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Spottiswoode v. Levine
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MAINE SUPREME JUDICIAL COURT					Reporter of Decisions
Decision:	1999 ME 79
Docket:	Yor-98-312
Argued:	April 6, 1999
Decided:	May 25, 1999

Panel:WATHEN, C.J., and RUDMAN, DANA, ALEXANDER, and CALKINS, JJ.



JOHN P. SPOTTISWOODE et al. v. TIMOTHY LEVINE et al.

RUDMAN, J.

	[¶1]	Timothy and Maureen Levine ("Mr. and Mrs. Levine") appeal
from the judgment entered in the Superior Court (York County,
Fritzsche, J.) in favor of John and Terry Spottiswoode ("Mr. and Mrs.
Spottiswoode"), holding the Levines liable for contribution as co-guarantors
of the debt of R.B.K. Caly Corporation ("RBK").  The Levines contend that the
court erroneously: (1) concluded that Mrs. Levine was liable for contribution,
despite her allegation that her guaranty violated the Equal Credit
Opportunity Act ("ECOA"), 15 U.S.C. §§ 1691-1691f (1994); and (2) applied
a "pro rata" standard in allocating the liability of the co-guarantors, thereby
rendering them liable for one-third of the debt.  By way of cross-appeal, RBK
contends that the court erroneously concluded that Mr. Levine did not
violate the Uniform Trade Secrets Act ("UTSA"), 10 M.R.S.A. §§ 1541-1548
(1997).  We affirm the judgment entered on the Spottiswoode's claim for
contribution and the judgment entered on RBK's UTSA counterclaim.
	[¶2]	In the spring of 1993, Mr. Spottiswoode and Mr. Levine formed
RBK to undertake commercial construction projects.  Mr. Spottiswoode had
been successful in the residential construction business and wanted to enter
into commercial construction.  Mr. Levine had substantial experience in
commercial construction, but fewer assets than Mr. Spottiswoode.  Although
the parties hoped the venture would prove to be quite profitable, RBK later
became insolvent and failed.  
	[¶3]	Mr. and Mrs. Spottiswoode and Mr. Levine served as directors of
RBK; Mr. Spottiswoode and Mr. Levine also served as president and vice-
president, respectively.  Mr. Spottiswoode, Mr. Levine, and RBK entered
into a number of agreements, including an employment agreement for Mr.
Levine and a stock purchase agreement.  The employment agreement
provided that Mr. Levine would receive, inter alia, the following
compensation for his services: (1) $85,000 salary per year; (2) disability
insurance at RBK's expense; and (3) twenty-five percent of RBK's pre-tax
net income, as bonus compensation.  The stock purchase agreement
provided that: (1) Mr. Spottiswoode would initially obtain 499 shares of
stock, and Mr. Levine would obtain one share; (2) Mr. Levine had the right
to purchase up to 248 additional shares from Mr. Spottiswoode for $1,000
per share; and (3) Mr. Levine must use any bonus compensation that RBK
paid him to exercise his right to purchase shares from Mr. Spottiswoode,
until he had purchased all 248 additional shares.  
	[¶4]	The general structure of the venture involved Mr. Spottiswoode
providing financial support for RBK and Mr. Levine providing specialized
expertise.  To finance the venture, Mr. Spottiswoode put up a substantial
amount of his own assets, and RBK borrowed additional funds on its own. 
Mr. Spottiswoode funded the corporation in part by utilizing an existing line
of credit with Ocean National Bank ("the Bank"), part of which the Bank
loaned to RBK as working capital.  A central dispute in this case involves the
$300,000 commercial line of credit that the Bank extended to RBK.  Six co-
guarantors guarantied the repayment of loans made under the credit line:
(1) Mr. Spottiswoode; (2) Mrs. Spottiswoode; (3) Mr. Levine; (4) Mrs.
Levine; (5) Down-East Construction & Development Corporation ("Down-
East"); and (6) Lake Brook Co. ("Lake Brook").{1}  After the business failed,
the Spottiswoodes repaid the approximately $300,000 that the Bank had
loaned to RBK, and then sought a one-half contribution from the Levines.
	[¶5]	When Mr. Spottiswoode initially arranged for the Bank to
