Independent School Dist. No. 35 v. Oliver Mining Co.

• Decision Date: 14 May 1926
• Docket Number: No. 25110.,25110.
• Citation: Independent School Dist. No. 35 v. Oliver Mining Co., 208 N.W. 952, 169 Minn. 15 (Minn. 1926)
• Parties: INDEPENDENT SCHOOL DIST. NO. 35 et al. v. OLIVER MINING CO. et al.
• Court: Minnesota Supreme Court

208 N.W. 952

169 Minn. 15

INDEPENDENT SCHOOL DIST. NO. 35 et al. v. OLIVER MINING CO. et al.

No. 25110.

Supreme Court of Minnesota.

May 14, 1926.

Appeal from District Court, St. Louis County; Martin Hughes, Judge.

Action by Independent School District No. 35 and others against the Oliver Mining Company and others. After dismissal of the action on the merits, without findings, plaintiffs appeal from an order denying their motion for findings or a new trial. Order reversed.

Gunderson & Leach, of Alexandria, H. V. Mercer, of Minneapolis, Joseph E. Austin, of Chisholm, A. R. Folsom, of Buhl, Archer & Rosemeier, of Virginia, Thad S. Bean, of Buhl, and Manahan, Sullivan & Hoogesteger, of St. Paul, for appellants.

Washburn, Bailey & Mitchell, of Duluth, for respondent.

HOLT, J.

Action upon two undertakings; the one given by defendants conditioned to pay plaintiffs any damages sustained by them if a preliminary injunction, procured in the suit brought by the defendants herein against the plaintiffs herein, was finally dissolved, and the other a supersedeas given on appeal to this court; the defendants herein as plaintiffs in said action having been defeated in the court below. The appeal was unsuccessful, and this action resulted. Oliver Mining Co. et al. v. Independent School District 35 et al., 155 Minn. 400, 192 N. W. 949. The court below ruled that plaintiffs herein were not entitled to damages, and dismissed the action on the merits without findings. They appeal from the order denying their motion for findings or a new trial.

The following extract from the memorandum accompanying the order of the learned trial court shows the reasons for the decision:

"The plaintiffs were finally defeated in their action for an injunction on two grounds as I understand it: (1) That the power was in the electors to ratify the action of the board, and that such ratification was effectual, and that there was no limitation upon the power of the electors as to the amount of money that could be raised for the building of schoolhouses and the purchasing of school sites; and (2) that the plaintiffs were guilty of such laches as would prevent them from recovering in the case. * * * When the present action had been partly tried. * * * the court reached the conclusion that, no matter what the evidence showed in the instant case, there ought not to be any recovery by reason of the fact that, owing to the manner in which the cost plus contract had been let by the school district to the National Contracting Company, the attempt to sell the bonds through a fiscal agency agreement, which was in fact an arrangement to sell for less than par and accrued interest, and the fact that the school board was letting contracts hundreds of thousand dollars above any authorization from the electors, and above any money in the treasury to pay for the same, and the fact that the position of the parties was changed after the giving of the original stipulation by the ratification election, and the further fact that the law with reference to the authority of the electors to authorize such expense was very doubtful, it would be inequitable to permit the plaintiffs in the instant case to recover any damages."

Judge Hughes further stated that the school district was constantly letting contracts to different plaintiffs herein without authority and without money to pay with, and no one could tell where the end would be had not the injunction suit been brought, and concludes that, if under those circumstances taxpayers, though guilty of laches, resort to injunction, they should not be mulcted in damages, and that plaintiffs are not in with clean hands before a court of equity.

As we understand respondents, it is conceded that the right of a recovery is grounded on contract obligations evidenced by the two bonds mentioned, but that it was necessary to bring the suit in equity solely because of the propriety of avoiding a multiplicity of actions. In others words, the suit is properly brought in equity to enforce legal obligations. It follows that all equitable defenses available in an action at law, but none other, may be interposed. Nor do we take it to be denied that matters determined in the injunction suit cannot be relitigated herein. Defendants herein cannot "go behind the decree in the case in which the bonds were given. The law and the facts of that case, as settled by the court, are conclusive of their rights in this proceeding. They cannot be permitted to raise any question as to either." Oelrichs v. Spain, 15 Wall. 211, 21 L. Ed. 43. To the same effect is Pelkey v. National Surety Co., 143 Minn. 176, 173 N. W. 435; Landis v. Wolf, 206 Ill. 392, 69 N. E. 103; Yale v. Baum, 70 Miss. 225, 11 So. 879; Revell v. Smith, 25 Okl. 508, 106 P. 863; Fullerton v. Pool, 9 Wyo. 9, 59 P. 431.

