Pleasure Time, Inc. v. Kuss, 75-117

Citation78 Wis.2d 373,254 N.W.2d 463
Decision Date01 June 1977
Docket NumberNo. 75-117,75-117
PartiesPLEASURE TIME, INC., a Wisconsin Corporation, Respondent, v. Theodore P. KUSS and Florence Kuss, Appellants.
CourtUnited States State Supreme Court of Wisconsin

Edward J. Coe and Coe, Dalrymple & Heathman, S. S., Rice Lake, submitted brief for appellants.

Richard P. Tinkham and Tinkham, Smith, Bliss, Patterson & Richards, Wausau, submitted brief, for respondent.

ABRAHAMSON, Justice.

This appeal is taken by the vendors under a land contract from a judgment in favor of the purchaser. There are three issues: construction of the land contract as to prepayment and releases; vendors' right to strict foreclosure; and the damage award to the purchaser.

I.

On November 15, 1969, Theodore Kuss and his wife Florence Kuss, the vendors, executed a land contract for the sale of real property to Pleasure Time, Inc., the purchaser, and also executed a separate Agreement for the sale of real and personal property. The essential terms of the land contract and the Agreement provided for the sale of 300 acres of land in Barron county (including buildings thereon) and personal property for $200,000. The contract required a $30,000 down payment, with the remaining $170,000 to be paid off in annual installments of $16,046.80 per year, beginning on November 1, 1970. The payments were to be applied to interest on the unpaid balance first, which was charged at seven percent annually, and then to principal. Prepayments of principal without penalty were expressly allowed, and the Agreement provided that the purchaser could "obtain releases therefor. Any prepayment made shall be credited against the next payment or payments to principal due hereunder, as the case may be." 1 Additionally, the Agreement permitted the purchaser to pay a stated sum to the vendors and to receive in return a warranty deed for certain lands which were then released from the land contract. Each building had an assigned release price, the lakeshore lots had an assigned release price of $30 per foot of shoreline, and the non-shore lands' release price was $200 per acre. 2

Both before and after the execution of the land contract the purchaser was engaged in developing the property. The area was surveyed, roads were built, culverts installed and lots staked out. Four plats covering most of the property were recorded in August of 1970. In 1970, the vendors conveyed one entire plat, most of another (except the lakeshore areas), some lots and a building, to the purchaser for which the vendors received a $17,900 payment and a $1,300 payment.

The first annual installment payment was due on November 1, 1970; $11,090 would be interest and the balance of $4,856.80 would be principal. The purchaser applied the $19,200 ($17,900 k $1,300) to the principal part of the annual payments and made payments of interest in 1970 and in 1971. The 1970, 1971 and 1972 interest part of the annual installment payments were paid but were late. However, interest on the late interest was duly paid, and the 1973 interest portion of the annual installment was paid on time.

In January, 1973, the purchaser tendered and delivered to vendors a certified check in the sum of $9,850, together with a form of warranty deed to be executed by vendors for parcels to be released in exchange for such payment. The vendors retained the certified check but have failed and refused to execute and deliver the warranty deed.

The vendors argued then, as now, that the agreement requires annual installment payments of $16,046.80, regardless of any release payments made, and the purchaser is in default. The purchaser contends that its prepayment of principal and its tender should be applied to the principal part of each annual installment due, and accordingly it has complied with the Agreement and is entitled to releases. The trial court concluded, and we agree, that the purchaser's interpretation of its contractual obligation is the correct one.

The construction of a written contract is normally a matter of law for the court, although in a case of ambiguity in a written contract where words or terms are to be construed by extrinsic evidence, then the question is one for the trier of fact. RTE Corp. v. Maryland Casualty Co., 74 Wis.2d 614, 621, 247 N.W.2d 171 (1976). The contract is to be considered as a whole in order to give each of its provisions the meaning intended by the parties. Ketay v. Gorenstein, 261 Wis. 332, 53 N.W.2d 6 (1952); State ex rel. Department of Agriculture and Markets v. Badger Dairy, Inc., 245 Wis. 229, 232, 14 N.W.2d 34 (1944). If the construction is a question of law it may be redetermined independently by this court on appeal. Zweck v. D P Way Corp., 70 Wis.2d 426, 435, 436, 234 N.W.2d 921 (1975). If the construction is a question for the trier of fact, this court will not disturb such finding unless it is contrary to the great weight and clear preponderance of the evidence. Baldwin v. Anderson, 40 Wis.2d 33, 41, 161 N.W.2d 553 (1968).

