price, but where he agrees to make such a sale with an option to repurchase the property it is evident that the expectation of regaining the property has been a powerful motive, and if he is deprived by a strict enforcement of the terms of the option of the right to repurchase, there is in substance precisely the same forfeiture that equity has relieved against in case of mortgages. It should not be admitted that a court of equity to-day has an inferior instinct for natural justice or an inferior power to give effect to it, than Chancellors possessed three centuries ago. .11 § 774. Relief from penalties in bonds. The common early form of contractual obligation in England was a bond upon condition, so that in the early books the word obligation without more is used to designate such a bond. The purpose of the bond obviously was, and still is, to secure performance of the condition; but instead of attempting to secure this result by exacting a promise from the obligor to perform the condition, there is an acknowledgment of indebtedness-in effect a promise to pay a sum of money if the condition is not performed. The only remedy on such an instrument would naturally be an action for the sum promised, and such was the early law. Later by a somewhat forced construction, there was held to be an implied promise to perform the condition of the bond.12 Nevertheless debt for the penal sum of the bond remained the ordinary remedy for the enforcement of the instrument. The court of equity early assumed jurisdiction to limit the recovery in such an action to the damages actually suffered by the obligee, regarding the literal enforcement of the obligation as unconscientious. 13 A distinction was taken, however, between bonds "where the party might be put in as good a plight as where the condition itself was literally performed,' "A learned writer on the early history of penalties and forfeitures has said truly: "To the court of chancery fell the task of moulding the law of penalties and forfeitures into harmony with more humane standards of conduct, a task slowly performed and still uncompleted. For example, neither law nor equity has dealt adequately with oppressive instalment contracts." William H. Loyd, 29 Harv. L. Rev. 123. 12 See supra, § 670. 13 See the following section. and cases "where the condition was collateral and no recompense or value could be put on the breach of it." 14 In the former case equity would give relief; in the latter case it would not; and this distinction has developed into the modern distinction between penalties and liquidated damages. So far as bonds to secure the payment of money were concerned, the power exercised by Chancery, afterwards enacted into statute law, 15 was entirely effective to prevent ultimate recovery of more than the actual damage suffered by the obligee; but still inconvenience was caused by the allowance of judgment at law for the full penalty of the bond against which relief must be sought by application to equity. Another statute was accordingly passed requiring the assignment by the obligee of a breach of condition, and a jury thereupon assessed such damages as had been caused to the plaintiff by the breach or breaches alleged.16 These statutes, the effect of which has been adopted by statute or otherwise in modern American law, ordinarily preclude the recovery on a penal bond (whether to secure the payment of money or some other performance) of more than the actual damage assessed by a jury, for the injury suffered by breach of condition." Where, however, the law imposes by statute a penalty for the doing or failure to do a particular act, it is no defence that the failure has not caused damages equal to the statutory penalty, and the wrongdoer is not the less liable for the full penalty if under the authority of law a bond is taken to secure performance. 18 14 Stated in argument in Marks v. Marks, Prec. in Ch. 487, as ruled by Lord Somers. 15 4 and 5 Anne, c. 16, §§ 12, 13. 16 8 and 9 William III, c. 11, § 8. Though the statute was only permissive in its terms, the court held (see Roles v. Rosewell, 5 T. R. 538; Hardy v. Bern, 5 T. R. 636) that it was mandatory in effect. Even where judgment went by default the plaintiff must suggest on the record breaches of condition, upon which damages would be assessed. 