Tobias Kerngood et al. vs. Bernard Gusdorf et al.

Tobias Kerngood et al. vs. Bernard Gusdorf et al. Equity. No. 6,592. Decided July 13, 1886. Justices Hagneb, James and Merrick sitting. 1. A bill was filed seeking to rescind certain purchases of goods, which it was alleged were obtained for the purpose of defrauding complainants, and to recover their value out of defendant’s stock in trade, on the ground that Lhoy had so mixed and confused the goods with their own as to prevent a remedy by replevin. The defendants were thereupon enjoined until final hearing from disposing of their stock in trade, the complainants giving an undertaking with sureties “ to make good to the defendants all damages by them sustained or suffered by reason of wrongfully or irregularly suing out the injunction.” Thirty-five days afterwards a receiver was appointed who took the goods out of the possession of the defendants and sold them at an enormous sacrifice. On final hearing the bill was dismissed with costs, and on an inquiry as-to the damages sustained by the defendants by reason of the injunction, it was held that the responsibility of the complainants and their sureties under the undertaking given ceased with the appointment of the receiver, and was limited to such damages only as accrued during the interval. 2. Tlie measure of damages in such a case is the profit on the sales, of which the defendants were deprived up to the time of the appointment of the receiver. Appeal from a decree of the court below dismissing a bill filed to restrain defendants from selling or removing goods alleged to have been fraudulently obtained. The Case is stated in the opinion. R. Ross Perry and Hanna & Johnston for complainants: It is a familiar principle that the obligation of parties to a bond cannot be extended by implication beyond tlie very terms of their contract. Their obligation is “strictissimi juris.” McCluskey vs. Cromwell, 11 N. Y., 598; Magee vs. Man. Life Ins. Co., 92 U. S., 98; U. S. vs. Boecker, 21 Wall., 656; Miller vs. Stewart, 9 Wheat., 702, 70S; Martin vs. Thomas, 24 How., 315, 317; Thomp., Liab. Sur., 536. This principle is applied to injunction bonds. Bein vs. Ileatb, 12 How., 179. Under "tlie authority of Bien vs. Heatb, McCluskey vs. Cromwell, Magee vs. Man. Life Ins Co., supra, and tlie other cases, it is plain that a surety’s liability cannot be stretched to cover damage done by another order to which he was in no sense a party; and the surety’s liability is conceded everywhere to be the measure of that of the principal. As to the nature of damages properly claimable, see Chic., etc., E. E. Co. vs. Howison, 86 111., 215; Streeter vs. Mining Co., 4 Col., 535; Cummings vs. Mugge, 94 111., 186; Somerville vs. Mayes, 54 Miss., 31; Hotchkiss vs. Platt, 7 Hun, 56; Muller vs. Fern, 35 la., 420; Patterson vs. Kingsland, 8 Blatchf., 278. In another aspect of the case it may also he said that the damage complained of by the defendants is altogether too remote. Milwaukee, etc., E. Co. vs. Kellogg, 94 U. S., 475 ; La. Mut. Ins. Co. vs. Tweed, 7 Wall., 52; Scheffer vs. Wash., etc., E. E., Sup. Ct. D. C.; 3 Pars. Cont., 187; Hobbs vs. London, etc., E. Co., L. E. 10, Q. B., 117. > Ifj as the court holds and as the authorities cited show, the injunction issued on January 25, 1879, terminated, so far as the liability of the sureties on the injunction.bond is concerned, on March 2,1879, by the possession of a receiver under a different and later order, the only point is, what damage did defendants suffer by reason of the loss of the use of the goods for these five weeks? Levy vs. Taylor, 24 Md., 292. The following cases are cited to show the different subject matters of damage which have been rejected as proper claims under the terms of injunction bonds: Future profits of an unestablished business. Chic., etc., E. E. Co. vs. Howison, 86 111., 215. Other unlawful acts of the person suing out the writ of injunction. Cummings vs. Mugge, 94 111., 187. The referee, in his first report, allowed counsel fees, which was clearly wrong_ in this jurisdiction. Oelrichs vs. Williams, 15 Wall., 230, 231; Bein vs. Heath, 12 How., 179; Day vs. Woodworth, 13 How., 390, 371. A. C. Bradley and N. H. Miller for defendants": The primary object of the bill was the injunction. The receivership was a necessary consequence of it and followed in two months after the injunction. The injunction deprived the defendants of the possession of their goods and store, broke up the business, and was the proximate cause of the damage. La. Mut. Ins. Co. vs. Tweed, 7 Wall., 