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The Skinny Pancake-Hanover, LLC v. Crotix

Supreme Court of New Hampshire, Grafton

July 11, 2019

THE SKINNY PANCAKE-HANOVER, LLC
v.
CROTIX & a.

          Argued: June 6, 2019

          Sheehan Phinney Bass & Green, P.A., of Manchester (James P. Harris and Patrick J. Queenan on the brief, and Mr. Harris orally), for the plaintiff.

          Cleveland, Waters and Bass, P.A., of Concord (Bryan K. Gould and Cooley A. Arroyo on the brief, and Mr. Gould orally), and Schuster, Buttrey & Wing, P.A., of Lebanon (Barry C. Schuster on the brief), for the defendants.

          LYNN, C.J.

         The plaintiff, The Skinny Pancake-Hanover, LLC, appeals decisions of the Superior Court (Bornstein, J.) that granted partial summary judgment to the defendants, Crotix and James and Susan Rubens, on the plaintiff's breach of contract claim, and that dismissed the plaintiff's claim against the defendants for breach of the implied covenant of good faith and fair dealing. We affirm.

         I

         The relevant facts follow. On October 15, 2015, the plaintiff entered into a lease with the defendants for a single unit in the Hanover Park Condominium building. The lease gave the plaintiff the option to purchase its rental unit along with certain other units in the building. Specifically, the option provided that:

Within the first nine (9) months from Lease Commencement Date, Tenant shall have the exclusive option to purchase all Hanover Park Condominium units then owned by Landlord . . . in AS IS condition for $5, 553, 570 . . . . After 180 days from Commencement Date, this Purchase Option shall expire if there is no signed Purchase & Sale Agreement.

         On May 20, 2016, the plaintiff sent the defendants a letter to "give formal notice of Tenant's intent to exercise its purchase option" under the lease. Included with the letter was a Purchase and Sale Agreement that provided for certain conditions to be met prior to closing, including a 90-day due diligence period during which the plaintiff could perform inspections, and further providing that the plaintiff may, in its "sole discretion, on or before the expiration of the Due Diligence Period elect to . . . terminate [the] Agreement by providing written notice [of] termination to [the defendants] . . ., in which case all of the rights and obligations of the parties to [the] Agreement" would cease and terminate. By letter dated May 26, 2016, the defendants "declined" the plaintiff's request, stating that the plaintiff's attempted exercise of the option was untimely under the terms of the agreement.

         In response, on May 28, the plaintiff sent the defendants an e-mail stating that it was hoping to "avoid a lengthy argument over this as the evidence is so overwhelmingly in favor of our position and we are absolutely committed to whatever means necessary to exercise our option." On July 19, the plaintiff sent the defendants a letter demanding that they convey the property, emphasizing that the defendants were "obligated to sell the Property upon" the plaintiff's exercise of the option on May 20. The defendants responded by stating that "[t]he terms of the option to purchase [were] clearly set forth in the Lease and, in order for [the plaintiff] to benefit from the terms of that option, it was required to perform according to those terms."

         In September 2016, the plaintiff filed a verified complaint in superior court asserting: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) intentional misrepresentation (fraud); (4) negligent misrepresentation; and (5) violation of the Consumer Protection Act (CPA), RSA chapter 358-A. According to the plaintiff, the May 20 letter provided the defendants with notice of its "intent to exercise its Option to Purchase" and obligated them to sell the property. In their answer, the defendants asserted that the May 20 correspondence was insufficient to trigger their obligations because "[n]either the letter nor the proposed purchase and sale agreement accepted the terms of the Purchase Option but offered numerous conditions and terms."

         Thereafter, the parties engaged in extensive litigation. First, the parties cross-moved for summary judgment, which the court denied because, in its view, there were genuine issues of fact as to what date constituted the commencement date for purposes of the agreement, and there also were issues of fact concerning the plaintiff's good faith and fair dealing claim. In October 2017, the court denied the defendants' motion for partial dismissal of the breach of the good faith and fair dealing claim. In reaching this decision, the court was guided by the plaintiff's assertion that this claim was not based on the defendants' performance under the contract, but rather was based on the defendants' breach of the covenant during contract formation.

         In January 2018, the court granted in part the defendants' second motion to dismiss. The court dismissed the plaintiff's claims for intentional misrepresentation (fraud) and for violation of the CPA, but did not dismiss the claims for breach of the implied covenant of good faith and fair dealing and for negligent misrepresentation. As to the good faith and fair dealing claim, the court reiterated that, as explained by the plaintiff in its objection to the first motion to dismiss, this claim was predicated on the defendants' alleged bad faith actions with respect to contract formation, not contract performance. The court later denied the plaintiff's motion to amend its complaint to add allegations of breach of the covenant with respect to the defendants' performance under the contract. According to the court, "the proposed amendments would introduce a new cause of action that the plaintiff ha[d] repeatedly disclaimed" up until that point and would prejudice the defendants.[1]

         In July 2018, the court granted the defendants' motion for partial summary judgment on the plaintiff's breach of contract claim. The court agreed with the defendants' argument that no breach occurred because the plaintiff never properly invoked its option. The court ruled that the plaintiff's May 20 correspondence was insufficient because it was not an unconditional acceptance in accordance with the terms of the option provision of the lease. The court also rejected the plaintiff's arguments that its later correspondence operated as an acceptance because these later demands were "explicitly tethered to the May 20" correspondence. The court reasoned that these later attempts were "all ineffective because none of them were unequivocal, unconditional, and in accord with the terms of the option agreement." The court concluded that the plaintiff's reliance on Livingston v. 18 Mile Point Drive, 158 N.H. 619 (2009), was misplaced because that case "involved a party's breach of a contract's implied covenant of ...


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