United States Court of Appeals,

Fifth Circuit.

No. 92-8172.

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.

Nov. 16, 1993.

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 Corporati o n ("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 porti on 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

C ramer, Greer, and Maxfield were each individually liable for certain amounts of u npaid rent.

However, the jury also found that the RTC could have mitigated a porti on 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 Sho p 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 sp ace. 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

m ont h and adjust ed 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' rights1 During these months, the tenants paid $15,490.50 of the rent that accrued under the Body

Shop Lease and $6,509.50 of the rent that accrued under the Fitness Connection Lease. 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" pro visions. 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, 199 0, t he 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 t o 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 theRTC 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 dist rict 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 liabilit y 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. R esolution 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 fi rst task, though, i s to

decide whether the guaranties are ambigu ous. 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. C

oker v. Coker, 650 S.W.2d 391, 39 4 n. 1 (Tex.1983); W estern Bank-Dow ntow n v.

Carline, 757 S.W.2d 111 (Tex.App.—Houston [1st Dist.] 19 88, writ denied). However, Cramer

does not contend, and we do no t find, t hat the guaranties at issue in this case are ambiguous.

Therefore, we will construe the guarant ies 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 at393.

In each of the guaranties at issue in this case , Cramer agreed to guarantee "the ful l

performance of each and all of the terms, covenants and conditions of said l ease to be kept and

performed by said Tenant, including t he payment of all rentals and other charges to accrue

thereunder." Cramer also acknowledged that his guaranties would "continue in favor of the Landlord

notw ithstanding 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 a rgues that the question that we must address is whether each lease should be

construed to contain a self-executing extension mechanism in which the holdover period is considered

to be merely an extension or continuation of the original lease or whether the holdover period should

be construed to create "new" month to month tenancies with the same terms each month. Cramer

contends that the tenants' holding over did not extend the original leases. In other words, Cramer

concludes that the rent payments that accrued during the holdover period should be considered to

arise out of entirely "new" leases to which his guaranties do not apply, not o ut of an "extension,

modification, or alteration" of these leases. However, we do not agree with Cramer's contentions.

Cramer relies heavily on Bockelmann v. Marynick, 788 S.W.2d 569 (Tex.1990). In that case,

a husband and wife jointly leased a duplex for a twelve-month term. The lease contained a holdover

provision that provided as follows:

Should Tenant remain in possession of the demised premises with the consent of the Lessor

after the natural expiration of this lease, a new tenancy from year to year shal l be created

between Lessor and Tenant which shall be subject to all the terms and conditions hereof but

shall be terminable by 60 days notice.

Shortly before the twelve-month term expired, the wife moved out of the duplex. The husband held

ove r and remained in possession of the premises for almost two years. The husband eventually

defaulted on the rent payments that accrued under the year to year tenancies that were created by the

holdover provision of the lease. The question presented to the Bockelmann court was whether the

landlord could recover from the wife the unpaid rent that accrued during the year to year tenancies.

The Texas Supreme Court held that the landlord could not recover. The court reasoned that since2 It has been suggested that if Cramer had no control over whether Freeman, Fuquay, and

Greer could remain on the premises, our holding theoretically exposes Cramer to limitless liability.

However, Cramer agreed to guarantee all of the "modifications and extensions" of the leases

"notwithstanding any assignment". Thus, the specter of infinite liability is not inherent in our

holding but is instead a peculiarity of the guaranties that Cramer voluntarily entered into. the lease provided that "a "new tenancy' would be created if the tenant remained in possession beyond

expiration of the lease," id. at 571, according to t he "express terms of the lease, [the] holdover

tenancy was a new tenancy rather than an extension or renewal of the original lease." I d. at 571-72

(f ootnote omitte d). The court thus concluded that the husband's holdover tenancy was not "a

continuation of the original tenancy he held jointly with [his wife], but was rather a new tenancy for

which he alone was liable." Id. at 572.

