Opinion
NO. 01-17-00336-CV
06-05-2018
JULIO GARCIA AND ELSIE RITCHIE, Appellants v. FIRST COLONY MALL, LLC F/K/A GGP-SUGARLAND MALL, L.P., Appellee
On Appeal from the 268th District Court Fort Bend County, Texas
Trial Court Case No. 16-DCV-231080
MEMORANDUM OPINION
In this case involving a commercial lease, appellants Julio Garcia and Elsie Ritchie ("the guarantors") signed a guaranty agreement on behalf of the tenant, Sugar Land Mia Bella, L.P. ("Mia Bella"). After Mia Bella stopped paying rent, the landlord, appellee First Colony Mall, LLC f/k/a GGP-Sugarland Mall, L.P. ("the Mall"), sued the guarantors for breach of the guaranty agreement. The Mall moved for summary judgment on its claim, and the trial court rendered summary judgment in the Mall's favor, awarding the Mall $147,384.26 in damages, pre- and post-judgment interest, attorney's fees, and court costs.
In three issues on appeal, the guarantors contend that the trial court erroneously rendered summary judgment in favor of the Mall because the guarantors raised genuine issues of material fact on their affirmative defenses of novation, waiver, and accord and satisfaction.
We affirm.
Background
A. Factual Background
First Colony Mall, LLC owns the First Colony Mall located in Sugar Land, Texas. In 2011, Garcia was the managing member of Sugar Land Mia Bella, L.P., which operated an Italian restaurant under the name Mia Bella Trattoria. Trattoria First Colony, LLC, and Mia Managing Group, LLC, were the limited partner and the general partner, respectively, of Mia Bella. Julio Garcia and Pedro Garcia owned membership interests in both Trattoria First Colony and Mia Managing Group.
On May 13, 2011, the Mall and Mia Bella entered into a commercial lease agreement ("the Lease"). The Lease allowed Mia Bella to operate an Italian restaurant in 4,276 square feet of space for a ten-year period. Under the terms of the Lease, Mia Bella paid approximately $18,000 per month in rent to the Mall.
Article 23(b) of the Lease provided that, if Mia Bella defaulted on its obligations, the Mall could elect to terminate the lease, and it would have the right to collect from Mia Bella, among other things, "any unpaid rental which has been earned at the time of termination" of the Lease. The Lease included a provision stating that a payment by Mia Bella "of an amount less than the monthly rental shall not . . . be an accord and satisfaction. [The Mall] may accept a check or payment without prejudice to its right to recover the balance of rental due and pursue any other remedy." Further, the Lease provided that if the Mall terminated the Lease pursuant to Article 23(b), that termination "shall not be construed as a forfeiture of rental remaining to be paid during the balance of the Term, nor shall it act to relieve [Mia Bella] of any other obligations under this Lease . . . ." The Mall also agreed that, if a default occurred, it would "use reasonable efforts to relet the Leased Premises and mitigate its damages."
The Lease included a provision stating that Mia Bella "acknowledges that the Guaranty of the Lease is a material inducement to the execution of the Lease by [the Mall]." On May 13, 2011, the same day the Mall and Mia Bella entered into the Lease, Garcia and Ritchie signed a guaranty agreement ("the Guaranty"). The guarantors agreed:
[T]hat if default shall at any time under the Lease be made by [Mia Bella], their successors and assigns, in the payment of any monthly installment of rent, or additional rent, or in the performance of any of the terms, covenants and conditions of the Lease, and if the default shall not have been cured within the time specified in the Lease for curing the same, then Guarantors will well and truly pay on demand in cash the amount of the monthly installment of rent and additional rent not paid by [Mia Bella] and cure such other default together with such costs and expenses (including without limitation attorney fees) incurred by [the Mall] as a result of or arising out of the default for which [Mia Bella], its successors and assigns are obligated to [the Mall] pursuant to the terms of the Lease. This Guaranty shall include any liability of [Mia Bella] that shall accrue under the Lease for any period preceding as well as any period following the term of the Lease. Notwithstanding anything to the contrary contained herein, this Guaranty shall be limited to the amount of $299,320.00.(Emphasis in original.) The Guaranty stated that it was "an absolute and unconditional guaranty of payment and performance" that was enforceable against the guarantors "without the necessity for any suit or proceedings" by the Mall against Mia Bella and "without the necessity of any notice of non-payment, non-performance or non-observance." The Guaranty also provided that the liability of the guarantors "is co-extensive with that of [Mia Bella] and also joint and several."
