United States v. Gurney
8 U.S. 333 (1808)

Annotate this Case

U.S. Supreme Court

United States v. Gurney, 8 U.S. 4 Cranch 333 333 (1808)

United States v. Gurney

8 U.S. (4 Cranch) 333

ON CERTIFICATE OF DIVISION OF OPINION AMONG THE JUDGES

OF THE CIRCUIT COURT FOR THE DISTRICT OF PENNSYLVANIA

Syllabus

B. in Philadelphia, agreed to pay to A's agent one hundred and seventy thousand guilders in Amsterdam on 1 March, and if he should fail so to do, then to repay to A. the value of the said guilders at the rate of exchange current in Philadelphia at the time demand of payment is made, together with damages at twenty percent in the same manner as if bills of exchange had been drawn for the said sum, and they had been returned protested for nonpayment, and lawful interest for any delay of payment which may take place after the demand. B. paid the one hundred and seventy thousand guilders in Amsterdam, to the agent of A. on 13 May instead of 1 March. A. is not entitled to the twenty percent damages, but may, in a suit upon the bond given to perform the contract, recover interest on the one hundred and seventy thousand guilders from 1 March to 13 May.

It is not a good plea for the defendants to say that they paid the one hundred and seventy thousand guilders to A.'s agent, for the use of A. at Amsterdam, on 13 May, without averring it to be the whole sum then due.

It is a known rule that a demurrer brings all the pleadings before the court, and in consequence of which judgment may be rendered against him who committed the first fault, or which will most generally produce the same result, for him who upon the whole record shall appear to be entitled to the judgment.

Contracts are always to be construed with a view to the real intention of the parties.

If the reservation of damages in the condition of the bond is in law only a double penalty, then interest is the legal compensation for the breach of covenant contained in the bond.

This case was certified from the Circuit Court for the District of Pennsylvania, the judges of that court being divided in opinion upon the question whether, upon the state of the pleadings, the judgment ought to be rendered for the plaintiffs.

It was an action brought by the United States against Gurney and others upon a bond conditioned to comply with a certain written agreement between them and the Secretary of the Treasury of the United States of the same date

"to pay the sum of 500,000 guilders at Amsterdam . . . in the manner and form, and on or before the particular days and times in the said agreement mentioned; or in case the said sums shall not be paid as aforesaid, at either of the said places, then to repay to the United States the value of the said 500,000 guilders, at the rate of exchange current in Philadelphia at the time demand of payment is made, together with damages at 20 percent, in the same manner as if bills of exchange had been drawn for the said sum, and they had been returned protested

Page 8 U. S. 334

for nonpayment, and lawful interest for any delay of payment which may take place after the demand."

After oyer of the bond and condition, the defendants set forth the written agreement, by which, in consideration of $205,000, to be immediately advanced to them by the United States, the defendants agree to pay to the bankers of the United States at Amsterdam 500,000 guilders, in manner following, viz., 230,000 guilders on or before the first of February; 170,000 guilders on or before the first of March; and 100,000 guilders on or before the first of June, 1803; and in case the said payments shall not be made at the times and in the manner aforesaid, they will pay to the United States

"20 percent damages for their noncompliance with this agreement, for the whole of the sum so agreed to be paid, or such parts thereof as they shall not actually pay at the times, place and manner aforesaid, together with interest from the day of demand of repayment on behalf of the United States . . . in the same manner as for bills of exchange returned with protest for nonpayment."

The defendants then pleaded that on 1 February, 1803, they paid at Amsterdam to Willink & Van Staphorst, bankers of the United States, to and for the use of the United States, the said 230,000 guilders, and on 13 May the said 170,000 guilders, and on 16 May the said 100,000 guilders, in the said articles of agreement mentioned, "and this they are ready to verify," &c.

