Opinion ID: 1988079
Heading Depth: 1
Heading Rank: 7

Heading: Cross-AppealExoneration of Bond.

Text: The essence of Hawkeye's argument on its cross-appeal is that the trial court violated its due process rights by releasing FMS and its surety from any liability on the bond without first allowing Hawkeye an opportunity to show that it had sustained damages as a result of the temporary injunction. See U.S. Const. amends. V, XIV. In considering such a constitutional claim, our review is de novo in light of the totality of the circumstances. Exira Community Sch. Dist. v. State, 512 N.W.2d 787, 791 (Iowa 1994). A party who obtains a temporary injunction against another must post a bond. See Iowa R. Civ. P. 327. The purpose of the bond is to protect the party who is enjoined from damages resulting from an injunction that proves to have been improperly granted. See City of Corning v. Iowa-Nebraska Light & Power Co., 225 Iowa 1380, 1385, 282 N.W. 791, 794 (1938). Upon dissolution of the injunction, the enjoined party may bring an action against the party who sought the injunction as well as its surety to recover damages. See Dennis v. Mantle, 173 Iowa 450, 451, 155 N.W. 830, 830 (1916); Shenandoah Nat'l Bank v. Read, 86 Iowa 136, 141-42, 53 N.W. 96, 96 (1892). Also of importance to our analysis is the concept that [d]ue process mandates that persons who are required to settle disputes through the judicial process `must be given a meaningful opportunity to be heard.' In re Marriage of Seyler, 559 N.W.2d 7, 9 (Iowa 1997) (quoting Boddie v. Connecticut, 401 U.S. 371, 377, 91 S.Ct. 780, 786, 28 L.Ed.2d 113, 118 (1971)). Here, Hawkeye filed a separate action alleging damages as a result of having been prevented from competing with FMS for one year after the termination of the 1990 contract. This action was brought against FMS and its surety. Notwithstanding the pending action, FMS filed a motion in the present case not only to terminate the requirement that it continue the bond, but also to exonerate the bond and release the surety. At the hearing on FMS's motion, Hawkeye argued that it would be improper to exonerate the bond because to do so would release FMS and its surety from any liability for damages incurred by Hawkeye during the period the bond was in force. At the time of this hearing, Hawkeye's claim against the bond for damages had not yet been heard. In its ruling on FMS's motion, the district court dissolved the temporary injunction and held that FMS was no longer required to post security. In addition, the court exonerated the bond and released the surety. It is the latter rulings that Hawkeye claims violate its due process right to a hearing. The word exonerate means to relieve esp. of a charge, obligation, or hardship. Webster's Third New Int'l Dictionary 797 (unabr. ed.1993). The term release is defined as to relieve from something that confines, burdens, or oppresses. Id. at 1917. Thus, the effect of the court's ruling was to discharge FMS and its surety from any liability for damages under the bond and to eliminate the bond as a source of funds for the payment of any such damages. Because the court's ruling occurred prior to a decision on whether Hawkeye had sustained damages as a result of the temporary injunction, the protection of the bond was rendered illusory. More importantly, Hawkeye was denied a hearing on whether it had a valid claim under the bond. Although it was entirely appropriate for the district court to order that FMS had no obligation to continue the bond once the injunction had been dissolved, whether FMS and its surety had any liability to Hawkeye for the period during which the bond was in effect is a different question. A decision on that issue must await a hearing on Hawkeye's pending action to recover damages from FMS and its surety. Thus, the trial court should not have exonerated or released FMS and its surety from any liability to Hawkeye for damages sustained during the term of the bond. That part of the court's order exonerating the bond and releasing the surety from liability is reversed. We remand the case to the district court to allow the court to modify its prior ruling on FMS's motion to be consistent with our decision, and for any other appropriate proceedings.