#### Emily H. Hathorn and Frank H. Hathorn, Respondents, *v.*Natural Carbonic Gas Company, Appellant.

Third Department,

September 9, 1914.

Injunction — suit to restrain extraction of gas from mineral waters — undertaking to pay damages caused by preliminary injunction— condemnation of mineral springs by State—when suit should not be discontinued.

Where in a suit to restrain the defendant from extracting gas from mineral waters to the injury of adjacent springs owned by the plaintiff, the latter has obtained a temporary injunction and has given an undertaking to pay defendant’s damages if plaintiff be found not to be entitled to the injunction, and thereafter the defendant’s lands were sold on foreclosure and said lands together with those of the plaintiff have been condemned and taken over by the State under the act for the protection of natural mineral springs, the court should not order a discontinuance of the suit upon the ground that a further prosecution thereof is futile. This, because the defendant is entitled to have the plaintiff’s right to the preliminary injunction determined, so that it may recover any damages sustained by reason thereof if it shall prove to have been improperly granted.

Appeal by the defendant, Natural Carbonic Gas Company, from an order of the Supreme Court, made at the Saratoga Special Term and entered in the office of the clerk of the county of Albany on the 10th day of February, 1914, granting a discontinuance of the action without prejudice to any right by action or proceeding which the defendant may have upon the undertaking given by plaintiffs upon obtaining the preliminary injunction herein, and denying defendant’s motion for a dismissal of the action for plaintiffs’ failure to prosecute the same.

*Morris & Plante [Guthrie B. Plante*of counsel], for the appellant.

*Rockwood, Scott & McKelvey [L. B. McKelvey*of counsel], for the respondents.

Lyon, J.:

The plaintiffs were the owners of real property situated in the village of Saratoga Springs, N. Y., known as “Hathorn *769Spring,” and the defendant was the owner of twenty-one acres of land situated about 4,600 feet therefrom. This action was brought in July, 1908, to obtain a permanent injunction restraining the defendant from pumping from wells which it had drilled, and from extracting from mineral waters taken from its lands, carbonic acid gas, which it was engaged in compressing, liquifying and selling for commercial purposes. The complaint alleged that there existed underneath the surface of that territory a system of valuable mineral waters which held in solution natural mineral salts and an excess of carbonic acid gas without which the mineral salts would be precipitated and the waters become turbid and valueless; that by reason of the acts of the defendant, particularly in accelerating the flow of the carbonic acid gas by pumping and otherwise, the force of the natural flow of the mineral waters had been lessened; the pressure of the carbonic acid gas confined in the rocks underlying the lands of the respective parties as well as of the whole region, reduced; the flow of water at plaintiffs’ spring diminished; the quality of its water impaired; and the spring rendered less .valuable, all to plaintiffs’ damage in the sum of $100,000. The complaint also alleged that the acts of the defendant were in violation of chapter 429 of the Laws of 1908, entitled “An act for the protection of the natural mineral springs of the State and to prevent waste and impairment of its natural mineral waters,” which statute went into effect May 20, 1908. The answer denied that the defendant had done any improper or illegal acts, or that in the prosecution of its business it had lessened the force of the natural flow of waters at plaintiffs’ spring, or had impaired the quality thereof, or had rendered plaintiffs’ spring less valuable, and alleged that the lands owned by it contained natural carbonic gas in dry form, and mineral water holding in solution natural mineral salts and an excess of carbonic acid gas; that while it had sunk wells and fitted the same with tubing and pumps, it had not accelerated or exercised any force of compulsion upon the water or gas, but had simply lifted to the surface, in fact, less water and gas than had naturally flowed into its wells. The defendant also denied having violated said statute, and alleged that the same was unconstitutional. *770In August, 1908, the Special Term granted a preliminary injunction restraining the defendant from accelerating by pumping' or otherwise the natural flow of mineral water or carbonic acid gas upon its lands, or doing any act whereby the natural flow of water from plaintiffs’ spring was lessened, or the quality of its waters impaired, or the carbonic acid gas or mineral ingredients diminished. The order was granted upon condition that the respondents execute and file an undertaking in the sum of $20,000 conditioned to pay the appellant such damages, not exceeding said sum, as it might sustain by reason of the injunction if the court should finally decide that the respondents were not entitled thereto. The undertaking of a surety company was accordingly given. Upon appeal the order was somewhat modified, and as modified affirmed (128 App. Div. 33), and upon further appeal the modified order was affirmed (194 N. Y. 326), the Court of Appeals holding that said statute was constitutional to the extent indicated in the opinion of that court. In March, 1911, this decision was approved by the United States Supreme Court in an action brought by a stockholder of the appellant to test the constitutionality of the statute. *(Lindsley*v. *Natural Carbonic Gas Company,*220 U. S. 61.)

