PUBLISHED OPINION
Case No.: 94-1575
Complete Title
of Case:
JEROME A. BENCE, JR.,
Plaintiff-Appellant-
Cross Respondent,
v.
JAMES A. SPINATO and
AUTO SERVICES ASSOCIATES, INC.,
Defendants-Respondents-
Cross Appellants,
FALLS CAR WASH, INC.,
Defendant.
Submitted on Briefs: April 27, 1995
COURT COURT
OF APPEALS OF WISCONSIN
Opinion Released: August 16, 1995
Opinion Filed: August 16, 1995
Source of APPEAL Appeal
and cross-appeal from a judgment
Full Name JUDGE COURT: Circuit
Lower Court. COUNTY: Waukesha
(If "Special", JUDGE: PATRICK L. SNYDER
so indicate)
JUDGES: Anderson,
P.J., Nettesheim and Snyder, JJ.
Concurred:
Dissented:
Appellant
ATTORNEYSOn
behalf of the plaintiff-appellant-cross respondent, the cause was submitted on
the briefs of Gary R. Schmaus of Schmaus Law Office of
Germantown.
Respondent
ATTORNEYSOn
behalf of the defendants-respondents-cross appellants, the cause was submitted
on the brief of James R. Sommers of Hunter & Sommers of
Waukesha.
COURT OF APPEALS DECISION DATED AND RELEASED August 16, 1995 |
NOTICE |
A party may file with the
Supreme Court a petition to review an adverse decision by the Court of
Appeals. See § 808.10 and
Rule 809.62, Stats. |
This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official Reports. |
No. 94-1575
STATE
OF WISCONSIN IN COURT OF
APPEALS
JEROME A. BENCE, JR.,
Plaintiff-Appellant-
Cross Respondent,
v.
JAMES A. SPINATO and
AUTO SERVICES
ASSOCIATES, INC.,
Defendants-Respondents-
Cross Appellants,
FALLS CAR WASH, INC.,
Defendant.
APPEAL and CROSS-APPEAL
from a judgment of the circuit court for Waukesha County: PATRICK L. SNYDER, Judge. Affirmed.
Before Anderson, P.J.,
Nettesheim and Snyder, JJ.
SNYDER, J. Jerome
A. Bence appeals from a judgment dismissing his claim for damages he suffered
as a result of removing underground storage tanks (USTs) on property that he
leased to James A. Spinato. Bence
argues that Spinato is responsible for the costs associated with the removal
and clean up of the USTs because Spinato either owned the USTs or was liable
under the terms of the lease. We
conclude that Bence became the owner of the USTs by virtue of the original
owner's abandonment and that the lease did not contemplate liability for the
removal of the USTs.
Spinato cross-appeals
from that portion of the judgment dismissing his claim for specific performance
or damages as a result of Bence's failure to honor Spinato's option to purchase
clause in the lease. We conclude that
Spinato was in default of the lease at the time he attempted to exercise the
option and that Bence properly terminated the lease prior to Spinato's
request. Accordingly, we affirm the
trial court's judgment in its entirety.
FACTS
The issues in this case
arise out of a parcel of land in Menomonee Falls, Wisconsin, that Bence owned
and leased to various parties for the primary purpose of operating a car
wash. On January 15, 1969, Bence
entered into a lease agreement with Edick Laboratories, Inc., which sold
Penny-Wise Car Wash franchises. Under
this lease, Bence agreed to construct a Penny-Wise Car Wash on the premises
pursuant to certain agreed upon plans and specifications. Edick agreed to install all equipment
necessary for the operation of the car wash and all equipment relating to the
sale of petroleum products.
Spinato and his
corporation, Auto Services Associates, Inc., commenced operation of the car
wash upon its completion pursuant to various agreements with Edick. None of these agreements were produced at
trial. However, Spinato testified based
on his recollection that he entered into a sublease agreement for the real
estate, a franchise agreement and a purchase-lease agreement for the car wash
equipment. Pursuant to the equipment
lease, Spinato agreed to pay Edick $50,000 over five years, after which he
would own the equipment.
