
    Waller v. Long.
    Decided, Jan. 20th, 1818.
    1. Bond with Penalty — Back Interest. — If a bond be given in the usual form with a penalty, conditioned to be discharged by payment of the principal at a future day, “with interest from the date if not punctually paid.” such back-interest is to be considered an additional penalty, and not recoverable.
    2. Statute — Judgment on Bond — Construction.—The clause in our Act of Assembly, CR. Code of 1819. c. 128, § 83, p. 509,) which prescribes the sum for which judgment is to be rendered on a bond, meant that, in cases of penalties by way of security, the final justice of the case should be attained in the Courts of law, in effectuating which object, t-hose Courts are to be governed by the same considerations which influence the Court of Equity.
    This was an action of debt brought by the appellant, an assignee of Daniel B. White, against the appellee, in the County Court of Spotsylvania. It was brought upon a bond bearing date the 17th March 1806, in the penalty of 3881. 19s. 6d. conditioned for the payment of 1941. 9s. 9d., on or before the 25th of December 1808, “with interest from the date if not punctually paid.” The defendant, after oyer of the bond, pleaded “payment.”
    On the trial of the cause, the defendant produced a witness to prove that, at the time of executing the bond, it was agreed, that he should have a credit till 25th Dec. 1808, and that that credit was a constituent part of the Contract by which the debt in question was created. The Court excluded this evidence from the Jury, and the defendant excepted. The Jury returned a special verdict, in which, after finding the execution of the bond; the assignment of it to the appellant before the day of payment; several payments, amounting to 461. 13s. Od. on and before the 25th of December 1808; and sundry payments thereafter; they submit the question to the Court, whether the appellant is entitled to recover interest upon the sum mentioned in the condition of the bond, from the day of the date thereof, or not. In the former event, they find for the appellant the debt in the declaration mentioned, to be discharged by the payment of 361. 2s. 7d.; in the latter, by the payment of 21. 10s. Id., with interest, in either case, from the 20th of Oct. 1809.
    Upon this verdict, the County Court held the affirmative opinion, and gave judgment for the larger sum found by the Jury. They gave judgment for the interest from the date of the bond, calculated upon the whole sum mentioned in the condition, altho’ 461. 13s. Od. of it had been paid on and before the day on which it became due and payable.
    On an appeal, the Superior Court of law for the County reversed the judgment, and rendered judgment for the smaller sum; from which judgment an appeal was taken to this Court.
    Wirt for the appellant.
    Interest from the date was recoverable as a matter of special contract, perfectly understood by the parties, not as a formal part of the instrument, but one to be executed. Such bonds are in conformity with the constant practice and custom of the country, which, in such cases has been considered as decisive of the law.  Even the set-offs in this Record, are calculated in the same way. Being the contract of the parties, it must be carried into effect, unless it be against some rule of law.
    A bond of this description is not usurious ; 1. because it is evidence of a debt existing at its date, from which time interest, therefore, would have run if nothing further had been said: — a future day for payment, is indeed given, but upon the express condition of paying interest from *lhe date, if the principal be not punctually paid; which interest is only at the legal rate:
    2. Because the back interest is required upon a contingency, by which the ob-ligor might have discharged himself altogether ; and interest . depending on such contingency, even though above the legal rate, must bo paid:
    
    3. Because, to constitute Usury there must be proof of borrowing and lending, 
    
    But if Usury existed in the contract, and even were apparent on the face of the bond, the objection cannot be taken without being pleaded, 
    
