Dodge v. Cohen

14 App. D.C. 582, 1899 U.S. App. LEXIS 3585

• Court: Court of Appeals for the D.C. Circuit
• Decided: May 3, 1899
• Docket: No. 863
• Status: Published

Opinion

Mr. Chief Justice Alvey

delivered the opinion of the Court:

This case has been in this court on a former appeal, and appears under the titling of Strasburger v. Dodge, 12 App. D. C. 37, where the facts of the origin and progress of the litigation to the reversal of the decree by this court, fully appear. That first appeal was taken by certain of the creditors of Abraham Strasburger, the insolvent debtor, from a decree declaring the judgments obtained by such creditors against Strasburger, by his confession, to have the effect and operation of a preferential assignment within the contemplation of the Act of Congress of February 24, 1893, and by force of the act made a general assignment for the benefit of all the creditors. The executions on the judgments then in the hands of the marshal, and which had been levied on the property of the debtor, were all enjoined and the property placed in the hands of receivers for sale. That decree, on appeal, was reversed by this court, and the cause was remanded with directions to the court below to dismiss the bill and to make such other orders regarding the fund in the custody of the court as might be proper, not inconsistent with the opinion of this court. It is upon the proceeding of the court below, after the receipt of the mandate of this court, that the questions presented by the present appeal have arisen.

In order to the full and clear understanding of the case as now presented, it is necessary to refer to some of the proceedings that were had prior to the first appeal, and which led to the issuing of the injunction and taking the property out of the' custody of the marshal and placing it in the hands of the receivers.

The bill was filed on the 18th of July, 1893, by Dodge Brothers, for themselves and such other creditors of Strasburger as might think proper to come in an'd make themselves parties; and the object of the bill was to have declared as a voluntary assignment for the benefit .of all the creditors, certain confessed judgments in favor of particular creditors. These creditors were made parties defendants, and so were Strasburger and the marshal. Upon that bill a restraining order was passed by the court to be of force “until further order, to be made, if at all, after a hearing, which, was fixed for the 25th day of July, 1893.” The defendants answered, and the case came on for hearing, and on August 10, 1893, the court passed an order restraining and enjoining the marshal from selling or otherwise disposing of the goods, etc., levied upon by him, and ordering that “the property and assets now held by him, having been seized and levied upon as the property.of the defendant, Abraham Strasburger, under executions issued to him in the suits at law, numbered, etc., in the Supreme Court of the District of Columbia, be turned over and delivered by him to the receivers appointed in this cause. And it is further ordered, that the defendants, Joseph A. Goldstein, Isaac Steinem, Samuel Steinem, Samuel Cohen, Herman Adler and Benjamen I. Cohen, be, and they are hereby restrained and enjoined from proceeding further in the suits at law, numbered, etc., as prayed in said bill.”

Receivers were appointed to take charge of the property, with authority to sell the same; and it was ordered “that the complainants in this cause, Dodge Brothers, shall file the usual undertaking, with surety to be approved by this court, on the issuing of an injunction under Rule 40 [now 42] of the equity rules of this court, and for costs of this suit; this order to take effect upon the filing and approval of this undertaking.”

The rule of court referred to as Rule 40, is Rule 42 in the last revision. The rule provides specifically the terms and conditions of the undertaking, and for the proceedings thereon to ascertain and determine the damages, in the event of the injunction being wrongfully issued.

In obedience to the order of court of August 10, 1893, and in conformity to equity Rule 40 (now. 42), the complainant, Dodge Brothers, with Leopold Luchs, as surety, filed the undertaking required, which is in these terms:

“Chauncey W. Dodge and Harry D. Dodge, partners, trading as Dodge Brothers, the complainants, and Leopold Luchs, surety, hereby undertake to make good to the defendants, and each of them, all damages by them, or either of them, suffered or sustained by reason of wrongfully and inequitably suing out the injunction in the above entitled cause, and stipulate that the damages may be ascertained in such manner as the justice shall direct, and that on dissolving the injunction he may give judgment thereon against the principal and sureties for- said damages and the costs of this suit, in the decree itself dissolving the injunction.”

