Case Title: Robert J. Baierl v. John McTaggart

Citation: 2001 WI 107

Docket Number: 1998AP003329

State: wisconsin

Court: Wisconsin Supreme Court

Date: 2001-07-11T00:00:00Z

Document:
2001 WI 107 
 
SUPREME COURT OF WISCONSIN 
 
 
Case No.: 
98-3329 
 
 
Complete Title 
of Case: 
 
Robert J. Baierl, d/b/a Supreme Builders,  
 
Plaintiff-Appellant, 
 
v. 
John McTaggart and Susan McTaggart,  
 
Defendants-Respondents-Petitioners.  
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
2000 WI App 193 
Reported at:  238 Wis. 2d 555, 618 N.W.2d 754 
(Published) 
 
 
Opinion Filed: 
July 11, 2001 
Submitted on Briefs: 
      
Oral Argument: 
May 29, 2001 
 
 
Source of APPEAL 
 
COURT: 
Circuit 
 
COUNTY: 
Milwaukee 
 
JUDGE: 
Charles F. Kahn, Jr. 
 
 
JUSTICES: 
 
Concurred: 
CROOKS, J., concurs (opinion filed). 
 
 
WILCOX, J., joins concurrence. 
 
 
SYKES, J., dissents (opinion filed). 
 
 
PROSSER, J., joins dissent. 
 
Dissented: 
      
 
Not Participating:       
 
 
ATTORNEYS: 
For the defendants-respondents-petitioners there 
were briefs by David R. Sparer, Jason H. Klimowicz and King 
Street Law Collective, Inc., Madison, and oral argument by David 
R. Sparer. 
 
 
For the plaintiff-appellant there was a brief by 
Thomas L. Frenn, Roy H. Nelson and Petrie & Stocking S.C., 
 
2 
Milwaukee, and oral argument by Thomas L. Frenn. 
 
 
An amicus curiae brief was filed by Teel D. Haas, 
assistant legal counsel, Wisconsin Department of Agriculture, 
Trade and Consumer Protection, and oral argument by Teel D. Haas. 
 
 
An amicus curiae brief was filed by Laurence J. 
Dupuis, Jeffrey R. Myer, Mark A. Silverman and Legal Action of 
Wisconsin, Inc., Milwaukee, on behalf of Legal Action of 
Wisconsin, Inc. 
 
 
 
 
2001 WI 107 
 
NOTICE 
This opinion is subject to further editing and 
modification.  The final version will appear 
in the bound volume of the official reports. 
 
 
No. 98-3329 
 
STATE OF WISCONSIN                    :  
  IN SUPREME COURT 
 
 
Robert J. Baierl, d/b/a Supreme Builders,  
 
 
          Plaintiff-Appellant, 
 
     v. 
 
John McTaggart and Susan McTaggart,  
 
          Defendants-Respondents- 
          Petitioners. 
 
 
REVIEW of a decision of the Court of Appeals.  Reversed. 
 
¶1 
ANN WALSH BRADLEY, J.   The defendant-tenants, John 
and Susan McTaggart (McTaggarts), seek review of a published 
decision of the court of appeals reversing the circuit court's 
grant of summary judgment in their favor.1  The McTaggarts assert 
that the landlord-plaintiff, Robert Baierl (Baierl), d/b/a 
Supreme Builders, may not enforce a residential lease that 
includes a provision which is specifically prohibited by Wis. 
Admin. Code § ATCP 134.08(3) (Apr. 1993).  The circuit court 
                     
1 Baierl v. McTaggart, 2000 WI App 193, 238 Wis. 2d 555, 618 
N.W.2d 754 (reversing judgment of Circuit Court for Milwaukee 
County, Judge Charles F. Kahn, Jr., presiding). 
FILED 
 
JUL 11, 2001 
 
Cornelia G. Clark 
Clerk of Supreme Court 
Madison, WI 
 
 
 
 
 
No. 
98-3329 
 
 
 
 
2 
agreed and invalidated the lease, concluding that the provision 
violated § ATCP 134.08(3).  
¶2 
We determine that because the lease includes a 
provision in violation of § ATCP 134.08(3), the landlord, 
Baierl, may not enforce the lease against the tenants.  Holding 
the lease unenforceable by the landlord not only advances the 
intent underlying § ATCP 134.08(3), but prevents the objectives 
of the regulation from being wholly undermined.  Accordingly, 
summary judgment was properly granted in the McTaggarts' favor 
and we reverse the decision of the court of appeals. 
I 
¶3 
The controlling facts are not in dispute.  In July 
1996, the McTaggarts entered into a residential lease with 
Baierl.  Under the lease, the McTaggarts agreed to rent an 
Oconomowoc apartment owned by Baierl for a period of one year.  
The lease was to run from August 1, 1996, to July 31, 1997.  
¶4 
The lease documents consisted of a standard form 
residential lease and several addenda.  Important to our 
discussion 
is 
Addendum 
A, 
which 
contained 
the 
following 
provision purportedly requiring the tenant to indemnify the 
landlord for all costs and attorneys fees incurred in enforcing 
the lease agreement: 
 