It is undisputed that, in November 2014, Mia Bella began falling behind on its monthly rental obligations. Mia Bella and the Mall attempted to negotiate a rental abatement and a restructuring of rental payments, but the parties were unable to come to an agreement. In April 2015 and September 2015, the Mall's counsel sought recovery of outstanding rent from the guarantors. Both of the letters mailed to the guarantors from the Mall's counsel notifying them of their obligations under the Guaranty included the following paragraph:
A temporary forbearance in exercising any and all rights under the Lease is in no way intended to waive any rights or claims, or change, alter or modify the terms and conditions of the Lease, and there is nothing in this letter that shall constitute an election of remedies or a waiver of any rights, claims, causes of action, or remedies, at law, by statute, or in equity, or a waiver of any existing or future defaults under the Lease, whether or not mentioned herein. [The Mall's] acceptance of rent for less than the full amount due and owing shall not constitute an accord or satisfaction, novation, or waiver by [the Mall] of the deficiency. [The Mall] reserves all rights, whether or not mentioned herein, arising under the Lease or applicable law.The Mall indicated its intent to initiate legal proceedings to recover the outstanding rental balance if the guarantors did not satisfy their obligations under the Guaranty. It is further undisputed that the guarantors did not pay the outstanding rental balance to the Mall.
While the Mall and Mia Bella were attempting to negotiate a modification of Mia Bella's rental obligations, on February 25, 2015, Julio Garcia and Pedro Garcia sold their membership interests in Trattoria First Colony, LLC, and Mia Managing Group, LLC—the limited and general partners of Mia Bella—to Jose Luis Castelan. In the documents effecting the sale of the membership interests, the parties agreed that Garcia should "not be released of [his] personal guaranty on the lease on the restaurant premises."
The Mall attempted to mitigate its damages as a result of Mia Bella's failure to pay rent. On December 2, 2015, the Mall and Castelan, in his individual capacity, entered into a License Agreement, pursuant to which the Mall granted Castelan a license to operate an Italian restaurant under the trade name of Mia Bella Trattoria in the same space Mia Bella had been leasing for the previous four years ("the License Agreement"). The License Agreement specified that it was for a one-year term beginning on December 1, 2015, and that Castelan would owe $12,000 in rent per month. The License Agreement stated, "This License contains all the covenants, promises, agreements, conditions and understandings between Licensor [the Mall] and Licensee [Castelan]. There are no other agreements, either oral or written, between them other than those set forth in this License." The License Agreement did not reference the Lease, the Guaranty, or Mia Bella's and the guarantors' obligations under the Lease and the Guaranty, respectively. Neither Mia Bella nor the guarantors were parties to the License Agreement.
On December 15, 2015, the Mall's counsel sent a letter to the guarantors stating, "By this letter, [the Mall] hereby gives [Mia Bella] written notice of its election to terminate the Lease, in its entirety, effective retroactively to November 30, 2015." The Mall demanded payment from the guarantors for Mia Bella's outstanding rental balance. The letter informed the guarantors that the notice of termination was not a release of Mia Bella or the guarantors from their liability for rent under the Lease. B. Proceedings in the Trial Court
When the guarantors failed to pay Mia Bella's outstanding rental balance to the Mall, the Mall filed suit for breach of the Guaranty on March 23, 2016. The Mall sought a total of $150,384.26 in damages from the guarantors, jointly and severally, plus attorney's fees. The guarantors answered and asserted, among other defenses, the affirmative defenses of accord and satisfaction, waiver, and novation.
