Noble County v. Rogers

Attorneys for Appellant

Phillip A. Renz
Diana C. Bauer
Miller, Carson, Boxberger &
Murphy
Fort Wayne, IN

Attorneys for Amicus Curiae State of Indiana

Jeffrey A. Modisett
Attorney General of Indiana
Indianapolis, IN

Jon Laramore
Deputy Attorney General
Indianapolis, IN
Attorney for Appellee

Crystal Rogers, Pro Se
Cromwell, IN

IN THE
INDIANA SUPREME COURT

NOBLE COUNTY et al.,
Appellants (Plaintiffs below),

v.

CRYSTAL ROGERS,
Appellee (Defendant below).

)
) Supreme Court No.
) 57S03-0003-CV-218
)
)
) Court of Appeals No.
) 57A03-9903-CV-124
)
)

APPEAL FROM THE NOBLE CIRCUIT COURT
The Honorable Kevin P. Wallace, Special Judge
Cause No. 57C01-9611-CP-140

ON PETITION TO TRANSFER

March 27, 2001

SULLIVAN, Justice.

After a court overturned a restraining order that a county building
inspector had obtained against Crystal Rogers, she sought damages under a
trial rule that awards costs and damages to those wrongfully enjoined by
governmental entities. Both the trial court and the Court of Appeals held
that Rogers could recover under the trial rule despite the immunity
provisions of the Indiana Tort Claims Act. We hold that Rogers is not
entitled to damages because the county’s conduct was not wrongful for
purposes of the trial rule.

Background

In November, 1996, Crystal Rogers began a renovation project on a
house that she owned in an unincorporated area of Noble County. Rogers had
hoped to add a second story to the home. However, a Noble County building
inspector issued a stop work order on November 12, 1996, asserting that the
project violated the Noble County Building Code because Rogers had not
obtained a building permit. Rogers continued construction until the county
obtained a temporary restraining order.

Rogers appealed the trial court’s decision to the Court of Appeals,
which reversed and dissolved the temporary restraining order. Rogers v.
Noble County By and Through the Noble County Bd. of Comm’rs, 679 N.E.2d 158
(Ind. Ct. App. 1997), transfer denied. The court first held that the
pertinent Noble County ordinances amounted to a “building code” under
Indiana Code § 36-7-8-3 and not a “housing code” under Indiana Code § 36-7-
8-4. It then dissolved the temporary restraining order because such
“building codes” do not apply to “private homes that are built by
individuals and used for their own occupancy.” See Ind. Code § 36-7-8-3(d)
(1998).

On remand, Rogers asserted that she was entitled to damages under
Indiana Trial Rule 65(C). Her counterclaim sought compensation for the
cost of finding another place to live while the restraining order was in
place and for damage to the house caused by exposure to the elements.
Noble County moved for summary judgment on the counterclaim, arguing that
the Indiana Tort Claims Act precluded her recovery. The trial court denied
summary judgment, but certified its order for interlocutory appeal.

The Court of Appeals held that Trial Rule 65 is procedural in nature
and therefore trumped the conflicting provisions of the Tort Claims Act.
Noble County ex rel. Noble County Bd. of Comm’rs v. Rogers, 717 N.E.2d 591,
596 (Ind. Ct. App. 1999). We granted transfer, thereby vacating the Court
of Appeals decision. Noble County ex rel. Noble County Bd. of Comm’rs v.
Rogers, 735 N.E.2d 227 (Ind. 2000) (table).

Discussion

Rogers’s primary contention in this appeal is that she is entitled to
“costs and damages” under Indiana Trial Rule 65(C), which reads:
No restraining order or preliminary injunction shall issue
except upon the giving of security by the applicant, in such sum as
the court deems proper, for the payment of such costs and damages as
may be incurred or suffered by any party who is found to have been
wrongfully enjoined or restrained. No such security shall be required
of a governmental organization, but such governmental organization
shall be responsible for costs and damages as may be incurred or
suffered by any party who is found to have been wrongfully enjoined or
restrained.

(emphasis added). Rogers argues that because the restraining order was
lifted after her first appeal, Trial Rule 65(C) requires Noble County to
pay for the costs and damages she incurred while the restraining order was
in effect.

Noble County contends that the Trial Rule conflicts with the immunity
granted to governmental entities by the Indiana Tort Claims Act (“ITCA”).
See Ind. Code §§ 34-13-3-1 to § 34-13-3-25 (1998). Noble County argues
that two of the specific immunity provisions of Indiana Code § 34-13-3-3
preclude the damages Rogers sought in her counterclaim:
A governmental entity or an employee acting within the scope of the
employee’s employment is not liable if a loss results from:
…
(5) the initiation of a judicial or an administrative proceeding;
(6) the performance of a discretionary function; …[1]

The parties ask us to resolve this apparent conflict by applying
either the Trial Rule or the ITCA to the exclusion of the other.[2] This
posture puts into tension the powers of coordinate branches of our state
government by asking us to ignore the pronouncement of one such branch.
However, we have long held that “[i]f an act admits of two reasonable
interpretations, one of which is constitutional and the other not, we
choose that path which permits upholding the act.” Price v. State, 622
N.E.2d 954, 963 (Ind. 1993), reh’g denied.[3] See also A Woman’s Choice-
East Side Women’s Clinic v. Newman, 671 N.E.2d 104, 111 (Ind. 1996)
(Dickson, J., concurring in result) (discussing “our overriding obligation
to construe our statutes in such a way as to render them constitutional if
reasonably possible”), reh’g denied; Baldwin v. Reagan, 715 N.E.2d 332, 338
(Ind. 1999) (“If there is more than one reasonable interpretation of a
statute, at least one of which is constitutional, we will choose that path
which permits upholding the act.”).

