Key v. William Ryan Homes, Inc.
| Decision Date | 23 March 2016 |
| Docket Number | No. 2015AP490.,2015AP490. |
| Citation | 879 N.W.2d 809 (Table),369 Wis.2d 72 |
| Parties | Nancy KEY, Plaintiff–Appellant, v. WILLIAM RYAN HOMES, INC., Defendant–Respondent, Pine Investments LLC, Defendant. |
| Court | Wisconsin Court of Appeals |
This is a dispute over a real estate transaction gone bad. It all began well enough in 2005 when William Ryan Homes, Inc., agreed to purchase property from Nancy Key for later development. But as the due diligence progressed, William Ryan backed out of the deal in August 2008. In early 2014, Key brought suit seeking, among other remedies, specific performance on the agreement. The circuit court granted summary judgment to William Ryan, holding that the agreement provided Key with a limited and exclusive remedy: keeping the earnest money. Key argues that the contract gives her the right to determine whether a breach has occurred, and as a result, control over whether the limitation of remedies provision applies. Thus, she argues William Ryan did not materially breach the agreement-which would have triggered the limitation of remedies provision-and that specific performance is the proper remedy. We disagree and affirm the circuit court's grant of summary judgment. Additionally, William Ryan requests that we order Key to pay its reasonable attorneys' fees for this appeal. Because we conclude that William Ryan was not the “prevailing party in the lawsuit,” we decline to order fees.
¶ 2 Key owns real estate located in East Troy, Wisconsin. On February 3, 2005, Key executed an agreement with William Ryan to sell the East Troy property for $1.5 million.1 The agreement provided that William Ryan would make an initial earnest money deposit of $25,000, which would be increased to $50,000 upon the approval of the preliminary plat. The agreement also gave William Ryan a time period to assess the suitability of the property and obtain various government approvals prior to closing.
¶ 3 Section 11 of the agreement contains several provisions relating to performance of the contract and remedies for its breach. It provides:
This Contract may be terminated by either party by giving thirty (30) days written notice to the other party if such other party has materially breached any provisions of this Contract, provided, however, that if the party guilty of the breach cures such breach prior to the expiration of the thirty (30) day period, this Contract shall continue on in full force and effect. PURCHASER and SELLER agree to proceed in good faith and diligence in attempting to satisfy all contingencies. If the SELLER materially breaches this contract, PURCHASER may, at its option, elect to (a) seek specific performance; or (b) have the earnest money refunded. If PURCHASER materially breaches this contract, SELLER shall retain the entire Earnest Money Deposit, as liquidated damages as Seller's sole and exclusive remedy.... The prevailing party in any lawsuit between the parties shall be entitled to recover its reasonable attorneys' fees, costs and witness fees incurred in such lawsuit.
¶ 4 Pursuant to the agreement, William Ryan deposited $50,000 in earnest money in an escrow account. William Ryan purchased three ninety-day extension periods for $10,000 each and exercised its option to delay closing an additional eighteen months under the agreement.2 The extensions would have expired on September 17, 2008. However, on August 14, 2008, William Ryan informed Key that it would “not be going forward with the deal.”
¶ 5 On January 29, 2014—more than five years after William Ryan announced its intention to abandon the agreement—Key filed an action to enforce the agreement.3 Key requested specific performance, damages for breach of contract, and in the alternative that she be awarded the escrow money. Both Key and William Ryan stipulated that the $50,000 in earnest money should be disbursed to Key's attorney to be held in trust pending resolution of the litigation. Two months into the litigation, the parties agreed that the earnest money would be paid to Key.
¶ 6 Both Key and William Ryan later moved for summary judgment. The circuit court determined that the agreement limited Key's remedy to the earnest money deposit if William Ryan materially breached the agreement. The court found that William Ryan's statement that it would “not be going forward with the deal” was a material breach. Thus, the court concluded that Key's exclusive remedy was to retain the earnest money as liquidated damages. The circuit court also found that there was no prevailing party in the lawsuit because both William Ryan and Key had prevailed on significant issues during the litigation. Key succeeded in obtaining the earnest money, and William Ryan had prevailed on the issue of specific performance. Accordingly, because there was no prevailing party, the court declined to award either party their costs and fees. Key appeals the circuit court's denial of her request for specific performance. Neither William Ryan nor Key appeals the circuit court's ruling relating to attorneys' fees. William Ryan, however, does ask this court to award fees for prevailing in this appeal.
