Slania Enterprises, Inc. v. Appledore Medical Group, Inc.

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THE SUPREME COURT OF NEW HAMPSHIRE

___________________________

Strafford
No. 2017-0159

SLANIA ENTERPRISES, INC.

v.

APPLEDORE MEDICAL GROUP, INC.

Argued: November 16, 2017
Opinion Issued: May 1, 2018

Lynne C. Christie, of Durham, by brief and orally, for the plaintiff.

Nixon Peabody LLP, of Manchester (Kevin M. Fitzgerald on the brief and
orally), for the defendant.

BASSETT, J. The plaintiff, Slania Enterprises, Inc. (Slania), appeals a
decision by the Superior Court (Howard, J.) granting the motion of the
defendant, Appledore Medical Group, Inc. (Appledore), to dismiss as time-
barred a petition to recover damages stemming from an alleged breach of a
commercial real estate lease. We reverse in part, vacate in part, and remand.

The trial court recited, or the plaintiff alleged, the following facts. In
October 2012, Slania, as the lessor, and Appledore, as the lessee, entered into
a commercial real estate lease for an initial fixed term that ended on April 30,
2015. However, Appledore never took possession of the premises.
 Appledore paid rent due through January 2013, but then stopped doing
so. In March 2013, Appledore communicated to Slania that it wished to
terminate the lease. On April 12, 2013, Slania notified Appledore that it was in
default on its rental payments. Appledore did not pay. On April 22, 2013, at
the expiration of the 10-day cure period, Slania notified Appledore that,
pursuant to Section 13.1(b) of the lease, it was electing, as its remedy upon
default, to “keep the lease in effect and recover rent and other charges due
[from Appledore] less the amount [Slania] may recover by re[-]letting the
premises.” Slania re-let the premises from February 2015 through the end of
the initial term of the lease, April 2015, for a lesser monthly amount.

On April 29, 2016, Slania filed a breach of contract action against
Appledore for $82,527.87 in damages, which included rent, late fees, and
utility costs due from May 2013 through April 2015. Appledore moved to
dismiss, asserting that because the lease was breached no later than April 22,
2013, the claim was barred by the three-year statute of limitations under RSA
508:4, I (2010). Slania objected, arguing that the lease was an installment
contract, and, therefore, the statute of limitations did not bar a suit to recover
payments due within three years of the date the complaint was filed.

The trial court granted Appledore’s motion to dismiss, ruling that,
because “a real estate lease of the type involved here is not an installment
contract as that term is contemplated in the statute of limitations context,” the
so-called “installment contract rule,” under which the statute of limitations
runs only against each installment when it becomes due, did not apply. See
General Theraphysical, Inc. v. Dupuis, 118 N.H. 277, 279 (1978). Thus, the
trial court concluded, the breach in this case occurred “no later than April 22,
2013, the date upon which Appledore’s right to cure the claimed default
expired.” The trial court also ruled that, even if the installment contract rule
could apply to a commercial real estate lease, it did not apply to the parties’
lease because Appledore never took possession of the property.

In addition, the trial court decided that, although the lease “provided
Slania with the choice to continue the Lease and calculate damages in a certain
manner as a remedy to Appledore’s breach[,] . . . Slania’s unilateral choice of
remedies cannot serve to extend the time in which Appledore’s initial breach
occurred.” The trial court concluded that when Appledore “failed to cure the
default by April 22, 2013, the cause of action had arisen for purposes of the
statute of limitations.” The trial court denied Slania’s motion for
reconsideration. This appeal followed.

In reviewing the trial court’s grant of a motion to dismiss, our standard
of review is whether the allegations in the plaintiff’s pleadings are reasonably
susceptible of a construction that would permit recovery. Plaisted v. LaBrie, 165 N.H. 194, 195 (2013). We assume that the plaintiff’s pleadings are true

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and construe all reasonable inferences in the light most favorable to the
plaintiff. Id. We then engage in a threshold inquiry that tests the facts alleged
by the plaintiff against the applicable law, and if the allegations constitute a
basis for legal relief, we must hold that it was improper to grant the motion to
dismiss. Id.

