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Nature of Suit Code: 230
Nature of Suit: Rent, Lease, Ejectment
Cause of Action: 

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F 1 L :C D 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

'.)tllti:,j Sr:jt{:•; C.:t1 rt o f J\.f,f>Ca ls 

·r,,nt1 .. '. c:~~- --~~·: 

JAN :' - 1996 

ROBERT L. HOECKER 

VIRGINIA DOYLE, Clerk 

Plainti ff, 

and 

LUIGI and IOLE B. PUCCINI 

TESTAMENTARY TRUST (by its 

Trustees: Virginia Doyle, 

Individually, Timofeyew Puccini, 

Ltd . , a New Mexico corporation, 

Puccini Investments, Inc., a New 

Mex ico corporation, 

v . 

Plaintiffs-Appellants, 

Cross-Appellees, 

HUBERT R. GARDNER, and HOWARD G. 

HALL, 

v. 

Defendant, Third Party 

Plaintiff-Appellees, 

Cross-Appellants, 

WILLIAM E. HERSHMAN; Albuquerque 

Motel Properties, Ltd., a 

partnership, 

Third Party Defendants. 

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Nos. 88-1048) 

and 88-1080) 

(D.C. No. 85-515JC) 

(Dist. of N.M.) 

ORDER AND JUDGMENT* 

Before McKAY, BARRETT and EBEL, Circuit Judges 

* This Order and Judgment has no precedential value and shall not 

be cited, or used by any court within the Tenth Circuit, except 

for purposes of establishing the ·doctrines of the law of the case, 

res judicata, or collateral estoppel. 10th Cir . R. 36.3. 

Appellate Case: 88-1048 Document: 01019958994 Date Filed: 01/08/1990 Page: 1 
After examining the briefs and the appellate record, this 

panel has determined unanimously that oral argument would not 

materially assist the determination of this appeal. See Fed. R. 

App. P. 34(a); Tenth Cir. R. 34.1.9. The cause is therefore 

ordered submitted without oral argument. 

Luigi and Iole B. Puccini Testamentary Trust (Puccinis) 

appeal from an order of the court finding that Hubert R. Gardner 

and Howard G. Hall, Jr. (Gardner and Hall) were discharged from 

their obligations under several leases with Puccinis. Gardner and 

Hall cross-appeal the district court's denial of their request for 

attorney fees. 

On May 1, 1963, Puccinis executed a 55-year lease (1963 

lease) in favor of Gardner and Hall under which Gardner and Hall 

were allowed to place a mortgage on the leased property for the 

construction of a motel. On March 16, 1964, Gardner and Hall 

transferred their interest in the lease to Mesa Motel Company, 

Inc. {Mesa), a New Mexico corporation controlled by them with the 

consent of the Puccinis. 

On April 1, 1971, the Puccinis executed a second lease (1971 

lease) in favor of Gardner and Hall for the purpose of providing 

two additional lots for parking for the motel. This lease was 

also assigned to Mesa with the consent of the Puccinis. 

On May 5, 1977, Mesa and Hall sold their 1963 and 1971 

leasehold interests to Albuquerque Motel Properties, Ltd. 

limited partnership. Although the Puccini's consented 

{AMP), a 

to the 

sale, they expressly refused to release Gardner and Hall from 

liability under the leases. On May 29, 1980, AMP, as debtor 1n 

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Appellate Case: 88-1048 Document: 01019958994 Date Filed: 01/08/1990 Page: 2 
,., 

possession, filed its voluntary petition for bankruptcy. Gardner 

and Hall were not named as parties nor were they listed as 

creditors. On November 18, 1980, and after a trial, the 

bankruptcy court entered an order authorizing the sale of the 

property, free and clear of liens, to one Eugene LaMeres. 

On December 24, 1980, the bankruptcy trustee assigned his 

interest in the 1963 lease to LaMerei. ~ithin the assignment, the 

trustee warranted "that the lease is now in full force and effect 

and that all obligations thereunder are current to the date of 

transfer or will be paid from the proceeds of sale in accordance 

with the further order of the bankruptcy court." 

