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Handy Boat v. Professional Services
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MAINE SUPREME JUDICIAL COURT					Reporter of Decisions
Decision:	1998 ME 134
Docket:	Cum-97-456	
Argued:	January 5, 1998
Decided:	June 3, 1998	


Panel:	WATHEN, C.J., and ROBERTS, CLIFFORD, RUDMAN, LIPEZ, SAUFLEY, JJ.



HANDY BOAT SERVICE, INC. v. PROFESSIONAL SERVICES, INC. and KERRY S. LUTHER

SAUFLEY, J.

	[¶1]  Professional Services, Inc. and Kerry S. Luther appeal from the
summary judgments entered in the Superior Court (Cumberland County,
Mills, J.) in favor of Handy Boat Service, Inc. on its breach of contract and
fraudulent transfer claims.  On appeal, they argue that the court erred in
construing Luther's personal guarantee, applying the parol evidence rule,
and awarding damages on the fraudulent transfer claim.  Finding no error
with the exception of a damage calculation, we affirm in part and vacate in
part.
	[¶2]  On April 20, 1990, Handy Boat Service, Inc. and Professional
Services, Inc. executed a lease governing Professional Services's occupation
of a waterfront building in Falmouth for the purpose of operating a
restaurant.  The lease was signed by representatives of both parties,
including Kerry S. Luther, president of Professional Services.{1}  Luther also
signed a separate guarantee of the lessee's obligation.
	[¶3]  Pursuant to the terms of the lease, Professional Services
exercised its option to extend the lease for an additional five years on
February 7, 1991.  In 1994, Luther established a separate corporation,
Professional Catering Services, Inc., because he knew there was going to be
trouble between Professional Services and Handy Boat.{2}  In November 1995,
Professional Services vacated the leased premises and transferred property
having a value of $60,000 to Professional Catering without any equivalent
exchange in value.
	[¶4]  Handy Boat subsequently filed a two-count complaint alleging
breach of contract against both Professional Services and Luther.  Handy
Boat later amended that complaint to include a third count alleging
fraudulent transfer against both defendants pursuant to the Uniform
Fraudulent Transfer Act, 14 M.R.S.A. §§ 3571-3582 (Supp. 1997).  As
amended, the complaint sought contract damages for unpaid rent and
expenses and double damages for the fraudulent transfer pursuant to
14 M.R.S.A. § 3578(1)(C).
	[¶5]  Concluding that Luther's guarantee applied to the original lease
term and the extension, the court granted a summary judgment for Handy
Boat on its breach of contract claims against both defendants, awarding
$114,083.90 plus interest, costs, and attorney fees.  The court also granted
a summary judgment for Handy Boat on its fraudulent transfer claim against
the defendants, awarding $228,167.80, or double Handy Boat's contract
damages, plus interest and costs.{3}  This appeal by the defendants followed.
I. The Personal Guarantee
	[¶6]  Luther argues that his personal guarantee does not apply to the
lease as extended by Professional Services because the lease unambiguously
defines a one-year lease term and three separate five-year extension terms
and the guarantee contains no language explicitly making it applicable to the
extension terms.  
	[¶7]  A guarantee is a contract and is governed by the same rules of
construction applicable to other contracts.  See Bumila v. Keiser Homes of
Maine, Inc., 1997 ME 139, ¶ 12, 696 A.2d 1091, 1094.  When a guarantee
and contract are executed at the same time, by the same parties, for the
same purpose, and in the course of the same transaction, they will be
construed together as one legal instrument.  See id.  A contract is to be
interpreted to effect the parties' intentions as reflected in the written
instrument, construed with regard for the subject matter, motive, and
purpose of the agreement, as well as the object to be accomplished.  See id. 
The interpretation of an unambiguous contract is a question of law.  See
Town of Lisbon v. Thayer Corp., 675 A.2d 514, 516 (Me. 1996).  We review
such questions de novo.  See Collins v. Trius, Inc., 663 A.2d 570, 572 (Me.
1995).
	[¶8]  The unambiguous language of the lease and the guarantee made
Luther's personal guarantee applicable to the optional lease term extensions. 
The parties executed both the lease and the guarantee for the purpose of
operating a restaurant at the Falmouth premises.  Section 2.01 of the lease
provides Professional Services with "said Premises for a term of one (1) year
. . . unless sooner terminated or extended as provided in this Lease[.]"  
(Emphasis added).  Section 18.01 of the lease further provides Professional
Services with options to extend the lease for three successive periods of five
years.  When Professional Services exercised its option to extend the lease
for an additional five-year period, it did so pursuant to the explicit terms of
the lease.  
	[¶9]  The guarantee provides that Luther "unconditionally guarantees
to [Handy Boat] the complete performance of all obligations of [Professional
Services], its successors or assigns, under the Lease, without limitation." 
(Emphasis added).  The extension of the lease created a continuing
obligation under that lease.  Construing the guarantee and the lease as one
document to effect the parties' intentions concerning the undisputed object
to be accomplished, the operation of a restaurant at the Falmouth premises,
we conclude that the guarantee unambiguously and unconditionally applies
to the extended six-year lease term, without limitation.  Cf. Bumila, 1997
ME 139 at ¶ 13, 696 A.2d at 1094 (holding that guarantee executed in
connection with principal note extended to replacement note, given that
the guarantee encompassed "other papers evidencing the obligations hereby
guaranteed.").  The court therefore committed no error in concluding that
Luther's personal guarantee applied to the lease as extended by Professional
Services.
II. The Parol Evidence Rule
	[¶10]  Luther and Professional Services argue that the court erred in
refusing to consider extrinsic evidence offered to prove (1) that the
inventory of restaurant equipment was not attached to the lease when it was