This undertaking was signed by the principals and the surety, and was approved by the court, August 21, 1893.

The receivers disposed of the property that was turned over to them, and the cause was referred to the auditor to state an account, and to distribute the proceeds of sales. And on March .23, 1897, a decree was passed declaring the several judgments and executions thereon to constitute a voluntary assignment, and to be for the benefit of all the creditors of the insolvent debtor, and ordering a distribution of the funds in the hands of the receivers, among all the creditors pro rata. It was from this decree that the first appeal was taken to this court, by the judgment creditors, and a supersedeas bond was given by the appellants.

Upon the reversal by this court, and the going down of the mandate, the court below referred the cause to the auditor, “to ascertain and report the damages, if any, sustained by the defendants or either of them, by reason of the wrongfully and inequitably suing out of said injunction granted by this court, and also the costs of this cause.”

Under this reference, the auditor proceeded and took testimony on behalf of the parties on both sides of the litigation, and he stated an account, and made a report explanatory thereof; and in explaining schedule A he says:

“I have next stated the conditions of the executions in the hands of the marshal upon which levies had been made on the 10th of August, 1893, the date of the issue of the injunction.- This statement shows that there would have been in the hands of the marshal funds sufficient to have satisfied the three executions at that date, and a small balance to be returned to the execution defendant. There is at this time a balance in the hands of the receivers, which, being the proceeds of the goóds and chattels subject to the levy at the time of the injunction, should be appropriated to the said executions in the order of their seniority of levy as of that date, and such an appropriation is made in this schedule.

“ It will he observed that this appropriation would have satisfied the senior execution in full, leaving a balance to be applied on account of the second execution; the latter application leaves a very small balance of the second judgment unsatisfied.

“Then follows ip this schedule a statement of the damages sustained:

. “ The judgment of the Cohen-Adler Shoe Co., as it stood on the 10th of August, 1893, being satisfied in full from the receiver’s fund, the damages sustained by that judgment plaintiff consist of intere'st on the amount of the judgment from that date, calculated, for convenience, to the 1st of July next, 1898.

“The damages sustained by Steinem Bros, consist of a small balance of the judgment not reached by the funds in the receiver’s hands, and interest on the full amount of the judgment from the 10th of August, 1893, to the 1st of July next, 1898.

“The damages sustained by Kich & Co. consist of the full amount of the judgment as of August 10,1893, with interest thereon until paid, calculated, for convenience, until the 1st of July, next, 1898.

“The damages sustained by the defendant Strasburger consist of the balance which he would have received as estimated in the case of a sale by the marshal, and interest thereon from the 10th of August, 1893, to the 1st of July, next, 1898.”

As will appear from • the auditor’s statement of the condition of the executions, and the assets applicable thereto, at the time of granting the injunction and turning over the property to the receivers, the amount in the hands of the marshal would have been sufficient to satisfy the three executions levied by him, leaving a balance of $412.82, payable to the judgment debtor.

To this report and account of the auditor the appellants excepted upon various grounds :

1. That a court of equity of this District has no jurisdiction to assess damages on an injunction bond of the character given in this cause.

2. That, under the mandate of this court, the court below could not assess damages upon the injunction bond or undertaking, but could only proceed to dismiss the bill, and to take such action as the mandate directed.

3. That no damages can be recovered upon the injunction bond or undertaking filed in this cause, because the injunction issued on the 10th of August, 1893, was not wrongfully and inequitably sued out.

4. No damages are recoverable upon the injunction bond or undertaking, because there has been no breach of the terms, provisions, or conditions thereof.

5. That there were no damages sustained by the defendants, or either of them, by reason of the injunction.

6. That the auditor was in error in estimating the value, or .the probable proceeds of the goods of the defendant Strasburger, levied upon by the marshal, at $10,824.37, at the time the injunction was issued.

