Court Opinion

ID: 8203381
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:49:19.584961+00
Date Added: 2024-06-11T08:47:44.107863
License: Public Domain

ANN WALSH BRADLEY, J.
¶ 57. 0dissenting). I agree with the Wisconsin Bankers Association and the court of appeals that "this case does not involve one agreement superseding another. It involves two separate, independent agreements that do not in any way involve each other."
*368¶ 58. I also agree with the Wisconsin Bankers Association and the court of appeals that "the TCA is a stand-alone agreement. . . [that] must be interpreted on its terms with respect to the [$2.5 million loan], and the Commitment must be interpreted separately on its terms with respect to the proposed financing addressed in the Commitment."
¶ 59. The majority, however, disagrees. Rather than treating the TCA and the Commitment as two separate contracts which must be interpreted independently, it interprets the TCA as the final agreement with an integration clause that replaces the separate Commitment agreement. In fact, the majority warns that treating the two agreements as separate could have "unforeseen consequences." Majority op., ¶ 52 n.5.
¶ 60. In this regard, I conclude that the analysis of the Wisconsin Bankers Association and the court of appeals is more persuasive and should be controlling. It is, I fear, the approach of the majority that has the potential to yield "unforeseen consequences" for the day-to-day practices of the banking industry. Because the majority's analysis introduces uncertainty in the lending process and creates uncertainty in well-established law, I respectfully dissent.
I
¶ 61. The majority accurately sets forth the question before the court: whether Town Bank has a obligation to lend $6.5 million in Phase II financing under the terms of the Commitment. See majority op., ¶¶ 21-22.1 In answering this question, however, the majority does not focus on the terms of the Commit*369ment. Rather, its focus shifts to the terms of the Term Credit Agreement (TCA), and specifically, to the TCA's "Entire Agreement" clause. See id,., ¶ 40 ("[T]he TCA is an unambiguous, fully integrated agreement with which Town Bank fully complied.").
¶ 62. The majority concludes that the TCA's "Entire Agreement" clause evinces the parties' intent to "exclude from their final agreement any understanding or agreement not contained within the TCA, the exhibits, the Business Note, and the security documents." Id., ¶ 43. It determines that whenever a contract "contains an unambiguous merger or integration clause, the court is barred from considering evidence of any prior or contemporaneous understandings or agreements between the parties, even as to the issue of integration." Id., ¶ 39.
¶ 63. Thus, although City Real Estate seeks to enforce the Commitment, the majority determines that the Commitment may not be considered by a court due to the terms of the TCA. The implication of this analysis is that any written contract with an unambiguous integration clause necessarily supersedes all existing agreements between the parties, unless the integration clause specifically references an existing agreement. Under the majority's analysis, the TCA and the Commitment are intertwined — the parties do not have any obligations under the Commitment because the Commitment was superseded by the TCA, as evinced by the TCA's integration clause.
*370II
¶ 64. The majority's conclusion that an unambiguous integration clause replaces any existing agreement not specifically referenced is directly contrary to the position advocated by the Wisconsin Bankers Association.2 The Wisconsin Bankers Association contends that "this case does not involve one agreement superseding another," and that the TCA and the Commitment are "separate, independent agreements that do not in any way involve each other."3
¶ 65. The Wisconsin Bankers Association repeatedly argues that the TCA and the Commitment are independent agreements that must be interpreted separately.4 Its concern is that City Real Estate attempts to read the terms of the Commitment into the TCA: "[Our] only concern is that the borrower should not be able to find support for its argument that Town Bank breached *371its obligations under the Commitment by somehow reading the terms of the Commitment into the completely independent Term Credit Agreement."5 It argues that the effect of the TCA's unambiguous integration clause is to put both parties on notice "that any other agreement that might be out there, whatever it may be, is not part of' the TCA.6
¶ 66. To this end, the Wisconsin Bankers Association contends: "The Term Credit Agreement stands on its own. The Commitment stands on its own."7 It asserts that "[t]he TCA must be interpreted on its terms with respect to the [$2.5 million loan], and the Commitment must be interpreted separately on its terms with respect to the proposed financing addressed in the Commitment."8 According to the Wisconsin Bankers Association, the terms of the TCA are not relevant when interpreting the Commitment: "Whether or not City fulfilled [the Commitment's] conditions and is entitled to damages for the Bank's failure to lend is a question of interpretation of the Commitment."9
*372¶ 67. The majority's conclusion that the court is barred from considering the Commitment due to the TCA's integration clause is incompatible with the Wisconsin Bankers Association's assertion that the TCA and the Commitment are "separate, independent agreements that do not in any way involve each other." This conclusion introduces uncertainty in contractual relationships far beyond the contours of this case.
¶ 68. As explained by the Wisconsin Bankers Association, the situation presented in this case is "quite common throughout the state."10 At any given time, there may exist a number of separate, independent agreements between a borrower and a bank:
Banks often have a variety of outstanding loans to individuals and their related interests, as well as agreements for other banking services with those parties. A bank could have several loans to a borrower, could be negotiating the refinancing of some of those loans, and at the same time could be negotiating different commitments for upcoming projects.11