The Mall moved for traditional summary judgment on its claims against the guarantors for breach of the Guaranty. As summary judgment evidence, the Mall attached a copy of the Lease, the Guaranty, the December 15, 2015 letter from the Mall's counsel to the guarantors, notifying them that the Mall was terminating the Lease and demanding the payment of the outstanding rental balance, and the Mall's financial records demonstrating the outstanding rental balance. The Mall also attached the affidavit of Heidi Westlund, the Mall's senior general manager, who averred that the guarantors "personally guaranteed the payment of all sums due to First Colony Mall by Mia Bella under the lease." Westlund averred that the Mall complied with its obligations under the Lease by leasing the premises to Mia Bella. She averred that Mia Bella began falling behind on its monthly rental obligations in November 2014 and that it "continued to pay less than what was owed for each subsequent month until First Colony Mall exercised its right to terminate the lease by notice letter dated December 15, 2015, but effective November 30, 2015." She stated that, at the time the Mall terminated the Lease, $147,384.26 remained due and owing under the Lease.
In response to the Mall's summary judgment motion, the guarantors argued that Mia Bella's debts to the Mall were discharged on December 2, 2015, when the Mall "entered into a new lease with Mia Bella and Mia Bella's manager." The guarantors argued that the License Agreement created a fact issue on their affirmative defenses of accord and satisfaction, novation, and waiver. Specifically, the guarantors argued that the License Agreement—a "new lease"—extinguished the previous terms of the Lease, as well as Mia Bella's liability for rental payments under the Lease. Because Mia Bella was no longer obligated to pay the delinquent rental payments to continue operating under the License Agreement, the guarantors could not "be held to a larger liability than the tenant." As summary judgment evidence, the guarantors attached the agreement between Garcia and Castelan concerning the sale of the membership interests in Mia Bella's limited and general partners, as well as the License Agreement.
In reply, the Mall argued that the License Agreement did not raise a fact issue on the guarantors' affirmative defenses, but instead "constitute[d] compliance with First Colony Mall's statutory and contractual duty to mitigate damages—not any extinguishment, satisfaction, or waiver of obligations under the underlying lease or guaranty." The Mall argued that the License Agreement could not be considered a novation because it did not involve the same parties as the Lease and the terms of the License Agreement were not inconsistent with the Lease. The Mall further argued that termination of the Lease did not "extinguish any obligation to pay amounts that had already become due." The Mall argued that the License Agreement did not raise a fact issue on the defense of accord and satisfaction because the License Agreement did not extinguish any obligation under the Lease, nor was there an "unmistakable" statement that the License Agreement would constitute a satisfaction of the obligations of the underlying Lease. Finally, the Mall argued that the guarantors had not presented any evidence that, by entering into the License Agreement, the Mall intended to relinquish its right to collect rental amounts due and owing under the Lease.
The trial court granted the Mall's summary judgment motion and rendered judgment that the Mall recover from the guarantors, jointly and severally, $147,384.26 in damages, pre- and post-judgment interest, trial-level and conditional appellate attorney's fees, and court costs. This appeal followed.
Summary Judgment
In three issues, the guarantors contend that the trial court erred by rendering summary judgment in favor of the Mall. Specifically, they argue that they raised a fact issue precluding summary judgment on each of their affirmative defenses of novation, waiver, and accord and satisfaction. A. Standard of Review
We review a trial court's ruling on a summary judgment motion de novo. City of Richardson v. Oncor Elec. Delivery Co., 539 S.W.3d 252, 258 (Tex. 2018). To prevail on a traditional summary judgment motion, the movant bears the burden of proving that no genuine issues of material fact exist and that it is entitled to judgment as a matter of law. TEX. R. CIV. P. 166a(c); City of Richardson, 539 S.W.3d at 258-59. When a plaintiff moves for summary judgment on its own claim, it must prove that it is entitled to judgment as a matter of law on each element of its cause of action. Lawyers Title Co. v. J.G. Cooper Dev., Inc., 429 S.W.3d 713, 717 (Tex. App.—Dallas 2014, pet. denied).
