UNITED STATES COURT OF APPEALS

For the Fifth Circuit

No. 95-50098

POLO CLUB OFFICE PARK,

Plaintiff,

VERSUS

WILLIAM A. FREED, ET AL.,

Defendants,

AND

WILLIAM A. FREED, SOL FREED AND JACK SPIRT,

Third Party Plaintiffs-Appellees,

VERSUS

SAN MARCOS PROPERTIES, LTD.,

Third Party Defendant-Appellant.

Appeal from the United States District Court

For the Western District of Texas

(A-94-CA-23)

February 23, 1996* Pursuant to Local Rule 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 Local Rule

47.5.4.

1 Federal jurisdiction was based on diversity of citizenship, as Polo Club was a Kansas

partnership and the guarantors were Texas citizens.

2 Before SMITH, WIENER and DeMOSS, Circuit Judges.

PER CURIAM: *

This is an appeal from a judgment granting indemnification in favor of several limited

partners against their limited partnership, which appeals the ruling. Finding that the limited

partnership waived its sole issue on appeal, we AFFIRM the judgment of the district court.

BACKGROUND

In November 1984, Irving Wallerstein executed a $775,000 real estate lien note to

Interfirst Bank Austin for the purchase of real estate. The note was secured by a lien on the

property. William Freed, Sol Freed and Jack Spirt (“guarantors”) guaranteed the note.

The note was modified and renewed several times and, even tually, a limited

partnership was created with Wallerstein as general partner and the guarantors (and several

others) as limited partners. This limited partnership was known as San Marcos Properties,

Ltd. (“San Marcos”). The property was conveyed to San Marcos and it assumed the liability

on the note. The limited partnership agreement contained an indemnification clause which

indemnified the partners for all payments reasonably made in the ordinary course of

partnership business.

The note went into default in October 1992. In 1993, the FDIC, which had acquired

the note from Interfirst, assigned the note to Polo Club Office Park (“Polo Club”). In 1994,

Polo Club sued the guarantors in federal district court for breach of contract and to foreclose

on the property. 12 Issues not raised on appeal are waived. S ee Randall v. Chevron U.S.A., Inc

. , 13 F.3d

888, 911 (5th Cir. 1994).

3 The guarantors brought a third party action against San Marcos, seeking

indemnification pursuant to the limited partnership agreement for any money they paid Polo

Club. Before trial, the guarantors settled with Polo Club, paying it $138,750. However, the

guarantors continued their suit against San Marcos.

Just days before trial, San Marcos sought leave to file an amended answer, adding the

defense that the guarantors were acting as guarantors, not limited partners, when they settled

with Polo Club. The district court denied the motion, finding that it was filed too late and

that granting it would prejudice the guarantors.

During its opening statement, San Marcos asse rted that the guarantors were acting

solely as guarantors, not limited partners, when they settled with Polo Club. Immediately

after the opening statement, the district court noted that “[t]he argument [San Marcos] just

made is basically the argument . . . that the court wouldn’t let [them] file.”

After a bench trial, the district court found in favor of the guarantors and ordered San

Marcos to indemnify them for the amount they paid to Polo Club, as well as attorneys’ fees

and expenses.

DISCUSSION

The sole issue on appeal is whether the guarantors were acting solely as guarantors,

and not as limited partners, when they settled with Polo Club. San Marcos claims that

because they were acting as guarantors, they are not entitled t o indemnification under the

limited partnership agreement. On appeal, San Marcos does not argue that the district court

erred in denying leave to amend its answer. 23 Issues raised in pleadings that are excluded by order of the district court are not

properly before the court. Any other construction would render a nullity Federal Rule of

Civil Procedure 15(a), which requires leave to amend pleadings.

4 Several cases in our circuit identify the standard as “unless it involves a purely legal

question or failure to consider it would result i n a miscarriage of justice.” See, e.g., First

United Financial Corp. v. Specialty Oil Co., Inc

. 5 F.3d 944, 948 (5th Cir. 1993); Atlantic

Mutual Ins. Co. v. Truck Ins. Exchange , 797 F.2d 1288, 1293 (5th Cir. 1986); Callejo v.

Bancomer, S.A. , 764 F.2d 1101, 1117 n.20 (5th Cir. 1985).

However, because th e older cases, such as Coblentz

, use the conjunctive standard, that

is the correct one. Smith v. Penrod Drilling Corp. , 960 F.2d 456, 459 n.2 (5th Cir. 1992)

(“In the event of conflicting panel opinions from this court, the earlier one controls, as one panel of this court may not overrule another.”). Therefore, the proper standard for

determining w hen an issue may be raised for the first time upon appeal is that it (1) must

involve a purely legal issue and (2) failure to consider the issue would result in manifest

injustice.

4 Because San Marcos was not allowed to amend its answer and include the defense,

the issue o f the guarantors settling only as guarantors was not properly before the district

court. San Marcos is therefore attempting to raise the issue for the first time upon appeal. 3

San Marcos could have appealed the district court’s denial of leave to amend; it chose not

to do so. Instead, San Marcos argues that the district court erred in finding that the

guarantors settled with Polo Club as limited partners, when they were acting as guarantors.

Issues raised for the first time upon appeal are not reviewable, “unless they involve

purely legal questions and failure to consider them would result in manifes t injustice.”

Varnado v. Lynaugh , 920 F.2d 320, 321 (5th Cir. 1991); United States Dep’t of Labor v.

Kast Metals Corp

. , 744 F.2d 1145, 1149 n.3 (5th Cir. 1984); American Surety Co. of New

York v. Coblentz , 381 F.2d 185, 189 (5th Cir. 1967). 4

T his case does not turn upon a purely legal issue. We have held previously that

contract interpretation is not a purely legal issue. A tlantic Mutual

, 797 F.2d at 1293 ;

Nissho-Imai Co. v. Occidental Crude Sales, Inc

. , 729 F.2d 1530, 1549 (5th Cir. 1984).5

Likewise, no miscarriage of justice will result if this issue is not considered. Because

the district court denied leave to amend the answer, no evidence wa s presented on the

guarantor/limited partner issue and the guarantors were not given an opportunity to introduce

evidence regarding the capacity in which they settled with Polo Club. Therefore,

consideration of this issue on appeal would prejudice the guarantors. A tlantic Mutual

, 797

F.2d at 1293.

CONCLUSION

Therefore, San Marcos waived the issue of whether the guarantors settled with Polo

Club as a guarantor rather than as a limited partner. Because San Marcos waived its sole

issue on appeal, the judgment of the district court is AFFIRMED.