RUSSELL v. UNITED PACIFIC INSURANCE COMPANY (1962)

These two actions find their source in a prior action (Butler v. Holman, 146 Cal.App.2d 22, 303 P.2d 573 cert. den., 353 U.S. 930, 77 S.Ct. 718, 1 L.Ed.2d 723).

The estate of Aaron B. Butler, deceased, owned a parcel of unimproved realty near Coalinga, California. Jack M. James, Andrew J. Thickstun, and their respective wives, located the ‘Mistake Lode Mining Claim’ on a lode deposit of chrome ore on the Butler property under the erroneous belief that the land was a part of the public domain. In October 1952 the locators leased to J. R. Holman, who entered into possession, developed the mine and commenced mining operations.

On June 24, 1955, the executors of the Butler estate, hereinafter referred to as ‘Butler,’ sued Holman, Thickstun and James, hereinafter referred to as ‘Holman group,’ for recovery of the land, an accounting, demages and injunctive relief.

A few days later, on July 1, 1955, Butler leased the mine to G. M. Russell, R. W. Russell and E. F. Chambers, hereinafter designated as ‘Russell-Chambers.’

On July 5, 1955, the Holman group cross-complained against Butler to quiet title to the land and for injunctive relief, bringing in Russell-Chambers as cross-defendants, and obtained an ex parte temporary order restraining all cross-defendants from entering upon or interfering with the mine, upon filing a $5,000 bond issued by The Travelers Indemnity Company.

On July 22, 1955, after a vigorously contested hearing, the injunction sought by Butler was denied, and the Holman group obtained the preliminary injunction based on their cross-complaint, enjoining Butler and Russell-Chambers from entering upon or interfering with the mine and filed a $100,000 bond issued by United Pacific Insurance Company.

Upon a nonjury trial, there was a judgment for Butler against the Holman group for damages to October 3, 1955; the right was reserved to Butler to file an additional suit for damages and an accounting for an unknown quantity of ore mined subsequent to October 3, 1955, and either stockpiled in Holman's possession or sold by him. Judgment was rendered November 22, 1955, and entered December 13, 1955.

Upon being advised of rendition of the judgment the Holman group on November 23, 1955, surrendered possession of the property and mine to Butler but refused to deliver up the stockpiled ore. Holman subsequently milled and sold the stockpiled ore and retained the proceeds thereof.

The two actions here involved followed. Russell-Chambers sued in three counts, the first against Holman, Thickstun and James, seeking damages for ore converted, an accounting, attorneys' fees, and other incidental expenses not pertinent here; the second against United Pacific, seeking to recover $100,000; and the third against Travelers, seeking to recover $5,000.

Butler sued the same individual and corporate defendants, seeking to recover damages for ore converted, interest, attorneys' fees and an accounting from the individual defendants and the face amount of their respective bonds from the corporate defendants.

These two actions, consolidated for trial, were tried to the court sitting without a jury. Following trial, the court found that the temporary restraining order and preliminary injunction were valid in form, and the only method by which they could be terminated was trial on the merits; that defendants Holman, Thickstun and James were not entitled to the preliminary injunction; that Butler was entitled to $12,500 attorneys' fees, allocable $1,500 to the restraining order and $11,000 to the preliminary injunction, and damages of $8,536.22, being 7 per cent royalty reserved under the Butler to Russell-Chambers lease calculated on Holman's profit after October 3, 1955; that Russell-Chambers were entitled to attorneys' fees of $2,500, allocable $900 to the temporary order and $1,600 to the preliminary injunction; $2,165 surveyors' fees, allocable $663.50 to the temporary injunction and $1,501.50 to the preliminary injunction, and $45,255.89 principal.

Butler had judgment against all of the individual defendants for $8,536.22 principal and $12,500 attorneys' fees; against Travelers for $1,500 and against United Pacific for $19,536.22 ($8,536.22 principal and $11,000 attorneys' fees), the judgments on the bonds, if paid, to be set off against the individual judgments.