A matter is conclusively established if reasonable people could not differ as to the conclusion to be drawn from the evidence. See Cmty. Health Sys. Prof'l Servs. Corp. v. Hansen, 525 S.W.3d 671, 681 (Tex. 2017). If the movant meets its burden, the burden then shifts to the nonmovant to raise a genuine issue of material fact. See Katy Venture, Ltd. v. Cremona Bistro Corp., 469 S.W.3d 160, 163 (Tex. 2015) (per curiam); see also First United Pentecostal Church of Beaumont v. Parker, 514 S.W.3d 214, 220 (Tex. 2017) (stating that fact question exists if evidence rises to level that would enable reasonable and fair-minded people differ in their conclusions). We review the evidence presented in the motion and response in the light most favorable to the nonmovant, crediting favorable evidence if reasonable jurors could and disregarding contrary evidence unless reasonable jurors could not. Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009) (citing City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005)). We indulge every reasonable inference and resolve any doubts in the nonmovant's favor. Helix Energy Sols. Grp., Inc. v. Gold, 522 S.W.3d 427, 431 (Tex. 2017).
A plaintiff moving for summary judgment is not under any obligation to negate affirmative defenses. Tesoro Petroleum Corp. v. Nabors Drilling USA, Inc., 106 S.W.3d 118, 124 (Tex. App.—Houston [1st Dist.] 2002, pet. denied); see Woodside v. Woodside, 154 S.W.3d 688, 691 (Tex. App.—El Paso 2004, no pet.). An affirmative defense prevents the granting of a summary judgment only if each element of the affirmative defense is supported by summary judgment evidence. Tesoro Petroleum, 106 S.W.3d at 124. A party raising an affirmative defense in opposition to a summary judgment motion must either (1) present a disputed fact issue on the opposing party's failure to satisfy its own summary judgment burden of proof or (2) establish the existence of a fact issue on each element of his affirmative defense. Id.; see Woodside, 154 S.W.3d at 691-92. B. Novation
In their first issue, the guarantors contend that the trial court improperly granted summary judgment in favor of the Mall because the guarantors raised a fact issue on their affirmative defense of novation. Specifically, the guarantors argue that because the Mall and Mia Bella entered into the License Agreement while the Lease was still operative, the License Agreement replaced the requirements of the Lease and extinguished the liability of the guarantors under the Lease.
A novation is the substitution of a new agreement between the same parties or the substitution of a new party on an existing agreement, and as a result of the substitution, "only the new obligation may be enforced." Honeycutt v. Billingsley, 992 S.W.2d 570, 576 (Tex. App.—Houston [1st Dist.] 1999, pet. denied); see Vandeventer v. All Am. Life & Cas. Co., 101 S.W.3d 703, 712 (Tex. App.—Fort Worth 2003, no pet.) ("Novation is the creation of a new obligation in the place of an old one, by which the parties agree that a new obligor will be substituted to perform the duties agreed upon by the old contract, while the original obligor is released from performing those duties."). A novation occurs if a new contract reflects an intention to "relinquish and extinguish pre-existing claims and rights of action," and if a novation occurs, "in lieu of the old obligation, a party accepts the promise of performance of the new obligation instead of the performance itself." Fulcrum Cent. v. AutoTester, Inc., 102 S.W.3d 274, 277 (Tex. App.—Dallas 2003, no pet.).
The elements of novation are: (1) a previous, valid obligation; (2) an agreement of the parties to a new contract; (3) the extinguishment of the old contract; and (4) the validity of the new contract. Honeycutt, 992 S.W.2d at 576. The substitution of a new agreement occurs "when a later agreement is so inconsistent with a former agreement that the two cannot subsist together." Fulcrum Cent., 102 S.W.3d at 277 (quoting Scalise v. McCallum, 700 S.W.2d 682, 684 (Tex. App.—Dallas 1985, writ ref'd n.r.e.)). "In the absence of inconsistent provisions, 'a second contract will operate as a novation of a first contract only when the parties to both contracts intend and agree that the obligations of the second shall be substituted for and operate as a discharge of the obligations of the first.'" Id. (quoting Chastain v. Cooper & Reed, 257 S.W.2d 422, 424 (Tex. 1953)).