On January 6, 1981, Puccinis and LaMeres entered into a 

three-year lease-purchase option agreement for the property. 

Under the agreement, LaMeres could purchase the property during 

the lease for $650,000, the fair market value of the property. 

This agreement also acknowledged LaMeres' acquisition of the 

leasehold interest of the trustee in bankruptcy for AMP and 

further provided: 

This agreement shall supersede and replace those 

provisions of the current lease between . . Puccini 

and Hubert Gardner, et al., dated May 1, 1963. 

Thereafter, Puccinis filed a stipulation with the bankruptcy court 

in which they acknowledged: 

[T]he Puccini Trust. waives all claims that the Trustee 

has not assume [sic] the lease with the Puccini Trust, 

nor will it assert that the Trustee has breached said 

lease or failed to provide adequate assurance of curing 

prior defaults and future performance and that it 

consents to the assignment of the lease by the Trustee to 

Eugene LaMeres. 

( R • , S 1. Op . at p . 9 ) . 

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Appellate Case: 88-1048 Document: 01019958994 Date Filed: 01/08/1990 Page: 3 
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The stipulation was approved by the bankruptcy court the same 

day it was submitted. Puccinis subsequently filed a claim against 

the bankrupt estate for future rents under the leases in the 

amount of $3,216,947.76. These claims were compromised for 

$12,500. 

An accounting in the bankruptcy by the trustee was filed on 

August 2, 1982, and the order on said final account was filed 

February 3, 1983. By April 13, 1983, LaMeres' successor in 

interest acquired fee interest in the subject property in 

accordance with the January 6, 1981, agreement. 

On July 8, 1985, Puccinis initiated 

$3,104,076.80 in future rentals allegedly 

this action seeking 

due and owing from 

Gardner and Hall under the 1963 and 1971 leases. 

Within their complaint, the Puccinis alleged that Gardner and 

Hall were in default under the lease as of May 29, 1980, the day 

on which AMP filed in bankruptcy; as a result of Gardner's and 

Hall's default rent was terminated as of April, 1983 and no 

further rent had been received by them; and that the total rent 

due them under the 1963 and 1971 leases, both of which had a 

termination date of December 31, 2019, was $3,104,076.80. 

Within their response, Gardner and Hall argued that an accord 

and satisfaction was reached by Puccinis and the bankruptcy 

trustee when Puccinis' claim was discharged in the course of AMP's 

bankruptcy; Puccinis had waived their claim against Gardner and 

Hall; Puccinis are estopped from filing their claims and laches 

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Appellate Case: 88-1048 Document: 01019958994 Date Filed: 01/08/1990 Page: 4 
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applies; and that the Puccinis had conveyed their interest in the 

subject premises and are not a party in interest. 

During trial the Puccinis acknowledged that they were 

proceeding under the same theory in district court, i.e., future 

rentals, as they had in bankruptcy court, and that they had 

comprised their $3,216,947.76 claim in bankruptcy court for 

$12,500 (R., Vol. I at pp. 64-5). During the trial, the Puccinis 

also acknowledged that all rents due and owing prior to May 1, 

1983 had been paid (R., Vol. I at p. 97); that they had no 

specific recollection of having the bankruptcy trustee contact 

Gardner and Hall inasmuch as they had concluded that Gardner and . 

Hall were doing nothing and "[s]o we really didn't waste much more 

time trying to contact them or their attorney since they hadn't 

come forward." (R., Vol. I at p. 104). 

Gardner was seriously ill at the time of the trial and did 

not testify. Hall testified inter alia that: he had never 

received a 20-day termination notice under the lease (R., Vol. I 

at pp. 131-2); he was unaware that Puccinis had sold their 

interests in the property underlying the leases until he was 

deposed in the immediate action (Id. at p. 134); he was not 

contacted relative to AMP's problems and that had he been aware of 

the problems he could have probably found someone who would have 

given the .trust a better offer than what they received from 

LaMeres (Id. at pp. 152-4). 