In the event that Supreme Builders shall be obliged to 
commence legal action in order to enforce the terms 
and conditions of any portion of this lease and 
amendment, the tenant shall be liable to Supreme 
Builders 
for 
all 
Supreme 
Builders' 
costs, 
disbursements and expenses incurred including, without 
limitation, reasonable attorney fees incurred.  
No. 
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3 
The provision in the lease is in direct violation of Wis. Admin. 
Code § ATCP 134.08(3), which prohibits as an unfair trade 
practice the inclusion of any clause requiring a tenant to pay a 
landlord's attorneys fees and costs: 
 
ATCP 134.08 Prohibited rental agreement provisions.  
No rental agreement may: 
 . . .  
  (3) Require payment, by the tenant, of attorney's 
fees or costs incurred by the landlord in any legal 
action or dispute arising under the rental agreement. 
This does not prevent the recovery of costs or 
attorney's fees by a landlord or tenant pursuant to a 
court order under ch. 799 or 814, Stats. 
Wis. Admin. Code § ATCP 134.08(3) (Apr. 1993).2  
¶5 
In November 1996, the McTaggarts informed Baierl that 
they would be vacating the apartment in January 1997, prior to 
the expiration of the lease term.  The following January, the 
McTaggarts 
vacated 
the 
apartment 
and 
moved 
to 
Ohio 
for 
employment reasons.  At that time, the McTaggarts instructed 
Baierl to deduct the January 1997 rent from the security deposit 
they had paid upon leasing the apartment.   
¶6 
Subsequent to the McTaggarts' premature departure from 
the apartment, Baierl deducted costs for damages and the January 
rent from the McTaggarts' security deposit.  Unable to re-rent 
the apartment, Baierl then withheld the remainder of the deposit 
and sought to enforce the lease.  After unsuccessfully demanding 
                     
2 All subsequent references to Wis. Admin. Code § ATCP 
134.08(3) are to the April 1993 version in effect at the time 
the lease was entered.  
No. 
98-3329 
 
 
 
 
4 
payment, Baierl brought this action in Milwaukee County Circuit 
Court to collect damages under the lease.  
¶7 
In response, the McTaggarts asserted that the lease 
was void and unenforceable on the grounds that the inclusion of 
the provision requiring the tenants to pay attorneys fees and 
costs 
violated 
§ ATCP 
134.08(3). 
 
The 
McTaggarts 
also 
counterclaimed that Baierl wrongfully retained their security 
deposit under § ATCP 134.063 to satisfy rent for which they had 
no liability under the void lease.  Accordingly, they sought 
double damages and costs and attorneys fees under Wis. Stat. 
§ 100.20(5) (1995-96).4   
¶8 
Upon the McTaggarts' motion, the circuit court granted 
summary judgment in their favor.  The circuit court concluded 
that because the inclusion of that provision was prohibited by 
§ ATCP 134.08(3), the entire lease was void.  As a consequence 
of the invalidation of the lease, the court awarded damages to 
the McTaggarts in the amount of the security deposit remaining 
after deduction of the January 1997 rent and other uncontested 
                     
3 Wisconsin Admin. Code § ATCP 134.06(3)(a) states, in 
pertinent part: 
(3) SECURITY DEPOSIT WITHHOLDING; RESTRICTIONS. (a) A 
landlord may withhold from a tenant's security deposit 
only for the following: 
 . . .  
  2. Unpaid rent for which the tenant is legally 
responsible, subject to s. 704.29, Stats. 
 
Wis. Admin. Code § ATCP 134.06(3)(a)2 (June 1999). 
 
