Tri-State Petroleum Corp v. Saber Energy Inc. 845 F.2d 575 1988

8/9/2019 Tri-State Petroleum Corp v. Saber Energy Inc. 845 F.2d 575 1988

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11.8 Sellers Right to Recover Lost Profits Contract Sales and Lease Contracts: Performance and Breach

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United States Court of Appeals,Fifth Circuit.

TRI-STATE PETROLEUM CORPORATION,

Plaintiff-Appellant,

v.

SABER ENERGY, INC. d/b/a Saber Refining Co.,

Defendant-Appellee.

No. 87-2705.

May 24, 1988.

In buyer's suit against seller under principal con-

tract, seller filed counterclaim for buyer's failure tohonor gasoline purchase contract. Seller conceded

liability on principal contract, and upon trial of

counterclaim, the United States District Court for

the Southern District of Texas, at Houston, Karen

K. Brown, United States Magistrate, awarded seller

damages for lost profits and attorney fees, but

denied buyer's claim for attorney fees on principal

contract claim, and buyer appealed. The Court of

Appeals, Thornberry, Circuit Judge, held that: (1)

magistrate's findings supported conclusion that can-

cellation clause inserted by buyer never became

part of gasoline purchase contract, and (2) seller's

rights of setoff under principal contract did not pre-

clude award of attorney fees to buyer on claim un-

der principal contract.

Affirmed in part; reversed in part and remanded.

West Headnotes

[1] Frauds, Statute Of 185 144

185 Frauds, Statute Of

185IX Operation and Effect of Statute185k144 k. Waiver of Bar of Statute; Estop-

pel. Most Cited Cases

Sales 343 87(1)

343 Sales

343II Construction of Contract

343k87 Evidence to Aid Construction

343k87(1) k. Presumptions and Burden of

Proof. Most Cited Cases

Seller's failure to make written objection within ten

days of receipt of gasoline purchase contract to

which buyer had added cancellation term precluded

seller from asserting defense of statute of frauds but

did not relieve buyer of burden of proving that can-

cellation term was orally agreed to prior to written

insertion. V.T.C.A., Bus. & C. 2.201, 2.201(b),

2.201 comment, 2.207, 2.207(a, b).

[2] Federal Civil Procedure 170A 2261

170A Federal Civil Procedure

170AXV Trial

170AXV(K) Trial by Court

170AXV(K)2 Findings and Conclusions

170Ak2261 k. In General. Most Cited

Cases

Decisions on credibility and weight of testimony

are integral parts of findings of fact, rather than

mere comments on weight of evidence. Fed.Rules

Civ.Proc.Rule 52(a), 28 U.S.C.A.

[3] Federal Courts 170B 850.1

170B Federal Courts

170BVIII Courts of Appeals

170BVIII(K) Scope, Standards, and Extent

170BVIII(K)5 Questions of Fact, Verdicts

and Findings

170Bk850 Clearly Erroneous Findings

of Court or Jury in General

170Bk850.1 k. In General. Most

Cited Cases

(Formerly 170Bk850)

Federal Courts 170B 854

170B Federal Courts




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845 F.2d 575, 6 UCC Rep.Serv.2d 368

(Cite as: 845 F.2d 575)

2010 Thomson Reuters. No Claim to Orig. US Gov. Works.
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and Findings

170Bk854 k. Nature ofEvidence Other

Than Oral Testimony. Most Cited Cases

Magistrate's finding that testimony was ambiguous

and unreliable was finding of fact subject to clearly

erroneous standard of review, even though some

testimony discounted by magistrate was from de-

positions, rather than trial. Fed.Rules Civ.Proc.Rule

52(a), 28 U.S.C.A.

[4] Sales 343 389

343 Sales

343VII Remedies of Seller

343VII(F) Actions for Damages

343k385 Trial

343k389 k. Verdict and Findings. Most

Cited Cases

Magistrate's findings that, although two of buyer's

executives believed seller had agreed to cancella-

tion clause that buyer added to gasoline purchase

contract, only nontestifying employee had taken

part in negotiations with seller, and that testimony

that either executive overheard or participated in

conversations with seller was ambiguous and unre-

liable supported conclusion that cancellation clause

never became part of contract; affirmative finding

that there was no agreement as to cancellationclause was not required. V.T.C.A., Bus. & C.

