Wake County NcArchives Court.....Gales, Vs. Buchanan 1811-18
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Deb Haines http://www.genrecords.net/emailregistry/vols/00003.html#0000719 June 12, 2008, 11:03 pm

Source: North Carolina Reports
Written: 1811-18

CASES ARGUED AND DETERMINED IN THE SUPREME COURT OF NORTH CAROLINA

JULY TERM, 1812.*

GALES v. BUCHANAN & POLLOK.

From Wake.

A gives his bond to B for $1,000, payable six months after date, with interest 
from the date on so much of said bond as should remain unpaid at the end of 
sixty days, after the said bond became payable. This interest is secured by 
way of penalty, and equity will relieve against it; and where such interest 
has been paid, equity will decree it to be refunded.

This was a bill filed in the Court of Equity for Wake County against Buchanan 
& Pollok, merchants, of the town of Petersburg, in Virginia. The complainant 
charged that on or about 12 July, 1804, Robert Johnson and Robert Fleming, 
merchants, trading under the name and firm of Johnson & Fleming, with Andrew 
Fleming, Henry Hunter and complainant, their securities, gave three several 
writings obligatory to one Jacob Mordecai, who, before either of the said 
writings obligatory became due, assigned them to the defendants. That Johnson 
& Fleming made large payments towards the discharge of these bonds, and that 
defendants had failed to apply those payments as in good conscience they were 
bound to do, and had instituted suits in Hillsboro Superior Court against 
complainant, on two of the said bonds, and had recovered judgments for larger 
sums than in equity were due to them, complainant being ignorant, at the time 
of the trial, of the amount of payments made to defendants by Johnson & 
Fleming. The first bond was to secure the payment of $2,000 on or before 20 
April, 1805; the second bond was to secure the payment of $1,662.38 on or 
before 20 October, 1805; and the third bond was to secure the payment of the 
said sum on or before 1 March, 1806. In each bond the obligors bound 
themselves "to pay interest, from the date of the bond, on such part thereof 
as should remain unpaid at the end of sixty days after the said bond became 
payable." 

Johnson & Fleming having failed to discharge the first bond within sixty days 
after it became due, Were required by defendants to pay interest from the date 
of the bond upon the sum remaining due at the end of the said sixty days; and 
such interest, had been satisfied to defendants out of the moneys paid to them 
by Johnson & Fleming, and the balance of such moneys, only, carried to the 
credit of the second and third bonds, upon which complainant had been sued; 
and these being penal bonds, judgments had been rendered for the penalty in 
each, and complainant charged that defendants threatened to sue out their 
executions and cause to be raised the interest attempted to be secured by the 
said bonds. The complainant prayed for an injunction as to this interest, and 
that defendants might be decreed to come to an account for the moneys paid to 
them by Johnson & Fleming, and give credit to complainant for the amount of 
interest which they had improperly received upon the first bond.

An injunction was granted, and the defendants having filed their answer, the 
cause came on to be heard upon the bill and answer, when the following 
question was made and ordered to be sent to this Court, to wit, Whether 
interest on the three bonds mentioned in complainant's bill, or on either of 
them, shall be computed from the time they bear date, or from the time they 
were made payable.

Lowrie, J. The question submitted to us in this case is simply this, whether 
the interest secured by the bonds and to be paid from the dates thereof, on 
such sums as should remain unpaid sixty days after each bond became due, was 
so secured by way of penalty or not. And the Court think that such interest 
was so secured by way of penalty, and that a court of equity ought to relieve 
against it. This is like the case of Orr v. Church, 1 Hen. Bl., 227. It is 
true that the word penalty is there inserted in the bond; but we think that 
makes no difference. The principle in both cases is the same. In this case, as 
well as in that, the interest was only demandable on the failure of the 
obligors to pay at the day. Had the principal of the bonds been paid on the 
day on which they became due, or within sixty days thereafter, such interest 
would not have been demandable by the terms of the contract; hence it could 
only be demanded as a penalty for nonperformance. The obligors wanted no 
interest until the days of payment mentioned in the bonds and the clauses 
securing the interest were inserted to insure punctuality. It is the peculiar 
province of a court of equity to relieve against penalties. We, therefore, 
think that the injunction should be made perpetual as to the interest which by 
the terms of the contract accrued on the two bonds on which complainant hath 
been sued, from the date of the said bonds up to the time when they 
respectively became payable; and that defendants come to an account for the 
moneys paid to them by Johnson & Fleming, and that complainant be credited 
with the amount of interest which they have improperly received upon the first 
bond.

*The Honorable Leonard Henderson, Esquire, was prevented by indisposition from 
attending at this term.

Additional Comments:
North Caroline Reports, Vol. 6, Cases Argued and Determined in the Supreme 
Court of North Carolina, Reported by A.D. Murphey, Annotated by Walter Clark. 
1811 to 1813, Inclusive and at July Term, 1818. Reprinted by the State. E.M. 
Uzzell and Company, State printers and binders, 1910.

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