In re Snow, 120 U.S. 274 (1887)

Section 3 of the act of Congress approved March 22, 1882, c. ’ Stat. 31, provides as follows: “ Sec. 3. That if any male person, in a territory or other place over which the United ates have exclusive jurisdiction, hereafter cohabits with more an one Woinan, he shall be deemed guilty of a misdemeanor, p. 276.•276 OCTOBER TERM, 1886.

The grand jury of the United States for November Term, 1885, in the District Court of the First Judicial District in and for the Territory of Utah, on the 5th of December, 1885, presented and filed in that court, in open court, three several indictments, in the name of the United States, against Lorenzo 'Snow, each of them found December 2, 1885, designated as No. 741, No. 742, and No. 743. Each of them was founded bn the foregoing statute, and they were alike in all respects except that each covered a different period of time. No. 741 alleged that Snow, on the 1st of January, 1883, “at the county of Box Elder, in the said district, territory aforesaid, and within the jurisdiction of this court, and on divers other days and times thereafter, and continuously between said first day of January, a .d . 1883, and the thirty-first day of December, a .d . 1883, did then and there unlawfully live and cohabit with more than one woman, to wit, with Adeline Snow, Sarah Snow, Harriet Snow, Eleanor Snow, Mary H. Snow, Phoebe W. Snow, and Minnie Jensen Snow, and during all the period aforesaid, at the county aforesaid, he, the said Lorenzo Snow, did unlawfully claim, live, and cohabit with all of said women as his wives.” No. 742 alleged that Snow, on the 1st of January, 1885, “ and on divers other days and times thereafter, and continuously between said first day of January, a .d . 1885, and the first day of December, a .d . 1885, did then and there unlawfully live and cohabit with more than one wroman, to wit, with ” the seven persons above named, “ and during ah the period aforesaid ” “ did unlawfully claim, live, and cohabit with all of said women as his wives.” No. 743 alleged that Snow, on the 1st of January, 1884, “ and on divers other days and times thereafter, and continuously between said first day of January, a .d . 1884, and the thirty-first day of December, A.d . 1884, did then and there unlawfully live and cohabit with more than one woman, to wit, with ” the seven persons above named, “ and during all the period aforesaid ” “ did un p. 277lawfully claim, live, and cohabit with all of said women as his wives.”

On the 22d of October, 1886, the defendant filed in the District Court of the Third Judicial District of the Territory of Utah a petition setting forth that he is a prisoner confined in the penitentiary of the Territory of Utah, “by virtue of the warrant, judgment, and proceedings of record, including three indictments against your petitioner, his arraignment thereon, and pleas thereto, respectively, as well as demurrers o such pleas, decisions thereof, and verdicts of the jury, p. 280being the record of said matters in the District Court of the First Judicial District of the Territory of Utah,” copies of all which papers, sixteen in number, were annexed to the petition • that, under said judgment, and in execution thereof, he had been imprisoned in said penitentiary for more than six months, to wit, continuously since the 12th day of March, 1886, and had paid $300 in satisfaction of the fine adjudged against him, and “all the costs awarded and' assessed against him on said prosecution;” that his imprisonment is illegal in that “the court had no jurisdiction to pass judgment” against him “ upon more than one of the indictments or records referred to in its said judgment, for the reason that the offence therein set out is the same as that contained and set out in each of the other said indictments and records, and the maximum punishment which the court had authority to impose was six months’ imprisonment and a fine of three hundred dollars ; ” and “ that by his said imprisonment your petitioner is being punished twice for one and the same offence.” The prayer is for a writ of habeas corpus, to the end that the petitioner may be discharged from custody.

There can be no doubt that the action of the District Court, p. 281as set forth in its order and judgment refusing to issue the writ, was, so far as an appeal is concerned, equivalent to a refusal to discharge the petitioner on a hearing on the return to a writ; and that, under § 1909 of the Revised Statutes, an appeal lies to this court from that order and judgment.

