BROCCOLI v. INSURANCE COMPANY OF NORTH AMERICA

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Court of Appeal, First District, Division 1, California.

Albert R. BROCCOLI et al., Plaintiffs and Appellants, v. GOLDEN RULE CHURCH ASSOCIATION, Defendant and Appellant; INSURANCE COMPANY OF NORTH AMERICA, Real Party in Interest and Appellant.

Civ. 39949.

Decided: September 15, 1977

Rawles, Hinkle, Finnegan, Carter & Petersen, Jared G. Carter, Ukiah, for plaintiffs and appellants and real party in interest and appellant. Howard B. Crittenden, Jr., San Francisco, for defendant and appellant.

Insurance Company of North America (hereafter ‘Surety’) was the surety on the written undertaking of Albert and Dana Broccoli, under which it agreed to pay the Golden Rule Church Association (hereafter ‘Association’) such damages as it might sustain by reason of the entry of a certain preliminary injunction ‘if the court finally decides that the [Broccolis were] not entitled thereto.’ (See Code Civ.Proc., § 529.) The preliminary injunction prohibited a private sale under a deed of trust, of certain land in Mendocino County.

The Association appealed from the order granting the preliminary injunction. (See Code Civ.Proc., § 904.1, subd. (f).) The Broccolis chose not to appear on that appeal, or to file a brief therein. Division Four of this court thereafter in an unpublished opinion holding that the Broccolis were ‘not entitled thereto,’ reversed the ‘order granting a preliminary injunction . . ..’ That adjudication is now final for all purposes (see rule 24(a), Cal.Rules of Court; 6 Witkin, Cal.Procedure (2d ed. 1971) Appeal, § 513(b), p. 4462); the doctrine of res judicata applies, and the issue there decided “is conclusively determined as to the parties or their privies . . ..' (Martin v. Martin, 2 Cal.3d 752, 758, 87 Cal.Rptr. 526, 530, 470 P.2d 662, 666; Bernhard v. Bank of America, 19 Cal.2d 807, 810, 122 P.2d 892.)

Following filing of the remittitur on the earlier appeal the Association conducted a sale of the subject property under the deed of trust; the sale's price was $392,000 which was the amount due on the underlying obligation.

Thereafter the Association moved, under Code of Civil Procedure section 535, for judgment against Surety for the damages sustained as a result of the preliminary injunction. Judgment in favor of the Association and against Surety was thereafter entered in the amount of $46,200 with interest from the date of the judgment.

Surety, and the Broccolis, have appealed from the whole of the judgment.1 The Association has appealed from that portion of the judgment which denied it interest from the date of the filing of the remittitur on the earlier appeal.

We consider first the appeal of the Broccolis and Surety (hereafter the ‘Appellants').

Their first contention is stated as: ‘The trial court erred in hearing and rendering judgment on this motion pursuant to C.C.P. § 535 because the main action has not been finally decided.’

We are thus confronted with the problem arising from certain decisional authority and language of Code of Civil Procedure section 535 under whose purported authority the Association obtained the judgment here at issue.

Section 535 provides, as here relevant: ‘After trial and final decision that the party in whose behalf such restraining order or injunction was issued was not entitled thereto, the liability of such party and his surety or sureties, if any, may be enforced on motion filed in the trial court, without the necessity of an independent action.’ (Emphasis added.) Appellants contend that this language must be read as meaning ‘After trial [of the main action] and final decision that the party in whose behalf such restraining order or injunction was issued was not entitled thereto, . . .’

This contention appears supported by some decisions of the state's appellate courts. Clark v. Clayton (1882) 61 Cal. 634 concerned a factual context where “defendant's counsel moved the Court to dissolve the injunction heretofore issued herein; and plaintiff's counsel not opposing, the motion was granted.” The principal action in which the injunction had been issued ‘had not been finally disposed of, but was still pending.’ An action was then brought on ‘an undertaking for injunction,’ following which a judgment of nonsuit in that action was entered. The high court, on appeal, was of the ‘opinion that the action was prematurely brought, and the nonsuit was properly granted’ (p. 638). The same court reaffirmed its conclusion in Dougherty v. Dore (1883) 63 Cal. 170, 172, saying: ‘On the whole we are satisfied with the decision of Clark v. Clayton, . . .’ The remaining related decision coming to our attention is Nuclear Electronic Laboratories, Inc. v. William C. Cornell Co. (1965) 239 Cal.App.2d 8, 11, 48 Cal.Rptr. 416, 419, where the court reiterated the earlier rule of Clark v. Clayton, supra, stating: ‘Where a preliminary injunction supported by a bond has been issued and dissolved but the action in which it was granted is still pending for trial, an independent action brought upon the bond is premature and the defendant in such action is entitled to move for a nonsuit. (Clark v. Clayton, supra.)’