To this plea the United States replied that although the defendants, on 1 February, 1803, paid to the said Willink & Van Staphorst, bankers of the United States, for the use of the United States, the said sum of 230,000 guilders, in the said articles of agreement mentioned, and although the defendants, on the said 13 May, at Amsterdam, paid to the said Willink & Van Staphorst, bankers of the said United States, to and for the use of the said United States, the sum of 170,000 guilders, and although the defendants, at Amsterdam, on the said 16 May, paid to the said Willink & Van Staphorst, bankers of the said United States, to and for the use of the said United States, the further sum of

Page 8 U. S. 335

100,000 guilders, in the said articles of agreement mentioned; yet the said United States deny that the said last mentioned sum of 170,000 guilders, so as aforesaid paid by the defendants to the said Willink & Van Staphorst, bankers of the United States at Amsterdam, on the said 13 May, was, by the United States, accepted, received and allowed in payment and satisfaction of the said sum of 170,000 guilders, which, by the said agreement, the defendants were bound to pay on or before 1 March, 1803, and this the said United States pray may be inquired of by the country. And the said United States in fact say that the defendants did not pay or cause to be paid to the said Willink & Van Staphorst, bankers of the United States at Amsterdam, to and for the use of the said United States, the said sum of 170,000 guilders, in the said articles of agreement mentioned, on or before the said 1 March, 1803, being the time prescribed by the said articles of agreement for payment of the same.

Nor have the defendants at any time since 1 March, 1803, paid to the United States 20 percent damages for their noncompliance with the said agreement for the payment of the said sum of 170,000 guilders, part of the said sum of 500,000 guilders in the said agreement mentioned, to the said Willink & Van Staphorst, bankers of the said United States at Amsterdam, to and for the use of the said United States, on 1 March, 1803, together with interest from the day of demand of repayment on behalf of the United States, in the same manner as for bills of exchange returned with protest for nonpayment, although afterwards, viz., on 14 June, 1803, at Philadelphia, demand of repayment of the said sum of 170,000 guilders, together with the said 20 percent damages, was made on behalf of the said United States, by Albert Gallatin, Secretary of the Treasury of the United States, from the defendants, but to pay the aforesaid sum of 170,000 guilders, together with 20 percent damages, and interest on any part or parcel thereof, to the said United States, the defendants have hitherto refused, and still refuse, contrary to the form and effect of the said condition of the said writing obligatory, and the agreement therein referred to, and in the plea set

Page 8 U. S. 336

forth, and this the said United States are ready to verify, wherefore they pray judgment, &c.

To this replication the defendants demurred specially.

1st. For duplicity.

2d. Because they could not take issue on the replication without a departure from their plea; and,

3d. Because the United States have by their replication endeavored to put in issue matters foreign and irrelative to said plea.

This demurrer was joined on the part of the United States.

Page 8 U. S. 341

MARSHALL, CH. J. delivered the opinion of the Court as follows, viz.,

This case comes on upon a special demurrer to a replication filed by the plaintiffs to a plea of payment after the day. The replication is double, and consequently ill. But it is a known rule that a demurrer brings all the pleadings before the court, in consequence of which judgment must be rendered against him who has committed the first fault, or which will most generally produce the same result, for him who upon the whole record shall appear to be entitled to their judgment. It therefore becomes necessary to examine the plea of the defendants. By their agreement with the Secretary of the Treasury, they were bound to pay to the bankers of the United States in Amsterdam the sum of 500,000 guilders in the following manner, viz., 230,000 guilders on or before the first day of February, 170,000 guilders on or before 1 March, and the remaining 100,000 guilders on or before the first day of June, in the year 1803. The first payment was made on the day, and the last before the day, but the second payment was made on 13 May, instead of 1 March. On the effect of this payment the whole case depends.

The defendants plead that they did, on 13 May, at Amsterdam, pay to the bankers of the United States for the use of the United States the sum of 170,000 guilders. The replication admits this payment as pleaded, but denies that it was accepted, received, and allowed by the United States in payment and satisfaction of the same sum which was payable on 1 March. The replication proceeds to aver that the said sum of 170,000 guilders was not paid on 1 March, nor had the defendants paid the damages of 20 percent which were stipulated in case of failure to pay on the day.

