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STATE OF MAINE  DISTRICT COURT  
DIV. OF SO. KENNEBEC  
LOCATION: AUGUSTA  
KENNEBEC, ss.  DOCKET NO. AUG-CV-02-41  
fl  
/  4  
YIM K. CHEUNG, Plaintiff


JUDGMENT
WING KI WU and CINDY WU,
Defendants
This matter came on for hearing on the plaintiff's complaint seelung payment on a promissory note. Because the court finds that the defendants are in default with regard to the promissory note, the judgment will be for the plaintiff, however not in the amount whch he is seelung.

Background
Yim Cheung and Wing Wu are in the Chnese restaurant trade. Cheung was the sole shareholder in Cheung Lee Garden, Inc., d/b/a Canton Village in Gardiner. Wu and hs wife Cindy wished to purchase the restaurant by a purchase of Cheung's stock. Wu would pay a portion of the purchase price in cash at closing, with the balance payable under the terms of a promissory note, with payments begnning November 1, 1999. The documents were prepared by an attorney familiar with the business.
Wu continued hs monthly installment payments to Cheung until the payment due in January 2002, when a partial payment was made.. According to Wu, the payments stopped because Cheung was refusing to reimburse Wu for several expenses attributable to the business which accrued prior to the sale and for whch Wu felt Cheung was responsible. There is no question that the defendants failed to make their
January 1, 2002 payment and are in default on the note. Cheung seeks payment of the
balance of $25,885.67 plus interest and reasonable counsel fees.
The defendants' answer to the complaint denies that it failed to make the full payment on January 1, 2002, or payments thereafter. However, the real issue, though not pled, is the defendants' position that they should receive credit in some way for bills the plaintiff should have paid but whch they paid instead and for whch the plaintiff refused to reimburse them. The defendants' initial argument was that their payment of these bills constituted a "prepayment" of the note under a provision that states "Maker may prepay hs note or any portion thereof at any time without penalty." This provision is clearly and unambiguously intended to allow the borrower o pay off the note early to save interest payments without any penalty -such as the avoided interest
-for such early payment. There is nohng in the note authorizing prepayment by payments to hrd parties and such interpretation would be beyond the clear intent of the agreement.
Since the defendants' "prepayment" argument fails, the court will examine whether the defendants position is viable under other appropriate theories. Because the debts in question all arise out of operation of the Gardiner restaurant whch was the subject of the sale, what the defendants are seehng would properly be termed a "recoupment." lnnis v.Methot Buick-Opel, Inc., 506 A.2d 212, 217 (Me. 1986). The defendants did not plead the defense of recoupment in their answer; nor did they bring a counterclaim on this basis. Ordinarily, this failure in pleading would be considered a waiver of the defense or counterclaim. However, in earlier proceedings the courts have recognized hs issue in the present case and have allowed it to be litigated. In an Order on Motion for Summary Judgment, after noting that there was no genuine issue as to the amount due from the defendants under the promissory note and certain amounts for wluch the plaintiff was responsible, the motion judge stated, "The Court finds that there are genuine issues of material fact as to all other claims of defendants as to pavment, the composite of wluch is claimed to constitute discharge of the liability under the note." (Emphasis provided). Further, in a Pre-Trial Order following a trial management conference, another judge stated, "The court has allowed defendant to plead payment as an affirmative defense." Thus, whether correct or not, the law of the case whch must govern at tnal is that the defendants are allowed to pursue their recoupment defense. Nor is ths a surprise to the plaintiff, since hs Trial Memorandum submitted prior to the trial acknowledges the prior court ruling that established as the law of the case the defendants' ability to pursue the unplead defense.