7. That there was error, because the damages assessed included all the expenses incurred by the receivers, including their commissions.

8. That there was error because the auditor has assessed as damages interest on the judgments from August 10,1893, . to the date when the damages shall be paid, whereas the interest, if any be allowed, should only run to the 23d of March, 1897, when the final hearing of the cause was had; and—

9. That if any damages be assessable by this court, the measure thereof should only be the interest upon the funds in the hands of the receivers for distribution, from August 10, 1893, to March 23, 1897.

The case being brought to final hearing on October 10, 1898, these exceptions were all overruled, and the auditor’s report and account fully ratified and confirmed; and the court thereupon passed a final decree, whereby the injunction was dissolved, and the fund in the hands of the receivers was directed to be paid over, and judgment was entered on the auditor’s account, in pursuance of the undertaking, against Dodge Brothers and Leopold Luchs, for the amount of damages ascertained by the auditor, and the costs, and that the bill be dismissed. It is from this decree that the present appeal is taken; and the errors assigned are the overruling of the exceptions.

It will not be necessary to review in detail each separate exception, as several of them may be considered together, and embraced in one general view.

1. The first question raised by the exceptions to the auditor’s report is, had the court below, as a court of equity, power and jurisdiction to assess the damages, on the undertaking of the appellants, occasioned by the wrongful issuance of the injunction, restraining the enforcement of the executions on the judgments against the insolvent debtor? This, we think, can not be regarded as an open question in the courts of the United States* Equity Rule 42 of the court below expressly provides that, as a condition precedent to the right to obtain an injunction in a case such as that instituted by the complainants, there should be an undertaking to make good to the defendant “ all damages by him suffered or sustained, by reason of wrongfully, and inequitably suing out the injunction, and stipulate that the damages may be ascertained in such manner as the justice shall direct, and that, on dissolving the injunction, he may give j udgment thereon against the principal and sureties for said damages in the decree itself dissolving the injunction.” The undertaking to which we have referred, and which we have quoted in extenso, was given in strict conformity to the rule; and there can certainly be no question of the competency of the court to prescribe the rule. The court may prescribe the terms and conditions upon which it will grant the injunction ; and in order that delay and unnecessary litigation may be avoided, and that complete justice may be done and administered in the one and the same proceeding, it is fully within the power of the court to provide for the assessment of the damages occasioned by the wrongful issuance of the injunction, and the consequent, breach of the bond or undertaking.

This subject has been considered by the Supreme Court of the United States upon more than one occasion. In the case of Russell v. Farley, 105 U S. 433, the subject, and the general practice of the courts of equity, both in England and this country, were extensively discussed by the late Mr. Justice Bradley. In that case it was held, that where neither the bond or undertaking given, nor the statute law, nor any rule of court, prescribes a specific mode of assessing damages, and the condition of the bond or undertaking is simply to pay such damages as the adverse party may sustain by reason of the injunction, if the court finally decides that the party to whom it was granted was not entitled to it — in such case, it would seem that the court may, as an incident to its jurisdiction, cause them to be assessed under its own direction, or leave the party to his action at law. But no doubt or question is supposed to exist, as to the power or jurisdiction of the court where, as in this case, there is an express rule of court providing for the mode of assessing damages, and the undertaking has been given in conformity to tbat rule. The principle is fully sanctioned in the case of Meyers v. Block, 120 U. S. 206. And indeed the principle has been recognized as fully established in all the courts'of the United States, where the question has arisen. Lea v. Deakin, 11 Biss. 40, 42 ; Tobey Furniture Co. v. Colbey, 35 Fed. Rep. 592-594; Leslie v. Brown, 90 Fed. Rep. 171, 174.