However, in the case before us, we believe that when Cramer agreed to guar antee the

payment of all of the rent that was to accrue under the leases "notwithstanding any extension", he

obligated himself to pay for any rent that became due during the contractual holdover periods. We

reach this conclusion because the language of the "holding over" provisions of the leases reveals that

the month to month tenancies created after the expiration of the primary term should be deemed to

be contractual extensions of the leases rather than "new" leases with similar terms. The Body Shop

Lease and Fitness Connection Lease contemplated that the tenants could remain in possession of the

leased premises. These leases supplied the terms for any such extensions, providing that "[a]ny

holding over after the expiration of the said term ... shall be construed to be a tenancy from month

to month...." In Bockelmann, however, the lease itself explicitly defined the holdover period to be

a "new tenancy." 788 S.W.2d at 571-72. Thus, since t he co ntractual holdover provisions of the

Body Shop Lease and Fitness Connection Lease demonstrate that the holdover period is an agreed

upon continuation of each lease, we find that the contractual holdover period repres ents a ty pe of

"extension" of the leases within the meaning of the guaranties. Accordingly, since Cramer agreed to

guarantee "the payment of all rentals and other charges to accrue" under the leases "notwithstanding

any extension[s]", the guaranties make Cramer liable for the rent that accrued during the contractual

holdover period. 2

III. The Alleged Reduction of RentCramer and Greer assert tha t in June of 1989, the rent for both the Body Shop Lease and

Fitness Connection Lease was reduced to the amount that the tenants actually paid during the primary

terms of the leases. More specifically, Cramer and Greer argue that the rent on the Body Shop Lease

was reduced from $9,000 per month to $6,000 per month. They contend that this fact explains why

th e t enant s paid only $6,000 of rent per month on the Body Shop Lease for the ten month period

from June of 1989 through March of 1990. Similarly, Cramer and Greer maintain that the rent on

Fitness Connection Lease was reduced from $6,000 per month to $3,000 per month. Again, Cramer

and Gr eer assert that this fact shows why the tenants paid only $3,000 of rent per month on the

Fitness Connection Lease from June of 1989 through March of 1990. Accordingly, Cramer and

Greer claim that they are not liable for the $29,998.00 that remains unpaid for the primary term of

the Body Shop Lease and the $30,000.00 that remains unpaid for the primary term of the Fitness

Connection Lease. Cramer and Greer also argue that they are no t liable for $27,000.00 of the

$67,716.75 of unpaid rent that accrued during the nine month contractual holdover period under the

Body Shop Lease. Similarly, Cramer and Greer contend that they are not liable for $27,000.00 of

the $48,387.80 that accrued during the ni ne month contractual holdover period under the Fitness

Connection Lease. In response, the RTC notes that the agreements upon which Cramer and Greer

rely for their contention that the monthly rent on the two leases was reduced were not signed by the

landlord. Moreover, the RTC introduced into evidence excerpt s from the deposition of Jean Nix,

who testified that amount of unpaid rent actually due was $176,102.55.

No defendant moved for judgment as a matter of law on this issue at the close of the evidence

or after the verdict was returned. S ee Fed.R.Civ.P. 50. Consequently, this objection is being raised

for the first time on appeal, and our review is thus extremely limit ed: "It is the unwavering rule in this

Circuit that issues raised for the first time on appeal are reviewed only for plain error," and we will

reverse "only if the judgment complained of results in a "manifest miscarriage of justice.' " M cCann

v. Texas City Refining, Inc., 984 F.2d 667, 673 (5th Cir.1993) (quoting Coughlin v. Capitol Cement

C o., 571 F.2d 290, 297 (5th Cir.1978)). Therefore, the issue before us is whether there is a ny

evidence to support the amount of damages for which the jury found Cramer and Greer liable. Id.3 Moreover, as we will show in part VI, infra, the $102.55 discrepancy between the amount of

damages that the jury awarded and the amount that RTC claimed can be attributed only to a

mechanical or arithmetic error or oversight. Given the fact that the agreements upon which Cramer and Greer rely for their contention

that the monthly rent on the two leases was reduced were not signed by the landlord, and were

therefore ineffectual, and the fact that Jea n Nix t est ified that the landlord's records showed that

Cramer and Greer were liable for $176,102.55 of unpaid rent, we conclude that there was evidence

to find that Cramer and Greer were liable for the amounts awarded by the jury. 3

IV. The Duty to Mitigate

Over the RTC's t imely objection, the district court instructed the jury to determine the amount

of damages that the RTC could have "avoided or mitigated by ta king po ssession of the leased

premises after the primary lease terms expired." The RTC contends that the district court erred by

submitting this issue to the jury because Texas common law does not impose a duty on a lessor to

mitigate its damages.

