Yim K. Cheung v. Wing Ki Wu

2007 ME 22, 919 A.2d 619, 2007 Me. LEXIS 58
CourtSupreme Judicial Court of Maine
DecidedFebruary 1, 2007
StatusPublished
Cited by17 cases

This text of 2007 ME 22 (Yim K. Cheung v. Wing Ki Wu) is published on Counsel Stack Legal Research, covering Supreme Judicial Court of Maine primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Yim K. Cheung v. Wing Ki Wu, 2007 ME 22, 919 A.2d 619, 2007 Me. LEXIS 58 (Me. 2007).

Opinion

CLIFFORD, J.

[¶ 1] Yim K. Cheung appeals from a judgment entered in the District Court (Augusta, Studstrup, J.). The court found that Wing Ki Wu and Cindy Wu owe damages to Cheung for their default on a promissory note given to Cheung in payment for the purchase of stock in a restaurant, but also found that Cheung’s recovery from the Wus was limited by what the Wus proved to support their affirmative defenses of recoupment. The court also denied Cheung’s request for attorney fees. Cheung contends that the court erred by denying his motion for summary judgment; allowing the Wus to pursue the unpleaded affirmative defense of recoupment; and denying Cheung’s request for attorney fees, as provided under the terms of the promissory note and the contract, and pursuant to M.R. Civ. P. 37(c). We agree in part with Cheung’s contentions, vacate the judgment with respect to attorney fees, and remand for further proceedings.

[621]*621I. BACKGROUND

[¶2] On September 20, 1999, Yim K. Cheung entered into an agreement with Wing Ki Wu whereby Wing Ki agreed to purchase the stock in Cheung’s corporation, Cheung Lee Garden, Inc., d/b/a Canton Village, the terms of which were set forth in a stock purchase agreement signed by Cheung and Wing Ki, with the closing scheduled to take place on October 1, 1999. The purchase price was set at $145,000, with $95,000 of this amount to be paid pursuant to the terms of a promissory note, given to Cheung by Wing Ki and his wife, Cindy, in thirty-six monthly installments of $2983.32, with an interest rate of seven percent accruing annually.

[¶ 3] It is undisputed that the Wus paid their monthly installments on time until the payment due January 1, 2002, at which time they paid only $2693.22. Cheung received no further payments thereafter. The Wus contended that they made no further payments because they were forced to pay for numerous liabilities that accrued prior to October 1, 1999, for which Cheung was responsible and which he had failed to disclose, and therefore they were entitled to reduce the amount payable on the note.

[¶ 4] The promissory note states:

This note is given in connection with a certain Stock Purchase Agreement and Security Agreement of even date. The terms of said Agreements are incorporated herein by reference and a default in the terms of either Agreement shall also be a default of this note upon which the full sum shall become due and payable at the option on the Holder.

The stock purchase agreement provides:

No undisclosed liabilities. Except for liabilities and obligations incurred in the ordinary course of business, neither the corporation nor any of the property of the corporation is subject to any material liability or obligation not heretofore disclosed to the Purchaser. All [accounts] payable, bills or charges of Cheung Lee Garden, Inc. incurred prior to October 1, 1999 shall be the sole responsibility of Yim K. Cheung. All [accounts] payable, bills or charges of Cheung Lee Garden, Inc. incurred after October 1, 1999 shall be the sole responsibility of Wing Ki Wu.

[¶ 5] The note contains an acceleration clause stating that Cheung may declare due and payable at once the entire balance of principal and interest accrued without further notice or demand upon default, including a default in payment due on the note that is continued for thirty days. The note further provides that “[i]n the event of default in the terms hereof, the undersigned agree to pay all costs and expenses, including reasonable attorney’s fees incurred by the Holder of this note in any legal proceedings arising from or connected with the enforcement of this note.”

[¶ 6] Cheung filed a complaint against the Wus alleging that they had been in default on the note for thirty days. The complaint demanded payment of the full balance due on the note ($25,885.67), as well as reasonable attorney fees as provided by the note. The Wus answered the complaint, and denied that they were in default on the note, but did not assert any affirmative defenses.

[¶ 7] Cheung served on the Wus’ attorney a single request for admissions addressed to both Wing Ki and Cindy. Only Cindy signed the response to the request for admissions, and neither Wing Ki nor their attorney separately signed a response to the request for admissions.

[1Í8] The District Court (French, J.) held a pretrial conference and issued an order, stating that the issue in the case was “has the promissory note been paid.” Cheung filed a motion for summary judg[622]*622ment against Wing Ki and for partial summary judgment against Cindy, supported by a statement of material facts, and affidavits of Cheung and his attorney. In his affidavit and statement of material facts, Cheung admitted that he had failed to pay some of the bills the Wus claimed were owed by him, totaling $856.42. In response, the Wus filed an opposing statement of material facts supported by an affidavit of Cindy. Twenty-seven of the thirty-eight opposing statements of material facts failed to appropriately begin with the designation “Admitted,” “Denied,” or “Qualified.” See M.R. Civ. P. 56(h)(2).

[¶ 9] The District Court (Perry, A.R.J.) denied Cheung’s motion for summary judgment, and rejected Cheung’s argument that Wing Ki had admitted all of Cheung’s requests for admissions by failing to sign the response to the request for admissions. The court acknowledged that the Wus improperly controverted Cheung’s statement of material facts, but did not allow those statements to be used against the Wus.

[¶ 10] Cheung then filed a motion requesting a pretrial conference, again objecting to the use of the unpleaded affirmative defense of payment. The District Court (Vafiades, C.J.) held a pretrial status conference, and issued a pretrial order that allowed “the defendant to plead payment as an affirmative defense.”

[¶ 11] At trial, after putting on one witness, Cheung made a motion for judgment as a matter of law pursuant to M.R. Civ. P. 50(d), based on the failure of the Wus to plead an affirmative defense. The Wus argued that, by denying similar motions based on the Wus’ failure to plead an affirmative defense, the court had allowed the affirmative defense to become part of the case. The court stated that the Wus’ position “is correct, that although not previously [pleaded], for whatever reason, the Court has allowed that pleading orally at the time of the conference and so payment remains an issue, and for that reason I’ll deny the motion for judgment as a matter of law.”

[¶ 12] The court permitted the Wus to file a post-trial brief, in which they argued for equitable subrogation and setoff or re-coupment, to reduce or cancel any debt they may owe to Cheung by virtue of the promissory note taken in payment for the corporation. The court found that the Wus were in default on the promissory note, and entered judgment in favor of Cheung in the amount of $25,646.27 plus interest and court costs. The court further held, however, that pursuant to the principal of recoupment, Cheung’s recovery was to be reduced by $11,434.57, representing the liabilities and obligations incurred by the corporation prior to October 1,1999, for which Cheung was responsible. The court did not grant Cheung attorney fees because it was Cheung who first breached the contract and “the [Wus] also have their own attorney’s fees.”

[¶ 13] Cheung moved for findings of fact and conclusions of law and to reconsider.

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Cite This Page — Counsel Stack

Bluebook (online)
2007 ME 22, 919 A.2d 619, 2007 Me. LEXIS 58, Counsel Stack Legal Research, https://law.counselstack.com/opinion/yim-k-cheung-v-wing-ki-wu-me-2007.