THE STATE OF NEW HAMPSHIRE SUPREME COURT

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1 THE STATE OF NEW HAMPSHIRE SUPREME COURT In Case No , 102 Plaza, Inc. v. Jared Stevens & a., the court on July 12, 2017, issued the following order: The defendants, River House Bar and Grill, LLC and its principal, Jared Stevens (tenants), appeal an order of the Circuit Court (Moore, J.), following a hearing on the merits, granting the plaintiff, 102 Plaza, Inc. (landlord), possession of a commercial property for breach of a lease. The tenants argue, in part, that the evidence was insufficient to support a finding that the landlord had provided them with written notice of default under the terms of the lease. We reverse and remand. A lease is a form of contract that is construed in accordance with the standard rules of contract interpretation. Tulley v. Sheldon, 159 N.H. 269, 272 (2009) (quotation omitted). The interpretation of a lease is, ultimately, a question of law for this court to determine. Id. In construing a lease, we give the language used by the parties its common meaning as understood by reasonable people and, absent ambiguity, we determine the parties intent from the plain meaning of the language used. Id. It is this court s task to interpret the contract, using facts found by the trial court. In our search for the interpretation that will best reflect the parties intention, the court considers the written agreement of these parties, all of its provisions, its subject matter, the situation of the parties at the time, and the object intended. So. Willow Properties v. Burlington Coat Factory of N.H., 159 N.H. 494, 501 (2009) (quotation omitted). The lease in this case was for a term of five years beginning on June 1, 2011, and ending on May 31, So long as the tenants were not in default, the lease provided that its term would automatically renew for one additional fiveyear term unless the tenants notified the landlord at least four months prior to the renewal date that they were not renewing the lease. Paragraph ten of the lease provided that Stevens, the only tenant identified in the lease, shall use the premises during the term of this lease for pizza and sandwich sales. The parties do not dispute that the tenants have used the property for pizza and sandwich sales throughout the duration of the lease. The lease did not expressly prohibit any other uses, and in 2014, the parties amended the lease so as to add Stevens s business as a named tenant so that [he] may obtain a liquor license. With respect to the amendment, the landlord s principal, Cliff Antonell, testified that [w]e agreed that [Stevens] could serve beer and wine along with his pizza in the shop. We did not agree that he could open up a bar.

2 Paragraph 26 of the lease contained the following provision governing default by the tenants: In the event that:... b) The [tenants] shall default in the observance or performance of any... of the [tenants ] covenants, agreements or obligations hereunder [other than the payment of rent] and such default shall not be corrected within thirty (30) days after written notice thereof... then the [landlord] shall have the right thereafter, while such default continues, to re-enter and take complete possession of the leased premises, to declare the term of this lease ended, and remove the [tenants ] effects, without prejudice to any remedies which might be otherwise used for arrears or rent or other default.... Paragraph 28 of the lease further provided that [a]ny notice... to the [tenants] relating to the leased premises or occupancy thereof, shall be deemed duly served, if left at the premises addressed to the [tenants], or if mailed to the leased premises, registered or certified mail, return receipt requested, postage prepaid, addressed to the [tenants]. In 2014, the year the parties amended the lease to allow Stevens to obtain a liquor license, the tenants built a bar and a stage, and began to provide entertainment, including karaoke and live music, and a full service bar. On February 9, 2016, Katie Antonell, an employee of the landlord, sent an addressed only to Cliff Antonell, which was entitled Jared Letter, and which stated, in its entirety: Hi Jared, We saw on your site that you were advertising live music every Saturday in February. We wanted to let you know that the service of live music needs to be approved by us first. Your site didn t mention hard alcohol, but that also needs to be approved by us if you are offering it. Because you have the live music advertised this month of February, you can proceed with the music this month, however no later until you have a conversation with Cliff. Thank you, Katie. 2

3 Cliff Antonell testified that the was in fact sent to the tenants. Stevens, however, disputed that he ever received it. During Stevens s cross-examination, the following exchange occurred: Q Okay. So you said you didn t notice Ms. Antonell s , correct? A Correct. Q Just didn t notice it? You don t remember any of the conversations with Mr. Antonell about not wanting him to -- not wanting you to conduct the entertainment?... Q Prior to February A Absolutely not. Q So you don t remember any of those conversations? A No. Q But you did get a letter from me in March notifying you? A It was either -- I believe we do have the envelope. I think it was April 12th. I believe it was a certified mail. Q So you did get something from me notifying you that you were in default? A In April, yes. Although Stevens admitted to receiving a certified letter from the landlord s trial counsel notifying him of a default, that letter was not admitted into evidence, and the record does not otherwise contain evidence of its contents. The landlord served eviction notices upon the tenants, dated June 23, 2016, providing the following reasons for the eviction: 1. That you currently occupy the premises without a valid lease against the wishes of 102 Plaza, Inc.; and 2. You are in default of the terms of the prior lease for using the leased premises as a bar and nightclub, beyond the allowed 3