To this end, a proper construction of the word “wrongfully” in the
Trial Rule resolves the conflict between the rule and the statute. We have
never had the opportunity to determine the scope of wrongful conduct for
governmental actors under T.R. 65(C). We now hold that their conduct is
wrongful only to the extent that they have acted with such bad faith and
malice that their actions undermine the authority of the court issuing the
restraining order or injunction.[4]

This construction harmonizes the immunity provisions of the ITCA with
our inherent power to sanction litigants for improper or untoward behavior
in judicial proceedings. The ITCA expresses a legislative policy to
protect the State’s finances while ensuring “‘that public employees can
exercise their independent judgment necessary to carry out their duties
without threat of harassment by litigation or threats of litigation over
decisions made within the scope of their employment.’” Celebration
Fireworks, Inc. v. Smith, 727 N.E.2d 450, 452 (Ind. 2000) (quoting Indiana
Dep’t. of Corr. v. Stagg, 556 N.E.2d 1338, 1343 (Ind. Ct. App. 1990),
transfer denied). To achieve these goals, the Legislature placed 20
categories of substantive behavior beyond the reach of tort suits. See
Ind. Code § 34-13-3-3 (1998).

The Legislature’s ability to immunize government actions knows few
limits, but those limits are reached when immunity impinges upon the
judiciary’s constitutional sphere. That is, while the Legislature may
shield the State from substantive tort liabilities, it may not immunize the
State from our power to sanction the attorneys and parties appearing before
us. See State v. Kuespert, 411 N.E.2d 435, 438-39 (Ind. Ct. App. 1980)
(upholding power of the trial court to issue monetary sanctions against the
State for discovery violations under Trial Rule 37). Cf. Ind. Const. art.
VII, § 1 (“The judicial power of the State shall be vested in one Supreme
Court, one Court of Appeals, Circuit Courts, and such other courts as the
General Assembly may establish.”) (emphasis added); State ex rel.
Indianapolis-Marion County Bldg. Auth. v. Superior Court of Marion County,
Room No. 1, 264 Ind. 313, 317, 344 N.E.2d 61, 64 (1976) (“Over the years,
this Court, in its opinions, has circumscribed a segment of judicial
authority and called it inherent and incidental. Courts are vested with an
inherent power to order, in emergency situations, the removal of obstacles
to the due administration of justice in the court.”).[5] This power to
sanction is a necessary precondition to the exercise of our independent
judicial power:
To deny a court the power to enforce obedience to its lawful orders
against parties who have been subjected properly to its jurisdiction
in the first instance, is to nullify its effectiveness as an
independent branch of our government. The power of a court to enforce
compliance with its orders and decrees duly entered is inherent. No
statutory sanction is needed. In both equity and law a court would be
powerless to give effective relief were its arms tied by such
requirements as relator asserts are necessary.

State ex rel. Brubaker v. Pritchard, 236 Ind. 222, 226-27, 138 N.E.2d 233,
235 (1956). See also O’Conner v. State, 178 Ind.App. 415, 382 N.E.2d 994,
998 (1978) (“In protecting this discovery process, the trial court has the
inherent power to impose sanctions … .”), aff’d, 272 Ind. 460, 399 N.E.2d
364 (1980). To protect the proper functioning of judicial proceedings, we
also have imbedded this power in numerous court rules. See, e.g., Ind.
Trial Rule 11, Ind. Trial Rule 37, Zwiebel v. Zwiebel, 689 N.E.2d 746, 750
(Ind. Ct. App. 1997) (“[Under Trial Rule 11], the trial court has the
discretion to impose sanctions where it determines that the verified motion
contains information that the attorney knows to be false.”), transfer
denied. Similarly, the judicial power encompasses the ability to hold a
litigant in contempt. See, e.g., Meyer v. Wolvos, 707 N.E.2d 1029, 1031
(Ind. Ct. App. 1999) (“We have recognized the inherent judicial power to
deal with contempt. No statutory sanction is needed as a court’s power to
enforce compliance with its orders and decrees duly entered is inherent.”),
transfer denied; Crowl v. Berryhill, 678 N.E.2d 828, 831 (Ind. Ct. App.
1997) (“Time and time again, Indiana appellate courts have recognized the
inherent judicial power to deal with contempt.”).