to wit, with ” the seven women named, and “ during all the > Per^0(t aforesaid ” “ did unlawfully claim, live and cohabit with all of said women as his wives.” Thus, in each p. 282indictment, the offence is laid as a continuing one, and a single one, for all the time covered by the indictment; and, taking the three indictments together, there is charged a continuing offence for the entire time covered by all three of the indictments. There was but a single offence committed prior to the time the indictments were found. This appears on the face of the judgment. It refers to the indictments as found “ for the crime of unlawful cohabitation committed ” “ during the time ” stated, divided into three periods, according to each indictment. For so much of the offence as covered each of these periods the defendant is, according to the judgment, to be imprisoned for six months and to pay a fine of $300. The division of the two years and eleven months is wholly arbitrary. On the same principle there might have been an indictment covering each of the thirty-five months, with imprisonment for seventeen years and a half and fines amounting to $10,500, or even an indictment covering every week, with imprisonment for seventy-four years and fines amounting to $44,400; and so on, ad infinitum, for smaller periods of time. It is to prevent such an application of penal laws, that the rule has obtained that a continuing offence of the character of the one in this case can be committed but once, for the purposes of indictment or prosecution, prior to the time the prosecution is instituted. Here each indictment charged unlawful cohabitation with the same seven women; all the indictments were found at the same time, by the same grand jury, and on the testimony of the same witnesses, covermg a continuous period of thirty-five months; and it was the mere will of the grand jury which divided the time among three indictments, and stopped short of dividing it among thirty-five, or one hundred and fifty-two, or even more. It was quite in consonance with this action, that the prosecuting officer tried the indictments in the inverse order of the time to which each related, that for 1885 first, that for 1884 next, and that for 1883 last. Hence the defendant could not, on any trial, plead or show that he had before been tried on an indictment in respect to a period of time antedating that ai in the indictment on trial. Then, after the verdicts, there was p. 283not a separate judgment in each case; but only one judgment in form was rendered for all the cases. The judgment says, on its face, that the proper officer of the penitentiary is to imprison the defendant therein “for the periods as in this judgment ordered and specified,” that is, for three successive periods of six months each, the first period to apply to the indictment thirdly tried; the second period to apply to the indictment first tried, and to begin when the sentence and judgment on the indictment thirdly tried should expire; and the third period to apply to the indictment secondly tried, and to begin when the sentence and judgment on the indictment first tried should expire.

because the offence created by the statute was the exercising of a calling on the Lord’s day, and, if the plaintiff had continued baking from morning till night, it would still be but one offence; that the four convictions were for one and the same offence; and that an action would he against the justice and the officers. On the other side it was urged, that, as the justice had general jurisdiction of the offence in question, the convictions must be quashed, or reversed on appeal, before they could be questioned. At a subsequent day, the unanimous opinion of the court was delivered by Lord Mansfield. He first considered the question whether the legality of the convictions could be objected to before they were quashed. As to this he said: “ Here are three convictions of a baker, for exercising his trade on one and the same day, he having been before convicted for exercising his ordinary calling on that identical day. If the act of Parliament gives authority to levy but one penalty, there is an end of the question; for there is no penalty at common law. On the construction of the act of Parhament the offence is ‘ exercising his ordinary trade upon the Lord’s day ’; and that without any fractions of a day, hours or minutes. It is but one entire offence, whether longer or shorter in point of duration; so, whether it consists of one, or of a number of particular acts. The penalty incurred for this offence is five shillings. There is no idea conveyed by the act itself, that, if a tailor sews on the Lord’s day, every stitch he takes is a separate offence; or, if a shoemaker or carpenter work for different customers at different times on the same Sunday, that those are so many separate and distinct offences. There can be but one entire offence on one and the same day. And this is a much stronger case than that which has been alluded to, of killing more hares than one on the same day. Killing a single hare is an offence; but the killing ten more on the same day will not multiply the offence, or the penalty imposed by the statute for killing one. Here, repeated offences are not the object which the legislature had in view in making the statute; but singly, to punish a man for exercising his ordinary trade and calling on a Sunday. Upon this construction, the justice had no jurisdiction whatever in respect of the p. 285three last convictions. How, then, can there be a doubt but that the plaintiff might take this objection at the trial ? ” As to justifying the levy under the last three warrants, Lord Mansfield said: “ But what could the justification have been in this case, if any had been attempted to be set up 2 It could only have been this: That because the plaintiff had been convicted of one offence on that day, therefore the justice had convicted him in three other offences for the same act. By law that is no justification. It is illegal on the face of it; and, therefore, as was very rightly admitted by the counsel for the defendant, in the argument, if put upon the record by way of plea, would have been bad, and on demurrer must have been so adjudged. Most clearly, then, it was open to the plaintiff, upon the general issue, to take advantage of it at the trial. The question does not turn upon niceties; upon a computation how many hours distant the several bakings happened; or upon the fact of ■which conviction was prior in point of time; or that for uncertainty in that respect they should all four be held bad. But it goes upon the ground that the offence itself can be committed only once in the same day.”

