Houston Appeals Court affirms summary judgment against guarantors in Mia Bella Sugarland breach-of-lease case, rejects affirmative defenses

Garcia v. First Colony Mall, LLC, No. 01-17-00336-CV (Tex.App. - Houston [1st Dist.] Jun. 5, 2018, no pet h.) (because guarantors of restaurant lease 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 the Mall's favor.

Opinion issued June 5, 2018

In The

Court of Appeals

For The

First District of Texas

————————————

NO. 01-17-00336-CV

———————————

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 postjudgment 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
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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:
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[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, nonperformance
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
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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.”
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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
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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
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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
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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
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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
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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.
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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.”
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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.,
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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
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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:
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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
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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
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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
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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
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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
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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.1
 See id.

1 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
22
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.

intended to seek the outstanding rental balance from Mia Bella or from the
guarantors.
23
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
24
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
25
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.

Landlord required to mitigate damages in breach-of-lease case

Houston Court of Appeals reverses summary judgment granted in favor of landlord in residential lease dispute, finding that landlord & landlady acted unreasonably with respect to mitigation of damages, and did not prove their damages. The opinion, written by Justice Hanks, also addresses the question of whether the mitigation issue must be pleaded by the defendant.

EXCERPT FROM THE OPINION IN

ONTIVEROS V. WILLIAMS (Tex.App.- Houston [1st Dist.] Feb. 11, 2010)

Damages for Breach of Contract

Rosales and Ontiveros pointed out in their response to the Williamses' Motion for Summary Judgment and in their appellate brief that genuine issues of material fact exist as to whether the Williamses (1) mitigated their damages and (2) improperly deducted amounts from the security deposit.

1. Mitigation

The Williamses argue that the issue of mitigation was not pled by Rosales and Ontiveros and, thus, shall not be considered by this Court on appeal.

Section 91.006 of the Texas Property Code requires a landlord to mitigate his damages after the breach of a lease and declares void any lease provision to the contrary. Tex. Prop. Code Ann. § 91.006 (Vernon 2007). When a tenant contends that the landlord has mitigated his damages, the breaching tenant need not plead the landlord's mitigation as an affirmative defense; rather, the tenant's evidence of the landlord's mitigation tends to rebut the amount of damages claimed by the landlord for the breach and may be admitted under a general denial. McGraw v. Brown Realty Co., 195 S.W.3d 271, 277-78 (Tex. App.--Dallas 2006, no pet.). Thus, it was not necessary for Rosales and Ontiveros to plead that the Williamses mitigated their damages, and the issue is properly before our consideration.

On the other hand, a tenant's contention that the landlord failed to mitigate his damages must be pleaded as an affirmative defense, and the filing of a general denial is usually not sufficient to raise the issue. Id. at 277; see Tex. R. Civ. P. 94 (party relying on affirmative defense must specifically plead defense). However, when a plaintiff in his pleadings anticipates defensive matters and pleads them, the defendant may rely upon defenses though his only pleading is general denial. Phillips v. Phillips, 820 S.W.2d 785, 789 (Tex. 1991) (citing Raney v. White, 267 S.W.2d 199, 200 (Tex. Civ. App.--San Antonio 1954, writ ref'd)).

Here, the Williamses pled in "Plaintiff's [sic] Original Petition" that "Plaintiffs reasonably mitigated their damages." Although the Williamses, as plaintiffs, had no obligation to anticipate defenses and plead those issues, by anticipating the defense in their pleadings, they allowed the defendants to properly respond with a general denial. See id. Because the plaintiffs' petition claimed they reasonably mitigated damages, the defendants' filing of a general denial, "den[ying] each and every allegation of Plaintiffs' Original Petition," put failure to mitigate at issue in the case.

