Hovey v. Rubber Tip Co. — 12 Abb. Pr. 360

Majority

p. 360

HOVEY against THE RUBBER TIP COMPANY.

New York Superior Court;

General Term, June, 1872.

Headnote

Injunction Damages.—Undertaking.

General counsel fees and costs paid in defense of an injunction suit are not to be included in the damages sustained by reason of the injunction, within the meaning of the ordinary undertaking, where other relief was sought beside the injunction. In such a case, if the injunction is not dissolved on application, but on the trial of the cause, the costs, &c., sought to be recovered, must be shown to have been incurred in respect to the injunction alone.

Appeal from an order.

This action was brought by Samuel D. and Elbridge S. Hovey, plaintiffs and respondents, against The Rubber Tip Pencil Company, defendants and appellants, and now came before the court on an appeal from an order denying motion to confirm the report of the referee, appointed to ascertain damages sustained by defendant, by reason of the injunction.

At the commencement of the suit, an ex-parte injunction was granted upon an undertaking, pursuant to section 222 of the Code, that the plaintiffs would pay to the defendant such damages as it may sustain by reason of the said injunction, if this court shall finally decide that the said plaintiffs were not entitled thereto, not exceeding five hundred dollars.

This injunction remained in force, until the trial of the action before Mr. Justice Jones, when judgment was recovered by the defendant dismissing the complaint, from which no appeal has been taken.

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An order was subsequently made, appointing a, referee to ascertain the damages sustained by defendant, by reason of the injunction, who, after hearing proofs, reported that said defendant is entitled to recover, upon said undertaking, the sum of five hundred dollars as damages sustained by reason of said injunction, which damages consisted of counsel fees incurred and expended by defendant, in obtaining a dismissal of the complaint, and which was reasonable in amount.

The report was filed, and a motion to confirm it heard before Mr. Justice Jokes, and December 31, 1871, an order was made by him, denying the motion.

Upon the decision of the motion, the following opinion was delivered:

Jones, J. This was an action in equity brought to procure a permanent injunction against defendants’ continuing to do certain acts which they were committing in violation, as it was alleged, of plaintiffs’ rights, and to recover damages for the acts already done.

At the commencement of the action, plaintiffs obtained, under sections 218 and 219 of the Code, a temporary injunction, to the same effect as the permanent one prayed for by the complaint, and upon obtaining such temporary injunction, gave the undertaking required by section 222.

The defendants answered the complaint. The issue joined was brought to trial, and the cause tried on the merits. The result of the trial was a judgment dismissing the complaint, and adjudging that plaintiffs were not entitled to the injunction prayed for.

After the entry of judgment, defendants, pursuant to the provisions of the undertaking, procured a reference, to ascertain the damages sustained by them, by reason of the injunction. On such reference, the ref

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eree assessed such' damages at a certain sum, being for general counsel fees in the cause. Defendants had made no motion to dissolve the temporary injunction.

The undertaking under which the questions here involved arise, is to the effect that plaintiffs will pay to the defendants such damages (not exceeding a specified amount), as they might sustain by reason of the temporary injunction, if the court should finally decide that the plaintiffs were not entitled thereto.

■ It is clear that the judgment rendered in this case was, within the meaning of the undertaking, a final decision by the court, that the plaintiffs were not entitled to the injunction ; and, it is also clear, that the effect of that judgment was to dissolve the temporary injunction.

The question presented is, whether general counsel fees paid or incurred in the defense of the action, come, within the provision of the terms of the undertaking as damages sustained by reason of the injunction?

This depends upon whether the defense was undertaken solely by reason of the existence of the injunction. I say solely, since if any other cause operated, the defense became necessary, whether there was an injunction or not, and the same liability for counsel fees would be incurred in that defense, whether there was the adjunct of the injunction or not.

Prima facie, an action is defended to prevent the defendant being either restrained from doing some act or acts, or compelled to do some act or acts ; or from being affected in his rights or interests in some property, real or personal, or mixed ; or adjudged liable to pay a sum of money; or estopped in any future litigation upon some matter involved, by the judgment to be rendered in such action.