Whether novation has occurred is a question of the parties' intent. Vandeventer, 101 S.W.3d at 712. Only if a party has agreed to the substitution of a new party is the former party relieved of liability, and consent of the parties to substitute a new obligor and release the old obligor "cannot be achieved unilaterally," although it may be express or implied. Id. However, novation is never presumed; instead, there must be a "clear, definite intention on the part of all concerned that such is the purpose of the agreement." Id. at 713; Fulcrum Cent., 102 S.W.3d at 278 ("It must clearly appear that the parties intended a novation, and novation is never presumed."). Furthermore, the relevant intent in determining novation is the obligee's intent to release the first obligor and seek performance only from the party allegedly substituted. Vandeventer, 101 S.W.3d at 713. "Unless the obligee makes a clear manifestation of assent to the substitution of the new obligor and release of the original obligor, he retains his rights against the original obligor." Id.
In arguing that a fact issue exists on their affirmative defense of novation, the guarantors contend that the License Agreement was a "new agreement between First Colony and Mia Bella entered into while the First Lease was operative and controlling" that extinguished the requirements and obligations of the Lease and, thus, extinguished the guarantors' liability under the Lease and the Guaranty. The guarantors argue that the "plain language" of the License Agreement extinguished the Lease, as it provided for a significantly shorter lease term and reduced monthly rental payments as compared to the Lease. The guarantors thus contend that the terms of the Lease and the License Agreement are so inconsistent that the two contracts cannot be read together.
The Lease—entered into between the Mall and Mia Bella in May 2011—set the original lease term at ten years and required Mia Bella to pay nearly $18,000 per month in rental payments. The Lease provided that failure to pay an installment of rent constituted a default by Mia Bella and that, upon default by Mia Bella, the Mall could elect to terminate the Lease and recover from Mia Bella as damages "any unpaid rental which has been earned at the time of termination." The Lease also allowed the Mall, upon default by Mia Bella, to relet the premises "for any length of time, rental and conditions that [the Mall] in its sole discretion deems advisable." The Mall agreed in the Lease that, in the event of default, it would use "reasonable efforts to relet the Leased Premises and mitigate its damages." The guarantors signed the Guaranty, agreeing to personally guarantee Mia Bella's performance of the Lease and agreeing that, if Mia Bella defaulted, the guarantors would "well and truly pay on demand in cash the amount of the monthly installment of rent and additional rent not paid by [Mia Bella]."
It is undisputed that Mia Bella defaulted under the Lease when it fell behind in making its rental payments beginning in November 2014. It is also undisputed that the Mall and Mia Bella attempted to negotiate a rental abatement and a restructuring of Mia Bella's rental obligations, but these attempts were unsuccessful.
At some point in 2015, the Mall became aware that Castelan had purchased the membership interests of the limited and general partners of Mia Bella. The Mall sent several letters throughout 2015 to Garcia and Castelan, notifying them of Mia Bella's failure to abide by the terms of the Lease and demanding payment of the outstanding rental balance. These letters included a paragraph stating:
A temporary forbearance in exercising any and all rights under the Lease is in no way intended to waive any rights or claims, or change, alter or modify the terms and conditions of the Lease, and there is nothing in this letter that shall constitute an election of remedies or a waiver of any rights, claims, causes of action, or remedies, at law, by statute, or in equity, or a waiver of any existing or future defaults under the Lease, whether or not mentioned herein. [The Mall's] acceptance of rent for less than the full amount due and owing shall not constitute an accord or satisfaction, novation, or waiver by [the Mall] of the deficiency. [The Mall] reserves all rights, whether or not mentioned herein, arising under the Lease or applicable law.
On December 2, 2015, the Mall and Castelan—in his individual capacity—entered into the License Agreement, which granted Castelan a license to operate an Italian restaurant under the trade name Mia Bella Trattoria for a one-year term beginning on December 1, 2015, and ending November 30, 2016. The License Agreement set the rental obligation at $12,000 per month. Although the License Agreement used identical language as the Lease in describing the purpose of the business activities to be conducted at the premises, the License Agreement did not reference the Lease, nor did it reference the guarantors or the Guaranty. Mia Bella was not a signatory to the License Agreement, and this entity was not mentioned in the License Agreement. The License Agreement was silent concerning the collection of outstanding rental payments under the Lease—which undisputedly had never been paid to the Mall—as well as the obligations of the guarantors. On December 15, 2015, the Mall notified the guarantors that it had terminated the Lease for non-payment of rent, effective November 30, 2015, and that it intended to collect the outstanding rental balance under the Lease from the guarantors.