It is beyond question that this power extends to governmental
attorneys and parties. “When the State enters the court as a litigant, it
places itself on the same basis as any other litigant; subjecting itself to
the inherent authority of the court to control actions before it, just as
any other litigant.” State v. Blenden, 748 So.2d 77, 88-89 (Miss. 1999),
reh’g denied. See also State ex. rel. Mass Transp. Auth. of Greater
Indianapolis v. Indiana Revenue Bd., 146 Ind. App. 334, 337-38, 255 N.E.2d
833, 835-36 (holding state auditor in contempt for refusing to comply with
a court order), cert. denied, 400 U.S. 877 (1970); State ex. rel. Indiana
State Bar Assoc. v. Moritz, 244 Ind. 156, 164, 191 N.E.2d 21, 25 (1963)
(enjoining properly elected prosecutor from appearing in court because
prosecutor had not been admitted to the bar); Bangs v. Northern Indiana
Power Co., 211 Ind. 628, 635, 6 N.E.2d 563, 566 (1937) (upholding power of
trial court to award damages against mayor of Huntington for violating
injunction; “The courts are clothed with the power, in such actions, to
enter judgment of a coercive and remedial nature.”). Other jurisdictions
similarly uphold this judicial power in the face of misconduct by the
government. See, e.g., Nelson v. Steiner, 279 F.2d 944, 948 (7th Cir.1960)
(“The executive branch of government has no right to treat with impunity
the valid orders of the judicial branch.”).[6]
Therefore, our interpretation of the word “wrongfully” in the last
sentence of T.R. 65(C) must balance the limitations of the ITCA with the
judiciary’s inherent power to sanction. So long as any damages granted
under Trial Rule 65(C) are part and parcel of our sanctioning power, the
constitutional conflict the parties point to is not at issue. Under this
balance, a restraining order or an injunction obtained by the government is
wrongful only when the government acts in bad faith or with malice so as to
threaten the proper functioning of the court. This standard protects the
legislative policy of immunizing discretionary government actions while
preserving the courts’ ability to control litigation. We therefore
recognize that in those rare cases where this standard is met, T.R. 65(C)
may operate as a sanction for the government’s wrongful conduct despite the
immunity otherwise granted by the ITCA.

Here, however, Rogers’s counterclaim sought damages solely on the
basis of the dissolution of the restraining order after her initial appeal,
and no such bad faith is presented in the record. The dispute over the
restraining order focused on the purely legal question[7] of the
characterization of a building code. See Rogers v. Noble County By and
Through the Noble County Bd. of Comm’rs, 679 N.E.2d 158 (Ind. Ct. App.
1997). The record and the two previous opinions reveal no hint that Noble
County was motivated by anything other than a concern for safety. The
trial court should have granted Noble County’s motion for summary judgment
as to Rogers’s damage claims.

Conclusion

Having previously granted transfer, thereby vacating the opinion of
the Court of Appeals pursuant to Ind. Appellate Rule 11(B)(3), we remand
this case for proceedings consistent with this opinion.

SHEPARD, C.J., and RUCKER, J., concur.
BOEHM, J., dissents with separate opinion in which DICKSON, J., concurs.

ATTORNEYS FOR APPELLANTS
Phillip A. Renz
Diana C. Bauer
Fort Wayne, Indiana
ATTORNEY FOR APPELLEE

Crystal Rogers, Pro Se
Cromwell, Indiana

AMICUS CURIAE

Jeffrey A. Modisett
Attorney General of Indiana

Jon Laramore
Deputy Attorney General
Indianapolis, Indiana
_________________________________________________________________

IN THE

SUPREME COURT OF INDIANA

__________________________________________________________________

NOBLE COUNTY et al., )
)
Appellants (Plaintiffs Below), ) Indiana Supreme Court
) Cause No. 57S03-0003-CV-218
v. )
) Indiana Court of Appeals
CRYSTAL ROGERS, ) Cause No. 57A03-9903-CV-124
)
Appellee (Defendant Below). )
__________________________________________________________________

APPEAL FROM THE NOBLE CIRCUIT COURT
The Honorable Kevin P. Wallace, Judge
Cause No. 57C01-9611-CP-140
__________________________________________________________________