44; Milwaukee, etc., E. Co. vs. Kellogg, 94 U. S., 474, 475; Barton vs. Fisk, 30 N. Y., 166; Kennedy vs. Hammond, 16 Mo., 341. Profits that might have been realized from the use of the goods tied up by the injunction are a necessary element in estimating the damage sustained. Hoy vs. Gronable, 34 Pa. St., 10 : Phila., etc., E. E. Co. vs. Howard, 13 How., 344 ; Edwards vs. Edwards, 31 111., 474 ; Chapman vs. Kirby, 49 111., 211; Chicago City E. E. Co. vs. Howison, 86 111., 215 ; Eoherts vs. White, 73 N. Y., 381; St. Louis Smelting Co. vs. Wyman, 19 Eep., (Col.), 105; Goebel vs. Hough, 26 Minn., 252; 9 Eep., 121; Strasburger vs. Barber, 38 Md., 103, 107; Bell vs. Cunningham, 3 Pet., 69, 85, 86; Brown vs. E. C.o., 54 Wis., 342; Pollock vs. Gantt, 69 Ala., 373 ; 44 Am. Eep., 519; Frank vs. Chaffee, 34 La. Ann., 1203 ; 16 Eep., 268; Ives vs. Humphreys, 1 E. D. Smith, 196, 201, 202; Allison vs. Chandler, 11 Mich., 543, 549, 557, 558 ; Corcoran vs. Judson, 24 N. Y., 106,1’08. The weight of authority in this country is opposed to Oelrichs vs. Williams, and it should not be regarded as authority. Andrews vs. Glenville Wooden Co., 50 N. Y., 282; Eoberts vs. White, 73 N. Y., 375 ; Prader vs. Grim, 13 Cal., 585 ; Behrens vs. McKenzie, 23 la., 333 ;• Derry Bank vs. Heath, 45 N. H. 524; Eyan vs. Anderson, 25 111., 372; 382; Collins vs. Sinclair, 51 111., 328; State vs. Beldsmeier 56 Mo., 226; Porter vs. Hopkins, 63 Cal., 53; 15 Eep., 429. The ascertained value of the goods was $7,000; and the difference between that and the amount of the receiver's sale must be attributed to depeciation, for which the plaintiffs are liable, if not liable under the principles applied in the first report. Levy vs. Taylor, 24 Md., 282 ; Meysenburg vs. Schlieper, 48 Mo. 431. But it is submitted that the first report was correct, and that its principles should be the judgment of this court. The fees for the referee's report are properly assessed against the plaintiffs. Lawton vs. Green, 64 N. Y., 326, 331. The claim of plaintiffs to, offset the price of their goods against the damages ascertained is inconsistent with the theory of their bill and cannot be allowed. 1 Waterman Trespass, 636; Gillard vs. Brittan, 8 M. & W., 515; Morrison vs. Shuster, 1 Mackey, 190, 194, 195. [MAJORITY — Mr. Justice James] Mr. Justice James delivered the opinion of the court. In this case a bill in equity was filed charging in behalf of a number of complainants, that the defendants had committed fraud in making certain purchases of them, and that by reason of this fraud the defendants had acquired no title to the goods, and that these goods had been confused by the defendants with other goods, so that complainants could not recover by replevin; in other words that they had no remedy at law for the purpose of recovering their goods specifically, and therefore they sought relief in a court of equity. A restraining order was made at the time of the filing of the bill, without taking any undertaking from the complainants. Afterwards upon answers filed, a preliminary hearing was had and an injunction was granted on the 25th of January, 1819, enjoining the defendants from disposing of their stock in trade. At that time an undertaking was given, the language of which, according to the rule prescribed by the court, was that the principals and sureties should “make good to the defendant all damages by him sustained or suffered, by reason of wrongfully or irregularly suing out the injunction awarded in the above cause.” After the goods were thus tied up in the hands of their owner, an order Avas made on the 12th of March, 1819, appointing receivers to take possession of and sell these goods at public auction. They were sold by the receivers, and, it is alleged, that they were sold at an enormous sacrifice. It is admitted that they were worth, when the injrmction was issued, $T,000. They were sold for $1,600 or $1,800, after a lapse of only about five weeks. The injunction was granted until the final hearing, which did not take place for some two years afterwards. The receiver took possession of the goods one month and five days after the injunction had tied them up in the hands of the owner, and it is now claimed that the loss sustained upon the sale by the receiver is part of the damage suffered by reason of the injunction. The question therefore comes up immediately: What steps were the results of obtaining the injunction? The injunction did not take possession of the goods, of course. It only controlled their possession in the hands of the owner, and prevented him from disposing