Tufail v. Midwest Hospitality, LLC

• Decision Date: 10 July 2013
• Docket Number: No. 2011AP1451.,2011AP1451.
• Citation: 2013 WI 62,348 Wis.2d 631,833 N.W.2d 586
• Parties: Amjad T. TUFAIL, Plaintiff–Respondent–Petitioner, v. MIDWEST HOSPITALITY, LLC, d/b/a Midwest Hospitality (WI), LLC, Defendant–Appellant, Aslam Khan, d/b/a Midwest Hospitality, Defendant.
• Court: Wisconsin Supreme Court

348 Wis.2d 631

833 N.W.2d 586

2013 WI 62

Amjad T. TUFAIL, Plaintiff–Respondent–Petitioner,

v. MIDWEST HOSPITALITY, LLC, d/b/a Midwest Hospitality (WI), LLC, Defendant–Appellant,Aslam Khan, d/b/a Midwest Hospitality, Defendant.

No. 2011AP1451.

Supreme Court of Wisconsin.

Argued April 11, 2013.

Decided July 10, 2013.

For the plaintiff-respondent-petitioner, there were briefs by Douglas W. Rose, Lora L. LoCoco, and Rose & deJong, S.C., Milwaukee, and oral argument by Douglas W. Rose.

For the defendant-appellant, there was a brief by Christopher T. Hale, Andrew G. Frank, and Hale and Wagner, S.C., Milwaukee, and oral argument by Christopher T. Hale.

ANN WALSH BRADLEY, J.

[348 Wis.2d 634]¶ 1 This is a review of an unpublished opinion of the court of appeals, which reversed the circuit court's judgment awarding damages in favor of Amjad Tufail (Tufail). The case before us involves a contract dispute between the landlord, Tufail, and the tenant, Midwest Hospitality, LLC (Midwest Hospitality) over the terms of a commercial lease of property.¹

¶ 2 Tufail, the petitioner, asserts that the court of appeals erred when it determined that Midwest Hospitality's early termination of the lease was justified by Tufail's misrepresentation. Although he acknowledges that the lease unambiguously provides a representation that Midwest Hospitality may not be prevented from using the property for certain specified purposes, Tufail argues that operation of a fast-food restaurant with a drive-through is not among the purposes listed in the lease. He further asserts that all of the uses identified in the lease are permitted uses of the premises under the City of Milwaukee zoning code.

¶ 3 Additionally, Tufail contends that the representation was not false given that the City of Milwaukee granted a special use permit allowing the operation of a Church's Chicken restaurant, including the operation of a Church's Chicken fast-food restaurant with a drive-through.

¶ 4 We conclude that the representation does not include any use of the property as a Church's Chicken fast-food restaurant with a drive-through. Additionally, there is no indication that any of the uses identified in the lease were prevented under the City of Milwaukee zoning code.

¶ 5 We further conclude that the representation was not false because the circuit court found that Midwest Hospitality was not prevented from using the property for the uses specified in the lease, and its finding is not clearly erroneous. Therefore, Tufail did not breach the lease. Accordingly, we reverse the court of appeals and remand, and the judgment of the circuit court is thereby affirmed.

I

¶ 6 The contract dispute in this case concerns the terms of a commercial lease for a property located on West North Avenue in Milwaukee, Wisconsin. Tufail had previously operated a restaurant called “New York Chicken” on the property before leasing the property to Midwest Hospitality.²

¶ 7 After purchasing the property in 2000, Tufail submitted a request to the City of Milwaukee Development Center for a permit to operate a fast-food restaurant. His application was denied, but Tufail appealed to the City of Milwaukee Board of Zoning Appeals. On November 9, 2000, the Board of Zoning Appeals granted Tufail's request for a permit to operate a fast-food restaurant for a ten-year period. Under the terms of the permit, the New York Chicken restaurant was allowed to remain open until 4:00 a.m.

¶ 8 Sometime before the New York Chicken restaurant ceased operations in 2007 and again after operations ceased, Midwest Hospitality approached Tufail and inquired about opening a Church's Chicken restaurant on the property. Prior to negotiating the lease, Midwest Hospitality visited the former New York Chicken restaurant and conducted a walk-through of the property. It then prepared a written lease and the parties negotiated its terms.

¶ 9 Tufail and Midwest Hospitality formally executed the lease in March 2008. It was to be in effect for a five-year period beginning on April 1, 2008 and ending on March 31, 2013. Midwest Hospitality agreed to pay rent in the amount of $35,000 for the first year, which was to be paid in equal installments on a monthly basis.