2.207, 2.207(a, b).

[5] Sales 343 384(1)

343 Sales



343k384 Damages

343k384(1) k. In General. Most Cited

Cases

Jobber or reseller who, due to buyer's breach,never obtains goods from his supplier, is entitled to

lost profit damages from breaching buyer under

Texas Uniform Commercial Code. V.T.C.A., Bus.

& C. 2.708(a, b).

[6] Sales 343 383

343 Sales



343k380 Evidence

343k383 k. Weight and Sufficiency.

Most Cited Cases

Testimony that seller could have located sufficient

gasoline to supply both buyer and customers to

whom gasoline was resold upon buyer's breach of

gasoline purchase contract supported award of dam-

ages for lost profits to seller as lost volume seller

and jobber; buyer presented no evidence to support

claim that there was seller's market in gasoline

making seller's lost volume or jobber status un-

likely. V.T.C.A., Bus. & C. 2.708(a, b).

[7] Federal Courts 170B 634

170B Federal Courts


170BVIII(D) Presentation and Reservation in

Lower Court of Grounds of Review

170BVIII(D)2 Objections and Exceptions

170Bk634 k. Amount or Extent of Re-

lief; Costs; Judgment. Most Cited Cases

(Formerly 170Bk34)

Buyer's failure to object to calculation of damages

waived any complaint upon appeal from judgmentawarding seller damages for buyer's breach of gas-

oline purchase contract.

[8] Sales 343 384(1)

343 Sales



343k384 Damages

343k384(1) k. In General. Most Cited

Cases

Damages recoverable by seller for buyer's breach ofgasoline purchase contract would not be reduced to

credit buyer with broker's commission and adminis-

trative costs allegedly saved as result of breach,

absent any evidence by buyer that broker planned

to forego commission on unsold gasoline or that ad-

ministrative costs were in fact saved. V.T.C.A.,

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845 F.2d 575, 6 UCC Rep.Serv.2d 368

(Cite as: 845 F.2d 575)

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4/10

Bus. & C. 2.708(a, b).


170B Federal Courts170BVIII Courts of Appeals



and Findings

170Bk855 Particular Actions and Pro-

ceedings, Verdicts and Findings

170Bk859 k. Contract Cases in

General. Most Cited Cases

(Formerly 170Bk959)

Interpretation of contract is question of law and is

subject to clearly erroneous standard of review only

when ambiguities require reviewing court to con-

sult extrinsic evidence.

[10] Federal Civil Procedure 170A 2737.5

170A Federal Civil Procedure

170AXIX Fees and Costs

170Ak2737 Attorneys' Fees

170Ak2737.5 k. Particular Types of

Cases. Most Cited Cases

Seller's rights under principal contract to withhold

sums from buyer to set off amount buyer might owe

under other contracts did not preclude award of at-

torney fees to buyer as prevailing party on claim

under principal contract, even though seller pre-

vailed against buyer on counterclaim for breach of

gas purchase contract; buyer was forced to institute

litigation to collect amount rightfully due under

principal contract.


170B Federal Courts


170BVIII(L) Determination and Disposition

of Cause

170Bk943 Ordering New Trial or Other

Proceeding

170Bk945 k. Determination of Dam-

ages, Costs or Interest; Remittitur. Most Cited

Cases

Upon determination that buyer was entitled to

award of attorney fees for prevailing on claim

against seller under principal contract, remand was

required for reconsideration of magistrate's determ-

ination that buyer had incurred $14,737.50 as reas-

onable attorney fees; seller had conceded liability

on buyer's principal claim and most of litigation in

case concerned counterclaim, on which seller pre-

vailed.

*577 John E. Rapier, Dallas, Tex., for plaintiff-ap-

pellant.