ON PETITION TO TRANSFER

__________________________________________________________________
March 27, 2001

BOEHM, Justice, dissenting.
I respectfully dissent. I do not believe that a suit for wrongful
enjoinment implicates the Tort Claims Act. Rather, I would conclude that,
under Trial Rule 65(C), a governmental entity seeking a preliminary
injunction voluntarily assumes the obligation to pay costs and damages
arising from a wrongful injunction. As a result, the claim by a person
wrongfully enjoined is not one arising in tort and the Tort Claims Act,
which bars only claims “in tort,” does not preclude recovery of those costs
and damages from a governmental entity. More importantly, the majority’s
approach does nothing to resolve the tension between the Tort Claims Act
and Trial Rule 65(C), and ignores the point that this Trial Rule has been
repeatedly enacted by the legislature, both before and after the Tort
Claims Act. I also find no support for the majority’s conclusion that a
governmental entity—or any other party to a lawsuit—acts “wrongfully” under
Trial Rule 65(C) only where it acts in “bad faith” or with “malice” in
invoking the power of the courts. It seems to me that the majority’s rule
is inherently self-contradictory. If the Tort Claims Act applies at all to
a wrongful injunction, it provides protection to the governmental entity
even for acts taken maliciously or in bad faith. Indeed, as explained
below, the torts that the Act does immunize—malicious prosecution and abuse
of process—have bad faith as an element. Thus, allowing suit only in the
event of bad faith or malice, although possibly supportable as a policy
matter, is a position incompatible with the Tort Claims Act and, in my
view, amounts to rewriting the statute.
All parties agree that the resolution of this case turns on the
interplay between the Indiana Tort Claims Act, see Ind.Code §§ 34-13-3-1 to
25 (1998), and Indiana Rule of Trial Procedure 65(C). Section 1 of the
Tort Claims Act declares that the Act “applies only to a claim or suit in
tort.” I.C. § 34-13-3-1. The Act goes on to bar suit against governmental
entities, including counties, under certain circumstances and for specific
enumerated activities, two of which are “the initiation of a judicial or an
administrative proceeding” and “the performance of a discretionary
function.” Id. § 34-13-3-3(5) & (6). Indiana Trial Rule 65(C), which
requires a party seeking a preliminary injunction to post a bond, exempts a
“governmental organization” from that requirement but provides that “such
governmental organization shall be responsible for costs and damages.”
Thus, the issue is whether the Tort Claims Act bars a party who is the
subject of a wrongfully issued preliminary injunction from obtaining costs
and damages from a governmental entity notwithstanding the trial rule. If
obtaining a preliminary injunction that is ultimately vacated is a tort,
then it is necessary to determine whether the statute or the trial rule
governs. This was the inquiry of the Court of Appeals. If, however,
Rogers’ claim is not grounded in tort, the Tort Claims Act does not apply.
The issue then becomes whether Trial Rule 65(C) standing alone is a
sufficient basis to impose liability on Noble County for Rogers’ costs and
damages.
A. The Remedy for a “Wrongful” Preliminary Injunction Is Contractual
in Nature
Many states, either by statute or by rule of court, provide that a
bond must be posted as a prerequisite to obtaining a preliminary
injunction. Similarly, Federal Rule of Civil Procedure 65(C) provides for
the issuance of security as a precondition to the grant of a preliminary
injunction by a federal court. Indiana Trial Rule 65(C), like the trial
rules of many other states, is modeled on the federal rule. Essentially,
for the privilege of obtaining the expedited and, by definition,
“preliminary” relief of a preliminary injunction, the plaintiff offers
security in an amount that will adequately compensate the defendant if it
is later determined that the interim relief was improperly granted. The
enjoined party is a third-party beneficiary of the bond, which is a
contract between the issuer and the party seeking the injunction.
Accordingly, if recovery is sought on the injunction bond, it is
essentially a contract claim. Curtis 1000, Inc. v. Youngblade, 878 F.
Supp. 1224, 1277-78 (N.D. Iowa 1995) (citing Note, Recovery for Wrongful
Interlocutory Injunctions Under Rule 65(C), 99 Harv. L. Rev. 828, 832-33
(1986)); In re Estate of Prichard, 425 N.W.2d 744, 748 (Mich. Ct. App.
1988).
The federal rule is that a defendant wrongfully enjoined has no cause
of action in the absence of a bond. W.R. Grace & Co. v. Local 759, 461
U.S. 757, 770 n.14 (1983). For the most part, the same has been true under
state law as well. Note, Interlocutory Injunctions and the Injunction
Bond, 73 Harv. L. Rev. 333, 343-44 (1959). The view of a claim for
wrongful injunction as essentially contractual in nature is consistent with
that result. If a party who has obtained an ultimately vacated injunction
has committed a tort, the enjoined party would have a claim with or without
a bond to secure payment. In addition, in many jurisdictions, and in
Indiana until 1976,[8] the amount of recovery is generally limited to the
amount of the bond. Coyne-Delany Co. v. Capital Dev. Bd., 717 F.2d 385,
393-94 (7th Cir. 1983); State v. Zahourek, 935 P.2d 74, 77 (Colo. Ct. App.
1996), aff’d, 956 P.2d 556 (Colo. 1998) (generally, no recovery is allowed
unless the wrongfully enjoined party has a claim for malicious prosecution,
restitution, or unjust enrichment). The sum of this appears to be that in
the vast majority of jurisdictions recovery by a wrongfully enjoined party
is viewed as fulfilling an undertaking by the party seeking the relief to
compensate for a wrongful injunction, not as compensating for a tort.
In Indiana, the law is less clear because our case law, like that of a
few other states, allows both an action on the injunction bond as well as
an action for damages beyond the amount of the bond. See generally 42 Am.
Jur. 2d Injunctions § 346 (2000). This is provided by statute in some
jurisdictions. E.g., Ill. Comp. Stat. 110/11-110 (1984). Indiana has
permitted recovery beyond the amount of the bond without any statutory