4 All subsequent references to the Wisconsin Statutes are to 
the 1995-96 volumes unless otherwise noted.  
No. 
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5 
deductions.  Pursuant to Wis. Stat. § 100.20(5), the court 
doubled these damages and awarded the McTaggarts reasonable 
attorneys fees.   
¶9 
After unsuccessfully seeking reconsideration of the 
circuit court's grant of summary judgment, Baierl appealed.  In 
a divided decision, the court of appeals reversed.  Baierl v. 
McTaggart, 2000 WI App 193, 238 Wis. 2d 555, 618 N.W.2d 754.  
The 
majority 
explained 
that 
under 
common 
law 
contract 
principles, as expressed in Simenstad v. Hagen, 22 Wis. 2d 653, 
126 N.W.2d 529 (1964), a contract containing an illegal 
provision may nonetheless be enforced if severance of the 
illegal provision would not defeat the primary purpose of the 
contract.  2000 WI App 193, ¶¶7-8.  The court concluded that the 
purpose of the lease could be satisfied absent the illegal 
clause. Id. at ¶10.  It then examined the equities of this case 
and determined that given the McTaggarts' breach, the equities 
favored Baierl.  Id. at ¶11 & ¶13.   
¶10 The dissent argued that the illegal lease provision 
could not merely be severed and the remainder of the contract 
enforced.  Id. at ¶23-31 (Schudson, J., dissenting).  To do so, 
the dissent maintained, undermines the protection provided to 
consumers by Wis. Admin. Code ATCP ch. 134 and removes the 
deterrent effect of § ATCP 134.08(3).  Id.  
II 
¶11 We review a grant of summary judgment applying the 
same methodology as employed by the circuit court.  Grams v. 
Boss, 97 Wis. 2d 332, 337-39, 294 N.W.2d 473 (1980).  Summary 
No. 
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6 
judgment is appropriate if the record reveals no genuine issue 
of material fact and the moving party is entitled to judgment as 
a matter of law.  Wis. Stat. § 802.08(2). 
¶12 As a general matter, Wisconsin courts seek to enforce 
contracts deliberately made by the parties rather than set them 
aside.  Burstein v. Phillips, 154 Wis. 591, 594, 143 N.W. 679 
(1913).  However, the preference for enforcing bargains may give 
way where a contract "violates a statute, rule of law, or public 
policy."  Continental Cas. Co. v. Wisconsin Patients Comp. Fund, 
164 Wis. 2d 110, 117, 473 N.W.2d 584 (Ct. App. 1991). 
¶13 In the present case it is undisputed that the 
inclusion of this lease provision, requiring the tenant to 
indemnify the landlord for costs and attorneys fees incurred in 
enforcing the lease, is a violation of Wisconsin law.  The 
Department 
of 
Agriculture, 
Trade 
and 
Consumer 
Protection 
(Department) has exercised its rule-making authority under Wis. 
Stat. § 100.20(2)(a) and 
specifically 
determined 
that the 
inclusion of such a clause in a residential lease is an unfair 
trade practice.  The conduct of inserting the clause into a 
lease constitutes the violation and is punishable by law.  Under 
§ 100.26(3), a person who "neglects or fails to obey any 
regulation or order" promulgated under § 100.20 is subject to a 
fine and potential imprisonment.  Wis. Stat. § 100.26(3).   
¶14 The sole disputed question before us is whether Baierl 
may enforce the lease in light of the illegal inclusion of this 
No. 
98-3329 
 
 
 
 
7 
lease provision.5  This presents us with a question of law.  We 
review such questions independently of the legal conclusions 
reached by the circuit court and the court of appeals.  
Deutsches Land, Inc. v. City of Glendale, 225 Wis. 2d 70, 79-80, 
591 N.W.2d 583 (1999). 
¶15 In addressing whether Baierl may enforce the lease, 
the parties have staked out two divergent positions grounded in 
Wisconsin case law.  On the one hand, Baierl, like the court of 
appeals majority, relies on the rule of severability articulated 
in Simenstad v. Hagen, 22 Wis. 2d 653.  In Simenstad the court 
determined that a contract may survive if an illegal clause can 
be severed from the remainder of the contract without defeating 
the primary purpose of the bargain.  Id. at 662.  Baierl argues 
that here the lease may be enforced, notwithstanding the illegal 
provision, because that provision is a nonessential clause that 
is properly severable from the remainder of the lease. 
¶16 On the other hand, the McTaggarts advance that a 
violation of an administrative regulation promulgated under 
§ 100.20 results in the unenforceability of a contract.  They 
rely on two cases where that result was obtained.  In Perma-
Stone Corp. v. Merkel, 255 Wis. 565, 39 N.W.2d 730 (1949), this 
court declared a home repair contract void where a roofing and 
                     
5 At oral argument, Baierl clarified that he did not dispute 
the circuit court's calculation of damages, but rather only the 
legal premise on which they were awarded.  Accordingly, because 
we ultimately agree with the circuit court that Baierl may not 
enforce the lease provisions, we need not revisit the circuit 
court's calculation of damages.   
No. 
98-3329 
 
 
 
 
8 
siding contractor had required a customer to sign a judgment 
note as part of the contract, in violation of an administrative 
regulation directed at that industry.  Similarly, in Huff & 
Morse, Inc. v. Riordon, 118 Wis. 2d 1, 345 N.W.2d 504 (Ct. App. 
1984), the court of appeals concluded that an automobile repair 
shop's violation of a regulation requiring a written estimate 
prior to repair rendered a contract invalid and prevented the 
shop from collecting under the contract.  
¶17 Having examined both parties' arguments, we conclude 
that neither party's position is tenable as an absolute 
proposition.  Both positions fail to give due consideration to 
the principle that is ultimately controlling: the intent 
underlying the statute or regulation that was violated.  
¶18 The rule of severability announced in Simenstad is not 
unconditional.  Where the illegality of a contractual provision 
arises from the violation of a statute, the rule of severability 
is qualified by the controlling statute.  See Simenstad, 22 
Wis. 2d at 661 ("unless this result is prohibited by statute"). 
 Thus, even if a lease provision is collateral to the underlying 
bargain of the lease, the severability analysis requires an 
examination of the controlling statute or, as in this case, the 
administrative regulation.   
¶19 The McTaggarts' position also sweeps too broadly.  A 
violation of a regulation promulgated under § 100.20 does not 
result in per se unenforceability of a contract.  We have 
explained that it is "grave error" to assert that all contracts 
in violation of a statute are unenforceable.  Chapman v. 
No. 
98-3329 
 