    Neither is the back interest to be considered as a penalty, and therefore not recoverable. It is not a penalty in reason, or in the understanding of the parties. The penalty is generally understood in this Country as intended, only to enforce compliance with the condition.
    ■ — The condition is always regarded as containing the contract itself. This bond has a penal part, independently of the condition. What motive could the parties have to insert another penalty? It was clearly not intended as such, but in the light of a liquidated satisfaction in damages. It is easy to imagine countless cases, where the interest from the day appointed, is no satisfaction for the Injury sustained by default of payment.
    I have not found any case decided in a court of law on the point relating to back interest; but there are cases analogous in principle. — Ex. gr. a contract was sustained, by which the purchase money for a tract of land was to be paid by instalments; and in the event of failure to pay any one instalment, the whole was demandable immediately. Was not that a more highly penal agreement than this? In Gowlett v. Hansforth, 2 Bl. Rep. 958, the principal and interest were both made payable at an earlier period, in consequence of the failure to pay the in-stalments punctually.
    The case of Shode v. Parker, 2 Vern. 316, is the first and last I have been able to find, in which a distinction is taken between a contract for reducing the interest upon compliance with the times of payment, and one where *the interest is to be increased if not paid at the day. — The quaire annexed by Vernon is a complete answer to the case; for there is no difference in reason, or the nature of things between the two contracts. The motive to pay, and the advantage from paying, is the same in both cases. In fact, it is a distinction without a difference, and discountenanced by other decisions, 
    
    Stanard contra. — Upon the true understanding of what is meant by a penalty, must depend the correct decision of this case. A Penalty is the forfeiture of something not estimated by the amount of advantage gained on one side, or of loss sustained on the other. Courts of law have, under the Statute, the same iiower to relieve against penalties that Courts of Equity have.
    