basis other than Trial Rule 65(C). National Sanitary Supply Co. v. Wright,
644 N.E.2d 903, 905 (Ind. Ct. App. 1994), trans. denied; Howard D. Johnson
Co. v. Parkside Dev. Corp., 169 Ind. App. 379, 389, 348 N.E.2d 656, 663
(1976). And in Indiana, a wrongfully enjoined party may recover actual
damages even if no security was demanded. Wright, 644 N.E.2d at 905. The
sum of this is that a claim for “wrongful enjoinment” has a long history in
Indiana, but has never been explicitly characterized as either a “tort” or
a “contract” claim.
B. Governmental Liability for Wrongful Injunctions
Many jurisdictions make special provision for preliminary injunctions
by government agencies, but most simply exempt the government from the
requirement to post a bond. Governmental entities are exempt under the
federal counterpart to Trial Rule 65(C), but there is no provision in the
federal rule purporting to impose liability on the government for a
wrongful injunction. Many states also require no bond from a governmental
entity before it may obtain a preliminary injunction, but make no express
provision for liability. See 42 Am. Jur. 2d Injunctions § 287 (2000).
Indiana is in a distinct minority in its inclusion of express language
calling for government liability for a wrongful preliminary injunction.
Some authorities explain the government’s exemption as based on a
desire to spare the public the cost of posting a bond. E.g., Provident
Mgmt. Corp. v. City of Treasure Island, 718 So. 2d 738, 740 (Fla. 1998).
Others state that it is because the government is presumed to be fiscally
responsible in the event any loss is incurred. Id.; Howard D. Johnson, 169
Ind. App. at 389, 348 N.E.2d at 663; cf. Juniata Foods, Inc. v. Mifflin
County Dev. Auth., 486 A.2d 1035, 1037 (Pa. 1985) (“The bond requirement .
. . is merely to insure a ready source for payment of damages if due.”);
Norco Const., Inc. v. King County, 721 P.2d 511, 513-14 (Wash. 1986)
(government not required to post supersedeas bond because “the State
treasury provides an adequate guaranty that the prevailing party will be
able to collect the amount of the judgment”).
Some states have concluded that the government is required to answer
in damages even though it has not posted a bond. This rule is sometimes
grounded in a statute or rule, and sometimes not. See Corpus Christi Gas
Co. v. City of Corpus Christi, 46 F.2d 962, 963 (5th Cir. 1931) (construing
Texas statute providing that city “shall be liable in the same manner, and
to the same extent, as if the bond, undertaking or security in ordinary
cases had been duly given and executed”); Provident Mgmt., 718 So. 2d at
740; cf. Norco Constr., 721 P.2d at 514 (“[A] party that is exempt from the
bond requirement is in the same position as if it had posted a bond.”).
Other courts have concluded that in the absence of a bond, a party
wrongfully enjoined simply has no recourse against a government entity,
consistent with principles of sovereign immunity. Village of Lake in the
Hills v. Laidlaw Waste Sys., Inc., 513 N.E.2d 598, 602-03 (Ill. App. Ct.
1987); Orange County v. Heath, 192 S.E.2d 308, 310 (N.C. 1972). This issue
has not been decisively determined under federal law. But see SEC v.
Unifund SAL, 910 F.2d 1028, 1039-40 (2d Cir. 1990) (suggesting that party
seeking redress for wrongful injunction against federal entity may be
without recourse altogether).
Only North Carolina and Illinois have explicitly discussed the
interaction between sovereign immunity and a rule or statute that dispenses
with the bond requirement for governmental agencies but explicitly provides
for damages to the party wrongfully enjoined. For different reasons, both
have concluded that a governmental entity is not liable for damages to the
wrongfully enjoined defendant. Illinois by statute allows recovery for
wrongful injunction at the hands of a private party whether or not bond has
been posted. However, this claim for wrongful enjoinment has been deemed
tort-like enough to implicate that state’s immunity act if the government
is the party seeking the injunction. Laidlaw, 513 N.E.2d at 601. In
Laidlaw, the Illinois Court of Appeals concluded that villages were immune
from a claim for a wrongful injunction under the state’s tort immunity act.
In so doing, it opted for a broader definition of tort, even though it
acknowledged that “obtaining a wrongfully issued preliminary injunction is
not technically a tort.” Id.
I do not believe that reasoning applies under Indiana law.
Traditionally, at common law, sovereign immunity was the norm in this
state. However, by 1972, this Court had taken the last step in a series of
decisions that had largely abrogated common law sovereign immunity.
Campbell v. State, 259 Ind. 55, 63, 284 N.E.2d 733, 737-38 (1972)
(abrogating sovereign immunity for state); Klepinger v. Board of Comm’rs,
143 Ind. App. 155, 177-78, 239 N.E.2d 160, 173 (1968), trans. denied
(abrogating sovereign immunity for counties); Brinkman v. City of
Indianapolis, 141 Ind. App. 662, 231 N.E.2d 169 (1967), trans. denied
(abrogating sovereign immunity for cities). Accordingly, the Tort Claims
Act was enacted in 1974 in the context of an Indiana common law presumption
against governmental immunity. Because the Indiana Act is in derogation of
the common law, it is to be narrowly construed against a grant of immunity.
Mullin v. Municipal City of South Bend, 639 N.E.2d 278, 281 (Ind. 1994).
For this reason, I do not agree with the Laidlaw court’s conclusion that
nontortious activity is immunized by the Tort Claims Act, nor with the
majority’s unstated conclusion that Noble County has committed a “tort” as
understood by the Act.
North Carolina took the view that the enactment of its procedural rule
65(C) did not waive government immunity for torts, apparently assuming that
a suit for wrongful injunction is a tort, without saying so explicitly.
Heath, 192 S.E.2d at 310. No express reliance was placed on North
Carolina’s Trial Rule 65(C), which, like Indiana’s, specifically provides
that no bond is required of a governmental entity, but that the
governmental entity is nevertheless responsible for damages arising from
wrongful enjoinment. Id. Because I believe that the recovery is
essentially contractual in nature, I also find that authority unpersuasive.

