Handy Boat Service, Inc. v. Professional Services, Inc.

• Decision Date: 03 June 1998
• Docket Number: Docket No. C
• Citation: Handy Boat Service, Inc. v. Professional Services, Inc., 711 A.2d 1306 (Me. 1998)
• Parties: HANDY BOAT SERVICE, INC. v. PROFESSIONAL SERVICES, INC. and Kerry S. Luther. umx97x456.
• Court: Maine Supreme Court

Page 1306

711 A.2d 1306

1998 ME 134

HANDY BOAT SERVICE, INC. v.PROFESSIONAL SERVICES, INC. and Kerry S. Luther.

Docket No. Cumx97x456.

Supreme Judicial Court of Maine.

Argued Jan. 5, 1998.

Decided June 3, 1998.

Michael J. Gartland(orally,)Seth W. Brewster, Verrill & Dana, L.L.P., Portland, for plaintiff.

Joel C. Martin(orally), Thomas C. Bradley, Petruccelli & Martin, Portland, for defendants.

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

SAUFLEY, Justice.

¶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.¹Luther 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.²In 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.³This 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.SeeBumila v. Keiser Homes of Maine, Inc., 1997 ME 139, p 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.Seeid.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.Seeid.The interpretation of an unambiguous contract is a question of law.SeeTown of Lisbon v. Thayer Corp., 675 A.2d 514, 516(Me.1996).We review such questions de novo.SeeCollins 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 p 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.SeeClarke 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.SeeFarley 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.SeeWaxler 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.Seeid.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...