Court Opinion

ID: 9689879
Source: CourtListenerOpinion
Date Created: 2023-08-24 18:49:10.233389+00
Date Added: 2024-06-11T18:18:52.625033
License: Public Domain

DIANE S. SYKES, J.
¶ 46. (dissenting). I respectfully dissent. The consumer protection code provides protection against unfair trade practices by, among *654others, 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 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) *655in 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 allowed where there has been part performance of the legal portion of the bargain.
Restatement of the Law of Contracts § 603 (1932).
¶ 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 *656and 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.
¶ 53. I am not persuaded by the rationale of the majority that applying the common law rule of sever-ability 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 *657consumer 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 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.