 
 
 
9 
Zakzaska, 273 Wis. 64, 66, 76 N.W.2d 537 (1956).  The 
controlling analysis in determining whether a statutory or 
regulatory violation renders a contract unenforceable is the 
intent underlying the provision that was violated.  Vic Hansen & 
Sons, Inc. v. Crowley, 57 Wis. 2d 106, 117, 203 N.W.2d 728 
(1973); Posnanski v. Hood, 46 Wis. 2d 172, 181, 174 N.W.2d 528 
(1970) (applying legislative 
intent 
analysis 
to 
determine 
whether violation renders lease unenforceable); cf. Huff & 
Morse, Inc., 118 Wis. 2d at 10 (examining "major purpose" behind 
administrative regulation). 
¶20 Moreover, the McTaggarts' arguments have focused on 
the question of whether the lease is "void."  We do not view the 
question as whether the lease is void, i.e., a legal nullity, 
because in such case no party could enforce the lease.  Where a 
statute is intended to protect one party to a contract, that 
party may seek enforcement notwithstanding the violation of the 
statute enacted for their protection.  See Restatement (Second) 
of Contracts § 179 cmt. c (1981).  Thus, the question in this 
case is not whether the lease is void.  If it were, not even the 
tenants could enforce the lease.  The question is one of the 
enforceability of the lease by Baierl in light of the intent 
underlying the regulation at issue.   
¶21 Because it is ultimately the intent underlying the 
regulation that dictates whether the clause is severable and or 
whether the inclusion of the clause renders the entire contract 
unenforceable, we must examine § ATCP 134.08(3).  Administrative 
rules and regulations are construed in the same manner as 
No. 
98-3329 
 
 
 
 
10
statutes.  Moonlight v. Boyce, 125 Wis. 2d 298, 303, 372 N.W.2d 
479 (Ct. App. 1985).  It is fundamental that we must favor a 
construction of a statute or regulation which will fulfill the 
intent of the statute or regulation over one which defeats its 
manifest object.  Shands v. Castrovinci, 115 Wis. 2d 352, 356, 
340 N.W.2d 506 (1983).  Where one of several interpretations of 
a statute or regulation is possible, the court must ascertain 
the underlying intent from the language in relation to the 
subject matter, history, and object intended to be accomplished. 
 Id. 
¶22 We look first to the language of § ATCP 134.08 to 
determine whether the regulatory violation renders the entire 
lease unenforceable or whether the illegal clause is properly 
severable.  An examination of the language provides important 
insight into the nature of the regulatory prohibition.  The 
regulation is entitled "Prohibited rental agreement provisions" 
and states that "no rental agreement may require" the tenant to 
be obligated for the landlord's costs and attorneys fees 
incurred in enforcing the lease.  Wis. Admin. Code § ATCP 
134.08(3).  The language of § ATCP 134.08(3) indicates that the 
prohibited act is the inclusion of a clause claiming to obligate 
the tenant to reimburse the landlord's costs and attorneys fees.  
¶23 The language of the enabling statute, Wis. Stat. 
§ 100.20, 
also 
provides 
insight 
into 
the 
nature 
of 
the 
prohibition in § ATCP 134.08(3).  Section 100.20 generally 
prohibits "[u]nfair methods of competition and unfair trade 
practices in business."  Wis. Stat. § 100.20(1).  The Department 
No. 
98-3329 
 
 
 
 
11
is given the mandate of promulgating rules, such as § ATCP 
134.08, to proscribe specific unfair trade practices.  Wis. 
Stat. § 100.20(2).  Thus, not only is the inclusion of the 
provision at issue a prohibited act under § ATCP 134.08(3), but 
it is also properly denominated an unfair trade practice. 
¶24 While we are able to glean much from the language of 
the regulation and statute, ultimately § ATCP 134.08 is silent 
as to the effect of a violation on a residential lease.  This 
silence renders the regulation ambiguous as to its effect, if 
any, on a lease that violates its provisions.  See Forest County 
v. Goode, 219 Wis. 2d 654, 664, 579 N.W.2d 715 (1998).  
Accordingly, we turn to the subject matter, history, and object 
of the regulation to further ascertain the Department's intent. 
¶25 The subject matter of § ATCP 134.08, and ATCP chapter 
134 in general, reflects the Department's foray into the realm 
of residential landlord-tenant relations, an area fraught with 
consumer protection concerns.  Courts have long acknowledged an 
inherent inequality of bargaining power between landlords and 
tenants.  See, e.g., Javins v. First Nat'l Realty, 428 F.2d 
1071, 1080 (D.C. Cir. 1970).  As one court has explained: 
 