The subject of property rights in the waters and gas at Sara-toga Springs was provocative of much litigation. Several actions were instituted by the Attorney-General on behalf of the People of the State, one of which was brought against the appellant, in which it was held *(People*v. *New York Carbonic Acid Gas Co.,*196 N. Y. 421) that the liability of the defendant *for*the acts herein complained of was not determinable as matter of law, but was dependent upon the decision of questions of fact.

In April, 1910, in a proceeding of foreclosure instituted in the United States court, a receiver of the appellant, which was a New York' corporation, was appointed, and in Novemder, 1910, a decree was entered under which in March, 1911, its property, real and personal, was sold. In May, 1911, such sale was confirmed, and thereupon its property, including any right of action upon the undertaking herein, was transferred to a corporation of the same name, incorporated under the laws of the State of New York for the purpose of taking over and operating the plant. In February, 1911, the lands of the *771respondents were condemned and appropriated by the Commissioners of the State Reservation, under the provisions of chapter 569 of the Laws of 1909, In June, 1911, the lands of the appellant were also condemned and appropriated under such act. No further proceedings seem to have been had in the action until in June, 1913, when the respondents moved to discontinue the action upon the ground that circumstances had arisen since its commencement, one of which was the insolvency of the appellant, which while in no way involving the merits, would render the trial of the case futile and unnecessary, and a cost and burden to the State in determining issues of no present consequence. The appellant thereupon by cross-motion sought a dismissal of the action upon certain grounds, among which were the failure of respondents to diligently prosecute the same; that the questions involved, except as to any damages sustained by the respondents had become academic and that as was admitted by the moving affidavit of the respondents, further prosecution of the action would be futile. The appellant, evidently assuming under the aúthority of *Kelley*v. *McMahon*(37 Hun, 212) that the Case being in equity the court had power to dismiss the complaint in part, and to retain it in part for the purpose of considering at a later stage parts of the case not then passed upon, and that the court might reserve the questions relating to the injunction, served as part of its motion papers an offer to Consent to a discontinuance of the action with such reservation. However, the offer was not accepted, and a withdrawal thereof is recited in the order appealed from as having been considered upon the hearing of the motions. The court denied appellant’s motion to dismiss the action for a failure to prosecute it, but granted an order of discontinuance upon the ground that subsequent to the commencement of the action the appellant’s property had been sold under a judgment, and the appellant was no longer performing the acts enjoined, as the properties of both parties had been appropriated by the State of New York, which was then in possession thereof, “by reason of which facts which do not affect the merits of the controversy between the parties, the further prosecution of this action would be a useless formality and would require the determination by a court of equity of *772issues in which neither the parties nor the State have any further interest, and the further prosecution of said action is futile.” The order further provided as follows: “And it is further ordered that this order shall be without prejudice to any right which the defendant may have by reason of the undertaking heretofore filed by the plaintiff as a condition of the temporary injunction order heretofore granted in this action or to any action or proceeding which the defendant maybe advised to take thereon, the purpose and intention of this order being to discontinue the said action for the reasons hereinbefore stated, but without deciding whether or not the plaintiffs were entitled to the preliminary injunction when granted.” From such order this appeal has been taken, the appellant complaining that the effect of the order appealed from is to deprive the appellant of the right to recover upon the undertaking the damages sustained by it by reason of the preliminary injunction, which the appellant claims ruined its business, forced it into a receivership, and inflicted damages in excess of the amount of the undertaking. It is the contention of the appellant that a final determination that the respondents were not entitled to the injunction is required by the terms of the undertaking, and must be established before the appellant is entitled to recover thereon.