According to Spinato,
the USTs and pumping equipment necessary for the sale of gasoline were already
installed on the premises when he first took occupancy of the car wash. Spinato further testified that the
purchase-lease agreement with Edick for the car wash equipment did not include
the USTs or any equipment related to the sale of gasoline. Spinato speculated that Edick separately
contracted with Mobil Oil Company to provide the gasoline equipment and USTs
because Mobil was his supplier at the outset of his operation. However, it is unclear from the record
whether Edick owned the USTs or whether it contracted with Mobil to install the
USTs and then leased them from Mobil.
At some point in early
1971, Edick filed for bankruptcy.
Spinato testified that he did not purchase any of Edick's property from
the bankruptcy trustee. Rather, he
simply stopped paying the equipment lease and “assumed the equipment that was
there.” In March 1971, Mobil informed
Spinato that it would no longer supply gas, and removed its pumps and
equipment, but made no demands as to the USTs.
Similarly, there is no evidence in the record that the bankruptcy
trustee made any claim to the USTs as Edick's property. Accordingly, the USTs remained on the
property.
On March 26, 1971,
Spinato contracted with Union Oil Company of California (Union 76) to supply
gasoline and pumping equipment in order to continue both the gasoline and car
wash operation. On December 31, 1971,
he entered into a twenty-year lease with Bence for the car wash and
premises. The lease included an option
to purchase after the expiration of the twenty-year term. Spinato operated the car wash and sold
gasoline until some time in 1983. In
December 1983, he subleased the car wash to Falls Car Wash, Inc., which was
principally owned by Richard Bernhardt.
Bernhardt operated the car wash and sold gas until sometime in 1988 when
he determined that the sale of gasoline was no longer profitable.
On December 2, 1988, the
Village of Menomonee Falls Fire Department notified Bernhardt that the
abandoned USTs had to be removed
pursuant to Wisconsin law.[1] Bernhardt failed to remove the USTs. During 1989 and 1990, Bernhardt failed to
pay certain real estate taxes and municipal sewer and water bills pursuant to
the terms of the lease. Consequently,
on September 27, 1991, Bence sent a letter to Bernhardt informing him that he
was in default of the lease.
On November 13, 1991,
Bence filed a small claims action against Spinato and its sublessee, Falls Car
Wash, seeking eviction, a judgment for the delinquent taxes and sewer and water
charges, and a determination terminating the option to purchase under the lease
as a result of the default. However,
Spinato did not receive the summons and complaint until December 10, 1991. In the meantime, on November 30, Spinato
sent a letter informing Bence of his intent to exercise his option to purchase
the premises.
On December 16, 1991,
Spinato answered Bence's small claims complaint and filed a counterclaim,
seeking specific performance of the option to purchase clause in the
lease. Spinato subsequently amended his
pleadings, alleging in his counterclaim that he had suffered damages in excess
of $20,000 as the result of Bence's failure to honor the option to
purchase. Because Bence's claim alleged
damages in excess of the small claims court's jurisdiction, the case was
transferred to circuit court.
On June 16, 1993, Bence
filed an amended complaint in which he alleged that in addition to the
delinquent taxes and sewer and water charges, he had since suffered substantial
damages for the proper removal of the USTs and a sludge tank, and that such
clean up was Spinato's responsibility as owner of the tanks. Spinato answered and denied any ownership of
the USTs.
After a two-day bench
trial, the court in a written decision awarded Bence a judgment for the
delinquent taxes, water and sewer bills, plus interest and penalties. However, the court denied any damages for
the cost of the removal of the USTs based on its conclusion that Bence owned
them. The court also dismissed
Spinato's counterclaim for specific performance of the option to purchase or
damages in lieu of specific performance, concluding that Spinato was in default
of the lease at the time of his request to exercise the option. Bence appeals and Spinato cross-appeals
from the judgment. We will discuss
additional relevant facts pertaining to Spinato's cross-appeal when we address
that issue.