Thomas M. Farrell, Gerald L. Bracht, Houston,

Tex., for defendant-appellee.

Appeal from the United States District Court for the

Southern District of Texas.

Before THORNBERRY, WILLIAMS, and DAVIS,

Circuit Judges.

THORNBERRY, Circuit Judge:

This appeal concerns the interpretation of a contract

that required Tri-State Petroleum to buy gasoline

from Saber Refining. Tri-State asserts that it suc-cessfully incorporated a clause in the contract that

allowed it to cancel the agreement. The magistrateFN1

held, however, that the clause never became

part of the contract. Tri-State also asserts that the

magistrate erred in calculating Saber's damages be-

cause of Tri-State's breach of the contract, and in

refusing to award attorneys' fees to Tri-State. We

affirm the magistrate's decision on Tri-State's liabil-

ity under the contract and on the amount of Saber's

damages. We reverse the magistrate's failure to

award attorneys' fees to Tri-State, and remand for a

calculation of the amount of the fees.

FN1. This case was tried by the consent of

all parties before a U.S. magistrate. See 28

U.S.C. 636(c).

Page 3

845 F.2d 575, 6 UCC Rep.Serv.2d 368

(Cite as: 845 F.2d 575)

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5/10

I.

Because of an agreement with Texaco, Tri-State

Petroleum in 1981 needed to secure delivery of gas-

oline into the Colonial Pipeline in Pasadena, Texas.

In accord with custom in the industry, Tri-State ar-

ranged for Lawrence Dorr, an independent broker,

to locate a source for the gasoline and to negotiate a

contract. Dorr arranged an agreement between Tri-

State and Saber Refining. Dorr sent telex messages

confirming the agreement's negotiated terms, such

as price, place of delivery, date of delivery, and

quantity, to both parties. The telex messages called

for Saber to deliver 110,000 barrels of gasoline into

the pipeline per month from July 1981 to December

1981.

After receiving the telex message, Saber prepared a

formal contract expressing the agreement of the

parties. The contract incorporated the terms of the

telex messages, but also contained several standard

provisions. One provision was that Except as oth-

erwise provided on the face hereof, buyer may not

cancel this Agreement under any circumstances

without Saber's express written consent. Another

provision conditioned the contract on Buyers Ac-

ceptance of the terms and conditions expressed in

this Agreement, additional or *578 conflictingterms proposed by Buyer are rejected. Saber

signed its draft and sent it to Dorr, who forwarded

it to Tri-State.

When Tri-State received the agreement, Donald

Book, Tri-State's general manager, had a cancella-

tion clause typed on the first page. The clause gave

Tri-State the right to cancel the contract if Texaco

ever canceled its agreement with Tri-State. The dis-

trict court found that Book, as well as Edward

Coyne, Tri-State's president, at the time thought

that Saber had orally agreed to the cancellationterm. But the court also found that neither Book nor

Coyne had participated in any discussions with

Saber. The district court found that the only Tri-

State employee to negotiate with Dorr and Saber

was James Peyton. Neither party, however, offered

any testimony by Peyton.

Book signed the modified contract for Tri-State and

forwarded it, along with a cover letter, to Dorr. The

letter told Dorr that Tri-State had added the cancel-

lation provision pursuant to an oral agreement with

Saber. Dorr forwarded the modified contract to

Saber, but the district court found that he neglected

to forward Book's cover letter explaining the

change in the contract. Saber did not notify Tri-

State of any objection to the new cancellation

clause.

The gasoline purchase for July 1981 was without

dispute. In August, however, Tri-State told Saber

that Texaco had canceled its agreement with Tri-

State, and that therefore Tri-State would exercise its

option to cancel the Saber contract. Saber objectedand set off its claim against an amount that Saber

owed Tri-State under another, unrelated contract.

When Tri-State sued under the unrelated contract,

Saber filed a counterclaim seeking damages for Tri-

State's failure to honor the gasoline purchase con-

tract.

