RICHARD N. SMITH, Appellant v. CIMARRON PLAZA, LIMITED, Appellee

Reversed and Remanded and Opinion filed December 18, 1989.
 
 
S
In The
Court of Appeals
Fifth District of Texas at Dallas
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No. 05-89-00341-CV
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RICHARD N. SMITH, Appellant
V.
CIMARRON PLAZA, LIMITED, Appellee
 
.................................................................
On Appeal from the 162nd District Court
Dallas County, Texas
Trial Court Cause No. 88-9393-I
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O P I N I O N
Before Justices McClung, Lagarde and Ovard
Opinion By Justice Lagarde
        Richard N. Smith, defendant in the court below, appeals the granting of appellee's Motion for Summary Judgment in a dispute concerning the enforceability of a lease agreement executed between Smith, the lessee, and appellee, lessor Cimarron Plaza, Limited. Appellant concedes that appellee made a prima facie showing that it is entitled to have its motion granted; however, appellant states that summary judgment is precluded because he has raised material issues of fact in all three of his affirmative defenses. We agree with appellant as to one of his points of error. We affirm the granting of appellee's Motion for Summary Judgment, in part, and reverse and remand that part of the judgment dealing with total damages owing.
        Appellant and appellee entered into a lease agreement in December 1985. Appellant operated a restaurant out of the leased premises until December 1986, when he subleased the premises to Mindy Lu's Hot Pie Shops Incorporated (Mindy Lu's). Thereafter, appellee received rental payments from Mindy Lu's and communicated with Mindy Lu's instead of dealing with appellant. Appellee sent Mindy Lu's a Tenant Estoppel Certificate, the confirmation of which appears in the record, although the actual certificate is absent. Mindy Lu's and appellee also agreed to a rent reduction in June 1987.
        Appellant states in his affidavit that after Mindy Lu's occupied the premises, appellant and appellee did not maintain contact, but appellant periodically checked with Mindy Lu's to monitor the lease situation. Mindy Lu's assured appellant that, regarding the lease, no problems existed. In reality, Mindy Lu's failed to pay some of its water bills, taxes, and rent. In December 1987, Mindy Lu's closed and appellee seized the premises and some restaurant equipment located on the premises. Appellee then proceeded against the appellant for rents and other payments due under the lease.
        At no time did appellee delete appellant's name from the lease agreement, which reads, in pertinent part:
        ARTICLE XVII. 17.1 Tenant shall not assign or in any manner transfer this lease or any estate or interest therein, or subject the Demised Premises or any part thereof, or grant any license, concession or other right of occupancy of any portion of the Demised Premises without the prior written consent of Landlord. Consent by Landlord to one or more assignments or sublettings shall not operate as a waiver of Landlord's rights as to any subsequent assignments and sublettings. . . . .
 