    
      In this case is the reservation of back-interest to be regarded as a liquidated compensation in damages, or as a Penalty? If any part (however small) of the principal be not paid on the day appointed, interest on the whole sum is demandable from the date., according to the terms of this bond! Is this any measure of compensation? Does it not answer exactly to the description of a penalty? Is there any difference betweeen a contract to pay interest from the date in case of default, and a contract to pay a certain additional sum in the same event? It is still the agreement of the parties. The usual penalty itself, is an agreement oí the partiesyet the Court of law mitigates its rigour.
    The main force of Mr. Wirt’s argument is a supposed custom of the Country. I deny the existence of any such custom; having always understood it a question concerning which the best informed members of the profession have differed. But if there be such a custom, it ought to be shewn to the court, as the particular custom was in Floyer v. Edwards. In that case, the custom was matter of evidence that there was no corrupt purpose of evading the Statute. Even in that case, the court, though it decided the contract not to be usurious, yet said the surplus was not recoverable in assumpsit for money had and received, which is an equitable action.
    If such claims can be supported in Courts of law, *where is the guard to protect parties from the effect of agreements to pay penalties? If A owes B 1001. and B tells him that, if he will pay him 501. to morrow, he will relinquish the debt; he is not bound to do so, if the 501. be not paid. But there is a distinction between a case where the creditor is willing to relinquish part of the debt in consideration of punctual payment, and one where the debtor agrees to pay more than the debt, if he fail to be punctual. This is the distinction recognized in Courts of Equity. If there was no penal part, in the usual form, in the bond, and it simply was, “I A. B. bind myself to pay 501. twelvemonths afterdate; and, if I do not punctually pay that sum, I will pay interest upon it from this date;” — such interest would clearly be considered a penalty.
    In Burton v. Slatten, 5 Bro. Pari. Cases, 233, the sum allowed had every appearance of liquidated damages. — Rot so here; for the interest may be demanded during many months, on the whole amount, for á default of one moment, and as to one cent!
    If a debtor was to contract, expressly, to pay all damages the creditor should sustain by his failure to pay the money on the day; the creditor could nevertheless recover no more than the interest. Yet Mr. Wirt contends for a sum to be added, by implication, as a liquidation of such damages I
    In Halifax v. Higgens, 1 Vern. 134, the one per cent, additional interest was a compensation for failing to pay the interest regularly.
    The distinction I have mentioned, is fully supported by the authorities,  and no case can be found where retrospective interest is permitted to be added to the sum stipulated by the condition. To do this would be to allow a forfeiture. In Gowlett v. Hansforth, 2 Bl. Rep. 958, it was not a forfeiture, and the Court went expressly upon that ground.
    It appears on the face of this special Verdict, that the Jury have mis-calculated the set-offs. They have submitted one question only; whether the whole back interest is to be recovered,-even though part was punctually *paid. At all events, such interest ought not to be charged on so much as was paid on or before the day appointed.
    Wirt in reply. — My impression is, that if a payment in part be made on the day, the creditor is entitled to the back interest on the sum remaining due only. I have understood the custom of the country to be so; and such appears to be the equitable standard. If in this I am mistaken, and the practice has been to enforce the contract strictly, I insist upon it as my client’s legal right upon the authority of Blake v. Eawrence 4 Esp. Rep. 147, before cited.
    As to the custom of the Country, it was said in Long v. Colston 1 H. & M. 115, that a general custom was not to be proved. In Floyer v. Edwards, the custom was special, and therefore proof was required.
    The distinction taken in Courts of Equity, relied upon by Mr. Stanard, is a distinction without a difference. — The stipulation in both cases is that, although the interest would otherwise run from the date of the bond, the plaintiff: will give it up, if the principal be punctually paid. If a bond be given, conditioned to pay at a future day, with interest from the date, and an endorsement be made, that, in the event of payment of the principal on that day, the interest, shall be remitted; such bond and endorsement would amount to the condition of this bond exactly. And, according to the case of Shermer v. Beale, 1 Wash. 11, 14; such endorsement is to be considered as incorporated with the bond.
    The distinction therefore, being unreasonable, ought not, (as Judge Roane said in Baring v. Reeder, 1 H. & M. 162,) to be considered as of binding authority. But, even according to the British decisions, — in Halifax v. Higgens, the interest was to be raised in case of failure in punctuality; yet the Court allowed the higher rate, not as the legal standard of interest; but on the ground that such was the contract of the parties. In Nicholls versus Maynard, Lord Hard-wicke, (by way of an obiter dictum, • for it was not necessary to the decision in that cause,) does indeed recognize the distinction. In Blake v. Lawrence, not only the time of commencement of the interest *was drawn back, but also that of payment of the principal sums; yet the contract was enforced, though more highly penal than this. In Gowlett v. Hansforth, there was a forfeiture, in Mr. Stanard’s sense; but the court decided, that it should be enforced as the contract of the parties. Lord Mansfield, though notorious for a disposition to break down the barriers between the Courts of Law and Equity, no where asserts that he would enforce in a Court of law this distinction adopted in the Courts of Equity. It is a distinction completely overthrown by the cases I have cited.
    This case was re-argued by the same counsel, March 28th, 1817, but, from a due regard to brevity, the second argument is not inserted.
    
      
       See generally, monographic note on “Bonds” appended to Ward v. Churn, 18 Gratt. 801.
    
    
      
       See principal case cited in Chapman v. Shepherd, 24 Gra.tt. 385.
    
    
      
       Ployer v. Edwards, Cowp. 112.
    
    
      
      Cb) 1 Hawk. 527, c7.28, § 3, Pollard v. Baylor, 4 K. & M. 223.
    
    
      
       Burton's case, B Co. Rep. 69, (a) Ployer v. Edwards, Cowp. 112.
    
    
      
       Price v. Campbell, 2 Call 210.
    
    
      
       1 Saund. 296 b. note (1).
    
    
      
      j Blake ex’r of Dalev. Lawrence, 4 Esp. Rep. 147.
    
    
      
      fe) Halifax v. Higsens, 2 Vern. 134; Burton v. Slatten, B Brown’s Pari. Cases, 233; Powell on. Mortg’s. 962-3.
    
    
      
       Bonafous v. Rybot, 3 Burr. 1374.
    
