Court Opinion

ID: 9524589
Source: CourtListenerOpinion
Date Created: 2023-08-07 02:54:44.600694+00
Date Added: 2024-06-11T13:11:06.993018
License: Public Domain

*567SCHUDSON, J.
¶ 15. (dissenting). The issue in this appeal is whether the trial court was correct in voiding a lease because Addendum A, paragraph seventeen, of the lease provided:
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.
I conclude that the trial court was correct. I further conclude that the majority has inappropriately engaged in fact-finding and, in order to support its decision, has drawn an inference wholly unsupported by the record. Finally, I conclude that the majority's decision undermines the consumer protection that the legislature intended in enacting WiS. Stat. § 100.20.
¶ 16. Wisconsin Admin. Code ch. ATCP 134 was adopted pursuant to WiS. Stat. § 100.20. See WiS. Admin. Code § ATCP 134.01. Wisconsin Admin. Code § ATCP 134.08 (1990) provides, in relevant part:
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.
On appeal, Supreme Builders concedes that Addendum A, paragraph seventeen, of its lease violates § ATCP 134.08(3). In the trial court, however, Supreme Builders never conceded that paragraph seventeen violated *568the administrative rule, and never argued that the provision was severable. Instead, Supreme Builders repeatedly argued that paragraph seventeen merely provided for "the recovery of costs or attorney's fees" under the second sentence of § ATCP 134.08(3).
¶ 17. The trial court, not Supreme Builders, first raised the possibility that the lease could be saved by severing paragraph seventeen. Even when the trial court all but invited Supreme Builders to argue sever-ability, Supreme Builders still failed to do so and, instead, remained true to its contention that paragraph seventeen was legal. Nevertheless, the trial court considered severability, commenting: "I'm looking for a way to read [paragraph seventeen] so it can be severed from the rest of the contract and simply [be] deemed unenforceable to avoid the drastic results [of voiding the lease]."
¶ 18. The trial court rejected Supreme Builder's argument that paragraph seventeen was legal, and Supreme Builders does not renew that argument on appeal. The trial court also concluded that the lease could not be saved by severing the illegal paragraph because the "trend and philosophy [of the case law] is that the inclusion ... of contract provisions which are directly prohibited by Consumer Protection Statutes results in the voiding of the entire contract."
¶ 19. More than two months later, Supreme Builders moved the trial court for reconsideration but still did not argue or even raise severability. Now, on appeal, Supreme Builders implicitly concedes, for the first time, that paragraph seventeen is illegal and argues, for the first time, that it should be severed to save the lease. Thus, the record does not support the majority's assertion that Supreme Builders "suggested that the trial court consider enforcing the lease and *569find the prohibited clause 'unenforceable.'" Majority at ¶ 5 n.4. See State v. Anderson, 215 Wis. 2d 673, 683, 573 N.W.2d 872 (Ct. App. 1997) (appellate court not required to consider arguments raised for first time on appeal). But see State v. Weber, 164 Wis. 2d 788, 791, 476 N.W.2d 867 (1991) ("Once an issue is raised in a petition for review, any argument addressing the issue may be asserted in the brief of either party or utilized by this court.").
¶ 20. Assuming we should reach the merits of the argument Supreme Builders raises for the first time on appeal, I conclude that the trial court was correct.
¶ 21. To reach its result, the maj ority inappropriately engages in fact-finding. See State v. Hydrite Chem. Co., 220 Wis. 2d 51, 79, 582 N.W.2d 411 (Ct. App.) (court of appeals is "a reviewing court, not a fact-finding court"), review denied, 220 Wis. 2d 364, 585 N.W.2d 156 (1998); see also Wurtz v. Fleischman, 97 Wis. 2d 100, 107 n.3, 293 N.W.2d 155 (1980) (clarifying that Wis. Const, art. VII, § 5(3) "precludes [court of appeals] from making any factual determinations where the evidence is in dispute"). The majority states: "[T]he lease is voluminous, consisting of a standard residential lease and three addenda, and the prohibited clause found in paragraph seventeen was tucked into an addendum, not the standard residential lease." Majority at ¶ 10 (emphasis added). Thus, the majority infers that it was not Supreme Builder's standard practice to execute leases with the offending language, and concludes that Supreme Builders did not engage in "any 'serious moral turpitude' which would prevent severance." See id.
