UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

Lakeview Management, Inc.;

Lakeview Neurorehabilitation

Center, Inc.; and Lakeview

Neurorehab Center Midwest, Inc.,

Plaintiffs

v. Civil No. 07-cv-303-SM

Opinion No. 2009 DNH 036

Care Realty, LLC; and

THCI Company, LLC,

Defendants

MEMORANDUM DECISION

Plaintiff Lakeview Management, Inc. (“LMI”) owns Lakeview

Neurorehabilitation Center, Inc. (“LNC”) and Lakeview Neurorehab

Center Midwest (“LNC-M”). LNC, in turn, operates a neurological

rehabilitation center in Effingham Falls, New Hampshire, while

LNC-M operates a neurological rehabilitation center in Waterford,

Wisconsin. Both centers are operated in facilities owned by and

leased from defendants, Care Realty, LLC (“Care”) and THCI

Company, LLC (“THCI”). For ease of reference, the Lakeview

entities shall be referred to collectively as “Lakeview” or

“Lessee,” and defendants as “THCI” or “Lessor.”

In 1997, LNC and LNC-M entered into identical amended and

restated lease agreements with THCI’s predecessor, Meditrust of

New Hampshire, Inc. (“Meditrust”) entitling them to occupy and

operate the facilities in New Hampshire and Wisconsin. In April

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 1 of 62
1 Identical Leases were entered into with respect to the

facilities in Wisconsin and New Hampshire. The Leases are interrelated though separate. The court’s jurisdiction is based on

diversity of citizenship, and New Hampshire law generally governs

disposition of the issues presented, although Wisconsin’s

applicable statute of limitations will be applied with respect to

the Wisconsin Lease. For ease of reference and discussion, the

Leases will be treated as if there was only one.

2

of 2001, THCI acquired and assumed all of Meditrust’s rights and

obligations under those Leases.1 This dispute arises from the

contractual relationship between the parties as embodied in the

Lease.

The Lease was for a “Fixed Term” of ten years, terminating

on September 30, 2007, but subject to Lakeview’s unilateral right

to extend the term for three successive periods of five years

each. Lakeview could exercise its option to extend the term by

giving THCI written notice “of each such extension” within a

defined time window — at least 180 days, but not more than 360

days, before expiration of the Fixed Term (or an extended term).

At issue in this case, fundamentally, is whether Lakeview

validly extended the Lease term, such that it is contractually

entitled to occupy and operate the facilities for another five

years, and, if it did validly extend, whether it subsequently

repudiated or terminated that extended contract.

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The business relationship between these parties began to

deteriorate within a short time after THCI purchased the

properties, and, as the Lease term progressed, that relationship

became increasingly strained. There were a number of reasons for

the decline, but, at bottom, each side seemingly misapprehended

its legal rights and responsibilities, and also frequently

misapprehended what the other was attempting to communicate. 

Each side viewed the relationship through its own peculiar

filter, generally talking over the other, often at crosspurposes. Perhaps intentionally, perhaps not. The resulting

factual record is somewhat convoluted and difficult to sort out,

but while the record is lengthy and exhibits numerous, the

dispute can be resolved by resort to familiar principles of

contract law and equity.

The case was ably tried to the bench and has been fully

argued and briefed by capable counsel. This memorandum decision

sets out the court’s findings, rulings, and conclusions.

Factual Background

A fairly thorough review of the pertinent factual

circumstances, including the court’s findings of fact, is

necessary to a discussion of the legal issues presented.

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2 “Additional Rent” is a component of the total rent

payable to THCI, consisting of “an amount equal to fifteen

percent (15%) of Rental Net Income.” (Ex. M 22.) “Rental Net

Income” is defined as “the amount equal to the Net Income from

the Facility and all of the Related Facilities [NH and WI] . . .

adding back depreciation, amortization, Additional Rent and

management fees in excess of five percent (5%) of Gross

Revenues.” (Id.) “Gross Revenues” has a specific meaning under

the Lease, as defined in Section 2.1 (Ex. B 1), and essentially

includes all revenues received less contractual allowances (id.).

4

Before acquiring the Lakeview facilities from Meditrust, and

as part of its due diligence inquiries, THCI obtained an executed

Tenant Estoppel Certificate from Lakeview (Ex. F 6). In that

certificate, among other things, Lakeview affirmatively

represented to THCI that “[t]he methodology for computing

Additional Rent2 under the Lease is set forth in Section 3.1.2 of

the Lease.” Notwithstanding its representations in the Tenant

Estoppel Certificate, Lakeview had not calculated Additional Rent

in conformity with the Lease’s definition of Gross Revenues since

December of 2000 (i.e., before THCI acquired the property, in

April of 2001).

Lakeview principals testified that Meditrust, the former

owner, had agreed to an oral modification of the Lease that

redefined the term “Gross Revenues” to mean Gross Revenues as

understood when applying Generally Accepted Accounting Principles

(“GAAP”), rather than as defined in the Lease. The difference

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3 Gross Revenues calculated under GAAP would be larger than

those calculated under the Lease definition, which in turn would

result in a lower Additional Rent payment to the Lessor. That

is, management fees in excess of 5% of GAAP Gross Revenues would

be less than management fees in excess of 5% of Lease-defined

Gross Revenues, so, when that amount is added back to the Rental

Net Income, it would also be lower, and the Additional Rent

calculation (15% of the lower Rental Net Income) would be

concomitantly lower.

5

was significant; using GAAP Gross Revenues meant Lakeview would

enjoy a significant reduction in Additional Rent owed.3

The evidence of an agreement between Meditrust and Lakeview

to change the Gross Revenues definition consisted almost entirely

of testimony from Lakeview principals — testimony generally

lacking in specificity. Lakeview’s accountant corroborated that

testimony after a fashion, saying that the change in accounting

for Gross Revenues predated THCI’s acquisition, and was based on

her own understanding (she was told) that an agreement had been

reached. One Lakeview principal testified that the agreement had

been reduced to writing in the form of an “estoppel agreement,”

but Lakeview’s accountant could not find it among her records,

and no such written agreement was found among Meditrust or THCI

records, and it was not produced at trial. Lakeview principals

also suggested that THCI should have known that it was using GAAP

Gross Revenues to calculate Additional Rent before it acquired

the properties, claiming that anyone familiar with commercial

lease accounting (like THCI) would recognize, from even a cursory

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review of routinely submitted financial reports, that Lakeview

was not using the Lease definition of Gross Revenues when

calculating Additional Rent, despite representations to the

contrary in the Tenant Estoppel Certificate.

Shortly after taking ownership of the facilities, THCI

(Warren Cole, a THCI principal, and his staff) did realize that

Additional Rent was being calculated differently than called for

under the Lease. THCI raised the issue informally with Lakeview,

but Lakeview continued to calculate Additional Rent in the same

manner. THCI did not acquiesce in what it considered an

incorrect calculation, but neither did it press the issue or take

formal action to resolve the dispute.

Almost three years after THCI bought the facilities, it more

formally notified Lakeview, in writing, that it disagreed with

the manner in which Lakeview was calculating Additional Rent,

thought it was owed at least $500,000 in underpaid Additional

Rent, and was considering an audit, as allowed under the Lease,

to determine the variance between what was due and what had been

paid. (Ex. M 20.) Lakeview responded that it thought its

calculations were correct, asserting that Meditrust had agreed to

its method and that THCI had waived any objection, noting that

THCI had accepted Additional Rent payments since it acquired the

property, with knowledge of Lakeview’s use of a different

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definition of Gross Revenues. (Exs. M 21, M 22.) THCI demurred

and estimated that Lakeview owed some $680,000 in back Additional

Rent. (Ex. M 23.) The parties moved on to other concerns and,

for the next few years, seemed to tacitly agree to disagree about

the Additional Rent issue and whether Lakeview was in default. 

Neither party brought it up as an issue, nor took steps to

resolve the matter.

Shortly after THCI succeeded Meditrust as Lessor, Lakeview

expressed an interest in negotiating better Lease terms for

itself. In 2006, Lakeview pressed harder for negotiations aimed

at amending the Lease terms, noting that the Fixed Term was

coming to an end the next year. But nothing substantive came of

those efforts. Lakeview expected to reach an agreement of some

kind before it had to exercise its option to extend, and it

continued to pursue that goal. THCI understood the time issue —

the window during which Lakeview’s option could be exercised

would close on March 30, 2007. On October 18, 2006, Warren Cole

e-mailed Michael Torzilli, the THCI employee in direct contact

with Lakeview:

Also we need to move Lakeview along. [A]t some

point they are going to invoke their renewal and

appraisal process. I think we want to trump that. 

Remember, they can[’]t exerci[s]e that if they are in

default. Perhaps its time to call them in default on

the percentage [Additional] rent.

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(Ex. L 754.) Notwithstanding Cole’s suggestion, THCI did not

call Lakeview in default on the Additional Rent issue until it

filed its counterclaim in this suit.

The next month, on November 15, 2006, Lakeview wrote to THCI

regarding its Lease option:

In connection with the above-referenced Lease, the

Lessee hopes to extend the term of the Lease for an

additional five-year period, and the Lessee very much

looks forward to continuing its relationship with the

Lessor. However, before giving formal written notice

of its intention in that regard pursuant to Article

1.4, Lessee would appreciate the opportunity to discuss

with you the revision of a handful of provisions.

(Ex. L 757 (emphasis added).)

Plainly, Lakeview did not effectively exercise its option by

that letter, but it did put THCI on notice that it anticipated

doing so, while simultaneously inviting THCI to discuss

amendments to the Lease before Lakeview made its decision. Over

the next few months, Lakeview kept asking for amendment

discussions, but without much success. (Exs. L 759, L 805,

L 806, L 831.) THCI’s response was usually the same — “we’re

reviewing the matter.” (Id.)