Clearly, landlords have greater bargaining power than 
tenants in residential leases.  A tenant must live 
somewhere.  The tenant has no meaningful choices.  He 
can accept this landlord or go to another landlord who 
charges the same rent and asks the tenant to sign the 
same standard form lease.  
Taylor v. Leedy & Co., 412 So. 2d 763, 766 (Ala. 1982).  Thus, 
when examining the history and object of § ATCP 134.08(3), we 
bear in mind that the Department regulates against this 
No. 
98-3329 
 
 
 
 
12
backdrop.  Its regulations are an attempt to alleviate the 
residential tenant's limited bargaining power.  With § ATCP 
134.08, the Department has sought to do this by prohibiting as 
unfair trade practices the inclusion of certain provisions in 
residential leases. 
¶26 We next examine the history of § ATCP 134.08(3).  That 
history is well-documented and confirms that the Department 
sought not only to prevent a source of unfairness to residential 
tenants, but also sought the more particularized goal of 
preventing tenants from being intimidated into forgoing their 
legal rights.  
¶27 The Department promulgated § ATCP 134.08 following an 
extensive study of Wisconsin landlord-tenant relations at the 
request of the legislature.  See Wisconsin Department of 
Agriculture, Trade and Consumer Protection, Landlord-Tenant 
Report to the Joint Committee on Finance of the Wisconsin 
Legislature (Dec. 1, 1978).  After holding fact-finding hearings 
at which landlord and tenant representatives testified, the 
Department found that among the areas in need of regulation were 
written lease provisions commonly found in residential leases.  
Id. at 11.  The Department identified certain objectionable 
provisions, the inclusion of which could be considered unfair 
trade practices.  Id. at 61-62.  Among these were provisions 
that require a tenant to pay all attorneys fees and costs 
incurred by the landlord in a dispute between the two parties.  
Id.  
No. 
98-3329 
 
 
 
 
13
¶28 In concluding that such clauses could be subject to 
regulation, the Department noted that residential leases are not 
usually negotiated contracts, but standard pre-printed form 
documents.  Id. at 60.  The Department also focused on witness 
testimony explaining that the inclusion of objectionable clauses 
in these form leases, whether or not they are enforced, has the 
consequence of intimidating tenants into forgoing their legal 
rights.  Id. at 61.  The Department placed emphasis on the 
following testimony: 
 
"The general problem with respect to lease provisions 
is not only the concessions that they force from 
tenants but also the extent to which they intimidate 
tenants from pursing their rights.  In other words, 
many lease provisions have been found to be void 
because 
they 
are 
either 
unconscionable 
or 
unconstitutional; but their existence in a lease 
continues to have an unjust effect because tenants 
believe them to be valid.  As a result, tenants either 
concede to unreasonable requests of the landlords or 
fail to pursue their own lawful rights."   
Id.6 
¶29 The 
Department 
also 
noted 
testimony 
from 
some 
landlords who explained that these objectionable provisions were 
not enforced, and therefore caused the tenant no serious 
problems.  Id. at 62. The Department concluded that this fact, 
if true, merely aggravated the unfairness of these objectionable 
provisions: 
 
                     
6 The quoted testimony was that of Attorney Robert Anderson, 
Legal Action 
of Wisconsin, 
Legislative 
and 
Administrative 
Representation Program.   
No. 
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14
If [these provisions are not actually enforced], 
however, there can be no explanation for the inclusion 
of the provisions in the rental agreement, unless they 
are intended solely for the purpose of intimidation.  
This purpose, far from legitimizing the provisions, 
merely compounds the alleged unfairness. 
Id. at 62. 
¶30 The final factor that we examine is the object of the 
regulation.  We are able to accurately identify the object 
intended by § ATCP 134.08(3) from the documented history of 
§ ATCP 134.08.  The regulation was intended not only to prevent 
the extraction of the concession of reimbursed attorneys fees 
and costs from tenants by landlords, but also to prevent the 
chilling effect that the inclusion of a clause claiming to 
require the payment of attorneys fees and costs has on a 
tenant's assertion of legal rights.  The Department relied on 
and was persuaded by the fact that, although the clause may be 
unenforceable, tenants who read such a clause in a residential 
lease will forgo pursuing their rights under the lease out of 
fear that they will be forced to bear the landlord's litigation 
expenses.  
¶31 This regulatory objective is of particular import in 
light of the overall statutory and regulatory scheme established 
to 
encourage 
private 
enforcement 
of 
legal 
rights. 
 
