ARGUMENT: January 17, 2018
Circuit Court Dane County (L.C. No. 2014CV1624) Juan B. Colas
OF DECISION OF THE COURT OF APPEALS Reported at 375 Wis.2d
798, 899 N.W.2d 738 (2017 - unpublished)
the defendant-appellant-petitioner, there were briefs filed
by Nicole S. Schram, Cathleen A. Dettmann, Kevin J.
Palmersheim, and Haley Palmersheim, S.C., Middleton. There
was an oral argument by Cathleen A. Dettmann.
the plaintiff-respondent, there was a brief filed by Robert
C. Procter, III, with whom on the brief were Justin H.
Lessner, and Axley Brynelson, LLP, Madison. There was an oral
argument by Robert C. Procter, III.
amicus curiae brief was filed on behalf of Wisconsin Realtors
Association by Debra P. Conrad and Wisconsin Realtors
WALSH BRADLEY, J.
The petitioner, Capital Cartage, Inc. (Capital Cartage),
seeks review of an unpublished decision of the court of
appeals affirming the circuit court's determination that
real estate broker Mark McNally (McNally) is entitled to a
commission pursuant to the listing contract between the
parties. Contrary to the court of appeals'
determination, Capital Cartage asserts that McNally is not
entitled to a commission because the offer to purchase
McNally procured contains substantial variances from the
seller's terms as set forth in the listing contract.
Specifically, Capital Cartage argues that three terms in the
offer to purchase constitute substantial variances from the
listing contract. Among these is a dispositive condition that
Mary Hermanson, one of Capital Cartage's owners, continue
to work for the business without pay for an undetermined
period of time following the sale.
Capital Cartage further asserts that the court of appeals
erroneously interpreted Libowitz v. Lake Nursing Home,
Inc., 35 Wis.2d 74, 150 N.W.2d 439');">150 N.W.2d 439 (1967) . It alleges
that Libowitz did not, as the court of appeals
concluded, alter the standard for determining whether a
substantial variance exists as set forth by Kleven v.
Cities Serv. Oil Co., 22 Wis.2d 437, 126 N.W.2d 64');">126 N.W.2d 64
(1964) . Therefore, it contends that McNally is not
entitled to a commission because he did not procure an offer
to purchase "at the price and on substantially the terms
set forth" in the listing contract.
We conclude first that Kleven remains the law of
this state with regard to determining whether a substantial
variance exists between a listing contract and an offer to
purchase. Although a term of the offer to purchase that is
directly in conflict with the listing contract is a
substantial variance, it is not the sole manner in which
substantial variance may be shown. Kleven offered
direct contradiction as an example, not as a limitation.
Applying this standard, we conclude that in the context of
the sale of a business with real estate where the sale did
not go through, the condition in the offer to purchase that
Mary Hermanson continue to work for Capital Cartage without
pay constitutes a substantial variance from the listing
contract as a matter of law. Consequently, we determine that
McNally did not procure an offer to purchase "at the
price and on substantially the terms set forth" in the
listing contract and therefore is not entitled to a
Accordingly, we reverse the court of appeals.
Mary and Rolyn Hermanson own Capital Cartage, a moving and
storage business. Seeking to retire and sell the business
with real estate, Mary Hermanson (Hermanson) met with
McNally, a real estate broker. As a result of this meeting,
McNally drafted a listing contract. He used the standard
state form listing contract, labeled as a WB-6 Business
The listing contract contained a provision setting forth the
requirements that must be met for the broker to earn a
commission. In relevant part, the contract provides:
Seller shall pay Broker's commission, which shall be
earned if, during the term of this Listing . . . [a]n offer
to purchase is procured for the Business or included property
by the Broker, by Seller, or by any other person, at the
price and on substantially the terms set forth in this
Listing and the standard provisions of the current [state
form offer to purchase. ]
The asking price for the business with real estate as
reflected in the listing contract was $1.2
million.Approximately three weeks after the listing
contract was executed, McNally procured an offer to purchase
Capital Cartage from Steven Erickson (Erickson).
Prior to submitting an offer to purchase, Erickson presented
a letter of intent to Hermanson. The letter of intent
included, among others, the following three conditions for
Lender required good faith deposit (approximately $7, 500 for
appraisal and other costs) is split between seller and buyer
once financing is fully approved, commitment letter issued
and appraisal ordered. Seller to be reimbursed in full for
good faith deposit at closing.
Covenant agreements not to compete signed by Mary and Rolyn
Hermanson (prior to close) [.]
Mary and Rolyn Hermanson agree to operate business as normal
until acquisition takes place and for Mary to stay on full
time and without pay for period outlined in proposed
Hermanson, dissatisfied with the letter of intent, sent an
email to McNally objecting to the $1.2 million sale price.
Instead, Hermanson sought a $1.4 million sale price.
