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THE SUPREME COURT OF NEW HAMPSHIRE
___________________________
Nashua District Court
No. 2000-551
N.A.P.P. REALTY TRUST
v.
CC ENTERPRISES A/K/A CC MULTI-MEDIA ENTERPRISES, INC & a.
November 1, 2001
Jordan, Maynard & Parodi, P.L.L.C., of Nashua (Edward A. Jordan on the brief and orally), for the plaintiff.
Bolton Law Offices, P.A., of Nashua (Steven A. Bolton on the brief and orally), for the defendants.
Duggan, J. The defendants, CC Enterprises and its president, Christopher Currier, appeal from a Nashua District Court (Howorth, J.) order ruling that they violated the terms of their lease agreement by using the leased premises to sell and rent sexually explicit videos, magazines and related novelties. The plaintiff, N.A.P.P. Realty Trust, cross-appeals, asserting the trial court erred in denying its requests for relief on alternative grounds. We vacate and remand.
On February 20, 1999, the parties entered into an agreement to lease a unit within a shopping center in Hudson. According to the agreement, the unit was leased "for the purpose of operating a Video Multi-Media store and other related items." In April 1999, the defendants opened a business known as "Video Express of Hudson" (Video Express) on the premises. Video Express offers sexually explicit videos for sale and rent, as well as sexually explicit magazines and various sexual devices for sale. In the negotiations leading up to the agreement, the plaintiff did not expressly restrict the type of videos the defendants could rent and sell. The defendants, however, did not explain that they intended to exclusively offer sexually explicit merchandise. Shortly after Video Express opened for business, the plaintiff served the defendants with notices to quit asserting, among other things, that the defendants’ use of the premises violated article V of the lease agreement. Article V provides "that no trade or occupation shall be conducted in the Lease premises or use made thereof which will be unlawful, improper, noisy or offensive, or contrary to any law or any municipal by-law or ordinance in force in the Town of Hudson . . . ."
Following an eviction hearing, the district court refrained from ruling on the plaintiff’s claim that the defendants’ business is contrary to the law and ordinances of the Town of Hudson, noting that the issue would be resolved in a pending action brought against the defendants by the Town in superior court. The district court, however, did rule that based "on the subjective judgment . . . of third persons as well as the landlord’s principal," the defendants’ business was "offensive" within the meaning of the agreement and ordered a writ of possession to issue. This appeal and cross-appeal followed.
On appeal, the defendants argue the trial court erred when it applied a subjective standard to determine whether their use of the premises was "offensive" as the term was used in the agreement. They also contend the trial court improperly interpreted a general clause of the lease as prohibiting a use specifically allowed in another clause.
"A lease is a form of contract that is construed in accordance with the standard rules of contract interpretation." Echo Consulting Services v. North Conway Bank, 140 N.H. 566, 569 (1995). "[T]he proper interpretation of a lease is ultimately a question of law for this court to determine. A lease is interpreted to reflect the parties' intentions at the time of contracting." Woodstock Soapstone Co. v. Carleton, 133 N.H. 809, 815 (1991) (citation omitted). "[T]he language of a contract is ambiguous if the parties to the contract could reasonably disagree as to the meaning of that language." Great Lakes Aircraft Co. v. City of Claremont, 135 N.H. 270, 288 (1992) (quotation omitted). In this lease, the term "offensive" is reasonably subject to varying interpretations, and is therefore ambiguous. Cf. Dalzell v. Harlow, 129 N.H. 43, 44 (1986) (concluding phrase "use the . . . dock" ambiguous because phrase itself does not define scope of permissible uses).
In resolving the ambiguous terms of a contract, we apply different standards for different types of contracts. For example, the standard applied to interpreting much of the language of a promissory note is provided by statute. See, e.g., Mundaca Inv. Corp. v. Febba, 143 N.H. 499, 501 (1999) (applying statutory standard to determine parties’ obligations under promissory note). The standard applied to interpreting an insurance contract arises in part from the inequality in bargaining power. See, e.g., Hudson v. Farm Family Mut. Ins. Co., 142 N.H. 144, 146 (1997) (construing ambiguous language to favor coverage for insured). In this case, the contract is for a commercial lease. Rules of statutory interpretation do not regulate this type of contract and the inequality in bargaining power that exists in insurance contracting does not exist here. Thus, the defendants argue that we should apply the objective standard generally used in contract interpretation. Under this standard, a court determines the parties’ intent by assigning the meaning a reasonable person would give to an ambiguous term. See Gamble v. University of New Hampshire, 136 N.H. 9, 13-14 (1992).
We recognize that "possible standards of [contract] interpretation fall into two categories: objective standards, which assign a meaning to words according to external criteria; and subjective standards, which assign meaning according to the state of mind of one or more parties to the agreement." 11 S. Williston, Contracts