But there is contrary authority.

The undertaking here at issue was written pursuant to, and incorporated the identical provisions of, Code of Civil Procedure section 529. That statute requires the surety's written agreement ‘that he will pay to the party enjoined such damages, not exceeding an amount to be specified, as such party may sustain by reason of the injunction, if the court finally decides that the applicant was not entitled thereto.’ As will hereafter be seen, it bears emphasis that section 529's requirement is only for a final judicial determination that the applicant was not entitled to the injunction; there is no requirement of a trial and final decision in the principal action.

Following Clark v. Clayton, supra, 61 Cal. 634, the state's Supreme Court was confronted with a related problem in Asevado v. Orr (1893) 100 Cal. 293, 34 P. 777. There, without mention of Clark v. Clayton, or any requirement that the principal action be terminated before liability may arise upon an undertaking for an injunction, the appropriate rule was stated (p. 299, 34 P. p. 779) in this manner: ‘Their [the sureties'] liability depends simply upon proof that the injunction was issued, that the defendants suffered damages thereby, and that the court has decided that the plaintiff was not entitled to the injunction.’

Other cases holding that the requirement is only that the trial court finally determine that the plaintiff was not entitled to the injunction follow.

Heim v. Mooney (1913) 23 Cal.App. 233, 239, 137 P. 616, 618: ‘The engagement of a surety on an injunction bond is ‘to the effect that he will pay to the party enjoined such damages . . . as such party may sustain . . . if the court finally decides that the applicant was not entitled thereto.’ (Code Civ.Proc., sec. 529.)'

Wilshire Mortgage Corp. v. Graybeal Co. (1940) 41 Cal.App.2d 1, 6, 105 P.2d 996, 999: ‘A surety's liability is measured by the terms of his bond. In the instant case both the undertaking given upon issuance of the temporary restraining order and the injunction pendente lite provided in plain and unequivocal language that the surety, in the case of the temporary restraining order, ‘will pay to the said parties so enjoined such damages not exceeding the sum of Five Thousand ($5,000.00) Dollars as such parties may sustain by reason of the said temporary restraining order if the said Superior Court finally decide that the said plaintiff was not entitled thereto’; and in connection with the injunction pendente lite the terms of the undertaking provided ‘that in case said Injunction Pendente Lite shall issue, and said plaintiff will pay to the said party so enjoined such damages, not exceeding the sum of Five Thousand and no/100 ($5,000.00) Dollars as such party may sustain by reason of the said Injunction Pendente Lite if the said Superior Court finally decide that the said plaintiff was not entitled thereto’. Until, therefore, a final determination was had showing that the injunction was wrongfully issued, or until by its conduct in dismissing the action the principal, in effect, conceded it was not entitled to the injunction, no liability could attach to the surety under the terms of the bonds herein.'

Edwards v. Container Kraft Carton etc., Co. (1958) 161 Cal.App.2d 752, 761, 327 P.2d 622, 627: ‘Malicious prosecution is not of the essence of recovery upon the injunction bonds. All that is necessary thereto is a final judgment dissolving the injunction plus proof of damage therefrom.’

Russell v. United Pacific Ins. Co. (1963) 214 Cal.App.2d 78, 87, 29 Cal.Rptr. 346, 351: “The liability of sureties on an injunction bond depends simply on proof that the injunction was issued, that the defendant suffered damage thereby, and that the court has decided that the plaintiff was not entitled to the injunction.”

Nuclear Electronic Laboratories, Inc. v. William C. Cornell Co., supra, 239 Cal.App.2d 8, 48 Cal.Rptr. 416. This is the above cited authority which quoted, without relying upon, the case of Clark v. Clayton, supra, 61 Cal. 634. Elsewhere the court observed the rule of Asevado v. Orr, supra, 100 Cal. 293, 299, 34 P. 777 by stating (p. 11, 48 Cal.Rptr. pp. 418–419): ‘In order to recover upon the bond, the plaintiff must show that he sustained damages as the result of a temporary injunction or restraining order issued in a prior action and that such action resulted in a final judgment determining that the party who obtained the injunctive relief was not entitled thereto.’