After an initial dispute over whether Tri-State had

properly named Saber as a defendant, Saber con-

ceded its liability on the unrelated contract, and the

district court granted Tri-State partial summary

judgment. The parties agreed to try Saber's counter-claim before a magistrate. The magistrate held that

the cancellation clause never became a part of the

contract. As a result, Tri-State had breached the

agreement when it attempted to cancel. The magis-

trate awarded Saber, as a lost volume seller and

jobber, damages for lost profit. She also awarded

Saber, as the prevailing party in the litigation, its

attorneys' fees. But she denied Tri-State's claim for

its attorneys' fees in winning the partial summary

judgment on the unrelated contract.

II.

[1] Tri-State first argues that the magistrate erred in

concluding that the cancellation clause never be-

came part of the contract. The magistrate's holding

was based on the view that this dispute is governed

Page 4

845 F.2d 575, 6 UCC Rep.Serv.2d 368

(Cite as: 845 F.2d 575)



6/10

by Tex.Bus. & Comm.Code Ann. 2.207 (Tex.

UCC).

(a) A definite and seasonable expression of ac-

ceptance or a written confirmation which is sent

within a reasonable time operates as an accept-

ance even though it states terms additional to or

different from those offered or agreed upon, un-

less acceptance is expressly made conditional on

assent to the additional or different terms.

(b) The additional terms are to be construed as

proposals for addition to the contract. Between

merchants such terms become part of the contract

unless:

(1) the offer expressly limits acceptance to

the terms of the offer;

(2) they materially alter it; or

(3) notification of objection to them has

already been given or is given within a reason-

able time after notice of them is received.

The magistrate concluded that Saber's sending the

contract to Tri-State was an offer. By signing the

contract and returning it to Saber, Tri-State accep-

ted Saber's offer, even though Tri-State added anadditional or different term-the cancellation

clause-to the contract. See Tex. UCC 2.207(a).

That term did not become part of the contract, the

magistrate concluded, because all three of subsec-

tion (b)'s requirements had been met: Saber's offer

*579 limited acceptance to the express terms of the

offer; adding a cancellation term materially altered

the contract; and Saber had already given notice to

Tri-State of its objection to the additional term.

Tri-State contests the magistrate's conclusion that

section 2.207 governs the dispute. Its argument is inessence that Saber had agreed orally to the insertion

of the cancellation clause. Therefore, Tri-State's in-

sertion of the cancellation term in the contract, and

its sending of the letter to Dorr explaining its reas-

on for inserting the term, operated as mere written

confirmations of the oral agreement. As a result,

Tri-State claims, not section 2.207 but section

2.201(b) governs this case:

(b) Between merchants if within a reasonable

time a writing in confirmation of the contract and

sufficient against the sender is received and the

party receiving it has reason to know its contents,

it satisfies the requirements of Subsection (a)

against such party unless written notice of objec-

tion to its contents is given within ten days after

it is received.

It is unquestioned that Saber failed to make any ob-

jection to Tri-State's cancellation term within ten

days of receipt, and Tri-State therefore argues that,

as a matter of law, the cancellation clause became a

part of the contract in accordance with the terms of

section 2.201(b).

We reject Tri-State's argument concerning section

2.201. That section is merely the UCC's statute of

frauds. Subsection (b) provides an exception to the

normal rule that a writing must be signed by the

party against whom enforcement is sought. Section

2.201 does not apply in the present case because

neither party is asserting that any oral contract is in-

valid because of the statute of frauds. As Comment

3 to section 2.201 makes clear, the only result offailing to object within ten days as required by sub-

section (b) is to take away from the party who fails

to answer the defense of the Statute of Frauds; the

burden of persuading the trier of fact that a contract

was in fact made orally prior to the written con-

firmation is unaffected.

This issue was squarely addressed in Hurricane

Steel Industries v. Maurice Pincoffs Co., 464

S.W.2d 387 (Tex.Civ.App.-Houston [14th Dist.]

