JERRY H. HARLAN AND W. C. DAILY, Appellants v. ROBERT J. TATE, Appellee

AFFIRMED, and Opinion Filed December 30, 1996
 
 
S
In The
Court of Appeals
Fifth District of Texas at Dallas
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No. 05-95-01346-CV
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JERRY H. HARLAN AND W. C. DAILY, Appellants
V.
ROBERT J. TATE, Appellee
..............................................................
On Appeal from the 15th Judicial District Court
Grayson County, Texas
Trial Court Cause No. 91-1838
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O P I N I O N
Before Justices Morris, James, and Wolfe
Opinion By Justice James
        Appellant FN:1 , W. C. Daily, appeals from an adverse judgment in favor of appellee, Robert Tate, on opposing motions for summary judgment. Appellant contends the trial court erred in granting appellee's motion and denying his motion because appellant is a holder in due course, or because appellee repudiated his obligations under the agreements and appellant's assignor was excused from any further payment of the underlying indebtedness. Alternatively, appellant contends, in granting partial specific performance, the trial court erred by allowing appellee excessive credit and offset against the balance due on the note. For the reasons set forth below, we affirm the trial court's judgment.
I. Procedural and Factual Background
         In December of 1985, appellee entered into a contract of sale to purchase 519.8 acres from Jerry Harlan that adjoined a golf course and housing development owned by appellee (the Contract). The property under contract consisted of 50 acres on which improvements were located and 469.8 acres of largely unimproved farm land. The Contract provided the tracts were to be sold in two stages. Appellee agreed to pay $1,900,000 as the total purchase price.
        Pursuant to the terms of Contract, the first stage closed February 2, 1986 and encompassed the fifty-acre tract, including the main house. For the first stage, appellee agreed to pay $544,286.50 financed by a note dated December 1, 1985 and secured by a deed of trust and vendor's lien on the property being conveyed. The parties allocated $400,000 as the purchase price for the main residence.
        On August 1, 1986, appellee closed the second stage encompassing the remaining 469.8 acres. At closing, appellee made a cash down payment of $450,000 and signed a Renewal, Extension and Consolidated Note for $1,450,000 payable to Harlan. The consolidated note included the first-stage note and was a wraparound note secured by a wraparound deed of trust in favor of Harlan. FN:2
        When appellee purchased the 469.8 acre tract, it was subject to three superior liens on various parcels of the tract. Merchants & Planters National Bank held two of the liens totaling $90,000 and Howe State Bank held a note and deed of trust for $290,000. Under the specific language of the wraparound deed of trust, Harlan had sole responsibility to perform his obligations under these three notes and to hold appellee harmless and indemnify him from the consequences of any failure on Harlan's part to perform his obligations. Although appellee had the option to pay the underlying notes if Harlan was in default, the agreements specifically provided appellee assumed no duty to do so.
        Appellee agreed to pay interest at ten percent per annum in five annual installments beginning August 1, 1987. Additionally, appellee agreed to pay ad valorem taxes, and maintain certain minimum property and life insurance coverage. The property was subject to certain restrictions against mobile homes so long as there was an unpaid balance on the loan. The note and deed of trust defined events of default. If appellee defaulted and failed to cure it after thirty days from receiving written notice of the default, Harlan could enforce his rights under the agreements by accelerating the note and foreclosing the deed of trust. If Harlan defaulted on his obligations, appellee's remedy was specific performance.
        By August 1, 1988, appellee had paid only $130,962.55 in interest and still owed $165,000. By mutual agreement, appellee and Harlan modified their transaction. In one agreement entitled Agreement for Deed in Lieu of Foreclosure, appellee agreed to convey to Harlan a twenty-five acre tract, which included the main residence, and to receive credit for $455,000 on the $1,450,000 existing note. Amounts of property insurance required by the wraparound deed of trust were reduced, appellee's personal liability on the debt was limited to ten percent of any deficiency after foreclosure not to exceed $145,000, and appellee agreed to loan Harlan $19,500 for six months. If Harlan failed to pay this note when due, appellee was entitled to a reduction of fifty percent of the next accruing interest installment on the extended note. All other terms and conditions of the wraparound note and deed of trust remained substantially the same, including those concerning Harlan's responsibility for payment of the underlying notes. The new agreements contained specific declarations the parties did not intend them to a novation.