The rule to be distilled from these authorities is tersely stated in the case of Sheridan County Electric Co-op. v. Ferguson (1951) 124 Mont. 543, 227 P.2d 597, 600, 601, as follows:

‘No cause of action arises upon the injunction bond until it is finally determined that the injunction ought not to have been granted and both the bond and the statute so provide.

‘The final determination may be by a final judgment of the court or something equivalent thereto but after such final determination the sureties are bound thereby. . . .

‘It is immaterial whether the final decision is accomplished without a trial on the merits, . . .’

And in the same vein, in was stated in Union Springs Telephone Company v. Green (1971) 47 Ala.App. 427, 431, 255 So.2d 896, 899–900:

‘We do not hold that a hearing on the merits is necessary in the event of dissolution of a temporary injunction on a motion to dissolve in order for there to be liability on the dissolution bond, rather we hold to the contrary. Application for a temporary injunction is an extraordinary proceeding, and such injunction is issued ex parte, and only upon petitioner entering into bond conditioned to pay all damages and costs which any person may sustain by the suing out of such injunction if the same is dissolved. . . . There is a right of appeal from the decree of dissolution. By filing the application and the required bond the applicant takes his chance that there may be dissolution upon motion. He has, by making the bond, entered into a contract that in the event there is dissolution the bond becomes due for damages resulting from the issuance of the injunction. Upon breach of the condition of the bond a right of action thereon arises immediately. The right of action on the bond is conditioned only upon a legal dissolution of the injunction. It matters not whether such dissolution comes upon a motion to dissolve or a hearing upon the merits. In requesting the extraordinary relief of a temporary injunction and making the bond the applicant in colloquial language ‘pays his money and takes his chances.’ There is no right of defense on the ‘merits' to the action for damages on the bond after ‘dissolution’ of the injunction.'

We are of the opinion that the claimed inconsistency between Code of Civil Procedure section 529 stating that liability arises when ‘the court finally decides that the applicant was not entitled thereto’, and section 535's recital that such liability arises ‘after trial and final decision’ that he was ‘not entitled thereto,’ may reasonably be reconciled. ‘[T]wo enactments relating to the same subject matter should be construed to avoid conflict between them where it is reasonably possible to do so.’ (Garrick v. Board of Pension Commissioners (1971) 17 Cal.App.3d 243, 246, 94 Cal.Rptr. 598, 600.) Section 535's ‘trial and final decision’ may reasonably be interpreted to mean ‘trial [or hearing] and final decision’ on one's right to a preliminary injunction. Here Appellants were accorded the right to such a hearing and final decision by Division Four of this court. It is of no moment that they chose not to participate in that hearing.

We are of the opinion, from the foregoing authority, and we hold it to be the law of this state, that a surety's liability for damages on an undertaking for a preliminary injunction arises at such time as the court ‘finally decides that the applicant was not entitled thereto.’ And where such an injunction is ancillary to a principal actions the surety's liability is not necessarily postponed until determination of that action.

We have considered Appellants' insistent argument that, despite the final decision of Division Four of this court on the earlier appeal, the record nevertheless established their right to the preliminary injunction. But by their failure to appear or file a brief on that appeal the court was permitted to accept as true the statement of facts of the Association's opening brief, and to assume that the latter's points were well taken and therefore reverse the judgment. (6 Witkin, Cal. Procedure (2d ed. 1971) Appeal, § 439, p. 4403, and see authority there collected.) And in any event, even though it may have been erroneous, the reviewing court's determination that the Broccolis were not entitled to the preliminary injunction is now a conclusive and binding adjudication of that issue.2 (See Ryerson v. Riverside Cement Co. (1968) 266 Cal.App.2d 789, 792–794, 72 Cal.Rptr. 595; Grable v. Grable (1960) 180 Cal.App.2d 353, 359–360, 4 Cal.Rptr. 353 [cert. den., 364 U.S. 892, 81 S.Ct. 222, 5 L.Ed.2d 187]; 4 Witkin, Cal. Procedure (2d ed. 1971) Judgment, § 158, p. 3303.)

Moreover, we observe that most of Appellants' arguments, including those claiming a ‘denial of due process,’ the Association's failure to exercise its ‘option to accelerate,’ and that this court's earlier decision ‘was not supported by evidence in the record on appeal,’ are not timely. They should have been made on the earlier appeal where the points at issue were finally decided; they are not subject to relitigation on this appeal.

