UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 97-10517
Summary Calendar
_____________________
LAWRENCE E. STEINBERG
Plaintiff-Counter Defendant-Appellee,
versus
CINEMA N’ DRAFTHOUSE SYSTEMS, INCORPORATED; JOHN J. DUFFY; JAMES
T. DUFFY; NORMA S. DUFFY
Defendants,
CINEMA N’ DRAFTHOUSE SYSTEMS, INCORPORATED
Defendant-Counter Claimant-Appellant.
Appeal from the United States District Court
for Northern District of Texas
(3:91-CV-1044-R)
December 23, 1997
Before WIENER, BARKSDALE, and EMILIO M. GARZA, Circuit Judges.
PER CURIAM:*
Our court has already twice visited the dispute between these
parties. See Steinberg v. Cinema N’ Drafthouse Systems, Inc., 28
F.3d 23 (5th Cir. 1994)(Steinberg I); Steinberg v. Cinema N’
*
Pursuant to 5TH CIR. R. 47.5, the Court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5TH CIR. R.
47.5.4.
Drafthouse Systems, Inc., No. 95-11222 (5th Cir. July 12, 1996)
(Steinberg II).
Steinberg is owner and holder of a note given by Cinema and
guaranteed by the Duffys (the latter are not parties to this
appeal). Cinema contends that the district court erred by
dismissing on the merits its counterclaim against Steinberg, by
which Cinema sought to recover any losses incurred by it as a
result of indemnifying the Duffys. Needless to say, we review
findings of fact for clear error; legal conclusions, de novo.
E.g., Phillips Petroleum Co. v. Best Oilfield Servs., Inc., 48 F.3d
913, 915 (5th Cir. 1995).
Cinema contends initially that the district court erred
because, according to Cinema, the primary basis for dismissal was
that it was required by Steinberg I, discussed below. The district
court did note that a successful counterclaim against Steinberg
would conflict with this court’s mandate in Steinberg I. However,
the court did not dismiss the counterclaim on that basis.
Cinema, as maker, executed a note evidencing a $100,000
loan from a bank. The Duffys each guaranteed payment of the entire
loan. Security for the loan was given by way of a collateral
pledge of Cinema’s stock in its wholly owned subsidiaries.
Steinberg, having executed a take out commitment, became the owner
and holder of the note, guaranties and collateral pledge when the
loan was not paid at maturity. Steinberg foreclosed on the
- 2 -
collateral by public sale and became the purchaser for $5,000.
Steinberg then sued Cinema and the Duffys for the deficiency.
Both Cinema and the Duffys defended the action on the basis
that the sale was not conducted in a commercially reasonable
manner, and that under Texas law, Cinema, as the primary obligor,
and the Duffys, as guarantors, were discharged from liability for
the deficiency. The district court rendered a take nothing
judgment against Steinberg, finding that the sale had been
commercially unreasonable and that neither Cinema nor the Duffys
could waive the right to a commercially reasonable sale.
On appeal, our court reversed in part, holding that the
Duffys, as guarantors, could and had waived their right to a
commercially reasonable sale. Steinberg v. Cinema ‘n’ Drafthouse
Systems, Inc., 28 F.3d 23 (5th Cir. 1994) (Steinberg I).
On remand to the district court, Cinema and the Duffys moved
to amend their answers to assert counterclaims. Cinema sought to
assert a counterclaim against Steinberg to recover as damages under
TEX. BUS. & COMM. CODE § 9.507 all amounts which it is obligated to
pay to the Duffys by way of reimbursement for the amounts paid by
them in satisfaction of Steinberg’s judgment. The Duffys also
sought leave to assert a counterclaim against Steinberg for the
amounts which they were obligated to pay Steinberg on his judgment
and were unable to recover from Cinema because Cinema was
discharged due to the sale being commercially unreasonable. The
- 3 -
district court denied leave to amend finding that the counterclaims
were untimely.
In an unpublished opinion, our court affirmed the denial of
leave to amend as to the Duffys, but reversed as to Cinema.
Steinberg v. Cinema N’ Drafthouse Systems, Inc., No. 95-11222 (5th
Cir. July 12, 1996) (Steinberg II). The panel allowed Cinema to
assert their counterclaim because Cinema’s cause of action did not
accrue until the Duffys demanded indemnification, which occurred
after the decision in Cinema I.
On remand, leave to amend was granted; and the district court
considered Cinema’s counterclaim on the merits. The dismissal of
that counterclaim by the district court is now before us in this
third appeal.
Cinema’s counterclaim was premised on the fact that it would
have a legal obligation to reimburse the Duffys. As discussed in
the district court’s comprehensive opinion, that court determined
correctly that the only possible claim the Duffys would have
against Cinema is one for equitable subrogation. M.D. Fleetwood v.
Med Center Bank, 786 S.W.2d 550, 553-54 (Tex.Ct.App. 1990). The
court also determined correctly that this claim would fail.
Guillot v. Hix, 838 S.W.2d 230, 232 (Tex. 1992). Consequently,
Cinema’s counterclaim against Steinberg would necessarily fail.
St. Paul Mercury Ins. Co. v. Lexington Ins. Co., 78 F.3d 202, 208-
09 (5th Cir. 1996). In sum, the court determined that Cinema would
- 4 -
not be obligated to reimburse the Duffys, and consequently, any
counterclaim for reimbursement against Steinberg was without merit.
The district court also dismissed the counterclaim on a second
basis, that Cinema’s damages on its counterclaim would not be
recoverable because they are consequential and precluded by Tex.
Bus. & Comm. Code § 1.106(a). We need not address this issue.
AFFIRMED
- 5 -