17 Turck v. Marshall, etc., Co., 8 Col. 113, 5 Pac. 838; Ripley v. Eady, 106 Ga. 422, 32 S. E. 343; Doane v. Chicago City Ry. Co., 51 Ill. App. 353; Bolster v. Post, 57 Ia. 698, 11 N. W. 637; Henry v. Davis, 123 Mass. 345; Coker v. Brevard, 90 Miss. 64, 43 So. 177; Gillilan v. Rollins, 41 Neb. 540, 59 N. W. 893; Davis v. Gillett, 52 N. H. 126; Disosway v. Edwards, 134 N. C. 254, 46 S. E. 501; Keck v. Bieber, 148 Pa. 645, 24 Atl. 170, 33 Am. St. Rep. 846. 18 In Benson v. Gibson, 3 Atk. 395, Lord Hardwick said: "Nor is it like the case of bonds given as a security not to It is also true, especially where the rights of the public are involved, that if the nature of a breach is such that the damages are uncertain, and it is apparent that the penal sum named in a bond is a reasonable liquidation of the actual damages, recovery of the sum named may be had although the contract is in form a bond with penalty.19 Subject to these quali defraud the revenue, because there, where a person is guilty of a breach, it is considered in law as a crime, and this court will not relieve for that reason." In Dieckerhoff v. United States, 136 Fed. 545, 547, 69 C. C. A. 255, the court said: "There is a line of authorities holding that, where the sum named in the bond is a fixed penalty imposed by law as a punishment for a breach of duty enjoined by law, the court will not undertake to alter or refuse the penalty which the Legislature has fixed for the nonperformance of a statutory duty. It was so held in Clark v. Barnard, 108 U. S. 436, 2 Sup. Ct. 878, 27 L. Ed. 780, where the statute granting authority to extend a line of railroad provided that the railroad company should deposit with the State Treasurer 'their bond in the sum of $100,000, that they will complete the said road before January, 1872.' In United States v. Pingree, 1 Sprague 339, Fed. Cas. No. 16,050, the bond was for rewarehousing, and the statute expressly provided that if the goods were not rewarehoused the collector should levy and collect the original duty plus an additional duty of 100 per cent. In United States v. Oteri, 67 Fed. 146, 14 C. C. A. 344, the law required that in cases of withdrawal for export the exporter should give bond in a penal sum equal to double the amount of the estimated duties to produce the proof required by law of the landing of the same beyond the limits of the United States. In United States v. Hatch, 1 Paine, 336, Fed. Cas. No. 15,325, the statute re quired the master to enter into a bond in the sum of $400, that he shall exhibit a certain certified copy of a list of his crew, and also the crew (except such as may have died, absconded, etc.) to the boarding officer at the first United States port he might reach. In United States v. Montell, Taney, 47, Fed. Cas. No. 15,798, the statute required a bond to be given in an amount which varied with the tonnage of the vessel, conditioned that the certificate of registry of the vessel shall be solely used for the vessel for which it is granted, and shall not be sold, lent, etc. The court said: 'It would be difficult by any course of proof, or by any process of reasoning, to show that the United States had sustained any particular amount of damages in a case of this description, or to adopt any rule by which the damages could be measured by a jury or be liquidated by agreement between the parties. The sum for which the parties are to become bound is manifestly a penalty or forfeiture, inflicted by the sovereign power for a breach of its laws. It is not a liquidated amount of damages due upon a contract, but a fixed and certain punishment for an offence."" See also American Book Co. v. Wells, 83 S. W. 622, 26 Ky. L. Rep. 1159; Marshall v. Atkins (Tex. Civ. App.), 127 S. W. 1148. 