Most of the cases to which the parties have referred us discuss the legal consequences of a

lessee's decision to abandon a leased premises during the primary term of a lease. Under Texas law,

if a lessee aban do ns a leased premises before the expiration of the primary term of a lease, the

abandonment does not necessarily terminate the lessor's rights under the lease. Instead, the lessor

ma y eit her (1) t reat the lessee's conduct as an anticipatory breach of the contract, consider the

contract to be terminated, and hold the lessee for damages or (2) disregard the abandonment, keep

the contract alive, and sue for the rent that accrues thereafter. S peedee Mart, Inc. v. Stovall, 664

S.W.2d 174, 177 (Tex.App.—Amarillo 1983, no writ); S tubbs v. Stuart, 469 S.W.2d 311

(Tex.Civ.App.—Houston [14th Dist.] 1971, no writ). Moreover, under Texas law, a landlord has

traditionally had no duty to mitigate its damages if a tenant abandons the leased premises. S ee, e.g.,

Metroplex Glass Center, Inc. v. Vantage Properties, Inc., 646 S.W.2d 263, 265 (Tex.App.—Dallas

1983, writ ref'd n.r.e.). However, in Brown v. Republicbank First National Midland, 766 S.W.2d

203, 205 (Tex.1988), four concurring justices and one dissenting justice of the Texas Supreme Court

advocated adopting a rule that requires lessors of abandoned leaseholds to mitigate their damages.4 Texas law provides that "[t]he right of the landlord to hold a holdover tenant for another term

is not affected by the length of time the tenant holds over but will arise if the tenant holds over for

a few days or for a single day, unless the circumstances are such as to excuse the holding over."

Marynick v. Bockelmann, 773 S.W.2d 665, 668-69 (Tex.App.—Dallas 1989), rev'd on other

grounds, 788 S.W.2d 569 (Tex.1990). Nevertheless, the majority opinion in Brown did not address this issue, and Texas intermediate

appellate courts still adhere to the rule that Texas common law does not impose on landlords a duty

to mitigate their damages once the leased premises has been abandoned. See Cassidy v. Northwest

Tech Center Assoc., Ltd., 785 S.W.2d 407, 412 (Tex.App.—Dallas 1990, writ denied); Marynick

v. Bockelmann, 773 S.W.2d 665, 673 (Tex.App.—Dallas 1989), rev'd on other grounds, 788 S.W.2d

569 (Tex.1990).

The issue in the present case, however, is whether the RTC was under any legal duty to

mitigate its damages during the co nt ract ual holdover period, a period during which the leased

premises remained occupied by the same te nant s who possessed the buildings during the primary

terms. According to the terms of the leases, any holding over was to be construed to create tenancies

from month to month. When the tenants remained in the leased premises at the beginning of each

month, the landlord was entitled to hold the tenants liable for the rent due for that month. 4 Therefore,

for each month that Freeman, Fuquay, and Greer remained on the premises of the Body Shop and the

Fitness Connection after the primary terms of the leases had expired, the RTC had a right to hold the

tenants for the rent payments due that month. The RTC was not under a common law duty to evict

the tenants. Hence, no duty to mitigate damages is applicable in this case, and the RTC had a right

to expect rent payments from the tenants while they occupied the premises. The district court should

not have submitted to the jury an issue regarding mitigation of damages because, under the facts of

this case, mitigation of damages has no applicability.

