Ash Park LLC v. Bishop

• Decision Date: 03 June 2010
• Docket Number: No. 2008AP1735.,2008AP1735.
• Citation: 783 N.W.2d 294,2010 WI 44,324 Wis.2d 703
• Parties: ASH PARK, LLC, a Wisconsin Limited Liability Company, Plaintiff-Respondent,v.ALEXANDER & BISHOP, LTD., a Wisconsin Corporation, Defendant-Appellant-Petitioner.
• Court: Wisconsin Supreme Court

324 Wis.2d 703

783 N.W.2d 294

2010 WI 44

ASH PARK, LLC, a Wisconsin Limited Liability Company, Plaintiff-Respondent,v.ALEXANDER & BISHOP, LTD., a Wisconsin Corporation, Defendant-Appellant-Petitioner.

No. 2008AP1735.

Supreme Court of Wisconsin.

Argued Feb. 23, 2010.

Decided June 3, 2010.

COPYRIGHT MATERIAL OMITTED

For the defendant-appellant-petitioner there were briefs by Valerie Bailey-Rihn, Jeffrey O. Davis, Freya K. Bowen, and Quarles & Brady LLP, Madison, and oral argument by Jeffrey O. Davis.

For the plaintiff-respondent there was a brief by R. George Burnett, Patrick M. Blaney, and Liebmann, Conway, Olejniczak & Jerry, S.C., Green Bay, and oral argument by R. George Burnett.

An amicus curiae brief was filed by Thomas D. Larson and the Wisconsin Realtors® Association, Madison, on behalf of the Wisconsin Realtors® Association.

¶ 1

ANN WALSH BRADLEY, J.

The petitioner, Alexander & Bishop, Ltd., seeks review of a published decision of the court of appeals affirming the orders of the circuit court.¹ After Alexander & Bishop breached a contract to purchase a parcel of real estate from Ash Park, LLC, the circuit court granted summary judgment in favor of Ash Park and ordered specific performance of the contract. It also imposed interest on the purchase price.

¶ 2 Alexander & Bishop asserts that the circuit court erroneously exercised its discretion under existing law by ordering specific performance without requiring Ash Park to demonstrate that a legal remedy would be inadequate and by failing to inquire whether performance of the contract would be possible. In the alternative, Alexander & Bishop asks us to change Wisconsin law in one of three ways. First, it contends that a seller of real estate should be required to demonstrate that a legal remedy would be inadequate as a prerequisite to an award of specific performance. Second, it argues that ordering a judicial sale of the property and a money judgment for the deficiency should be a mandatory procedure to effectuate an award of specific performance. Third, it asks us to require mitigation of damages when a seller asks for legal interest in addition to the equitable remedy of specific performance.

¶ 3 Finally, Alexander & Bishop asserts that the circuit court erroneously exercised its discretion by imposing interest on the purchase price.

¶ 4 We conclude that the circuit court did not erroneously exercise its discretion when it ordered specific performance of this contract. The contract provides that specific performance is an available remedy, and neither the contract nor Wisconsin law requires Ash Park to demonstrate that a legal remedy would be inadequate as a precondition to relief. Further, although impossibility is a defense to specific performance, Alexander & Bishop failed to present evidence that performance would be impossible in the proceedings before the circuit court.

¶ 5 Additionally, we decline to alter longstanding Wisconsin law by imposing a requirement that a seller of real estate demonstrate the inadequacy of legal damages as a prerequisite to an order for specific performance. Although a judicial sale and deficiency judgment may be a means of effectuating an award of specific performance, we conclude that this procedure is not mandatory. Rather, it depends on the facts and equities of the case. Because a duty to mitigate is contrary to an award of specific performance and would pose practical difficulties for the non-breaching seller we decline to require mitigation when a seller asks for interest in addition to specific performance.²

¶ 6 Finally, we conclude that the circuit court did not erroneously exercise its discretion by ordering interest on the purchase price. Accordingly, we affirm the court of appeals and remand to the circuit court for further proceedings.

I

¶ 7 In 2007, Ash Park was the owner of a vacant parcel of real estate that was subject to a mortgage. On April 6, Alexander & Bishop made an offer to purchase the parcel of real estate with the plan of developing it into a multi-tenant retail shopping center.

¶ 8 Ash Park submitted a counter-offer, which incorporated by reference most of the terms of Alexander & Bishop's offer to purchase. It set the purchase price at $6.3 million, with the closing date to take place on or before December 14, 2007. The counter-offer was accepted by Alexander & Bishop and is the contract that forms the basis of this lawsuit.