C. Noble County Assumed the Liability Provided by Trial Rule 65(C)
In my view, the basis upon which Rogers seeks recovery from Noble
County is essentially contractual. There is no written contract between
the two, and no bond creating a third party beneficiary relationship.
Nonetheless, by pursuing a preliminary injunction under Rule 65(C), Noble
County accepted the arrangement imposed by the Rule and bound itself to
reimburse Rogers for “costs and damages” if it was subsequently determined
that the injunction should not have issued. See 1 Samuel Williston &
Richard A. Lord, A Treatise on the Law of Contracts § 4:2 (4th ed. 1990)
(“[B]roadly speaking, any conduct of one party from which the other may
reasonably draw the inference of a promise, is effective in law as such a
promise.”); Restatement (Second) of Contracts § 19 (1981) (“The
manifestation of assent may be made wholly or partly by written or spoken
words or by other acts or by failure to act.”); see also Grove v.
Charbonneau Buick-Pontiac, Inc., 240 N.W.2d 853, 856-57 (N.D. 1976)
(published rules of contest are a valid offer that, if acted upon, create a
binding contract); Lucas v. Godfrey, 467 N.W.2d 180, 183-84 (Wis. Ct. App.
1991) (same).
Although Rule 65(C) now directly creates the obligation to reimburse
for a wrongful injunction, Indiana law has long required this result.
Initially, this was accomplished by the requirement that a bond be posted.
Indeed, the requirement that a party seeking an injunction reimburse a
defendant who is wrongfully enjoined predates Rule 65(C) by nearly a
century. In 1881, the legislature provided the code pleading procedure for
obtaining injunctions. 1881 Ind. Acts ch. 38, § 183. This included the
requirement that a party seeking an injunction enter into a “written
undertaking, with surety . . . for the payment of all damages and costs
which may accrue by reason of the injunction.” Ind.Code Ann. § 3-2107
(Michie 1968). Rule 65(C) became effective as of January 1, 1970, and
Section 3-2107 was repealed effective the same day. Thus, Indiana law has
long provided by either rule or statute for damages to be recovered by a
wrongfully enjoined party.
In 1970, the obligation of private parties to post a bond in order to
obtain a preliminary injunction was retained in Trial Rule 65(C). The
government was relieved of that obligation and instead the Rule itself
provided for compensation to wrongly enjoined parties without the need for
a bond. Indiana law has thus preserved and reaffirmed the longstanding
rule that a party wrongfully enjoined may recover damages. A trial rule
cannot override a statute on a point of substantive law. However, in 1969,
Trial Rule 65(C) was adopted by this Court and was also enacted by the
General Assembly. See Pub. L. No. 191-1969, § 1, 1969 Ind. Acts 661. It
has been reenacted twice since that time, both subsequent to the enactment
of the Tort Claims Act in 1974. Ind.Code § 34-5-1-6 (1984); Ind.Code § 34-
8-2-2 (1998). Presumably this belt and suspenders approach was designed to
meet precisely the point that some provisions of the trial rules verge or
encroach on substantive law. The 1970 changes merely replaced the bond
requirement, which plainly directed a contractual obligation of the
governmental entity with a simple requirement that the entity reimburse
directly. Basic contract principles and the doctrine that statutes are to
be construed in harmony if possible lead me to conclude that the action for
“wrongful injunction” is not a tort within the meaning of the Tort Claims
Act. In my view, if the legislature wishes to change that rule of
substantive law, it may do so, but the laws on the books do not provide the
immunity Noble County claims.
D. The Policy Considerations Are for the Legislature to Resolve
Noble County urges that considerations of public policy require
immunity for a governmental entity from liability for an ultimately
unsuccessful preliminary injunction. The State, as amicus curiae, urges
that the “as-yet-undefined threat of damage awards against government
officials and agencies seeking injunctive relief will hamper enforcement
efforts in areas such as environmental protection, health code enforcement,
fire and building safety, and workplace safety.”
Equally compelling public policy concerns favor allowing the
wrongfully enjoined defendant to recover against the government. The
requirement of posting bond or alternatively undertaking exposure to
damages encourages private parties and the governmental entity alike to be
cautious before invoking the extreme remedy of an injunction based on a
hastily developed and sometimes incomplete record. Moreover, the “threat
of damage awards” is not necessarily “as-yet-undefined.” Anticipating
Rogers’ damages would have been unproblematic. Rogers was living with her
family in a house with no roof. It was obvious that she would be required
to find another place to live during an adjudication on the merits. That
is precisely what happened after the tarpaulin covering her house was
ripped away during high winds and brought down a power line. To be sure,
taxpayers will shoulder the burden of any damage awards against the
government. But the countervailing concern is that denying damages
requires a single citizen to bear the loss even if proven correct. Trial
Rule 65(C) was adopted by this Court and also enacted by the General
Assembly. It resolved this debate in favor of distributing the loss among
the taxpayers of the governmental unit rather than letting it fall on a
single unfortunate citizen. If the legislature wishes to change that
balance, it can do so. Under the current legal regime, however, I believe
Rogers is entitled to recover as the Rule provides.
E. A “Wrongful” Preliminary Injunction Does Not Require Malice or Bad
Faith
“Wrongful” injunction has uniformly been found to mean “erroneous,”
not “malicious,” and the error is by the court, not the party seeking the
injunction. The majority concludes that the proper interpretation of
“wrongful” under Rule 65(C), as applied to governmental entities, would
include only preliminary injunctions sought maliciously or in bad faith.