V. Individual or Joint and Several Liability

The jury's verdict and the district court's judgment a ssessed varying amounts of damages

individually against each defendant. However, this differentiation of damages among the defendants

was not correct. The liability of the guarantors, Cramer and Maxfield, should not have been

individualized because t he guaranties executed by Cramer and Maxfield expressly state that theliabilit

y incurred by the guarantors "shall be joint and several." Moreover, Freeman, Fuquay, and

Greer each signe d t he Assignment and Assumption Agreements for the Body Shop Lease and the

Fitness Connection Lease. Generally, "joint and several liability arises when two or more persons

cosign a contract." M

arynick v. Bockelmann, 773 S.W.2d 665, 668 (Tex.App.—Dallas 1989), rev'd

on other grounds, 788 S.W.2d 569 (Tex.1990); G uynn v. Corpus Christi Bank & Trust, 620 S.W.2d

188, 190 (Tex.Civ.App.—Corpus Christi 1981, writ ref'd n.r.e.). Therefore, when Greer assumed

the obligati o ns o f t he t enants under the leases, he became jointly and severally liable for all of the

unpaid rent that accrued while he was a tenant.

VI. The Amount of Damages

The RTC next contends that the district court should have granted its motion for judgment

as a matter of law on the issue of the amount of damages that it was entitled to recover. At the close

of the evidence, the RTC moved pursuant to Federal Rule of Civil Procedure 50(a) for judgment as

a matter of law on its claims against all of the defen dants, contending that i t had proved that the

defendants were jointly and severally liable for accrued but unpaid rent in the sum of $176,102.55.

The district court denied this motion and submitted the case to the jury. As noted above, the jury

returned a verdict in favor of the RTC and awarded the plaint iff certain sums against each defendant.

However, the amounts that the jury awarded the RTC totalled only $176,000.00. Pursuant to Federal

Rule of Civil Procedure 50(b), the RTC then renewed its motion for judgment as a matter of law, and,

in the alternative, moved for a new trial. The district court denied this motion as well.

We review the r ulings o n t he Rule 50(a) and (b) motions d e novo, employing the same

standards that the district court applied. For both motions, we consider all of the evidence "in the

light and with all reasonable inferences most favorable to the party opposed to the motion." B arnett

v. I.R.S., 988 F.2d 1449, 1453 (5th Cir.), petition for cert. filed, 62 U.S.L.W. 3166 (U.S. August 30,

1993) (No. 93-336). If the facts and inferences point so strongly and overwhelmingly in favor of one

party that the reviewing court believes that reasonable jurors cou ld not have arri ved at a contrary

verdict, then we will conclude that the motion should have been granted. C rist v. Dickson Welding,

Inc., 957 F.2d 1281, 1285 (5th Cir.) (citing Boeing Co. v. Shipman, 411 F.2d 365, 374 (5th Cir.1969)(en banc)), cert. denied, --- U.S. ----, 113 S.Ct. 187, 121 L.Ed.2d 132 (1992).

The RTC maintains that it is entitled to judgment as a matter of law against all defendants

fo r t he full amount of unpaid rent that it pleaded and proved: $176,102.55. It is clear and

unmistakable that this is the correct sum, once it is found that there is liabilit y and that it is joint and

several. The RTC proved t hat it was t he owner of the landlord's rights under the leases and

guaranties at issue, that the defendants were the signatories on the leases and guaranties, and that rent

payments in the amount of $176,102.55 remained due and owing. However, without any factual or

legal justification whatsoever, the jury substituted the figure $176,000.00 for the correct amount of

damages that the RTC suffered: $176,102.55. Since the record will only justify the award of the full

amount of damages pleaded, we render judgment in favor of the RTC for the full amount of unpaid

rent, $176,102.55. On remand, we instruct the district court to enter a $176,102.55 judgment jointly

and severally against Cramer, Greer, and Maxfield.

VII. Attorney's Fees and Costs

The RTC also argues that the district court erred when it reduced the RTC's attorney's fees

and costs awards. The district court reduced the fees and costs awards, apparently because the jury

found that the RTC could have mitigated its damages. Given our holding on the mitigation issue, we

vacate the attorney's fees and costs awards and remand to the district court for the determination of

attorney's fees and costs.

VIII. Conclusion

The judgment is AFFI RMED in part, REVERSED and RENDERED in part, and

REVERSED and REMANDED in part. This case is REMANDED to the district for further

proceedings and entry of judgment consistent with this opinion.