    
      
       15 Viner, 453, pi. 1; Holies v. Wyse, 2 Vern. 289; Nicholls v. Maynard, 3 Atk. 519; Brown v. Barkham, 1 P. W’ms. 653; Bonafous v. Rybot, 3 Burr. 1372.
    
   January 20th, 1818,

JUDGE ROANE

pronounced the Court’s Opinion, as follows, after stating the case.

Altho’ the testimony offered by the defendant was rejected, and properly rejected, by the Court, the same construction results from the face of the bond itself. The penalty of the bond is conditioned to be discharged by the payment of 1941. 9s. 9d. on or before the 25th of Dec. 1808, with interest from the date, “if not punctually paid.” It is evident that the agreement of the parties is completed, before the-insertion of these last words “with interest,” &c., at least so far as it respects the time of payment, and the sum to be then paid. The sum to be then paid is shewn to be 1941. 9s. 9d. only, in exclusion of the back interest, by this consideration, that the payment of that sum on or before the 25th of Dec. 1808, would have discharged the penalty of the bond. These last words were only inserted to enforce, more effectually, the payment of the principal; to add to the penalty, by which the payment thereof was already secured. That is no part of the sum agreed to be paid on a given day, which only becomes payable after that day, and in the event that payment is not punctually made on the day. It is only a penalty.

The Court understands it to be a clear principle, that the clause in our Act, (1 Rev. Code of 1794, p. Ill,) which prescribes the sum for which judgment is to be rendered on a bond, meant that, in cases of penalties by way of '^'security, the final justice of the case should be attained in the Courts of law, for which, before, parties had been driven into the Courts of Equity. The Court is also of opinion, that, in effectuating this object, those Courts are to be governed by the same considerations which influence the Courts of Equity. If any authority is wanting to support this clear position, it may be found in the case of JSonafous v. Rybot, 3 Burr, 1373, in relation to the English statute of 4 and 5 Anne, ch. 16, which is substantially similar to our Act.

The principle of Equity upon this subject, is, that, where the condition is for the payment of a sum of money at a certain time, if it is not paid, the Court will allow interest upon it, from the day when it should have been paid, and considers the forfeiture as a penalty which is a subject matter of relief, (2 Eonb. 388.) Equity does not give more than the sum agreed to be paid, with interest thereupon from the time when it ought to have been paid. This is the just measure of repairing the breach of the agreement: all beyond it is relieved against, as being, in effect, a penalty.

Under the influence of this principle, while it was held, in the case of Nicholls v. Maynard, 3 Atk. 521, that, where a mortgage was made reserving 5 per cent, interest, with an agreement to abate one per cent, in case of punctual payment being made, if payment at the time is not made, the five per cent, is payable, (for it was reserved, and the condition of abatement has not been complied with ;) — it was also decided that, if four per cent, only had been reserved, with a proviso or condition that, in case of nonpayment by a certain time, the interest should be increased to five per cent., such proviso would not have been good; because, continue the Court, “where the interest is to be increased if the money be not paid on the day, that is but a nomine poenas, and relievable in equity.” Where the greater sum is reserved, if the condition of abatement is not strictly complied with, it is to be paid; because it is reserved, and a contrary decision would contravene the agreement of the parties; but the greater sum is not to be paid where it is only reserved to enforce the payment of the smaller, which alone forms themeas-ure of the contract *of the parties. In other words, the agreement of the parties is to prevail, so far as it respects the sum agreed to be paid: it is to be relieved against, so far as it partakes of the nature of a penalty.

These positions, supported by all the authorities, are decisive of the case before us. The party is to get only that which he would have received, had the contract been duly complied with, and legal interest thereupon from the time when it should have been paid. All beyond is in the nature of a penalty, and relievable against, by the principles of equity. The cases which shew that the rate of interest can not be increased, equally shew that the back interest can not be given: it will not be given unless it is reserved, as a part of the contract.

On these grounds, the Court is of opinion, to affirm the judgment of the Superior Court.  