¶ 10 Paragraph 5 of the lease specified the intended purposes for which the property may be used:

[348 Wis.2d 637]5. Use of Premises. Tenant may use and occupy the Premises for any lawful purposes, including, but not limited to, the retail sales, consumption, and delivery of food and beverages which shall include, but not be limited to, Chicken products, Fish products, bread products, salads, sandwiches, dessert items, promotional items, and any other items sold by any Church's Chicken store.

Tufail also made representations in Paragraph 33 of the lease, which provide as follows, in relevant part:

Landlord represents and warrants to Tenant that:

....

(g) no existing restrictions, building and zoning ordinances, or other laws or requirements of any governmental authority prevent the use of the Premises for the purposes set forth in Paragraph 5....

Landlord hereby acknowledges that Tenant is relying upon all of the foregoing representations and warranties in executing this Lease and that matters so represented and warranted are material ones, and Landlord accordingly agrees that any misrepresentation or breach of such warranty will be reason for Tenant to terminate this Lease.

Furthermore, the lease contained an integration clause providing that the written lease set forth all understandings between Tufail and Midwest Hospitality:

This Lease, the exhibits, rider and addendum, if any, attached hereto and forming a part hereof set forth all the covenants, promises, agreements, conditions, terms, provisions and understandings by and between the Landlord and Tenant concerning the Premises. There are no other such matters, whether oral or written, between Landlord and Tenant other than are set forth herein. No change, modification, alteration, amendment, addition or deletion to this Lease shall be binding upon Landlord or Tenant unless it is in writing and executed by the person to be so charged with the same. Landlord and Tenant have negotiated the terms of this Lease; therefore, this Lease shall not be interpreted or construed against or in favor of any party.

¶ 11 After the lease was executed, Midwest Hospitality entered the property and began renovation. It completed some initial preparation work, but did not ultimately complete the renovations.

¶ 12 The renovation work ended in May 2008 when Midwest Hospitality was informed that it needed to obtain a special use permit in order to operate a fast-food restaurant with a drive-through at the property. A special use permit is a particular type of permit required by the City of Milwaukee in order to use a property for certain purposes under the zoning code. Although a sit-down restaurant ³ is classified as a “Permitted Use,” a fast-food restaurant ⁴ is classified as a “Limited Use” requiring a special use permit.

¶ 13 Upon being advised of the permit requirement, Midwest Hospitality applied for a special use permit to operate a Church's Chicken fast-food restaurant with a drive-through on the property. The application was met with opposition by community groups that opposed adding a Church's Chicken restaurant to the neighborhood.⁵

¶ 14 Despite the opposition, the City of Milwaukee Board of Zoning Appeals ultimately approved Midwest Hospitality's application for a special use permit in a written decision issued on September 22, 2008. The special use permit was issued subject to certain conditions, which are set forth in relevant part as follows:

10. That this use, both fast-food/carry-out and drive-through, closes by 9:00 p.m.

11. That this Special Use is granted for a period of one (1) year, commencing with the date hereof.

At trial, a Midwest Hospitality representative testified that the conditions in the special use permit changed the business's profitability forecast and rendered the operation of a Church's Chicken restaurant on the property not worth the investment:

Q. And now could you have run the Church's Chicken at 1635 West North with restrictions on the evening hours to 9:00 p.m. and a new review by [the Board of Zoning Appeals] every year?

A. No way. It would just be impossible. It wouldn't even be worth the investment.... [The 9:00 closing restriction] changed our forecast that we had in mind for the profitability of this business....

¶ 15 After the special use permit was approved, Midwest Hospitality notified Tufail that it would stop paying rent. It sent a letter to Tufail arguing that it was not responsible for the lease payments because a special use permit was required to operate a Church's Chicken fast-food restaurant with a drive-through. It therefore contended that Tufail made a false representation and that it was entitled to terminate the lease before the five-year term expired.

¶ 16 Tufail, in turn, commenced the present action. He alleged a breach of contract claim, an anticipatory breach of contract claim, and a claim for breach of the duty of good faith and fair dealing. Midwest Hospitality later pled counterclaims alleging a breach of contract, deceptive advertising contrary to Wis. Stat. § 100.18 (2009–10), and unjust enrichment.

¶ 17 The circuit court presided over a three-day bench trial, which took place in March 2011. At the conclusion of the trial, the circuit court made findings of fact relating to the claims advanced in the pleadings. It found that the “vast majority of Church's Chicken restaurants have drive-through operations, but not all.” Additionally, “Midwest Hospitality's application for a special use permit to use the subject property for a fast-food restaurant with a drive-through was approved by the City of Milwaukee,” and it was not “prevent[ed], in any way, [ ] from opening a Church's Chicken restaurant at the subject property with a drive-through and as a fast food...