COURT OF APPEALS DECISION DATED AND FILED February 2, 2011 A.
John Voelker Acting Clerk of Court of Appeals |
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NOTICE |
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This opinion is subject to further editing. If published, the official version will appear in the bound volume of the Official Reports. A party may file with the Supreme Court a petition to review an adverse decision by the Court of Appeals. See Wis. Stat. § 808.10 and Rule 809.62. |
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Appeal No. |
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STATE OF |
IN COURT OF APPEALS |
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DISTRICT II |
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Gunderson, Inc.,
Plaintiff-Respondent, v. Aspirus Wausau Hospital, Inc.,
Defendant-Appellant. |
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APPEAL
from a judgment of the circuit court for
Before Brown, C.J., Neubauer, P.J., and Reilly, J.
¶1 PER CURIAM. This marks the parties’ second appearance before this court on their breach-of-contract action. The first time, Gunderson, Inc., appealed from a grant of summary judgment in favor of Aspirus Wausau Hospital, Inc. We reversed and remanded, instructing the court to allow a jury to decide whether a material breach occurred. The case was assigned to a new judge. Once again, however, the court answered the question itself, this time directing the verdict in Gunderson’s favor, and submitted to the jury only the damages question. Aspirus appeals from the judgment entered on the directed verdict. Because we conclude that the trial court should have given the breach-of-contract question to the jury, we once more reverse and remand with directions.
¶2 In August 2004 the parties renegotiated a contract under which Gunderson supplied Aspirus with surgical linen services on a rental basis. Soon thereafter, Aspirus began complaining of product shortages and various quality issues. By letter dated May 23, 2005, Aspirus advised Gunderson that “if nonsterile or defective surgical linens are again provided to Aspirus” the contract would be “immediately canceled.” In October, Aspirus simply advised Gunderson that it would begin providing its surgical linen services internally as of January 15, 2006, and thanked Gunderson for past services. On November 22, 2005, Aspirus notified Gunderson that, due to “numerous, varied and continuous” problems, and specifying nine, it was terminating the contract effective December 31, 2005.
¶3 Gunderson responded by commencing this action, alleging breach of contract based on the October letter’s “attempted cancellation … without cause.” Aspirus answered that the October letter simply exercised a contractual right preserved by § 2.1 (providing, in part, that “[n]othing in this Agreement will be construed in such a way as to prevent Aspirus-WH from continuing to evaluate the costs and benefits of an in-house … services program”). Aspirus also affirmatively alleged that it had the right to terminate pursuant to § 1.2, which provides:
1.2 Either party shall have the right to
terminate this Agreement if the other party fails in any material respect to
provide services consistent with its obligations under this Agreement and/or
attached Schedules. The party claiming the right to terminate shall provide written notice
to the other party, specifying the breach. The receiving party shall have thirty (30)
days from the receipt of such notice to cure the breach to the satisfaction of
the non-breaching party. (Emphasis
added.)
¶4 Gunderson moved for partial summary judgment and Aspirus moved for summary judgment, each arguing that the other breached the contract. The trial court denied Gunderson’s motion and granted Aspirus’. It found that Gunderson materially breached the contract by chronically failing to supply the surgical linens Aspirus ordered and that, despite its long awareness of the shortages and substantial opportunity to cure them, Gunderson failed to do so.
¶5 Gunderson appealed. See Gunderson, Inc. v. Aspirus Wausau Hosp.,
Inc., No. 2007AP2623, unpublished slip op. (Wis. Ct. App. Oct. 1,
2008). This court affirmed the portion
of the judgment denying Gunderson’s motion for partial summary judgment but reversed
the part granting Aspirus’ motion for summary judgment, and remanded the matter
to the trial court with instructions to submit to a jury the question of
whether a material breach occurred.
¶6 On remand, Gunderson moved at the close of evidence for a directed verdict on grounds that Aspirus failed to give ninety days’ notice of termination under § 4 of the contract. That section provides:
4. Gunderson shall comply with the current
JCAHO, Wisconsin Bureau of Quality Assurance, Center for Disease Control, OSHA
and Aspirus-WH Linen Committee Standards now in effect, or as amended from time
to time during the term of this Agreement. In the
event that Gunderson fails to meet the standards required of it, Aspirus-WH
shall give written notice to Gunderson of the alleged failure and Gunderson
shall have thirty (30) days in which to correct or remedy the condition. In the
event such failure is not remedied within the time period specified, Aspirus-WH
may elect to terminate this Agreement or any extension thereof, effective upon
ninety (90) days written notice in advance of the termination date. (Emphasis added.)