There is no language in the License Agreement entered into with Castelan demonstrating an intent on the part of the Mall to forego the collection of outstanding rent from Mia Bella or the guarantors under the Lease. See Fulcrum Cent., 102 S.W.3d at 277 (stating that novation occurs if new contract reflects intention to "relinquish and extinguish pre-existing claims and rights of action"). There is no indication in the License Agreement that the Mall intended to release Mia Bella and the guarantors from paying the rental amounts that had already accrued and instead seek performance only from Castelan under the terms of the License Agreement. See Vandeventer, 101 S.W.3d at 713 (stating that relevant intent in determining novation is obligee's intent to release first obligor and seek performance only from party allegedly substituted).
We disagree with the guarantors' contention that the provisions of the Lease and the License Agreement are so inconsistent that they cannot be read together. See Fulcrum Cent., 102 S.W.3d at 277. First, the respective agreements were between different parties: the Lease was between the Mall and Mia Bella, and the License Agreement was between the Mall and Castelan. Second, the Lease expressly provided that, upon default, the Mall could terminate the Lease and seek payment of the outstanding rental balance from Mia Bella or the guarantors. Finally, the Lease also expressly allowed the Mall to relet the premises under any conditions the Mall deemed advisable, and the Mall agreed in the Lease that it would use reasonable efforts to relet the premises and mitigate its damages. Entering into the License Agreement with Castelan to operate a Mia Bella restaurant in the existing space and using the existing fixtures, albeit for a shorter lease term and for reduced monthly payments, constituted an attempt to mitigate damages.
We conclude that the guarantors failed to raise a fact issue on an essential element of their affirmative defense of novation—the extinguishment of the Mall's rights under the Lease to seek payment of the outstanding rental balance upon termination of the Lease. See Honeycutt, 992 S.W.2d at 576; see also Vandeventer, 101 S.W.3d at 713 ("Unless the obligee makes a clear manifestation of assent to the substitution of the new obligor and release of the original obligor, he retains his rights against the original obligor."); Tesoro Petroleum, 106 S.W.3d at 124 (stating that party opposing summary judgment motion by raising affirmative defense may defeat summary judgment by establishing existence of fact issue on each element of affirmative defense).
We overrule the guarantors' first issue. C. Waiver
In their second issue, the guarantors argue that the trial court erred in granting summary judgment in favor of the Mall because the guarantors raised a fact issue on their affirmative defense of waiver. Specifically, the guarantors argue that by entering into the License Agreement, the Mall intended to relinquish the right to collect past-due rent under the Lease, thereby relieving the guarantors of liability.
Waiver is the intentional relinquishment of a known right or intentional conduct inconsistent with claiming that right. In re Gen. Elec. Capital Corp., 203 S.W.3d 314, 316 (Tex. 2006) (per curiam) (orig. proceeding); Blackstone Med., Inc. v. Phoenix Surgicals, L.L.C., 470 S.W.3d 636, 646 (Tex. App.—Dallas 2015, no pet.). The elements of waiver include (1) an existing right, benefit, or advantage held by a party; (2) the party's actual knowledge of its existence; and (3) the party's actual intent to relinquish the right, or intentional conduct inconsistent with the right. Ulico Cas. Co. v. Allied Pilots Ass'n, 262 S.W.3d 773, 778 (Tex. 2008); Geis v. Colina Del Rio, LP, 362 S.W.3d 100, 111 (Tex. App.—San Antonio 2011, pet. denied).