1971, no writ). In Hurricane, the seller contended,

as does Tri-State in the present case, that the buy-er's failure to object under subsection (b) made it

bound by the terms of a written confirmation letter

sent by the seller. The court commented that the

failure to object to [the letter] in writing within ten

days would not make [the buyer] bound by its lan-

guage. The only effect ... was to constitute the letter

Page 5

845 F.2d 575, 6 UCC Rep.Serv.2d 368

(Cite as: 845 F.2d 575)

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a compliance with the statute of frauds requirement

of Subsection (a). Id. at 389.

[2][3][4] A deeper problem than Tri-State's mis-

taken reliance on section 2.201 is its failure at trial

to prove that Saber orally agreed to the insertion of

the cancellation clause. The magistrate did find that

Book and Coyne, Tri-State executives, believed

that Saber had agreed to the clause. But the magis-

trate also found that Peyton, alone among Tri-State

employees, took part in negotiations with Dorr and

Saber. In particular, the magistrate held that

[t]estimony that Coyne or Book overheard or par-

ticipated in these conversations is ambiguous and

unreliable. With no credible evidence that Book or

Coyne had any direct knowledge of what Saber did,their belief about Saber's position is naturally no

evidence of what Saber agreed to. Because Peyton

did not testify, the magistrate's findings compel the

conclusion that there was no credible evidence that

Saber ever agreed to the cancellation clause.

Tri-State attacks the magistrate's finding that

Book's and Coyne's testimony was ambiguous and

unreliable. Tri-State argues that this statement is

a comment on the weight of the evidence and not a

finding. We disagree. Decisions on the credibility

and weight of testimony are integral parts of find-ings of fact. See Fed.R.Civ.P. 52(a) (Findings of

fact ... shall not be set aside unless clearly erro-

neous, and due regard shall be given to the oppor-

tunity of the trial court to judge of the credibility of

the witnesses. ) (emphasis added); cf. *580Ander-

son v. City of Bessemer City, 470 U.S. 564, 105

S.Ct. 1504, 1512, 84 L.Ed.2d 518 (1985) (When

findings are based on determinations regarding the

credibility of witnesses, Rule 52(a) demands even

greater deference to the trial court's findings....).

Furthermore, even though some of the testimony

discounted by the magistrate is from depositions,

the clearly erroneous standard nonetheless applies.

See id. 105 S.Ct. at 1511-12 (holding that the stand-

ard applies even when the district court's findings

do not rest on credibility determinations, but are

based instead on physical or documentary evidence

or inferences from other facts). Our review of the

record disclosed no reason to think the finding

clearly erroneous, and we therefore reject Tri-

State's argument.

Although the magistrate's findings compel the con-

clusion that there was no credible evidence that

Saber agreed to the cancellation clause, Tri-State

argues that Saber had the burden to obtain an

affirmative defensive finding that no agreement

existed. Presumably, Tri-State is arguing that Saber

is guilty of a procedural default in failing to obtain

an explicit ruling on this issue, and, as a result, the

appeals court should decide the issue against it. Tri-

State, however, cites no authority for this proposi-

tion and its argument contradicts the general federalrule that the only findings required are those suffi-

cient for a clear understanding of the basis of the

decision. 9 C. Wright & A. Miller, Federal Prac-

tice and Procedure, 2577, at 697 (1971). In this

case, we think the magistrate's findings are suffi-

cient for an understanding of the basis of decision.

III.

[5] Tri-State next argues that the magistrate erred in

awarding Saber its lost profits as a result of Tri-

State's breach. First, Tri-State argues that no lost

profits should have been awarded because Saber

was not a lost volume seller. Second, it argues

that the magistrate failed to include in the calcula-

tion of Saber's lost profits some of the costs that

Saber avoided by Tri-State's breach.

The general measure of damages for the seller be-

cause of the buyer's breach is provided by UCC

2.708(a): the difference between the market price at

the time of tender and the unpaid contract price.

