Bennett Bros. v. Congdon

Hunt, J.

It is argued by the appellant that the court committed errors of law by which it was prevented from arriving at -a position where it could properly exercise a discretion upon the facts. The particular errors presented to us are: First, that the court erred in excluding from all consideration the testimony of two witnesses, Nelson Bennett and Sewall Davis; and, second, that the court ought not to have decided the motion to dissolve upon the ground that the insolvency of the defendants the Congdons was not proved.

Upon the hearing had before the court, Nelson Bennett testified directly that, for the corporation Bennett Bros. Company, he had entered into an agreement with the defendant E. E. Congdon, by which agreement the Bennett Bros. Company was entitled to the compensation which Congdon might recover from the railway company for services which had been performed by him, and that Congdon had expressly told him (Bennett) that, if he recovered in the suit which he was about to institute against the railway company, the amount of such recovery would be turned over to the corporation by him (Congdon). The testimony of the witness Sewall Davis was to the same effect, and also tended to show admissions by Congdon of an agreement with Bennett to turn over to the corporation the proceeds of any judgment that he might recover.

The reason that the court excluded the testimony of these two witnesses was because the act of Bennett in making the contract with Congdon, if he made it at all, was his individual act, and not the act of Bennett Bros. Company, the plaintiff corporation.

It is a firm principle of the law of this state that the granting or refusing to grant preliminary injunctions is so largely in the discretion of the district courts that the appellate court will be very slow to interfere with the exercise of that discretion. But it is the duty of the district court to exercise its discretion according to correct principals of law and evidence; in other words, the rule presupposes a case properly presented to the court. Upon a hearing on a motion to dissolve a restraining order, if a ruling is made which excludes most material and competent testimony offered upon the main issue involved in the pleading, and the court refuses, through error in applying rules of law, to consider such testimony although by it alone the allegations of the complaint are principally sustained, it cannot be said that the lower court has put itself in a position where discretion has been exercised upon the essential facts of the case. It has erroneously refused to permit the evidence to be put before it. There has been, therefore, no case before it where it could properly exercise discretion. A court is sometimes called upon to grant a temporary restraining order to show cause, upon papers or testimony which at first examination appear to be sufficient, yet afterwards are held not to be. In certain instances, haste in issuing a restraining order is necessary to prevent the doing of an act which, if done, would apparently work irreparable injury to another. A judge, under such circumstances, must do the best he can by acting upon the testimony at hand. But when the return day has come the parties may offer strictly legal testimony for the purpose of continuing or dissolving the order, and, if they do, it is the duty of the court to hear and consider it, and to exercise its legal discretion upon all that is competent and properly before it.

In the late case of Thompson v. Railway Co., (N. J. Ch.) 37 Atl. 129, Reed, V. C., said that it would seem that the same rule must be applied to distinguish between testimony that is admissible and testimony that is non-evidential, whether such testimony is found in affidavits to be used as a ground for obtaining an injunction, or the testimony is obtained in open court by examination of witnesses to sustain a litigated fact. The court sustained the rule laid down in the earlier New Jersey case of Railroad Co. v. Stewart, 21 N. J. Eq. 484, where the Chief Justice held that he was not aware of any relaxation of the rules of evidence with respect to affidavits annexed to injunction bills. To the same effect are Campbell v. Morrison, 7 Paige 157, and Clark v. Herring, 43 Ga. 226.

In the case before us, if the court had considered the evidence of the witnesses Bennett and Davis, and had then, in the exercise of its discretion, attached credibility to the statements of the defendants rather than those of Bennett and Davis, we should be reluctant to interfere with the exercise of that discretion; but, inasmuch as it refused to consider the statements of said witnesses at all, it left the case without any testimony on the part of plaintiff to sustain the material allegations of its complaint. The error was palpably one of law, in altogether excluding the testimony. It did not tend exclusively to prove an individual contract between Bennett and the defendant Congdon, as held by the court.

It would be improper for this court to intimate how the discretion of the lower court should be exercised after it considers the testimony improperly excluded; nor do we express any opinion whatsoever upon the merits of the case as shown by the evidence, including that heard and excluded.

The order will be made reversing the order of the District Court dissolving the temporary restraining order, and remanding the case, with directions to the lower court to consider the evidence excluded, and thereafter to exercise its discretion upon the whole case presented.

The appellant also complains of the action of the court in holding that the allegation of insolvency of the defendants, the Congdons, was material, and that such insolvency should be proved as a fact.

The most important question in the case was whether or not the defendants were the owners of the judgment against the railway company as trustees or agents for the plaintiff corporation. Upon this point the solvency or insolvency of the defendants was immaterial.

The second question was whether the defendants, as agents or trustees, should be enjoined.

If the first question was answered affirmatively, the answer to the second should have been arrived at by endeavoring to ascertain whether or not there was a sufficient showing of a breach of the trust, and consequent peril to the trust fund. If there was, the court ought to have granted the injunction, irrespective of the question of defendants’ solvency or insolvency. (Beach on Injunctions, §§ 909, 910.)

■ The respondents suggest that ‘ ‘the sustaining of a motion to dissolve a temporary restraining order is not a refusal, within the meaning of the code, of an injunction, to bring it within the provisions of Section 23, Code of Civil Procedure.” But in our opinion an order vacating a temporary restraining order is an order dissolving an injunction, from which an appeal lies, and it was within the power of the Supreme Court to continue the injunction order in force pending an appeal from the order of the District Judge dissolving the injunction.

The order of the District Court is reversed and the cause remanded, with directions to proceed in accordance with the views herein expressed.

Reversed and Remanded.

Pemberton, C. J. and Buck, J. concur.