APPEAL
On appeal, Bence argues
that Spinato was the owner of the tanks and therefore the trial court erred in
failing to award him the costs he incurred for the removal of the USTs, the
environmental clean up, the restoration of the site and the clean up of the
sludge tank. Regarding the ownership of
the USTs, the trial court concluded as follows:
The USTs were placed upon the property by
a prior tenant, one [Edick] Laboratories, Inc.
At the time of that lease ... Spinato was an agent and/or employee of
[Edick]. The court finds that Spinato
has no responsibility to the proceedings in question because of his association
with [Edick]. ... Under the terms of their agreement, [Edick] was responsible
for the placement of the USTs. Under normal landlord/tenant procedure, the
USTs became the property of Bence as lessor upon the termination of his
business arrangement with [Edick].
...
The terms of the lease which allow the tenant, Spinato here, to remove
certain improvements cannot be extended to include the USTs. The ownership of the USTs was never
transferred by Bence.
The trial court's
conclusion regarding ownership of the USTs and responsibility for clean up
include both findings of fact and conclusions of law. We will not overturn the trial court's findings of fact unless
they are clearly erroneous. Section
805.17(2), Stats. However, the application of a set of facts
to the terms of a commercial lease and the determination of the parties' rights
under that lease present questions of law that we review independently of the
trial court's determination. See
Foursquare Properties Joint Venture I v. Johnny's Loaf & Stein, Ltd.,
116 Wis.2d 679, 681, 343 N.W.2d 126, 127 (Ct. App. 1983).
In order to determine
who owned the USTs at the time Bence removed them, it is necessary to first
consider who owned them originally.
Our review of the record reveals that the trial court did not make a
specific finding regarding original ownership of the USTs. The court merely found that the USTs were
“placed upon the property” by Edick. A
logical inference from this finding is that Edick owned the USTs. However, an equally logical inference, based
on the facts in the record, is that Edick contracted with Mobil to install the
USTs and pumping equipment, and then leased them from Mobil.
Although the court did
not make an explicit finding as to the original owner, the court significantly
found that Spinato did not own the USTs. Based upon our review of the record, we conclude that this
finding is not clearly erroneous.
Regarding the initial ownership, Bence argues that “[n]owhere in the record does it appear that
the title to, or ownership of, the [USTs] was handled separately by the
parties.” We disagree.
Despite the fact that
none of the agreements between Edick and Spinato were produced at trial,
Spinato's undisputed testimony was that his equipment lease with Edick did not
include any equipment related to the sale of gas or the USTs. The trial court is the ultimate arbiter of
credibility of witnesses, Bank of Sun Prairie v. Opstein, 86
Wis.2d 669, 676, 273 N.W.2d 279, 282 (1979), and in this case it deemed
Spinato's testimony to be credible.
We further conclude that
the trial court's lack of a finding as to the original owner of the tanks is
not fatal to the trial court's ultimate conclusion of law that Bence became the
owner of the USTs. Regardless of
whether Mobil or Edick originally owned the USTs, it is clear that the USTs
were abandoned shortly after Edick filed bankruptcy. If Mobil owned the USTs, it abandoned them after retrieving the
pumping equipment in March 1971. If
Edick owned the USTs, the bankruptcy trustee must have abandoned them within Edick's
bankruptcy early in 1971. There is no
evidence in the record that the bankruptcy trustee made any claim to the USTs.
We therefore must apply
the fact that the USTs were abandoned within the context of landlord/tenant
law. It is generally recognized, and
undisputed by both parties, that underground fuel tanks installed by a lessee
constitute “trade fixtures.” See,
e.g., Standard Oil Co. v. LaCrosse Super Auto Serv., Inc.,
217 Wis. 237, 244, 258 N.W. 791, 794 (1935); see also Sgro v.
Getty Petroleum Corp., 854 F. Supp. 1164, 1179 (D. N.J. 1994) (and
cases cited therein). Trade fixtures
ordinarily belong to the lessee and are removable by the tenant at the
expiration of the lease term. Appliance
Buyers Credit Corp. v. Crivello, 43 Wis.2d 241, 253, 168 N.W.2d 892,
898 (1969).