¶ 22. The record provides no basis for the majority's factual finding or inference. Addendum A, the first of three addenda, all of which were dated and signed *570together with the lease, contains not only paragraph seventeen but numerous other provisions including one stating, "Tenant acknowledges that this addendum constitutes a part of the agreement with Supreme Builders and is considered as a part of the lease to which it is attached." Most significantly, the addendum is titled "ADDENDUM A SUPREME BUILDERS ADDITIONAL CONDITIONS TO THE LEASE FOR _AT_."1 See Appendix. Thus, the addendum does not appear to be one designed solely for the tenants in this case. Accordingly, the record casts considerable doubt on the majority's speculation that it was not Supreme Builder's standard practice to execute leases with the offending language.
¶ 23. Severing paragraph seventeen in order to save Supreme Builders' lease undermines the consumer protection provided by Wis. Admin. Code ch. ATCP 134. As the McTaggarts argue:
[I]f the Court concludes that the illegal provision does not render the lease void, the Court will have nullified Wis. Admin. Code § ATCP 134.08(3). Once this Court determines that landlords will never suffer any repercussions from including an illegal attorney's fees provision in their leases (other than the provision not being enforced), many landlords will intentionally include [an] illegal attorney's fees provision in their leases. Occasionally some tenants would be willing [to] pay the landlord's attorney's fees; others who knew the law would not. However, the result [Supreme Builders] urges would encourage landlords to violate Wis. Admin. Code §ATCP ch. 134 by allowing them to occasionally *571collect their attorney's fees without fear of ever suffering any consequence. This result turns Wis. Admin. Code § ATCP ch. 134 on its head by penalizing the very people who most need its protections: those too unsophisticated or poor to hire a lawyer who knows that an attorney's fees provision violates Wis. Admin. Code § ATCP 134.08(3).
The McTaggarts are correct.
¶ 24. In Shands v. Castrovinci, 115 Wis. 2d 352, 340 N.W.2d 506 (1983), the supreme court, deciding whether WlS. STAT. § 100.20(5) required an award of reasonable attorney fees for an appeal in an action resulting from a violation of Wis. Admin. Code § Ag 134.06, see Shands, 115 Wis. 2d at 354, reiterated that "a 'cardinal rule in interpreting statutes' is to favor a construction which will fulfill the purpose of the statute over a construction which defeats the manifest object of the act," id. at 356 (emphasis added).2 The supreme court explained that § 100.20(5) "gives any person who suffers damages because of a violation of the administrative regulations, including Ch. 134, a right to recover twice the amount of pecuniary loss, together with costs, including a reasonable attorney fee." See id. at 357. The court acknowledged that "generally, except for court costs and fees, a plaintiff may not recover attorney fees and expenses of litigation... unless such liability arises from specific statutory provisions or the contract of the parties." Id. Nevertheless, the court concluded that "a tenant who has suffered pecuniary loss because of a violation of Wis. Adm. Code Ch. Ag 134 shall recover reasonable attorney fees for appellate review undertaken to attack or defend a trial court's *572decision in the suit," id. at 359, consistent with the consumer protection principles underlying the statute and the administrative rule. The supreme court articulated four bases for its conclusion, all of which are applicable to this appeal.
¶ 25. First, the supreme court explained that allowing tenants to recover double damages and attorney fees "encourages injured tenants to bring legal actions to enforce their rights under the administrative regulations." See id. at 358. Quite obviously, lease provisions like paragraph seventeen would deter tenants from legally resisting landlords' efforts to enforce the terms of a lease even when the terms might be unlawful.
