To those without CA real estate licenses, but answered anyway, thank you for trying to help.
In CA, a counter offer constitutes another offer. Once an offer has been countered, you can't go back and accept the original offer or a previous counter offer. If a Buyer writes an offer and Seller writes a counter offer and then Buyer writes a counter (counter) offer and sends it to the Seller, the Seller's previous counter offer cannot be re-activated because it has legally been terminated. (See Beverly Way Associates v. Barham, 226 Cal. App. 3d 49, (1990).)
So, the Seller was right, your counter offer voided their previous counter offer.
Aren't you working with a Realtor? Doesn't your Realtor know this?