Russell-Chambers had judgment against all of the individual defendants for $45,225.89, attorneys' fees of $2,500 and surveyors' fees of $2,165; against Travelers for $1,563.50 ($663.50 surveyors' fees and $900 attorneys' fees); and against United Pacific for $48,357.39 ($45,255.89 principal, $1,600 Attorneys' fees and $1,501.50 surveyors' fees), with a similar set-off provision.

No interest prior to the date of the judgment was allowed.

All parties, with the exception of Jack M. James and Lavonna James, filed notices of appeal. Travelers, Holman, Thickstun and Thickstun failed to file or join in filing an opening brief, and their appeals must be dismissed. (Cal. Rules of Court, rule 17(a).) Butler and Russell-Chambers presented joint briefs. The net result for our consideration is an appeal by defendant United Pacific as to the judgments against it, with plaintiffs Butler-Russell-Chambers resisting, and a cross-appeal by Butler-Russell-Chambers, with United Pacific resisting. For convenience, we shall refer to United Pacific as defendant, and to Butler-Russell-Chambers as plaintiffs.

Appeal of United Pacific

By the terms of the bond which supported the preliminary injunction, defendant undertook to pay to the plaintiffs in this action, who were cross-defendants in the injunction suit, such damages, not exceeding the sum of $100,000, ‘* * * as said parties may sustain by reason of the said injunction if the court finally decides that the cross-complainants be not entitled thereto.’ The statutory language of section 529 of the Code of Civil Procedure, providing for an undertaking upon the granting of an injunction, is substantially similar.

Defendant's first group of contentions and arguments require a determination of whether, in the light of the particular facts here present, judgment on the merits constitutes a ‘final decision’ within the meaning of the terms of the bond.

Many of the cases to which we have been referred require but brief comment. They are not determinative of our problem. For example, Asevado v. Orr, 100 Cal. 293, 34 P. 777, involved a voluntary dismissal by the plaintiff which the court deemed to be a confession that he was not entitled to the injunction and permitted recovery. In Fowler v. Frisbie, 37 Cal. 34, an order dissolving an injunction was held to be a prima facie adjudication that there was no foundation for the injunction, and recovery was allowed. In Wilshire Mortgage Corp. v. O. A. Graybeal Co., 41 Cal.App.2d 1, 105 P.2d 996, a dismissal entered by stipulation of the parties was deemed to be neither a confession nor an adjudication that the injunction was wrongfully issued, and the court properly denied recovery. In none of those cases was judgment on the merits considered.

Defendant cites and relies upon the case of Curtiss v. Bachman, 110 Cal. 433, 42 P. 910. There the court held that a successful motion to dissolve an injunction obtained ex parte, or a successful appeal from an order granting an injunction, after notice and hearing, gives rise to liability on the bond for damages, but if the defendant, instead of attempting to rid himself of the restriction, seeks to prevent the issuance of a permanent injunction or elects to defend the action on the merits, the expense of counsel fees thus incurred is an incident of suit and not recoverable as damages sustained by reason of the injunction. (See also Bustamente v. Stewart, 55 Cal. 115; Lambert v. Haskell, 80 Cal. 611, 22 P. 327.)