¶ 26. Second, the supreme court explained: "[T]he tenant who sues under [Wis. Stat. § 100.20(5)] acts as a 'private attorney general' to enforce the tenants' rights set forth in the administrative regulations. Thus, the individual tenant not only enforces his or her individual rights, but the aggregate effect of individual suits enforces the public's rights." Id. Similarly, tenants who, like the McTaggarts, invoke both the administrative rule and the statute in defending against a landlord's suit, "enforce[ ] the public's rights."
¶ 27. Third, the supreme court emphasized that "tenant suits have the effect of deterring impermissible conduct by landlords because, if they violate the administrative regulations, they will be subject to double damages and will be responsible for costs, including attorney fees." Id. Similarly, tenants who, like the McTaggarts, invoke both the administrative rule and the statute in defending against a landlord's suit, "deter[ ] impermissible conduct by landlords."
¶ 28. Fourth, the supreme court pointed out that "private tenants['] actions provide a necessary backup *573to the state's enforcement powers" under Wis. Stat. § 100.20, id,., and therefore "constitute an enforcement mechanism reinforcing that of the justice department," id. at 359. Clearly, that is no less so when tenants, like the McTaggarts, invoke both the administrative rule and the statute against a landlord suing under a lease containing an illegal provision that would reduce a tenant's legal leverage.
¶ 29. Paragraph seventeen violates Wis. Admin. Code § ATCP 134.08(3). By requiring tenants to pay the landlord's attorney fees and costs in any legal action "that Supreme Builders shall be obliged to commence ... in order to enforce the terms and conditions of any portion of this lease and amendment," paragraph seventeen shifts the balance of legal power between landlords and tenants, contrary to the clear intentions of the legislature and the Department of Agriculture, Trade and Consumer Protection. To conclude that the remedy is merely to sever the illegal provision is to eliminate the deterrent power of § ATCP 134.08(3). See Shands, 115 Wis. 2d at 359 (in action pursuant to Wis. Stat. § 100.20(5), tenant "is not successful until he or she has actually recovered damages and attorney fees").
¶ 30. At best, the majority reaches a result satisfying what it deems the equities of the instant case. The equities, however, rest in facts beyond the summary judgment record. Moreover, and most significantly in this case, the majority bases its legal conclusion about Supreme Builder's lack of "serious moral turpitude" on its own inference about what was not Supreme Builder's standard practice — an inference unsupported by the record and countered by the face of the addendum containing paragraph seventeen, as *574well as by the face of Addendum C-2, which also contains the "Supreme Builders" title.
¶ 31. And most dangerously, the majority opinion undermines the four consumer protection principles articulated by our supreme court in Shands. Under the majority's interpretation, Wis. Admin. Code § ATCP 134.08 now reads, between the lines:
ATTENTION LANDLORDS:
DO NOT REQUIRE TENANTS TO PAY YOUR ATTORNEYS' FEES OR COSTS IN ANY LEGAL ACTION OR DISPUTE.
HOWEVER, IF YOU DO, YOU PROBABLY WILL GET AWAY WITH IT.
BUT IF YOUR TENANT REALIZES THE REQUIREMENT IS UNLAWFUL, AND IF YOUR TENANT IS ABLE TO GO TO COURT TO CHALLENGE IT, YOU WILL NOT BE ALLOWED TO ENFORCE THE UNLAWFUL REQUIREMENT.
BUT DO NOT WORRY. ALTHOUGH YOU WILL NOT BE ALLOWED TO ENFORCE THE UNLAWFUL REQUIREMENT, YOU WILL SUFFER NO OTHER CONSEQUENCES.
That is not what the legislature or the department intended. That is not what Shands permits. Accordingly, I respectfully dissent.
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 The second addendum is titled "ADDENDUM B." The third addendum is titled "ADDENDUM C-2 SUPREME BUILDERS PET AGREEMENT."

 Wisconsin Admin. Code ch. Ag 134 was subsequently renumbered ch. ATCP 134. See Wis. Admin. Code ch. ATCP 134 (1999), at 541.