As a preliminary matter, I would note that there is no basis for this
conclusion in the plain language of the Rule, which makes no distinction
between governmental and private parties in this respect. As the majority
notes, a trial rule is subject to standard rules of statutory construction.
Noble County v. Rogers, ___ N.E.2d ___, ___ n.3 (Ind. 2001). I see no
basis for the proposition that the wrongfulness of an injunction varies
depending on the identity of the party seeking the injunction. More
importantly, the majority’s view of the Rule runs counter to the common and
longstanding understanding of the law of preliminary injunctions.
The general rule at common law is that, in the absence of malicious
prosecution or abuse of process, a party is not liable in tort for the
wrongful issuance of a preliminary injunction. Sneakers v. Cobb County,
455 S.E.2d 834, 836 (Ga. 1995); Thayer Co. v. Binnall, 95 N.E.2d 193, 201
(Mass. 1950); Mayor of Lansing v. Ku Klux Klan, 564 N.W.2d 177, 180-81
(Mich. Ct. App. 1997); State ex rel. Douglas v. Ledwith, 281 N.W.2d 729,
734-35 (Neb. 1979); Church of Latter Day Saints v. Wallace, 573 P.2d 1285,
1288 (Utah 1978); 42 Am. Jur. 2d Injunctions § 337 (2000). Thus, the
prevailing authority on this matter is that a “wrongful” injunction, on the
one hand, and “abuse of process” and “malicious prosecution,” on the other,
are wholly separate concepts. A frequently stated rationale for this view
that no tort arises from a “wrongful” injunction is that any error arising
from the incorrect issuance of the preliminary injunction stems from the
court, and not from the party seeking the injunction. KKK, 564 N.W.2d at
180-81; Wallace, 573 P.2d at 1288; 42 Am. Jur. 2d Injunctions § 337.
The majority’s view mistakenly applies “wrongful” to describe not the
court’s action, but the party seeking the injunction. Under the federal
rule, after which our rule is modeled, a party is wrongfully enjoined “when
it turns out the party enjoined had the right all along to do what it was
enjoined from doing.” Nintendo of America, Inc. v. Lewis Galoob Toys, 16
F.3d 1032, 1036 (9th Cir. 1994). This description in no way suggests that
actual wrongful conduct by the party seeking the injunction is required.
There is no requirement of malice or bad faith to recover for a wrongful
injunction. Rather, consistent with the accepted definition of wrongful,
it is a substantial departure from commonly understood preliminary
injunction law under Rule 65(C) and its counterparts around the country to
conclude that a wrongfully enjoined person is entitled to damages depending
on the party’s subjective state of mind.
Finally, the majority’s solution exacerbates the tension between the
Tort Claims Act and the Trial Rule. The majority establishes a rule that
attempts to hold the governmental entity in check by making it liable if it
should act in bad faith or with malice in seeking a preliminary injunction.
That is a tort if committed by a private person, but it is also a tort
that the Tort Claims Act immunizes if committed by a governmental entity.
Thus, application of the Tort Claims Act does not turn on the subjective
state of mind of the governmental entity. Rather, with the exception of a
claim for false imprisonment or false arrest, under the Tort Claims Act the
governmental entity is immune from suits for malicious prosecution, which
include an element of bad faith. E.g., Butt v. McEvoy, 669 N.E.2d 1015,
1018 (Ind. Ct. App. 1996). Specifically, this immunity for malicious
prosecution extends to the context of the “the initiation of a judicial or
administrative proceeding.” Id. at 1017 (construing Ind.Code § 34-4-16.5-
3(5), which was repealed but not altered in the adoption of Ind.Code § 34-
13-3-3(5)); Clifford v. Marion County Prosecuting Attorney, 654 N.E.2d 805,
809 (Ind. Ct. App. 1995) (“In view of the fact that the primary tort which
arises from initiating legal proceedings necessarily includes the element
of bad faith, the presence of bad faith cannot remove the conduct from the
very protection envisioned by the [Tort Claims] Act.”). As the Court of
Appeals emphasized in Clifford, an activity is authorized under the Tort
Claims Act “regardless of whether it was done negligently or done with
improper motive.” 654 N.E.2d at 810. Ironically, because a suit for
malicious prosecution or abuse of process is by all accounts a tort, the
very language the majority invokes to describe the non-immune governmental
action, i.e., malicious or in bad faith, simultaneously invokes the
immunity of the Tort Claims Act.
The Tort Claims Act does include language along the lines of the rule
established by the majority for two circumstances not relevant here.[9]
Indiana Code section 34-13-3-3(8) provides immunity for “an act or omission
performed in good faith and without malice under the apparent authority of
a statute which is invalid if the employee would not have been liable had
the statute been valid.” Indiana Code section 34-13-3-3(20) provides for
governmental immunity from errors resulting from the Y2K bug so long as the
act or omission did not amount to “gross negligence, willful or wanton
misconduct, or intentional misconduct.” Thus, where the legislature
intended to exempt bad faith actions from immunity, it has said so. There
is no such provision in the “judicial proceedings” or “performance of a
discretionary function” sections on which Noble County relies.
The Tort Claims Act is substantive law enacted by the legislature. It
grants immunity in tort to governmental entities for initiation of judicial
proceedings. Rule 65(C) imposes the requirement that the government assume
the risk of liability if it chooses to seek a preliminary injunction. I
agree that this provision could have been overridden by the legislature if
it had chosen to do so. But the Rule and statute as presently written are
compatible and do not encroach upon one another. Both have been repeatedly
adopted by the General Assembly. In sum, Noble County agreed to reimburse
Rogers when it sought to obtain a preliminary injunction. I would affirm
the trial court.

