Walters v. National Properties, LLC

• Decision Date: 23 June 2005
• Docket Number: No. 2003AP862.,2003AP862.
• Citation: 2005 WI 87,699 N.W.2d 71,282 Wis.2d 176
• Parties: Raul J. WALTERS, d/b/a Lake Geneva Centre, Plaintiff-Respondent, v. NATIONAL PROPERTIES, LLC, Defendant-Appellant-Petitioner, HORIZON PROPERTIES, INC., and Horizon Convenience Stores, Inc., Defendants.
• Court: Wisconsin Supreme Court

282 Wis.2d 176

2005 WI 87

699 N.W.2d 71

Raul J. WALTERS, d/b/a Lake Geneva Centre, Plaintiff-Respondent, v. NATIONAL PROPERTIES, LLC, Defendant-Appellant-Petitioner, HORIZON PROPERTIES, INC., and Horizon Convenience Stores, Inc., Defendants.

No. 2003AP862.

Supreme Court of Wisconsin.

Oral argument December 14, 2004.

Decided June 23, 2005.

For the defendant-appellant-petitioner there was a brief by Thomas B. Burke, Milwaukee, and oral argument by Thomas B. Burke.

For the plaintiff-respondent there was a brief by Joseph M. Cardamone III and Gagliardi, O'Brien, Braden, Olson & Capelli, Salem, and Martin B. Carroll and Fox, Hefter, Swibel, Levin & Carroll, LLP, Chicago, IL, and oral argument by Martin B. Carroll.

¶ 1. DAVID T. PROSSER, J.

This is a review of a decision of the court of appeals, Walters v. National Properties, LLC, No. 2003AP862, unpublished slip op. (Wis. Ct. App. Jan. 21, 2004). In this small claims landlord-tenant dispute, we are asked to decide whether the landlord, Raul J. Walters (Walters), lawfully evicted his tenant, National Properties, LLC (National). National points to differences between the terms in its lease and the allegedly ambiguous and arguably more lenient terms in the default notice it received. National contends that because of these ambiguities and inconsistencies, it is entitled to rely on the default notice. We agree. However, even though we adopt National's ambiguity argument and permit it to rely on the default notice, National still did not timely cure its default. We therefore conclude that the eviction was lawful, and we affirm the court of appeals.

I. FACTS AND PROCEDURAL POSTURE

¶ 2. The facts are not in dispute. Walters, d/b/a Lake Geneva Shopping Centre, operates a shopping mall in Lake Geneva. On December 23, 1993, Walters entered a ten-year renewable lease agreement with Horizon Convenience Stores, Inc. (Horizon). The leased space consisted of a gasoline station and convenience store. On August 15, 1997, Horizon assigned its interest in the lease to National. The lease requires National to pay a fixed rent in equal monthly installments, due on the first day of each month. Additionally, National must pay a variable amount based on its monthly and yearly sales. National must also pay property taxes. To allow Walters to verify the amount of variable rent due, the lease requires National to report its total monthly sales as part of each month's rent payment; National also must annually report its yearly sales. Two other paragraphs — ¶ 18 and ¶ 22—in the lease are of particular importance to this case:

18. DEFAULT AND BANKRUPTCY. If LESSEE should default in the payment of any rental or monies due hereunder, when due, or be in default of any covenant, agreement or condition herein . . . then upon the occurrence of any one or more of such contingencies and after the LESSEE has been given notice by certified mail of such default, LESSEE has thirty (30) days after the date of such notice to correct such default or defaults. If no such corrections are made, this lease is canceled and all rights of the LESSEE are terminated.

. . . .

22. NOTICE. All notices to be given to either party by the other shall be by Certified or Registered Mail, return receipt requested, whether or not it is specifically designated as such in this lease agreement. . . . The time of any such notice shall begin to run with the date of the mailing of such notice. (Emphasis added.)

¶ 3. National did not submit the rent payment due September 1, 2002. Consequently, Walters mailed a default notice on September 13, 2002. He sent the notice by certified mail, pursuant to the lease. The date "September 13, 2002" was typewritten on the notice. National received the notice on September 16, 2002. The notice alleged that National was in default in four ways: (1) Past due rent in the amount of $3421.42; (2) Failure to provide copies of all monthly sales receipts on a monthly basis; (3) Failure to provide annual sales information; and (4) Failure to pay real estate taxes for 2001. The notice also stated:

[U]nless such defaults are resolved on or before the expiration of thirty (30) days after service of this Notice, Landlord will exercise its remedies under the Lease, including . . . the right to terminate your right to possession of the premises.