        The terms and modifications were carried forward in an instrument entitled Extension of Real Estate Note and Lien (the Note). Appellee did not owe any interest payments under the Note until August 1, 1991 when he would owe $130,492.07 or fifty percent of this amount if Harlan failed to repay the $19,500 loan when due. The agreements were executed February 27, 1989 and were effective August 1, 1988. There was a prepayment penalty if appellee attempted to prepay the principal balance within two years.
        On March 24, 1989, Harlan used the reconveyed property consisting of twenty-five acres and the main house as security to borrow $150,000 from Grayson County State Bank. On that same date, Harlan renewed and extended his loans at the American Bank of Sherman. To secure the American Bank extension, Harlan pledged appellee's note and assigned its collateral to American Bank. Also, on April 1, 1989 Harlan renewed and extended his loan with Howe State Bank. The principal on the renewed note was $184,821.35, payable in annual installments of principal of $12,321.42 and semi-annual installments of interest at 10.5 percent per annum for five years, after which the entire balance came due. Howe State Bank retained the same security it had on the prior loan of $290,000.
        By July 2, 1990, Harlan had defaulted on payments on his loans with Howe State Bank and Grayson County State Bank and both institutions had sought foreclosure. Harlan filed for bankruptcy under Chapter 11 and received the benefit of an automatic stay of the pending foreclosure proceedings. On February 15, 1991, after a hearing on Howe State Bank's motion to lift the stay, the bankruptcy court denied the motion but provided the stay would be automatically lifted if Harlan failed to obtain approval of his plan for reorganization or if appellee failed to pay the interest installment due on August 1, 1991.         On May 9, 1991, appellee sent a letter to Harlan's attorney and copies of the letter to Howe State Bank and Harlan stating because of the effect of unfavorable economic conditions on his development project and Harlan's bankruptcy, he would not make the August interest payment "short of a drastic turnaround immediately." The letter also referred to unsuccessful attempts by appellee to engage Harlan in new discussions concerning the interest payment. On July 2, 1991, Howe State Bank foreclosed its security interest in 357.7 acres of the original 519.8 acres FN:3 . Also on July 2, 1991, appellant purchased Harlan's $60,000 note and its security from American Bank of Sherman for $75,257.48.
        On September 23, 1991, an attorney representing Harlan sent appellee a letter informing him of his failure to make the August interest payment, demanding that appellee pay delinquent ad valorem taxes, and requesting appellee to provide receipts for life insurance premiums required by the Note. The letter gave appellee thirty days in which to cure the defaults. The letter warned of acceleration and foreclosure if appellee failed to do so within the thirty days. On November 8, 1991, Harlan's attorney sent appellee another letter demanding principal and interest payments on the note.
        On December 2, 1991, Harlan executed a Transfer of Lien and Note in Lieu of Foreclosure assigning to appellant any and all interest he had in "[t]hat certain Renewal, Extension and Consolidated Promissory Note in the original principal sum of $1,450,000, dated August 1, 1986, executed by Robert J. Tate, as Maker, and payable to the order of Jerry H. Harlan as Payee." The assignment was effective November 11, 1991. On December 12, 1991, Harlan's attorney sent a letter to appellee on behalf of appellant giving notice of a trustee's sale to take place on January 7, 1992.
        Appellee filed for a temporary injunction to enjoin the foreclosure and for partial specific performance of the Contract based upon partial failure of consideration. After a hearing, the trial court granted appellee's application for temporary injunctive relief. Both parties filed motions for summary judgment and on July 13, 1995, the court granted appellee's motion awarding him clear title to the remaining 137.1 acres, judgment against Harlan for $161,329.85, attorney's fees against Harlan and appellant, postjudgment interest, and release of Harlan's claim against appellee's life insurance policy pledged to secure the Note. All parties to this appeal stipulate there were no issues of material fact before the trial court when it granted summary judgment and we should decide this appeal solely on the legal issues presented.
