have been meaningless to include the interest clause in
the contract with Galaxy, a company with no assets, unless the
owner's guaranty for full payment included a guaranty to pay the
interest. Id., ¶¶46-47. Similarly, it would make little sense
for the Lease to mention "Church's Chicken" four times if that
term could refer to any type of restaurant. Tufail seems to
suggest that since the Lease does not explicitly define
12
No. 2011AP1451.dtp
"Church's Chicken," no warranty would be violated if a Church's
Chicken could open and operate under any circumstance. However,
the "Church's Chicken" term is useful only if it refers to the
Church's Chicken fast-food restaurants that actually exist.
IV
¶82 After a trial, the circuit court ruled in favor of
Tufail. In so doing, the court appears to have overlooked or
discounted critical testimony, minimized the fast-food zoning
problem to focus on the drive-through, shifted the blame to
Midwest for failing to engage in due diligence, and disregarded
an explicit provision in the Lease.
¶83 From the outset, Midwest sought to lease Tufail's
property to open and operate a Church's Chicken fast-food
restaurant. Paragraph 33(g) of the Lease was designed to
minimize the hazard of an existing zoning barrier against the
operation of a traditional Church's Chicken restaurant and to
provide an escape clause from a five-year lease if an existing
barrier unexpectedly materialized. Midwest no doubt wanted a
drive-through which is often, if not always, a component of a
fast-food restaurant. If a drive-through were the sole or major
sticking point, the specific representations in the Lease might
present a different case.
¶84 The circuit court recast the facts and narrowed the
issue. The circuit court found that "there was no evidence
presented that Tufail knew about the many other Church's Chicken
restaurants, whether or not they had drive-through operations or
other Church's Chicken franchise requirements."
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No. 2011AP1451.dtp
¶85 In my view, the statement about Tufail's knowledge is
clearly erroneous, and the court's emphasis on the drive-through
problem fails to deal with Midwest's legal argument that there
were two zoning problems they had to face, contrary to Tufail's
warranty.
¶86 As to his knowledge, Tufail testified that the
restaurant he bought in 2000 was a drive-through and carry-out
fast-food restaurant:
Q All right. And when you bought [the
Property], was it an ongoing restaurant?
A It was a running restaurant. It was a
chicken place.
Q What was the name of it then?
A At that time it was a New York Chicken. But
basically it was a Church's Chicken place closed down.
And the [previous owner], he bought it from Church's
Chicken and put the name—— They didn't let him use
their Church's Chicken. They—— So he put a New York
Chicken [there].
(Emphasis added.)
¶87 Tufail acknowledged that "it was an old design
Church's Chicken which [he] was running." (Emphasis added.) He
said that he used Church's Chicken equipment in his New York
Chicken and suggested that Church's Chicken use the same
equipment for its new operation. Tufail visited another
Church's Chicken in Milwaukee, and he discussed the new interior
and exterior alterations that Midwest intended to make. He
expected that Midwest would make his property look like other
Church's Chicken restaurants. He testified that the purpose of
14
No. 2011AP1451.dtp
the Lease "as it was presented by Midwest [was] to open a new
Church's Chicken restaurant at the leased premises."
¶88 In March 2007, before the Lease was fully negotiated
and signed, Tufail was visited by Khan who oversees more than
100 Church's Chicken franchises in the Midwest. The circuit
court and the majority appear to believe that Khan and Tufail
never discussed what a Church's Chicken restaurant is all about,
so that Tufail really did not know. This view of the facts is
unrealistic if not incredible and is directly contrary to
Tufail's acknowledgment at trial that he understood Midwest
could not operate the Property without a special use permit.
¶89 In short, the court's finding that Tufail knew nothing
about other Church's Chicken restaurants cannot be squared with
the record.
¶90 The court made another questionable finding of fact.
The court found that, "[i]n early 2008, after the [New York
Chicken] restaurant had closed, Tufail was then approached by
representatives of Midwest Hospitality who sought to lease the
subject property." (Emphasis added.) Tufail's attorney, citing
the record, writes in his brief: "Midwest had approached Tufail
about opening a Church's Chicken restaurant at the location
prior to and immediately after Tufail temporarily ceased
operations of his chicken restaurant." (Emphasis added.) In
short, Tufail's attorney corrected the circuit court's findings
of fact.
15
No. 2011AP1451.dtp
¶91 The court of appeals——in its recitation of facts——
simply disregarded the circuit court's mistaken "findings" on
both matters discussed above.
¶92 As noted, the circuit court found that "there was no
evidence that Tufail knew . . . whether other Church's Chicken
restaurants had drive-through operations." It also found that
"the vast majority of Church's Chicken restaurants have drive-
through operations, but not all." (Emphasis added.) The latter
finding is correct, but it is seriously incomplete. The court
made no finding that there was any Church's Chicken restaurant
that was not a fast-food restaurant. The court also made no
finding that there was any freestanding Church's Chicken that
did not have a drive-through operation. More important for
purposes of this case is that the Property had been operated as
a freestanding fast-food restaurant and was intended by Midwest
to be operated as a freestanding Church's Chicken fast-food
restaurant. The point is that the Property's operation as a
fast-food restaurant was not allowed by the Milwaukee zoning
code without a special use permit. Tufail warranted otherwise.
