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.