        When both sides have filed motions for summary judgment, the reviewing court may determine whether the trial court erred in granting or denying of any of the motions and may reverse the trial court's judgment and render such judgment as the trial court should have rendered, including rendering judgment for the other movant. Jones v. Strauss, 745 S.W.2d 898, 900 (Tex. 1988); Smith v. Smith, 794 S.W.2d 823, 825 (Tex. App.--Dallas 1990, no writ). The court should consider all evidence accompanying both motions in determining whether to grant either party's motion. Id. A court of appeals should consider all summary judgment grounds the trial court ruled on and the movant preserved for appellate review that are necessary for final disposition of the case. Cincinnati Life Ins. Co. v. Cates, 927 S.W.2d 623, 626 (Tex. 1996). An appellate court may consider other grounds that the movant preserved for review and the trial court did not rule on in the interest of judicial economy. Id.
        First, we will analyze appellant's second point of error concerning whether appellee breached the contract between himself and Harlan. Second, we consider whether appellant is a holder in due course of the Note. Last, we analyze appellant's alternative third point of error complaining the trial court failed to give appellant proper credit or offset under the judgment granting appellee partial specific performance of the contract.
II. Anticipatory Breach, Repudiation, and Impossibility of Performance
        In appellant's second point of error, he argues the trial court erred in denying his motion for summary judgment because appellee's May 19, 1991 letter constituted a repudiation of the Contract and excused any further performance by Harlan or constituted a breach because it made Harlan's performance under the Contract impossible.
        Harlan defaulted on his loans to Howe State Bank and Grayson County State Bank. To stay the impending foreclosures, he filed for reorganization in bankruptcy on July 2, 1990. On February 15, 1991, the bankruptcy court denied the motion of Howe State Bank to lift the automatic stay. The bankruptcy court ordered, however, that the stay would terminate without further action of the court and without further notice from Howe State Bank upon Harlan's failure to obtain approval of his plan of reorganization and to receive the full amount of appellee's interest payment on the Note due on August 1, 1991.
        On May 9, 1991, appellee sent a letter to Harlan's attorney with copies to Howe State Bank and Harlan. According to the letter, appellee had tried to initiate negotiations to modify the terms of the payment due August 1, 1991 because of adverse economic conditions. In addition, appellee did not think it would be practical to put out any more money because Harlan had filed for bankruptcy. Thus, appellee wrote that the August 1st interest payment would not be made "short of a drastic turnaround immediately."
        Appellant argues this letter constituted an anticipatory breach of the Note and excused Harlan from any further performance under the Contract to sell appellee the property. Generally, there can be no breach of a contract before time for performance arrives. Vise v. Foster, 247 S.W.2d 274, 280 (Tex. Civ. App.--Waco 1952, writ ref'd n.r.e.). However, if a party expressly renounces the contract and declares his intention not to perform it before the time for performance arrives, the other party may treat the renunciation as a breach and immediately bring an action for damages. Id. The terms "repudiation" and "anticipatory breach" are often used interchangeably by many courts. See Group Life Ins. and Health Ins. Co. v. Turner, 620 S.W.2d 670, 673 (Tex. Civ. App.--Dallas 1981, no writ). Either occurs when a party absolutely renounces his obligation to make periodic payments of money he is required to make in the future. Id. The repudiating party must express a fixed intent to "abandon, renounce, and refuse to perform the contract." Id. Appellant alleges the letter's condition of a drastic improvement in the economy was no condition at all because the economy could not be expected to make a drastic improvement immediately. As further evidence of appellee's intent not to perform, appellant points out that appellee failed to pay the May 1990 ad valorem taxes and July property insurance premium as required under the agreement.