However, in the later case of Reachi v. National Auto. & Cas. Co., 37 Cal.2d 808, 236 P.2d 151, the California Supreme Court recognized and restated the general rule that expenses incurred in the defense of a prior attachment suit are not recoverable in a subsequent action on the bond, if the attachment might have been vacated on proper motion without incurring such expenses, but held that such expenses are recoverable items of damages in an action on the bond where the attachment is not subject to a motion to vacate or dissolve it, being valid and regular on its face, and it is necessary to defend that main action in order to defeat the attachment. Defendant's arguments that the Reachi rule, laid down in an action on an attachment undertaking, is inapplicable to this case arising on an injunction bond are without merit. With respect to allowances for incidental expenses incurred by reason of a wrongful levy of attachment or wrongful issuance of an injunction, the courts of this state have applied the same principles. Cases arising on injunction bonds and cases arising on attachment bonds are cited without any distinction being made (Reachi v. National Auto. & Cas. Co., supra; Le Fave v. Dimond (dicta), 46 Cal.2d 868, 871, 299 P.2d 858, 60 A.L.R.2d 939; Ideal Heating Corp. v. Royal Indem. Co., 107 Cal.App.2d 662, 237 P.2d 521). Neither logic nor public policy would be served by a datermination that recovery will be permitted a plaintiff in an action on an attachment undertaking and denied a plaintiff in an action on an injunction bond where, in each case, it was necessary to defend on the merits in order to rid the plaintiff of the wrongful attachment or preliminary injunction.

We paraphrase the Reachi rule: Where it is necessary to defend on the merits in order to defeat a preliminary injunction, judgment after full trial against the party who obtained the preliminary injunction is, in effect, tantamount to an adjudication that he was not entitled to any injunctive relief at any time, and that thereupon a right of action upon the injunction bond accrues in favor of the party enjoined. (See also Robinson v. Fidelity & Deposit Co., 5 Cal.App.2d 241, 42 P.2d 653; Rice v. Cook, 92 Cal. 144, 147, 28 P. 219; 27 Cal.Jur.2d, Injunctions, § 108, p. 233.) As to the accrual of liability and right of action on the bond, there is no distinction ‘* * * whether the single relief of injunction is sought and a temporary injunction secured pending the disposition of the case, or whether the temporary injunction is merely ancillary to a different remedy.’ (28 Am.Jur., Injunctions, § 388, p. 853.)

In our case the order for issuance of the preliminary injunction was granted after a full and contested hearing; the injunction was valid and regular on its face; and an appeal from the order obviously would have been futile. There was no method provided by law whereby plaintiffs could have been relieved of the restraint save by trial on the merits. It is clear that this case falls squarely within the rule of Reachi. We conclude that judgment after trial on the merits in the injunction suit constituted a ‘final decision’ that the Holman group was not entitled to the preliminary injunction.

Defendant next contends that the direct damages, i. e., damages for the value of ore mined by Holman during the life of the bond and subsequently sold by him, may not be recovered in an action against it on the bond for the reason that such damages were not proximately caused by reason of the injunction. In support of its contention, defendant argues that a showing that damages occurred during that a showing that bond is not sufficient to cause liability to attach; the proof must disclose that such damages occurred by reason of the injunction and bond. This contention is sound and requires modification of the judgment.

The recovery of damages is founded on equitable principles, and only such damages as were the ‘actual, necessary, and proximate result of the injunction during the time it was operative’ (43 C.J.S. Injunctions § 309, p. 1091) should be allowed. While a court should be zealous in imposing liability for a hazard the surety assumes, it should be equally zealous in protecting the surety's right to be free from liability for damages not occurring within the scope of the surety's contractual obligation. As has often been said:

‘* * * a surety on an official bond undertakes no liability for anything which is not within the letter of his contract. The obligation is strictissimi juris; that is, he has consented to be bound only within the express terms of his contract and his liability must be found within that contract or not at all.’ (Krebs v. Travelers Indem. Co., 192 Cal.App.2d 83, 85, 13 Cal.Rptr. 352, 353; Bank of America v. Dowdy, 186 Cal.App.2d 690, 692, 9 Cal.Rptr. 779.)

With these principles in mind, we turn again to the record.