In entering judgment in favor of Gardner and Hall and 

against the Puccinis, the district court found, inter alia: 

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Appellate Case: 88-1048 Document: 01019958994 Date Filed: 01/08/1990 Page: 5 
60. The Luigi and Iole B. Puccini Testamentary Trust, 

or its predecessors, did not in any manner breach the 

terms of the 1963 and 1971 leases, so as to relieve 

Hubert R. Gardner and Howard G. Hall from their 

obligations thereunder. 

61. Howard G. Hall and Hubert R. Gardner are bound by 

the terms of the 1963 and 1971 leases, which they 

signed, unless released or discharged therefrom. 

62. When consent was given to assignments of the 

Defendants' interest in the leases to Mesa Motor Hotel 

Company and to AMP, Ltd., the lessors expressly refused 

to release Defendants Hall and Gardner from liability. 

63. The Puccini Trust did not expressly reserve the 

right to proceed against Defendants Hall and Gardner in 

its consent to the leasehold assignment from the 

Bankruptcy Trustee to LaMeres or in its January 6, 1981 

agreement with LaMeres. 

64. The 1981 agreement of LaMeres clearly expresses an 

intention by the Puccini Trust to replace the 1963 and 

1971 leases with a new and independent contract 

containing additional and materially different terms. 

65. By its decision to "replace" the 1963 and 1971 

leases with the LaMeres Agreement, the Puccini Trust 

assented to the discharge of Gardner and Hall's 

obligations in consideration for LaMeres's performance 

under the January 6, 1981 contract. 

(R., Sl. Op. at pp. 10-11). 

The court found/concluded that the January 6, 1981, agreement 

with LaMeres constituted a novation which discharged Gardner and 

Hall from their obligations under the 1963 and 1971 leases. The 

court also found that it would be inequitable to enforce the 

aitorney fee provision of the contract in favor of Gardner and 

Hall. 

On appeal, Puccinis contend the only issue is whether the 

parties entered into a novation discharging Gardner and Hall from 

a - lease on which they defaulted. Gardner and Hall cross-appeal, 

contending that the district court abused its discretion 1n 

denying their request for attorney fees. 

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Appellate Case: 88-1048 Document: 01019958994 Date Filed: 01/08/1990 Page: 6 
I. 

Puccinis argue that Gardner and Hall were not released by the 

assignment of the lease and sale of the premises because they 

(Puccinis) were forced to lease and sell the property to mitigate 

the damages which arose after Gardner and Hall defaulted in the 

1963 and 1971 leases. Puccinis also argue that the district court 

erroneously concluded that the new lease and sale was a novation 

discharging Gardner and Hall. 

Puccinis cite to Sims v. Craig, 627 P.2d 875 (N.M. 1981) in 

support of their argument that a novation did not occur after the 

lease and sale. In Sims, the Supreme Court of New .Mexico held: 

In order for this contract to constitute a novation, 

there must be (1) an existing and valid contract, (2) an 

agreement to the new contract by all parties, (3) a new 

valid contract, and (4) an extinguishment of the old 

contract by the new one. 

627 P.2d 875, 877. 

Puccinis argue that their lease and sale did not give rise to 

a novation under Sims 1 inasmuch as (1) Gardner and Hall did not 

agree to the new contract and (2) the 1963 and 1971 leases were 

not extinguished by the valid new contract with LaMeres. 

Gardner and Hall respond that the district court properly 

found a novation. Gardner and Hall note that the January 6, 1981, 

Puccini/LaMeres agreement specifically provided that it would 

"supersede and replace those provisions of the current lease 

between Luigi Puccini and Hubert Gardner, et al., dated May 1, 

1963." Gardner and Hall also cite to Western Bank v. Aqua 

1 Following the submission of briefs herein, 

elements set forth in Sims were quoted and followed in 

Magnuson, 755 P.2d 67, ?O(N.M. 1988). 

the 

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novation 

Maulsby v. 

Appellate Case: 88-1048 Document: 01019958994 Date Filed: 01/08/1990 Page: 7 
Leisure, Ltd., 737 P.2d 537 (N.M. 1987) as supportive of their 

argument that a novation did occur. 

