First Wisconsin Trust Co. v. L. Wiemann Co., 77-089

• Decision Date: 13 February 1980
• Docket Number: No. 77-089,77-089
• Citation: 286 N.W.2d 360,93 Wis.2d 258
• Parties: FIRST WISCONSIN TRUST COMPANY and Pearl Brown, co-executors of the Estate of H. H. Brown, and Martin Bernstein and E. Ace Bernstein, Plaintiffs-Respondents and Cross-Appellants, v. L. WIEMANN COMPANY, Defendant-Appellant and Cross-Respondent.
• Court: Wisconsin Supreme Court

Page 360

286 N.W.2d 360

93 Wis.2d 258

FIRST WISCONSIN TRUST COMPANY and Pearl Brown, co-executors

of the Estate of H. H. Brown, and Martin Bernstein and E. Ace Bernstein, Plaintiffs-Respondents and Cross-Appellants, v. L. WIEMANN COMPANY, Defendant-Appellant and Cross-Respondent.

No. 77-089.

Supreme Court of Wisconsin.

Submitted on Briefs Dec. 5, 1979.

Decided Jan. 8, 1980.

Reconsideration Denied Feb. 13, 1980.

First Wisconsin Trust Company and Pearl Brown, co-executors of the estate of H. H. Brown, and Martin Bernstein and E. Ace Bernstein, plaintiffs-respondents and owners of certain real estate, commenced an action against L. Wiemann Company, defendant-appellant and lessee of a portion of the real estate, to recover damages for an alleged breach of a lease. Judgment was entered awarding the plaintiffs damages in the amount of $104,108.09.

The defendant appeals from the judgment and the plaintiffs cross-appeal from that part of the judgment which denied prejudgment interest on a portion of the damages.

Morris Karon, Milwaukee, on brief, for defendant-appellant and cross-respondent.

Herbert L. Usow, S. C., Milwaukee, on brief, for plaintiffs-respondents and cross-appellants.

HANSEN, Justice.

The defendant entered into a 28 year lease for the ground floor of a building in Milwaukee in which to operate a retail variety store. The term of the lease was from June 1, 1953, to May 31, 1981. The rent was $1,000 per month, plus a percentage of the net sales in excess of $200,000 per year, and $166.66 per month to repay a $25,000 loan from the lessor for the financing of improvements. The defendant also agreed to pay one-half of the real estate taxes in excess of $4,000 per year.

Subsequent to the time the lease was entered into, the plaintiffs purchased the property from the former owners for $257,500 and expended $60,000 for improvements, making a total investment of $317,500.

On October 4, 1972, the plaintiff lessors commenced an action against the defendant lessee alleging that the defendant had failed to pay rent for the month of October, 1972, and demanding the sum of $1,166.67 as damages. The defendant answered and alleged as an affirmative defense that the plaintiffs breached the covenant of quiet enjoyment and the covenant to repair contained in the lease, and that the action of the plaintiffs constituted constructive eviction. The defendant also alleged that prior to September 28, 1972, the defendant vacated the leased premises, and on that date it mailed a notice of termination to the plaintiffs and delivered possession of the premises to the plaintiffs; therefore the defendant was not liable for the payment of rent.

On June 26, 1973, the plaintiffs commenced a second action against the defendant alleging three causes of action. In their first cause of action the plaintiffs sought damages in excess of $139,000 for the defendant's abandonment of the premises and failure to pay rent from September, 1972, through the end of the lease term, May, 1981, and for the defendant's failure to pay real estate taxes which it was obligated to pay under the terms of the lease. In their second cause of action the plaintiffs alleged that the defendant negligently caused damage to the premises in the amount of $1,200. The third cause of action alleged that the plaintiffs sold the property for $100,000; that they had invested $317,500 in the property; and that by breaching the lease the defendant had caused the plaintiffs damages in the amount of $217,500.

The trial court ordered the two cases consolidated for trial, and the issues were tried to the court.

At the conclusion of the trial, the trial judge made extensive findings of fact and pronounced the following conclusions of law:

"1. Plaintiffs' claim for $1,200 for damages to the leased premises, objected to by defendant, is allowed for the sum of $1,200 plus interest from the date of this Court's decision, February 28, 1977.

"2. Plaintiffs' claim for real estate taxes, objected to by defendant, is allowed for the sum of $3,019.68 plus interest at the rate of 5% Per annum from September 28, 1972, the date of the breach of the lease, to February 28, 1977, the date of this Court's decision, said interest being in the sum of $666.84, for a total sum of $3,686.52.