        17.3 Notwithstanding any assignment or subletting, Tenant and any guarantor of Tenant's obligations under this lease shall at all times remain fully responsible and liable for the payment for the rent herein specified and for compliance with all of its other obligations under this lease . . . .
        Appellant concedes that, although appellee presented a prima facie case entitling it to a judgment as a matter of law, summary judgment is nevertheless improper because he has raised a material question of fact on his affirmative defense of novation. Once a movant establishes that he is entitled to a judgment, the nonmovant, to avoid a summary judgment, has the burden to show the existence of a fact issue regarding his affirmative defense. Helmcamp v. Interfirst Bank Wichita Falls, 685 S.W.2d 794, 795 (Tex. App.--Fort Worth 1985, writ ref'd n.r.e.). Novation contemplates the creation and substitution of new obligations for existing obligations. Siegler v. Telco Leas., Inc., 593 S.W.2d 850, 851 (Tex. Civ. App.--Houston [1st Dist.] 1980, no writ). Novation consists of four essential elements: (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. Id. at 852. A novation agreement does not need to be written or even evidenced by express words of agreement. Bank of North America v. Bluewater Main., Inc., 578 S.W.2d 841, 842 (Tex. Civ. App.--Houston [1st Dist.] 1979, writ ref'd n.r.e.). The intent to substitute the new obligation for the old can be inferred from facts and circumstances, including the conduct of the parties. Id.
        Appellant contends that because appellee dealt with Mindy Lu's after December 1986, novation occurred. Appellant says that the estoppel agreement and the rent reduction executed between appellant and Mindy Lu's and the lack of contact between appellant and appellee all tend to indicate that novation exists as a material fact question. Appellant contends that novation can be inferred from these circumstances. Appellant has the burden of offering summary judgment evidence on each element of an affirmative defense. See Brownlee v. Brownlee, 665 S.W.2d 111, 112 (Tex. 1984). After reviewing the record, we conclude that appellant failed to offer summary judgment evidence raising a material question of fact on the extinguishment of the old contract. Appellee did deal with Mindy Lu's when Mindy Lu's occupied the premises, but the lease that appellant signed clearly states that appellant remains liable for rental payments despite the subletting to Mindy Lu's. Absent fraud, misrepresentation, or mistake, a party is charged with knowledge of the legal effect of a contract voluntarily made. Barfield v. Howard M. Smith Co. of Amarillo, 426 S.W.2d 834, 838 (Tex. 1968). Given the terms of the contract, the appellee's conduct towards its sublessee cannot be construed as an implied extinguishment of its contract with appellant. Appellant has not established a genuine issue of material fact in regards to his affirmative defense of novation; therefore, we overrule appellant's first point of error.
        Appellant also contends that his affirmative defense of estoppel raises a material question of fact. To rely on estoppel as an affirmative defense, the appellant must establish: (1) a false representation or concealment of material facts; (2) made with knowledge, actual or constructive, of the facts; (3) to a party without knowledge or the means of knowledge of the real facts; (4) with the intention that it should have been acted upon; and (5) the party to whom it was made must have relied upon or acted upon it to his prejudice. Nichols v. Vantage Management Co., Inc., 638 S.W.2d 186, 188 (Tex. App.--Dallas 1982, no writ). Silence can operate as a misrepresentation, leading a wronged party into a mistaken understanding of the facts. Storms v. Tuck, 579 S.W.2d 447, 452 (Tex. 1979). A misleading silence can give rise to an estoppel when there is a duty to speak. See Smith v. Nat'l Resort Communities, Inc., 585 S.W.2d 655, 658 (Tex. 1979) (emphasis added).
        Appellant contends that appellee's lack of communication to appellant regarding Mindy Lu's financial difficulties operates as estoppel by silence because this silence led appellant to believe that Mindy Lu's was fulfilling its obligations under the lease. Further, appellant believed that he was no longer liable on the lease. Appellant contends that he relied on these misrepresentations to his detriment because had he known the true situation, he would have taken steps to regain possession of the premises and possibly mitigate his harm.
        We have searched the record and we conclude that appellant has presented no evidence indicating that appellee had a duty to speak to him regarding Mindy Lu's situation. To claim an estoppel defense, the appellant must show that he was without means of acquiring knowledge of the facts which the party to be estopped misrepresented by silence. Barfield, 426 S.W.2d at 838. Appellant must also demonstrate that he has used due diligence to ascertain the truth of the matter upon which he has detrimentally relied. Simpson v. MBank Dallas, N.A., 724 S.W.2d 102, 107 (Tex. App.--Dallas 1987, writ ref'd n.r.e.).
        Appellant states that he communicated with Mindy Lu's and received assurances that Mindy Lu's was meeting its obligations. Appellant states that appellee never communicated with him after Mindy Lu's occupied the premises. Appellant does not explain his own failure to contact appellee to acquire the facts concerning the sublease. Appellant does not state that he had no means of acquiring knowledge of Mindy Lu's financial difficulties except to say that Mindy Lu's and appellee dealt with each other and not with appellant. Appellant argues, in a conclusory matter, that he could not easily discover the facts of the sublease, but the record contains no indication that appellant even attempted to contact the appellee. Appellant states that reasonable diligence only required that he communicate with Mindy Lu's because he reasonably believed that appellee had substituted Mindy Lu's as the lessee. Given the previously quoted terms of the lease and the lack of novation evidence, we hold that appellant's belief fell short of a reasonable conclusion. Appellant did not demonstrate due diligence in ascertaining the state of affairs between Mindy Lu's and appellee. The record contains no indication that appellant could not obtain access to the pertinent facts. Since the facts may have been equally available to appellant, the appellee had no duty to inform appellant of facts that the appellant, through due diligence, could have ascertained for himself. We overrule appellant's second point of error.