As the letter of intent foreshadowed, Erickson's offer to
purchase was for a price of $1.2 million. The offer to
purchase was presented on the standard state form "WB-16
Offer to Purchase - Business with Real Estate."
Erickson, however, included an additional page, labeled as
"Addendum A, " which consisted of the last page of
the letter of intent. Addendum A listed conditions for the
sale, which included the three above conditions at issue
After receiving the offer, Mary and Rolyn Hermanson rejected
the offer in a letter from their counsel to McNally. The
letter stated in part:
Capital Cartage, Inc., has just concluded its Special Meeting
of Shareholders at my office this afternoon. The Wisconsin
statutes require that a majority vote of the shareholders is
necessary to sell the business. The vote was called and the
motion to approve the offer to purchase failed to achieve a
majority of the shareholders' votes. Capital Cartage has
decided not to sell its business at this time.
did not provide any other reason for rejecting the offer.
Subsequently, McNally filed this lawsuit, alleging that
Capital Cartage owed him a commission of $72, 000 pursuant to
the listing contract. He asserted that he had procured an
offer "at the price and on substantially the terms set
forth in this Listing[.]"
Capital Cartage answered the complaint and subsequently moved
for judgment on the pleadings. It argued that no commission
was due as a matter of law because there were substantial
variances between the listing contract and the offer Erickson
submitted. Capital Cartage cited six alleged variances,
including the three conditions at issue.
The circuit court denied the motion for judgment on the
Whether the offer varies substantially from the terms of a
listing contract is a question of fact that is in dispute in
the pleadings. Though the listing contract and the offer are
undisputed and are part of the pleadings, whether the
variances are substantial may depend upon other relevant
facts concerning the transaction or the nature of the
business being sold. The inclusion of some conditions in an
offer may be a substantial variance in some circumstances and
not in others [ . ]
The case proceeded to trial. As indicated in the circuit
court's decision denying the motion for judgment on the
pleadings, one of the issues at trial was whether the offer
to purchase contained substantial variances from the listing
At the jury instruction conference, following extensive
discussion, the circuit court determined as a matter of law
that the three conditions at issue were not substantial
variances from the listing contract. The circuit court
And I think 'substantial variance' has to mean
inconsistent with or in direct conflict with. I don't
think it can just be any variance, even any difference at
all-any difference at all between the listing contract and
the offer. Not every variance is a substantial one. And where
there's nothing in the contract on a topic and the offer
proposes something, that's not a substantial variance as
I read the case law.
Accordingly, the circuit court instructed the jury that
"[t]he court has determined that as a matter of law that
the provisions in the offer to purchase that the sellers
share in the costs of appraisal, that the Hermansons sign
non-compete agreements and that Ms. Hermanson continue to
work for Capital Cartage after the sale are not substantial
variances." The jury found in McNally's favor,
requiring Capital Cartage to pay his commission.
Capital Cartage appealed, arguing that the circuit court
erred by denying its motion for judgment on the pleadings. It
further contended that the circuit court erred at the jury
instruction conference by concluding, as a matter of law,
that the three conditions at issue were not substantial
variances from the listing contract.
The court of appeals affirmed the circuit court's entry
of judgment on the jury's verdict. McNally v. Capital
Cartage, Inc., No. 2015AP2627, unpublished slip op.
(Wis. Ct. App. Apr. 27, 2017) . In an unpublished decision,
the court of appeals concluded "that a substantial
variance in this context is limited to variances in offers
that directly conflict with express terms in the
corresponding listing contract." Id., ¶3.
Capital Cartage argues that the circuit court erred by
denying its motion for judgment on the pleadings and in the
alternative, by instructing the jury that the three
conditions at issue are not substantial variances as a matter
A judgment on the pleadings is essentially a summary judgment
decision without affidavits and other supporting documents.
Jares v. Ullrich, 2003 WI.App. 156, ¶8, 266
Wis.2d 322, 667 N.W.2d 843. We determine first whether the
complaint has stated a claim. Id. If so, we next
examine the responsive pleading to ascertain whether an issue
of material fact exists. Id. Judgment on the
pleadings is proper only if there are no genuine issues of
material fact. Town of Windsor v. Vill. of DeForest,
2003 WI.App. 114, ¶5, 265 Wis.2d 591, 666 N.W.2d 31.
A factual issue is genuine if the evidence is such that a
reasonable jury could return a verdict for the nonmoving
party. Physicians Plus Ins. Corp. v. Midwest Mut. Ins.
Co., 2002 WI 80, ¶18, 254 Wis.2d 77, 646 N.W.2d 777
(citing Baxter v. DNR, 165 Wis.2d 298, 312, 477
N.W.2d 648 (Ct. App. 1991)). Whether judgment on the
pleadings should be granted is a question of law we review
independently of the determination made by the circuit court
and court of appeals. Jares, 266 Wis.2d 322,
Likewise, whether jury instructions accurately state the
applicable law presents a question of law which we review
independently of the determinations rendered by the circuit
court and court of appeals. State v. Beamon, 2013 WI
47, ¶18, 347 Wis.2d 559, 830 N.W.2d 681.
