In re New York, N. H. & H. R.

64 F. Supp. 487, 1945 U.S. Dist. LEXIS 1632
CourtDistrict Court, D. Connecticut
DecidedDecember 14, 1945
DocketNo. 16562
StatusPublished
Cited by3 cases

This text of 64 F. Supp. 487 (In re New York, N. H. & H. R.) is published on Counsel Stack Legal Research, covering District Court, D. Connecticut primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re New York, N. H. & H. R., 64 F. Supp. 487, 1945 U.S. Dist. LEXIS 1632 (D. Conn. 1945).

Opinion

HINCKS, District Judge.

These three banks were collateral note-holders when bankruptcy intervened. As secured creditors their appropriate treatment was originally considered by the Interstate Commerce Commission as an integral part of a plan proposed for the reorganization of the principal debtor. After successive modifications of a plan had come before this court I entered an order (Order No. 734, P. R. 11050), approving the plan contained in the Fifth Supplemental Order of the Interstate Commerce Commission, thus giving effect to the essential rulings as to the rights of these banks contained in my opinion of December 8, 1941. 54 F.Supp. 595, 609. Under this order, these claimants were recognized as secured only to the extent of the value of their collateral as determined in the subsequent stages of these proceedings. Fifth Supplemental Order, I.C.C., Sections J(14) (15) and (16) P. R. (10901).

However, on appeal the appellate court held that these pledgee-creditors were entitled to compensation for their loss resulting from an ex parte injunction entered at the inception of the proceedings (October 23, 1935) restraining them in common with all other collateral noteholders from disposing of their collateral pending further order of court: that the damage “resulting from” the injunction and “caused the banks should be made good to them and that they should be classified as secured creditors to the extent to which they could have realised on their collateral had they not been restrained from selling, and as unsecured creditors only for the amount by which the debts owing them exceed such realizable value of the collateral.” 2 Cir., 147 F.2d 40, 48.1

Consequently, so much of my decree as dealt with these creditors was reversed, and on motion of the debtor’s trustees the appellate court directed this court “to entertain claims in administration by said banks for damages resulting from the injunction and to allow said claims and provide for their payment in cash.” Id., 147 F.2d 53. Agreeable to this direction the [490]*490claims have been filed and the parties have been duly heard thereon.

In this situation the parties are in dispute as to the scope of the remand. The banks take the position that the appellate action was such as completely to dispose of the issue of liability; that this court is confined to an ascertainment of damages. The trustees, on the other hand, take the position that for present purposes the appellate action should be taken as an order of reversal with a direction for a new trial de novo with the issue of liability as well as the issue of damages still open. Feeling that the question thus raised was not free from doubt it seemed to me better to treat the petitions as submitted for trial de novo in the light of the appellate opinion and to admit any evidence desired by any party on both issues, so that if appeal results the appellate court may have before it a comprehensive record upon which it can indicate a final adjudication of the controversy.

Counsel for the trustees contends that the claimants by failure to appeal from the order of the injunction which had been entered by the court, even before trustees had been appointed, ex parte and “pending further order of court”, and by their failure to make seasonable motion for a lifting of the injunction or otherwise to make demand for a restoration of their contractual rights, were so guilty of laches or so bound by their apparent acquiescence in the resulting restriction upon their rights, that they are barred from all claim for damage. As my earlier opinion shows, I thought this contention had merit. But the appellate court ruled otherwise and I, at least, must take the appellate ruling as stating the law of the case.2

Counsel for the trustees also contends that under the appellate opinion the claimants, to recover, must prove that the injunction was the proximate cause of their losses and that, without proofs that they would have sold their, collateral if they had been free to do so, it cannot be said that that injunction was the proximate cause of their losses.

However, it is clear that the injunction was the proximate cause of the' loss to the [491]*491pledgees of their jus disponendi. And I construe the appellate opinion to mean that for such a loss they are entitled to compensation measured by what they could have realized, without proof that they would have elected to liquidate if they had been free to do so. Any intimations to the contrary, in Osage Oil Co. v. Chandler, 2 Cir., 287 F. 848, are I think overruled by the appellate decision here.

In cases of conversion generally the measure of damage is the value of the property converted: to recover that value the owner is not required to show what dispositions he would have made had the conversion not occurred. 65 C.J. 131. And if the wrongful detention of a chattel causes the owner to lose a ready market, the damage is recoverable. A.L.I. Restatement, Torts, Vol. 4, Pg. 674, without necessity for proof, I think, that the owner would have availed himself of that market but for the wrongful detention which prevented him. Even if the injunction here did not accomplish a conversion, the situation produced was at least strongly analogous.

The underlying principle, I apprehend, is founded upon the recognition of the fact that one having unqualified title to property, and indeed one having a qualified title with power of sale, has unfettered choice as to whether he will hold and enjoy the property or by sale obtain its equivalent in cash. When deprived of that right by a wrongful act, compensation dependent upon a perilous opportunity to show that he would have sold of his own volition is something less than full compensation.

Tims it is that in conversion cases involving property or fluctuating value the damages recoverable are the market value at the time of the conversion or the highest intermediate value between the notice of the conversion to the party injured and a reasonable time thereafter, whichever is higher. In re Salmon Weed & Co., 2 Cir., 53 F.2d 335, 79 A.L.R. 379. For an injured party to exact this higher measure of compensation it is not necessary for him to show that he had planned or intended to hold the property. Tudecd, often — perhaps generally' — -the intervention of a wrongful act is not foreseen and the victim has in readiness no conscious policy for his guidance through an unexpected situation. Notwithstanding, he is entitled to be restored to a position in which his range of elective action is as broad as under his original right.

And so I conclude that it was not through inadvertence that the appellate court, having ruled that the injunction was a wrongful infringement of the rights of the pledgees, said that they were entitled to what they “could” have realized: That whether they would have sold if free to do so was immaterial.

Before attempting further to apply the appellate opinion to the facts of this case, attention should be called to the fact that the note of each of these claimants contained an acceleration clause as a result of which each such note must be deemed to have come into default on October 23, 1935, when the petition for reorganization was filed. On that day also the injunction entered.

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Bluebook (online)
64 F. Supp. 487, 1945 U.S. Dist. LEXIS 1632, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-new-york-n-h-h-r-ctd-1945.