If a defendant claims that he defended for none of these purposes, but solely for the purpose of vacating, by means of a judgment in his favor, an order or or

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ders made in the action before he puts in his defense; claiming, in fact, that but for such order or orders, he would not have defended, as in that ease it would be wholly immaterial to him what judgment was rendered, it is incumbent- on him to convince the court, by an argument drawn from the' allegations and prayer of the complaint, the averments of his answer and the provisions of the order complained- of, that such was the sole object of the defense.

The cases of Edwards v. Bodine, 11 Paige, 224; Aldrich v. Reynolds, 1 Barb. Ch., 613 ; Wilde v. Joel, 15 How. Pr., 329 ; Corcoran v. Judson, 24 N. Y., 106 , are not in conflict with the above views, but on the contrary, as I read them, are in accordance therewith. In Edwards y. Bodine, a motion to dissolve the injunction had been made, which was granted. The only counsel fee allowed, was one of one hundred dollars for arguing that motion, and so much of the taxable costs as were applicable to that motion (pp. 225, 227). The general taxable costs in the suit and general counsel fees were not allowed.

The case of Aldrich v. Reynolds is based solely on the decision in Edwards v. Bodine, and cannot be regarded as going beyond it. Although it does not distinctly appear that a motion to dissolve was made in this case, yet it is to be gathered from the language of the case, that such was the fact. For the case states that the master allowed the taxable costs of the defendant, in obtaining a dissolution of the injunction, and twenty-five dollars paid as extra counsel fee in obtaining such dissolution, which ruling of the master the chancellor affirmed. •

Similar language is used in Edwards v. Bodine, where he says, arguendo: “ The object of the court in requiring a bond in such cases will be best effected by giving to the language of the condition of the bond its natural sense; which will cover the necessary

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costs and counsel fees to obtain the dissolution of the injunction, as well as the damages which the party enjoined has otherwise sustained, during the time the injunction was in force.” What is intended by the phrase ‘ ‘ necessary counsel fees to obtain the dissolution of the injunction,” is shown by the decision modifying the vice-chancellor’s decretal order,' ‘ so as to allow the hundred dollars charged for the extra fees to the two counsel employed to argue the case, upon the motion for a dissolution of the injunction.”

The defendants have not in this case convinced me by any argument drawn from the allegations and prayer of the complaint, the averments of the answer and the provisions complained of, that the sole object of its defense was to procure, by means of a judgment, a vacation of the order of injunction.

An inspection of the pleadings shows, that plaintiffs claim to be the only persons authorized and empowered to manufacture and sell certain patented lead pencils, and seek a judgment against defendants restraining them from doing certain acts interfering with this sale of pencils, and for five thousand dollars damages.

The defendants, by their answer, claim that they are the owners of certain patents for the manufacture of certain lead pencils; that the letters patent under which the plaintiffs claim was only an alleged improvement on the patents of the defendants, and can be used only in connection with the inventions secured by the letters patent owned by them, the defendants, and can only be used with the consent and license of the defendants first obtained, which consent and license they have never given; and therefore they claim the right to do the acts complained of.

From this it is evident that even if no preliminary injunction had issued, the defendants would have found themselves obliged to defend. For if the action went by

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default, the judgment must necessarily have determined, as against defendant, the plaintiffs’ right to manufacture and sell as claimed by them, without any interference by or on behalf of defendants, other than by a regular action instituted to determine the rights of the parties.

If such a judgment would not be prejudicial, and for that reason it was unnecessary to defend the action, then the preliminary order was not prejudicial, and there was no necessity to defend the action to get rid of it.

But further than this, if no defense had been interposed, a judgment for damages might have been recovered against defendant.

The exposure to such a judgment called for a defense, wholly irrespective of the issuance of the preliminary injunction.

The motion to confirm the referee’s report must be denied, and his report wholly set aside and the counsel fees disallowed.

John H. Washburn, for defendants, appellants.