Lakeview’s option rights are set out in Article 1.4 of the

Lease, which provides:

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1.4 Extended Terms. Provided that this Lease has

not been previously terminated, and so long as no lease

default (as hereinafter defined) shall have occurred

and be continuing, Lessee is hereby granted the right

to extend the Fixed Term of this Lease for three (3)

additional periods (collectively, the “Extended Terms”)

as follows: three (3) successive five (5) year periods

for a maximum Term, if all such options are exercised,

which ends on September 30, 2022. Lessee’s extension

rights shall be exercised by Lessee by giving written

notice to Lessor of each such extension (the “Extension

Notice”) at least one hundred eighty (180) days, but

not more than three hundred sixty (360) days, prior to

the termination of the Fixed Term or then current

Extended Term. Lessee may not exercise its option for

more than one Extended Term at a time. During each

effective Extended Term, all of the terms and

conditions of this Lease shall continue in full force

and effect, except that the Base Rent for each such

Extended Term shall be the greater of (a) the fair

market value rent for the Leased Property at such time,

to be determined by an appraisal of the Leased Property

performed by an appraiser mutually acceptable to the

Lessor and the Lessee, as of the first day of each of

the Extended Terms or (b) the Base Rent in effect

immediately prior to the expiration of the preceding

term. Said Base Rent shall be determined concurrently

with the Lessee’s giving of the Extension Notice to the

Lessor.

(Ex. B (bold type and underscoring added for emphasis).)

As the deadline for exercising its option to extend

approached, Lakeview intensified its effort to renegotiate the

Lease terms. THCI remained generally unresponsive. THCI was not

inclined to reduce the rent, but, rather, wanted to substantially

increase it. Lakeview was seeking lower rent and was not likely

to pay more than it would be required to pay if it exercised its

option to extend the term. THCI could have been more candid

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about its position, but, then, it appears to have already begun

thinking that Lakeview would not continue as its tenant.

Certainly, THCI was not anxious for Lakeview to exercise its

option. During an extended term, the rent would either remain

the same or increase only to the level of prevailing market

rates, after an appraisal process. But, given the widespread

decline in the real estate market, combined with increasing costcontrolling pressures from the states — the primary payors for

the rehabilitative services provided at the facilities — an

appraisal may not have resulted in any increase in the rent

Lakeview was paying. Nevertheless, the appraisal process

provided for in the Lease could only work to THCI’s advantage —

the rent would either remain as it was, or it would go up if

market values were higher. Rent would never go down, no matter

how depressed the market at the time of option exercise. 

Consequently, Lakeview had no incentive to insist on an

appraisal. THCI did, but declined to do so when that process was

later invoked by Lakeview.

In any event, notwithstanding its lack of success in

negotiating better terms, Lakeview was not so lulled into

somnolence by THCI’s unresponsiveness that it neglected to

exercise its option within the prescribed time window. Given the

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4 Breslin humorlessly, and not very credibly, claimed at

trial that he did not know what “bs” meant.

11

fast-approaching deadline, Lakeview gave written notice of its

exercise of the option to extend, in writing, on March 16, 2007:

Pursuant to Article 1.4 of the above-referenced

Lease, notice is hereby given that Lessee intends to

extend the term of the Lease for an additional fiveyear period. We would appreciate your continued

consideration of the matters addressed in our

correspondence of November 15, 2006.

Should any further notice of Lessee’s intent to

extend the term of the Lease be required, please

contact us at your first convenience. Thank you for

your attention to this matter, and we look forward to

continuing our relationship with you.

(Def. Exs. M 8, L 833.)

THCI did not misunderstand the import of Lakeview’s notice,

or perceive any ambiguity in its message. On March 28, 2007,

employees of THCI involved in managing the Lakeview properties

engaged in the following e-mail exchange in which they recognized

that the option was exercised, but contemplated a potential

challenge to that exercise.

Breslin: Has Lakeview exercised their option to

extend the Lease? Please advise. Thank

you.

Torzilli: They have asked to be allowed to extend,

yes.

Breslin: With no conditions so they have

extended, or will we contest the

extension due to the nonpayment of

excess rent or some bs4 like that?

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Torzilli: We will contest since they are in

default on the percentage rent

[Additional Rent] and try to use that to

negotiate a new rent/lease. I will have

a proposal for what we should do there

by Friday (or Monday).

Breslin: Ok. If you were Bob, would you consider

it extended.

Torzilli: Yes.

(Ex. L 834 (emphasis added).)

THCI (Torzilli) sent a letter to Lakeview on April 16, one

month after the option was exercised, in which THCI acknowledged

Lakeview’s March 16 notice “purporting to exercise certain

extension options in the Lease.” THCI “reserved all rights” with

respect to Lakeview’s right to extend. The period during which

the option could be exercised had expired more than two weeks

earlier.

THCI, as seemed to be its habit, chose its words carefully,

seemingly more for the purpose of keeping all options open than

in candidly disclosing its position. THCI did not declare in its

April 16 letter that it would not perform under the Lease as

extended, but did not say it would. It did not dispute the

validity of the option’s exercise, nor did it acknowledge that

the option had been validly exercised. It did not explicitly

declare the option exercise invalid due to a continuing Lease

default, it merely observed that a breach of the Lease (and an

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“Event of Default”) existed due to Lakeview’s failure to pay the

full amount of Additional Rent due, dating back to 2001.

Having “reserved its rights” with regard to the option’s

exercise, THCI also finally responded to Lakeview’s request to

discuss Lease amendments. In Torzilli’s April 16 letter, THCI

outlined some basic terms it proposed “for Lessee’s renewal of

the Leased Property.” It was an imaginative proposal, to be

sure, and was consistent with THCI’s intent to “try to use [the

Additional Rent default] to negotiate a new rent/lease.” 

(Ex. L 834.) THCI proposed, among other things, a new base rent

that was significantly higher than that called for in Lease

provisions related to extensions, as well as payment by Lakeview

of roughly $1.4 million to resolve THCI’s claim of Additional

Rent arrearages over the previous six years.

Lakeview was “a bit taken aback with the proposed new terms

and amount[,] not to mention the allegation . . . [of] breach.” 

(Ex. L 875.) Given THCI’s attention-getting proposal for

amendments to the Lease, or a new contractual relationship

entirely (it is unclear precisely what THCI meant), Lakeview

invoked the Lease’s appraisal process with regard to establishing

rent during an extended term:

In the meantime, we do believe that based on what

you feel current value of the property is, as evidenced

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by the 70% rental increase, we need to move on getting

fair market real estate appraisals. We had hoped that

we could avoid the costly appraisal step. We have

identified the certified appraisers in both areas [NH

and WI] and if you could identify 5 that we could

choose from we should have a mutually agreed upon

appraiser, attached is the list.

(Ex. L 875.) THCI never agreed to an appraiser or the process.

Lakeview continued its efforts to have a meaningful dialogue

with THCI about the Lease situation. (See Ex. L 935.) But its

principals seemed both unrealistic and naive in expecting an

agreement more favorable than the existing Lease, or even one

markedly less unfavorable than had been proposed by Torzilli. 

For reasons best known to them, they continued to anticipate a

mutually satisfactory agreement of some kind, notwithstanding all

the signs that THCI was proceeding on the assumption that the

Lease would either expire on September 30, by which time Lakeview

would either agree to terms dictated by THCI or would be

replaced. Presumably, at some point, THCI intended to declare

Lakeview’s exercise of the option invalid. Although a meeting

was held in June of 2007, and the parties corresponded throughout

the summer months, no progress was made on an agreement to amend

the Lease terms. Growing frustration on Lakeview’s part began to

show itself in e-mail exchanges. (See, e.g., Exs. L 946, L 958.)

On July 27, 2007, the following e-mail exchange occurred

between Cole and Torzilli:

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Cole: At some point you will have to remind

[Lakeview] that they owe us $1,800M

dollars. Are they personal for that? 

That alone should get us the stock in

the business.

Torzilli: I want to speak to them first to make sure

they fully understand our proposal. Then I

will hit them with the addition rent claim.

(Ex. L 937 (emphasis added).) As that exchange illustrates, THCI

had not yet, in its own view, actually declared the Additional

Rent calculation to be a “Lease Default” precluding exercise of

the option to extend.

By early August of 2007, THCI recognized that Lakeview

principals were “growing more hostile and the time-frame is so

short,” a reference to the dwindling time available to obtain the

state licenses and permits that would be necessary if THCI took

over the facilities and operations. THCI began planning for a

potential assumption of operations, noting that “we also need to

get some litigators going on this.” (Ex. L 960.) Breslin emailed Torzilli on August 3 asking:

Are we sure we are in for a fight? I thought they

offered to throw us the keys?

(Ex. L 961.)

On August 17 Lakeview e-mailed THCI:

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After all the back and forth it is clear that we

are unable to come to an agreement regarding an

extended term.

* * *

As provided for in our current Lease, we are prepared

to exercise our option to renew the Lease for a five

year term at the current Lease rate. We are unwilling

to and unable to agree to the proposed increase in rent

for a ten year term, and we cannot wait any longer to

resolve this issue. We are forced to proceed on the

assumption that you have not accepted our offer to

extend for the next five years. We intend to initiate

immediate notifications to all affected parties; as

required by regulatory agencies and consumer contracts.

(Ex. L 962.) That e-mail caused THCI to consider its position

with respect to possibly offering a different proposal. (See

Exs. L 964, L 968.) Discussions followed, but again little

progress was made.