Slania first argues that the trial court erred when it decided that
commercial real estate leases cannot be installment contracts for purposes of
the installment contract rule. We agree with Slania: a commercial real estate
lease can be an installment contract. An installment contract is “[a] contract
requiring or authorizing the delivery of goods in separate lots, or payments in
separate increments, to be separately accepted.” Black’s Law Dictionary 395
(10th ed. 2014). So too is a lease, in which a month’s use of the lessor’s
property is compensated by a monthly rent payment. Thus, a commercial real
estate lease that calls for separate payments, separately accepted, is an
installment contract.

Slania further argues that because a commercial real estate lease is an
installment contract, the installment contract rule applies. Under New
Hampshire law, “when an obligation is to be paid in installments[,] the statute
of limitations runs only against each installment as it becomes due even
though the creditor has the option to declare the whole sum due on default of
an installment, unless he exercises that option.” General Theraphysical, Inc.,
118 N.H. at 279. “In essence,” the installment contract “rule treats each
missed or otherwise deficient payment as an independent breach of contract
subject to its own limitations period.” Pierce v. Metropolitan Life Ins. Co., 307
F. Supp. 2d 325, 328-29 (D.N.H. 2004). “Accordingly, a party bringing an
action on an installment contract can recover only for those payments relating
to periods for which the applicable statute of limitations has not expired at the
time plaintiff files suit.” Id. (quotation, brackets, and ellipsis omitted).

Appledore counters that the installment contract rule does not apply to
commercial real estate leases because a lease does not convey a final
possessory interest. Appledore cites no support for this proposition. Nor have
we found any. Indeed, we have applied the installment contract rule to
contracts for the lease of goods, which similarly do not deliver a “final
possessory interest.” See General Theraphysical, Inc., 118 N.H. at 278-79.
Moreover, courts in other jurisdictions have ruled that the installment contract
rule can apply to real estate leases. See Lakeview Management, Inc. v. Care
Realty, LLC, Civil No. 07-cv-303-+SM, 2010 WL 346811, at *2 (D.N.H. Jan. 22,
2010) (applying the installment contract rule to a real estate lease and
observing that this court has not expressly excepted real estate leases from
that rule); Lindner v. Meadow Gold Dairies, Inc., 515 F. Supp. 2d 1141, 1151
(D. Haw. 2007) (applying Hawaiian common law); Holiday Furniture Factory
Out. Corp. v. DOC, 852 So. 2d 926, 928 (Fla. Dist. Ct. App. 2003); Annotation,

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When Statute of Limitations begins to run against action to recover upon
contract payable in instalments, 82 A.L.R. 316 (1933) (collecting cases that
apply the installment contract rule to many types of contracts including real
estate leases).

Appledore next contends that the installment contract rule does not
apply to real estate leases because leases are regulated by statute. See RSA ch.
540 (2007 & Supp. 2017); RSA ch. 540-A (2007 & Supp. 2017). The
installment contract rule is a common law rule. See General Theraphysical,
Inc., 118 N.H. at 279. “Generally, we will not construe a statute as abrogating
the common law unless the statute clearly expresses that intent.” Petition of
Willeke, 169 N.H. 802, 806 (2017) (quotation, brackets, and ellipsis omitted).
Nothing in RSA chapters 540 and 540-A addresses the statute of limitations for
a breach of contract action based upon a lease. Nor does the plain language of
RSA 508:4, I, which sets forth a three-year statute of limitations for “all
personal actions, except actions for slander or libel,” evince clear legislative
intent to abrogate the installment contract rule. Accordingly, we conclude that
commercial real estate leases do not fall outside the bounds of the installment
contract rule, and we reverse the trial court’s contrary ruling.