        Appellee contends his statement that he would not pay the August 1 installment was not absolute, but conditioned upon improved economic conditions before August 1. In fact, he testified that prospects for his golf course project had improved somewhat since he had written the letter and before the due date of the installment. He further contends it was not his intent to abandon his obligations at the time he wrote the letter, but wrote the letter to bring Harlan and Howe State Bank together for further negotiations. Applying the proper standard of review for summary judgments, and accepting as true evidence favorable to the non-movant, as well as indulging every reasonable inference or doubts in the non-movant's favor, See Nixon v. Mr. Property Management Co., Inc., 690 S.W.2d 546, 548-49 (Tex. 1985), we cannot find, as a matter of law, appellee's May 9, 1991 letter expressed his absolute intent not to make the August interest payment. FN:4
        Even if we were to conclude the letter constituted a repudiation, that would not end the inquiry. An intention to repudiate must be clearly expressed and the other party must accept the intent to repudiate as complete and binding so as to terminate the contract. See Dudley v. Born, 710 S.W.2d 638, 644 (Tex. App.--Beaumont 1986, writ ref'd n.r.e.). If there is an absolute notice of intention not to perform a future contractual promise by the promisor, the promisee is not bound to accept the breach as final. See Vise, 247 S.W.2d at 280. If the promisee chooses, he may treat the notice as ineffective, await the time when the renounced promise is to be performed, and hold the promisor responsible for all the consequences of nonperformance. Id. However, when the promisee elects to not accept the repudiation, he keeps the contract in force for all parties to it, including his own obligations and liabilities under the contract. Id. 280-81. More importantly under the facts of this case, non-acceptance allows the repudiator to complete the contract and to take advantage of any subsequent circumstances that would justify his declining to complete it. Id. at 281.
         The repudiation must be promptly acted upon by the party accepting it. Dudley, 710 S.W.2d at 644. More than four months after appellee sent the letter appellant contends was a repudiation and more than two months after the foreclosure by the Howe State Bank, Harlan's attorney sent appellee a letter informing appellee that he had failed to make the August interest payment. The letter, dated September 23, 1991, demanded payment of the interest installment, delinquent ad valorem taxes, and receipts for life insurance premiums. Harlan, through his attorney, gave appellee the requisite thirty day notice, required under the terms of the Note and wraparound deed of trust, to put him in a position to accelerate the Note and foreclose under the wraparound deed of trust. On November 8, 1991, Harlan's attorney sent appellee another letter informing him of Harlan's acceleration of the Note and the posting for foreclosure of the entire property described in the wraparound deed of trust. Both letters act in accordance with the terms of the contractual agreements. These actions are inconsistent with Harlan or appellant's having accepted appellee's repudiation. Harlan had the option to accept the anticipatory breach, in which case the repudiated contract would no longer control Harlan and appellee's behavior, or to continue under the terms of the Contract and the Note. Harlan and appellant's actions after receipt of appellee's May 9, 1991 letter conclusively prove Harlan did not accept appellee's repudiation.
        We find no merit in appellant's claim of impossibility of performance. It is only when a party to a contract prevents the other party from performing by wrongful means that the injured party will be excused from performance. See S.K.Y. Investment Corp. v. H. E. Butt Grocery Co., 440 S.W.2d 885, 889-90 (Tex. Civ. App.--Corpus Christi 1969, no writ). Under every agreement executed between Harlan and appellee, Harlan remained solely responsible for servicing the underlying debt of the wraparound mortgage. Appellee was specifically exempted from any obligation to make payments on the indebtedness. Within weeks of modifying the original agreements and accepting the Note from appellee, Harlan signed a renewal note with Howe State Bank that required him to make substantial payments long before the first interest installment would come due on the Note. Appellant acknowledges Harlan never made any payments to Howe State Bank, was delinquent for five quarters on American Bank's note, and was in default on the Grayson County State Bank indebtedness. In regard to the latter, the record reveals Harlan mortgaged the 25 acre tract and principal residence to the Grayson County State Bank within days of appellee's reconveying the property to Harlan. Harlan received a loan of $150,000 in new funds from Grayson County State Bank. The record does not show what disposition Harlan made of these funds, but it does show Harlan failed to pay the first interest installment to Howe State Bank that came due in less than six months after he received them.