¶ 69. The majority's determination that a written contract containing an unambiguous integration clause replaces all existing agreements between the parties may yield undesirable and unforeseen consequences. Parties may find that by signing a form agreement, they have put into question the enforceability of any other *373outstanding agreements between them — without having intended to do so.12 Before drafting a new contract, must a loan officer now review all other existing agreements and enumerate them in the new contract to ensure that the new contract does not inadvertently supersede those existing agreements?
¶ 70. The Wisconsin Bankers Association called City Real Estate's interpretation of the integration clause "radical," "absurd," and "impractical" because it would require the parties to "expressly negative" any other existing agreements: "City is requesting a radi*374cal new interpretation of integration clauses. It wants this Court to require the integration clause to 'expressly negative the Commitment in order to have the terms of the Commitment excluded from the terms of the [TCA]. . . . This is an absurd and very impractical request."13
¶ 71. Yet, the majority's conclusion is the mirror image of City Real Estate's request, and it leads to the same absurd and impractical result. Rather than requiring drafters to "expressly negative" any existing agreements, the majority requires drafters to "expressly affirm" their existing agreements if they wish to prevent those agreements from being superseded.
¶ 72. Such a requirement may create traps for the unwary. Signing a contract with an unambiguous integration clause does not necessarily evince an intent to supersede all existing agreements. Parties sign contracts all the time without thinking it necessary to enumerate (and thereby preserve) any existing agreements between them.
¶ 73. Nevertheless, this requirement is driven by the majority's analysis. Its decision may "result in completely unnecessary effort on the part of parties when drafting a contract, and build into contracts the very ambiguity and uncertainty the parol evidence rule is intended to remove."14
Ill
¶ 74. The majority's analysis is flawed not only because it introduces uncertainty into the lending process, but also because it creates uncertainty in what has *375been the well-established law. We have repeatedly explained that "[p]arol evidence is always admissible with respect to the issue of integration[.]"15 The reason underlying this rule is that a court cannot determine from the four corners of a contract whether the parties intended it to be a complete integration, a partial integration, or no integration whatsoever. "[A] writing cannot of itself prove its own completeness[.]" Restatement (Second) of Contracts § 210 cmt. b (1981); see also id. § 214 cmt. a.
¶ 75. On one hand, the majority embraces this time-honored rule, while on the other hand it embraces an opposite or a different rule. Unfortunately, the majority's inconsistency is demonstrated not only from paragraph to paragraph, but also the inconsistency exists within the very same paragraph.
¶ 76. Citing several cases, the majority sets forth the time-honored rule: "the parol evidence rule does not preclude the court from considering evidence of any prior or contemporaneous understandings or agreements between the parties for the purpose of determining whether the parties intended the contract to be integrated. Our courts often refer to this rule by stating that 'parol evidence is always admissible with respect to the issue of integration.'" Majority op., ¶ 38 (emphasis added).
¶ 77. In the very same paragraph the majority appears to embrace the exact opposite of the rule, i.e., *376that parol evidence is never admissible with respect to. the issue of integration. It appears to assert that the rule comes into play only after the issue of integration has already been determined: "If and once it is determined that the parties intended the contract to be integrated, only then does the parol evidence rule go into effect." Id.
¶ 78. The first sentence of the following paragraph sets forth yet a different rule. Rather than being always admissible on the issue of integration, it is only sometimes admissible, i.e. admissible when there is an integration clause that is ambiguous. The majority states: "[W]hen the contract contains an unambiguous merger or integration clause, the court is barred from considering evidence of any prior or contemporaneous understandings or agreements between the parties, even as to the issue of integration." Id., ¶ 39.
¶ 79. So what is the rule? Is it the time-honored rule that the majority purports to embrace — that parol evidence is always admissible with respect to the issue of integration? Is it never admissible on the issue of integration? Or is it only sometimes admissible on the issue of integration when an integration clause is ambiguous? The majority gets tangled up in its analysis because it conflates the general rules of contract interpretation with the specific rule of parol evidence associated with the interpretation of an integration clause.16
IV
¶ 80. When I examine this case, I apply the time-honored rule that parol evidence is always admissible *377with respect to the issue of integration. Like the Wisconsin Bankers Association and the court of appeals, I conclude that the Commitment is a separate agreement from the TCA and it must be interpreted according to its terms.
¶ 81. The question of whether City Real Estate repudiated the Commitment by failing to satisfy its conditions precedent presented questions of fact which were decided by the jury. After hearing some evidence that City Real Estate failed to fulfill the Commitment's conditions, the jury nevertheless determined that under these circumstances, it was Town Bank that breached the Commitment. An appellate court will sustain a jury verdict if there is any credible evidence to support it. Hoffman v. Wisconsin Elec. Power Co., 2003 WI 64, ¶ 9, 262 Wis. 2d 264, 664 N.W.2d 55. Here, there is credible evidence in the record to support the jury's verdict.
¶ 82. Because the majority's analysis is incompatible with and less persuasive than the analysis advanced by the Wisconsin Bankers Association, because it may introduce uncertainty in contractual relationships far beyond the contours of this case, and because it creates uncertainty in what has been the well-established law, I respectfully dissent.
¶ 83. I am authorized to state that Chief Justice SHIRLEY S. ABRAHAMSON joins this dissent.