I. Counsel fees paid by defendant in obtaining a final decision that plaintiffs wére not entitled to the injunction, are, if reasonable, a proper item of damage. The language of the undertaking, following that of Code (section 222), is, that the plaintiff will pay “ such damages” to defendant “as it may sustain by reason of the said injunction, if this court shall finally decide that the said plaintiffs were not entitled thereto.” It is well settled that reasonable counsel fees, and expenses actually paid in obtaining a final decision, that the plaintiff was not entitled to the injunction, are proper items of damage to be allowed (Edwards v. Bodine, 11 Paige, 224; Aldrich v. Reynolds, 1 Barb. Ch., 613 ; Wilde v. Joel, 15 How. Pr., 329 ; Corcoran v. Judson, 24 N. Y., 106 ). The only question is, whether

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they were, in fact, paid in obtaining such final decision. There is nothing in either the Code or the undertaking, prescribing the manner or procedure by which such final'decision shall be obtained. It is admitted by plaintiffs that counsel fees paid in obtaining a dissolution of the injunction by motion, provided it is followed by final judgment, are allowable, but claimed to be limited to such; and that as, in the present case, there was no such motion, but the counsel fees allowed were paid in defense of the action generally, defendant cannot recover them. 1. The referee finds as a matter of fact, ‘ ‘ that this court did finally decide on the trial of this action, that said plaintiffs were not entitled to said injunction,” and “that the said defendant incurred and necessarily expended in obtaining such final decision “ expenses and counsel fees,” amounting to more than the sum specified in the undertaking ; and it was admitted by plaintiffs, and so reported, that they were reasonable (fols. 9, 10, 11, 33). It is urged that said findings of fact by the referee should be held conclusive. 2. If the question is to be considered open, then it is claimed, that the restriction of counsel fees to such as should be incurred in a special motion to dissolve, as claimed by plaintiffs, is supported by neither principle nor authority. A motion to dissolve, if successful, may be a part of the procedure by which such final decision may be obtained, but it is not conclusive (Methodist Churches v. Barker, 18 N. Y., 465 ; Childs v. Lyon, 3 Robt., 704). It follows, then, if plaintiffs’ theory be correct, that while entitled to counsel fees in an inconclusive motion, those reasonably expended in obtaining a final, direct, and necessarily conclusive decision, upon which, by the very terms of the undertaking, the right to any damages is made to depend, are not to be allowed. And that, should such motion to dissolve fail, and yet subsequently, upon the trial, it should be finally de

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cided that plaintiffs were not entitled to the injunction, yet defendant would be remediless. On the contrary, a dismissal of the complaint on the final hearing of the cause, includes, by force of the term itself and of the law applicable to it, a determination that the party was not equitably entitled to the injunction (Loomis v. Brown, 16 Barb., 325 ). A dismissal of the complaint undoubtedly dissolves the injunction (Disbro v. Disbro, 37 How. Pr., 148 ). 3. If the injunction were granted upon grounds independent of the cause of action, it might admit of some question, if a trial of the merits would be considered a decision of the right to the injunction : but where the issues as to the merits and the injunction are the same, it is urged that no question can properly be raised. But, in the present case, the cause of action and grounds of the injunction are identical, and the issues as to both one and the same. The decision upon the merits is not and does not involve the decision of any other issue or question, than is involved and must be decided in deciding whether the plaintiffs were or were not entitled to the injunction. The suit was commenced for the sole purpose of obtaining and continuing forever the injunction, and the defendant was made such solely to reach it by injunction. The terms of the injunction order and the prayer of the complaint are precisely the same, and if the latter be granted, the temporary injunction is included and justified. The right to the injunction is and must be directly decided by the decision upon the merits, and is not merely a result. And to decide that plaintiffs are not entitled to a perpetual injunction is to decide that they were not entitled to the temporary injunction. In such case it cannot be doubted that the general counsel fees of the defendant, reasonably incurred, should be allowed to the extent of the undertaking. 1 TUlinghast & Bhearmart s Practice, 728, in which it is said : “It would seem that if a party to the