In the case at bar the statute provides, that if any male person shall thereafter cohabit with more than one woman, he shall, on conviction, be punished thus and so. The judgment in the case, taken in connection with the other proceedings in the record and the statute, shows, within the principle of Crepps v. Durden, that there was but one entire offence, whether longer or shorter in point of duration, between the earliest day laid in any indictpient and the latest day laid in any. There can be but one offence between such earliest day and the end of the continuous time embraced by all of the indictments. Not only had the court which tried them no jurisdiction to inflict a punishment in respect of more than one of the convictions, but, as the want of jurisdiction appears on the face of the judgment, the objection may be taken on habeas corpus, when the sentence on more than one of the convictions is sought to be enforced. If such an objection could be taken in Crepps v. Durden, in a collateral action for damages, it can be taken on a habeas corpus to release the party p. 286from imprisonment under the illegal judgment. These considerations distinguish the case from that of Ex parte Bigelow, (ubi supra^) and bring it within the principle of such cases as Ex parte Milligan, 4 Wall. 2, 131; Ex parte Lange, 18 Wall. 163, 178; and Ex parte Wilson, 114 U. S. 417.

On the whole case we are unanimously of opinion that The order and judgment of the District Court for the Third Judicial District of Utah Territory must be reversed and the case be remanded to that court, with a di/rection to grant p. 287the writ of habeas corpus prayed for, and to take such proceedings thereon as may be in conformity with law and not inconsistent with the opi/nion of this court.

The appellant, the Memphis and Little Rock Railroad Company, (as reorganized,) an Arkansas corporation, conveyed, by deed of May 2, 1877, to Pierson, Matthews, and Dow, trustees, its road and connections, and all its property, rights, and privileges, including its franchise to be a corporation, to secure the payment of its bonds of the same date, aggregating $2,600,000, p. 288and payable in thirty years, subject to a mortgage for $250,000 executed May 1, 1877. The deed provided for the employment, at the expense of the trust estate, of such attorneys and agents as were reasonably necessary for the execution of the trust, and, also, for the payment of charges, costs, expenses, and compensation, incurred by the trustees, from time to time, “ in and about or for the execution of the trust.”

The company resisted each of the claims asserted by the appellees. Its answer proceeded mainly upon the ground that the bonds secured by the deed of May 2, 1877, were and continued to be void under the constitution and laws of Arkansas, having been issued, it was alleged, to the stockholders of the appellant without consideration in money, labor, or property actually received, of which fact the plaintiffs and every original taker of the bonds were advised, and as to which subsequent takers, if such there were, were put upon inquiry by the p. 289recitals in the mortgage securing their payment. Consequently, it was contended, the appellees were under no duty, and had no legal right as trustees, or in any other capacity, to intervene and satisfy the decree in favor of the state, or to incur liability or costs in reference to the defendant’s property. The company also filed a cross-bill, setting forth the same grounds, and praying that upon final hearing the deed of May 2, 1877, and the bonds thereby secured, be declared void.

building and equipping the road, to increase the capital stock of the company to $1,300,000, by issuing coupon bonds of $1000 each, bearing eight per cent, interest, convertible at any time within ten years thereafter into shares of stock—such bonds to be secured by mortgage upon the company’s road, charter, works, and real estate, or either of them. The action of the stockholders having been ratified by the directors, the company by deed of trust executed May 1, 1860, conveyed to Tate and others its franchises, property, privileges, road, roadbed, right of way, rolling stock, and works, in trust to secure its bonds, aggregating $1,300,000, payable thirty years after date, with interest at the rate of eight per cent, per annum. On the 10th of January, 1861, it placed a mortgage upon its road and rolling stock to secure the before-mentioned state loan of $100,000, with interest from that date until paid, at the rate of eight per cent. By deed of March 1, 1871, it conveyed its franchises, property, and net income, to Henry F. Vail, in trust to secure other bonds, amounting to $1,000,000, payable thirty years thereafter, with interest at the rate of eight per cent, per annum. The company having made default in the payment of interest on the latter bonds, Vail, the trustee, on the 17th day of March, 1872, sold and conveyed these properties, rights, privileges, and franchises, for $15,000 in cash, subject to all prior and superior hens, to one Stillman Witt, .who purchased in behalf of the holders of bonds, secured by the deed of March 1,1871. Subsequently, March 29,1873, Witt executed a deed declaring the respective interests of the parties whom he represented, and conveying to each his proportionate share of the property and interests so purchased. On the 17th of November, 1873, the grantees in the latter deed conveyed the same property, rights, and franchises to the Memphis and Little Rock Railway Company — a corporation then recently organized under the laws of Arkansas, by the parties to whom Witt conveyed, subject, however, to the condition that that company should execute its bonds for ^2,600,- 000, secured by first mortgage to the New York Guaranty and Indemnity Company — that amount, according to t e estimate of the parties, being less than the principal and m p. 291terest due on the $1,300,000 mortgage of May 1, 1860, and other indebtedness theretofore incurred in the construction and equipment of the road. In conformity with that condition the railway company executed, December 1, 1873, a mortgage securing its bonds for $2,600,000. That mortgage provided among other things, that “ in case of any sale, judicial or otherwise, of the premises embraced in this mortgage, and the holders of a majority in interest of the then outstanding bonds secured by this mortgage shall, in writing, request the said trustee, or its successor or successors, or his or their survivor or survivors, so to do it, they or he is authorized to purchase the premises embraced herein for the use and benefit of the holders of the then outstanding bonds and coupons secured by this mortgage. And that, having so purchased said premises, the right and title thereto shall vest in said trustee or trustees, and no bondholder shall have any claim to the premises or to the proceeds thereof, except for his pro rata share of the proceeds of said premises as represented in a new company or corporation to be formed by a majority in interest of said bondholders for the use and benefit of the holders of the bonds secured hereby. And whenever the holders of a majority of said bonds shall have organized a new company or corporation for the use and benefit of all the holders of the bonds secured by this mortgage, the said trustee, or its successor or successors, or his or their survivor or survivors, shall reconvey the premises so purchased by it, him, or them to said new company or corporation.”