As illustrated by the August 17 e-mail, Lakeview’s

principals were operating under a fundamental misunderstanding of

its rights under the Lease: they were apparently unaware that an

option constitutes an irrevocable offer by the optionor (i.e.,

THCI), and not an offer by the optionee that must be accepted by

the optionor. Consequently, Lakeview failed to understand that

it had successfully exercised its option and the Lease term was

extended for five years, beginning on October 1, 2007. Instead,

Lakeview thought that, absent THCI’s acknowledgment or acceptance

of its option exercise, it would be dispossessed at the

expiration of the initial term, on September 30. Given that

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fundamental misunderstanding, Lakeview experienced a great deal

of pressure, since it was required by regulatory agencies to give

advance notice of any change in licenses or ownership, and was

required to plan for the continuity of care of Lakeview’s

vulnerable, brain-injured population, either by transition to a

new operator, or placement in different facilities. In

Lakeview’s view, time was indeed short. Accordingly, Lakeview

wrote to THCI on August 21:

To follow up on our phone conversation, we need a

final decision by the end of the day. If renewal is

not the decision, beginning tomorrow we feel the focus

must be on transition planning and execution. We must

infuse a smooth change of ownership [sic] due to the

complexities of the operations and patient population.

(Ex. L 975.)

Given THCI’s pattern of unresponsiveness, Lakeview insisted

that a response be provided to its “offer” (however inartfully

expressed) to perform its contractual obligations under the

Lease, as extended. (See Ex. L 962.) THCI (Torzilli) replied

that it was “still evaluating their proposal.” (Ex. L 976.)

THCI was again slow to respond. (Ex. L 1002.) Lakeview

reasonably insisted upon an answer to its latest proposal —

essentially that it was ready, willing and able to perform under

the Lease as extended. Lakeview set a deadline of 5 PM on August

22 for THCI’s response:

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As discussed, the final deadline for resolution of

any future role for us at these facilities, or

alternatively commencing regulatory notification and

winding up activities is 5 PM today.

(Ex. L 1002.)

THCI ignored the deadline Lakeview set. It neither

acknowledged Lakeview’s rights under the exercised option, nor

disclosed its view that Lakeview was not entitled to an extended

term, due to an invalid exercise of the option. At 5:03 PM on

August 22 Lakeview wrote THCI:

Please accept this e-mail as notification that the

deadline has past [sic] and we regret that we were

unable to work out the Lease extension. Therefore, we

need to immediately move forward with the required

notifications. We will work with you on the transition

and need to outline that plan as soon as possible!

(Ex. L 1021 (emphasis added).) That e-mail, fairly construed,

represented Lakeview’s not unreasonable conclusion that THCI, as

owner, would not suffer Lakeview’s continued occupation and

operation of the facilities after expiration of the Fixed Term on

September 30. Lakeview’s conclusion was understandable given

THCI’s unresponsiveness and its refusal to acknowledge, much less

communicate its own intent to perform under, the Lease as

extended by the option’s exercise, or, for that matter, to

declare its position that the option had not been validly

exercised. Given that situation, and the obligations, both legal

and ethical, that Lakeview owed its patients and its regulators,

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Lakeview declared its intent to begin the required licensure

notifications (and patient discharge planning), and it assumed

there would be a transition of responsibility for the operations,

rather than a complete shut-down (which would require patient

placement arrangements).

Importantly, however, Lakeview did not clearly and

unequivocally declare a repudiation of the Lease — either the

Fixed Term, or as extended. It responsibly expressed an intent

to meet its legal and ethical obligations under pressures

resulting in large part from THCI’s unresponsiveness and the

inferences Lakeview plausibly drew from that unresponsiveness.

The next day, August 23, Lakeview sent THCI two e-mails. 

The first reiterated Lakeview’s regret that the parties were not

able to work out an extension acceptable to both, and went on to

state:

Upon (or prior to) the expiration of the term, we

intend to vacate and surrender the leased property in

compliance with the agreement. Further, in accordance

with the Lease agreement, we intend to fulfill all our

obligations in connection with the surrender of the

leased property, including for example, the transfer

and assignment of contracts and permits as allowable

and necessary for the properties continued operation. 

To satisfy our obligations under law and the agreement,

we will work with you to implement and execute a plan

for the transition, but we must communicate with you to

minimize the impact to the business!!!

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(Ex. L 1027.) About six hours later, Lakeview sent another email to THCI stressing that it was required to give a thirty-day

notice to patients, guardians, and the New Hampshire Bureau of

Health Facilities Administration, that it “[had] not been able to

extend their physical plant Lease beyond October 1, 2007,” (Ex. L

1029 (emphasis added)), putting THCI on notice, again, that

Lakeview was acting on the premise that THCI would not permit its

continued tenancy. Lakeview again pointed out the time

constraints applicable to changing operations with respect to

licenses, etc., and clarified what its proposed “transition”

involved.

Lakeview’s proposed transition consisted of an offer of full

resolution of the contractual relationship between it and THCI,

including contract disputes. The two e-mails, in context,

communicated Lakeview’s understanding that THCI would not permit

Lakeview to perform under the Lease after September 30 and that

the parties could not agree on terms of a new contractual

relationship. Accordingly, Lakeview was offering to resolve all

disputes and the contractual relationship itself on the following

proposed terms:

1) As contemplated by the Lease’s terms when a term

expires, and in the interests of its patients and in

compliance with its regulatory and ethical obligations,

Lakeview would fully cooperate in a transition of

operations to THCI, or a new Lessee.

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2) Lakeview would continue to manage the facilities

after September 30, 2007, as necessary to ensure a

smooth operational transition, if THCI agreed to retain

those services, for a management fee of 5% of Gross

Revenue (presumably as understood with reference to

GAAP);

3) THCI would provide the working capital necessary to the

operations as of October 1, 2007;

4) “[THCI] will agree to the fair market asset buyout;”

5) “[THCI] or its designee and Lakeview Management

shall execute mutual releases (no recourse for any past

accusations);”

6) “[THCI] would provide an experienced operator for

Lakeview to work with during the transition.”

(Ex. L 1029 (emphasis added).)

The two e-mails sent on August 27, read together and in

context, offered THCI a contract acceptable to Lakeview that

would resolve both the Lease relationship, including all disputes

under the Lease, as well as provide for a smooth and effective

transition of operations to THCI or another Lessee over a

reasonable time period. It also provided that THCI would buy

Lakeview’s business (i.e., a “fair market asset buyout”). THCI

(Torzilli) responded reasonably quickly on that occasion — in

just over an hour — but with a familiar refrain:

“We are reviewing the below [proposal]. We will get

back to you by tomorrow afternoon, but in the interim,

no action should be taken regarding the discharge of

patients.”

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(Ex. L 1037 (emphasis added).) That is, THCI was considering the

offer, and was concerned that steps leading to a shut-down of the

operations (discharge of patients) not be taken. Lakeview

acknowledged Torzilli’s response within the hour:

. . . as discussed, we will assist as needed to get you

whatever will help us transition these programs. We

expect that you will get back to us in writing as to

[THCI’s] intent to continue our services until they

have secured the appropriate licenses and have a

competent operator in place.

* * *

Both parties will have to involve legal [i.e.

attorneys] ASAP to complete legal documents that bind

us to the terms [of our proposal] by mid week in order

to preclude our requirement to notify patients,

clients, guardians and families. Time has run out and

if we know we are not going to be in an interim

operational position on October 1, and there is a

potential that the buildings will be unlicensed, we

will have no choice but to begin the notification

process to patients, clients, guardians and families

pursuant to the licensing rules. Discharge planning on

these difficult clients is going to be enormous and we

need time to find the most appropriate placements.

(Ex. L 1040 (emphasis added).)

The next day, August 24, Lakeview referred to the asset

purchase term of its proposal, noting that “the asset purchase

does not include the names, licenses, intellectual properties[,]

goodwill, etc.” Once again, THCI was slow to respond. So, three

days later, on August 27, Lakeview sent a prodding e-mail to THCI

(Torzilli):

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 22 of 62
23

We have not heard a word from you!!! Is the

expectation that we are to work toward discharging the

patients and emptying the buildings as required by law

if there is not a qualified licensee identified to take

over when we exit? Your radio silence is unacceptable

— we are talking about the welfare of real people

here!! Are Warren or Daniel [THCI principals]

available for a phone call? Thanks.

(Ex. L 1152.) THCI responded within minutes: “We will be

sending you a response via e-mail and letter by the end of

business today.” (Ex. L 1153.)

Warren Cole, when he saw the e-mail from Lakeview, asked

Torzilli: “Have you spoken to them since we elected to move

forward and take over?” (Ex. L 1161.) It appears from the

record that, notwithstanding Torzilli’s actual response (Ex. L

1152), the answer should have been “no” — THCI did not advise

Lakeview of its election to “move forward and take over,” and it

is not clear on what legal basis THCI thought itself entitled to

do so.

On the evening of August 27, THCI did send a letter to

Lakeview, by e-mail (Ex. L 1182), that, yet again, appears to be

a study in ambiguity, rather than a direct response to the issues

presented. THCI (Torzilli) wrote, in part:

. . . this is to confirm that we are in agreement in

wanting to plan for the smooth transition of the

operation of the facilities . . . .

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 23 of 62
24

* * *

In an effort to further this process, we would like to

schedule a conference call tomorrow to discuss with you

our plans concerning the transition.

In addition we request that you forward the documents

on the attached list to me no later than Friday, August

31st , 2007 [sic] so that we may further advance the

transition. We are entitled to these documents

pursuant to Section 17.2 of the Lease.