Moreover, even if the pleadings had not put mitigation at issue, both parties addressed the issue in their summary judgment pleadings and attached evidence, without objection from the Williamses. An unpleaded affirmative defense may serve as the basis for a summary judgment when it is raised in the summary judgment motion and the opposing party does not object to the lack of a Rule 94 pleading in either its written response or before the rendition of judgment. Roark v. Stallworth Oil & Gas, Inc., 813 S.W.2d 492, 494 (Tex. 1991). In other words, trial by consent applies in the summary judgment context. Id.; see also Segal v. Emmes Capital, L.L.C., 155 S.W.3d 267, 298 (Tex. App.--Houston [1st Dist.] 2004, pet. dism'd). "The failure to plead an affirmative defense under rule 94 is an issue that must be raised in the trial court, or it may not be urged on appeal." Roark, 813 S.W.2d at 495.

Rosales and Ontiveros's response to the Williamses' Motion for Summary Judgment states facts raising the issue of mitigation and failure to mitigate. The Williamses filed a reply brief to Rosales and Ontiveros's response, but did not object or specially except. Thus, the issue of failure to mitigate was properly before the consideration of the trial court in deciding the motion and accordingly, is also properly before the consideration of this Court on appeal.

a) Actual Mitigation of Damages

Rosales and Ontiveros's response to the Motion for Summary Judgment and attached evidence creates a fact issue as to whether the Williamses actually mitigated their damages. The response states that Rosales and Ontiveros requested to stay in the house for an additional month but were told that they could only stay "until April 11, 2008 because the house had been rented to another tenant." In Rosales' affidavit, she states that Kimberly Williams told her that they "had to leave the house by April 11, 2008 because she needed two weeks to clean the house before the new tenants arrived." Additionally, the response alleges and the attached affidavit states that Rosales observed and spoke with the new tenant renting the house in May and June of 2008.

The Williamses argue in their appellate brief that the affidavits of Rosales and Ontiveros are self-serving conclusory statements based on supposition and hearsay and do not amount to more than a scintilla of evidence. However, the Williamses did not make these objections before the trial court. Because the objections to hearsay and speculation are objections to form, the Williamses waived them by failing to present the objection to the trial court. See Tex. R. Evid. 802; Pico v. Capriccio Italian Rest., Inc., 209 S.W.3d 902, 909 (Tex. App.--Houston [14th Dist.] 2006, no pet.). Hearsay, when not objected to, is relevant evidence that can be considered on appeal. Tex. R. Evid. 802.

[ * * * ]

Thus, the statements in the affidavits attached to Rosales and Ontiveros's response are some evidence that the Williamses mitigated their damages for an amount greater than what they acknowledged in their motion for summary judgment.

b) Failure to Mitigate

While it is Rosales and Ontiveros's primary contention that the Williamses actually mitigated their damages by leasing the property to another tenant, the facts provided in response to the Williamses' Motion for Summary Judgment alternatively show that the Williamses failed to mitigate their damages. It is undisputed that Rosales and Ontiveros asked to stay in the apartment for an additional month but were only allowed to stay in the house until April 11. Because the landlords have an obligation to avoid waste, their refusal to allow Rosales and Ontiveros to stay at the house longer, if the property were not leased to another tenant, would constitute a failure to mitigate.

2. Amount of Damages

Rosales and Ontiveros also argue that the trial court erred in awarding the amount of damages claimed by the Williamses. None of the Williamses' pleadings or motions clearly document the calculation of their alleged damages. The trial court awarded $7,190 in damages on the breach of contract claim. Based on the Williamses' alleged damages in their motion, this figure appears to be the amount claimed for rent ($6,580) and the claimed amount for damage to the property and reletting fees ($610). The Williamses appear to have claimed $6,580 for rent based on four months of rent at a rate of $1,295 and four months of late fees of $350.

In their response to the Williamses' Motion for Summary Judgment, Rosales and Ontiveros stated that they "received a letter from Plaintiffs which indicated that she needed to leave the house by April 11, 2008 and how much Defendants [Rosales and Ontiveros] needed to pay for the rent of the house." Rosales and Ontiveros contend that they paid the Williamses an agreed amount of $558 to cover rent for April 1 through 11, which was accepted by the Williamses. Accordingly, there is a fact issue regarding the amount of rent actually owed.