The court below seems to have been of the opinion that plaintiffs had pursued such reckless and irregular conduct in disregard of defendants' rights as taxpayers that there was good cause for the injunction sought, and hence damages suffered, though covered by their undertakings, may be withheld in the discretion of the court. The strongest support for this position in any case cited or found is the argument in Russell v. Farley, 105 U. S. 433, 26 L. Ed. 1060, but the decision is not finally placed upon the basis of discretion, but upon the merits as revealed by the record. The facts are wholly dissimilar from those here presented. The suit in which that injunction issued and the bond was given involved a quantity of railroad iron, and the final decree awarded part thereof to the plaintiff Farley and part to the defendant, and "adjudged that neither the plaintiff nor the defendant Russell is entitled to costs or damages herein." Upon the appeal from the decree it was contended that the court below had no power to decree that Russell was not entitled to damages, thereby precluding him from an action on the bond, and, if it had the power to decree on the subject of damages, it was error to deny them. It is to be observed that there was an adjudication as to damages in the injunction suit; not so in the injunction suit herein, for the findings in the latter expressly state that no issue except the one as to the validity of the contracts involved was litigated or decided.

In the Russell Case, after giving a history of the chancery practice, showing that the requiring of security as a condition for issuing a temporary injunction was discretionary, the court says:

"Since the discretion of imposing terms upon a party, as a condition of granting or withholding an injunction, is an inherent power of the court, exercised for the purpose of effecting justice between the parties, it would seem to follow that, in the absence of an imperative statute to the contrary, the court should have the power to mitigate the terms imposed, or to relieve from them altogether, whenever in the course of the proceedings it * * * would be inequitable or oppressive to continue them. Besides, the power to impose a condition implies the power to relieve from it. * * * At the final hearing, it may manifestly appear * * * that the suit has been fairly and honestly pursued or defended by the party who was required to enter into the undertaking, and that it would be inequitable to subject him to any other liability than that which the law imposes in ordinary cases. In such a case it would be a perversion, rather than a furtherance, of justice to deny to the court the power to supersede the stipulation imposed."

The court concluded that the circuit court had the power to determine whether or not damages were recoverable in the suit, and held that on the threshold of the inquiry as to the merits of the decision below the court was met by the prominent fact that the injunction had never been entirely dissolved, and it had never been decided that the complainant was not entitled to it; at least for a portion of the iron claimed by Russell. In the opinion is also found this significant language:

"When the court sees no just cause for superseding or suspending the effect of an injunction bond, or undertaking, it should be enforced in pursuance of its terms; and the party for whose benefit it was given will be entitled to an assessment of damages."

No other case to which our attention has been called puts the matter stronger for respondent than the above. Coosaw Mining Co. v. Carolina Mining Co. (C. C.) 75 F. 860, qualifies the right to deny recovery on the injunction bond to cases in which it does not appear that the ones enjoined were put to any disadvantage by reason thereof.

It is true that in the former action the court could have ascertained the damages. Hayden v. Keith, 32 Minn. 277, 20 N. W. 195. But, not having so done, the sole remedy is on the undertakings. As already indicated, these are contracts to be construed in the light of the statutes under which they were given. As well stated by Justice Harlan in his dissenting opinion in Tullock v. Mulvane, 184 U. S. 497, 22 S. Ct. 372, 46 L. Ed. 657, this undertaking is a contract. "In the absence of a statute fixing the measure of damages or limiting the recovery, we think the bond should be viewed in the light of an independent contract, and is to be interpreted by the general principles of the common law." Recovery on an undertaking is not made dependent by our statute upon the court's discretion. However, if there be any equitable defenses by way of estoppel or otherwise, it was for defendants to plead and prove them herein, unless the record in the injunction suit plainly disclosed the existence of such defenses. No finding in the injunction suit, in view of the finding above referred to, tends to establish a defense to the undertakings. No findings were made in the present action. The whole record in the injunction suit was received in evidence; but, even with that in, we are convinced, in view of the fact that only the validity of the...