Resolution Trust Corp. v. Cramer

• Decision Date: 16 November 1993
• Docket Number: No. 92-8172,92-8172
• Citation: 6 F.3d 1102
• Parties: RESOLUTION TRUST CORPORATION, as Receiver of First Savings of Arkansas, F.A., Plaintiff-Appellee-Cross-Appellant, v. Cliff CRAMER, et al., Defendants, Cliff Cramer and Robert E. Greer, Defendants-Appellants-Cross-Appellees, and Gary Maxfield, Defendant-Cross-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1102

6 F.3d 1102

RESOLUTION TRUST CORPORATION, as Receiver of First Savings of Arkansas, F.A., Plaintiff-Appellee-Cross-Appellant, v. Cliff CRAMER, et al., Defendants Cliff Cramer and Robert E. Greer Defendants-Appellants-Cross-Appellees and Gary Maxfield, Defendant-Cross-Appellee.

No. 92-8172.

United States Court of Appeals Fifth Circuit.

Nov. 16, 1993.

Randal Patterson, Hollmann, Lyon, Patterson & Durell, Inc., Odessa, TX, for Cramer.

H. Thomas Hirsch, Odessa, TX, for Greer.

Ray Bradford Miller, Harper Estes, Lynch, Chappell & Alsup, P.C., Midland, TX, for appellee.

Appeals from the United States District Court for the Western District of Texas.

Before GOLDBERG, HIGGINBOTHAM, and EMILIO M. GARZA, Circuit Judges.

GOLDBERG, Circuit Judge:

The Resolution Trust Corporation ("RTC") brought this suit against several defendants including Cliff Cramer, Robert E. Greer, and Gary Maxfield to recover unpaid rent payments under two commercial leases and the guaranties of those leases. The RTC alleged that during the last ten months of primary terms of the leases, from June of 1989 through March of 1990, the tenants paid only a portion of the rent payments that were due. The RTC also charged that the tenants held over for nine months, until December of 1990, but only paid portions of the rent due for April and May of 1990. Thereafter, the tenants ceased paying rent altogether. After a trial, a jury determined that Cramer, Greer, and Maxfield were each individually liable for certain amounts of unpaid rent. However, the jury also found that the RTC could have mitigated a portion of its damages by taking possession of the leased premises after the primary terms of the leases had expired. After the district court reduced the amount of damages that the jury awarded based on the jury's finding on mitigation of damages, the court entered judgment against Cramer, Greer, and Maxfield in varying amounts. The district court awarded attorney's fees and costs to the RTC, but it also reduced these amounts based on the jury's finding regarding mitigation.

Cramer and Greer's appeal and the RTC's cross-appeal require us to address six issues. First, we must decide whether Cramer is liable under the guaranties that he signed for the unpaid rent that accrued after the primary terms of the leases. Second, we must address Cramer and Greer's assertion that the rent was actually paid in full during the primary terms of the leases because, in June of 1989, the rent was reduced to the level that the tenants paid. Third, we must determine whether the RTC was under a duty to mitigate its damages. Fourth, we must decide whether the defendants' liability is individual or joint and several. Fifth, we must determine whether the jury should have awarded the full amount of damages pleaded. Finally, we are asked to determine whether the RTC's attorney's fees and costs awards were properly reduced. We will address these issues in turn.

I. Facts and Proceedings Below

On May 18, 1984, Cramer and Maxfield signed a commercial lease on behalf of their company, The Body Shop Fitness Centers, Inc., for space in a Midland, Texas shopping center. This lease will be called the "Body Shop Lease". On July 29, 1985, Cramer and Maxfield individually signed another lease agreement for more commercial space in the same shopping center. A fitness club called the Fitness Connection was opened in this space. This lease will be referred to as the "Fitness Connection Lease".

When the leases were executed, Cramer and Maxfield signed guaranties of those agreements. The guaranties are identical in all relevant respects. Each of the guaranties reveals that Cramer and Maxfield agreed to guarantee "the full performance of each and all of the terms, covenants and conditions of said lease to be kept and performed by said Tenant, including the payment of all rentals and other charges to accrue thereunder."

The original lease agreements were both amended and assigned. In October of 1988, the Body Shop Lease was amended to reduce the monthly rent to $9,000 per month and to extend the primary term of the lease so that it would end on March 31, 1990. The Fitness Connection Lease was also modified in October of 1988 by two amendments which reduced the monthly rent to $6,000 per month and adjusted the primary term of the lease so that it too would expire on March 31, 1990. Moreover, in December of 1988, and with the approval of the landlord at that time, the tenants' rights and duties under the Body Shop Lease and the Fitness Connection Lease were assigned to Richard Freeman, Ralph Fuquay, and Greer. The RTC later succeeded to the rights of the lessor under both leases. The leases contain identical contractual "holding over" provisions. These terms read as follows:

Any holding over after the expiration of the said term, with the consent of the Landlord, shall be construed to be a tenancy from month to month, and shall be on the terms and conditions herein specified, so far as applicable.

