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

Supreme Court of New Hampshire

May 1, 2018


          Argued: November 16, 2017

          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 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-, 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. ...

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