Howard P. Kells and Caltex Joint Venture v. John J. Maloney and Marianne Maloney

Kells IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS, AT AUSTIN NO. 3-91-446-CV HOWARD P. KELLS AND CALTEX JOINT VENTURE, APPELLANTS vs. JOHN J. MALONEY AND MARIANNE MALONEY, APPELLEES FROM THE DISTRICT COURT OF TRAVIS COUNTY, 250TH JUDICIAL DISTRICT NO. 451,877, HONORABLE HUME COFER, JUDGE PRESIDING This case involves an appeal from a summary judgment granted by the trial court in favor of the appellees, the Maloneys, who brought suit to collect a deficiency remaining after they foreclosed upon the real property securing a promissory note owed them by appellants Howard P. Kells and Caltex Joint Venture ("Caltex"). Appellants seek to reverse the trial court's order, claiming that material facts remain disputed and therefore summary judgment was improper. We will affirm the trial court's judgment. Caltex is a joint venture consisting of Kells and other persons not involved in this appeal. In 1985, appellants purchased from the Maloneys certain real property located in Travis County and signed a promissory note to them for $30,000, secured by a deed of trust on the property. This note was to be paid in five annual installments of $3300 or more each, beginning April 30, 1986, with the balance due in full no later than April 30, 1990. Only the first payment was made timely, and only one partial payment was made thereafter. In May of 1987, Kells and the Maloneys came to an oral agreement, as reflected in a September 18, 1987, letter from John Maloney to Kells. Kells claims that, as consideration for a lower interest rate and deferred payment of the 1987 installment, he and Caltex agreed to improve the property and thus enhance its value as collateral. The Maloneys dispute this contention, pointing out it was not mentioned in a letter from them to Kells confirming the oral agreement. Further, appellees argue there was no consideration for any subsequent agreement. All parties agree, nonetheless, that under both the original and modified agreements an installment was due on April 30, 1988. Kells conceded at oral argument, and does not dispute in his brief to this court, that no such payment was made on that date. Thereafter, the Maloneys sent in succession a written notice of default, an acceleration letter, notice of foreclosure, and a demand letter for the deficiency remaining after applying the proceeds from the sale. The Maloneys then brought the present action seeking to recover the remaining deficiency and attorneys' fees. The Maloneys moved for summary judgment and Kells defended on the ground that the appellees were improperly seeking to recover under the terms of the original agreement rather than the modified one. Eventually, Kells counterclaimed that the Maloneys' action constituted a breach of the second agreement. The trial court granted appellees' first motion for summary judgment on the deficiency and later issued a final order disposing of appellants' counterclaim in response to appellees' second motion for summary judgment. Appellants assert four points of error, all of which depend upon the contention that controverted fact issues material to appellees' cause of action exist, rendering summary judgment improper. A movant for summary judgment has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548 (Tex. 1985). In deciding whether there is a disputed material fact issue precluding summary judgment, we must take as true all evidence favoring the non-movant and indulge every reasonable inference and resolve every doubt in favor of the non-movant. Id. at 548-49. Here, the only fact appellants dispute is not material to appellees' recovery. Even if we assume that a question exists regarding consideration for the second agreement, the summary judgment must be affirmed. Appellants' sole short paragraph of argument merely asserts that a second agreement was entered into by the parties; they do not contest, and indeed admitted at oral argument, their breach of the parties' modified agreement by their failure to pay the 1988 installment required under either contract. Both parties refer to the subsequent agreement as a modification of the original contract on the note. It is settled law, and appellants do not dispute, that in this situation . . . [A] right of action on the original contract is merely suspended, and if there be a default in the performance of the substituted agreement, a right of election exists on the part of the obligee to declare a rescission of the subsequent agreement and rely upon the original agreement, or to waive any right under the original agreement and to enforce the subsequent agreement. Worth Petroleum Co. v. Callahan, 82 S.W.2d 1060, 1063 (Tex. Civ. App.--Eastland 1935, no writ). The Maloneys elected to proceed under the original note's terms after Kells defaulted upon his substituted performance. Appellants' argument that a modified agreement merely exists does not address this central issue. Appellee, therefore, was entitled to judgment as a matter of law as no material dispute of fact remained. Appellants suggested at oral argument before this court that the second agreement constituted a novation, in which case the original contract would be extinguished and no remedy would exist under its terms. Appellants failed to make this argument below or in the brief for this court and presented no evidence of such intent to the trial court. Intent of the parties is required in order for a new note to extinguish the former one. Villarreal v. Laredo Nat. Bank, 677 S.W.2d 600, 607 (Tex. App.--San Antonio 1984, writ ref'd n.r.e.). Furthermore, novation is an affirmative defense that must be raised by the pleadings or else is waived. Lincoln v. King, 193 S.W. 437, 439 (Tex. Civ. App.--Amarillo 1946, no writ). Appellants thus cannot argue now, after their unfailing insistence of a modification, that the original agreement was expunged. Appellants' points of error are all overruled. The judgment of the trial court is affirmed. Marilyn Aboussie, Justice [Before Chief Justice Carroll, Justices Aboussie and B. A. Smith] Affirmed Filed: October 21, 1992 [Do Not Publish]