Discussion
After considering all of the testimonial and other evidence presented, the court finds and concludes that the defendants are in default in their payments pursuant to the promissory note, and as a result, they are liable to the plaintiff under the contract for the full amount of the outstanding balance on the note minus their recoupment. As part of the Pre-Trial Order noted above, it is stated, "The parties agree that if the defendants owe anythng, their maximum liability is $25,646.27 as of January 1,2002. Ths amount, plus applicable interest, will be starting point to determine the final judgment amount.
The payments whch the defendants have made and for whch they feel the plaintiff is responsible run the gamut from payroll expenses to taxes and utilities, advertising and repairs. Although these are corporate obligations, the stock purchase agreement specifically provides:
All account's (sic) 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 account's (sic) payable, bills or charges of Cheung Lee Garden, Inc. incurred after October 1,1999, shall be the sole responsibility of Wing Ki Wu.
Thus, the corporate responsibility became the personal responsibility of the individual former stock holder, Mr. Cheung.
After reviewing the many detailed claims made by the Wuls, the court is satisfied that most of these claims for recoupment are just and should be used to reduce the amount of the final judgment. However, the court will not allow for recoupment the security deposit payment for the commercial lease, credit for LP gas, certain prorated telephone directory advertising and repair items and changes made to conform with Bureau of Health regulations. The total amount of recoupment allowed is $11,434.57.
The plaintiff also seeks reimbursement for hs reasonable attorney's fees, as provided in the promissory note. However, in light of the fact that it was the plaintiff who first breached the contract by failure to take responsibility for hs appropriate share of the outstanding bills, and the fact that the defendants also have their own attorney's fees, the court finds it would be unjust and a windfall to the plaintiff to require the defendants to pay those fees under the circumstances. Therefore, the court does not order reimbursement of either the plaintiff's or the defendants' attorneys' fees by the other party.
Therefore, the entry will be:
Judgment for the plaintiff in the amount of $25,646.27 plus interest and court costs, less recoupment in the amount of $11,434.57.
Justice, superio; Court sithng as Judge, District Court
YIM K CHEUNG -PLAINTIFF DISTRICT COURT 3 STONERIDGE DRIVE AUGUSTA FARMINGDALE ME 04344 Docket No AUGDC-CV-2002-00041 Attorney for: YIM K CHEUNG
MITCHELL & DAVIS DOCKET RECORD 86 WINTHROP STREET AUGUSTA ME 04330
VS WING KI WU -DEFENDANT 57 BACK BRYANT RD BUCKFIELD ME 04220 Attorney for: WING KI WU G CHARLES SHUMWAY I1 -RETAINED CHILDS RUNDLETT FIFIELD SHUMWAY LLC 257 DEERING AVENUE PORTLAND ME 04103
CINDY WU -DEFENDANT 57 BACK BRYANT RD BUCKFIELD ME 04220 Attorney for: CINDY WU G CHARLES SHUMWAY I1 -RETAINED CHILDS RUNDLETT FIFIELD SHUMWAY LLC 257 DEERING AVENUE PORTLAND ME 04103
Filing Document: COMPLAINT Minor Case Type: CONTRACT
Filing Date: 02/26/2002

Docket Events:
02/26/2002 FILING DOCUMENT -COMPLAINT FILED ON 02/26/2002
02/26/2002 Party(s): YIM K CHEUNG ATTORNEY -RETAINED ENTERED ON 02/26/2002 Plaintiff's Attorney: JAMES E MITCHELL
02/26/2002 Party (s) : WING KI WU ATTORNEY -RETAINED ENTERED ON 02/26/2002 Defendant's Attorney: G CHARLES SHUMWAY I1
02/26/2002 Party is) : CINDY WU ATTORNEY -RETAINED ENTERED ON 02/26/2002 Defendant's Attorney: G CHARLES SKLTMWAY I1
02/26/2002 Party (s) : YIM K CHEUNG SUMMONS/SERVICE -CIVIL SUMMONS FILED ON 02/26/2002 Defendant's Attorney: JAMES E MITCHELL CINDY WU
02/26/2002 Party(s) : YIM K CHEUNG SUMMONS/SERVICE -CIVIL SUMMONS FILED ON 02/26/2002 Defendant's Attorney: JAMES E MITCHELL
Page 1 of 5 Printed on: 09/20/2005

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