. 2. But, it is contended by the appellants that inasmuch as the mandate of this court, on the reversal of the decree on the former appeal, only directed that the bill be dismissed, and that such other orders be made in regard to the fund in the custody of the court as might be proper, not inconsistent with the opinion of this court, therefore there was no right or power left in the court below to assess the damages that had accrued to the defendants, by reason of the restraint imposed by the injunction. In this contention, however, we can not concur. On the former appeal, this court, in disposing of the case as then presented, had no question before it of the damages that might be claimed by reason of the injunction that had restrained the executions in the hands of the marshal, nor of the right or power of the court to assess those damages. It simply reversed the decree appealed from and remanded the cause that a final decree might be passed, disposing of the bill and the fund in the control of the court. It did not, and could not, on that appeal, decide any question in regard to the damages that had accrued by reason of the injunction, as that involved necessarily a further inquiry into matters of fact. The inquiry and assessment of damages on the undertaking was incidental and collateral to the principal case, and hence not disposed of in passing upon the case as stated by the bill. The question of damages arising on the undertaking was simply a consequence of the final result of the cause, and which final result gave rise to the subsequent inquiry as to the damages sustained by the defendants. This is fully and clearly illustrated by the English case of Newby v. Harrison, 3 D. F. & J. 290, in which the assessment of damages occasioned by the restraint of the injunction, was adjudged to be proper after the dismissal of the bill. But in the present case the bill was not dismissed, nor was the injunction dissolved, until the final decree of October 10, 1898, passed on the auditor’s report, and after judgment entered for the damages ascertained. That decree was in no sense inconsistent with the opinion of this court on the former appeal.

3. It is next contended by the appellants, that damages can not be assessed, by reason of the stay of executions by the injunction, for any time subsequent to the 23d day of March, 1897, the date of final hearing upon which the decree was passed from which the first appeal was taken; and that interest by way of damages should only be allowed, if any be allowed at all, on the amount of the funds in the hands of the receivers for distribution, from August 10, 1893, to March 23, 1897. But to this contention we can not assent. The decree of March 23, 1897, was suspended by the appeal of the defendants in the bill, and it did not operate, nor did it profess to operate, in any manner to dissolve the injunction previously granted. The injunction remained in force, and as long as the injunction .remained in operation the undertaking remained in force as a means of indemnity. And as to the distributable fund in the hands of the receivers as the only basis for calculation of damages, that would not see,m to be supported by any principle of reason or justice. It is shown that the amount of the funds in the hands of the receivers, for actual distribution, is only a little more than half the value of the property that was taken out of the hands of the marshal and turned over to the receivers, and which was liable for the satisfaction of the executions. There is no principle, therefore, that would restrict the execution creditors to the net fund in the hands of the receivers, as the sole basis upon which interest should be calculated, by way of damages for the wrongful defeat of their executions.

4. We come now to the question, what is the proper measure of damages which the plaintiffs in the judgments are entitled to receive for the wrongful deprivation of the benefits of the levies made under their executions in the hands of the marshal? It is shown by the proof in the case, taken and reported by tbe auditor, that the fair and reasonable cash value of the property seized under the executions, if it had been allowed to be sold by the marshal, would have been more than enough to satisfy the executions in full. It is contended, however, by the appellants, that, under the circumstances of the case, the sale of the property by the marshal under the executions in his hands was not wrongfully and inequitably enjoined, and that no damages should be assessed as occasioned by the injunction. Bnt we perceive no merit in this contention, and clearly there is no substantial justice upon which it can be founded. If the property was illegally and therefore wrongfully taken out of the custody of the marshal and placed in the hands of receivers for sale, whereby great loss was occasioned to the execution creditors, there can be no reason or justice for withholding the damages that they have sustained by the injunction. Otherwise there was no sense or reason in requiring the undertaking to be ’ entered into, as a condition upon which the injunction was granted. As said by the Supreme Court, in Russell v. Farley, supra, “When the court sees no just cause for superseding or suspending the effect of an injunction bond, or undertaking, it should be enforced in pursuance of its terms; and the party for whose benefit i,t was given will be entitled to an assessment of damages.”