In Western Bank, the Supreme Court of New Mexico observed: 

There are several features of a novation. See Sims 

v. Craig, 96 N.M. 33, 35, 627 P.2d 875, 877 (198~ One 

feature is the extinguishment of the old obligation. 

Moreover, '[i]n order to effect a novation there must be 

a clear and definite intention on the part of all 

concerned [that a novation take place].' Id. quoting 58 

Am. Jr. 2d Novation § 20 (1971)). 

737 P.2d at 539. 

Gardner and Hall argue that under Western Bank, a novation should 

be inferred here because the Puccini/LaMeres contract "states 

clearly that it was to replace the earlier contract." (Appellee's 

Answer Brief and Brief-In-Chief on Cross-Appeal, p. 3). 

In reviewing the interpretation and application of state law 

by a resident federal judge sitting in a diversity action, we nave 

recognized different degrees of deference to be accorded to his or 

her views. Mullan v. Quickie Aircraft Corporation, 797 F.2d 845, 

850 (10th Cir. 1986) and Hauser v. Public Service Company of 

Colorado, 797 F.2d 876, 878 (10th Cir. 1986) (clearly erroneous 

standard); Rhody v. State Farm Mutual Insurance Company, 771 F.2d 

1416, 1417 (10th Cir. 1985) (great deference); Wilson v. Al 

McCord, Inc., 858 F.2d 1469, 1473 (10th Cir. 1988) -----'----- (some 

deference). We shall proceed under the "some deference" standard. 

Findings are not to be determined clearly erroneous unless, after 

a review of the entire record, we are left with a definite and 

firm conviction that a mistake has been committed. Zenith Radio 

Corporation v. Hazeltime Research, Inc., 395 U.S. 100 (1969); 

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Appellate Case: 88-1048 Document: 01019958994 Date Filed: 01/08/1990 Page: 8 
' Equal Employment Opportunity Commission v. General Lines, Inc., 

865 F.2d 1555, 1558 (10th Cir. 1989). 

Sims v. Craig, supra, sets forth the four elements of a 

novation in New Mexico. In our case, it is uncontested that 

Gardner and Hall did not participate in the second element set 

forth in Sims, i . e. , an agreement to the new contract. Thus, the 

January 6, 1981, agreement did not constitute a novation 

discharging Gardner and Hall from their 1963 and 1971 lease 

obligations. The district court's conclusion that the January 6, 

1981, agreement constituted a novation which discharged Gardner 

and Hall from their obligations under the 1963 and 1971 leases was 

clearly erroneous. 

II. 

Within their cross-appeal, Gardner and Hall contend that they 

are entitled to attorney fees under Paragraph 12 of the May 6, 

1963, lease which provided in part: 

12. Attorneys' Fees. In the event of any suit 

instituted by either party against the other in any way 

connected with this Lease ., the parties 

respectively agree that the successful party to any such 

action shall recover from the other its costs and a 

reasonable sum for its attorneys' fees in connection 

with said suit, such costs and attorneys' fees to be 

fixed by the court, as the case may be. 

(Appellee's Answer Brief and Brief-in-Chief on Cross-Appeal, 

Exhibit A, p. 16). 

In denying Gardner and Hall's request for attorney fees from 

the Puccinis, the district court concluded: 

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Appellate Case: 88-1048 Document: 01019958994 Date Filed: 01/08/1990 Page: 9 
• 

Insofar as the motion seeks reconsideration of the 

Court's denial of attorney's fees to the Defendants 

based upon equitable grounds, the motion is without 

merit. The Court properly exercised its discretion in 

finding it inequitable to allow the Defendants to 

receive attorneys' fees pursu~nt to a contract they 

contended was null and void as the result of a novation. 

(R., Vol. I, Tab 102, p. 2). 

We agree with the district court that it would be inequitable 

to award Gardner and Hall attorney fees under the contract which 

they contend is null and void. 

REVERSED AND REMANDED for further proceedings. 

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Entered for the Court: 

James E. Barrett, 

Senior United States 

Circuit Judge 

Appellate Case: 88-1048 Document: 01019958994 Date Filed: 01/08/1990 Page: 10