        It is undisputed that appellee's August 1, 1991 interest installment was not due until months after Harlan defaulted on the note to Howe State Bank and it had foreclosed. There is nothing in the record before us to excuse Harlan from servicing the underlying indebtedness as it came due. See Fant v. Howell, 547 2d 261, 265 (Tex. 1977). There is nothing in the record before us showing appellee took any action, including his May 9, 1991 letter, that would have prevented Harlan from paying the underlying indebtedness. There is nothing in the record to suggest appellee was obligated to pay the underlying debt. Although the bankruptcy court conditioned the stay of foreclosure on appellee's future payment of interest, it did not impose a burden on appellee to do any more than he was obligated to do under the Note. Although appellee's failure to pay the interest installment may have scuttled Harlan's plan for reorganization, his letter saying he would not make the payment did not render, in a legal sense, Harlan's performance under the Contract impossible. We find no authority that would so hold, and appellant has cited us to none. We overrule appellant's second point of error.
III. Holder in Due Course
        In his first point of error, appellant contends the trial court erred in granting appellee's motion for summary judgment and denying his motion for summary judgment because he is a holder in due course of the Note dated February 27, 1989 to be effective August 1, 1988. As a holder in due course of the Note, he is entitled to enforce its collection free of the claims and defenses asserted by appellee, including Harlan's default on the underlying debt and Howe State Bank's foreclosure on all but 137.1 acres of the original property described in the contract of sale.
        In reviewing summary judgment cases, we keep in mind that the movant for summary judgment has the burden of showing there is no genuine issue of material fact and is entitled to judgment as a matter of law. City of Sherman v. Henry, 910 S.W.2d 542, 548-49 (Tex. App.--Dallas 1995), rev'd on other grounds, 928 S.W.2d 464 (Tex. 1996). When both parties have filed motions for summary judgment and one is granted while the other is denied, we review the denial and render judgment if appellant complains of both the granting of the opponent's motion and the denial of his own motion. Id. at 549. The parties have stipulated there were no disputed issues of material fact presented to the trial court or on this appeal. When the facts are not in dispute, a claimant may defeat the motion for summary judgment of his opponent by convincing the court his opponent's legal position is unsound. Estate of Devitt, 758 S.W.2d 601, 602 (Tex. App.--Amarillo 1988, writ denied). When the facts are not in dispute, we review all legal questions presented. Id.
        Appellant argues he is a holder in due course of the Note. To be a holder in due course, there must be a negotiable instrument. An instrument is negotiable if it is signed by the maker or obligor, contains an unconditional promise or order to pay a sum certain in money, payable on demand or at a definite time, and payable to order or to bearer. Tex. Bus. & Com. Code Ann. § 3.104(a) (Vernon Supp. 1997). A holder in due course is a holder of a negotiable instrument who takes the instrument for value, in good faith, and without notice that it is overdue or has been dishonored or any defense against or claim to it on the part of any person. Tex. Bus. & Com. Code Ann. § 3.302(a) (Vernon Supp. 1997); See Williams v. Stansbury, 649 S.W.2d 293, 295 (Tex. 1983).
        Every noteholder is presumed to be a holder in due course of the instrument absent evidence to the contrary. Jones v. Missouri Sav. Ass'n, 756 S.W.2d 423, 424-24 (Tex. App.--Dallas 1988, no writ). If a notemaker shows the existence of a defense to the instrument, however, a person claiming the rights of a holder in due course has the burden of establishing his status as such. Id.
        Here, appellee asserts partial failure of consideration as a defense to the Note in that Harlan was unable to convey the entire property contained in the Contract. Because Harlan was unable to perform, appellee argues is entitled to his remedy of partial specific performance of the Contract and he was excused from further performance on the Note held by appellant. Accordingly, appellee argues he is entitled to clear title to the 137.1 acres remaining after Howe State Bank's foreclosure and for judgment in the amount of his overpayment of the purchase price for the remaining land. Appellant, on the other hand, claims he takes the Note free of any and all defenses as a holder in due course and may foreclose the wraparound deed of trust on the remaining land, assert any net deficiency to the extent of appellee's limited personal liability, and recover his attorneys fees.
