Lynn Props. v. JTH Tax Inc.

• Decision Date: 29 August 2022
• Docket Number: 21-cv-305-wmc
• Parties: LYNN PROPERTIES, LLC, Plaintiff, v. JTH TAX INC. and HARTFORD FIRE INSURANCE COMPANY. Defendants.
• Court: U.S. District Court — Western District of Wisconsin

LYNN PROPERTIES, LLC, Plaintiff,
v.
JTH TAX INC. and HARTFORD FIRE INSURANCE COMPANY. Defendants.

No. 21-cv-305-wmc

United States District Court, W.D. Wisconsin

August 29, 2022

OPINION AND ORDER

WILLIAM M. CONLEY, DISTRICT JUDGE.

In later January 2019, Wisconsin experienced extremely low temperatures, even for winter in the upper Midwest. As a result, a commercial building property in Portage, Wisconsin, owned by plaintiff Lynn Properties, LLC (“Lynn”) was severely damaged when its water pipes froze and burst. Lynn subsequently brought this lawsuit in state court, claiming that lessee, JTH Tax Inc. (“JTH”), and its insurer, Hartford Fire Insurance Company (“Hartford”) were liable for failing to properly heat the building. Defendant JTH then removed to federal court.^[1] JTH now moves for summary judgment on the merits (dkt. #38), while Hartford separately seeks summary judgment limiting its coverage responsibility. (Dkt. #47.) For the reasons given below, the court finds that no reasonable jury could find JTH liable for the claimed damages given its timely notice to Lynn that JTH had vacated the building. Because there is no liability for defendant JTH, the court need not take up defendant Hartford's motion to limit the scope of JTH's insurance coverage.

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UNDISPUTED FACTS

Defendant JTH began leasing and running a tax business 2547 New Pinery Road, Portage, WI (“the Property”) on August 17, 2015. At that time, Marian Walters was the landlord for the Property. JTH renewed its lease on April 19, 2018, extending the term until April 30, 2019. Among other things, JTH's lease specified that the landlord has full responsibility for the HVAC, unless damage was caused by direct misuse by the lessee.

In the summer of 2018, however, JTH decided to stop operations at the Property. On August 16, 2018, JTH then returned all keys for the Property to Marian Walters' daughter, Megan. Megan filled out a document titled “Verification of Keys Returned” which stated that “all parties acknowledge that the Tenant (or the Tenant's approved representative) have abided by the rules and regulations within the lease, and have peacefully surrendered keys to the Landlord (or the Landlord's approved representative).” (Def.'s Rep. to Pl.'s Opp'n. to Def.'s PFOF (dkt. #61) ¶¶ 13-14.) Plaintiff Lynn does not dispute that JTH returned all keys to Megan Walters in August, 2018, and no longer had access to the Property. However, Lynn emphasizes that after vacating, JTH continued to pay rent and utilities for the Property until its lease ended in April of 2019. Even so, there is no indication that JTH ever misused the HVAC system while it had access to the Property.

As fate would have it, Lynn purchased the Property from Marian Walters on September 6, 2018, at which time JTH's lease was assigned to Lynn. Still, as part of the purchase process, Walters had walked Lynn through the Property, and Lynn both “observed and understood that JTH had vacated the Property.” (Def.'s Rep. to Pl.'s Opp'n.

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to Def.'s PFOF (dkt. #61) ¶ 20.) Marian Walters also executed an affidavit on September 6, attesting that she was “in sole possession of the property and that no other party has possession or has the rights of possession under any lease or other agreement.” (Def.'s Rep. to Pl.'s Opp'n. to Def.'s PFOF (dkt. #61) ¶ 20 (emphasis added).) After purchasing the Property, however, Lynn chose not to get insurance for the building, perform an inspection of the furnace, or even visit the Property until February of 2019, about five months after the purchase and shortly after its pipes had already burst. (Def.'s PFOF (dkt. #40) ¶¶ 2223.)

On January 28, 2019, the Governor of Wisconsin declared a state of emergency in advance of dangerously low temperatures. Between January 31 and February 1, 2019, the actual low temperature in Portage hovered between negative 28 and negative 29 degrees Fahrenheit. Sometime during those two days, the building's pipes on the Property froze, burst and caused flooding, water damage, and mold. The building was so damaged by this flooding that it eventually had to be demolished.

OPINION

Summary judgment must be granted against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). On the other hand, if that party can establish any genuine issue of material fact, the court cannot grant summary judgment. Id. To be genuine, however, the evidence as to the issue must be “such that a reasonable jury could return a verdict for the

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non-moving party” if “all justifiable inferences are . . . drawn in [his] favor.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 255 (1986) (citation omitted).^[2]

In this lawsuit, plaintiff asserts two claims: breach of contract and negligence. To state a claim under Wisconsin law for a breach of the lease contract, plaintiff Lynn Properties must prove: “(1) the existence of a contract creating obligations flowing from defendant to plaintiff; (2) a breach of those obligations; and (3) damages from the breach.” Uebelacker v. Paula Allen Holdings, Inc., 464 F.Supp.2d 791, 801 (W.D. Wis. 2006) (citing Northwestern Motor Car, Inc. v. Pope, 51 Wis.2d 292, 296, 187 N.W.2d 200 (1971)). As to plaintiff's negligence claim, the specific elements of a cause of action in negligence under Wisconsin law are: (1) a duty of care or a voluntary assumption of a duty on the part of the defendant; (2) a breach of the duty; (3) a causal connection between the conduct and the injury; and (4) an actual loss or damage as a result of the injury. Green Spring Farm v. Kersten, 136 Wis.2d 304, 319 (1987). Under either theory, Lynn has been unable to produce sufficient evidence from which a reasonable jury could find that JTH breached anu obligation or duty.^[3]

“[A] tenant's liability for the breach is evaluated in part by determining whether the landlord has accepted the tenant's return in a manner that effects a legal surrender of the

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premises.” CCS N. Henry, LLC v. Tully, 2001 WI.App. 8, ¶ 10, 624 N.W.2d 847, 850. A voluntary surrender “entails the tenant's giving up of the lease before its expiration and the landlord's acceptance of the tenant's relinquishment of rights, either in fact or as implied at law.” Id. Lynn's main argument for breach at summary judgment is that while JTH may have voluntarily returned its keys to the building, it did not voluntarily surrender its lease of the property as evidenced by its continuing to pay rent and utilities through the end of the lease. These payments, then, created a continuing obligation to maintain the Property, including ensuring proper heating of the building. However, the fact that JTH acknowledged its financial obligations under the lease does not make the formal surrender of its rights to possess the property any less binding.

The Wisconsin Supreme Court has found that factual circumstances are essential to deciding whether a landlord had accepted the surrender of property. Chandler v. Hinds, 135 Wis. 43, 115 N.W. 339, 340 (1908). Accordingly, the court will also focus on the factual circumstances surrounding JTH's potential surrender. Here, the landlord acknowledges that she accepted JTH's return of all keys...