19 Blewett v. Front St. Ry., 49 Fed. 126, 51 Fed. 625, 2 C. C. A. 415, 7 U. S. App. 285; Welbourn v. Kee, 134 Ark. 361, 204 S. W. 220; New Britain v. New Britain Telephone Co., 74 Conn. 336, 50 Atl. 881, 1015; Fiscal Court v. Kentucky Pub. Service Co., 181 Ky. fications, in every case the amount of the penalty, 20 with the possible addition of interest, 21 furnishes the outside limit of possible recovery. § 775. Early history of the jurisdiction of equity to relieve from forfeiture and penalties. A learned writer 22 says of the early history of the development of the rules of law referred to in the preceding section: "The meagreness of the early equity reports makes it difficult to fix accurately the time when this policy was finally adopted (Spence says 22 in the reign of Charles I), and, logically, it could not long be delayed when the mortgagor's right to redeem was established. Certainly by the time of the Restoration it could be said: 'It is a common case to give relief against the penalty of such bonds to perform covenants, etc., and to send it to a trial at law to ascertain the damages in a quantum damnificatus.' 23 So, also, it became the common course to relieve against forfeitures for non-payment of rent, and upon payment of arrears to compel the landlord to make a new lease.24 Richard Francis summarizes the principle in his twelfth maxim: 'Equity suffers not advantage to be taken of a penalty or forfeiture where compensation can be made.' While text-writers have shown an inclination to consider this as a branch of equity jurisdiction to relieve against accidents, the decisions cannot Hale v. Thomas, 1 Vern. 349 (1685); 24 Baker v. Olibeare, 2 Freem. 92 (1685); Anonymous, 2 Freem. 116 (1690); Bowen v. Whitmore, 2 Freem. 192 (1693). See Poore v. Oxenbridge, Toth. 104 (1602). The Act of 4 Geo. II, ch. 28, limited the time within which the tenant might file a bill to six months after ejectment and dispensed with the necessity for a new lease. See Common Law Procedure Act of 1852 (15 & 16 Vict.), ch. 76, §§ 210212; Bowser v. Colby, 1 Hare, 109 (1841), at p. 130; Howard v. Fanshawe, [1895] 2 Ch. 581; Dendy v. Evans, [1910] 1 K. B. 263. be so limited, the facts, in many instances, showing default pure and simple. Relief was given in chancery as the principal agency of law reform and was justified by public opinion, hostile to catching bargains, which had become proportionately odious as wealth had become more widely distributed and capital more secure. Lord Eldon, characteristically, took pains to express his disapproval of the doctrine of equitable relief against penalties and forfeitures 'a principle,' he said, 'long acknowledged in this court but utterly without foundation.' 25 But, as Mr. Justice Story put it: 'There is no more intrinsic sanctity in stipulations by contract than in other solemn acts of the parties which are constantly interfered with by courts of equity upon the broad grounds of public policy on the pure principles of natural justice.' 26 And, having adopted the rule, it was only common sense to permit it to be administered at law, as was accomplished by the Acts of 8 & 9 William III and 4 Anne, which, in effect, provided that the plaintiff in actions on penal bonds should state the breaches of the condition, and, although entitled to judgment for the amount of the penalty, should be limited in his recovery to the damages proved, the judgment merely remaining as security for further breaches. Payment, also, of principal and interest due by the condition might be pleaded at law, although not made in strict accordance with the terms of the obligation, thus bringing law and equity into accord, at least as to bonds intended to secure money payments." 27 * Hill v. Barclay, 18 Ves. 56 (1811). See also Wallis v. Smith, 21 Ch. D. 243, 257 (1882) where Jessel, M. R., said: "It has always appeared to me that the doctrine of the English law as to non-payment of money-the general rule being that you cannot recover damages because it is not paid by a certain day-is not quite consistent with reason. A man may be utterly ruined by the non-payment of a sum of money on a given day, the damages may be enormous, and the other party may be wealthy. However, that is our law. If, however, it were not our law the absurdity would be apparent." 26 2 Story, Equity Jurisprudence, 13th ed., § 1316. See also the remarks of Lord Mansfield in Bonafous v. Rybot, 3 Burr. 1370 (1763). 278 & 9 Wm. III (1697), ch. II, § 8; 4 Anne (1705), ch. 16, §§ 12, 13; 1 Wms. Saunders, 58, n.; Roles v. Rosewell, 5 T. R. 538 (1794); Hardy v. Bern, 5 T. R. 636 (1794); Mackworth v. Thomas, 5 Ves. 329 (1800); Walcot v. Goulding, 8 T. R. 126 (1799); Keating v. Peddrick, 240 Pa. St. 590, 88 Atl. 11 (1913); Jennings v. Wall, 217 Mass. 278, 104 N. E. 738 (1914). |