Waiver is largely a matter of intent. Motor Vehicle Bd. of Tex. Dep't of Transp. v. El Paso Indep. Auto. Dealers Ass'n, 1 S.W.3d 108, 111 (Tex. 1999) (per curiam); Blackstone Med., 470 S.W.3d at 646. Ordinarily, waiver is a fact question, but a party can establish waiver as a matter of law when the facts and circumstances are admitted or clearly established. Blackstone Med., 470 S.W.3d at 646. In determining if waiver has occurred, courts examine the acts, words, or conduct of a party to determine if the party "unequivocally manifested" an intent to no longer assert the right in question. Geis, 362 S.W.3d at 111.
The guarantors argue that the License Agreement's merger clause created a fact issue regarding whether the Mall waived Mia Bella's and the guarantors' performance under the Lease. The License Agreement included a clause providing, "This License contains all the covenants, promises, agreements, conditions and understandings between Licensor and Licensee. There are no other agreements, either oral or written, between them other than those set forth in this License." The License Agreement defines the "licensor" as "First Colony Mall, LLC" and the "licensee" as Luis Castelan. The License Agreement is the only agreement between the Mall and Castelan. Castelan was not a party to the Lease, and Mia Bella—a party to the Lease—was not a party to the License Agreement. The existence of a merger clause in the License Agreement, under these circumstances, constitutes no evidence that the Mall intended to relinquish its right to seek payment of the outstanding rental balance under the Lease.
Furthermore, we disagree with the guarantors' contention that the very act of entering into the License Agreement with Castelan served as evidence that the Mall actually intended to relinquish its right to seek payment under the Lease or that the Mall engaged in intentional conduct inconsistent with that right. See Ulico Cas. Co., 262 S.W.3d at 778 (listing elements of waiver). As we have already stated, Article 23(b) of the Lease expressly provided that, upon default by Mia Bella, the Mall could terminate the Lease and seek payment "of any unpaid rental which has been earned at the time of termination" as damages. The Lease also specifically allowed the Mall to enter into an agreement to relet the premises in order to mitigate its damages arising out of Mia Bella's default. The parties also agreed in the Lease that the Mall's decision to terminate the Lease under Article 23(b) "shall not be construed as a forfeiture of rental remaining to be paid during the balance of the Term, nor shall it act to relieve [Mia Bella] of any other obligations under this Lease."
The Lease specifically contemplated that the Mall could terminate the Lease for Mia Bella's failure to pay rent and that, if that condition occurred, the Mall could seek the outstanding rental balance from Mia Bella—and, by extension, the guarantors—and could enter into a new agreement to relet the premises in an attempt to mitigate damages. The Mall's actions are consistent with the terms of the Lease. By itself, entering into the License Agreement, which in no way references the Lease or outstanding rental payments due under the Lease, does not raise a fact issue regarding whether the Mall actually intended to relinquish its right to collect the outstanding rental balance or whether the Mall engaged in intentional conduct inconsistent with asserting that right. See id.
The guarantors point out that the Mall sent notices of default in September and October 2015 "to the attention of Castelan as the owner of the Tenant." The Mall also sent these letters to Garcia, and the letters included language that the Mall intended to seek the outstanding rental balance from Mia Bella or from the guarantors.
We hold that the guarantors have failed to raise a fact issue on an essential element of their affirmative defense of waiver. See id.; Tesoro Petroleum, 106 S.W.3d at 124.
We overrule the guarantors' second issue. D. Accord and Satisfaction
In their third issue, the guarantors contend that the trial court improperly granted summary judgment in favor of the Mall because the guarantors raised a fact issue on their affirmative defense of accord and satisfaction. Specifically, the guarantors argue that they raised a fact issue on this defense because the Mall and Castelan entered into the License Agreement for a shorter term and at a lower monthly rental rate while the Mall did not notify Mia Bella that the Lease had been terminated.