* * *

As set forth in my letter to Mr. Anton C. Merka dated

April 16, 2007, all terms and conditions of the Lease

remain in effect. [The reference is to the letter

“reserving rights” with regard to Lakeview’s option

exercise.]

(Ex. L 1182 (emphasis added).) THCI’s letter did not respond to

Lakeview’s transition proposal in any substantive way. It did

not accept or reject, or even acknowledge the offer of an agreedupon resolution of the contractual relationship between them and

any pending contract disputes; nothing was said about the

proposed fair-market asset buyout; nothing about the proposed

exchange of mutual releases; and nothing about continuing to

retain Lakeview as an interim manager during a less timepressured transition.

Moreover, although THCI now asserts that Lakeview’s e-mails

constituted either a “termination” of the Lease or a

“repudiation” of its obligations under the Lease, nothing in

THCI’s letter purported to recognize or accept an asserted

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 24 of 62
25

“repudiation” by Lakeview. Nothing in the letter purported to

recognize an offer by Lakeview to “terminate the Lease early” —

i.e., the Lease as extended by the option exercise — and no words

used suggested that THCI was accepting such an offer and agreeing

to rescission. To the contrary, THCI declared that “all terms

and conditions of the Lease remain in effect,” a position

entirely inconsistent with acceptance of an early termination

offer and equally inconsistent with acceptance of a repudiation.

THCI’s August 27 letter, once again, told Lakeview very

little about its position with regard to the contractual

relationship. It was consistent with THCI’s implicit message

that Lakeview would not be permitted to occupy or operate the

leased premises after expiration of the Fixed Term. The letter

did suggest a substantive, perhaps positive, response to

Lakeview’s latest offer, in that it requested a conference call

on the next day “to discuss with you our plans concerning the

transition.” Attached to the letter was a lengthy and detailed

list of documents and information THCI wanted produced by August

31, “so that we may further advance the transition.” Torzilli

added that “We are entitled to these documents pursuant to

Section 17.2 of the Lease.”

Lakeview had little reason to think that THCI’s August 27

letter rejected its transition proposal — it was neutral — and it

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 25 of 62
26

contemplated a substantive discussion in a follow-up telephone

conference the next day. During that call, representatives of

THCI said directly that there would be no buyout. Lakeview’s

principals testified that they were stunned by this revelation

and insisted on speaking to THCI’s principals to confirm that

rejection and its implication — that THCI anticipated simply

taking over operation of the facilities. A telephone conference

with THCI’s principals was scheduled for the next day, August 29. 

That evening, August 28, Lakeview’s then legal counsel wrote to

THCI:

As you know, Lakeview has provided you with

written notice of our intent to extend the Lease. Your

subsequent refusal to either extend the Lease at its

current rental or to take the steps necessary to

determine the new rental amount was and continues to be

a material breach of Section 1.4 of the Lease. We

hereby provide you with notice of the breach and your

opportunity to cure the same. In the event you fail to

cure the default, the Lessee will be entitled to

exercise all available remedies under the Lease and at

law and in equity.

Counsel’s cover e-mail, transmitting that letter, was somewhat

curious in that it arguably confused the purpose and intent of

the attached formal letter. Counsel wrote:

Notwithstanding the attached letter, and subject

to its obligations under applicable law, Lakeview will

cooperate with the Lessor in the transition of the

facilities to a new Lessee. Thank you.

(Ex. L 1194.)

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 26 of 62
27

But THCI could not reasonably think the cover e-mail did

anything but acknowledge (from Lakeview’s perspective) the stillpossible contract resolution as Lakeview had proposed, while

formally reserving Lakeview’s own contract breach claims, should

the relationship not be amicably resolved. The next day, August

29, THCI principals finally confirmed, in the scheduled telephone

call, that there would be no buyout, no mutual releases, no

interim management agreement, and that, figuratively if not

literally, THCI actually anticipated that Lakeview would just

“throw them the keys” of its multi-million dollar health-care

facility operations that generated approximately $2 million in

profits for Lakeview each year.

Even Lakeview’s principals understood THCI’s position at

that point. Lakeview would not be allowed to occupy or operate

the facilities after September 30, 2007, in accordance with the

extended Lease; THCI expected that Lakeview would “transition

out,” notwithstanding its exercise of the option to extend the

Lease; and Lakeview would relinquish its contractual rights and

its business without a murmur and without an exchange of mutual

releases or an agreement of any kind. Indeed, THCI would likely

initiate a suit to recover for alleged breaches of contract,

particularly with respect to the claimed Additional Rent

arrearages.

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 27 of 62
28

Lakeview was not so inclined. When its offer to terminate

the Lease relationship on the terms it proposed was finally

rejected by THCI’s principals, Lakeview’s legal counsel promptly

notified THCI, on the next day (August 30), that Lakeview stood

on its contractual rights to the extended term, as provided for

in the Lease, and that THCI should cease activity that interfered

with its rights of possession and operation. This litigation

followed.

Discussion

Did Lakeview Effectively Exercise

Its Unilateral Right to Extend the Lease Term?

The first issue of importance is the current contractual

relationship between the parties. Essentially, THCI asserts that

Lakeview did not effectively extend the Lease term for two

reasons. First, it says the written notice provided by Lakeview

was ambiguous because it only declared an “intent” to exercise

the option, but did not adequately communicate the fact of

exercise. Second, THCI says that Lakeview was not entitled to

exercise its option under the Lease because it was in a

continuing default status with respect to Additional Rent owed.

Ambiguity

In its March 16 letter exercising the option Lakeview wrote:

“Pursuant to Section 1.4 of the above-referenced Lease . . . 

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 28 of 62
29

Lessee intends to extend the term of the Lease for an additional

five-year period.” (Ex. L 833.) The letter referred to the

option provisions of the Lease; was in writing; gave notice of

its intent to “extend the term;” was not conditional; referred to

“continuing our relationship with you;” and, to avoid any issue

or doubt about the matter, the letter invited THCI to contact

Lakeview “[s]hould any further notice of Lessee’s intent to

extend the term of the Lease be required.”

Not surprisingly, THCI’s own internal correspondence

confirmed that it had no doubt about the meaning or effect of

Lakeview’s March 16 notice. (See Ex. L 834.) So, Lakeview

clearly meant to exercise its option, effectively communicated

notice of that exercise as required by Article 1.4 of the Lease,

and the notice was understood by THCI as intended. While THCI

expected that it might contest that exercise at some point, on

grounds that Lakeview was in default with regard to Additional

Rent, there was no misunderstanding on THCI’s part that Lakeview

had exercised its option. THCI’s post-litigation claim that the

March 16 notice was ambiguous because it was carelessly drafted —

using the phrase “intends to exercise” rather than “hereby

exercises” — is both implausible under the factual circumstances

and legally unsustainable.

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 29 of 62
30

An option is an irrevocable continuing offer of a contract

by the optionor, that the optionee can accept according to its

terms. Whether an optionee has validly accepted an option turns

on the optionee’s objective manifestation of intent. Generally,

whether an option has been validly exercised is determined by

“ascertain[ing] the intent of the parties in light of the

language used and the surrounding circumstances.” Loose v.

Brubacher, 549 P.2d 991, 996 (Kan. 1976). When the option clause

is silent regarding the manner of exercise, no particular form or

notice is essential — all that is required is that the optionee

notify the optionor of the decision to exercise it prior to its

date of expiration. See id. (quoting Reger v. Sours, 34 P.2d

996, 999 (Kan. 1957)).

While there may well be particular factual circumstances in

which use of the phrase “intends to” would prove inadequate to

exercise an option, it is generally accepted that use of the

phrase “intends to” in a notice is sufficient to convey that an

option has been exercised. See, e.g., In re Millyard Rest.,

Inc., 110 B.R. 103 (Bankr. D.N.H. 1990) (assuming unequivocal

declaration by Lessee of an “intent to renew” lease term and

obligate itself to rental obligation for the next five years

under lease, constituted valid exercise of an option to extend);

First Nat’l Bank of Chicago v. Valley Liquors, Inc. (In re Valley

Liquors, Inc.), 103 B.R. 961, 968 (Bankr. N.D. Ill. 1989)

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 30 of 62
31

(written notice of intention to exercise option amounted to

exercise of the option — “Unless the option itself specifies

further action to exercise the option . . . the option can be

exercised by merely giving notice of intention.”); McDonald’s

Corp. v. Lebow Realty Trust, 888 F.2d 912, 914 (1st Cir. 1989)

(notice of intent to exercise option to purchase effectively

exercised the option); Southeast Cinema Entm’t, Inc. v. P.B.

Realty, Inc., 585 F. Supp. 2d 754, 767-68 (D.S.C. 2008) (where

option does not specify the manner in which it is to be accepted,

it can be accepted by optionee’s giving notice of intent to

exercise the option); Getty Ref. & Mktg. Co. v. Zwiebel, 604 F.

Supp. 774 (D. Conn. 1985) (assuming option to extend lease by

“giving written notice to that effect” was effectively exercised

by optionee’s giving “notice of intent to exercise”).

Here, THCI’s own assessment (Ex. L 834) was accurate, and

the court finds, both as fact and as a matter of law, that, under

the circumstances, Lakeview’s March 16 letter unconditionally,

clearly, and unambiguously exercised the option to extend the

Lease term. The objective manifestation of the words used and

THCI’s own understanding establish that there was a meeting of

the minds with respect to Lakeview’s exercise of that option, if

not the validity of that exercise due to a continuing default.

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 31 of 62
32

Moreover, if THCI had any doubt about the clarity, meaning,

or intent of Lakeview’s notice, it, in good faith, should have

promptly responded to Lakeview’s invitation to “contact us at

your first convenience,” “[s]hould any further notice of

Lessee’s intent to extend the term of the Lease be required.” 

