Court Opinion

ID: 6657242
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:58:46.351814+00
Date Added: 2024-06-11T15:59:59.981797
License: Public Domain

The following opinion on rehearing was filed May 10, 1907. Former judgment of affirmance vacated and judgment of district court reversed:
Albert, C.
An opinion was filed in this case at the present term, which is reported ante, p. 114, where the facts are set out at length. The cause, coming on for hearing on a motion to vacate the’judgment of affirmance entered by this court, and to enter a judgment of reversal, was re-argued at length.
On the reargument the defendants renewed their contention that Beddeo’s discharge in bankruptcy operated as a release of his codefendant. We do not think this con*120tention can be sustained. This is not a suit to enforce the judgment against which the injunction was leveled, but an action on the injunction bond, which the defendant Means signed as surety for Beddeo. It constitutes a new contractual obligation, wholly independent of the judgment, save to the extent that the judgment affects the question of damages, which we shall notice presently. Section 16 of the bankruptcy act (U. S. Comp. St., vol. 3, ch. 3), provides: “The liability of a person who is a co-debtor with, or guarantor or in any manner a surety for, a bankrupt shall not be altered by the discharge of such bankrupt.” The language “in any manner a surety for a bankrupt” is certainly broad enough to include a surety on an injunction bond. We have not overlooked the numerous cases cited by counsel, wherein sureties have been held to be released from liability by the discharge of their principals in bankruptcy. In each of those cases, however, it is clear that, in consequence of the discharge in bankruptcy, the contingency upon which the 'liability of the sureties had been dependent could never happen. Wolf v. Stix, 99 U. S. 1, which is included among the citations referred to, furnishes an apt illustration of that class of bonds. There the court said: “The cases are numerous in which it has been held, and we think correctly, that if one is bound as surety for another to pay any judgment that may be rendered in a specified action, if the judgment is defeated by the bankruptcy of the person for whom the obligation is assumed, the surety will be released. The obvious reason is that the event has not happened on which the liability of the surety was made to depend.” But in the case at bar the condition of the bond is that “plaintiff shall pay to the defendants all damages which they may sustain by reason of said injunction, if it be finally decided that the injunction ought not to have been granted.” The contingency upon which the liability of the surety was made to depend by the condition of this bond was a final decision that the injunction ought not to have been granted. That contingency happened, and the *121liability of the surety on the bond became fixed on the 6th day of June, 1904, when the injunction was dissolved and the suit in which it had issued was dismissed. Gibson v. Reed, 54 Neb. 309; Gyger v. Courtney, 59 Neb. 555.
But it is argued that the condition of the bond is to pay the damages sustained by the plaintiffs when those damages are ascertained against the principal, and, as they cannot now be thus ascertained on account of the discharge in bankruptcy of the principal, the contingency upon which the liability of the surety depends can never happen. This argument, pushed to its logical conclusion, would render section 16 of the bankruptcy act above quoted almost, if not entirely, nugatory, because it is hard to conceive of a contract of suretyship to which it would not apply with as much force as to the one under consideration. The obligation is to pay the damage on the happening of a certain event. That event has happened. Section 16, supra, is to the effect that the discharge of the principal in bankruptcy does not release the surety from his liability to pay such damages. Before he can pay them they must be ascertained, that is, the parties must agree upon the, amount or it must be established in an action on the bond. A statute which preserves a surety’s liability, notwithstanding the discharge of the principal, but which at the same time forbids the taking of a step essential to enforce the liability against the surety, would be a mockery.