The "accord" of "accord and satisfaction" is a new contract to discharge an existing obligation, while the "satisfaction" is the performance of the new contract. Honeycutt, 992 S.W.2d at 576-77; see Lopez v. Munoz, Hockema & Reed, L.L.P., 22 S.W.3d 857, 863 (Tex. 2000) ("The accord and satisfaction defense rests upon a contract, express or implied, in which the parties agree to the discharge of an existing obligation by means of a lesser payment tendered and accepted."); Richardson v. Allstate Tex. Lloyd's, 235 S.W.3d 863, 865 (Tex. App.—Dallas 2007, no pet.) ("An accord and satisfaction exists when parties agree to discharge 'an existing obligation in a manner other than in accordance with the terms of their original contract.'") (quoting Avary v. Bank of Am., N.A., 72 S.W.3d 779, 788 (Tex. App.—Dallas 2002, pet. denied)). To constitute an accord and satisfaction, in the new contract: (1) the parties must agree to discharge the existing obligation; (2) the parties must agree that one party will perform and the other will accept something different from what each expected from the existing obligation; (3) the parties unmistakably communicate that the different performance will discharge the existing obligation; (4) the agreement to discharge the existing obligation is plain, definite, certain, clear, full, explicit, and not susceptible to any other interpretation; and (5) the parties' agreement must be accompanied by acts and declarations that the creditor is "bound to understand." Honeycutt, 992 S.W.2d at 577 (quoting Jenkins v. Henry C. Beck Co., 449 S.W.2d 454, 455 (Tex. 1969)).
For the accord and satisfaction defense to prevail, "there must be a dispute and an unmistakable communication to the creditor that tender of the reduced sum is upon the condition that acceptance will satisfy the underlying obligation." Lopez, 22 S.W.3d at 863; Case Funding Network, L.P. v. Anglo-Dutch Petroleum Int'l, Inc., 264 S.W.3d 38, 50 (Tex. App.—Houston [1st Dist.] 2007, pet. denied). "An agreement that modifies an existing obligation will result in both an accord and satisfaction and a novation if the parties intended to extinguish the existing obligation." Honeycutt, 992 S.W.2d at 577; see Lopez, 22 S.W.3d at 863 ("The parties must specifically and intentionally agree to the discharge of one of the parties' existing obligations."); Cleveland Reg'l Med. Ctr., L.P. v. Celtic Props., L.C., 323 S.W.3d 322, 335 (Tex. App.—Beaumont 2010, pet. denied) ("The parties must mutually assent to form a new agreement to satisfy the original obligation, and the parties' intent is controlling."). Summary judgment evidence in support of this defense must demonstrate that both parties agreed that the amount paid by the debtor to the creditor fully satisfied the entire claim. Richardson, 235 S.W.3d at 865.
As we have stated, the License Agreement did not reference the Lease, nor did it make any mention of the existing indebtedness of Mia Bella and the guarantors to the Mall for the outstanding rental balance. The License Agreement contained no indication that, by entering into that agreement, the parties intended to extinguish the obligation under the Lease for Mia Bella and the guarantors to pay the outstanding rental balance to the Mall. Further, there was no indication in the License Agreement—let alone a "plain, definite, certain, clear, full, [and] explicit" indication—that the Mall's acceptance of the monthly rental payment of $12,000 under the License Agreement would satisfy Mia Bella's existing obligation to it. See Lopez, 22 S.W.3d at 863; Richardson, 235 S.W.3d at 865; Honeycutt, 992 S.W.2d at 577. The parties to the License Agreement did not "specifically and intentionally agree" to the discharge of Mia Bella's and the guarantors' obligation to pay the outstanding rental balance to the Mall. See Lopez, 22 S.W.3d at 863; Cleveland Reg'l Med. Ctr., L.P., 323 S.W.3d at 335 (stating that parties must mutually assent to form new agreement to satisfy original obligation).
We conclude that the guarantors' summary judgment evidence does not raise a fact issue on their affirmative defense of accord and satisfaction. See Honeycutt, 992 S.W.2d at 577 (stating elements of accord and satisfaction defense). We therefore hold that because the guarantors did not raise a fact issue on each element of any of their affirmative defenses, the trial court did not err in granting summary judgment in favor of the Mall. See Tesoro Petroleum, 106 S.W.3d at 124.
We overrule the guarantors' third issue.
Conclusion
We affirm the judgment of the trial court.
Evelyn V. Keyes
Justice Panel consists of Justices Jennings, Keyes, and Higley.