The method adopted by the auditor of ascertaining the value of the property, as stated in his report, we think was entirely fair and legitimate. The appellants have no reasonable ground of complaint of the result attained by the auditor; and clearly the judgment creditors were entitled to receive the proceeds of the property under the execu-tions, and would have received them but for the injunction and the interposition of the receivers. The auditor has allowed as damages, the interest upon the fund that the execution creditors would have received, if their executions had not been arrested, and the property .taken from the marshal, and placed in the hands of receivers; and this measure of damages, we think, is proper, and the one sanctioned by the authorities. This principle was adopted and applied by the Supreme Court in the case of Oelrichs v. Spain, 15 Wall. 211, 230. In that case the court said: “The delay caused by the injunction was the period for which interest was allowed by the court below. Whether the payment was, or would have been, improperly made, is an inquiry which does not arise in this case, and with which the appellants have nothing to do. It is sufficient for the purposes of this case, that there was, in fact, such delay, and that it proceeded from the cause alleged in the bill.”

The principle applicable here is well summarized by Mr. Beach in his work on Injunctions, Sec. 196, where he says: “ When the effect of an injunction is to deprive the party enjoined of the use of money which is due him, the interest thereon during the pendency of the injunction may be a proper measure of his damages. Thus, where a judgment creditor was enjoined from the collection of his judgment, and the injunction was dissolved as wrongful, the measure of his damage as against the sureties was held to be the interest on the judgment for the time the injunction was in force.”

No more lenient principle than this could be sanctioned by any principle of justice.

There has been a question in the argument, as to the time from which the undertaking operated as an indemnity to the judgment creditors. But the nature of the case and the object of the injunction would seem to be sufficiently plain to exclude all doubt on that subject. The undertaking was “to make good to the defendants, and each of them, all damages by them, or either of them, suffered or sustained by reason of wrongfully and inequitably suing out of the injunction in the above entitled cause,” etc. Not only what might, by possibility, be the result in the future, but what had and would be the result of the action of the complainants in staying and defeating the enforcement of the executions of the defendants, and withdrawing the only means by which the executions could be satisfied, and placing them in the hands of receivers, upon the allegation that the property was unduly and illegally seized. This was the object sought to be attained by the bill, and this was the object accomplished 'by means of the injunction, during the time of its operation. In treating of a similar proposition, in the case of Meyers v. Block, supra, the Supreme Court said:

“ The fourth assignment of error is that the court erred in holding that the bond, construed with the order requiring it, bound the obligors for damages sustained before it was given. The solution of the question raised by this assignment depends upon the fair construction of the order, and of the bond given in pursuance of it, and read (as it should be read) in the light of it. The order was ‘ that the injunction be maintained on the complaining creditors giving bond and security to save the parties harmless from the effects of said injunction.’ The last words clearly mean all the effects of the injunction. The condition of the bond was to pay ‘all such damages as he (the obligee) may recover against us in case it should be decided that the said writ of injunction was wrongfully issued.’ It seems plain to us that all the damages arising from the-wrongful issue of the injunctions were -intended to be covered by the bond as well as by the order; in other words, that the bond was intended and understood as a compliance with the requirements of the order. That is the natural and obvious meaning of its language when the two are read together; and the parties signing the bond must be presumed to have been cognizant of the order under which' it was given.

“It is unnecessary to review the authorities on this subject. It is undoubtedly true that a surety can not be held beyond the terms or legal effect of his engagement; and when that has respect to the conduct or fidelity of the principal or to any other matter usually contemplated as arising in the future, |it is to be interpreted prospectively, and not retrospectively. But if, from the nature of the case, the subject of guaranty is a past transaction in whole or in part, and the language of the engagement taken in its natural sense or legal effect is broad enough to cover it, such language may properly be construed to do so.”

The language of the order granting the injunction, and of the undertaking given in pursuance, of that order, would seem to leave no room for question as to the intent of the parties, or as to the comprehensive nature of the undertaking. It embraced all the damages occasioned by the operation of the injunction.

' Upon review of the whole case, we find no error in the decree appealed from and the same must be affirmed; and it is so ordered.

Decree affirmed.