Alternatively, Appledore asserts that, “even if the [c]ourt were to conclude
the installment [contract] rule generally applies to real estate leases,” the rule
does not apply here because: (1) Slania’s claim is based upon a “single distinct
event which has ill effects that continue over time,” McNamara v. City of
Nashua, 629 F.3d 92, 96 (1st Cir. 2011) (quotation omitted); and (2) Appledore
never took possession of the premises.

To support the proposition that Slania’s claim is time-barred because it
is based upon a single, discrete event, Appledore relies upon McNamara and
upon a non-precedential order of this court. See id.; see also Gage v. State,
Case No. 2013-0362, 2014 WL 11656372, at *5 (N.H. Jan. 29, 2014) (3JX
Order). However, both cases are distinguishable. In McNamara, the plaintiff
sued Nashua “for harm done in inducing [a] settlement and for . . .
misreporting . . . matters to the [New Hampshire Retirement System].”
McNamara, 629 F.3d at 96. The court specifically distinguished a lawsuit
based upon that kind of single, discrete event from a lawsuit that the plaintiff
could have brought if Nashua had been obligated “to make periodic payments
to [him] and successively underpaid him.” Id. In the latter case, the court
explained, “a claim might arise each time a payment was made and a suit
could be brought within the limitations period on any underpayment.” Id.

In Gage, we stated, in dicta, that the petitioner’s lawsuit was “not
analogous to a claim for breach of an installment contract” because she had
“not sued the New Hampshire judicial retirement plan for individual
underpayments of pension benefits,” but rather had “claimed that the State

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failed to properly administer” the plan, thereby impairing her rights under the
applicable statute. Gage, 2014 WL 11656372, at *5.

Here, by contrast, Slania’s claim is based upon Appledore’s failure to pay
monthly rent. Appledore’s failure to pay is not a “single event,” but rather a re-
occurring contractual breach. See Pierce, 307 F. Supp. 2d at 331-32
(observing that “[c]ourts have routinely treated the failure to make payments
according to an agreed-upon schedule as the breach of an installment
contract”). The mere fact that Appledore ceased paying rent as of a certain
date, or that it notified Slania of its intent not to pay rent as of a certain date,
does not mean that Appledore’s failure to pay constitutes a single, discrete
event. As the federal district court explained in Pierce, “nearly every action
seeking to recover on a contract calling for periodic performances has its
genesis at the point where the defendant stops rendering those performances
through the first of what turns out to be a series of discontinued
payments.” Id. at 331-32. If the “first missed or otherwise deficient payment
triggered the statute of limitations as to all future payments, the installment
contract rule would never apply.” Id. at 332. Such a result “cannot be squared
with existing New Hampshire law.” Id.; see General Theraphysical, Inc., 118
N.H. at 279.

Appledore next asserts that the installment contract rule does not apply
to this claim because Appledore never took possession of the property.
Appledore cites no authority for the proposition that a tenant must take
possession in order for the installment contract rule to apply to a commercial
real estate lease. We fail to see how the fact that Appledore did not take
possession of the premises is legally relevant. See Holiday Furniture Factory
Out. Corp., 852 So. 2d at 928 (observing that, although none of the court’s
prior cases “involved a tenant who had never taken possession of the property
. . . , we see no need to limit the general [installment contract] rule to lessees
who have been in possession for some period”).

Applying the installment contract rule in this case would mean that
Slania’s breach of contract claim against Appledore is timely, but that Slania
may recover only those damages that accrued within three years of when this
lawsuit was filed. See Pierce, 307 F. Supp. 2d at 328-29. However, the trial
court stated that “[e]ven if our Supreme Court were to apply the installment
contract rule to real estate leases, this court would nevertheless conclude that
the action is barred under the circumstances of this case.” It reasoned:

Appledore did not take possession of the property and clearly
indicated its intent not to honor the lease in its communication on
March 28, 2013. Further, after Slania gave notice of the breach on
April 12, 2013, Appledore did not cure the default within the 10-
day period. Unequivocally, this contract action arose no later than

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 April 22, 2013, and needed to be filed within three years of that
date. Since it was not, the claim is time-barred.