¶ 7 We review whether the circuit court erred in granting or denying summary judgement de novo. Olson v. Town of Cottage Grove, 2008 WI 51, ¶ 34, 309 Wis.2d 365, 749 N.W.2d 211. Summary judgment is proper where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Id. Interpretation of a contract presents a question of law we also review de novo. Levy v. Levy, 130 Wis.2d 523, 528–29, 388 N.W.2d 170 (1986).
¶ 8 This appeal centers on the interpretation of Section 11 of the agreement—specifically, whether the provision limits Key's remedy to the earnest money and precludes specific performance as an available remedy. We conclude that William Ryan materially breached the agreement, and Section 11 does limit Key's remedy to keeping the earnest money. We also decline William Ryan's request for attorneys' fees. Although Section 11 provides fees to “[t]he prevailing party in any lawsuit between the parties,” William Ryan has not prevailed in the lawsuit.
¶ 9 We interpret contracts to give effect to the parties' intent as expressed in the plain language of the contract. Seitzinger v. Community Health Network, 2004 WI 28, ¶ 22, 270 Wis.2d 1, 676 N.W.2d 426. “[C]ontract language should be construed to give meaning to every word, ‘avoiding constructions which render portions of a contract meaningless, inexplicable or mere surplusage.’ ” Maryland Arms Ltd. P'ship v. Connell, 2010 WI 64, ¶ 45, 326 Wis.2d 300, 786 N.W.2d 15 (citation omitted). If a contract provision specifies the remedies available, then we will generally enforce that provision's plain language to effectuate the parties' intent. Ash Park, LLC v. Alexander & Bishop, Ltd., 2010 WI 44, ¶ 37, 324 Wis.2d 703, 783 N.W.2d 294.
¶ 10 Section 11 provides that if William Ryan “materially breaches this contract, [Key] shall retain the entire Earnest Money Deposit, as liquidated damages as [Key]'s sole and exclusive remedy.” The language “sole and exclusive remedy” could not be more clear. Per Section 11, if William Ryan materially breached the agreement, Key's only remedy was to retain the $50,000 earnest money—not to seek specific performance. This language is so clear that the parties appear to agree that this is the proper interpretation.4
¶ 11 Despite the apparent clarity of this limitation of remedies provision, Key contends that it does not apply. She argues that a material breach cannot occur under Section 11 unless notice of breach and an opportunity to cure is provided to the breaching party. Accordingly, Key claims to hold the key, so to speak, to whether there is a material breach, allowing her to forestall the existence of a material breach by refusing to give notice to William Ryan. Thus, though Key brought suit for breach of contract and here seeks specific performance (a remedy for breach), she nevertheless maintains that William Ryan has not materially breached the agreement.
¶ 12 William Ryan responds that the language of the contract does not make notice a condition precedent to the existence of a material breach but only provides the conditions by which the nonbreaching party may terminate the agreement. William Ryan openly admits it materially breached the contract; it refused to complete the purchase. As such, William Ryan insists Section 11 limits Key's remedy to retention of the earnest money. We agree with William Ryan.
¶ 13 The language of Section 11 is not susceptible to Key's proposed construction. The relevant text provides:
This Contract may be terminated by either party by giving thirty (30) days written notice to the other party if such other party has materially breached any provisions of this Contract, provided, however, that if the party guilty of the breach cures such breach prior to the expiration of the thirty (30) day period, this Contract shall continue on in full force and effect.
The plain language states that notice and opportunity to cure are prerequisites to termination of the agreement, not the existence of a material breach. This provision gives rights to both parties. It protects the party that allegedly breached by giving that party notice and the opportunity to cure. It also provides a notice-based framework for the nonbreaching party to identify the alleged breach, demand that it be cured, and if it is not, enable termination of the agreement. In fact, the notice provision assumes that a material breach has already occurred. In order to terminate, Key had to give William Ryan “written notice ... if [it] has materially breached” the agreement. Thus, in order to trigger the notice requirement, William Ryan must already be in material breach. Nothing in the agreement allows Key to unilaterally prevent a material breach from occurring by simply withholding notice....
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