However, if a lessee
fails to remove the trade fixtures within a reasonable time after termination
of the agreement, it is presumed under common law that the tenant has abandoned
them and the fixtures become part of the realty owned by the lessor. See Sgro, 854 F. Supp.
at 1180; Modica v. Capece, 189 A.D.2d 860, 861 (N.Y. App. Div.
1993); Wolfen v. Clinical Data, Inc., 19 Cal. Rptr. 2d 684, 689
n.2 (Ct. App. 1993). Accordingly, we
conclude that the USTs became Bence's property after they were abandoned by
either Edick or Mobil. Therefore, the
trial court properly concluded that Bence owned the USTs.
Bence argues that upon
the termination of Edick's lease, Spinato stayed on the premises, negotiated a
new lease and used all of the trade fixtures originally installed as he
previously had under the Edick lease.
We interpret this argument as questioning whether the USTs were ever
actually abandoned. We conclude that
they were.
Our research reveals
that some courts hold that trade fixtures are not deemed abandoned where a
tenant conditionally sells trade fixtures to a subsequent tenant who plans to
carry on the same business and the landlord knows of the arrangement. See Central Chrysler Plymouth,
Inc. v. Holt, 266 N.W.2d 177, 180 (Minn. 1978). However, Bence cannot avail himself of such
an exception based on the facts of record.
First, Bence neglects to mention the fact that Spinato did not sign a
lease with Bence until December 31, 1971, some nine months after Edick's demise. Second, the only evidence in the record
regarding ownership after Edick's bankruptcy was Spinato's undisputed testimony
that he did not purchase any gasoline-related equipment. There is no evidence of an arrangement
between Edick and Spinato to continue the business or Bence's knowledge of such
an arrangement.
Bence also argues that
the following provision in the lease is evidence that Spinato owned the USTs:
The
Lessor hereby waives the right to claim as real estate any trade fixtures
affixed to the leased premises, and the same may be removed by the Lessee upon
the termination of this Lease, provided that the Lessee will repair any damages
occasioned by such removal.
We
disagree. This provision merely
reiterates the common law rule that trade fixtures are removable by the lessee.
Bence further questions
how Spinato was able to sell the car wash equipment to Bernhardt if Bence
acquired title to the trade fixtures by virtue of abandonment.[2] According to Bence, “[i]t would seem not
only reasonable and logical, but beyond question to conclude that upon Edick's
bankruptcy, [Bence] either became the owner of all of the fixtures on the
premises or none of them.” Bence's
“logic” fails to recognize that Spinato had a purchase-lease agreement with
Edick for the car wash equipment and no such agreement for the gasoline-related
equipment. It is true that Spinato
testified that he did not believe that he paid the entire amount agreed upon
for the car wash equipment prior to Edick's bankruptcy. However, the question of whether Spinato
properly asserted ownership over the car wash equipment after Edick's
bankruptcy is irrelevant to the question of ownership of the USTs, and
therefore we need not address it further.[3]
Last, Bence argues that
regardless of whether Spinato owned the USTs, the terms of the lease required
Spinato to pay for their removal.
Specifically, Bence argues that the following provision imposes such
liability:
Upon
the expiration or other termination of this Lease, the Lessee shall surrender
to the Lessor the leased premises and all buildings and improvements thereon,
in as good order and condition as they shall be at the beginning of the term of
this Lease, ordinary wear and tear and damage by the elements excepted.
Bence
contends that contamination related to the sale of gas does not constitute
normal wear and tear, and that Spinato violated this provision because he
received an uncontaminated site at the beginning of the lease and returned it
in a contaminated state subject to the Village of Menomonee Falls clean up
order.
The trial court referred
to this provision as merely a “general upkeep provision[]” and concluded that
the lease was silent as to any consideration of removal of the tanks because
“[t]he parties did not envision this problem.”
We agree with the trial court that this provision does not bind Spinato
to the clean up costs requested by Bence.
The USTs were required to be removed because they were no longer being
used, not because of their condition.