The court of appeals correctly observed that the resolution
of these two issues hinges on the same legal question:
whether the three conditions in the offer to purchase are
substantial variances from the terms of the listing contract.
McNally, No. 2015AP2627, ¶17. Thus, as did the
court of appeals, we address this single question. We answer
the question only in the context of a sale of a business with
real estate where the sale did not go through.
We begin our analysis by setting forth the evolution of the
law regarding "substantial variance" between a
listing contract and an offer to purchase. Next, we clarify
the standard under which courts are to determine questions of
substantial variance. Finally, we examine the conditions in
the offer to purchase, applying the law as set forth.
Our examination of the law begins in 1944, with this
court's decision in Moss v. Warns, 245 Wis. 587,
15 N.W.2d 786 (1944). In Moss, a seller of
residential property entered into a listing contract with a
broker. Id. at 588-89. The broker procured an offer
to purchase the property. Id. at 589. Stating only,
"[w]e decided not to sell. [A co-owner] would not
consent to it, " the seller rejected the offer.
After the broker brought suit seeking a commission pursuant
to the terms of the listing contract, the seller raised as a
defense alleged "discrepancies between some of the terms
of sale specified in the listing agreement and the terms
stated in [the] offer to purchase[.]" Id. at
590-91. The court concluded that the seller had waived any
objection to the alleged discrepancies because the seller did
not bring the discrepancies to the broker's attention
when initially rejecting the offer. Id. at 591-92.
Moss thus established a rule that " [r]
egardless of whether the principal, at the time of his
refusal to consummate the transaction, states some grounds or
no grounds for such refusal, a particular ground not
specified by him at the time is waived and cannot be urged by
him when sued [by a broker] for a commission."
Id. at 591 (citing 12 C.J.S., Brokers, p. 224,
§ 95) . In other words, the Moss court
concluded that, in order for sellers to rely on discrepancies
between the terms of an offer to purchase and the terms of a
listing contract to relieve them from paying a broker's
commission, sellers must bring their objections to the
The holding in Moss was subsequently limited by this
court's decision in Kleven, 22 Wis.2d 437. In
Kleven, as in Moss, a seller rejected an
offer to purchase without giving a reason for doing so.
Id. at 441.
The Kleven court concluded that sellers could reject
an offer to purchase without giving a reason and without
triggering a broker's entitlement to a commission if
there were "substantial" variances between the
terms of the listing contract and the terms of the offer.
Id. at 444. The court reasoned that an insubstantial
variance should be brought to a broker's attention to
give the broker an opportunity to correct it. Id.
However, where the variance is substantial, "such as one
that is directly in conflict with a material provision of the
listing contract, there has been no substantial performance
by the broker which would entitle him to his commission,
absent acceptance of the offer by the owner."
Id. In that situation, the broker is chargeable with
knowledge that the substantial variance exists when the offer
is submitted. Id. Therefore, "the owner should
be under no duty to point this variance out to the broker in
rejecting the offer." Id.
This court purported to apply Kleven in
Libowitz, 35 Wis.2d 74. The Libowitz court
summarized the circumstances in which a seller will be
relieved of paying a broker's commission following
Kleven as follows:
Summarizing these rules as they apply to the case at hand,
the complaint would be demurrable on the ground of failing to
state a cause of action if, in spite of liberal construction
principles, it alleged variations between the terms of the
listing contract and the offer that were: 1. Substantial
variations, i.e., 'directly in conflict with a material
provision of the listing contract;' 2. Insubstantial, but
called to the attention of the broker; or, 3. Insubstantial,
but of such a nature that they could not have been remedied
by the broker anyway.
Id. at 82-83.
The court of appeals in this case observed a difference in
language between Kleven and Libowitz, to
which it ascribed great import. Namely, Kleven used
the phrase "such as" when explaining the meaning of
"substantial variation, " while Libowitz
employed "i.e." McNally, No. 2 015AP2 627,
¶28; Kleven, 22 Wis.2d at 444;
Libowitz, 35 Wis.2d at 82.
In the court of appeals' estimation, the case turns on
this linguistic idiosyncrasy. It observed, "[t]he
Kleven court's use of 'such as' . . .
indicated that there are variances that are substantial that
do not involve a direct conflict between an offer and the
listing contract. If the Kleven court had intended
substantial variances to be limited to offer terms in direct
conflict with listing terms, the sentence would read:
'where the variance is a substantial one, that is, one
that is directly in conflict ..." McNally, No.
Accordingly, the court of appeals concluded "the supreme
court in Libowitz modified the Kleven
substantial variance language by replacing 'such as'
with 'i.e., ' thus, in our view, doing what
Kleven did not do. That is, Libowitz
limited 'substantial variances' to those involving a