Bignall v. Gould/Opinion of the Court

By the rules now established, at law as well as in equity, the sum of $10,000, named in this bond, is a penalty only, and not liquidated damages. As observed by Lord TENTERDEN in a similar case: 'Whoever framed this agreement does not appear to have had any very clear idea of the distinction between a penalty and liquidated damages; for the sum' in question 'is described in the same sentence as a penal sum and as liquidated damages.' Davies v. Penton, 6 Barn. & C. 216, 222; S.C.. 9 Dowl. & r. 369, 376. The object of the bond is to secure the obligee's discharge from a large number of claims against him held by certain third persons severally, amounting in all to something like $39,000, and varying from more than $8,000 to less than $10 each. A failure of either of those persons to release any one of those claims would be a breach of the bond; and for any such breach a just compensation might be estimated in damages. The sum of $10,000 must therefore be regarded as simply a penalty to secure the payment of such damages as the obligee may suffer from any breach of the bond. Watts v. Camors, 115 U.S. 353; S.C.. 6 Sup. Ct. Rep. 91; Boys v. Ancell, 5 Bing. N. C. 390; S.C.. 7 Scott, 364; Thompson v. Hudson, L. R. 4 H. L. 1, 30; Fisk v. Gray, 11 Allen, 132.

Upon the evidence introduced and the admissions made by the plaintiff at the trial, it does not appear that he suffered any damage whatever. Although there was a technical breach of the bond at the expiration of a year from its date, by the third persons therein named having failed to release the plaintiff from any of the debts held by them, yet, within a month afterwards, and before this action was brought, he was legally discharged from all those debts by obtaining a certificate of discharge in bankruptcy. This discharge was not the less complete and effectual because the creditors had not received payment in full, nor because the plaintiff might, if he saw fit, by new promises to them, waive the discharge, and revive so much of the debts as had not been satisfied by the dividends paid by the assignee in bankruptcy.

Judgment for nominal damages affirmed.