provide RBK with a line of credit, the Bank and Mr. Spottiswoode asked Mr.
Levine to co-sign the guaranty, as well as a commitment letter that
confirmed the Bank's approval of the $300,000 credit line and enumerated
"further conditions to the loan."  The commitment letter stated that the
line of credit would be effective through May 14, 1994, and required that all
guarantors provide the Bank with updated financial information and tax
returns before the Bank would consider renewing the credit line.  The
Spottiswoodes and Levines signed the first commitment letter, and then
signed the guaranty within eleven days.{2} 
	[¶6]	In May 1994, the Bank considered extending the line of credit
to RBK for a second year, and issued a renewal commitment letter to RBK
extending the Bank's commitment on the $300,000 credit line for another
year.  Similarly to the first commitment letter, the second letter indicated
that: (1) the Bank was committed to providing the line of credit for one
year; (2) all guarantors would have to resubmit financial information before
the Bank would consider renewal for the following year; and (3) all
guarantors must sign the commitment letter.  Mr. and Mrs. Levine both
signed the renewal commitment letter on June 2, 1994, and the four other
co-guarantors signed the letter on June 6, 1994.
	[¶7]	In May 1995, the Bank sent a third commitment letter to Mr.
Levine and Mr. Spottiswoode, requesting that they submit updated tax
returns, personal financial statements, and corporate financial information. 
The Spottiswoodes complied with the Bank's request, but the Levines
refused to submit any information or sign another commitment letter.  In
June 1995, Mr. Levine's position with RBK terminated.  That same month,
the Levines also refused to sign a document asking for their signatures on an
allonge to extend the time for repayment on the loan until August 15, 1995.
	[¶8]	On June 30, 1995, Mr. Spottiswoode alone signed an allonge to
extend repayment on the loan until August 15, 1995.  The Bank extended
repayment again in August and November 1995, after obtaining only Mr.
Spottiswoode's signature.  When the Bank called the loan, Mr. Spottiswoode
satisfied the debt, which had increased from $152,000 (the amount
outstanding on the loan at the time of Levine's termination) to
approximately $300,000.
	[¶9]	Another dispute in this case involves a computer system, which
Mr. Levine used while working for RBK.  RBK paid $5,000 to computer
programmer Myron Curtis for the right to use the software, at least part of
which Curtis had licensed from another vender.  Mr. Levine and Curtis
worked together to some degree on the program to adapt it for RBK's use in
making bids on construction projects.  After Mr. Levine's termination from
RBK, he obtained employment at Cianbro Corporation ("Cianbro").  He asked
Cianbro to purchase the right to use the computer system from Curtis. 
Cianbro paid Curtis $5,000 for the software, which apparently proved to be
of little benefit to Cianbro.
	[¶10]	The Spottiswoodes brought a suit for contribution against the
Levines, asking the court to order the Levines to pay one-half of the Bank's
loan to RBK, which the Levines had guarantied.  In response, the Levines
filed: (1) an answer and a two-part counterclaim against the Spottiswoodes,
disputing their liability for contribution; (2) a third-party complaint against
Down-East and Lake Brook for contribution; and (3) a third-party complaint
against RBK for indemnification.  RBK counterclaimed, alleging that Mr.
Levine obtained, purchased, and developed a computer system containing
trade secrets, which he misappropriated in violation of the UTSA.
	[¶11]	After a bench trial, the court concluded that: (1) no violation of
the ECOA occurred; (2) the Levines were each liable for contribution for
one-sixth of RBK's debt arising from the line of credit; and (3) the
Spottiswoodes failed to prove that Mr. Levine had violated the UTSA. 
Thereafter, the court denied the parties' motions to reconsider and/or
enter further findings of fact, although the court found that the parties
