Monday, April 8, 2013

'Tufail v. Midwest Hospitality, LLC' argument preview

Tufail v. Midwest Hospitality, LLC (2011AP1451) is scheduled for argument before the Wisconsin Supreme Court April 11, 2013 10:45 a.m. The case is before the court on review of the Court of Appeals. The issue [pdf] (page 14) is:
Whether a judicial interpretation of a use provision in a lease for premises to operate a fast-food restaurant comports with the standards of contract interpretation.
The synopsis states:
This case involves a question of contract interpretation. The Supreme Court reviews a Court of Appeals' decision regarding a lease dispute between a property owner and restaurant franchisee owner in Milwaukee.

Some background: Amjad T. Tufail operated a 'New York Chicken' restaurant under a special use permit granted by the city of Milwaukee Board of Zoning Appeals in November 2000. Tufail was permitted to operate his business in compliance with a submitted plan of operation which included a drive-through and being open until 4 a.m., seven days a week. The special use was granted for 10 years.

In March 2008, Midwest Hospitality leased the restaurant building from Tufail for five years, beginning on April 1, 2008 to operate a Church's Chicken franchise. The Lease required Midwest Hospitality to pay rent of $35,000 for the first year to be paid in equal monthly installments.

The lease included the following warranty: 'Landlord represents and warrants to Tenant that: (g) no existing restrictions, building and zoning ordinances, or other laws or requirements of any governmental authority prevent the use of the Premises for the purposes set forth in Paragraph 5.'

Paragraph 5 reads as follows:

'Tenant may use and occupy the Premises for any lawful purposes, including, but not limited to, the retail sales, consumption, and delivery of food and beverages which shall include, but not be limited to, Chicken products, Fish products, bread products, salads, sandwiches, dessert items, promotional items, and any other items sold by any Church's Chicken store.'

After Midwest Hospitality began occupying the premises, in May 2008 they learned that they had to obtain a special-use permit to operate the restaurant with a drive-through. The special-use permit was eventually granted with restrictions, including closing of the restaurant by 9 p.m.

Midwest Hospitality stopped paying rent, stating that it was not responsible for the lease payments because Tufail failed to inform it that a special-use permit would be required and that the lease was, as a result, terminated. The circuit court determined that Tufail had not breached the warranty.

The trial court found that the special use permit was required because of the drive-thru request. The trial court focused on the drive-thru as the reason requiring the special use permit and that the lease did not warrant an unrestricted ability to operate a drive-thru. It did not address whether a special-use permit was required for any other reason.

The Court of Appeals reversed, concluding that the warranty was breached.

Midwest Hospitality argued to the Court of Appeals that its desire to have a drive-thru has no bearing on whether a special-use permit was required or Tufail's representation that there were no zoning restrictions for use of the building as a Church's Chicken. It argues that the trial court ignored undisputed evidence that a free standing, fast-food restaurant was not permitted under the existing zoning regulation, regardless of a drive-thru.

Tufail contends the Court of Appeals' decision is inconsistent with standard principles of contract interpretation because it 'greatly expands the scope of the warranty beyond the language in the Lease.'

Tufail says that a special-use permit was only required to operate the property as a fast-food/carryout restaurant with a drive through, which was not the use specifically written into the lease. He contends Midwest Hospitality was free to operate a sit-down restaurant at the premises without a special-use permit.

Tufail says he was left without any Lease payments and was left with a property in a state of complete disrepair. From Milwaukee County.