## Facts

- James Harris (plaintiff) entered a tax-motivated sale–leaseback transaction involving a shopping mall building in Monona, Wisconsin.
- On the same date, Harris bought the mall from Metropolitan Mall (defendant) under a land contract and leased the property back to Metropolitan.
- The lease gave Metropolitan an option to repurchase the mall in the future.
- Harris made a down payment of \$388,100, intended to allow Metropolitan to complete interior improvements needed to attract retail tenants.
- Individual defendants (including partners/affiliates of Metropolitan) signed a guaranty connected to the lease, agreeing to pay the landlord “all damages” arising from the tenant’s default under the lease.
- Metropolitan materially breached obligations tied to the sale–leaseback arrangement.
- After the breach, Harris stopped making land-contract payments, took possession of the mall, and continued operating it.
- Harris later sold the property and received a total of \$150,000, derived partly from the purchaser and partly from fire-insurance proceeds after a fire in the mall.
- Harris sued Metropolitan and the individual guarantors for breach of contract, seeking restitution of his investment, unpaid rent, and out-of-pocket expenses.
- Metropolitan argued restitution was improper because Harris had received significant tax benefits from the transaction.
- The trial court treated the case as one for expectation (benefit-of-the-bargain) damages and offset amounts Harris received from the property; the court of appeals affirmed in an unpublished decision.

## Issues

1. Should a land contract for the sale of a building and a lease of that building back to the sellers, executed on the same date as part of a sale–leaseback, be construed together?
2. May a party injured by breach of a sale–leaseback contract choose restitution of the investment made under the contract as a remedy for the breach?
3. Does a lease guaranty obligating guarantors to pay “all damages” arising from the tenant’s default make the guarantors liable for the landlord’s restitutionary recovery resulting from breach of the integrated sale–leaseback transaction?

## Decision

- The Wisconsin Supreme Court reversed the court of appeals and remanded.
- The court held the land contract and lease, executed the same day as parts of a sale–leaseback, must be construed together as a single transaction.
- The court held an injured party in a breached sale–leaseback transaction may elect restitution of the investment conferred, rather than being confined to expectation damages.
- The court rejected the argument that Harris’s tax benefits, by themselves, barred restitution or required a reduction of the restitutionary recovery on that basis.
- The court held the guaranty’s “all damages” language made the individual guarantors liable for Harris’s restitution remedy tied to Metropolitan’s default in the integrated transaction.
- The case was remanded for computation of a restitutionary award consistent with the opinion, including appropriate credit for benefits Harris actually received from the property (such as amounts realized from the sale and insurance proceeds).

## Legal Principles

- Separate instruments executed contemporaneously by the same parties as parts of one deal are construed together to determine rights, duties, and remedies.
- For a material breach of a sale–leaseback treated as one contract, the injured party may elect restitution to recover the value of the benefit conferred (the investment), as an alternative to expectation damages.
- In awarding restitution, the court credits the defendant for measurable benefits the plaintiff actually received from the transaction (for example, cash realized on resale or insurance proceeds), to avoid double recovery.
- Tax benefits obtained by the plaintiff from entering a tax-motivated transaction do not automatically reduce or defeat a restitution remedy in a contract action.
- A guaranty promising payment of “all damages” resulting from tenant default under a lease that is part of an integrated sale–leaseback extends to restitutionary liability arising from the default, not only to unpaid rent or other expectation-based items.

## Conclusion

The Wisconsin Supreme Court treated the land contract and leaseback as one integrated sale–leaseback transaction, held that Harris could choose restitution of his investment despite having received tax benefits, and ruled that the lease guarantors were liable under their “all damages” guaranty for the restitutionary recovery, remanding for calculation of the proper award with credit for amounts Harris actually received from the property.


Harris v. Metropolitan Mall, 334 N.W.2d 519, 112 Wis. 2d 487 (1983)