        On March 24, 1989, Harlan refinanced his loans with American Bank by executing a new $60,000 note due and payable September 24, 1989. As additional collateral for American Bank's loan, Harlan pledged the Note and wraparound deed of trust executed by appellee February 27, 1989, effective August 1, 1988. In addition to financing statements and other pledge instruments, Harlan endorsed appellee's note to the order of American Bank.
        By July 2, 1991, Harlan had defaulted on the $60,000 note when appellant purchased it from the bank. American Bank transferred both the note and its collateral to appellant. Specifically, the bank's endorsement said "[t]his note is hereby transferred and assigned to W. C. Dailey without recourse."
        As stated in the Texas Business and Commerce Code, "[t]ransfer of an instrument vests in the transferee such rights as the transferor has therein." Tex. Bus. & Com. Code Ann. § 3.201(a) (Vernon Supp. 1997). On July 2, 1991, appellant became holder of a $60,000 note then past due secured by its collateral that included the Note and its collateral.         Because the $60,000 note was already past due and American Bank was ready to foreclose, appellant took with notice that it was in arrears. As such, appellant could not be a holder in due course of the $60,000 note he purchased from American Bank. See Williams v. Stansbury, 649 S.W.2d 293, 295 (Tex. 1983). Appellant argues even if he was not a holder in due course of the American Bank note, he is a holder in due course of the note transferred to him in December. We disagree.
        Prior to December 2, 1991, appellant had only a security interest in the Note and its collateral. Having this security interest did not make appellant a holder in due course of the Note. To establish ownership of the Note and to become a holder of it, appellant was required to follow the terms of the American Bank note and security agreement by making demand on Harlan for payment. If not paid, appellant could foreclose on American Bank's collateral which included the Note and its collateral. Only then would appellant become the holder of the Note for purposes of enforcing against appellee any rights under the deed of trust securing it. As stated previously, a transferor can transfer only what he has. See Tex. Bus. & Com. Code Ann. § 3.201(a) (Vernon Supp. 1997). Therefore, American Bank's assigning this security interest to appellant did not make him a holder of the Note.
        Appellant also took the Note with actual knowledge Harlan had defaulted on his obligation to pay the underlying indebtedness. On December 2, 1991, appellant became the owner and holder of appellee's Note. On that date, Harlan and appellant executed an agreement entitled "Transfer of Lien and Note in Lieu of Repossession and Foreclosure" which transferred to appellant ownership of the Note. The transfer provided it was to be effective November 11, 1991. Again, because the Note was past due at the time of transfer, appellant could not be a holder in due course of it. See Williams, 649 S.W.2d at 295.
        On July 2, 1991, when Howe State Bank foreclosed and acquired title to the 357.7 acres, Harlan materially breached the contract. Because of Harlan's breach, appellee had no duty to complete performance by paying the August 1, 1991 interest installment. See Fant, 547 S.W.2d at 265 (citing English v. Jones, 274 S.W.2d 666 (Tex. 1955)). Therefore, even though Harlan transferred the ownership of the Note to appellant, appellant was on notice of appellee's defense. After Harlan breached the Contract by allowing Howe State Bank to foreclose on the property he had conveyed to appellee, Harlan had no remaining rights under the Note to transfer to appellant. Accordingly, his transfer to appellant was without substance. We overrule appellant's first point of error. FN:5
IV. Partial Specific Performance
        We now address appellant's alternative argument that the trial court erred in computing the amount of offset or credit due to appellee under its judgment granting him partial specific performance of the Contract and awarding appellee clear title to the 137.1 acres remaining after foreclosure by the Howe State Bank. Both appellant and appellee agree that 27.71% is the percentage to be allocated to the land remaining and 72.29% is to be allocated to the land lost in foreclosure by Howe State Bank. The parties disagree on the sum to which these percentages are to be applied in determining the credit appellee is to receive. Appellant argues further that the modification effective August 1, 1988 giving rise to the Note was a new contract or novation barring credit or offset for any payments made by appellee before that date. Appellant argues the proper calculation is to apply the agreed percentages to the total amount of principal and accrued interest on the Note as of August 1, 1991, the due date of the first interest installment. From that date, appellant posits he is entitled to accrue interest on the resultant amount at eighteen percent per annum until paid. Through May 1, 1994, this method would result in appellee owing $699,986.83. Accordingly, appellant seeks in the alternative a declaratory judgment that at least $700,000 is due on the Note, an order of foreclosure and sale, and a judgment against appellee for $145,000 or ten percent "of the deficiency between the amount due on the day judgment is entered and the amount paid for the property upon foreclosure sale, whichever is less."