According to the RTC, in June of 1989, the rent payments on both of the leases came into default. From June of 1989 through March of 1990, the end of the primary terms, the tenants under the Body Shop Lease paid only $6,000 per month instead of the $9,000 per month called for in the lease. Similarly, during the same period, the tenants under the Fitness Connection Lease paid only $3,000 per month instead of the agreed upon $6,000 per month. Moreover, although the primary terms of the leases expired on March 31, 1990, the new tenants continued to occupy both leased spaces until sometime in December of 1990. The tenants paid only a portion of the rent that was due under the leases during April and May of 1990. ¹ However, after May of 1990, the tenants did not make rent payments under either lease.

The RTC then filed this suit to collect the unpaid rent payments that accrued during the primary terms of the leases and the contractual holdover periods. The RTC claimed that under the Body Shop Lease, $29,998.00 remained unpaid for the primary term, and $67,716.75 was due for the contractual holdover period. Under the Fitness Connection Lease, $30,000.00 remained unpaid for the primary term, and $48,387.80 was due for the contractual holdover period. Thus, according to the RTC, the unpaid rent payments for both leases totalled $176,102.55.

After a one-day trial, a jury determined that Cramer owed the RTC $88,000 for unpaid rent on both leases from June 1, 1989 through December 31, 1990 and that Maxfield owed the RTC $70,400 and Greer owed the RTC $17,600 for failing to pay the rent on the same leases for the same period of time. The total of these three awards is $176,000. However, the jury also found that the RTC could have mitigated its damages by $67,500 by taking possession of the leased premises after the primary terms of the leases had expired.

The district court then entered judgment on the jury verdict. Since the jury found that the RTC could have avoided by virtue of mitigation of damages $67,500 of the $176,000 that the jury awarded, the district court reduced the liability of each defendant by the fraction of the damages that RTC could have avoided. The court thus entered judgment for the RTC against Cramer for $54,250, against Maxfield for $43,400, and against Greer for $10,850. The district court awarded attorney's fees and costs to the RTC, but these awards were also reduced by the fraction of the damages that RTC could have avoided. Cramer, Greer, and the RTC then perfected the present appeals.

II. Cramer's Liability on his Guaranties

In his appeal, Cramer contends that he is not liable for any unpaid rent that accrued after March 31, 1990, the date on which the primary terms of both the Body Shop Lease and the Fitness Connection Lease expired. However, Cramer signed two guaranties that clearly state that they were intended to insure the payment of all of the rent that was to accrue under these leases. Thus, to determine whether Cramer is liable for the unpaid rent that accrued after March 31, 1990, we must examine the guaranties that Cramer signed and the leases that were guaranteed.

In the interpretation of a guaranty contract, our ultimate goal is to determine the intent of the parties. Resolution Trust Corp. v. Northpark Joint Venture, 958 F.2d 1313, 1320 (5th Cir.1992), cert. denied, --- U.S. ----, 113 S.Ct. 963, 122 L.Ed.2d 120 (1993). Our first task, though, is to decide whether the guaranties are ambiguous. This inquiry is a question of law for the court to decide. Temple-Inland Forest Prods. Corp. v. United States, 988 F.2d 1418, 1421 (5th Cir.1993). According to Texas law, if a guaranty contains an ambiguity, it should be construed in favor of the guarantor. Coker v. Coker, 650 S.W.2d 391, 394 n. 1 (Tex.1983); Western Bank-Downtown v. Carline, 757 S.W.2d 111 (Tex.App.--Houston [1st Dist.] 1988, writ denied). However, Cramer does not contend, and we do not find, that the guaranties at issue in this case are ambiguous. Therefore, we will construe the guaranties as a matter of law and enforce them according to their terms. Federal Deposit Ins. Corp. v. Nobles, 901 F.2d 477 (5th Cir.1990); Coker, 650 S.W.2d at 393.

In each of the guaranties at issue in this case, Cramer agreed to guarantee "the full performance of each and all of the terms, covenants and conditions of said lease to be kept and performed by said Tenant, including the payment of all rentals and other charges to accrue thereunder." Cramer also acknowledged that his guaranties would "continue in favor of the Landlord notwithstanding any extension, modification, or alteration of said lease entered into by and between the parties thereto, or their successors or assigns, or notwithstanding any assignment of said lease...." (emphasis added).

Cramer argues that the question that we must address is whether each lease should be construed to contain a self-executing extension mechanism in which the...