On the reargument the soundness of our conclusion in the former opinion that the amount of the judgment against which the injunction was directed is a proper element of damage in an action on the injunction bond, on the facts stated, is challenged. , It is argued rvith much plausibility that the bankruptcy proceedings, and not the injunction, made it ultimately impossible to enforce the judgment. This argument appears to prove too much. The bond was given to indemnify the plaintiffs against loss by reason of the injunction, in case it was wrongfully allowed. One source of danger of loss to the judgment creditor in such cases is that the judgment, while the in*122junction is in force, may be rendered uncollectible by a transfer of the debtor’s property, its seizure by other creditors or his insolvency. If the loss resulting from such causes is not covered by the bond, then the value of an injunction, as a means of avoiding a judgment, has never been fully appreciated. But it does not follow that the full amount of the judgment is always recoverable in actions of this character. A judgment might remain collectible, in whole or in part, after the dissolution of the injunction, or the injunction may have been directed against the enforcement of the judgment in a particular' manner, or against particular property, leaving the judgment creditor free to enforce it in some other way or against other property of the debtor. In either case it would be the duty of the judgment creditor to make reaonable use of the means at hand to protect himself against loss and he would not be entitled to recover the full amount of the judgment in an action on the bond. The record before us does not furnish sufficient data to say that the plaintiffs are entitled to recover the full amount of the judgment. While it shows that the judgment'woiild have been collected, but for the injunction, that it is wholly unpaid and that Beddeo is now insolvent, it does not show the extent to which the plaintiffs were restricted in the enforcement of the judgment by the injunction, nor that they might not have realized at least a portion of the judgment, notwithstanding the injunction. These matters will be cleared up, no doubt, on another trial.
We have not overlooked the cases cited by plaintiffs in support of their contention that they are entitled, in any event, to recover the fall amount of their judgment. Those cases are based on bonds conditioned to pay judgments already existing or to be subsequently recovered. See McCombs v. Allen, 82 N. Y. 116; Harrison v. Balfour, 13 Miss. 301; Hunt v. Burton, 18 Ark. 188; Hillyer v. Richards, 13 Ohio, 135. In the case at bar, the bond contains a condition that the obligors shall pay such damages as the plaintiffs may sustain by reason of the in*123junction. The distinction is obvious. The record is clear, however, as to one element of damage, namely, the amount plaintiffs are entitled to recover on account of attorney’s fees expended in resisting the injunction, which by stipulation is placed at $25. They were entitled to a judgment of that amount at least. Consequently, a judgment denying a recovery in any amount whatever is erroneous.
While what we have said disposes of this case, it is proper to notice another question discussed at some length on the reargument. Does plaintiffs’ judgment against Beddeo fall within any of the exceptions from the general provisions of section 17 of the bankruptcy act (U. S. Comp. St. vol. 3, ch. 3), providing that a discharge in bankruptcy shall operate as a release of the bankrupt from his debts? In the former opinion we held that it did, but our confidence in that conclusion has been somewhat shaken on an examination of the authorities presented. But it would seem that the question is not necessarily involved in this case. This action, as we have seen, is on the injunction bond. It is a new contractual obligation. It is not claimed that it was scheduled in the bankruptcy court, nor that the plaintiffs had notice or actual knowledge of the proceedings in bankruptcy. It comes, therefore, within the provisions of subdivision 3, sec. 17, supra, which expressly excepts from the general provisions for the release of the debtor debts not thus scheduled, unless the creditor had notice or actual knowledge of the bankruptcy proceedings. If the judgment debtor were solvent, whether the judgment had been released would be material as affecting the question of damages, because if the judgment is still in force and is still collectible, in whole or in part, that fact would go in mitigation of damages. But, as he is confessedly insolvent, it would seem immaterial on the question of damages whether the judgment had been released by the judgment debtor’s discharge in bankruptcy or had become uncollectible because of his insolvency. The result, so far as concerns the question of damages, would be the same *124in either event. The question is one of some importance, and one upon which the court should not commit itself until it is squarely presented. For that reason, it would seem best to withdraw what has been said on that question in the former opinion, and refrain from expressing any opinion thereon at this time.
It is recommended that the judgment of the district court be reversed and the cause remanded for further proceedings according to law.
Duffie and Jackson, CC., concur.
By the Court: For the reasons stated in the foregoing opinion, the judgment heretofore entered is vacated, and the judgment of the district court is reversed and the cause remanded for further proceedings according to law.
Reversed.