        Appellee argues the percentages are properly applied to the purchase price per acre in the Contract. Accordingly, appellee finds the price per acre is $2,885.72 resulting in the purchase price of the 131.7 remaining acres to be $395,632.21. FN:6 Appellee acknowledges he has received rental value on the 357.7 acres for five years at $6,300 per year and would add $31,500 to the credit Harlan or appellant are due. Further, appellee contends by the specific terms of the Note and other agreements executed in 1988, there has been no new contract or novation. Therefore, he is entitled to full credit for his down payment of $450,000. Appellee also claims full credit for the $130,962.55 interest payment made prior to the modification because the down payment was sufficient to pay the full purchase price of the remaining 131.7 acres. As a result, the Note with its interest were attributable only to the foreclosed land. Appellee paid taxes in the amount of $10,374.20 which he would allocate on the same percentages used in calculating other credits. He claims credit for $7,499.51.
        Including the downpayment, interest paid, and the tax credit, appellee alleges he is due credit of $588,462.06 against the purchase price of $395,632.21 and less the rental value of $31,500. As a result, appellee claims he overpaid the purchase price by $161,329.85 and sought judgment against Harlan and appellant for this amount. The trial court agreed as to the amount but entered judgment only against Harlan.
a. Novation
        Although appellant couches his argument in terms of a "novation," the doctrine of merger attends when considering subsequent agreements following renegotiations. This Court held in Caranas v. Jones, 437 S.W.2d 905, 910 (Tex. Civ. App.--Dallas 1969, writ ref'd n.r.e.), that a merger is the absorption of one contract into another and is largely a matter of the intention of the parties. The Court in Smith v. Smith, 794 S.W.2d 823, 828 (Tex. App.--Dallas 1990, no writ), followed Caranas and concluded a written agreement is not superseded or invalidated by a subsequent agreement relating to the same subject matter. Appellant cites us to ample authority holding where the second agreement is so inconsistent with the original agreement, a presumption conclusively arises it has been superseded by the second.
        Appellee argues our holding in Smith establishes the elements for a novation or merger that extinguishes the earlier agreement:
    1.        The same parties are involved in both agreements;
    2.        The agreements deal with the same subject matter; and
    3.        It is the intention of the parties the second agreement is to be a
        novation. Id.
        As appellee argues, a novation depends upon the intention of the parties and, here, the parties did not intend the modified agreements to be a novation. Without exception, all related documents executed by the parties subsequent to the closing of the first stage expressly relate back to the original Contract and its financing, apparently to preserve the viability of the prior agreements. The documents executed in March of 1989 by Harlan in renewing his loans at the American Bank describe the collateral as "[t]hat certain Renewal, Extension and Consolidated Promissory Note in the original principal sum of $1,450,000, dated August 1, 1986, . . ." rather than as the Note executed as of August 1, 1988 in a lesser principal amount and containing modified terms. More directly, the Note expressly provides it was not to be construed as a novation:
    This note is executed in partial renewal, extension and rearrangement of, but not in discharge or novation of, the above described original note and the payment of this note continues to be secured by all security agreements, collateral assignments, guaranty agreements, mortgage and lien instruments executed by the Undersigned (or by any other parties) in favor of the holder hereof, including those executed simultaneously herewith, those executed heretofore, and those hereafter executed, including, but not limited to the Deed of Trust.