Similarly, the Williamses have failed to conclusively prove the reasonableness of their claimed damages for reletting the property. In the affidavit of Kimberly Williams, she states that on April 28, 2008, she hired a staging company to enhance the attractiveness of the property, which cost $360. The terms of the contract called for the company to place a home manager in the house. In other words, Williams entered into an agreement to pay someone to occupy the house, rather than finding a tenant to pay her rent to occupy the house. Following this statement in the affidavit, she says she "aggressively marketed" the property. Because she does not state that she attempted to lease the property prior to entering the contract with the staging company, she has not shown that paying someone to occupy the house was reasonably necessary to find a new tenant.

Ontiveros v. Williams (Tex.App.- Houston [1st Dist.] Feb. 11, 2010)(Hanks) (breach of residential lease claim, mitigation of damages and failure to mitigate as affirmative defense, trial by consent in summary judgment context, partial summary judgment on liability only, proving amount of damages, attorney's fees)
REVERSE TRIAL COURT JUDGMENT AND REMAND CASE TO TRIAL COURT FOR FURTHER PROCEEDINGS:
Opinion by Justice George C. Hanks, Jr.
Before Justices Jennings, Hanks and Bland
01-09-00454-CV Francisca Rosales and Jose Ontiveros v. Kimberly Williams
Appeal from County Civil Court at Law No 3 of Harris County
Trial Court Judge: Hon. Linda Storey

Lease Law: Landlord Properly Mitigated Damages, Court Rules

In this commercial lease dispute, the First Court of Appeals, in a memo op. authored by Justice Hanks, affirms judgment for landlord on breach of lease damages and attorney's fees.

Narsi v. Weingarten Realty Investors, No. 01-06-00690-CV (Tex.App.- Houston [1st Dist.] Nov. 29, 2007)(Hanks) (lease law, landlord-tenant disputes, breach of commerical lease, interpretation of lease, renewal, lockout, mitigation defense, attorney's fees)
Opinion by Justice Hanks Before Justices Taft, Hanks and Higley
Full case style: Amirali M. Narsi v. Weingarten Realty Investors
Appeal from 189th District Court of Harris County (Hon. William R. Burke, Jr.)
Disposition: Trial court's judgment for landlord affirmed


MEMORANDUM OPINION BY JUSTICE GEORGE C. HANKS, JR.

Weingarten Realty Investors sued Amirali M. Narsi for breach of a lease. After a bench trial, the trial court found that the lease was ambiguous and issued a final judgment in favor of Weingarten. Rajab A. Rahim and Ahmed Bhai Mamji were also parties to the suit with Narsi. Rahim and Mamji did not appeal the final judgment.

On appeal, Narsi argues that the final judgment was improper because (1) the trial court misconstrued the plain language of the Original Lease, Renewal Agreement, and Lease Assignment; (2) the trial court failed to have Weingarten mitigate its damages; and (3) the trial court granted attorney’s fees without evidence showing that they were reasonable and necessary. We affirm.

Background

Jenny Hyun, associate counsel for Weingarten, testified that, in 1995, Weingarten entered into a commercial lease (“the Original Lease”) with Narsi, who was going to open a Dollar Store. The Original Lease was to remain in effect until November 30, 1998. In 1998, the parties extended the lease (“the Renewal Agreement”) until November 30, 2001. Hyun testified that, before the Renewal Agreement expired, Narsi assigned the lease to Ahmed Mamji, who was going to take over the Dollar Store. Their “Lease Assignment, Assumption & First Amendment to Lease” (“the Lease Assignment”) prolonged the Renewal Agreement until November 30, 2006. After the Renewal Agreement term expired, Mamji defaulted on the Lease Assignment. Weingarten locked Mamji out of the premises, relet the premises, and sued Narsi, alleging that he was liable for the time remaining on the Lease Assignment.