The 
enforcement of private legal rights is a significant goal in the 
realm of landlord-tenant relations.  As this court explained in 
Shands v. Castrovinci, 115 Wis. 2d 352, 340 N.W.2d 506 (1983), 
the legislature encourages private litigation by tenants to 
enforce their legal rights through the attorneys fees and double 
No. 
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15
damages provisions of Wis. Stat. § 100.20(5).  Private legal 
actions by tenants not only enforce the individual rights of the 
tenant, but allow tenants to serve as "private attorneys 
general," enforcing the tenant rights preserved under the 
administrative code.  Id. at 358.  In Shands, we also explained 
that enforcement of the administrative code through individual 
actions serves a deterrent effect, curbing impermissible conduct 
by landlords.  Id.  Such private action is a necessary backup to 
state enforcement actions given the limited resources available 
to the state that prevent state actions against every violator. 
 Id.   
¶32 As Shands makes clear, private tenant actions are an 
integral part of the enforcement of ATCP ch. 134.  The 
prohibition of lease provisions tending to intimidate tenants 
from taking action to enforce their rights must be viewed as 
part of the overall legislative and regulatory scheme described 
in Shands.   
¶33 Having examined the subject matter, history, and 
object of § ATCP 134.08(3) to determine the intent underlying 
the regulation, we conclude that enforcement of a lease 
containing the prohibited provision would not only fail to 
advance the goals of § ATCP 134.08(3), but would undermine them 
entirely.   
¶34 The Department sought to eliminate such clauses and 
the 
intimidation 
of 
tenants 
that 
the 
inclusion 
of 
such 
unenforceable clauses poses.  However, were we to allow the 
clause to be severed and the remainder of the lease to be 
No. 
98-3329 
 
 
 
 
16
enforced, neither of those goals would be advanced.  The 
prohibited clauses, the inclusion of which constitutes an unfair 
trade practice, would continue to appear in leases.  Landlords 
would have little incentive to omit such clauses and change 
their practice.  A landlord could insert the clauses with 
relative impunity, knowing that the court will merely ignore 
this unfair trade practice by severing the clause.   
¶35 Not only would landlords likely suffer no consequences 
from the violation, but they would also reap the unfair benefit 
of the clause's inclusion——the potential intimidation that such 
a clause poses.  By the undeterred inclusion of such clauses, 
tenants may continue to be intimidated into forgoing their legal 
rights.  Thus, the Department's goal of eliminating tenant 
intimidation would be frustrated.   
¶36 Allowing the clause to be severed and the remainder of 
the lease to be enforced by the landlord also undercuts the 
effectiveness of the private enforcement contemplated under the 
regulatory scheme.  In other contexts, we have relied upon the 
existence of administrative enforcement proceedings to conclude 
that certain legal violations are to be enforced solely by the 
governmental agency and not by a tenant through invalidation of 
a lease.  Posnanski, 46 Wis. 2d at 181-82.  However, in the 
present context, we cannot ignore that "[p]rivate tenant actions 
constitute an enforcement mechanism reinforcing that of the 
justice department."  Shands, 115 Wis. 2d at 358-59.  In light 
of the Department's concerns regarding tenant intimidation, 
permitting a landlord to enforce a lease containing the 
No. 
98-3329 
 
 
 
 
17
prohibited provision counteracts the larger goal of encouraging 
tenant enforcement of the administrative code to deter unlawful 
conduct on the part of landlords and to enforce public rights.  
See Shands, 115 Wis. 2d at 358.   
¶37 Given the effect that severance of the illegal clause 
and enforcement of the remainder of the lease would have on the 
policy goals of the Department, we conclude that § ATCP 
134.08(3) did not intend such a result.  Thus, the illegally 
included lease provision cannot merely be severed and the 
remainder of the lease enforced.  Because the enforcement of the 
lease would defeat the objectives of the regulation, we 
determine that the illegal inclusion of the provision renders 
the contract unenforceable by Baierl.   
¶38 Finally, we note that Baierl is not being made victim 
of an obscure regulatory provision of which he could not be 
expected to be aware.  Section ATCP 134.08 has been in existence 
since 1980, and its terms are made known to the public through 
Department 
publications. 
 
See 
Wisconsin 
Department 
of 
Agriculture, Trade & Consumer Protection, The Wisconsin Way: A 
Guide for Landlords and Tenants 17, 28 (Aug. 1999).   
¶39 On the other hand, we also acknowledge that the 
McTaggarts failed to live up to the terms of their bargain.  
Nevertheless, the controlling factor is the intent of the 
Department.  That intent does not exclusively address tenants 
such 
as 
the 
McTaggarts 
who 
abandon 
their 
contractual 
obligations.  Rather, that intent speaks to the tenants from 
whom the courts potentially will never hear——tenants who, in the 
No. 
98-3329 
 
 
 
 
18
determination of the Department, will forgo their legal rights 
when 
faced with a provision that 
states 
that 
they are 
responsible for their landlord's litigation costs.  It is for 
those tenants that the intent of § ATCP 134.08(3) must be 
effectuated.   
III 
¶40 In sum, we determine that a landlord who includes a 
provision specifically prohibited by Wis. Admin. Code § ATCP 
134.08(3) in a residential lease may not enforce the terms of 
that lease.  Having examined the underlying intent of § ATCP 
134.08(3), we determine that allowing the enforcement of such a 
lease would not only fail to advance the intent of that 
regulation, but would undermine its objectives completely.  We 
thus conclude that the circuit court properly granted summary 
judgment in the McTaggarts' favor.  Accordingly, we reverse the 
decision of the court of appeals.   
By the Court.—The decision of the court of appeals is 
reversed. 
 
