Link to the Chancery Court opinion:
Link to the Supreme Court opinion reversing and remanding:
Thursday, August 18, 2011
Chancery Court Articulates Standards for Injunction Bonds. In Service Corporation of Westover Hills v. Guzzetta (C.A. No. 2922-VCP, Del. Ch. July 21, 2011), the Delaware Chancery Court increased the amount of a bond related to an injunction to stop the defendants from demolishing a house on their newly acquired property. The defendants, who owned the adjacent lot, sought to have the house demolished in order to extend their yard space. The homeowners’ association charged with enforcing the community’s deed restrictions filed suit to enjoin the demolition in 2007 and were granted a temporary restraining order. The Chancery Court initially set an injunction bond of $5,000; after the defendants moved for an increase to almost $80,000, the Court raised the bond to $10,000. Ultimately the Chancery Court found that the defendants had been wrongfully enjoined and awarded damages of $10,000, prompting an appeal to the Delaware Supreme Court on the amount of the bond. The Supreme Court reversed and remanded the case to the Chancery Court to determine the appropriate bond amount. As a threshold matter, the Court discussed the record to be considered on remand. The court rejected the defendants’ argument that the Court should re-evaluate the amount of the bond de novo and permit them to present evidence of actual damages incurred after the original Motion to Increase the Bond was heard. Instead, the Court determined that since the issue on appeal was whether the Chancery Court had abused its discretion in setting the bond, the relevant record was that which was presented in the defendants’ original Motion. Turning to the amount of the bond, the Court noted the Supreme Court’s guidance that the trial court should “set the bond at a level likely to meet or exceed a reasonable estimate of damages” and “err on the high side,” since an enjoined party’s damages are capped at the amount of the injunction bond.” Ultimately the Court included in the amount of the bond estimated damages to account for three years of increased property taxes, insurance premiums on improvements to the property, sewer rents, dwelling test charges, $5,000 for lost use of the property, and $5,000 for increased demolition charges. With the new bond set at $26,353, the Court ordered an evidentiary hearing on actual damages.
