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Posted: February 22, 2017

Court Erred in Vacating Undertaking Before Determining Damages Suffered From TRO

On February 16, 2017, the First Department issued a decision in Canales v. Finger, 2017 NY Slip Op. 01266, holding that it was error to vacate an undertaking before determining whether the defendants were damaged by entry of a temporary restraining order and ordering that the undertaking be posted again, explaining:

[T]he court erred in vacating the undertaking when it denied the preliminary injunction and dissolved the TRO. The purpose of the undertaking is to provide a source of recovery to the nonmovant for damages suffered from the pendency of the restraint. As such, the undertaking should be reinstated, in the amount of $250,000, pending a determination of defendants’ damages, if any, from the pendency of the TRO. Here, the court allowed plaintiff to use his personal condominium, which was co-owned with another person, as security. As defendants correctly note, if they established damages from the TRO and wanted to collect, they would have to foreclose on any lien that was filed, and bring another proceeding against plaintiff and the co-owner to force the sale of the real property. This defeats the purpose of the undertaking here, where the TRO has been vacated. Thus, under these circumstances, the undertaking of $250,000, shall be from a third-party surety, or funds placed in an escrow account. The undertaking, in this form, shall be posted within 15 days of the date of this order.

(Internal citation omitted).

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