July 23, 1996


ATEL Capital Equipment Fund VII, L.P.
235 Pine Street, 6th Floor
San Francisco, California  94104

                           RE:      Registration Statement on Form S-1

Gentlemen:

         We have  examined  the  above-referenced  Registration  Statement to be
filed with the Securities  and Exchange  Commission on or about the date hereof,
in  connection  with the  registration  under  the  Securities  Act of 1933,  as
amended, of 15,000,000 of your limited partnership units (the "Securities"). The
Securities  are to be  offered  and  sold  by  and  through  the  broker-dealers
described in said Registration Statement on a "best-efforts" basis.

         As your counsel in connection with this  transaction,  we have examined
the proceedings taken and are familiar with the proceedings proposed to be taken
by you in connection with said sale and issuance of the Securities.

         It is our  opinion  that upon  completion  of the  proposed  additional
proceedings  being taken or  contemplated  by us, as your  counsel,  to be taken
prior to the issuance of the Securities and upon  completion of the  proceedings
being taken in order to permit such transactions to be carried out in accordance
with state  securities laws where required,  the Securities when issued and sold
in the manner  referred  to in the  Registration  Statement  will be legally and
validly issued, fully paid and nonassessable.

         We hereby  consent to the reference to our firm under "Legal  Opinions"
in the prospectus which is a part of said Registration Statement, and to the use
of this opinion as an exhibit thereto.

                                             Very truly yours,



                                             DERENTHAL & DANNHAUSER

ATEL 7-2/10.LO


                                      EXHIBIT 5.1