        In appellant's third point of error, he states that he raised a material issue of fact regarding his affirmative defense of a seizure and retention of restaurant equipment by appellee amounting to either a waiver or accord and satisfaction. Appellant asserts that appellee has failed to timely dispose of the equipment and this retention amounts to a waiver of its right to proceed against appellant for payments due under the lease.
        The record reveals that appellee wrote letters to appellant demanding storage costs for the equipment. Appellee asked for, and the court awarded, moving costs of $1,660.69 and storage expenses of $3,816. In his motion in opposition to summary judgment and on appeal, appellant cites Section 9.505 of the Texas Business & Commmerce Code FN:1 which allows a secured creditor to retain collateral in complete satisfaction of a debt. See Tanenbaum v. Economics Laboratory, Inc., 628 S.W.2d 769, 771 (Tex. 1982) (contrasting §9.505 with § 9.504, which allows a secured party to dispose of collateral in a commercially reasonable manner). Article twenty of the lease agreement reads, in pertinent part:
                In addition to the statutory landlord's lien, Landlord shall have at all times a valid security interest to secure payment of all rentals and other sums of money becoming due hereunder from Tenant, and to secure payment of any damages or loss which Landlord may suffer by reason of the breach by Tenant of any covenant, agreement or condition contained herein, upon all goods, wares, equipment, fixtures, furniture, improvements and other personal property of Tenant presently, or which may hereafter be situated on the Demised Premises, and all proceeds therefrom, and such property shall not be removed without the consent of Landlord until all arrearages in rent as well as any and all other sums of money then due to Landlord or to become due to Landlord hereunder shall first have been paid and discharged and all the covenants, agreements and conditions hereof have been fully complied with and performed by Tenant.
Clearly, under this article, the appellee has a contractual security interest in any equipment that appellant may have had on the premises.
        In response to appellant's point of error, appellee asserts that appellant does not own the equipment. Appellee states that the property belongs to Mindy Lu's, which is currently in bankruptcy. The lease only gives appellee a security interest in appellant's personalty, not in Mindy Lu's. Thus, appellant argues, because appellee has no security interest in the personalty seized, appellee has no right to sell it. The summary judgment evidence raises a question as to whether appellee was exercising its rights pursuant to its contractual lien when it seized the equipment or whether removal and storage fees were necessitated by appellee's having to remove and store the equipment located in the premises to make it suitable for reletting.
        In oral arguments before this Court, each side asserted somewhat inconsistent positions. Appellant stated that he did not contest amounts owing under the lease, including, we assume, moving and storage costs for equipment that he may not own. Appellee stated that all equipment seized belonged to Mindy Lu's and constituted part of the bankruptcy estate. Appellee acknowledged that it had no right to seize the equipment, yet did not offer to relinquish the award of storage expenses. After examining the record before us, we hold that appellant has raised a genuine issue of material fact concerning accord and satisfaction or waiver. The record does not indicate who owns the equipment, the type of equipment, its value, or the specific circumstances surrounding its seizure and storage.
        As a matter of law, the summary judgment evidence reveals the existence of a valid lease between appellant and appellee; appellant's liability under the lease; and specific terms of the lease regarding rents and other amounts owing. However, as to the amount of damages owed, material issues of fact still lack resolution. We cannot determine whether appellant is entitled to accord and satisfaction through sale of the equipment, or whether appellee has simply waived the entire amount owing through retention of equipment that may belong to appellant or in which appellee retains a valid security interest. We cannot determine the correctness of an award of moving and storage expenses for equipment that appellee now concedes was wrongfully seized and does not belong to appellant. See Whitworth v. Kuhn, 734 S.W.2d 108, 111-112 (Tex. App.--Austin 1987, no writ) (affirmation on liability and reversal and remand on some damage amounts in a summary judgment proceeding factually similar to the case at bar).
        We reverse and remand that part of the judgment awarding damages for moving and storage of the equipment. We also reverse and remand this case for a determination of ownership of the equipment and for a determination of appellant's rights under § 9.504 and § 9.505 of the Texas Business and Commerce Code. In all other respects, we affirm the judgment of the trial court.
 
 
                                                          
                                                          SUE LAGARDE
                                                          JUSTICE
 
Do Not Publish
Tex. R. App. P. 90
890341F.U05
 
FN:1 Tex. Bus. & Com. Code Ann. § 9.505 (Vernon 1987).
 
File Date[12-18-89]
File Name[890341F]