But section 2.708(b) provides that when subsection

(a)'s measure is insufficient to put the seller in as

good a position as performance would have done,

then the seller may recover his lost profit. Subsec-

tion (b)'s measure of damages is appropriate when

the purchaser at resale would have been solicited

Page 6

845 F.2d 575, 6 UCC Rep.Serv.2d 368

(Cite as: 845 F.2d 575)

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8/10

by the seller had there been no breach, the solicit-

ation would have been successful, and the seller

could have performed the additional contract.

The reason for the rule is based on the idea that

the lost volume seller would have received two

profits, not just one....

Malone v. Carl Kisabeth Co., 726 S.W.2d 188, 190

(Tex.App.-Fort Worth 1987, no writ). Similar to a

lost volume seller is a jobber, a reseller who, be-

cause of the buyer's breach, never obtains the goods

from his supplier. Nobs Chemical, U.S.A., Inc. v.

Koppers Co., 616 F.2d 212, 215 (5th Cir.1980). A

jobber is also entitled to lost profit damages from a

breaching buyer. Id.

[6] The magistrate concluded that Saber was a lost

volume seller for the gasoline that Tri-State should

have bought in August. This gasoline had already

been purchased by Saber, and Saber was able to sell

it to other buyers. The magistrate also held that

Saber was a jobber for the September gasoline,

which Saber never bought because of Tri-State's

breach.

Tri-State's main attack on the magistrate's findings

is to argue that a seller's market in gasoline exis-

ted at the time of Saber's purchases. In a seller'smarket, there is insufficient gasoline available for

buyers at the price that buyers wish to pay. Such a

market would make lost volume or jobber status

less likely because Saber, which did not produce

gasoline but only bought it for resale, would have

found it more difficult to obtain product.

There is no doubt that evidence of the status of the

market for gasoline would have been relevant, al-

though not necessarily*581 conclusive, to the

court's determination that Saber was a lost volume

seller. But Tri-State chose not to introduce suchevidence. The only evidence before the magistrate

was Hofer's testimony that Saber could have loc-

ated sufficient gasoline to supply both Tri-State and

the customers to whom Tri-State's gasoline was

resold. Under those circumstances, Tri-State cannot

legitimately fault the magistrate's decision to credit

Hofer's testimony and award Saber damages as a

lost volume seller.

[7][8] Tri-State also claims that the magistrate erred

in failing to credit it with certain costs that Saber

avoided because of the breach. First, Tri-State

points to the commission of Dorr, the broker for the

sale. His commission for the unconsummated Au-

gust and September purchases would have been

$9,900. Tri-State argues that Saber saved this ex-

pense because of the breach. Tri-State also notes

that we have no idea what other administrative

expenses that Saber might have saved because it

did not have to purchase and ship gasoline to Tri-

State.

Tri-State's argument is without merit. As an initial

matter, it appears that Tri-State never objected to

the calculation of damages. As a result, it waived

any complaint. Pickle v. International Oilfield

Divers, Inc., 791 F.2d 1237, 1241 (5th Cir.1986).

But in any case, because Tri-State introduced no

evidence on damages and failed even to cross-

examine Saber's witnesses on the subject of dam-

ages, the magistrate was justified in crediting

Saber's evidence on damages.

For example, Tri-State did not introduce any evid-ence that Dorr planned to forgo his commission on

the unsold August and September gasoline. Thus,

the magistrate was entitled to conclude that this ex-

pense was not saved as a result of the breach. In

addition, while Hofer acknowledged that Saber in-

curred some administrative costs in supplying the

gasoline to Tri-State, the magistrate could have in-

terpreted this reference as overhead, which Saber

would not save as a result of the breach. In any

case, Tri-State introduced no evidence that com-

pelled the magistrate to reach a different conclu-

sion.

IV.

[9] Tri-State's last argument on appeal is that the

magistrate erred in failing to award attorneys' fees

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(Cite as: 845 F.2d 575)

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9/10

for its successful prosecution of the contract that

was the subject of its principal claim. Both that

contract and the contract that was the subject of

Saber's counterclaim contained the following para-

graph:

E. If either party hereto institutes litigation con-

cerning this Agreement against the other party

and such litigation is ultimately resolved through

adjudication in a court of law, the prevailing

party shall be entitled to reimbursement from the

other party for reasonable attorneys fees ... as a

result of such litigation.