received equal benefit and should be equally liable for contribution.  This
appeal ensued.
I. Equal Credit Opportunity Act
	[¶12]	The Levines argue that the Spottiswoodes were independently
creditworthy, and that the Bank therefore violated the ECOA by requiring
Mrs. Levine's signature on a credit instrument.{3}  They contend that: (1) Mrs.
Levine could assert the alleged ECOA violation directly against the
Spottiswoodes as a defense to their action for equitable contribution; and (2)
the alleged ECOA violation voided her guaranty to the Bank, thereby
extinguishing the common liability that was the basis of the Spottiswoodes'
contribution claim.  We disagree.
	[¶13]	Neither party has cited a case upholding a claim or defense
against a co-guarantor based on an alleged ECOA violation.  "Section 1691
limits the remedies provided thereunder to 'creditors.'"  Hammons v.
Ehney, 924 S.W.2d 843, 852 (Mo. 1996).  "The term 'creditor' means any
person who regularly extends, renews, or continues credit; any person who
regularly arranges for the extension, renewal, or continuation of credit; or
any assignee of an original creditor who participates in the decision to
extend, renew, or continue credit."  15 U.S.C. § 1691a(e).  The Levines have
failed to show that either Mr. or Mrs. Spottiswoode: (1) "regularly extends,
renews, or continues credit"; (2) "regularly arranges for the extension,
renewal, or continuation of credit"; or (3) are an "assignee of an original
creditor who participates in the decision to extend, renew, or continue
credit."  15 U.S.C. § 1691a(e).  Therefore, the Spottiswoodes are not
"creditors" within the meaning of the ECOA, and the Levines cannot assert
an alleged violation of the act against them directly as a defense to an
equitable contribution action.  See Hammons, 924 S.W.2d at 852.  Further,
to the extent that the Spottiswoodes were innocent co-guarantors who had
no control over the actions of the Bank, little purpose would exist for
penalizing them.  See id.
	[¶14]	Even if the Bank had violated the ECOA, Mrs. Levine would not
escape liability for contribution.  "The vast majority of cases considering
relief available for violation of the ECOA have held that there is no authority
in the statutory language for the proposition that a violation of the ECOA
renders an instrument void."  Id.  "The reasoning of these cases is that
where such drastic relief is not expressly stated in the statute, it will not be
implied."  Id.  Therefore, an alleged ECOA violation by the Bank would not
render the guaranty void or extinguish Mrs. Levine's liability for equitable
contribution to co-guarantors.
II. Guaranty
	[¶15]	The Levines contend that the court erroneously: (1) concluded
that the Spottiswoodes were entitled to demand contribution from them
each for a one-sixth share of the debt they guarantied; and (2) denied their
Rule 52(a) motion for further factual findings as to the expiration of their
guaranty.  We disagree.
	[¶16]  We review issues of law de novo and issues of fact for clear
error.  See State v. O'Connor, 681 A.2d 475, 476 (Me. 1996); White v. Zela,
1997 ME 8, ¶ 3, 687 A.2d 645, 646.  "A guaranty is a contract and is
governed by the same rules of construction as other contracts."  Kandlis v.
Huotari, 678 A.2d 41, 43 (Me. 1996).  "Whether the language of a contract is
ambiguous is a question of law that we review de novo."  Id.  "If the contract
language is ambiguous or uncertain[,] its interpretation is a question of fact
to be determined by a factfinder."  Id.  "Contract language is ambiguous
when it is reasonably susceptible to different interpretations."  Id.  The
intent of the parties in entering a contract is a question of fact that we
review for clear error.  See Seashore Performing Arts Ctr., Inc. v. Town of
Old Orchard Beach, 676 A.2d 482, 484 (Me. 1996).  However, the
interpretation of an unambiguous contract is a question of law that we review
de novo.  See Town of Lisbon v. Thayer Corp., 675 A.2d 514, 516 (Me.
1996).  