No.  98-3329.npc 
 
1 
¶41 N. PATRICK CROOKS, J. (concurring).  I agree with the 
majority's decision and write separately to make two additional 
points.  First, the majority opinion should be a clarion call to 
landlords across the state to review their residential lease 
forms and ensure that they comply with Wis. Admin. Code § ATCP 
134.08, so as not to have their leases inadvertently invalidated 
as a result of noncompliance. 
¶42 Second, I write separately to emphasize that nothing 
in the majority's opinion forecloses a landlord from pursuing 
non-contract 
remedies, 
e.g., 
quantum 
meruit,7 
should 
a 
residential lease be found invalid because it violates Wis. 
Admin. 
Code 
§ ATCP 
134.08. 
 
Wisconsin 
courts 
have 
long 
recognized 
that where 
there 
has 
been 
a 
violation 
of a 
regulation, such as the one we have here, there may be recovery 
based upon quantum meruit.  In Zbichorski v. Thomas, 10 Wis. 2d 
625, 626, 103 N.W.2d 536 (1960), the defendant claimed that the 
contract she had with the plaintiff to replace the siding on her 
house with aluminum siding, and to do other work, was illegal.  
The claimed illegality was based upon a violation of a Wisconsin 
Department 
of 
Agriculture 
regulation, 
which 
required 
that 
contracts involving the sale of siding should be in writing, and 
                     
7 Quantum meruit is defined as a "claim or right of action 
for the reasonable value of services rendered."  Black's Law 
Dictionary 1255 (7th ed. 1999).  Black's also notes that 
"[q]uantum meruit is still used today as an equitable remedy to 
provide restitution for unjust enrichment.  It is often pleaded 
as an alternative claim in a breach-of-contract case so that the 
plaintiff can recover even if the contract is voided."  Id.   
No.  98-3329.npc 
 
2 
that a correct copy should be left with the customer.  Id. at 
627.  This court indicated that the plaintiff may be able to 
recover from the defendant based upon a claim of quantum meruit, 
even if it was determined that the contract was illegal.  Id. at 
626-27.  The court of appeals has concluded that quantum meruit 
may be available as a means for an auto repair shop to recover 
for repairs done, even though the shop failed to comply with a 
Wisconsin Department of Agriculture regulation requiring the 
shop to provide a written estimate.  See Huff & Morse, Inc. v. 
Riordon, 118 Wis. 2d 1, 345 N.W.2d 504 (Ct. App. 1984).  
Similarly, quantum meruit could provide a landlord whose 
residential lease is invalid with the means to bring a claim for 
recovery of rent owed.  
¶43 Here, after the circuit court concluded that the lease 
was void, the court found that quantum meruit was proper.  The 
court also found that, as a result, Baierl was entitled to the 
payment of rent through the end of January, 1997, and payment 
for other miscellaneous items.  (See R. at 31:27.)  Indeed, the 
McTaggarts did not contest the payment of rent for the time they 
lived in the apartment, or the payment of the other items, which 
were deducted from their security deposit.  See majority op. at 
¶8.  They only contested Baierl's attempt to withhold the 
remainder of their deposit as rent for those months after they 
vacated the apartment.  Quantum meruit was properly applied 
here, and it is worth reiterating that the majority's decision 
today does not bar such recovery.  
¶44 For the reasons stated herein, I respectfully concur. 
No.  98-3329.npc 
 
3 
¶45 I am authorized to state that Justice JON P. WILCOX 
joins this opinion. 
 
 
98-3329.dss 
 
1 
¶46 DIANE S. SYKES, J. (dissenting).  I respectfully 
dissent.  The consumer protection code provides protection 
against unfair trade practices by, among others, landlords.  The 
majority opinion allows the tenants in this case to use the code 
not as a shield against an unfair trade practice by their 
landlord, but as a sword to escape legal responsibility for 
breaching their lease, and worse, as a means of enriching 
themselves in the process. 
¶47 According to the majority, even though the McTaggarts 
inexcusably walked out on their lease more than six months 
early, they are entitled to 1) avoid liability for their 
intentional breach of lease; and 2) recover from their landlord 
double their security deposit, plus costs and actual attorneys' 
fees.  In other words, the tenants intentionally inflicted a 
financial loss on the landlord, and the court says the landlord 
is not only precluded from recovering but is in fact required to 
pay the tenants who committed the breach in the first place, and 
who suffered no financial loss at all. 
¶48 Surely the law does not allow, much less compel this 
bizarre result.  This is nothing but a game of legal "gotcha."  
An enterprising tenants' attorney, his clients clearly in the 
wrong, scoured the fine print in the lease and found an obscure, 
absolutely unessential but nevertheless prohibited clause, and 
on that basis succeeded in persuading the trial court and five 
members of this court to deny enforcement of the entire lease, 
rather than simply invalidate the prohibited clause.  This means 
the tenancy was month-to-month, and the McTaggarts win a 
98-3329.dss 
 