        We do not find, as appellant suggests, our holding in Balboa Ins. Co. v. K & D and Assoc., 589 S.W.2d 752, 758-59 (Tex. Civ. App.--Dallas 1979, writ ref'd n.r.e.), applies to our facts. Nothing in the subsequent agreements is so inconsistent with the first agreement that they both cannot stand. The Note has attached to it the Renewal, Extension and Consolidated Note arising out of the closing of the second stage of the Contract in 1986. Its terms were expressly incorporated in the Note by reference. Nothing in the record before us shows either Harlan or appellee intended the 1988 modifications to the 1986 transaction to be construed to be a novation. Accordingly, we conclude appellee is entitled to credit for payments he made prior to August 1, 1988.
b. Application of Credits or Offsets
        Appellee contends under his claim of partial failure of consideration he is entitled to credit for prior payments on the original purchase price of the acres surviving the foreclosure by the Howe State Bank. We agree. We have previously concluded Harlan breached the Contract when he failed to pay the underlying indebtedness and 357.7 acres were taken in foreclosure. Under the Contract, appellee's sole remedy is specific performance of the Contract. Under that remedy, appellee is entitled to clear title to the remaining 137.1 acres and credit against the purchase price of all amounts paid to Harlan. If the amount paid exceeds the net amount due on the purchase price, appellee is entitled to recover it from Harlan. Vise, 247 S.W.2d at 281 (citing Ullman, Lewis & Co. v. Babcock, 63 Tex. 68, 69 (1885)):
 
The true measure of damage would be the difference between the contract price and the value at the time and place at which, under the contract, it ought to have been delivered.
The court in Vise held a claimant may select his measure of damages for breach and he will be limited to that recovery although the law may have allowed recovery of damages on another theory. See id. In a suit for partial failure of consideration and partial specific performance of a contract for the purchase of land, a purchaser is entitled to abatement of the purchase price to the extent vendor is unable to convey a portion of the property. Atkin v. Cobb, 663 S.W.2d 48, 51 (Tex. App.--San Antonio 1983, writ dism'd). Having elected partial specific performance as his remedy, appellee is entitled to recover his damages accordingly. We conclude the trial court did not err in its application of credits or offsets for prior payments made by appellee to the allocable purchase price for the remaining acres. We further conclude the trial court correctly calculated the net amount of due to appellee for payments he made in excess of the purchase price. Fant, 547 S.W.2d at 265. We overrule appellant's third point of error.
 
 
 
 
 
        For the reasons set forth above, we affirm the trial court's judgment.
 
 
 
                                                          
                                                          TOM JAMES
                                                          JUSTICE
 
 
Do Not Publish
Tex. R. App. P. 90
951346F.U05
 
 
FN:1 Although Jerry Harlan is included in the style as an appellant, he will not be referred to as an appellant because he seeks no relief in this appeal and his rights, if any, under the agreements in issue have been transferred to W. C. Daily.
FN:2 In wraparound financing, the purchaser makes an installment note that includes or "wraps around" the principal balance of an underlying indebtedness. The purchaser does not assume responsibility for the underlying indebtedness and he accepts title subject to the lien or liens that secure payment of the underlying indebtedness. Summers v. Consolidated Capital Special Trust, 783 S.W.2d 580, 581 (Tex. 1989).
FN:3 The record is silent as to the disposition of the liens of the Merchants & Planters National Bank.
FN:4 In the absence of the parties' stipulation to the contrary, we would conclude this conflicting evidence raises a material issue of fact.
FN:5 Appellee correctly argues the Note is not negotiable because it is not for a sum certain. Harlan's failure to repay the $19,500 and any credit in that event could be determined only by reference to other documents. Further, the limitation of appellee's personal liability to a percentage of any deficiency destroys the Note's negotiability. Hinckley v. Eggers, 587 S.W.2d 448, 450-451 (Tex.Civ.App--Dallas 1979, writ ref'd n.r.e.).
FN:6 We express no opinion as to the accuracy of appellee's calculations of the purchase price. Neither party complains of the calculation on appeal, therefore any error is waived. Tex. R. App. P. 52(a).
File Date[12-30-96]
File Name[951346F]