It is true that Bernhardt, not Bence, decided to stop selling gasoline,
thereby triggering the removal order.
However, as we concluded above, Bence owned the premises and the USTs,
and nothing prevented him from including a requirement in the lease that the
lessee continue to sell gasoline or pay for the tanks' removal in the alternative.
We acknowledge that this
is a harsh result against Bence, considering that he may not have realized that
he was the owner of the USTs. However,
we view both Bence and Spinato as relatively innocent parties under the facts
of this case. The damages suffered were
created by a third-party abandoning the USTs and by the later enactment of
state law requiring the removal of abandoned underground storage tanks and
clean up of surrounding premises.
Nevertheless, we cannot conclude that the provision relied on by Bence
or any other provision of the lease contemplated liability for the clean up
associated with removal of the USTs.[4]
CROSS-APPEAL
Spinato cross-appeals
from the portion of the judgment dismissing his counterclaim for damages based
on Bence's refusal to honor the option to purchase clause in the lease. We begin our discussion of this issue by
setting forth additional facts and portions of the lease relevant to the option
to purchase.
According to the lease
between Bence and Spinato, Spinato had the option to purchase the leased
premises after the twenty-year term. In
order to exercise this option, Spinato was required to give written notice of his
intent no later than thirty days prior to the expiration of the lease.[5] The lease also contained a termination
clause, requiring Bence to give Spinato thirty days to cure any default prior
to terminating the lease.[6]
On September 27, 1991,
Bence sent a notice of default to Spinato's sublessee, Falls Car Wash, based
upon its failure to pay delinquent real estate taxes and sewer and water bills
as required under the lease, stating in part:
As
you are aware, under the lease agreement these items are your
responsibility. It is a position of
your landlord, that you are in default under the terms and conditions of said
lease and this letter is your 30 day notice to cure these items. In the event that the same are not cured
within 30 days of the date of this letter, we will have no alternative but to
terminate the lease forthwith.
On November 13, 1991,
Bence filed a small claims eviction action against Spinato and Falls Car Wash
based on the alleged breach of the lease.
However, the small claims summons and complaint were not served on
Spinato until December 10, 1991. In the
meantime, on November 30, 1991, Spinato mailed notice to Bence of his intent to
exercise the option to purchase. On
December 6, 1991, Bence sent a letter to Spinato informing him that the option
to purchase was void because Spinato was in default based upon his sublessee's
failure to pay the delinquent taxes, past sewer and water bills, and failure to
remove the USTs pursuant to the order from the Village of Menomonee Falls.
The trial court denied
Spinato's counterclaim for damages as a result of Bence's failure to honor the
option to purchase. In doing so, the
court concluded, in part, as follows:
[N]otwithstanding
the default provisions ... of the lease, ... Bence's actions in the
commencement of a lawsuit alleging that Spinato had failed to pay delinquent
real estate taxes for 1989 and 1990, and further to pay sewer and water charges
due the Village of Menomonee Falls, which action was commenced on November
13th, 1991, served as the notice in question, and thereafter the failure of
Spinato to cure the default within 30 days for whatever reason terminated the
lease and any rights that Spinato may have had to purchase the same.
In his cross-appeal,
Spinato argues that the trial court erred in determining that Bence terminated
the lease before Spinato exercised his option.
Whether Bence properly terminated the lease requires us to interpret the
lease and apply landlord/tenant statutes to the undisputed facts. These are questions of law that we review
independently of the trial court's determination. See Foursquare Properties, 116 Wis.2d at
681, 343 N.W.2d at 127 (interpretation of a lease is a question of law which we
review de novo); State v. Wilke, 152 Wis.2d 243, 247, 448 N.W.2d
13, 14 (Ct. App. 1989) (application of a statute to a set of undisputed facts
is a question of law).
Spinato contends that
under the plain meaning of the termination clause, Bence could have terminated
the lease only if he informed Spinato in writing of any default and thirty days
had passed without the default being remedied.