signed, (2) that the inventory was not accurate, and (3) that the condition of
the premises and equipment was different than alleged by Handy Boat. 
	[¶11]  The parol evidence rule operates to exclude from judicial
consideration extrinsic evidence offered to alter, augment, or contradict the
unambiguous language of an integrated written agreement.  See Clark v. 
DiPietro, 525 A.2d 623, 625 (Me. 1987); Astor v. Boulos Co., 451 A.2d 903,
905 (Me. 1982).  Application of the rule requires an initial finding that the
parties intended the writing to integrate their understandings concerning
the subject matter of the agreement.  See Farley Inv. Co. v. Webb, 617 A.2d
1008, 1010 (Me. 1992).  To determine whether integration was intended
and whether the scope of integration was complete or partial, the court may
consider extrinsic evidence.  See Waxler v. Waxler, 458 A.2d 1219, 1224
(Me. 1983).  Such consideration, however, is only appropriate where the
agreement is ambiguous on the issue of integration.  See id.  Where the
language of the agreement is unambiguous with respect to the existence and
scope of integration, no extrinsic evidence concerning integration may be
presented by the parties or considered by the court.
	[¶12]  Here, section 17.06 of the lease addresses integration,
providing that "[n]o oral statement or prior written matter shall have any
force or effect.  [Professional Services] agrees that it is not relying on any
representations or agreements other than those contained in this Lease. 
This Lease shall not be modified or cancelled except by writing subscribed
by all parties."  Through this unambiguous integration clause, the parties
clearly expressed their intention to treat the lease as the complete
integration of their agreement.  The court therefore correctly concluded
that it could not consider evidence extrinsic to that clause in deciding
whether the contract was integrated.  
	[¶13]  The defendants next argue that, even if the lease is wholly
integrated, the ambiguity of certain provisions within the lease required the
court to consider extrinsic evidence concerning the parties' intentions as to
those provisions.  Extrinsic evidence concerning a specific provision of an
integrated agreement may not be considered unless the court determines
the language of that provision to be ambiguous.  See McCarthy v. U.S.I. Corp., 
678 A.2d 48, 51-52 (Me. 1996) (extrinsic evidence may only be admitted to
show the parties' intent after contract language is first found to be
ambiguous); see also 3 Arthur L. Corbin, Corbin on Contracts § 579 (1960)
(parol evidence admissible for the purpose of interpreting an otherwise
integrated agreement). 
	[¶14]  The defendants contend that no inventory was attached to the
lease when Luther signed it, that the inventory they later received was not
accurate, and that neither the premises nor the inventory were in good
condition, either at the execution of the lease or at the time they vacated
the premises.  Section 1.01 of the lease, however, describes the inventory as
"attached hereto, made a part hereof and marked as Exhibit C[.]"  As for the
inventory's accuracy, section 5.01 of the lease states that Professional
Services "shall be deemed to acknowledge by entry thereupon that said
Premises, including the FF&E, are in then good and satisfactory order,
repair and condition[.]"{4}  Finally, with respect to the condition of the
premises and the inventory, subsection 5.01(b) states that Professional
Services shall "maintain, repair, replace, and keep the Premises,
including . . . the FF&E, in as good order, repair and condition as the same
are in at the commencement of said term[.]"
	[¶15]  The language of sections 1.01, 5.01, and 5.01(b), along with
that of the integration clause in section 17.06, supports the court's
conclusion that the lease was both integrated and unambiguous with respect
to the inventory's attachment, its accuracy, and the condition of both the
premises and the inventory at the time the lease was executed.  Luther and
Professional Services, having signed the lease, cannot now assert that the
inventory was not attached.  The court committed no error in applying the
parol evidence rule to preclude consideration of extrinsic evidence on these
issues.
III. Fraudulent Transfer Damages
	[¶16]  Finally, the parties agree that the court erred in using Handy
Boat's contract damages as the basis for its award of fraudulent transfer
damages pursuant to 14 M.R.S.A. § 3578(1)(C)(3).  Section 3578(1)(C)(3)
provides that a creditor in a fraudulent transfer action may obtain
"[d]amages in an amount not to exceed double the value of the property
transferred or concealed."  (Emphasis added).  The value of the property
transferred was $60,000.  Although Handy Boat asks this Court to conclude
that an additional $2,790 was fraudulently transferred, it failed to reference
this additional amount in its Rule 7(d)(1) statement.  In ruling on a motion
for summary judgment, "the court is to consider only the portions of the
record referred to, and the material facts set forth, in the Rule 7(d)
statements."  Gerrity Co., Inc., v. Lake Arrowhead Corp., 609 A.2d 295, 295
(Me. 1992) (emphasis added).  On the record before us, therefore, the
additional $2,790 must be disregarded in the computation of the damages
on Count III.  
	The entry is:
Judgment on Counts I and II affirmed. 
Judgment on Count III vacated and remanded
for further proceedings consistent with this
opinion.

Attorneys for plaintiff: Michael J. Gartland, Esq., (orally) Seth W. Brewster, Esq. Verrill & Dana, LLP P O Box 586 Portland, ME 04112-0586 Attorneys for defendants: Joel C. Martin, Esq., (orally) Thomas C. Bradley, Esq. Petruccelli & Martin P O Box 9733 Portland, ME 04104-5033
FOOTNOTES******************************** {1} Luther was a 50% shareholder in Professional Services. His wife owned the other 50%. {2} Luther was a 51% shareholder in Professional Catering. His wife owned the remaining 49%. {3} At the hearing on Handy Boat's motion for summary judgment, Professional Services and Luther did not dispute that the court could find them liable to Handy Boat on the fraudulent transfer claim. {4} In the lease, FF&E refers to furniture, fixtures and equipment.