It must be remembered that Holman had been continuously in actual possession of and conducting mining operations upon the land, under a good faith but mistaken claim of right, for more than two years prior to the filing of suit by Butler and prior to the time defendant issued the bond. The principal issue at the hearing on the applications of both sides for a prelinary injunction and the principal issue at trial on the merits was the establishment of a boundary line, the location of which had been lost with the passing years. This is not the typical case of an owner with clear title to land having well-defined and well-known boundary lines who might lawfully have ousted a trespasser but for the injunctive restraint. Rather, it is a case where the claimed right to possession and ownership of Butler-Chambers and the same right claimed by the Holman group depended upon the position in which the court in the injunction suit, after lengthy trial, the taking of expert testimony and the consideration of conflicting surveys, placed the southern boundary line of the real property in dispute. We cannot hold that one of two persons, each claiming a bona fide ownership interest in land, which claims are of such a nature that they can be determined only by judicial decree may, prior to that determination, be permitted and encouraged by the law to wage a deadly combat, if necessary, to gain entry to the claimed land.

What we have here said applies with equal force to Butler's lessees. The lease whereby their interest in the land was acquired conferred upon them no greater right to obtain actual possession than was enjoyed by Butler at the time the lease was made.

We shall not unduly lengthen this opinion by discussing the various cases to which plaintiffs have referred us for the purpose of showing, as it may thus be shown, that they are inapposite when applied to the facts of this case. In each there was a showing that the party enjoined sustained damages because the injunction either ousted him from the possession of property or restrained him from utilizing property in his possession. Our case does not fit within the mold cast by decisions dealing with either of those situations.

Nor do the cases of Walker v. Chanslor, 153 Cal. 118, 126, 94 P. 606, 17 L.R.A., N.S., 455; McCarty v. Fremont, 23 Cal. 196, 198; and Maher v. Wilson, 139 Cal. 514, 518, 73 P. 418, aid plaintiffs. In each of those cases actions for damages for assault and battery or false imprisonment were brought against the owners of property. Recoveries were denied on the theory that the plaintiff's injuries were shown to have been sustained at the hands of an owner exercising a right to possession of his property, using necessary force to regain possession. Injunctive relief was not involved.

We do not decide that under no circumstances can an owner out of possession sustain damage by reason of an injunction of restraint. We do decide as a matter of law that, for the reasons which we have stated, the plaintiffs in this case did not sustain any direct damages which they would not have sustained had there been no injunction.

Defendant next contends that there is insufficient evidence to support the award of attorneys' fees and surveyors' fees which were allocated to dissolution of the preliminary injunction. It is now well settled that reasonable counsel fees and expenses incurred in successfully procuring a final decision dissolving the injunction are recoverable as ‘damages' within the meaning of the language of the undertaking, to the extent that those fees are for services that relate to such dissolution (Reachie v. National Auto. & Cas. Co., supra, 37 Cal.2d 808, 236 P.2d 151; Soule v. United States F. & G. Co., 82 Cal.App. 572, 255 P. 886). The fixing of a reasonable fee rests in the discretion of the trial judge and an appellate court will not disturb the ruling unless ‘the sum allowed is so exorbitant that its allowance constitutes a palpable and plain abuse of discretion.’ (Mountain View Union High School District v. Ormonde, 195 Cal.App.2d 89, 96, 15 Cal.Rptr. 461, 465; State ex rel. State Public Works Board of California v. Westover Co., 140 Cal.App.2d 447, 450, 295 P.2d 96.) Counsel fees reasonably paid to secure a dissolution of the injunction are chargeable against the bond, even though other matters were heard at the same time (Mason v. U. S. Fid. & Guar. Co., 60 Cal.App.2d 587, 141 P.2d 475). In such a case it is for the trial court, in its discretion, to make a proper allocation. A trial judge is necessarily familiar with the value of an attorney's services, and when the nature and extent of such services is made known to the court, its own experience qualifies it to fix their value. (Spencer v. Collins, 156 Cal. 298, 104 P. 320.)

In our case there was necessarily involved in the single trial two actions, i. e., the action brought by Butler and the cross-action interposed by the Holman group. As has been mentioned, Holman's cross-complaint formed the basis for issuance of the injunction. It seems clear that counsel fees incurred in the prosecution of Butler's action cannot be ascribed to the injunction. It is equally clear that plaintiffs are entitled to recover as damages such counsel fees and necessary expense as are properly allocable to defense of the cross-complaint.