(Ex. M 8.)

Continuing Lease Default as a Bar to the Option’s Exercise

THCI next asserts that the Lease term was not extended

because a Lease Default had occurred and was continuing when the

option was exercised. In support of that position THCI points to

that provision of Article 1.4 that states “. . . so long as no

Lease Default (as hereinafter defined) shall have occurred and be

continuing, Lessee is hereby granted the right to extend the

Fixed Term of this Lease . . . .”

The short answer to THCI’s “continuing default” objection to

the option’s exercise is straightforward: THCI is equitably

estopped by its conduct from invoking that bar.

The Lease Default that THCI says had “occurred and was

continuing” at the time Lakeview exercised its option was

Lakeview’s failure to pay Additional Rent in the full amount

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 32 of 62
5 THCI also mentions, in passing, Lakeview’s alleged

failure to maintain appropriate insurance as required under the

Lease as a Lease Default precluding the option’s exercise. But

prior notice of that alleged default was not given to Lakeview,

and, in any event, that claim is subject to the same estoppel

analysis as the Additional Rent claim.

33

due.5 Lakeview had not been calculating the Additional Rent

using the Lease definition of Gross Revenues for many years, so,

in THCI’s view, it was in a perpetual state of default under the

Lease. THCI also points out, correctly, that, under the terms of

the Lease, failure to notice a default with regard to rent owed

does not waive THCI’s right to collect rent arrearages, and that

no notice of default or opportunity to cure is required under the

Lease with regard to arrearages in rent.

The trial evidence established that, as early as 2001, THCI

was well aware that Lakeview was calculating Additional Rent

differently than prescribed by the terms of the Lease documents. 

(See, e.g., Testimony of Warren Cole, Tr. Vol IV, pp. 163-164.) 

Nevertheless, THCI continued to accept rental payments, including

Additional Rent as calculated by Lakeview, without declaring a

default or taking steps to resolve the issue by agreement or

legal process.

Instead, both THCI and Lakeview let the matter sit —

essentially agreeing to disagree about whether Lakeview was

correctly calculating the amount due. As noted earlier, when

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 33 of 62
34

Lakeview exercised its option to extend the Lease term, THCI

responded (a month later, on April 16, 2007), not by declaring

the option exercise invalid due to the existence of a continuing

Lease Default based on its Additional Rent calculations over the

past six years, but by merely “reserve[ing] all rights with

respect to that letter and Lessee’s rights to extend the Lease.” 

(Ex. L 870.) By then, of course, the time period during which

the option had to be exercised had closed. Lakeview had no

opportunity at that point to get the matter finally resolved. 

Nor, did it have the opportunity to cure its (alleged) default,

as implicitly contemplated by Section 1.4 of the Lease. A

default must be “continuing,” to bar exercise of the option,

which presupposes awareness of the asserted default claim and

failure to cure (or resolve) that claimed default.

Under these factual circumstances, THCI was obligated, by

the covenant of good faith and fair dealing implied in every

contract, to inform Lakeview, before the option period expired,

that it considered the option not subject to valid exercise due

to an identified continuing default. THCI could have, and should

have disclosed its position while Lakeview still had an

opportunity to cure or resolve the asserted default. Had THCI

given notice of its default claim — after it was told in November

of 2006 that Lakeview hoped to exercise the option, or at the

latest when Lakeview sent notice of its exercise on March 16,

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 34 of 62
6 In the classic case of Meinhard v. Salmon, 164 N.E. 545,

546 (N.Y. 1928), then Judge Cardozo noted that trustees, at

35

2007 — Lakeview could have cured by paying the claim, or might

have made an acceptable offer in compromise of the claim, or

might have successfully sued to stay the option exercise period

on equitable grounds while a court resolved the Additional Rent

calculation dispute, and, if it was resolved against Lakeview, it

might have obtained a reasonable time to cure. That is,

Lakeview, if advised of THCI’s assertion of a continuing default

and its position that exercise of the option would be, and was,

invalid, could have taken steps to protect its valuable interest

in its leasehold rights. THCI’s failure to inform Lakeview of

its position induced a false sense of security on Lakeview’s part

with respect to the option’s exercise while the time in which it

could have cured any defect ran out.

Deliberately choosing to remain silent about its intent to

invoke a continuing default as a bar to the option’s exercise,

for the very purpose of springing the default as a “trump” after

Lakeview’s opportunity to cure was gone (see Ex. L 754), is

conduct fairly characterized as inequitable, and violative of the

covenant of good faith and fair dealing.

Equity will not countenance such conduct. While the

“punctillio of an honor the most sensitive”6 is not the governing

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 35 of 62
least, are held “to something stricter than the morals of the

marketplace.” He defined that stricter standard as “[n]ot

honesty alone, but the punctilio of an honor the most sensitive

is then the standard of behavior.” Id.

36

standard in the world of commercial leasing, still, there are

minimum standards of fair dealing. It has been said that

“[c]ontract law does not require parties to behave altruistically

toward each other; it does not proceed on the philosophy that I

am my brother’s keeper.” Original Great Am. Chocolate Chip

Cookie Co. v. River Valley Cookies, Ltd., 970 F.2d 273, 280 (7th

Cir. 1992). On the other hand, “while a commercial party does

not have to act with benevolence towards an opposing party, it

cannot behave inequitably.” Brunswick Hills Racquet Club, Inc.

v. Route 18 Shopping Ctr. Assocs., 864 A.2d 387, 399-400 (N.J.

2005).

Like most jurisdictions, New Hampshire recognizes the

doctrine of equitable estoppel. The doctrine’s purpose is “to

ensure justice where otherwise there would be none.” Hilco Prop.

Servs., Inc. v. U.S., 929 F. Supp. 526, 540 (D.N.H. 1996). 

Application of the doctrine is necessarily flexible; it “rests

largely on the facts and circumstances of the particular case.” 

Goodwin R.R., Inc. v. State, 128 N.H. 595, 600 (1986) (citation

omitted); see also Olszak v. Peerless Ins. Co., 119 N.H. 686, 690

(1979). Moreover, “[e]stoppel doctrine clearly permits silence

to stand for acquiescence in proper circumstances.” Ostler v.

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 36 of 62
37

Codman Research Group, 241 F.3d 91, 95 (1st Cir. 2001) (citations

omitted); Concrete Constructors, Inc. v. Harry Shapiro & Sons,

Inc., 121 N.H. 888, 892-93 (1981) (“An estoppel may arise . . .

from silence or inaction as well as from words or actions.”).

THCI remained silent about a material matter — its claim of

a continuing default as a bar to the option’s exercise — when it

had a duty to speak. When Lakeview notified THCI in November of

2006 that it hoped to exercise its option (the time in which to

exercise and/or cure any default was already running), THCI said

nothing. When Lakeview sent THCI notice of its exercise of the

option to extend on March 16, 2007, some two weeks before the

option exercise window closed, THCI still said nothing about any

objection it had to the option’s exercise. THCI said nothing at

all about invoking the Additional Rent issue as a bar to the

option’s exercise until one month later, on April 16. And, even

then it did not clearly state that it deemed the option’s

exercise to be invalid; it merely “reserved its rights.”

THCI’s conduct was not unlike that found to warrant

application of the equitable estoppel doctrine in Capital

Commercial Properties, Inc. v. Ames Realty II, Inc. (In re Ames

Department Stores, Inc.), 288 B.R. 339 (Bankr. S.D.N.Y. 2003),

and the similar cases cited therein. In that case, the Lessor

also claimed that the Lessee’s exercise of an option to extend a

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 37 of 62
38

Lease was invalid. The Lessor objected on grounds that the

notice was written on stationary, not of the Lessee, but of the

Lessee’s corporate parent. Id. at 341. After carefully

considering the equitable principles involved, including that an

obligation to communicate relevant facts — to speak — can arise

in equity when silence will convey a false impression, the court

noted that “estoppel by conduct occurs where one party ‘caused

the other party to occupy a more disadvantageous position than

that which he would have occupied except for that conduct.’” Id.

at 351 (quoting Stanley’s Cafeteria, Inc. v. Abramson, 306 S.E.2d

870, 873 (Va. 1983)). The court held the Lessor estopped from

denying the validity of the option’s exercise for two independent

reasons, the second being pertinent here:

The second [reason] arises from the Landlord’s

failure to raise the alleged defect in exercise of the

option in the period from the time of option exercise,

in December 2000, and the deadline for exercising it,

some six weeks later. Throughout this time, the

Landlord knew, if it mattered, that Ames Realty II was

the Tenant-of-record, and knew the manner of exercise

of the option. But it did not speak, and its failure

to speak deprived the Ames Defendant . . . the

opportunity to cure the alleged defect, if it was one,

which easily could have been done with the stroke of a

pen.”

In re Ames Dep’t Stores, 228 B.R. at 352 (footnote omitted); see

also In re Q.T., Inc., 118 B.R. 47, 50-51 (Bankr. E.D. Va. 1990)

(holding that landlord’s silence despite ample opportunity to

voice objections to option exercise before tenant relied on it

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 38 of 62
39

estopped landlord from objecting); In re Circle K Corp., 127 F.3d

904, 909 (9th Cir. 1997); Adelman v. Applefield, 203 N.Y.S. 2d

602, 606-07 (N.Y. Mun. Ct. 1959) (landlord estopped from

interposing otherwise valid objection to exercise of option to

extend lease where he remained silent about defect until after

the option exercise period expired).

