REYNOLDS, BYRNE & CO. vs. YARBOROUGH, 7 La. 188

Bullard, J., delivered the opinion of the court. The plaintiffs sue on a bond signed bv John Bostwick as principal, and the present appellee, Yarborough as security, by which they engage to pay the plaintiffs seven thousand dollars.

In the condition of the bond, it is recited that, “ whereas the said Reynolds, Byrne & Co., have agreed to furnish and advance sums of money to the said John Bostwick, and to endorse notes for him, and to accept his bills, &c., not exceeding five thousand dollars, provided that the said Bostwick would obtain the said Stephen Yarborough to consent and agree to become his security, jointly and severally with him, binding themselves to secure and save harmless, the said Reynolds, Byrne & Co., against any balance, that at the end of twelve months may be due to them, to the extent of five thousand dollars.” The parties then agree, that if at the expiration of the yéar, there should be no balance due, or if Bostwick shall pay any such balance or release the plaintiffs from their liabilities, then the obligation to be void; else to remain in full force and virtue.

The plaintiffs allege, that at the expiration of the year, there was a balance due them by Bostwick of five thousand six hundred eighty-six dollars and eighty-five cents, and they pray a judgment in solido, either for the penal sum of seven thousand dollars, or the aforesaid balance in the alternative. Judgment was rendered against Bostwick for the whole balance due, with interest and costs.

The parties appear to suppose, that the judgment below was only for five thousand dollars against the security; but on examining the record, it appears that although, after rendering the judgment against both for the whole amount, the judge, before signing it, directed it to be amended, so as to restrain the liability of the security to five thousand dollars; yet probably by a clerical mistake the judgment was ultimately signed, and so appears before this court, against both parties in solido, for the whole balance, with interest at ten per cent, and costs.

The plaintiffs appealed from so much of the judgment as ' relates to the defendant Yarborough, and insist before this court, that the defendant is bound for the seven thousand dollars, or any less sum, which the plaintiffs had advanced under the agreement.

Where parties enter into an obligation containing a penalty-of seven thousand dollars, for the faithful payment of a sum not exceeding five thousand dollars at a particular time, on failure of the principal to comply, the surety will only be bound for die principal sum stipulated to be paid, and not the The penal clause in the obligation, is the compensation for the damages the creditor sustains by the non-execution of the principal obligation.

But damages due for the delay in the performance of an obligation to pay money, are called interest. „ ,. , interest whether nomtieln- inthe shape of a penalty, cannot exceed ten per cent. The appellee answers, that there is no error to the prejudice of the appellant, but he prays that the judgment may be reversed, principally on the ground, that he had not been put legally in delay, before the inception of the suit. The first question, therefore, is, whether the liability of the security was limited to the sum of five thousand dollars by the contract.

It seems to us clear, that the plaintiffs did not obligate themselves to advance more than that sum, and that the security did not engage to guarantee the principal for more. Indeed it is formally declared, that he “ engages to secure and save harmless the said Reynolds, Byrne & Co., against any balance that at the expiration of the year, may be due to them to the extent of five thousand dollars.” But it is contended, that the plaintiffs are entitled to recover the whole seven thousand dollars. This appears to us to be an obligation with a penal clause.

The primary obligation of the security was to pay the balance which might be due, not exceeding five thousand dollars, and the penalty was the sum of seven thousand dollars. La. Code, art. 2113. “ The penal clause is the compensation for the damages which the creditor sustains by the non-execution of the principal obligation.” La. Code, art. 2121. “ The damages due for delay in the performance of an obligation to pay money, are called interest.” La. Code, art. 1929. Itis further provided by the Code, that conventional interest cannot exceed ten per cent.

When the parties are silent as to the interest or damages for the non-payment of money, tjie fiaw fixes it at five per cent, in contracts with individuals, x 7 and in those with banks, at the rate established by their charters. But conventional interest, whether stipulated in eo nomine or in the shape of a penalty, cannot exceed ten per cent. This brings us to examine the defence set up by the appellee, that the plaintiffs are not entitled to recover any thing in this suit, because he had not been put legally in default.

In an aetion t0 formance of a ofntputóng-P1foe mand, must be ma e‘ in an action to c?pS^umtPand t0 enforce the performance or theprimary obiitract,1°the%om-defendant indeto damages, In an action to recover damages for the non-performance of a contract, proof of a putting of the party in mor&, by a special demand, was holden by this court, in the case of Erwin vs. Fenwick, to be a prerequisite to the recovery of any damages. 6 Martin, N. S. 229. The obligor may be put in default in three different ways: 1st.

By the terms of the contract, when it is specially agreed, that the party failing to comply, shall be deemed to be in default, by the mere act of his failure. 2d. By the act of the party; and, 3d. By the operation of law. Among the acts of the party, by which the obligor may be put in default, is a demand made by the commencement of a suit; that is, as we understand it, a suit to enforce the J 7 7 ^ principal obligation, and not one merely for damages for its non-performance.

If then, this suit is instituted to recover the principal sum, to enforce the performance of the primary obligation of the contract, or in lieu thereof to recover the stipulated penalty, the commencement of the suit itself, puts the defendant in default, in relation to damages. According to these principles, if the judgment had been signed as it was directed to be amended, it would have been fully sustained by the law and the evidence; but as this judgment comes before us in such a form, as we think it ought not to stand, it must be reversed.

It is, therefore, ordered, adjudged and decreed, that the judgment of the District Court, as relates to the defendant Yarborough, be reversed, and proceeding to render such judgment as ought, in our opinion, to have been given below, it is further adjudged and decreed, that the plaintiffs recover of the said defendant Yarborough, in solido, with his co-defendant, the sum of five thousand dollars, with costs of the District Court, and that the costs of the appeal be borne by the appellants.