At the demurrer stage of this case, the trial court held that the contract was unambiguous and that as a matter of law, the contract required the payments for release of specific parcels be credited against any payments due or to become due on principal. At a trial before the judge, extrinsic evidence was introduced bearing on the meaning of the Agreement. The testimony of the parties and prior unsigned drafts of the Agreement were put into evidence. A prior draft expressly provided that prepayments for releases would not be considered prepayments of the annual principal installment. 3 The trial court viewed the omission of this language in the final draft as a deliberate decision that prepayments for releases would apply to principal. The trial court, recognizing the difficulty of reconsidering its prior ruling, went on to reconsider the issue in view of the extrinsic evidence and opined that "it comes to the same decision, only feeling more sure of itself this time."

We hold that the trial court did not err, as an issue of fact or law, in determining that payments for releases were to be credited against the annual principal installment.

II.

The vendors counterclaimed for "foreclosure of the land contract and sale" 4 based on three alleged defaults by the purchaser: waste, failure to make payments timely and the bankruptcy of a guarantor. The vendors allege that the purchaser should be found in default because it committed waste on the property. They claim that some buildings were totally or partially demolished and that there was serious deterioration of several other buildings.

Waste may be defined as the unreasonable conduct by the owner of a possessory estate that results in physical damage to the real estate and substantial diminution in the value of the estates in which others have an interest. See Burby, Real Property, sec. 12, p. 33 (1965); 4 Thompson on Real Property, secs. 1853, 1855 (1961 Repl. vol.). Cf. Restatement of Property, secs. 138, et seq. Whether a particular act is waste depends on the circumstances.

The trial judge viewed the premises at the commencement of the trial. The judge found certain buildings had been destroyed, but they were on lands released to the purchaser or in the platted road and the vendors had joined in the platting documents, or of less than $500 value. Other buildings were not being repaired, but as the trial judge noted, the parties had contemplated that the land would be subdivided and that the property would no longer be operated as a farm or as a resort. The evidence was that buildings having potential future value in the development were kept in good repair, and those which needed repairs e. g., roofing were awaiting either demolition or remodeling at an economically feasible opportunity. The purchaser claimed it had spent about $100,000 in the development of the land which had enhanced the value of the land. The property was valued as about $700,000 at the time of trial by an independent appraiser, whose testimony indicated that this increase beyond the $200,000 purchase price resulted from the platting activities making lots available for sale. The court noted that the outstanding balance of the land contract was about $138,500, substantially less than the value of the security.

In this state the question of the existence of waste is for the trier of fact. Melms v. Pabst Brewing Co., 104 Wis. 7, 16, 79 N.W. 738 (1899). The trial court found no waste in the case at bar that would constitute default and, as this finding is supported by sufficient credible evidence described above, we leave it undisturbed.

The vendors further allege that the purchaser defaulted by making late principal and interest payments, by allowing the insurance coverage to lapse and by permitting the property tax payments to become delinquent. The trial court, however, found that these deficiencies were substantially corrected when the action was commenced, thereby removing the purchaser from default status on these grounds.

The vendors' third ground for foreclosure is that one of the guarantors of the Agreement was adjudged bankrupt in March, 1972. The language of the Agreement was ambiguous as to the effect of the bankruptcy of a guarantor, and the trial court determined that it was the intent of the parties that the bankruptcy of a guarantor constitutes a default under the contract. After the bankruptcy, the vendors demanded and accepted several interest payments from the purchaser without claiming a default. The purchaser also made payment of taxes and further improvements on the property. The trial court said "it does not seem equitable that (vendors) could wait almost two years after knowledge of the fact of the bankruptcy, accepting two very substantial payments under the contract during that time, and thereafter asserts (sic) that such matter is a ground for foreclosure."

This court has stated that a mortgage foreclosure is...

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