He didn't cease his penitence until the day that he laid in the cemetery.

可能是因为发音便利的缘故，外国人有时候把 lie 的过去式说成  laid。正确的表达当然是：

He didn't cease his penitence until the day that he lay in the cemetery.

the day 作先行词，后面的定语从句用 that 或 when 引导均可，或省略。此外，该句直接把 the day that 改为 when 也可以。