As in Capital Commercial Properties, this court also “is

unwilling to countenance a party’s effort to seize upon an

alleged defect when timely protest, if indeed it was sincere,

would have provided an opportunity to cure any and all alleged

defects” in the option’s exercise. 288 B.R. at 354. 

Accordingly, based upon its deliberate silence regarding its

known objections to Lakeview’s option exercise and its remaining

silent while the option exercise period ran its course and

expired, thereby both inducing a false sense of security in

Lakeview with regard to the option’s effective exercise, and

THCI’s consciously depriving Lakeview of the time and ability to

cure any alleged defect or otherwise seek appropriate and timely

remedies, THCI is equitably estopped from denying the valid

exercise by Lakeview of its option to extend the Lease term. 

That is so, whether the asserted deficiency was in the nature of

an ambiguity arising from Lakeview’s use of the phrase “intends

to,” or a continuing default arising from the Additional Rent

calculation dispute, or THCI’s claimed (but argued only in

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 39 of 62
40

passing) continuing breach related to insurance coverage

requirements under the Lease.

Lakeview’s exercise of its option to extend the Lease term

was valid and effective. The Lease term was extended for the

first five-year period, as provided in Article 1.4 of the Lease.

Did Lakeview Repudiate or

Anticipatorily Breach the Extended Term Lease?

Under New Hampshire law, a contract is repudiated, or an

anticipatory breach occurs, when a party either unmistakably

repudiates his obligations through words or voluntarily disables

himself from performing them before the time for performance. 

LeTarte v. West Side Dev., LLC, 151 N.H. 291, 294 (2004) (citing

9 A. Corbin, Contracts § 959 (interim ed. 2002)). Anticipatory

repudiation requires an unequivocal expression of intent to

forego performance in the form of a definite and final

communication. Enterasys Networks, Inc. v. Clarendon Nat’l Ins.

Co., No. 04-cv-27-SM, 2006 WL 2482779, at *5 (D.N.H. Aug. 29,

2006) (quoting Md. Cas. Co. v. W.R. Grace & Co., No. 88 Civ. 2613

(JSM), 1996 WL 306372, at *1 (S.D.N.Y. June 7, 1996)). Whether a

party has anticipatorily breached a contract or has abandoned it

is generally regarded as a question of fact. See, e.g., Wolff &

Munier, Inc. v. Whiting-Turner Contracting Co., Inc., 946 F.2d

1003, 1008 (2d Cir. 1991).

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 40 of 62
41

After exercising its option to extend, Lakeview still

anticipated a new agreement with THCI — one that would result in

either a new and more favorable Lease arrangement, or a “buy out”

that would completely wrap up and resolve the contractual

relationship between them. Lakeview was open to either

alternative, but hopelessly misapprehended THCI’s quite different

expectations. Even after THCI’s “reservation of rights” letter

of April 16, in which THCI proposed a new arrangement involving a

dramatic rent increase and payment by Lakeview of disputed

Additional Rent for the previous six years (roughly $1.4

million), Lakeview’s principals still did not seem to recognize

the reality of the situation.

Viewing the communications and conduct of the parties in

context, as described earlier in detail, the court is persuaded

that Lakeview did not intend to, and did not, manifest a clear,

unequivocal, and final intent to repudiate the extended Lease. 

Nor did it offer to terminate the extended Lease relationship

between it and THCI. THCI’s contrary interpretation of that

correspondence is not persuasive.

Lakeview’s e-mails of May 2 (Ex. L 875) and August 17 (Ex. L

962) put THCI on fair notice that Lakeview was ready, willing,

and able to perform under the Lease as amended by its option

exercise. Though Lakeview’s principals seemed to think,

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 41 of 62
42

erroneously, that THCI’s acceptance or approval of the exercised

option was required for the term to be extended, THCI understood

that it was not. THCI’s failure to respond to Lakeview’s

representation — call it an offer to perform its obligations

under the contract — was reasonably understood by Lakeview as

THCI’s refusal to allow Lakeview to perform.

At that point, on August 23, in the two e-mails sent to THCI

(Exs. L 1027, L 1029), Lakeview made a different proposal. 

Rather than continuing its efforts to obtain more favorable terms

under the Lease, Lakeview unambiguously offered to resolve the

contractual relationship between them on specified terms: full

cooperation in transferring licenses, permits, etc., as called

for under the Lease when a term expires (Article 17); exchange of

mutual releases; a fair-market buyout by THCI of Lakeview’s

business; and Lakeview’s willingness to serve as interim manager

for a fee while the complicated transfer of operations occurred. 

THCI’s response, by letter on August 27, was at best ambiguous.

It cannot be said that Lakeview’s assertion that it was

willing to perform under the extended Lease amounted to a

“repudiation” in any way of its contractual obligations. It is

also difficult to find that THCI “accepted” repudiation of the

extended Lease — an extended Lease that it tacitly claimed, and

now explicitly claims, did not exist.

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 42 of 62
43

Lakeview’s final offer was rejected by THCI principals on

August 29, when it was confirmed that THCI would not buy out

Lakeview’s business, nor exchange mutual releases, nor engage

Lakeview as an interim manager while either a new Lessee was

found or THCI assumed responsibility for operation of the

facilities. But, Lakeview’s e-mails constituted neither a

repudiation of the Lease, nor an offer of rescission. Instead,

those e-mails set forth a proposal to end the contractual

relationship on terms: an exchange of mutual releases and THCI’s

purchase of Lakeview’s interest in the business. On August 29,

however, THCI rejected Lakeview’s offer in settlement or

resolution of the contractual relationship.

Even if one could plausibly argue that Lakeview’s proposal

constituted a clear and unequivocal declaration that it would not

perform, or a clear and unequivocal offer to terminate the

contract between the parties, still, THCI neither effectively

accepted that repudiation (or, alternatively, that offer to

terminate), nor did it detrimentally rely on any repudiation. 

Between August 23 and August 30, THCI increased its level of

activity with respect to an anticipated transition, but that

anticipated transition was just part of the overall offer by

Lakeview. THCI presumably knew that it was not going to accept

Lakeview’s offer. If THCI was relying on anything, it was

relying on its own expectation — unfounded and completely

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 43 of 62
7 To the extent THCI might have been genuinely perplexed or

uncertain about Lakeview’s desire to perform its contractual

obligation, it was entitled to seek adequate assurances from

Lakeview. The New Hampshire Supreme Court has recognized the

availability, and utility, of the “right to demand adequate

assurances” in situations where repudiation may have occurred but

the promisee is uncertain. That right is expressly provided for

under the Uniform Commercial Code (see N.H. REV. STAT. ANN.

(“RSA”) § 382-A:2-609(1)), and its application in general

contract law is “closely related to the duty of good faith and

fair dealing in the performance of the contract . . . . a duty

that has long been an integral component of our common law of

contracts . . . .” McNeal v. Lebel, 157 N.H. 458, 463 (2008),

(quoting RESTATEMENT (SECOND) OF CONTRACTS, § 251, cmt. a at 277;

citing Centronics Corp. v. Genicom Corp., 132 N.H. 133, 139

(1989)).

44

fanciful — that Lakeview was actually going to “throw them the

keys” (Ex. L 961) to a multi-million dollar enterprise in

exchange for little more than a “Thanks for your cooperation in a

smooth transition.”

Here, I find as fact and as a matter of law, that the words

used by Lakeview in its communications to THCI on May 2, August

17, August 22, and August 23, did not repudiate, or purport to

repudiate its obligations under the extended lease.7 To the

contrary, those communications plainly sought the opportunity to

perform under the terms of the extended lease. Alternatively,

should THCI refuse that performance, Lakeview offered to

terminate the contractual relationship between the parties on

stated terms — which offer was plainly rejected by THCI.

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 44 of 62
45

The Counter-Claim for Arrearages in Rent

THCI filed a counterclaim for Additional Rent owed, based

upon the discrepancy between Lakeview’s calculations using Gross

Revenues as the term is understood under GAAP, rather than Gross

Revenues as the term is defined in the Lease.

THCI had no reason to think, when it purchased the property,

that Additional Rent under the Lease was being calculated by

Lakeview in any manner other than as the pertinent documents

disclosed. Before purchasing the properties and succeeding to

the Lessor’s obligations, THCI performed adequate due diligence

inquiries, which included obtaining a Tenant Estoppel Certificate

(Ex. F 6) from Lakeview, as Lessee. The Estoppel Certificate

affirmatively represented that there were no known default

conditions under the Lease, and, significantly, that the

contractual arrangement between Lakeview and the then Lessor

(Meditrust) was as described in the Lease attached to the

certificate. The attached Lease was the Lease at issue. No

appended document disclosed a change in how Additional Rent was

calculated, or that a new or amended definition of Gross Revenues

was in effect, and nothing in any of the appended documents

referred to a side agreement or written or oral estoppel

agreement amending the Lease provisions related to Additional

Rent calculations. The Estoppel Certificate clearly stated that

“[t]he methodology for computing Additional Rent is set forth in

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 45 of 62
46

Section 3.1.2 of the Lease.” THCI was plainly entitled to rely

on that document.

Lakeview’s affirmative representations in the Estoppel

Certificate were material, and Lakeview knew that THCI would

reasonably rely upon those affirmative representations. An

“estoppel certificate” is a common device used in real estate

transactions. It consists of a “[a] signed statement by a party

(such as a tenant or mortgagee) certifying for another’s benefit

that certain facts are correct, as that a Lease exists, that

there are no defaults, and that rent is paid to a certain date. 

A party’s delivery of this statement estopps that party from

later claiming a different state of facts.” K’s Merch. Mart,

Inc. v. Northgate Ltd. P’ship, 835 N.E.2d 965, 971 (Ill. App. Ct.