The fact upon these pleadings appears to be that the payment was received by the United States without any

Page 8 U. S. 342

stipulation respecting the effect of that receipt upon their agreement with the defendants. If payment to the bankers of the United States, the persons to whom by agreement the money was to be paid, was not payment to the United States, it would not be a payment to the use of the United States, which the plea avers and the replication in terms admits. In such case the replication, instead of averring that this sum was not accepted in satisfaction of the same sum payable at an earlier day, would have averred, and ought to have averred that it was not accepted at all, and was not a payment to the use of the United States, in which case, instead of a special replication, issue might have been tendered on the plea. The Court then understands the fact as stated in the pleadings to be that the money was received without any agreement whatever, and the law must determine the effect of such a payment.

The payment made to the bankers in Amsterdam being then an actual payment to the United States, the inquiry is whether it was such a payment, and is so pleaded as to bar this action.

It is admitted that the statute of Anne, which allows payment after the day to be pleaded, is in force in Pennsylvania, but it is contended that this bond is not within that statute, or, if it is that this plea is not good under it.

If this be a bond within the statute of Anne, on which the Court gives no opinion, yet by that statute the payment must be of the whole sum actually due or the action for the penalty is not barred.

In this case the sum due on 1 March was paid on 13 May, without interest or damages.

By the United States it is contended that damages at the rate of 20 percentum on the sum of 170,000 guilders were then due; by the defendants it is contended that no interest was due.

Page 8 U. S. 343

The words of the contract to which each party refers are not precisely the same in the condition of the bond and in the articles of agreement which are referred to by the bond. There is no contradiction between them, but there is a variance in this that the condition of the bond expresses more fully than the articles the idea of the parties, that in case of failure to perform the contract at Amsterdam, the demand for payment was to be made in Philadelphia. The words of the condition are

"or in case the said sums shall not be paid as aforesaid, then to repay to the United States the value of the said 500,000 guilders at the rate of exchange current in Philadelphia at the time demand of payment is made, together with damages at the rate of 20 percent, in the same manner as if bills of exchange had been drawn for the said sum, and they had been returned protested for nonpayment, and lawful interest for any delay of payment that may take place after the demand."

The defendants were merchants residing and carrying on trade in Philadelphia, in which place the contract was made, and by the law of the state, bills of exchange returned unpaid under protest are liable to 20 percent damages. It is sufficiently obvious from these circumstances and from the words of the condition that the parties contemplated a repayment in Philadelphia in the event of nonpayment in Amsterdam.

It is contended by the plaintiffs that the instant the failure to pay the 170,000 guilders on the first of March had taken place, a full and complete right to the stipulated damages was vested in the United States, without any further act on their part, and that a payment of the principal sum on the succeeding day would not have relieved the defendants from those damages.

In this opinion the Court does not concur with the counsel for the United States.

Contracts are always to be construed with a view to the real intention of the parties. In this contract, the object of the United States was to remit to their bankers in Amsterdam a sum of money, for which they had

Page 8 U. S. 344

occasion in Europe. The heavy damages to be incurred by the defendants in the event of their failing to make the stipulated payments in Amsterdam, were considered as a compensation for the disappointments produced by the nonpayment of the money at that place in such time as to answer the purposes of the contract. Whether payment at the same place on a subsequent day would answer these purposes was for the United States to determine. They might accept it, or they might reject it, and claim whatever the law of their contract would give them. In the event of nonpayment in Amsterdam at the time stipulated, the defendants are to repay to the United States the value of the guilders they shall have failed to pay in Amsterdam "at the rate of exchange current in Philadelphia at the time demand of payment is made, together with damages at the rate of 20 percent." The fair interpretation of this agreement is that the demand is to be made in Philadelphia, that the money is to be repaid in Philadelphia, and that the damages are upon the money there to be repaid. Had a part of the sum of 170,000 guilders been paid on the first of March, it will scarcely be contended that damages would have accrued on that part. A repayment of it could not have been demandable in Philadelphia. It appears to the Court that the acceptance of any part of the sum due in Amsterdam on a subsequent day is a waiver of the claim to damages in Philadelphia on the sum so accepted, for that sum cannot be demanded in Philadelphia.