A.  Contribution

	[¶17]	As a general rule, co-guarantors must bear, among themselves, a
ratable proportion of the amount for which they are liable under the
contract of guaranty.  See, e.g., Hammons, 924 S.W.2d at 853.  A co-
guarantor who has paid more than its share is entitled to demand
contribution from each of the others for an aliquot part of the entire debt,
and to maintain suit to enforce the right to contribution.  See, e.g., Steele v.
Grot, 503 S.E.2d 92, 93 (Ga. Ct. App. 1998) ("[t]he right of contribution
arises not when the joint obligation is made but when one obligor pays more
than his share of the liability"); W. Coach Corp. v. Roscoe, 650 P.2d 449, 454
(Ariz. 1982).  However, the guarantors are free to determine, by the terms of
their contract, the proportion each shall bear.  See Kandlis, 678 A.2d at 42-
43.
	[¶18]	"The right to contribution originated in equity and eventually
took the form of an implied contract, so, in the absence of an express
agreement, contribution is enforceable on a theory of a contract implied in
law or in fact."  Id. at 45.  "[T]he underlying theory of contribution [is]
'based, not upon the instrument on which the guarantors have become
liable, but upon the theory that when they signed such instrument, they
impliedly agreed that if there should be any liability, each would contribute
his just proportion of the amount for which they might be held liable.'"  Id.
(quoting 38 AM. JUR. 2D Guaranty § 128 (1968)).
	[¶19]	Absent proof to the contrary, the law presumes that each co-
guarantor received equal benefit from the guaranty and must contribute
equally in discharging the common obligation.  See, e.g. Steele, 503 S.E.2d
at 93.  However, "[t]he presumption that each co-obligor benefitted in an
equal degree is subject to rebuttal by proof that there was an inequality of
benefits received."  Id.  "[S]ince the right to contribution is inherently
equitable in nature, the rule logically follows that where co-obligors have
received unequal benefits from the common obligation, the portion of the
contribution that each must bear is according to the benefit that each has
received."  Id. (quoting 18 AM. JUR. 2D Contribution § 23 (1985)).
	[¶20]	The trial court concluded that the Levines had failed to rebut the
presumption that the co-guarantors received equal benefit from their
common obligation.  As the court noted, the Levines received benefit that
included "a good salary and . . . a potential for even greater earnings." 
Although the stock purchase agreement only provided Mr. Levine with one
share of stock initially, he had an opportunity to accumulate 249 out of 500
shares.  In addition to the $300,000 line of credit to RBK that the Levines
guarantied, the Spottiswoodes also infused $500,000 of capital into RBK,
which the Levines did not guaranty.  The court did not err when it
concluded that the Levines received equal benefit in consideration for their
guaranties.  The court's equitable remedy was appropriate under the
circumstances.   