Paragraph 4 of the Lease Assignment states as follows:

[Mamji] does hereby accept this Assignment, assume and agree to perform the covenants, duties and obligations of “Tenant” under said Lease Contract (including the payment of rent), and agrees to be bound by all of such covenants, duties and obligations of Tenant as fully to the same extend as if [Mamji] had been the original party designated as “Tenant” thereunder; and [Mamji] shall be fully, directly and primarily liable for the performance thereof, and it is agreed that the liability of [Narsi] and [Mamji] is joint and several and may be enforced against either without any nature of notice to, demand upon, proceeding against or judgment against the other.
(Emphasis added.) Paragraph 5 provides as follows:

[Weingarten] hereby consents to this Assignment with the express understanding that this Assignment shall in no way relieve [Narsi] of liability for the performance of the covenants, duties and obligations of [Mamji] under said Lease Contract, including liability for the full amount of rental and any additional charges, provided to be paid by [Mamji] to [Weingarten] pursuant to said Lease Contract; and [Narsi] shall continue to be directly and primarily liable to [Weingarten] for the performance of all covenants, duties and obligations of [Mamji] under such Lease Contract, including payment of rental, and such liability shall remain and continue in full force and effect as to any further assignment or transfer of the Lease Contract, whether or not [Narsi] shall have received any notice or consented to such assignment or transfer, and whether or not [Weingarten] may subordinate any of its liens and/or security interests, contractual or statutory; provided, however, that any sum paid by [Mamji] to [Weingarten] shall be credited on the aforesaid obligation of [Narsi]. [Weingarten] shall not be obligated to give any notice to [Mamji] which is not presently provided for as a duty of [Weingarten] under said Lease Contract. (Emphasis added.)

The parties disagree with respect to the definition of the term “lease contract.” The trial court found the Lease Assignment to be ambiguous and stated that the court believed that Weingarten intended Narsi to be the guarantor, but it was not sure if the leases were enough to “get them there.” The trial court also considered the fact that Weingarten drafted the Lease Assignment. After deliberation, the trial court awarded Weingarten $347,274.35. The principal sum was $214,217.89, and prejudgment interest accrued at 18%.

Lease Interpretation

In his first and second issues, Narsi contends that the trial court erred in granting final judgment
in favor of Weingarten because ambiguity exists regarding whether, under the terms of the Lease Assignment, Narsi’s liability extended beyond November 30, 2001—the end of the Renewal Agreement. Weingarten asserts that there is no ambiguity and all parties agreed to the intent of the Lease Assignment. The Lease Assignment at issue provides that:

WHEREAS, by Lease Contract (the “Original Lease”) dated September 8, 1995, WEINGARTEN REALTY INVESTORS, therein and herein referred to as “Landlord,” leased to AMARALI [sic] M. NARSI and RAJAB A. RAHIM, therein called “Tenant” and hereinafter called “Assignor,” a storeroom . . . for a term commencing November 21, 1995, and terminated November 30, 2001, reference being here made to such Lease Contract for all relevant purposes; and

WHEREAS, the Original Lease was amended by a Renewal Letter Agreement dated September 30, 1998 (said Original Lease, together with the Renewal Letter Agreement shall hereinafter be referred to as the “Lease Contract”);[ The Original lease was to terminate on November 30, 1998, and the RenewalAgreement renewed the lease until November 30, 2001.] and
. . .
[Narsi] does hereby sell, assign and transfer unto Assignee [Mamji], effective April 1, 2001 (hereafter called “Effective Date”), all of [Narsi’s] leasehold interest under the aforesaid Lease Contract herein above referred to for the entire remainder of the lease term (such period being sometimes herein referred to as the “assignment period”).

Absent ambiguity, we interpret a contract as a matter of law. DeWitt County Elec. Co-op., Inc. v. Parks, 1 S.W.3d 96, 100 (Tex. 1999). “Whether a contract is ambiguous is a question of law that must be decided by examining the contract as a whole in light of the circumstances present when the contract was entered.” Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d 587, 589 (Tex. 1996). “If the written instrument is so worded that it can be given a certain or definite legal meaning or interpretation, then it is not ambiguous and the court will construe the contract as a matter of law.” Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). “An ambiguity exists only if the contract language is susceptible to two or more reasonable interpretations.” Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 157 (Tex. 2003). The language in a contract is to be given its plain grammatical meaning unless doing so would defeat the parties’ intent. DeWitt County Elec. Coop., 1 S.W.3d at 101. We presume that the parties intended every clause to have an effect. Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996).