2 
windfall judgment of twice their security deposit, costs, and 
actual attorneys' fees. 
¶49 Yes, the lease contains an addendum, which contains a 
clause, which contains a provision purporting to require the 
tenant to pay costs and attorneys' fees if the landlord ever had 
to take the tenant to court to enforce the lease.  It is clause 
number 17 (of 27) in Addendum A (there is also a "B" and a "C-
2"), and it is definitely prohibited by the consumer code, Wis. 
Admin. Code § ATCP 134.08(3)(Apr. 1993).  The landlord would 
never be able to enforce such a provision in a court of law.  
Indeed, the landlord did not try to enforce it in this case. 
¶50 How this insignificant little clause buried in a six-
page lease provides an excuse for the tenants' flagrant breach 
of lease——much less a basis for them to recover when they have 
suffered no loss whatsoever——is beyond me.  I agree with the 
court of appeals' conclusion that, because the prohibited clause 
is nonessential, does not relate to the primary purpose of the 
bargain, and was not the result of moral turpitude, it can be 
severed, and the rest of the lease survives its severance.  This 
is, in fact, the common law rule, as reflected in the 
Restatement of Contracts: 
 
§  603 UNESSENTIAL ILLEGAL PROVISION 
 
A bargain that is illegal only because of a 
promise or a provision for a condition, disregard of 
which will not defeat the primary purpose of the 
bargain, can be enforced with the omission of the 
illegal portion by a party to the bargain who is not 
guilty of serious moral turpitude unless this result 
is prohibited by statute.  Recovery is more readily 
98-3329.dss 
 
3 
allowed where there has been part performance of the 
legal portion of the bargain. 
Restatement of the Law of Contracts §  603 (1932). 
¶51 ¶51 We cited and applied this rule of severability in 
Simenstad v. Hagen, 22 Wis. 2d 653, 126 N.W.2d 529 (1964).  
Simenstad is factually distinguishable, but I see no reason why 
the common law rule of severability that it applied should not 
also apply here.  This particular clause is unrelated to the 
primary purposes and conditions of the lease, and therefore 
Perma-Stone Corp. v. Merkel, 255 Wis. 565, 39 N.W.2d 730 (1949), 
and Huff & Morse, Inc. v. Riordon, 118 Wis. 2d 1, 345 N.W.2d 504 
(Ct. App. 1984), are distinguishable. 
¶52 There is nothing in the text of the applicable 
statutes or rules that precludes severability or authorizes 
denying enforcement of the entire lease.  See Wis. Stat. 
§§ 100.20(2) and (5), 100.26(3) (1995-96); Wis. Admin. Code 
§ ACTP 134.08.  The statutes provide for public remedies for 
unfair 
trade 
practice 
violations, 
including 
fines 
and 
incarceration.  Wis. Stat. § 100.26(3).  The statutes also 
specify a private remedy (suit for double damages, costs and 
reasonable attorneys' fees), but only for persons "suffering 
pecuniary loss because of [an unfair trade practice] violation." 
Wis. Stat. § 100.20(5).  The statutes and rules are silent, 
however, 
on 
the 
issue 
of 
how 
a 
violation 
affects 
the 
enforceability of a contract.  The question, therefore, is 
whether the lease as a whole, or just the prohibited provision, 
is unenforceable by the landlord. 
98-3329.dss 
 
4 
¶53 I am not persuaded by the rationale of the majority 
that applying the common law rule of severability in this 
context would defeat the purpose of the regulatory scheme.  
Severance of the prohibited clause does not exacerbate unequal 
bargaining 
power 
between 
landlords 
and 
tenants, 
increase 
landlord intimidation of tenants, or produce a chilling effect 
on the assertion of tenants' rights.  See majority op. at ¶¶25-
30. 
¶54 Landlords who commit unfair trade practices can be 
prosecuted by the state and sued by their tenants when the 
tenants suffer pecuniary loss as a result of the landlord's 
conduct.  The majority opinion accurately notes the so-called 
"private attorneys general" function of the private right of 
action under the consumer protection code.  Majority op. at 
¶¶31-32.  But here, the tenants caused a pecuniary loss, they 
did not suffer one themselves.  The McTaggarts did not sustain 
any financial loss because of the landlord's inclusion of the 
illegal attorneys' fees provision in the lease.  I doubt they 
even knew it was there.  The landlord never sought or threatened 
to enforce it.  The "loss" only arises if the McTaggarts are 
allowed to use the attorneys' fees clause as a basis to 
invalidate the entire lease, thus requiring return of their 
security deposit.  This case represents creative lawyering, but 
bad precedent. 
¶55 Under the circumstances of this case, the court should 
enforce the contract——minus the prohibited clause——in a way that 
is consistent with its terms, with the law and the facts, with 
98-3329.dss 
 
5 
logic and with common sense.  It declines to do so.  I would 
affirm the court of appeals. 
¶56 I am authorized to state that Justice DAVID T. PROSSER 
joins this dissenting opinion.   
 
 
98-3329.dss 
 
1