Only FULL PAYMENT of the rent demanded in this Notice will waive the Landlord's right to terminate possession under this Notice, unless Landlord agrees in writing to continue possession in exchange for receiving partial payment. (Emphasis added.)

¶ 4. On October 15, 2002, National mailed a check for the overdue rent to Walters. This payment covered only the non-variable portion of the rent. Walters received the payment on October 17, 2002.

¶ 5. Believing that National's response was untimely and incomplete, Walters attempted to evict National. On November 1, 2002, Walters filed suit in Walworth County Circuit Court seeking National's eviction for failure to timely cure the "fixed monthly rent" part of the default and failure to cure the other parts of the default, including the payment of the variable part of the rent and the submission of monthly and annual receipts. On March 14, 2003, the circuit court entered judgment for Walters, evicting National. Circuit Judge John R. Race held that the language in the lease controlled: "My decision is that the landlord by mailing had accomplished the notice requirements and he used the word service, a verb. And I believe that he complied with the lease by putting it in the mail." The court of appeals affirmed on the same grounds and we subsequently granted review.

II. ANALYSIS

¶ 6. When we apply undisputed facts to the terms of a commercial lease, and determine the parties' rights under that lease, we exercise de novo review. Westhaven Assoc., Ltd. v. C.C. of Madison, Inc., 2002 WI App 230, ¶ 16, 257 Wis. 2d 789, 652 N.W.2d 819; Bence v. Spinato, 196 Wis. 2d 398, 408, 538 N.W.2d 614 (Ct. App. 1995).

¶ 7. State statutes govern procedures for evicting a tenant who fails to pay rent or otherwise breaches the lease. Wisconsin Stat. § 704.17(3)(a) (2001-02)¹ describes the default notice that a landlord must provide to a tenant holding a lease of duration longer than one year. However, the statute allows a lease for more than one year to contain contrary termination provisions that will override subsection (3). Wis. Stat. § 704.17(5). The lease at issue covered more than one year and included specific provisions on termination. Therefore, in this case, we review the lease provisions, not the statute.

¶ 8. This case is unusual because the language in the default notice is not precisely the same as the language in the lease. As a result, we must resolve the threshold question of whether the "date of service" provision in the notice supersedes the "date of mailing" provision in the lease, in determining when the thirty-day cure period begins, if we deem the two provisions inconsistent.

¶ 9. This question is further complicated by paragraph 18 of the lease. Paragraph 18 states that the tenant shall have thirty days "after the date of such notice," while paragraph 22 provides that the thirty-day period begins to run with the "date of the mailing of such notice." Both of these dates may be different from the "date of service" referenced in the default notice, depending upon the definition of "service."

¶ 10. National admits that under the lease, Walters could have demanded payment within thirty days from the date of mailing of the default notice. Clearly, the lease directs that the date of mailing of the notice, September 13, is effectively the beginning of the thirty-day cure period. National's strategy is different. It does not attack the lease provisions in any way; it argues that we should ignore the lease provisions because Walters worded his notice differently. The default notice stated on its face that National had to make payment before "the expiration of thirty (30) days after service of this Notice." (Emphasis added.)

¶ 11. For his part, Walters claims that the language in the notice, "thirty (30) days after service of this Notice," simply mirrors the language in the lease, "thirty (30) days after the date of such notice." As we see it, "notice" could be interpreted to mean the same thing as "service," an interpretation favorable to the tenant. It is more difficult to interpret "mailing" to mean the same thing as "service," an interpretation desired by the landlord. With perfect hindsight, we observe that if the landlord wanted his notice to accurately mirror his lease, he should have used identical language in the two documents. That would have produced clarity and ensured the unquestioned primacy of the lease. Here, Walters did not copy the lease language in the notice; instead, he chose alternative wording.²

¶ 12. We conclude that Walters' choice of alternative wording rendered the notice ambiguous. A reasonable tenant evaluating his options might have perceived the following: (1) Paragraph 18 of the lease states that the lessee has thirty days after "the date of such notice;" (2) Paragraph 22 of the lease states that the lessee has thirty days from "the date of the mailing of such notice;" (3) the notice states that the lessee must resolve the defaults within "thirty days after service of this Notice;" (4) both the lease and the notice are silent on the definition of "service." There is no way for the lessee to determine what "service" means without reference to extraneous sources.³ ¶ 13. In situations like these, this court has traditionally adhered to the deeply rooted doctrine of contra proferentem, a universally accepted legal maxim that any ambiguities in a document are to be construed unfavorably to the drafter. Black's Law Dictionary 328 (7th ed. 1999).⁴ Since this court's earliest days, we have recognized its validity. See, e.g., Lawe v. Hyde, 39 Wis. 345, 359 (1876). Although the rule is most...