of them until the receiver was appointed, who then took them out of his possession. Did the injunction have any effect after that? It is said it ran imtil the final hearing two years afterwards, and that the appointment of the receiver was one of the natural legal consequences of obtaining the injunction. Our opinion is that, although the parties may have contemplated the taking of the step when they obtained the injunction, it is not one of its incidents. Especially must this be so as to the sureties, for when they become responsible for any damage resulting from the obtaining of the injunction, it is plain they did not undertake to become responsible for the results of an entirely separate and independent step in the case, which might or might not be taken, and which the court might or might not allow to be taken. Their responsibility therefore ended when the injunction ceased to have any actual control over those goods; that is, at the end of one month and five days. After that the injunction could have no effect. The goods were taken away from the owners by an entirety different measure — a measure to which these sureties were not parties; and even as to the principal, his undertaking is the limit of his responsibility for damages arising out of that undertaking, and even as to him it was entirety separate from his next step in the cause, which he might not have taken and which he might not have been permitted to take. What damages then have accrued or arisen from the operation of this injunction? It was shown that in this business and in similar businesses 25 per cent, profits per annum were ordinarily realized upon a stock. This is done by selling goods and turning the capital over and over again. That would give a fraction of over 2 per cent, a month profits upon the stock on hand, which, we think, is a fair estimate of profit; so that by tying up these goods and preventing the sale for one month and five days, the plaintiffs wrongfully prevented the defendants from realizthe profits which they might have made in that time. The rule adopted by the court below was to allow interest simply on the value of the goods thus tied up, and that resulted in a decree for only $34.87. That does not give, as Ave think, a true rule; although the result of our own rule gives a very trifling compensation to the persons who appear to have been wrongfully restrained and whose business appears to have been very wrongfully broken up. We would be glad if, according to any known principle of law, Ave could impose a heavier penalty and put it where Ave think it properly belongs. But in view of the rule which AA'e think the law requires, Ave can only rIIoav the rate of profit which the proof shows might have been realized. That Avill give an amount which I shall presently state, after explaining another element in the cause. It appears that after the injunction had been obtained, the landlord of the house in which this business had been carried on, issued an attachment for tAvo months’ rent. Ho therefore reduced to that extent the value of the goods controlled by the injunction ; the amount attached Avas $938, which deducted from $7,000, the value of the goods then on hand, left only $6,062 to be operated upon by this suit; and that consequently is the amount in Avalué of the goods which the defendants might have gone on trading with. Upon that amount Ave basé our calculation of profits, which results in this; the profits would have been for those thirty-five days, $147.27; a very slight increase, it is true, but at the same time all that we can do under the principles of law applicable to the case. As to the cost of the reference, that appears to have been disposed of in the decree below. I may remark in this connection that if the decree below, which was signed by me, had been actually and essentially my decree, I would be incapacitated uuder the statute to take part in this hearing. But it was laid before me as nearly as possible in the form of a consent decree. Of course if it realty had been a consent decree, no appeal could have been taken; but I was simply asked to sign it, in order that it might go further. That decree provided that the bill should be dismissed with costs, and although the only question here is as to the damages suffered under the injunction, we think, even if it had not been already provided for, we would have made the same order. The costs, of course, include the costs before the auditor. We modify the decree by substituting for the amount of $34.87, the sum of $147.27. The bill is dismissed with costs.