The district court before trial entered an uncon-

tested partial summary judgment for Tri-State on its

principal claim. The magistrate later awarded Saber

judgment on its counterclaim and attorneys' fees for

its counterclaim. The magistrate also found that

Tri-State incurred reasonable and necessary attor-

neys' fees in prosecuting its principal claim against

Saber in the sum of $14,737.50. But the final judg-

ment awarded a net amount to Saber that failed to

include Tri-State's attorneys' fees in the calculation.

The magistrate did not explain her decision to deny

Tri-State's attorneys' fees.

Saber argues that the decision to deny Tri-State itsattorneys' fees under the contract was justified be-

cause Tri-State was not the prevailing party in the

entire litigation in view of the net judgment entered

against Tri-State. Saber also argues that the contract

in the principal claim gave it the right to withhold

sums from Tri-State to set off any amount that Tri-

State might owe Saber under other contracts. In any

case, Saber argues, Tri-State cannot show that the

magistrate's decision was clearly erroneous.

We disagree with Saber about the standard of re-

view. The interpretation of a contract is a questionof law and the appellate*582 court is not bound by

the clearly erroneous standard of review unless am-

biguities require the court to consult extrinsic evid-

ence. Paragon Resources, Inc. v. National Fuel Gas

Distribution Corp., 695 F.2d 991, 995 (5th

Cir.1983). If extrinsic evidence is necessary to the

interpretation, of course, then the court of appeals

is required to accept facts found by the district

court unless they are clearly erroneous. See id. We

think, however, that no extrinsic evidence is re-

quired to interpret this contract.

[10] The best interpretation of these contracts is

that each unambiguously awards attorneys' fees to

the party that prevails on each. Although Saber is

correct in noting its set-off rights under the contract

that formed the basis of Tri-State's principal claim,

its linkage of those rights to Tri-State's right to ob-

tain attorneys' fees is tenuous. Despite the set-off

rights, Tri-State had to institute litigation to collect

an amount rightfully due it under the principal con-

tract, and that seems to us sufficient under the lan-guage of the contract to allow it to recover its attor-

neys' fees. As a result, while Saber properly was

awarded attorneys' fees on its counterclaim, Tri-

State also should have been awarded attorneys' fees

on its principal claim.

[11] We are troubled, however, by the amount of

Tri-State's attorneys' fees. The magistrate held that

Tri-State incurred $14,737.50 as reasonable attor-

neys' fees. But nothing in the record explains the

magistrate's reasoning in arriving at this figure. In

addition, the amount appears excessive in view ofthe fact that Saber conceded its liability on Tri-

State's principal claim; most of the litigation in this

case concerned Saber's counterclaim. To resolve

these difficulties, we remand to the district court for

a new and more complete determination of the

amount of Tri-State's attorneys' fees, in accordance

with Johnson v. Georgia Highway Express, Inc.,

488 F.2d 714 (5th Cir.1974) (setting forth the

factors that courts are to use in this circuit in de-

termining an award of reasonable attorneys' fees).

V.

For the above reasons, we AFFIRM the magistrate's

decision except insofar as it failed to award attor-

neys' fees to Tri-State for the prosecution of its

principal claim, and REMAND to the district court

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845 F.2d 575, 6 UCC Rep.Serv.2d 368

(Cite as: 845 F.2d 575)

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for a new determination of the amount of the fees.

C.A.5 (Tex.),1988.

Tri-State Petroleum Corp. v. Saber Energy, Inc.

845 F.2d 575, 6 UCC Rep.Serv.2d 368

END OF DOCUMENT

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845 F.2d 575, 6 UCC Rep.Serv.2d 368

(Cite as: 845 F.2d 575)

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Tri-State Petroleum Corp v. Saber Energy Inc. 845 F.2d 575 1988

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