¶93 Although the circuit court made sparse findings of
fact about Church's Chicken restaurants, it made lengthy
findings about Midwest's lack of due diligence. The court said:
Brian Parrish is a commercial real estate broker
who testified about industry custom and practice
relating to commercial leases. Parrish testified that
prior to entering into commercial leases parties
routinely perform due diligence and described that as
the period of time prior to the occupant taking
occupancy to uncover any issues that they may
encounter that would inhibit them from doing what they
intend to do at that property, and that includes
16
No. 2011AP1451.dtp
government approvals, construction costs, financing,
inspections. He further testified that any issues of
import to the tenant[,] those items could have been a
contingency, a due diligence item, in the lease.
Midwest Hospitality did not perform proper due
diligence. In fact, Mr. Habash specifically testified
that Midwest Hospitality didn't do any due diligence.
He stated it was because of trust and assurances by
Mr. Tufail. But the Court does not find the testimony
of Mr. Habash about reliance on Mr. Tufail credible.
Mr. Habash is a senior executive at Midwest
Hospitality who has been involved with the lease and
renovation of many prior Church's Chicken restaurants.
Mr. Habash is the president of the independent
franchise council of over 750 such restaurants. Mr.
Habash was at the subject property before entering
into the lease and saw its poor condition. It is not
credible to believe that Mr. Habash relied upon
statements of Mr. Tufail when making the decision of
whether or not to have Midwest Hospitality enter into
the subject lease. Rather, it is more credible that
Mr. Habash relied upon his own knowledge, experience,
and personal inspection.
(Emphasis added.)
¶94 The circuit court's oral decision suggests that the
court believed that Midwest should have thoroughly investigated
all applicable zoning requirements before signing the Lease——
that Paragraph 33(g) does not mean anything because Midwest
should have previously discovered the requirements for a special
use permit. These sentiments appear to substitute the court's
expectations for the parties' intentions.
¶95 The majority opinion does not acknowledge the circuit
court's reliance on "due diligence" as a justification for not
enforcing the warranties in the Lease. This raises a very
important issue of contract law.
¶96 This court has observed that, "in general, the laws in
existence at the time of the contract are incorporated into that
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No. 2011AP1451.dtp
contract." Dairyland Greyhound Park, Inc. v. Doyle, 2006 WI
107, ¶60, 295 Wis. 2d 1, 719 N.W.2d 408 (citing Von Hoffman v.
City of Quincy, 71 U.S. 535, 550 n.30 (1866)). The court of
appeals has said: "It must be assumed that parties to a contract
had knowledge of the law in effect at the time of the
agreement." Krause v. Mass. Bay Ins. Co., 161 Wis. 2d 711, 718,
468 N.W.2d 755 (Ct. App. 1991) (citing Menard v. Sass, 127
Wis. 2d 397, 399, 379 N.W.2d 344 (Ct. App. 1985)).
¶97 Although these principles may be sound in general,
parties seldom have equal knowledge of the law. One party
cannot sign a contract assuring the other party that it will
have no problems under existing law and then assert a due
diligence defense when that assurance proves false. This axiom
was eloquently stated in the English case of Redgrave v. Hurd:
There is another proposition of law of very great
importance which I think it is necessary for me to
state, because, with great deference to the very
learned Judge from whom this appeal comes, I think it
is not quite accurately stated in his judgment. If a
man is induced to enter into a contract by a false
representation it is not a sufficient answer to him to
say, "If you had used due diligence you would have
found out that the statement was untrue. You had the
means afforded you of discovering its falsity, and did
not choose to avail yourself of them." I take it to
be a settled doctrine of equity, not only as regards
specific performance but also as regards rescission,
that this is not an answer unless there is such delay
as constitutes a defence under the Statute of
Limitations.
Redgrave v. Hurd, [1881] 20 Ch.D. 1 at 13 (Eng.) (first emphasis
added). One hundred years later, this ancient doctrine was
embodied in our Restatement (Second) of Contracts, § 172 (1981):
"A recipient's fault in not knowing or discovering the facts
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before making the contract does not make his reliance
unjustified unless it amounts to a failure to act in good faith
and in accordance with reasonable standards of fair dealing."
¶98 If the Supreme Court of Wisconsin intends to reject
these principles, it ought to explain why. Rejection of these
principles will certainly have implications for the enforcement
of Wis. Stat. § 100.18, which was one of Midwest's counterclaims
in this case.
¶99 One other item undermines the ruling of the circuit
court. The court looked to Paragraph 5 of the Lease and said:
"If Paragraph Five were vague or ambiguous in any way, the Court
finds that the language contained therein was drafted by Midwest
Hospitality and it should be construed against the drafter."