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action is made such solely in order to reach him by the injunction, his general counsel fees should be allowed,”—citing Wilde v. Joel {supra). The complaint and prayer for damages does not affect the identity of the issues, nor afford valid reason to claim that such counsel fees were not expended in obtaining a decision that the plaintiffs were not entitled to the injunction. The right to damages claimed and their assessment depend entirely upon the prior decision, that plaintiffs are entitled to the injunction prayed for. The question of damages is not an issue upon the trial, but to be determined by a reference after trial and order for judgment. Indeed, as a general rule, it may be said that the jurisdiction for damages does not attach in equity except as ancillary'to the relief prayed for. 2 Story Eq. Jur., Redfield’s ed., § 799. The trial in the present case was simply upon the ‘question of whether plaintiffs were or were not entitled to an injunction against the defendants. The counsel fees expended by defendants were upon this question only. Of the cases relied on by plaintiffs before the referee (Town of Guilford v. Cornell, 4 Abb. Pr., 220 , and Strong v. De Forest, 15 Id., 427), the former in no respect sustains, but, on the contrary, substantially negates it. Judgment was rendered in favor of defendants, but an order made continuing the injunction pending appeal to the court of appeals. That appeal being unsuccessful, it was simply decided that the counsel fees incurred by defendants, in defending that appeal, could not be allowed under the undertaking, because the injunction was terminated by the judgment, and the order'continuing it was a new injunction, requiring a new undertaking. The subsequent counsel fees, upon the appeal, were, therefore, disallowed ; but the referee’s report was in all other respects confirmed. In the other case (Strong v. De Forest), which is not satisfactorily reported, a distinction appears to have been

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made between services relating to the injunction, and services generally in the case, and the report sent back because the distinction did not appear. The justice seems to have held, also, that counsel fees incurred in the mere “ preparation” of a motion to dissolve, which was, in fact, never made, are, nevertheless, allowable ; which is inconsistent with the decision in Childs v. Lyon (3 Robt., 704). The note appended to the report shows that the referee’s report, as amended and explained, was subsequently confirmed by another justice, for the full amount originally reported. It does .not appear in the report, whether the issues of the injunction and action were or were not the same ; but as counsel is informed, one of the attorneys in that case, Samuel Brown, Esq., 291 Broadway, states that they were not the same, but distinct; and further states that full counsel fees, in the case, were allowed, to the amount of the undertaking ; and, also, the expenses of both references, in addition. So far, therefore, as that case can be considered an authority at all, it does not apply to the present. The recent decision of the general term of the supreme court in this district, reverse ing the order confirming the referee’s report of such damages in the case of Andrews v. Grlenville Woolen Co., is equally inapplicable, for in that case, also, the issues of the injunction and action were not the same, but the injunction was simply a collateral protection ; the action being to compel payment to plaintiff, as receiver of the company, of a debt due it from the other defendants, and the injunction restraining the company from collecting it, pending the suit. Even in that case, the referee, Henry Niooll, Esq., allowed counsel fees incurred in a motion to dissolve, which was denied, and also in the subsequent trial of the merits, wherein the complaint was dismissed; and Judge Sutherland confirmed his report. Upon appeal to general term this was reversed, Judge Ingra-

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ham, in a short opinion, holding neither item properly chargeable : the first because the motion was denied ; and, as to the other, citing Strong v. Be Forest, supra, as holding the costs of trial of the issue not to form any grounds for damages on the undertaking. And an appeal from this decision is now pending in the court of appeals. It is urged that the restriction of the rule of damages claimed by plaintiffs, involves manifest inconsistencies and injustice, and is supported by no direct adjudication ; while that claimed by defendant is supported by both principle and substantial authority, and is the only rule by which defendant can obtain the indemnity, which, by the fair construction of the law, it is entitled to, and is intended to be given.

II. Should the court, confirm the report, it is claimed that under all the decisions, in addition to the damages reported, the referee’s fees are to be allowed; and, also, the costs of the motion. Defendants are, also, entitled to a reasonable counsel fee upon this proceeding (Willett v. Scovil, 4 Abb. Pr., 405 ).

