dissenting:
The temporary restraining order (TRO) entered by the trial court precluded the defendants, Darnell Industries, Inc., and S&S Hinge Company, from transacting a profitable business arrangement for 21/2 months. As a direct result, both companies suffered monetary loss. The majority holds that the defendants may not recover damages under section 12 of the Injunction Act (Ill. Rev. Stat. 1977, ch. 69, par. 12) notwithstanding the trial court’s ultimate holding that the plaintiff, Stocker Hinge Manufacturing Company had no legal right to enjoin the transaction. The majority rests its decision upon an archaic procedural technicality. The result is bad policy which, although perhaps required by past decisions of this court, is not required by the language of the Injunction Act.
In reaching its decision that damages are not recoverable the majority relies on House of Vision, Inc. v. Hiyane (1969), 42 Ill. 2d 45, 50, Schien v. City of Virden (1955), 5 Ill. 2d 494, 504, Nestor Johnson Manufacturing Co. v. Goldblatt (1939), 371 Ill. 570, 573-74, and Schuler v. Wolf (1939), 372 Ill. 386, 389. These cases establish that once a preliminary injunction has been superseded by the court’s ruling on a permanent injunction it becomes functus officio and a contemporaneous or subsequent dissolution of the injunction cannot establish that the injunction was wrongfully entered in order for the trial court to award damages under section 12. The majority applies the same principle in this case where a TRO was dissolved at the same time that the court denied the plaintiff’s motion for a preliminary injunction.
These cases arguably establish the principle for which they are cited by the majority. Nevertheless, I would not apply that principle in this case. I believe that these cases are erroneous and that they represent bad policy; this court should overrule them or limit them to their facts.
In particular, the cases relied upon by the majority misapply the functus officio doctrine. “ ‘Functus officio’ is a robust, sonorous Latin phrase without precisional legal connotation” (Derry Township School District Appeal (1951), 18 Pa. Super. 415, 417, 79 A.2d 127, 129), and the incantation of that doctrine by the majority obscures the serious issue of policy involved in this case. In this context functus officio simply means that once the trial court denied the preliminary injunction the TRO lost its motive power and would have been dissolved, by operation of law, even if the trial court had not specifically dissolved it in the order of December 2, 1977. Functus officio, however, does not mean that in denying the preliminary injunction the trial court could not also determine that the TRO was “wrongfully” entered. As an official act the TRO is dead after the court decides the merits of the motion for a preliminary injunction, but the court’s treatment of the merits may establish that the plaintiff had no legal right to enjoin the defendants’ conduct.
The majority refuses to accept this observation because it interprets “wrongfulness” required under section 12 as referring to a court’s mistake in applying the proper legal standard in granting a TRO. Thus, the majority opinion contains an extended discussion of the proper standard for a trial court to apply in deciding whether to grant a TRO. After the preliminary relief has become functus officio, any mistake that the court made in applying this standard would not, in the majority’s view, be remediable by an award of damages to the defendants.
This standard, however, is not relevant in determining whether a defendant was “wrongfully” enjoined in a manner that entitles him to damages under section 12. Section 9 of the Injunction Act (Ill. Rev. Stat. 1977, ch. 69, par. 9), which contains the “wrongfulness” requirement, states that damages are to be awarded when the defendant has been “wrongfully enjoined.” I believe that this language only requires the trial court to determine that the plaintiff had no legal right to an injunction. Thus, “wrongfulness” refers to the legal relationship between the plaintiff and the defendant and not to that between the court and the defendant. When it ultimately is determined that the plaintiff was not entitled to any preliminary relief, the trial court’s proper application of the TRO standard should not shield the plaintiff from liability for the damages that his act in applying for the TRO has caused the defendant to suffer.
In denying the preliminary injunction in this case the trial court ruled, and the appellate court affirmed, that the plaintiff had not established the possession of a trade secret that was entitled to equitable protection. (See Stocker Hinge Manufacturing Co. v. Darnel Industries, Inc. (1978), 61 Ill. App. 3d 636, 643.) Because the TRO improperly prevented the defendants from using several manufacturing processes during the pendency of the suit, I would require that the plaintiff recompense them for their damages.
The majority’s decision will only result in a subtle and undesirable change in the sequence of proceedings involving preliminary relief. Hereafter defendants will have to completely exhaust hearings and appeals on the motion to dissolve the TRO. If unsuccessful on that motion, defendants will then go forward in defending against plaintiff’s motion for a preliminary injunction. In order to preserve their right to damages, defendants in the future will nearly always appeal a trial court’s denial of a TRO dissolution motion. The majority’s decision thus encourages piecemeal appeals and forces the appellate court to make a final determination concerning the defendant’s right to damages at a point in the litigation when the record often is only incompletely developed.
In the instant case, for example, “all parties recognized the obvious fact that the continuation of the TRO depended upon the identical legal and factual issues as governed the possible entry of a preliminary injunction.” (Stocker Hinge Manufacturing Co. v. Darnel Industries, Inc. (1981), 99 Ill. App. 3d 340, 342.) It was quite logical and consistent with conservation of judicial time and resources for the trial court to consolidate hearings on the two motions. The majority erroneously makes the trial court’s practical and commendable decision to consolidate the two motions the determinative factor denying the defendant’s recovery of damages.
A TRO is an extraordinary legal instrument. In some cases the trial court may grant it ex parte, and in such cases the court must rely almost entirely upon the plaintiff’s representations concerning his legal rights. A TRO magically freezes the relationship between the plaintiff and the defendant, but it only does so at a risk of considerable injury to the defendant. I believe that a party who chooses to seek this extraordinary instrument of potential destruction should pay for any damages that he inflicts upon his adversary if it is later determined that he has no legal right to an injunction. Because the majority refuses to reexamine this court’s erroneous construction of section 12, damages are not always available under such circumstances, and I would encourage the legislature to correct this injustice.