This is directly contrary to Paragraph 36 of the Lease, which
provides in part: "Landlord and Tenant have negotiated the terms
of this Lease; therefore, this Lease shall not be interpreted or
construed against or in favor of any party." (Emphasis added.)
¶100 In sum, the majority opinion heavily relies on the
findings of fact and conclusions of law of the circuit court and
completely rejects the well-considered decision of the court of
appeals. This is a mistake of the first order.
V
¶101 The majority opinion also relies on the "integration
clause" in the contract as precluding any consideration of parol
evidence. This too is an error because the integration clause
applies only to prior agreements. An integration clause "does
not bar the use of extrinsic evidence to clarify the meaning of
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an ambiguous text." Roth v. City of Glendale, 2000 WI 100, ¶49,
237 Wis. 2d 173, 614 N.W.2d 467 (Sykes, J., concurring) (quoting
Bidlack v. Wheelabrator Corp., 993 F.2d 603, 608 (7th Cir.
1993)); see also Restatement (Second) of Contracts § 214
(extrinsic evidence is admissible to establish the meaning of a
writing even if integrated).
¶102 If there is an integration clause, courts "may not
consider evidence of any prior or contemporaneous oral or
written agreement between the parties." Town Bank, 330
Wis. 2d 340, ¶37 (footnote omitted). In Town Bank, there was a
commitment letter before the parties signed the contract, and
the integration clause in the contract precluded consideration
of the prior commitment letter. Id., ¶41. In the present case,
there was no prior oral or written agreement regarding the
Property or the definition of "Church's Chicken." If there were
any ambiguity in the term "Church's Chicken," the integration
clause would not prevent the use of extrinsic evidence to
interpret that term in the Lease.
¶103 Even if the Lease were viewed as not specifying the
operation of a Church's Chicken fast-food restaurant, the intent
of the parties compels that interpretation. Paragraph 5 of the
Lease allows for the use of the Property to sell items
traditionally sold by any Church's Chicken. Items traditionally
sold by Church's Chicken are fast-food items, and the only
reasonable interpretation is that an establishment selling fast-
food items is a fast-food establishment. Because the court's
goal in construing a contract is to give effect to the parties'
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intent, Town Bank, 330 Wis. 2d 340, ¶33, it is reasonable to
interpret the inclusion of "Church's Chicken" to mean that
Midwest could operate a Church's Chicken fast-food restaurant.
VI
¶104 The majority opinion leans upon the fact that Midwest
ultimately attained a special use permit to operate a fast-food
restaurant with a drive-through. This does not remedy Tufail's
false warranty. The Lease warranted that there were no
ordinances or restrictions preventing the uses specified in
Paragraph 5. While Midwest obtained a one-year special use
permit, that permit did not change the fact that operating a
freestanding restaurant at the Property was not a permitted use.
The city plan examiner denied Midwest's application to operate a
Church's Chicken on the Property because the zoning code
prevented such a use. Midwest could have terminated the Lease
at that point, but it acted in good faith and worked hard to
obtain a special use permit. Unfortunately, the excessive
restrictions in the permit prevented Midwest from operating a
Church's Chicken because the restrictions made it economically
impracticable to do so.
¶105 Tufail had a permit to operate his New York Chicken
from 10:00 a.m. to 4:00 a.m.——18 hours a day, seven days a week.
Midwest received a permit that allowed it to operate until only
9:00 p.m., which likely was seven hours per day and 49 hours per
week less than Tufail had operated. If the Church's Chicken
restaurant were designed to open at 11:00 a.m., the restaurant
would operate only ten hours per day. This completely scuttled
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Midwest's business model for a restaurant located at the
intersection of North Avenue and 17th Street in Milwaukee.
¶106 Moreover, the special use permit imposed another
economic burden that prevented the operation of a Church's
Chicken. The requirement that Midwest pick up garbage within a
one-block radius of the Property was prohibitive. As the
majority points out, a Midwest representative testified that the
special use permit imposed restrictions that would have made the
operation of a Church's Chicken "impossible." Majority op.,
¶14. An economic impossibility is just as preventative as a
physical or legal impossibility. The circuit court apparently
failed to consider these insurmountable economic burdens when it
stated that the special use permit "did not prevent, in any way,
Midwest Hospitality from opening a Church's Chicken restaurant
at the subject property with a drive-through and as a fast food
restaurant." The special use permit's restrictions and
uncertainty effectively prevented the operation of the Church's
Chicken that the parties intended.
VII
¶107 When Tufail signed the Lease, he misrepresented that
there were no ordinances that would prevent any use of the
Property contemplated in Paragraph 5 of the Lease. Although the
Lease did not define "Church's Chicken," the only meaning of
that term is a fast-food restaurant. Even if "Church's Chicken"
is ambiguous, the parol evidence demonstrates that both parties
understood that a Church's Chicken is a fast-food restaurant.
Since the Milwaukee zoning code states that a freestanding fast-
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food restaurant is not a permitted use, Tufail breached his
warranty.
¶108 For the foregoing reasons, I respectfully dissent.
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