2005) (quoting BLACK’S LAW DICTIONARY 572 (7th ed. 1999)).

The purpose of an estoppel certificate is, as the term

suggests, to assure a purchaser, like THCI, that the Lessee will

not later make claims that are inconsistent with the

representations in the certificate, upon which the prospective

purchaser is entitled to rely. See id. “Estoppel certificates

are important and useful devices to preserve and enhance the

marketability of commercial property. They are widely used in

commercial real estate transactions.” Id.; see also Plaza

Freeway Ltd. P’ship v. First Mountain Bank, 96 Cal. Rptr. 2d 865

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 46 of 62
47

871-72 (Cal. Ct. App. 2000); Liberty Prop. Trust v. Day-Timers,

Inc., 815 A.2d 1045, 1052 (Pa. Super. Ct. 2003) (lessee was

equitably estopped from asserting an oral modification of the

lease where it clearly denied the existence of any such

modification in an estoppel certificate); Va. Highland Assocs. v.

Allen, 330 S.E.2d 892, 895-96 (Ga. Ct. App. 1985).

Lakeview might have thought it had an agreement with the

prior owner to change the rent calculation, by amending the

definition of Gross Revenues, and it may actually have had one

(though evidence of such an agreement was sparse). But, Lakeview

carelessly failed to present any documentation of that change to

THCI when it certified the terms of the Lease, and it did not

disclose any such oral or written agreement in any other way

before THCI purchased the property. Lakeview is reasonably

charged with knowing that THCI would rely upon its affirmative

representations in the estoppel certificate in deciding whether

to purchase the properties. Under such circumstances, Lakeview

must be held to the terms it represented were in effect,

including the Additional Rent calculation formula as set out in

the Lease that Lakeview itself certified as controlling the

relationship between it and the prior owner. Lakeview is

estopped from claiming a different state of facts now, after THCI

materially changed its position in reliance upon the certificate.

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 47 of 62
48

Lakeview points to Prime Financial Group, Inc. v. Masters,

141 N.H. 33 (1996), as supporting its argument that the

Additional Rent calculation was, nevertheless, amended by conduct

with respect to THCI. The argument proceeds as follows. Even if

THCI is not bound by the agreement with Meditrust, still,

Lakeview argues, THCI is now bound by its own conduct in the

intervening years. THCI effectively agreed to the amended

Additional Rent calculation, Lakeview says, or at least it is now

estopped by conduct from challenging it, because THCI knew in

2001 that Lakeview was calculating the Additional Rent

differently than called for by the Lease terms, yet THCI

continued for years thereafter to accept those Additional Rent

payments as Lakeview calculated them.

Prime Financial does not help Lakeview. That decision

recognizes that a provision in a contract requiring any waiver or

modification of its terms to be in writing, as this Lease does,

cannot limit the parties’ own ability to orally alter the

contract by agreement in the future. Id. at 37. Contracting

parties retain the power to alter, vary, or discharge a contract

by subsequent agreement, even an oral agreement, notwithstanding

a limitation in the contract itself. Id. In Prime Financial, a

jury determined that the parties to an equipment lease agreed to

waive a contractual provision requiring assignments of the lease

to be in writing, and that the party later objecting to an

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 48 of 62
49

assignment had also agreed to the assignment, as indicated by its

conduct. The objecting party, the lessor, had been given written

notice of the assignment, and was asked to concur. Id. at 35-36. 

The lessor remained silent, but accepted future payments on the

equipment lease from the assignee alone, and without protest. 

Id. at 35. The court recognized that the parties had effectively

agreed by conduct to waive the “amendments only in writing”

requirement, and, that the lessor had also agreed to the

assignment. Id. at 37.

Lakeview reads Prime Financial far too broadly, as holding

that a lessor who accepts commercial lease payments it knows were

calculated differently from the manner prescribed in the lease,

and who has brought that discrepancy to the attention of the

lessee, and has expressed its disagreement with the calculation,

and even advised the lessee from time to time during the lease

term of the growing dollar amount it believes the lessee owes in

arrearages, has, nevertheless, effectively consented to an

unwritten lease amendment modifying the rent obligation, as well

as waived any provision in the lease itself requiring amendments

to be in writing. The court disagrees.

THCI’s acceptance of Lease payments, while maintaining that

they were not properly calculated, cannot reasonably be construed

as suggesting agreement to the major amendment Lakeview seeks to

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 49 of 62
8 The precise amount owed is a matter of performing a

series of mathematical calculations. The result ought to be

50

impose. As noted in THCI’s post-trial brief, THCI had legitimate

business reasons not to aggresively press the issue, given other

priorities, its interest in maintaining the beneficial business

relationship between the parties, and the potential for general

agreement on a number of issues, including that one, at some

later time. In addition, THCI was entitled to rely on those

provisions of the Lease that permitted it to accept less than the

rent due without waiving its right to recover arrearages later.

In this case, the evidence does not establish that the

parties either agreed to waive the Lease provision requiring

amendments to be in writing, or, having done that, agreed to a

“Gross Revenues” definition different than that specified in the

Lease. And, although the court has held that THCI is estopped to

invoke Lakeview’s underpayment of rent as a bar to Lakeview’s

exercise of its option to extend, THCI is not barred from

pursuing its right to recover rent arrearages.

Accordingly, THCI is entitled to judgment on its

counterclaim for Additional Rent arrearages. Lakeview owes THCI

Additional Rent in an amount equal to the difference between the

Additional Rent as properly calculated under the Lease terms and

as in fact calculated by Lakeview.8

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 50 of 62
undisputed. If the parties cannot agree on the amount due,

however, the court will entertain a motion to reopen the case and

resolve the issue, likely by appointing an expert, or special

master, at the parties’ expense.

51

Statute of Limitations

THCI’s cause of action for Additional Rent owed accrued when

it became aware of Lakeview’s different calculation method and

its detrimental effect on THCI’s rent receipts. Gen.

Theraphysical, Inc. v. Dupuis, 118 N.H. 277 (1978). THCI knew of

both the different calculation method used by Lakeview and its

detrimental effect in 2001, yet it chose to sit on its rights. 

Suit was not brought to recover Additional Rent until the

counterclaim was filed on October 14, 2007.

In New Hampshire, “[t]o be timely, a contract claim must be

brought within three years of when it arose.” Coyle v. Battles,

147 N.H. 98, 100 (2001) (citing RSA 508:4, I). “[A] cause of

action . . . arises once all the necessary elements are present .

. . . In the case of a contract action, it would be when the

breach occurs.” Coyle, 147 N.H. at 100 (quoting Bronstein v. GZA

GeoEnvironmental, 140 N.H. 253, 255 (1995)). Here, Lakeview

breached the Lease in 2001, when it first made a rental payment

to THCI that was not in accordance with the Additional Rent

provisions in the lease, as affirmed in the Estoppel Certificate. 

The three-year limitations period begins to run as to each

Additional Rent payment as it becomes due. Gen. Theraphysical,

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 51 of 62
52

Inc., supra; Pierce v. Metro. Life Ins. Co., 307 F. Supp. 2d 325

(D.N.H. 2004) (“New Hampshire follows the ‘universal rule that

when an obligation is to be paid in installments the statute of

limitations runs only against each installment as it becomes due

. . . .’”).

Wisconsin law, on the other hand, prescribes a six-year

limitations period for actions in contract. Wis. Stat. § 893.43. 

While in this case the New Hampshire limitations period would

generally apply, New Hampshire law does not require blind

adherence “to a traditional rule whose application would be

unwise or unfair in a particular case.” Keeton v. Hustler

Magazine, Inc., 131 N.H. 6, 19 (1988). Applying New Hampshire’s

choice-of-law principles, and recognizing that the parties

consciously provided in the Wisconsin Lease that its terms would

be governed by Wisconsin law, it is appropriate to treat the two

Leases separately for statute of limitations purposes. It would

be unwise and unfair to impose New Hampshire’s three-year

limitations period with respect to breaches of the Wisconsin

lease. New Hampshire has no interest in what limitations period

applies to a breach of a Wisconsin contract, performed in

Wisconsin, and under which the parties have agreed to be bound by

Wisconsin law. Wisconsin on the other hand, has a strong

interest in enforcing its policy decisions.

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 52 of 62
53

Therefore, THCI is entitled to recover breach of contract

damages for Additional Rent due and owing, but only during the

three-year period extending back from the date of filing its

counterclaim with respect to the New Hampshire Lease, and

extending six years back with respect to the Wisconsin Lease, and

from filing of the counterclaim to the present. (Obviously,

Lakeview is obligated, as well, to calculate and pay Additional

Rent throughout the extended term as provided for in the Lease.)

The Mentor Sale

By agreement, the parties also brought late competing

supplemental claims related to an effort by Lakeview to sell its

New Hampshire business operations to Mentor National Healthcare,

LLC (“Mentor”) in the fall of 2007. The parties did not pursue

these claims at trial, and little discussion is required

(generally breach of contract, tortious interference, etc.). The

proposed sale never progressed beyond the early discussion stage,

and would not have progressed beyond that stage given this

dispute and the litigation initiated by Lakeview in September of

2007. Any potential purchaser would, without a doubt, have

insisted on an authoritative resolution of the validity of the

option’s exercise before even considering moving forward with

serious discussions, and that issue was legitimately contested.

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 53 of 62
54

Lakeview was in default when it exercised the option and but

for the court’s application of the equitable estoppel doctrine,

it had nothing of real value to sell (the right to occupy and

operate the facilities is the only business asset Mentor could

conceivably have been interested in purchasing).