This reasoning, to which the majority of the Court would strongly incline from the nature and circumstances of the contract, derives much additional force from the reference to bills of exchange. The repayment of the value of the guilders "at the rate of exchange current in Philadelphia at the time demand of payment is made, together with damages at the rate of 20 percent," is to be made "in the same manner as if bills of exchange had been drawn for the said sum, and they had been returned protested for nonpayment."

Why is this reference made to bills of exchange?

Page 8 U. S. 345

The stipulation that damages at the rate of 20 percentum should be incurred on those sums which the defendants might fail to pay at the time and place mentioned in their contract, did not require it, unless the law of bills of exchange was either to explain or to give validity to that stipulation. To a majority of the Court it is satisfactory evidence that the parties intended this contract, if not as a complete substitute for bills of exchange, to operate between themselves as if bills had been drawn. The law of Pennsylvania regulating bills of exchange was well understood. If those drawn on any part of Europe are returned back unpaid with a legal protest, the drawers and endorsers are subjected to damages at the rate of 20 percentum. But the right to these damages is not complete until the bill be returned back under protest. Till then they are not demandable. Consequently, payment before the bill returns does away the right to demand them. By receiving payment, the holder waives his right to damages. The express reference to bills which is made in this contract, and the terms in which that reference is made, being considered by the majority of the court as explanatory of the intention of the parties that the right to damages should be put on the same footing as if bills had been drawn, form an additional reason for their opinion that an acceptance in Amsterdam after the day, before a demand in Philadelphia, amounts to a waiver of any right the United States might otherwise, perhaps, have had to demand the stipulated damages.

But whether the sum agreed to be paid as a compensation for a failure to pay at the time and place mentioned in the contract, be considered merely as a penalty, or as stipulated damages, of which the law will coerce the payment, a forfeiture took place on the nonperformance of the condition of the bond, and a right to something more than that condition vested immediately in the obligees. If the reservation of damages in the condition of the bond is in law only a double penalty, then interest is the legal compensation for this breach of the covenant contained in the condition of the bond. If it be even of the character given to it by both parties in argument, the amount of damages settled by the parties themselves, the majority of the Court

Page 8 U. S. 346

is not satisfied, that in waiving those damages the obligee has, without any agreement on the subject, relinquished that right to interest which is attached to all contracts for the payment of money, which is only displaced by the agreement to receive a larger sum in damages, and which a mere tacit implied waiver of those stipulated damages might reinstate. The majority of the Court therefore is of opinion that under the circumstances which have taken place, the United States ought to receive, under this contract, interest on the sum of 170,000 guilders, from the first of March, the day on which that sum ought to have been paid, until 13 May, the day on which it was actually paid. Judgment, therefore, on the pleadings, must be rendered for the plaintiffs.

By the 26th section of the Judicial Act, it is directed that in cases of this description the court shall render

"judgment for so much as is due according to equity. And when the sum for which judgment should be rendered is uncertain, the same shall, if either of the parties request it, be assessed by a jury."

In this case, it is the opinion of the majority of the Court, that judgment ought to be rendered for so much as remains due of the sum of 170,000 guilders, calculating interest thereon from the first of March in the year 1803, and if either of the parties request it, that a jury be empanelled to ascertain the value of this sum in the money of the United States.

Official Supreme Court caselaw is only found in the print version of the United States Reports. Justia caselaw is provided for general informational purposes only, and may not reflect current legal developments, verdicts or settlements. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or information linked to from this site. Please check official sources.