There is no breach of the condition of the statutory undertaking unless the court shall finally decide that the plaintiff was not entitled to the injunction, or unless something occurs equivalent to such decision. *(Palmer*v. *Foley,*71 N. Y. 106; *Benedict*v. *Benedict,*76 id. 600; *Wilson*v. *Wilson,*130 App. Div. 70.) A judgment of dismissal of the complaint upon the grounds of expiration of ter,m of contract without fault on the part of the plaintiff, and that it did not state a cause of action, is a final decision that the plaintiff was not entitled to the preliminary injunction, and establishes the right of the defendant to damages, leaving the amount open to proof. *(Williams*v. *Montgomery,*118 N. Y. 519, 524.)

Where plaintiff enters an order vacating an injunction and discontinuing the action such an order is equivalent to a determination that the plaintiff is not entitled to an injunction, and the defendant is entitled to an order of reference to *773ascertain damages. *(Pacific Mail Steamship Co.*v. *Toel,*85 N. Y. 646; *Wynkoop*v. *Van Beuren,*63 Hun, 500; *Perlman*v. *Bernstein,*83 App. Div. 203.) However, such determination is not to be inferred because of a dismissal on account of matters arising subsequent to the commencement of the action which in no way involved the merits of the action. (Apolli*naris Co.*v. *Venable,*136 N. Y. 46; *Taylor Worsted Co.*v. *Beolchi,*37 Misc. Rep. 691, 693.)

The main reliance of respondents for justification of the order appealed from is based upon the cases of *Apollinaris Co.*v. *Venable*and *Taylor Worsted Co.*v. *Beolchi.*In the former case the complaint was dismissed upon the motion of defendants in punishment of the plaintiff for contempt of court. Thereupon the Special Term granted an order appointing a referee to assess the damages. The case is simply an authority for the proposition that when the complaint is dismissed because of a matter arising subsequent to the commencement of the action, such dismissal does not constitute a final determination of the action and warrant granting an order appointing a referee to assess the damages sustained by the issuing of a preliminary injunction. In the *Taylor*case the court expressly held that the plaintiff was entitled to the injunction when granted.

The order appealed from states that it is granted “but without deciding whether or not the plaintiffs were entitled to the preliminary injunction when granted. ” It would, therefore, appear that appellant’s only recourse to obtain a determination of that question is by a trial of the action upon the merits.

It is difficult to fully comprehend the usefulness of the order appealed from. The following statement appears in respondents’ brief as their construction thereof: “This order has no other effect than to bring to an end in a decent and orderly manner, a litigation which has now become futile,” the trial of. which would be expensive and would consume much time; “and while it does this on the one hand, it expressly reserves the defendant’s rights on the other.” Also at the heading of point 2 of respondents’ brief it is said, “The order in its present form is necessary to prevent serious injustice to the plaintiffs; for otherwise they would be compelled to notice this case *774for trial and prosecute the action to judgment, in order to avoid being mulcted in heavy damages by reason of the undertaking.” It hardly rests with the respondents after having instituted the action and obtained the injunction, to complain of being called upon to prove that granting the injunction was warranted, or to claim that the appellant should not be properly compensated for the damages sustained by it by reason of the injunction, if it shall prove to have been improperly granted. If the order does not prevent appellant from forcing the issues to trial and obtaining a final determination thereof upon the merits, it is ineffective and useless for the purpose for which it was evidently obtained. If it does work such a result it is grossly unjust to the appellant. In either event it should be vacated as to the portion thereof discontinuing the action.

The Special Term was clearly correct in refusing to dismiss ■the action for failure to prosecute it, as the answer was not served until January 11, 1910, and the proofs show that the respondents used due diligence in prosecuting the action.

The order should he reversed, excepting as to the portion thereof denying appellant’s application for a dismissal of the action, and as to such portion it should he affirmed.

All concurred.

Order reversed, excepting as to the portion thereof denying the defendant’s application for a dismissal of the action, and as to such portion affirmed, without costs to either party.