Spinato argues that the first written notice he received was upon
receiving the small claims summons and complaint on December 10, 1991. Therefore, the earliest that Bence could
have terminated the lease was January 9, 1992, well after November 30, 1991—the
date Spinato gave notice of his intent to exercise the option to purchase.
We agree with Spinato
that the trial court erred in concluding that the date Bence filed the small
claims suit—November 13, 1991—served as the proper thirty-day notice to Spinato
such that the lease was terminated prior to Spinato's November 30 letter. However, this does not automatically warrant
a reversal. If a trial court reaches
the correct result based on erroneous reasoning, we will affirm. State v. Amrine, 157 Wis.2d
778, 783, 460 N.W.2d 826, 828 (Ct. App. 1990).
We may sustain a trial court holding on a theory or reasoning not
presented to the trial court. Id. We do so here.
We agree with Bence that
proper notice was given under the termination clause when Bence informed
Spinato's sublessee, Falls Car Wash, about the default on September 27,
1991. According to the express terms of
the lease, “the word[s] ‘Lessor’ and ‘Lessee’ shall be deemed to include the
heirs, executors, administrators, successors, sublessees and assigns of
the parties.” (Emphasis added.) Therefore, the notice given to sublessee
Falls Car Wash constituted proper notice to lessee Spinato.
Bence's notice letter
stated that if the default items were not cured within thirty days, the lease
would be terminated “forthwith.”
Further, § 704.17(3), Stats.,
1991‑92, provides that if a tenant under a lease for more than one year
breaches a condition of the lease, the tenancy is terminated provided
that the landlord gives the tenant thirty days after notice of the breach in
which to comply.[7] Accordingly, we conclude that the lease and
option to purchase were properly terminated thirty days after Bence's September
27 letter, prior to Spinato's attempt to exercise the option.
By the Court.—Judgment
affirmed.
[1]
Wisconsin Adm. Code § Ind
8.225(2) states in relevant part:
(2) Tanks considered abandoned. Tanks placed in a “temporarily out of service” condition for more than 90 days shall be considered abandoned and be subject to removal or abandonment in place ....
[2] Bence also points to the testimony of Bernhardt to support his argument that Spinato owned the USTs. Bernhardt testified that the USTs were on an equipment list that he furnished to his bank for purposes of obtaining financing when he purchased the car wash equipment from Spinato. However, there is no evidence in the record which would indicate that Spinato generated the equipment list referred to by Bernhardt or that Spinato made any representations to Bernhardt that he owned the USTs.
[3] Although we conclude that ownership of the car wash equipment is not at issue, we note that one possible explanation for Edick's or the bankruptcy trustee's failure to claim the car wash equipment was suggested by Spinato at trial. Spinato testified that he and other Penny-Wise Car Wash franchisees were pressuring Edick because the car wash equipment did not function properly.
[4] Bence also argues on appeal that Spinato should be held responsible for the clean up associated with a sludge tank which collected both solids and wastewater from the car wash operation. However, other than identifying this additional expense, Bence fails to provide any legal argument in his brief-in-chief regarding why he is entitled to such damages or why the sludge tank is different from the USTs. This court generally will not decide issues that are undeveloped or inadequately briefed. See State v. Pettit, 171 Wis.2d 627, 646-47, 492 N.W.2d 633, 642 (Ct. App. 1992).
[5]
The relevant portion of the option clause provides:
Upon the expiration of the original 20 year term of this Lease, [Spinato] shall have the right and option to purchase the leased premises for the sum of $125,000.00, which option may be exercised by mailing notice of [Spinato's] intention to exercise the option to Lessor not later than 30 days before the expiration of this Lease.
[6]
The lease contained the following termination clause:
10.1No default whatsoever or
breach of covenant hereunder shall be deemed to have occurred on the part of
Lessee hereto until 30 days after written notice of such default or breach
shall have been given to Lessee and said Lessee within such time shall have
failed to remedy the default or breach ....
10.2If Lessee shall not remedy such default within the periods above provided after notice has been given or are not then engaged in good faith in remedying the default, this Lease may be terminated at Lessor's option.