III. On the confirmation of the report, judgment may be ordered directly against the sureties in the undertaking, without compelling defendants to resort to a regular action upon the undertaking (Willett v. Scovil, supra). It is true that in Wilde v. Joel, supra, Judge Hoffmah, in alluding to this question, but without deciding it, expressed the opinion that it was ■safest to bring an action on the undertaking; but when, some years later, the same learned judge published his Treatise on Provisional Remedies, he remarked as to this (p. 333) : “ I have not met with any other authority to this effect. There is an impression with the bar that it can be done” (See, also, Methodist Churches v. Barker, 18 N. Y., 465 ; Dickerson v. Cook, 3 Duer, 324 ).

Ambrose Monell, for plaintiffs, respondents.

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The defendant has not shown that it has sustained any damages by reason of the injunction obtained by the plaintiffs (Town of Guilford v. Cornell, 4 Abb. Pr., 220 ). In the case of Strong v. De Forest (15 Id., 427), the facts of the case are sufficiently disclosed in the opinion (And see Coates v. Coates, 1 Duer, 664 ; Wilde v. Joel, 15 How. Pr., 220 ; Edwards v. Bodine, 11 Paige, 223; Childs v. Lyons, 3 Robt, 704).

The complaint in this action, in addition to seeking relief by an injunction, also set up that the plaintiffs have been injured by the defendants’ acts and sustained damages to the extent of five thousand dollars, and demands judgment against the defendant to that amount.

It is clear that counsel fees are to be allowed when they have been incurred in a successful motion to dissolve the injunction (Coates v. Coates, 1 Duer, 664 ).

It also appears that reasonable counsel fees, and expenses paid in obtaining a final decision that the plaintiff was not entitled to the injunction, are proper items of damage to be allowed.

The question for consideration is, whether the counsel fees and costs paid by the defendant during the litigation including the trial, and which were allowed by the referee as damages by reason of the injunction, were paid in obtaining a decision that the plaintiff was not entitled to the injunction.

The pleadings and the evidence do not satisfactorily show that such payments were made in obtaining a dissolution of the injunction. The claim for damages made by the plaintiff was an element in the case, and which, irrespective of the demand for an in-' junction, has to be met, and prepared for. The pleadings in this suit and the defenses of it, so far as it appears in the present proceedings, involved other is

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sues and controversies than what relate simply to the relief sought by way of injunction, and it is apparent that it was defended for other reasons than simply to procure a dissolution of the injunction order. The sums paid as counsel fees by the defendant, were not incurred in obtaining a dissolution of the injunction, but in the general defense of the suit. This does not bring them within the rule established in Coates v. Coates ( 1 Duer, 664 ). •

The referee does not find what the services of counsel, if any, in dissolving the injunction, were worth, nor what sums, if any, were paid for such services, nor does he find that any fees were paid them, as distinguished from-the general fees paid them for services in the general defense of the suit. Neither the referee nor the court have the evidence before them, that enbles them to decide what was actually paid by the defendant for services to obtain a dissolution of the injunction, and unless this does appear clearly, it seems to be settled, that the defendant cannot sustain a claim to be allowed this as damages (Strong v. De Forest, 15 Abb. Pr., 427 ; Town of Guilford v. Cornell, 4 Id., 220; Child v. Lyon, 3 Robt., 754; Wilde v. Joel, 15 How. Pr., 320 ; Edwards v. Bodine, 11 Paige, 223).

A departure from that rule might, in some cases, affect plaintiffs oppressively. There is no reason to think that it was the intention of the legislature that an unsuccessful plaintiff, because he had, as one branch of his relief, asked for an injunction, should, in addition to the payment to the defendant of the costs and allowances provided by the Code, be mulcted in the counsel fees paid in the general defense of the suit.

I concur in the views of the learned judge who made the order appealed from, and which should be affimed, with costs to the plaintiff.

Sedgwick, J,, concurred.

Footnotes

* Present, Cuetis and Sedgwick, JJ.