Appellants next contend that the superior court erred in fixing the Association's damages.

‘It is well settled the damage recoverable under an injunction bond . . . is for all loss proximately resulting from the injunction; the factors to be considered in determining the loss depend upon the circumstances of the case; the measure of damage will vary with those circumstances; arbitrary rules do not govern; equitable principles are applied; and the allowance, although often difficult to measure accurately, should furnish just and reasonable compensation for the loss sustained.’ (Surety Sav. & Loan Assn. v. National Automobile & Cas. Ins. Co. (1970) 8 Cal.App.3d 752, 757, 87 Cal.Rptr. 572, 575.)

The court found that the land covered by the Association's trust deed was finally sold under the instrument's power of sale for $392,000. Interest at the rate of 6 1/2 percent per annum on that amount, during the period the sale was enjoined, was allowed as damages. The allowance was reasonable and equitable, for had the sale not been enjoined, it will reasonably be concluded that the Association would have earned interest during that period on the sale price.

The real estate taxes upon the land paid by the Association during the period of the injunction were also properly allowed as damages. Had the sale of the land not been enjoined those taxes would obviously have paid by the purchaser.

And the allowance of $3,000 for attorney fees for services in setting aside the preliminary injunction appears to be within the limits of reason, and was properly allowed the Association as damages. It is sufficient that the Association incurred an obligation for attorney fees; there need not be proof, according to current authority, that such fees have already been paid. (Allen v. Pitchess (1973) 36 Cal.App.3d 321, 327, 111 Cal.Rptr. 658.)

Appellants contend that the trial court erroneously computed the period of the injunction at 18 months, instead of 3 weeks less than that period of time. It is noted that the court fixed the Association's damages at $54,510, but gave judgment against Surety for $46,200, the amount of its undertaking. Were we to assume the validity of the instant argument, Appellants were nevertheless not prejudiced, for Surety would in that event also be liable in the full amount of its undertaking.

Nor do we observe error in the trial court's refusal to allow evidence of the land's market value at the time of its belated sale under the trust deed. The offer was denied because ‘the sale was duly and regularly held and noticed [a fact supported by the evidence], and therefore the amount of the bid at sale will be considered as controlling.’ On such a regularly held and noticed sale the beneficiary will be deemed to ‘have received the amount of its bid which equates the payment of money.’ (Surety Sav. & Loan Assn. v. National Automobile & Cas. Ins. Co., supra, 8 Cal.App.3d 752, 758–759, 87 Cal.Rptr. 572, 576.) It may not reasonably be established, at least in the absence, as here, of fraud, by expert testimony of the land's market value that the beneficiary in fact received more, or less, than the amount of his bid.

We find the damages awarded the Association to have been properly allowed according to the standards of Surety Sav. & Loan Assn. v. National Automobile & Cas. Ins. Co., supra, 8 Cal.App.3d 752, 759, 87 Cal.Rptr. 572.)

We consider now the cross-appeal of the Association. The sole contention is that interest should run ‘from the date of the Appellate Court Judgment, [and not] from the March 31, 1976, judgment on the injunction bond, . . .’ The contention lacks validity. Until the Association's claim for damages was liquidated by the judgment, the amount was neither ‘certain [nor] capable of being made certain by calculation, . . .’ In such a case interest will not be allowed. (Civ.Code, § 3287; and see Garrie v. McCauley (1958) 163 Cal.App.2d 273, 276, 328 P.2d 1013.)

From all of the foregoing it appears that the judgment of the superior court should be affirmed, as rendered.

The judgment is affirmed. Defendant Golden Rule Church Association will recover its costs of appeal from plaintiffs Broccoli and real party in interest Insurance Company of North America.

FOOTNOTES

1.  Although the judgment runs against Surety alone, the Broccolis claim to be parties aggrieved (see Code Civ.Proc., § 902), since they must indemnify Surety for such amount, if any, as it shall be obliged to pay under the judgment.

2.  We, of course, need not and do not determine whether the record on the earlier appeal established the Broccolis' right to a temporary injunction, or whether the decision on that appeal was otherwise erroneous.

ELKINGTON, Associate Justice.

RACANELLI, P. J., and WEINBERGER (Retired judge of the superior court sitting under assignment by the Chairperson of the Judicial Council), J., concur.

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