¶ 9 The parties' contract included a leasing contingency that gave Alexander & Bishop the option to terminate the contract if it was unable to secure an anchor tenant:

This Offer is contingent upon Buyer negotiating a lease with Buyer's principal tenant ... with terms and conditions acceptable to Buyer ... on or before July 20,

2007. If Buyer is unable to negotiate such lease by said date, this Offer may be terminated at the option of Buyer and all earnest money shall be returned to Buyer....

Upon timely notice, Alexander & Bishop also had the right to extend the lease contingency period:

[T]he Buyer shall have the right to extend the lease contingency period for two (2) additional periods of two (2) calendar months, i.e. to September 20, 2007 and November 20, 2007, provided Buyer (1) provides written notice to Seller of its intent to exercise such extension prior to the expiration of the lease contingency period and (2) pays to Seller, with its notice of exercise, a non-refundable extension fee ... of $25,000 for each extension period. The non-refundable extension fee shall be non-refundable but applicable to the purchase price at closing.

The contract specified that all contingencies would be waived if not invoked by July 20, 2007.

¶ 10 The contract also included a default clause, which enumerated remedies in the event of a breach. Among other remedies, the contract explicitly provided for specific performance as a remedy for “material failure to perform any obligations under this Offer”:

Seller and Buyer each have the legal duty to use good faith and due diligence in completing the terms and conditions of this Offer. A material failure to perform any obligation under this Offer is a default which may subject the defaulting party to liability for damages or other legal remedies.

If Buyer defaults, Seller may:

(1) sue for specific performance and request the earnest money as partial payment of the purchase price; or

(2) terminate the Offer and have the option to [pursue liquidated or actual damages.]

If Seller defaults, Buyer may:

(1) sue for specific performance; or

(2) terminate the Offer and request the return of the earnest money, sue for actual damages, or both.

In addition, the Parties may seek any other remedies available in law or equity.

The Parties understand that the availability of any judicial remedy will depend upon the circumstances of the situation and the discretion of the courts....

¶ 11 Alexander & Bishop had not secured an anchor tenant by July 20, 2007, and it exercised its option to terminate the contract. However, on August 1, the parties signed an “Agreement to Reinstate Vacant Land Offer to Purchase,” which stated that “the parties desire to reinstate the Offer on its original terms, except as specifically set forth herein[.]” It provided that upon the execution of the agreement by both parties “and the deposit by the Buyer [of] the Extension Fee with the Escrow Agent, the Offer shall be fully reinstated in accordance with its terms[.]”

¶ 12 The reinstatement agreement did not alter the extension dates, the closing date, or the terms of the lease contingency. Thus, until the next extension deadline, Alexander & Bishop retained two options: (1) extend the lease contingency for an additional period of two months, or (2) terminate the contract. Alexander & Bishop did not exercise either one of these options. As a result, the contract became binding on September 20.

¶ 13 On October 9, however, Alexander & Bishop informed Ash Park that its prospective anchor tenant was not interested in immediately leasing the property. The parties discussed amending their agreement, but their negotiations were unsuccessful.

¶ 14 Ash Park prepared for the December 14 closing, but the closing did not take place. Shortly thereafter, Ash Park filed a complaint for breach of contract, demanding “judgment from and against the Defendant for specific performance or damages at law, at the election of [Ash Park], in accordance with the terms of the parties' Purchase and Sale Contract.” ³

¶ 15 In response to Ash Park's motion for summary judgment, Alexander & Bishop asserted that there was no breach of contract because the contract had not been reinstated.⁴ It acknowledged that specific performance was an available remedy that “rests in the discretion of the court,” but it contended that specific performance “only comes into play when damages that could be had at law are an inadequate remedy.” Alexander & Bishop argued that Ash Park's damages “are solely economic and are measurable upon sale of the property after [Ash Park] mitigates its damages.”

¶ 16 Further, Alexander & Bishop contended that Ash Park had elected the remedy of liquidated damages consisting of $50,000 in earnest money and that such a remedy was adequate. It contended that “[i]t would be inconsistent [for Ash Park] to retain the earnest money and sue for specific performance.” Alexander & Bishop did not argue that specific performance was impossible because it could not pay the purchase price.

¶ 17 After arguments, the circuit court determined that the contract had been reinstated and that Alexander & Bishop had breached the contract.⁵ The court granted summary judgment in favor of Ash Park and ordered the parties to specifically perform the contract. It reasoned that the property was unique, that specific performance was the preferred remedy under Wisconsin law, and that under the terms of the contract the parties had bargained for this remedy:

This is a unique piece of property. I think specific

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