B.  Rule 52(a)

	[¶21]	The Levines contend that the guaranty and commitment letters
were ambiguous, when read together, and that the trial court erroneously
failed to make factual findings clarifying the ambiguity.{4}  We disagree.
	[¶22]	Rule 52(a) provides that the court "shall, upon the request of a
party made as a motion . . . find the facts specially."  M.R. Civ. P. 52(a). 
However, when the court files an opinion or memorandum of decision "it
[is] sufficient if the findings of fact and conclusions of law appear therein." 
Id.  "[T]he failure of the trial justice clearly to state the factual findings and
correlate them with the relevant legal conclusions both hinders effective
appellate review and fails to inform either the parties or the appellate court
of the reasoning underlying the conclusions."  Murray v. Murray, 529 A.2d
1366, 1368 (Me. 1987).  
	[¶23]	"Generally, the right to contribution can be destroyed only by an
agreement between the obligated parties."  Kandlis, 678 A.2d at 42-43. 
Since the guaranty and commitment letters were "executed at the same
time, by the same contracting parties, for the same purpose, and in the
course of the same transaction," we consider and construe them together as
one contract or instrument.  Id. at 43 (quotations omitted).  
	[¶24]	The guaranty and commitment letters are unambiguous, when
read together.  See id.  By their plain language, the guaranty and
commitment letters do not limit the Levines' contribution liability, despite
the Levines' unilateral refusal to comply with the Bank's third request for
updated financial information.  Although the commitment letters required
the guarantors to submit financial information for "renewal consideration,"
this requirement simply protected the Bank and did not limit the Levines'
liability under the broad terms of the guaranty, which the Levines each
signed.  As the trial court found, the Levines failed to expressly limit their
liability for contribution, although they were sophisticated enough to do so. 
It would be inappropriate to judicially limit their contribution liability by
implication.  See id. at 45.  The Levines did not escape liability by refusing to
submit information or sign additional documents necessary to extend or
renew the loan because, in their guaranty, they explicitly waived indulgences
that the Bank extended to RBK.
	[¶25]	The trial court properly exercised its discretion by declining to
issue further findings of fact as to the expiration of the Levines' contribution
liability.  See Bell v. Bell, 1997 ME 154, ¶ 6, 697 A.2d 835, 837.  The
record contained copies of the unambiguous guaranty and commitment
letters.  Since the interpretation of an unambiguous contract is a question of
law that we review de novo, no further findings of fact were necessary for
appellate review.  See Thayer Corp., 675 A.2d at 516.  
III. Uniform Trade Secrets Act
	[¶26]	On cross-appeal, RBK argues that the court's analysis of the
UTSA claim "contained numerous errors of law," and that the court ignored
the pertinent statutory language and applied the wrong legal standards to
the facts.
	[¶27]	In its counterclaim, RBK seeks injunctive relief and damages for
Mr. Levine's alleged misappropriation of a trade secret.  See 10 M.R.S.A.
§§ 1543, 1544.  As an initial matter, a court examining a claim under the
UTSA must determine whether the information at issue constitutes a "trade
secret," as that term is defined in 10 M.R.S.A. § 1542(4).{5}  See Northeast
Coating Techs., Inc. v. Vacuum Metallurgical Co., 684 A.2d 1322, 1324 (Me.
1996).  In order for information to qualify as a trade secret, the information
must: (1) derive "independent economic value, actual or potential, from not
being generally known [or] readily ascertainable";{6} and (2) be "the subject of
efforts that are reasonable under the circumstances to maintain its
secrecy."{7}  10 M.R.S.A. § 1542(4); Northeast Coating Techs., Inc., 684 A.2d
at 1324.  
	[¶28]	Even if the computer program qualified as a trade secret, RBK
could not recover damages or obtain injunctive relief under the UTSA
without establishing "misappropriation."  See 10 M.R.S.A. § 1544.  The term
"misappropriation" means, inter alia: "[d]isclosure or use of a trade secret of
another without express or implied consent by a person who . . . [a]t the
time of disclosure or use, knew or had reason to know that his knowledge of
the trade secret was . . . [a]cquired under circumstances giving rise to a duty
to maintain its secrecy or limit its use . . . ."  10 M.R.S.A. § 1542(2)(B). 
	[¶29]	Thus, RBK bore the burden of establishing that the information
at issue constituted a "trade secret" and that Levine "misappropriated" the
protected information.  The trial court found that RBK failed to sustain its
burden.  We are not compelled to find otherwise.
	The entry is:
		Judgment affirmed.

Attorney for plaintiffs: Peter Clifford, Esq., (orally) P O Box 1069 Kennebunk, ME 04043 Attorneys for defendants: John S. Campbell, Esq., (orally) Campbell & McArdle, P.A. P O Box 369 Portland, ME 04114
Footnotes posted as a separate file.