Headstart Building v National Centers For Learning Excellence, Inc. (WI)

Headstart Building v National Centers For Learning Excellence, Inc., 2017 WI APP 81.

Summary: The circuit court erred when declaring an option-to-purchase provision of a lease void.

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Facts: National Centers for Learning Excellence (National) entered into a contract with Headstart Building (Headstart) to purchase a property owned by Headstart. The contract contained an option-to-purchase provision. If the option was exercised, then the purchase price would be based on the average of two appraisals — one by each party — so long as they were within five percent of one another. If the numbers were over five percent, then the contract called for a third appraisal to be conducted. Due to the appraisers estimating the value of the property at different interests, the two appraisals were not within five percent of one another.

Headstart attempted to exercise the option. However, no third appraisal was ever conducted. Instead, Headstart filed a motion to compel National to purchase the property at the price determined by Headstart’s appraiser. National responded by seeking a declaratory judgement to resolve whether the appraisals should be based on a leased fee interest or fee simple. The circuit court dismissed Headstart’s motion ruling that there was no meeting of the minds and declared the option itself void. The circuit court also determined that the declaratory judgement was moot, and thus was dismissed.

Holding: Reversed and case remanded with directions. The sole issue on appeal is whether the option is enforceable. Headstart agreed with the circuit court arguing that there was no meeting of the minds and thus the option was unenforceable. Further, Headstart states that the option did not provide a method to determine the value of the property because it failed to specify whether National's lease should be considered. This appellate court disagreed with this reasoning.

This court states that (1) the option clearly calls for the appraisals of the fair market value of the property and the law is clear that the price term based on the fair market value is sufficiently definite, and (2) the option provides for a resolution to any dispute that may arise (i.e., a third appraisal shall be conducted). Accordingly, the price is capable of being determined with reasonable certainty. The court held that the option is sufficiently definite and enforceable. Therefore, the court reversed the circuit court's order denying National's declaratory judgment and voiding the option and remanded the case to reconsider the declaratory judgment.

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By: ATG Underwriting Department | Posted on: Wed, 04/18/2018 - 1:58pm