¶7 The trial court concluded that §§ 1.2 and 4 set forth a two-step process for contract termination: written notice of the specific failure with thirty days to cure under § 1.2 and, if not cured, ninety days’ written notice under § 4. The court concluded that, as a matter of law, Aspirus’ failure to give ninety days’ notice violated the contract. It thus directed the verdict as to liability and submitted to the jury only the question of damages. The jury awarded Gunderson approximately $1.1 million.
¶8 Aspirus filed postverdict motions asking the trial court to reconsider the directed verdict, to change the jury’s answer either to zero or to $42,824.19,[1] or to grant a new trial due to errors at trial, an excessive jury verdict, or in the interest of justice. After a hearing and additional briefing, the trial court denied Aspirus’ postverdict motion, entered judgment on the verdict, plus costs and interest, in the amount of $1,150,522.64. Aspirus appeals.
¶9 Aspirus first argues that the trial court erred in granting a directed verdict to Gunderson in several respects. We agree.
¶10 On appeal of the grant of a motion for directed verdict, the
test is whether the trial court was “clearly wrong” in refusing to instruct the
jury on a material issue raised by the evidence. Leen v. Butter Co., 177
¶11 To resolve this issue, we first must interpret the contract
language, which is a question of law that we review de novo. Kailin v. Armstrong, 2002 WI App 70,
¶18, 252
¶12 While not a model of clarity, we conclude the service contract is
unambiguous. We read it to provide two
discrete ways, not a single two-step process, to terminate the contract for
cause. Section 1.2 addresses either party’s right to terminate the
contract upon thirty days’ notice in the event of the other’s material, but
unspecified, failure to perform. A
breach of contract is material when it is so serious as to destroy the
essential object of the contract. See Management Computer Servs., Inc. v. Hawkins,
Ash, Baptie & Co., 206
¶13 In contrast to § 1.2’s two-way street, § 4 more narrowly addresses Aspirus’ right to terminate if Gunderson fails to comply with expressly identified health and safety standards. Upon Gunderson’s failure to cure after thirty days’ notice, Aspirus may terminate the contract with ninety days’ written notice.
¶14 The two sections speak to distinct scenarios and neither
invokes or cross-references the other. Further,
a two-step approach makes no sense if Gunderson was the party seeking to terminate
for an alleged material breach by Aspirus.
It would have to give Aspirus a thirty-day notice under § 1.2 and then
proceed to § 4, which, as described above, solely deals with how Aspirus is to
handle Gunderson’s failure to meet certain standards and gives only Aspirus the
right to terminate with ninety days’ notice.
If the two-step process does not apply in that case, it strikes us as patently
unfair that Gunderson could terminate with only thirty days’ notice but Aspirus
is bound to at least ninety. We reject
such an illogical reading. See Star Direct, Inc. v. Dal Pra, 2009
WI 76, ¶62, 319
¶15 In addition, other sections address notice requirements in
other particular situations, such as for termination at the end of the contract
term or if Aspirus were to locate a less costly alternative and Gunderson did
not meet the price. Our primary aim is
to ascertain the intent of the parties. Eden
Stone Co. v. Oakfield Stone Co., 166
¶16 As noted, the trial court directed the verdict as to liability
because Aspirus failed to give ninety days’ notice under § 4. On motions after verdict, it found that Aspirus
did not give thirty days’ notice. Having determined that §§ 1.2 and 4 are
independent, those rulings are “clearly wrong” because there exists credible
evidence to the contrary. It is for the
jury to decide from that evidence which section of the contract was breached; whether
the breach was material; which of the letters, if any, constituted proper
notice; whether the alleged breach was cured; whether the non-breaching party
suffered damages and, if so, in what amount.
See Koenings v. Joseph Schlitz
Brewing Co., 126
Wis. 2d 601, 605, 148 N.W.2d 65 (1967) (damages). Therefore, the judgment is reversed and the
matter is remanded for proceedings consistent with this opinion.
By the Court.—Judgment reversed and cause remanded with directions.
This opinion will not be published. See Wis. Stat. Rule 809.23(1)(b)5.
[1] Aspirus argued that even if ninety days’ notice was required, it should be liable only for the November letter’s fifty-one-day shortfall, or $42,824.19.