It would serve no useful purpose for this court to enter upon an exercise in mathematics by summarizing the extensive testimony relating to counsel fees. Suffice it to say that counsel for plaintiffs testified as to the nature and extent of their services. Their total fees covering all services in the principal suit, commencing with a time prior to the filing of the Butler complaint and terminating with the final decision on appeal, amounted to $46,156.78. Of this amount the trial court allocated $12,600 to necessary legal services rendered in procuring a dissolution of the preliminary injunction. We cannot say that such allowance constitutes an abuse of discretion.

Mr. Ross, a surveyor engaged by Russell-Chambers, testified in detail as to the services which he performed. The reasonableness of his fee of $2,165 is not questioned. The record discloses that he segregated and billed separately for the value of services performed during the life of the restraining order and those performed during the period the preliminary injunction was operative. Defendant argues that, by the terms of the Butler to Russell-Chambers lease, the lessees undertook to establish the boundary line at their own expense and the surveyor's fees, being a necessary part of that expense, were incurred by reason of their contractual obligation and not by reason of the injunction. But the Holman group, at whose instance the bond was issued, brought Russell-Chambers into the action as new parties cross-defendant, and Russell-Chambers were thereby required to cause a survey to be made and incur expenses therefor in order to establish the boundary line and thus defend against the cross-complaint. In the exercise of its discretion, the trial court obviously determined that the knowledge gained by the survey was an important factor in defeating the cross-complaint and the injunction with it, and it was immaterial that that knowledge also operated to resolve the same issue involved in the action brought by Butler. We find no abuse of discretion and leave the expense of the survey where the trial court laid it.

Plaintiffs' Appeal

Plaintiffs contend that the court erred in refusing to allow interest on the money judgments for direct damages and counsel fees. No contention is made that they are entitled to interest on the allowance of surveyor's fees. Our decision herein that plaintiffs are not entitled to recover from defendant surety damages for the value of the ore eliminates the question of interest on those amounts.

Plaintiffs cite and rely upon the case of Painter v. National Surety Co., 36 Cal.App. 44, 47, 171 P. 803, in which a judgment providing for interest on the allowances for counsel fees and expenses incidental and necessary to the plaintiff's successful endeavor to secure the dissolution of an injunction was held to be proper. However, in that case the court pointed out that no contention was made that the amounts found to have been expended by the plaintiff were uncertain or incapable of being made certain by calculation, and the interest was therefore allowed under the authority of section 3287 of the Civil Code. In our case, such contention is convincingly made by defendant. It was only through judicial determination that a specific sum was deemed to be the value of services performed by plaintiffs' counsel for which defendant was liable. It was first necessary for the probate court to fix and approve the amount to be allowed for extraordinary services rendered in behalf of the Butler estate in the injunction suit. In turn, the court below had the task of determining in this action the reasonable value of services actually rendered in procuring dissolution of the injunction. It was only through that final legal adjudication that the amount for which defendant was liable was made certain. We are of the opinion that the court properly decided that plaintiffs are not entitled to interest on the allowance for attorneys' fees which it ultimately found to be dur from defendant for any period of time preceding the judgment.

The unperfected appeal of J. R. Holman, Andrew J. Thickstun, Alta Mae Thickstun and the Travelers Indemnity Company is dismissed.

The cause is remanded to the superior court and that court is directed to modify the judgment by deleting from that portion which authorizes a recovery in favor of Ernest W. Butler, as executor, and against defendant United Pacific Insurance Company the sum of $8,536.22, and by deleting from that portion which authorizes a recovery in favor of G. M. Russell, R. W. Russell and E. F. Chambers and against United Pacific Insurance Company the sum of $45,255.89. As so modified the judgment is affirmed. No appellant shall recover costs on appeal.

BROWN, Justice.

STONE, Acting P. J., concurs. CONLEY, P. J., deeming himself disqualified, did not participate.