THCI did not unreasonably withhold consent to a sale to

Mentor (which had not yet been agreed upon) given its substantial

claims to Additional Rent arrearages, and Lakeview did not

unreasonably seek to sell its business, even though, for all

practical purposes, that business was unmarketable pending

resolution of this litigation.

The Consumer Protection Act Claims

Neither party is entitled to prevail on its respective state

law claims brought under New Hampshire’s Consumer Protection Act. 

To a degree, both parties behaved in a manner that is easily

subject to criticism, and each party’s behavior was instrumental

in creating the milieu of misunderstanding, miscommunication, and

misapprehension of their respective rights and responsibilities

under the Lease relationship. There is enough rascality here on

each side to preclude finding that either side was imposed upon

unduly. Even so, the rascality on neither side rises to the

level necessary to support a Consumer Protection Act claim. See

State v. Sideris, 157 N.H. 258, 263 (2008) (“under the rascality

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 54 of 62
55

test, the objectionable conduct must attain a level of rascality

that would raise an eyebrow of someone inured to be rough and

tumble of the world of commerce.”) (citation omitted).

Summary

The court, as trier of fact, recognizes that THCI has

capably argued an entirely different factual interpretation of

the evidence presented. It is clear that neither Lakeview’s nor

THCI’s factual theory of the case is free from inconsistency with

at least some of the evidence, or the occasional selfcontradiction. Both sides made statements and engaged in

behavior decidedly inconsistent with the perspective each later

sought to impose on the circumstances as a whole. As is often

the case, the truth lies somewhere in between. Overall, the

reality is that Lakeview’s imprecision and ineptness, combined

with THCI’s unresponsiveness and studied avoidance of clear

communication combined equally to create this confusing factual

situation, one that was easily avoidable. Each party was

maneuvering to attain a commercial goal, and neither party seemed

willing to, or capable of, doing so with candor and clarity.

Having heard the witnesses and having carefully reviewed and

considered the evidence presented, I have found that Lakeview’s

perspective, in general, and as qualified above, is more

persuasive. The contradictions and evidentiary flaws in THCI’s

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 55 of 62
56

position are greater, and, in the end, I am persuaded that THCI

well knew that Lakeview had neither repudiated nor abandoned the

Lease, while Lakeview naively dreamed of a profitable sale in

lieu of an extended term under the Lease.

The court’s ruling are summarized as follows.

Lakeview validly exercised its option to extend the Lease

term. THCI is equitably estopped by conduct from challenging the

validity of the option’s exercise.

Lakeview did not repudiate the extended Lease contract but,

recognizing THCI’s tacit refusal to permit Lakeview’s performance

under the extended contract, and finally recognizing the futility

of pursuing a new landlord-tenant relationship, it expressed its

intention to fully comply with its obligations under the extended

Lease. Lakeview did offer to terminate the Lease as extended

(and the contractual relationship between the parties) but only

on specified terms. That offer was rejected by THCI. At that

point, Lakeview took stock of its situation, and, through legal

counsel, put THCI on unmistakable notice that it insisted on its

contractual rights under the extended Lease.

THCI is entitled to recover properly calculated Additional

Rent consistently with the applicable statutes of limitations

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 56 of 62
57

periods as described. Lakeview’s petition for a declaratory

judgment (Count I) that it has not defaulted on the Lease, and,

is entitled to extend it, is granted in part and denied in part. 

Lakeview was in default, but THCI is estopped from invoking any

continuing default due to its own inequitable conduct. 

Lakeview’s option exercise was effective when the extension

window closed without a substantive objection from THCI. 

I find in favor of THCI on Lakeview’s breach of contract

claim (based upon THCI’s refusal to acknowledge extension of the

Lease) (Count II). THCI had no contractual obligation to

specifically “accept” or acknowledge Lakeview’s extension, beyond

performing its own obligations under the Lease. This case was

already in litigation by the time the Fixed Term expired, and a

state court had issued an injunction preserving the status quo. 

THCI had no opportunity to breach or not breach its contractual

obligation to permit Lakeview to occupy and operate the leased

premises, and it made no clear, unequivocal, or final statement

of an intent not to perform sufficient to constitute an

anticipatory repudiation, though Lakeview reasonably construed

its silence and conduct as indicating it would not permit

Lakeview to continue as tenant beyond September 30.

Lakeview’s second contract claim (Count III), based on

THCI’s alleged breach of Lakeview’s right to quiet enjoyment of

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 57 of 62
58

the leased property, also fails. To be sure, THCI officials made

visits to the facilities, and prepared for an anticipated

transition of operations at the end of the Fixed Term. But,

those visits and inquiries were invited by Lakeview’s own

imprecise and unclear statements and conduct as much as by THCI’s

strategies. Lakeview itself anticipated transitioning

operations, subject to an acceptable deal to terminate the

contract relationship. Thus, THCI’s activity did not breach any

obligation to provide quiet enjoyment of the premises.

Count IV, Lakeview’s claim for tortious interference with

business relations, is based on the same conduct alleged in Count

III, and it, too, fails for the same reasons.

Finally, Lakeview’s Consumer Protection Act claim, asserted

in Count V, fails, inter alia, because THCI’s conduct did not

rise to the requisite level of rascality.

Lakeview is not entitled to judgment on any of its three

supplemental claims (breach of contract, tortious interference

with business relations, and violation of the Consumer Protection

Act) arising from the potential sale of its business assets to

Mentor. That potential sale was not a realistic possibility

under the circumstances, so Lakeview was not harmed by any of the

alleged conduct on which those claims are based. 

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 58 of 62
59

Turning to THCI’s counterclaims, THCI is entitled to relief

on its breach of contract claim asserted in Count I. Lakeview

failed to pay the full amount of Additional Rent due to THCI. 

Lakeview’s obligation to pay rent is a contractual duty and to

the extent its breach also breached other agreements between the

parties, THCI is also entitled to judgment on the breach of

contract claim stated in Count II.

Because THCI’s claim for breach of the implied covenant of

good faith and fair dealing merely restates its breach of

contract claims, and because THCI has proved no conduct by

Lakeview of the sort described in Centronics, supra, 132 N.H.

133, THCI is not entitled to judgment on Count III.

Regarding Count IV, THCI’s Consumer Protection Act claim,

THCI is not entitled to judgment because Lakeview’s conduct did

not rise to the requisite level of rascality.

THCI’s unjust enrichment claim, Count V, fails because it is

based upon an erroneous premise — that Lakeview has been

wrongfully in possession of the leased property since the

expiration of the Fixed Term, and has been obligated to pay rent

as a holdover tenant at sufferance. Lakeview remains a tenant by

virtue of its valid extension of the Fixed Term.

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 59 of 62
60

Finally, because Lakeview is entitled to possession of both

the New Hampshire and Wisconsin properties, it is not liable,

under Wisconsin law, for failure to vacate the Wisconsin

property. Accordingly, THCI is not entitled to judgment on Count

VI of its counterclaims.

THCI is also not entitled to judgment on its supplemental

counterclaims arising from Lakeview’s preliminary discussions

with Mentor. Supplemental Counts I (a request for injunctive

relief), II (breach of the Lease), III (the second claim given

that number, for tortious interference with prospective economic

advantage), IV (civil conversion), and V (misappropriation and

unfair competition) all are based on the erroneous premise that

Lakeview has been, and is, a holdover tenant with narrowly

circumscribed rights to the leased property.

THCI’s first claim labeled Count III (breach of a stock

pledge agreement) is based on the premise that Lakeview’s failure

to fully perform its obligations under the Lease (i.e., failing

to vacate the property at the end of the Fixed Term and failing

to pay the full rent) precluded it from taking any action to

transfer or assign stock it had pledged to THCI. Under the

circumstances found, Lakeview had no obligation to vacate the

property, and, even if Lakeview did breach the stock pledge

agreement by engaging in negotiations with Mentor while in

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 60 of 62
61

continuing default on its obligation to pay the full rent due,

THCI has proven no damages resulting from any breach of the stock

pledge agreement. Accordingly, THCI is not entitled to relief on

that claim.

The foregoing shall constitute the findings of fact and

conclusions of law required by Rule 52 of the Federal Rules of

Civil Procedure. The court notes that the parties have submitted

literally hundreds of requests for findings and conclusions, many

of which are argumentative and convoluted. It is well settled,

however, that the court “does not have to make findings on every

proposition put to it by the parties.” Applewood Landscape &

Nursery Co. v. Hollingsworth, 884 F.2d 1502, 1503 (1st Cir. 1989)

(quoting Morgan v. Kerrigan, 509 F.2d 580, 588 n.14 (1st Cir.

1974)). Rather, the findings simply need be “sufficient to

indicate the factual basis for the ultimate conclusion.” Kelly

v. Everglades Drainage Dist., 319 U.S. 415, 422 (1943) (per

curiam). If either party believes that additional findings of

fact and conclusions of law are necessary to support the court’s

rulings, it may submit a written request for (a reasonable number

of) additional findings and conclusions within fifteen days of

the date of this Memorandum Decision. Any other requests for

findings of fact or rulings of law submitted by the parties and

not expressly or implicitly granted in the body of this opinion

are hereby denied.

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 61 of 62
62

Judgment will enter upon expiration of the allowed period in

which to request supplemental findings if none are requested, or

after ruling if requests are made.

SO ORDERED.

____________________________

Steven J. McAuliffe

Chief Judge

March 30, 2009

cc: Christopher H. M. Carter, Esq.

Daniel M. Deschenes, Esq.

Ovide M. Lamontagne, Esq.

Jonathan M. Shirley, Esq.

Leigh S. Willey, Esq.

Case 1:07-cv-00303-SM Document 139 Filed 03/30/09 Page 62 of 62