4 use of pizza and sandwich sales as set for[th] in paragraph 10 of the prior lease; and 3. Behavior of your customers that adversely affected the safety of other tenants; and [4.] For other good cause pursuant to RSA 540:2 II (e) and RSA 540:2 V as follows: For legitimate business and economic reasons. The trial court granted the eviction on the second ground, finding as follows: The [tenants] breached Paragraph 10 of the aforementioned June 1, 2011 Commercial Lease, by [their] unauthorized expansion of the use of the property from a pizza and sandwich shop to a bar/grill and entertainment venue without the prior written authorization of the [landlord]. The Court, in entering the above referenced finding, agrees with [the landlord s trial counsel] that the [tenants ] actions clearly expanded the use of the subject premises beyond what the parties could have comprehended and/or anticipated on the date the Commercial Lease was signed, June 1, 2011, and the [tenants] failed to provide the Court with any thirdparty, independent corroborating evidence, documentation, and/or witnesses demonstrating that the [landlord] had direct knowledge of or agreed to the aforementioned modification prior to February 1, 2016, or thereafter. The trial court made no express finding that the landlord had provided written notice of the default in accordance with paragraph 26(b) of the lease. On appeal, the tenants first argue that the trial court erred by not finding that the landlord had provided written notice of their default and thirty days in which to correct the default, and that the evidence was insufficient to support such a finding. We note that the landlord, in its brief, agrees that, in order to evict the tenants under paragraph 26(b) of the lease, the lease required it to provide the tenants with written notice of their default, and to allow them at least thirty days within which to correct the alleged default. The landlord further agrees that this provision is unambiguous. The landlord counters, however, that the February 9, from Katie Antonell to Cliff Antonell, and Stevens s testimony that he received a letter notifying him that he was in default, support a finding that it complied with this obligation. Although we ordinarily assume that the trial court made all findings necessary to support its decision, see, e.g., Nordic Inn Condo. Owners Assoc. v. Ventullo, 151 N.H. 571, 586 (2004), we agree with the tenants that the evidence in this case would not support a finding that the landlord complied with its notice obligation. 4

5 The common meaning of the term default, Tulley, 159 N.H. at 272, is [t]he omission or failure to perform a legal or contractual duty. Black s Law Dictionary 507 (10th ed. 2014). The evident purpose of the notice of default language of paragraph 26(b) is to specifically apprise the tenants of any covenants, agreements or obligations under the lease that the landlord believes they have failed to perform so as to put the tenants on notice that their failure to correct their allegedly deficient performance may result in forfeiture of their rights under the lease. See Filmtrucks, Inc. v. Exp. Indus. & Terminal Corp., 511 N.Y.S.2d 862, 864 (App. Div. 1987) (stating that the purpose of notice of default provision of a lease is to specifically apprise the tenant of claimed defaults in its obligations under the lease and of the forfeiture and termination of the lease if the claimed default is not cured within a set period of time ); cf. Great Traditions Home Builders v. O Connor, 157 N.H. 387, (2008) (observing that the purpose of the notice language in RSA 540:2, III (2007) is to alert a tenant as to the potential consequences of continuing conduct that gives rise to an eviction for other good cause prior to the tenant s loss of his or her home). Accordingly, to satisfy the landlord s notice obligation under paragraph 26(b), a written notice of default must, at a minimum, apprise the tenants of the specific obligation under the lease that they are required to perform, and how they are in fact in default of that obligation. See Westhampton Cabins & Cabanas Owners Corp. v. Westhampton Bath & Tennis Club Owners Corp., 882 N.Y.S.2d 124, 125 (App. Div. 2009) (stating that default notice is deficient if it fails to apprise the tenant of the condition that the landlord wishes to have cured or fails to reference the specific section of the lease that addresses the condition ). In this case, even if we assume, without deciding, that serving hard alcohol and providing musical entertainment, in addition to selling pizza and sandwiches, violates the tenants obligation under paragraph 10 to use the premises during the term of this lease for pizza and sandwich sales, there is no evidence in the record that the landlord apprised the tenants of this assertion, in writing, prior to the June 23, 2016 eviction notices. The February 9, did not apprise the tenants that serving hard alcohol and offering live music violated paragraph 10 so as to put them at risk of eviction under paragraph 26(b) if they continued to offer such services after thirty days. Indeed, not only did the fail to apprise the tenants that they were in breach of paragraph 10, it suggested that they could continue to offer such services if they discussed the matter first with Cliff Antonell. See Filmtrucks, Inc., 511 N.Y.S.2d at 864 (ruling that notice of default, which advised tenant of deficiencies, but then ambiguously stated that if the tenant failed to cure the deficiencies, the landlord would appreciate your immediately vacating the property, and did not advise that failure to correct deficiencies would result in loss of possession, did not constitute a sufficient notice of default). Although Stevens did admit to receiving, by certified mail, a letter notifying [him] that [he was] in default, that letter was not admitted into evidence. Nor was there testimony as to its contents with sufficient detail to 5

6 establish that the tenants were advised of the specific lease obligation that they were breaching and how they were breaching it in a manner that would put them on notice that their failure to correct the breach would subject them to eviction. Accordingly, we conclude that the evidence was insufficient to support the eviction for breach of the lease, and need not address the tenants alternative argument that the evidence compelled a finding that the parties modified the lease to allow the offering of bar services and live entertainment. To the extent that the landlord invites us to affirm on the basis that the tenants breached the lease by using the property in a manner that adversely affected the safety of other tenants, we decline the invitation. The trial court made no findings or rulings as to that theory, and, assuming proof of that allegation would justify eviction, we conclude that the evidence does not compel an eviction on that basis. We reverse and remand for such further proceedings consistent with this order, if any, as may be necessary. HICKS, LYNN, and BASSETT, JJ., concurred. Reversed and remanded. Eileen Fox, Clerk 6