DICKSON, J., concurs.

-----------------------
[1] Although not cited in Noble County’s brief, two other subsections
of Ind. Code § 34-13-3-3 are arguably invoked by these facts:
(7) the adoption and enforcement of or failure to adopt or enforce a
law (including rules and regulations), unless the act of enforcement
constitutes false arrest or false imprisonment;
(8) an act or omission performed in good faith and without malice
under the apparent authority of a statute which is invalid, if the
employee would not have been liable had the statute been valid …

[2] We note that the Illinois Court of Appeals has held that a
statutory scheme of sovereign immunity overrides a trial rule that awards
damages for a wrongfully obtained injunction. See Village of Lake in the
Hills v. Laidlaw Waste Systems, Inc., 513 N.E.2d 598 (Ill. App. Ct. 1987).

[3] When construing a trial rule, we employ such standard tools of
statutory interpretation. See Halsey v. Smeltzer, 722 N.E.2d 871, 873
(Ind. Ct. App. 2000) (citing Johnson v. State, 708 N.E.2d 912, 915
(Ind.Ct.App.1999), transfer denied), transfer denied. Cf. Rumfelt v.
Himes, 438 N.E.2d 980, 983-84 (Ind. 1982) (“Generally, the Rules of Trial
Procedure are to be construed together and harmoniously if possible.
However, as with statutes, a specific rule controls over a general one on
the same subject matter.”) (citations omitted).

[4] Because the initial sentences of T.R. 65(C) deal solely with
private parties and do not operate against the backdrop of the ITCA, we
express no opinion as to what constitutes a “wrongfully” obtained
restraining order or injunction in a purely private suit. See, e.g.,
National Sanitary Supply Co. v. Wright, 644 N.E.2d 903, 906 (Ind. Ct. App.
1994) (“[W]e hold that the test for determining if a preliminary injunction
was wrongfully issued [as between private entities] is not whether the
injunction was ultimately dissolved but rather whether injunctive relief
was warranted under the facts of the case.”), transfer denied.

[5] Courts in other jurisdictions have also recognized such inherent
authority:
We have consistently upheld this Court’s plenary power to control the
course of litigation in the trial courts. The legislature recognizes
these pertinent constitutional provisions which afford this Court full
authority over rules of practice and procedure and the Court’s
inherent power to prescribe rules. The prescription of the practice
and procedure attending the imposition of sanctions for the signing
and filing of papers with the courts is a procedural, not a
substantive, matter. The legislature is prohibited from enacting
statutes pertaining to such matter.
Squillace v. Kelley, 990 P.2d 497, 501 (Wyo. 1999) (citations omitted).
See also Cotner v. Hopkins, 795 F.2d 900, 902 (10th Cir. 1986) (“There is
strong precedent establishing the inherent power of federal courts to
regulate the activities of abusive litigants by imposing carefully tailored
restrictions under the appropriate circumstances.”).
[6] However, several Indiana cases have refused to award attorneys
fees and costs against the government on the grounds that it is immune from
“punitive” awards. See, e.g., State v. Denny, 273 Ind. 556, 557, 406 N.E.2d
240, 241 (1980) (refusing to shift costs under Ind. Appellate Rule 15(g));
State v. Carter, 658 N.E.2d 618, 623-24 (Ind. Ct. App. 1995). These cases
fall under the so-called American rule that a party may not shift the
expense of bringing a lawsuit absent statutory authority. This refusal to
allocate costs from party to party as a providential matter is a separate
analysis from a court’s power to sanction litigants.

[7] Cf. Grand Trunk Western R. Co. v. Kapitan, 698 N.E.2d 363, 368
(Ind. Ct. App. 1998) (Darden, J., concurring in part and dissenting in part
) (“Under Indiana Trial Rule 65(C), a party may recover damages, including
attorney’s fees, for a wrongful injunction. However, I do not believe the
injunction in this case should be characterized as ‘wrongful’ so as to
warrant an award of attorney fees [because the underlying issue] was a pure
question of law … I further believe such an award sets a bad precedent by
punishing litigants for an error on the part of the court and, as such,
augurs a chilling effect upon litigants.”) (emphasis in original), transfer
denied.
[8] The Court of Appeals held, in Howard D. Johnson Co. v. Parkside
Development Corp., 169 Ind. App. 379, 389, 348 N.E.2d 656, 663 (1976), that
recoverable damages in the wrongful injunction suit are not limited to the
amount of posted bond. Prior to this decision, it appears that the rule in
Indiana mirrored those of most other states—no recovery was possible
without the bond. Consistent with this rule, a defendant who deemed the
amount of the bond insufficient to cover potential damages could petition
the court to increase the amount of the bond. See, e.g., Jones Drilling
Corp. v. Rotman, 245 Ind. 10, 13, 195 N.E.2d 857, 859 (1964).

[9] The majority suggests that Indiana Code section 34-13-3-3(8) might
also apply to immunize Noble County’s actions in obtaining the preliminary
injunction. I disagree. This provision applies to a situation where a
statute is subsequently declared unconstitutional. Here, Noble County did
not act under the “apparent authority” of any statute that has subsequently
been called into doubt. It acted wrongly under a valid statute.