In our analysis, we must determine whether the parties have contracted to extend Narsi’s obligation in the lease contract through the assignment period of the Lease Assignment. Narsi contends that the “Lease Contract” expired by its terms on November 30, 2001—at the end of the Renewal Agreement—and that the Lease Assignment does not keep Narsi liable for any extension of the lease contract. Weingarten, on the other hand, contends that Narsi remains liable for the entire remainder of the assignment period—November 30, 2006.

If a contract is worded so that a court may properly give it a definite or certain legal meaning or interpretation, then it is not ambiguous. Friendswood Dev. Co. v. McDade + Co., 926 S.W.2d 280, 282 (Tex. 1996). A contract is ambiguous only when there exists a genuine uncertainty as to which of two meanings is proper. Columbia Gas, 940 S.W.2d at 589. However, an ambiguity does not arise simply because the parties advance conflicting interpretations of the contract. Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 134 (Tex. 1994). In order for an ambiguity to exist, both interpretations must be reasonable. Nat’l Union Fire Ins. Co. v. CBI Industries, Inc., 907 S.W.2d 517, 520 (Tex. 1995).

Narsi argues that the Lease Assignment extends the lease to November 30, 2006, but does not extend the “lease contract,” which is a defined term. We disagree. The term “lease,” which is used throughout the Lease Assignment, is defined in the Renewal Agreement as follows:
Reference is made to the captioned Lease Contract dated September 8, 1995, together with all subsequent amendments and extensions thereto, collectively herein referred to as “Lease,” for a term which commenced November 21, 1995, and shall terminate November 30, 1998.
Almost three years later, on May 22, 2001, the Lease Assignment references the term “lease” as follows:

The term of the Lease is hereby extended through November 30, 2006, unless sooner terminated in accordance with the terms and conditions set forth in the Lease.
Paragraph 2 of the Lease Assignment also uses the term “lease”:
Commencing December 1, 2001, Tenant shall pay to Landlord, as Minimum Rent, in accordance with the terms and conditions of Article IV of the Lease, the following . . . .

Only the Original Lease contains “articles.” Furthermore, paragraph 12 of the Lease Assignment states “all defined terms used herein shall have the same meaning as when used in the Lease unless another meaning is clearly indicated.” The term “lease” in the Lease Assignment refers to the Original Lease and the Renewal Agreement. Consequently, the phrase “entire remainder of the lease term” in the Lease Assignment refers to the lease’s extension through November 30, 2006. When the lease contract phrase is read in the context of the assignment period contained in the Lease Assignment, its meaning becomes clear—Narsi remains liable through the Lease Assignment’s extension of the lease contract.

We overrule Narsi’s first and second issues.

Mitigation of Damages

In his third issue, Narsi complains that Weingarten failed to mitigate its damages. Weingarten asserts it properly mitigated its damages.

A landlord has a duty to make reasonable efforts to mitigate damages when the tenant breaches the lease and abandons the property. Tex. Prop. Code Ann. § 91.006 (Vernon 2007); Austin Hill Country Realty, Inc. v. Palisades Plaza, Inc., 948 S.W.2d 293, 299 (Tex. 1997). However, the landlord is not required to fill the premises with any willing tenant; the replacement tenant must be suitable under the circumstances. Austin Hill, 948 S.W.2d at 299. The landlord’s failure to use reasonable efforts to mitigate damages bars the landlord’s recovery against the breaching tenant only to the extent that damages reasonably could have been avoided. Id. The tenant bears the burden to prove that the landlord has mitigated or failed to mitigate damages and the amount by which the landlord reduced or could have reduced its damages. Id.

Pursuant to section 16.02 of the Original Lease, Weingarten does not have the duty to relet the leased premises, but it does have a duty to “diminish[] by any net sums thereafter received by Landlord through reletting the Lease Premises during said period.”