"3. Plaintiffs' loss of rental under the lease from October 1972 through February 1973, objected to by the defendant, at the rate of $800.00 per month in a total sum of $4,000.00, with interest from February 1st, 1973 to February 28th, 1977, the date of this Court's decision, at the rate of 5% Per annum, said interest being in the sum of $814.79, for a total of $4,814.79. ¹

"4. For breach of the lease, objected to by the defendant, in the sum of $91,586.00 with interest from February 28, 1977, the date of this Court's decision.

"5. That in total, including interest as above specified, the plaintiffs are entitled to Judgment in the sum of $101,287.31. In addition thereto, the plaintiffs are entitled to interest on said sum of $101.287.31 at the rate of 7% Per annum from the date of this Court's decision on February 28, 1977 to the date that Judgment is entered. Further, that the plaintiffs are entitled to Judgment for their statutory costs and disbursements."

Judgment was thereupon entered, awarding the plaintiffs damages in the sum of $101,287.31, together with interest in the sum of $2,599.70, plus costs and disbursements of the action in the sum of $219.08, all of which totaled $104,108.09.

We are of the opinion that the following facts are also relevant to the issues raised on this appeal.

The lease contained a covenant for quiet enjoyment of the leased premises which provided as follows:

"Quiet Enjoyment. The landlord covenants that the Tenant, on payment of the rent herein reserved and the performance of agreements, covenants and conditions on the part of the Tenant to be performed and observed herein contained, shall and may, peaceably and quietly, have, hold and enjoy the premises demised herein throughout the term hereof and of any renewal thereof, free from molestation, eviction or disturbance by the landlords or any person or persons claiming by, through or under the landlord, or by any other person or persons whomsoever."

It was for an alleged breach of this covenant by the plaintiffs that the defendant terminated the lease in September, 1972.

There was testimony that during the term of the lease the area near 27th and Center streets, where the leasehold property was located, declined as a business area when it became part of the "inner core." Many businesses closed, many businesses had trouble with shoplifting, vandalism and break-ins, and as a result of these incidents and because of attacks on clerks and office help, merchants were having trouble keeping employees. The defendant also experienced these problems.

The defendant sustained repeated water damage from water that came from the second floor tenants. However, there is no evidence as to how much damage was sustained.

In 1962, there was a fire in the leased premises which resulted in damage. In 1965, an automobile smashed into the building and caused a business interruption. The plaintiffs expended $120,000 to repair the building. On May 22, 1971, there was another substantial fire loss and break-in which caused another serious interruption in the defendant's business.

On September 28, 1972, the defendant sent a letter to the plaintiffs which informed them that the defendant was terminating the lease "for a number of good and sufficient reasons, among which are the following:

"1. Constant breaches of the quiet enjoyment provisions contained in Par. 17 of said Lease, committed by tenants of the upper floors of the said building, which have destroyed the Company's ability to make proper use of the store premises.

"2. Various other improper acts of upper floor tenants in said building which have been disturbing and destroying the Company's ability to continue to operate the leased premises for its retail store business.

"3. Failure of the Landlords to make necessary repairs of constant damage to the leased premises.

"4. The foregoing constitute a constructive eviction of the L. Wiemann Company from the leased premises."

The defendant had removed all its property from the premises and it sent the keys to the premises with the letter.

After the defendant vacated the premises, the plaintiffs inspected the property and found that the wall paneling was removed from the wall, three windows were broken, the electrical outlets in the floor were pulled up and exposed, and there was a hole approximately 3 by 5 feet cut through the floor. The plaintiffs expended $1,200 in repairing the damage.

After the defendant terminated the lease, the plaintiffs attempted to relet the premises. They advertised, placed signs in the windows and contacted people who they thought would be interested in renting the premises. The plaintiffs rented a portion of the premises to another company on a month-to-month tenancy at $200 per month commencing in October, 1972.

On February 28, 1973, the plaintiffs sold the property for $100,000, and conveyed title to the property and delivered possession thereof to the purchaser free and clear of all encumbrances, and free of the lease. The conveyances contained the following provision:

"Seller reserves the right to sue the Wiemann Company for breach of its lease at subject premises, and the proceeds resulting from such action or judgment rendered thereupon shall belong to seller."

A real estate appraiser testified that the lease had a present value of $91,586 assuming that the lease was in force and effect. He capitalized the future monthly rent of $1,166.66 with a factor of eight percent for eight years and eight months, from October 1, 1972, to May 31, 1981. On cross-examination he stated that when he made his evaluation he was unaware that the plaintiffs had sold the property and turned...