 When we accepted review of this case, the Wisconsin Bankers Association requested permission to file an amicus brief. It explained that the appeal presented issues "of particular interest to the" Wisconsin Bankers Association because "[t]he Term Credit Agreement utilized by the parties is a form sold by a [Wisconsin Bankers Association] subsidiary to lenders in the state" and "[h]undreds of lenders and thousands of term credit lending arrangements are entered into using this form." Motion of Wisconsin Bankers Association for Leave to File Brief as Amicus Curiae ¶¶ 2-3.

 Brief of the Wisconsin Bankers Association as Amicus Curiae at 8.

 The Wisconsin Bankers Association explains that Town Bank entered into a separate TCA with City Real Estate to make the $2.5 million loan. "Whether or not City fulfilled [the conditions set forth in the Commitment] and is entitled to damages for Bank's failure to lend is a question of interpretation of the Commitment." Id. at 4.

 Motion of Wisconsin Bankers Association for Leave to File Brief as Amicus Curiae ¶ 5. At various times throughout this litigation, City Real Estate appeared to argue that the TCA's "multiple notes" clause supported its contention that the Commitment was a binding contract. The Bankers Association objected to City Real Estate's attempt to bootstrap its claim for damages under the Commitment to the "multiple notes" clause in the TCA.

 Id., ¶ 6.

Id., ¶ 5.

 Brief of the Wisconsin Bankers Association as Amicus Curiae at 8.

 Id. at 4. When it filed its motion for leave to file an amicus brief, the Wisconsin Bankers Association asserted that it had "no opinion on whether or not the Commitment was repudiated *372by the borrower's failure to fulfill conditions precedent to the construction loan." Motion of Wisconsin Bankers Association for Leave to File Brief as Amicus Curiae ¶ 5.

 Motion of Wisconsin Bankers Association for Leave to File Brief as Amicus Curiae ¶ 3; see also Brief of the Wisconsin Bankers Association as Amicus Curiae at 1.

 Brief of the Wisconsin Bankers Association as Amicus Curiae at 9.

 Imagine the following hypothetical, based on the facts of this case. Town Bank and City Real Estate execute a term credit agreement ("TCA I") for $2.5 million in Phase I financing. Several months later, Town Bank agrees to go ahead with Phase II financing. Town Bank and City Real Estate execute a second term credit agreement ("TCA II") for a $6.5 million loan.
TCA II contains an "Entire Agreement" clause which provides as follows:
This Agreement, including the Exhibits attached or referring to it, the Note [for $6.5 million] and the Security Documents, are intended by Customer and Lender as a final expression of their agreement and as a complete and exclusive statement of its terms, there being no conditions to the full effectiveness of their agreement except as set forth in this Agreement, the Note and the Security Documents. TCA II, the Note, and the Security Documents make no reference to TCA I or the terms of the $2.5 million Phase I loan.
Imagine that City Real Estate defaults on its obligations under TCA I, and Town Bank files suit to enforce its terms. Could City Real Estate argue that that TCA I was no longer enforceable because it had been superseded by TCA II? According to the majority's analysis in this case, such an argument may be viable — TCA II "contains an unambiguous [] integration clause, [therefore] the court is barred from considering evidence of [TCA I, which is a] prior [] agreement[] between the parties." See majority op., ¶ 39.

 Brief of the Wisconsin Bankers Association as Amicus Curiae at 7.

 Id at 2.

 Dairyland Equip. Leasing v. Bohen, 94 Wis. 2d 600, 608, 288 N.W.2d 852 (1980); Fed. Deposit Ins. Corp. v. First Mortg. Investors, 76 Wis. 2d 151, 158, 250 N.W.2d 362 (1977); Johnson Hill's Press v. Nasco Indus., 33 Wis. 2d 545, 550, 148 N.W.2d 9 (1967); Brevig v. Webster, 88 Wis. 2d 165, 173, 277 N.W.2d 321 (Ct. App. 1979); see also Scarne's Challenge, Inc. v. M.D. Orum Co., 267 Wis. 134, 64 N.W.2d 836 (1954).

 For a discussion of the dangers of conflating principles of contract interpretation with the parol evidence rule, see Margaret N. Kniffin, Conflating and Confusing Contract Interpretation and the Parol Evidence Rule: Is the Emperor Wearing Someone Else's Clothes?, 62 Rutgers L. Rev 75 (2009-2010).