Slania argues that, because it exercised its contractual right to “keep this
Lease in effect and recover monthly” from Appledore, the lease was neither
completely breached nor terminated on April 22, 2013. (Quotation omitted.)
Accordingly, Slania asserts that its suit is timely because the lease is an
installment contract and, therefore, “each month that the rent was not paid
was a separate breach of the lease triggering a new three year statute of
limitations for each breach.”

Appledore counters that the trial court found that Appledore materially
breached the lease on or before April 22, 2013, and, therefore, that the material
breach triggered the running of the statute of limitations. At oral argument,
Appledore asserted that the trial court found that Appledore had unequivocally
repudiated the lease on or before April 22, 2013. Appledore further argued
that repudiation “take[s] [this case] outside of the installment [rule] discussion
altogether,” presumably implying that Slania’s lawsuit is untimely.

As an initial matter, Appledore also argues that we should affirm because
Slania did not develop a sufficient argument in its appellate brief that the trial
court’s determination of when breach occurred was in error. We disagree and
turn to the merits of the parties’ arguments.

Under New Hampshire law, “[i]n instances of anticipatory breach, the
non-breaching party has the option to treat the repudiation as an immediate
breach and maintain an action at once for damages.” LeTarte v. West Side
Dev. Group, 151 N.H. 291, 294 (2004). “An anticipatory breach of a contract
occurs when a promising party repudiates his obligations either through words
or by voluntarily disabling himself from performing them before the time for
performance.” Id.

In LeTarte, we held that the defendant’s “repeated and unjustified failure
to make any of the first nineteen payments for more than three years”
constituted a “total anticipatory breach” of the parties’ installment contract,
and allowed the plaintiff to recover damages for such “total . . . breach.” Id. at
295. In a prior case, also involving an installment contract, we found that the
defendants’ failure to make payments “after the initial installments” constituted
a “material failure to perform” and, therefore, a “total breach” of the contract.
Id. at 294, 295; see Hoyt v. Horst, 105 N.H. 380, 389 (1964).

However, this court has yet to address whether, if the non-breaching
party elects not to sue within three years of the other party’s anticipatory
breach or repudiation, the non-breaching party’s lawsuit is barred by the
statute of limitations. Jurisdictions that have decided this issue are divided.

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Compare Bioveris Corp. v. Meso Scale Diagnostics, LLC, C.A. No. 8692-VCMR,
2017 WL 5035530, at *10 (Del. Ch. Nov. 2, 2017) (holding that letter with
accompanying payment “was a present breach accompanied by an anticipatory
repudiation, constituting a total breach” of the contract and that the
installment contract’s total breach triggered the applicable statute of
limitations), with Keefe Co. v. Americable Intern., Inc., 755 A.2d 469, 477 (D.C.
2000) (holding that the installment contract rule applied and explaining that
“nonpayment of one installment triggers no requirement to sue on the totality
of the debt”).

In rejecting Slania’s assertion that it could elect to keep the lease in place
and sue for breaches that occurred within three years of the date it filed suit,
the trial court did not mention anticipatory repudiation or material breach.
This case raises issues of first impression regarding the interplay of the
installment contract rule, a party’s election of contractual remedies, and
anticipatory repudiation or anticipatory breach. It does not appear that these
issues were fully explored by the trial court, and jurisdictions are divided on
how these issues affect when the statute of limitations accrues. Accordingly,
we vacate the trial court’s ruling with respect to Slania’s argument that, under
the terms of the lease, it could keep the lease in effect and bring an action to
recover for breaches that occurred no more than three years before the date it
filed this suit. We remand for such further proceedings, consistent with this
opinion, as the trial court may deem necessary.

Reversed in part; vacated in part; and remanded.

LYNN, C.J., and HICKS and HANTZ MARCONI, JJ., concurred;
DALIANIS, C.J., retired, specially assigned under RSA 490:3, concurred.

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