Appeal from the United States District Court for the Western District of Wisconsin. No. 81 C 279 -- John C. Shabaz, Judge.
Wood and Cudahy, Circuit Judges, and Celebrezze, Senior Circuit Judge.*fn*
This is an appeal in a diversity action brought by William B. Tanner Co., Inc. ("Tanner"), against the Sparta-Tomah Broadcasting Co., Inc., d/b/a Radio Station WCOW ("WCOW") alleging a breach of contract. This appeal presents interesting questions of law concerning the interpretation and construction of the parties' contract. We reverse the judgment of the district court, 543 F. Supp. 593, and remand for a new trial.
Tanner, and its predecessors in interest, is in the business of selling or leasing promotional materials and services to radio stations. In addition to monetary compensation, Tanner also trades its products to radio stations in return for advertising air time on those stations. Tanner then acts as a "distributor" for that air time, selling air time to advertisers and inventorying unused time until it can be resold.
In August of 1966, Tanner's predecessor (hereinafter "Tanner") and WCOW entered into a "lease" contract providing that Tanner would furnish a promotional package to WCOW for a period of three years in exchange for $1,908 and 2,340 one-minute spot announcements (commercial air time). In December of 1967, Tanner and WCOW entered into an additional one-year "license" contract whereby Tanner furnished WCOW with promotional material in exchange for $477 and 520 one-minute spots. The cash payments have been made in full.
The two contracts were essentially identical form contracts drafted by Tanner. Certain minor changes were made in the contracts, however, at the request of WCOW. The 1966 contract contained the following language concerning the spots:
3. Station also agrees to pay additionally for use of the above productions in broadcast time upon request by MARS BROADCASTING, INC., as follows: 2340 one-minute spots, with 1/3 of total number in drive time and the remainder in best time available between 6 A.M. and 7 P.M. These spots are preemptable, and since they are considered partial payment for service(s) received, they are to be valid until used. A conversion of the above spot total to a cash credit based upon lowest rate per time classification as per published rates as in SRDS this date, may be exercised by MARS BROADCASTING, INC., in the event nighttime schedules and/or shorter length announcements are desired.
The 1967 contract contained an identical provision, except that the number of spots was smaller and the "best time" provision specified between "6 A.M. and 9 P.M." rather than between "6 A.M. and 7 P.M."
Tanner made no request for use of spots during the three-year period of the first contract or the one-year period of the second contract. Tanner requested and received use of 34 spot announcements in 1974 and 48 spot announcements in 1978. In response to a request for spots in January of 1979, WCOW sent Tanner a letter which read:
Enclosed is a Radio Broadcast Order for d-Con Rat Killer which arrived here today. I am returning it to you as rejected. The original agreement with your company is something like a dozen years old. It is so old I no longer have a record of it. Neither do I know how much you have used on a total of how much. If you have something which shows this, please send it to me for my examination. Until I receive it, I can schedule nothing more that comes through the William B. Tanner Co.
This lawsuit for breach of contract followed. Cross motions for summary judgment were filed. The district court granted Tanner's motion, but only as to liability. The court found that the language of the contract was clear and unambiguous. The court rejected WCOW's contention that the limited term of the contracts with respect to the promotional materials created an ambiguity when considered with Tanner's apparently unlimited right to use the spots. The court held that the spots were to be available to Tanner without any time limitation. The court further rejected WCOW's argument that the court should imply a reasonable time for the availability of the spots to avoid sanctioning an unlimited obligation. The district court acknowledged the persuasiveness of the "reasonable time" argument, but declined to imply a reasonable term both because WCOW had acted ...