According to section 91.006 of the Texas Property Code, a landlord has a duty to mitigate damages, “a provision of a lease that purports to waive a right or to exempt a landlord from liability or duty under this section is void.” Tex. Prop. Code Ann. § 91.006 (Vernon 2007).

The Original Lease was signed before section 91.006 of the Texas Property Code was enacted, but the Renewal Agreement was signed afterwards. Assuming without deciding that section 91.006 applies here, Weingarten gave Narsi offsets and credits once its new tenant moved in. Mamji tried to bring in a third party by the name of Fatehali Chatoor to take over the lease. Weingarten did not have a duty to accept the tenant presented by Mamji. Narsi failed to present credible evidence to the trial court to demonstrate that Weingarten failed to mitigate its damages.

Because Weingarten did not have a duty to accept the third party tenant Mamji presented, and because Weingarten gave Narsi offsets and credits once a new tenant moved in, we hold that Weingarten properly mitigated its damages.

We overrule Narsi’s third issue.

Attorney’s Fees

In his fourth issue, Narsi argues that Weingarten is not entitled to recover attorney’s fees because there was no evidence or expert testimony verifying that the fees were reasonable and necessary. We use an abuse of discretion standard of reviewing attorney’s fees awards in non-declaratory judgment actions. See Ridge Oil Co. v. Guinn Invs. Inc., 148 S.W.3d 143, 163 (Tex. 2004).

Weingarten asserts that it is entitled to attorney’s fees because it won its breach of contract claim against Narsi. See Tex. Civ. Prac. & Rem. Code Ann. § 38.001(8) (Vernon 1997) (attorney’s fees recoverable for breach of contract claim).

When a prevailing party in a breach of contract suit seeks attorney’s fees, section 38.001 mandates an award of reasonable fees if there is proof that the fees are reasonable. See Atlantic Richfield Co. v. Long Trusts, 860 S.W.2d 439, 449 (Tex. App.—Texarkana 1993, writ denied); Budd v. Gay, 846 S.W.2d 521, 524 (Tex. App.—Houston [14th Dist.] 1993, no writ). A trial court has the discretion to fix the amount of attorney’s fees, but it does not have the discretion to completely deny attorney’s fees if they are proper under section 38.001. See Budd, 846 S.W.2d at 524. The party seeking to recover attorney’s fees carries the burden of proof. See Stewart Title Guaranty Co. v. Sterling, 822 S.W.2d 1, 8, 10 (Tex. 1992).

Weingarten’s attorney, Richard Howell, testified that he had expended approximately $13,000 at the rate of $225 per hour. Howell also testified that the services provided and the hourly rates were reasonable based on the issues involved in the case. Finally, Howell testified that $2,500 was a reasonable legal fee to charge if the case was appealed to this court; and $5,000 would be a reasonable fee if a petition for review is filed with the Texas Supreme Court. Howell’s testimony was uncontroverted.

What amount of attorney’s fees is reasonable is a question of fact. See Int’l Sec. Life Ins. Co. v. Spray, 468 S.W.2d 347, 349 (Tex. 1971). But where, as here, trial counsel’s testimony concerning attorney’s fees for the trial of a case is clear, positive and direct, and uncontroverted, the court takes it as true as a matter of law. See Ragsdale v. Progressive Voters League, 801 S.W.2d 880, 882 (Tex. 1990). This is especially the case where the opposing party had the means and opportunity to challenge the testimony and failed to do so. See id.; see also Tex. Civ. Prac. & Rem. Code Ann. § 38.003 (Vernon 1997) (stating rebuttable presumption that usual and customary attorney’s fees are reasonable).

Because Narsi failed to take the available opportunity to question or controvert Howell’s testimony, we hold that the testimony established Weingarten’s reasonable and necessary legal fees through trial of the case as a matter of law.

We overrule Narsi’s fourth issue.

Conclusion

We affirm the judgment of the trial court.

George C. Hanks, Jr.
Justice

Panel consists of Justices Taft, Hanks, and Higley.