include a foreclosure of the latter mortgage. Both mortgages were foreclosed by final decree of November 1, 1876, the amount found to be due on that of May 1,1860, being $1,088,- p. 292348.80, with interest at the rate of six per cent, per annum, and the amount due on that of December 1, 1873, being $3,016,000. The decree provided, among other things, “that if said trustees shall be so requested, and shall bid for said property, they shall pay into court a sufficient sum to pay the costs of sale and this suit, including counsel fees, allowances to trustees, to the commissioner for sale, and master of this court. And for the residue, their bid to the amount due and ordered to be paid by this decree shall be accepted by said commissioner, and he shall forthwith execute a deed conveying the purchased property to said trustees for and upon the trusts expressed in said second mortgage; that is to say, upon trust that they will convey the same to such new company or corporation as may be organized by the holders of a majority in interest of said bonds upon demand thereof.”

“ That we hereby require the said trustees, William 8. Pierson, Watson Matthews, and R. K. Dow, to convey all an p. 293singular the property, charter, franchises, rights, privileges, and immunities, so conveyed to them by such commissioner, to the Memphis and Little Rock Railroad Company, as reorganized, upon the following terms and conditions, to wit:

.Mr. John M. Bowers, for appellees, cited, in addition to some cases cited by Mr. Rose, the following cases not cited on his p. 297brief: Barnes n . Mott, 64 N. Y. 397 ; Pierce v. Emery, 32 N. H. 484; Stanley n . Chester <& Birkenhead Railway, 3 Myl. & Cr. 773; Low v. Connecticut, &c., Railroad, 45 N. H. 370; Olcott v. Tioga Railroad, 27 N. Y. 546; Moss v. Averill, 10 N. Y. 449 ; Oregon Railway v. Oregon Railway & Naw. Co., 28 Fed. Rep. 505, and cases cited; Pa/rish v. Wheeler, 22 N. Y. 494; Bissell v. Mich. Southern <& Northern Ind. Railroad, 22 N. Y. 258; Williams v. Morgan, 111 U.' S. 684; McCluer v. Manchester <& Lawrence Railroad, 13 Gray, 124; S. C. 74 Am. Dec. 624.

From these facts it appears that at the date of the mortgage of May 2, 1877, appellant’s entire assets consisted of the property, rights, and privileges purchased by Pierson, Dow, and Matthews, trustees, at the sale under the decree foreclosing the mortgage of December 1, 1873, and by them conveyed to it, on the express condition that the beneficial owners should receive therefor, besides $1,300,000 in stock, its mortgage bonds for $2,600,000. That amount, in the stock and bonds of the appellant, was the valuation placed by such owners upon their interests, after taking into account, as well the amount previously expended in the construction and maintenance of the road, as the probable value, in the future, of the stock and bonds to be given for a surrender of those interests. The transaction was, in its essence, a purchase of said property, rights, and privileges by the appellant at an agreed price, to be paid in its stock and bonds. A part of the price was paid when the $1,300,000 of stock was issued. But appellant disputes its liability upon the bonds given for the balance, upon the theory that they were prohibited from issuing them by the eighth section of the twelfth article of the constitution of Arkansas, adopted in 1874. That section provides that “no private corporation shall issue stock or bonds, except for money or property actually received, or labor done ; and all fictitious increase of stock or indebtedness shall be void.” In support p. 298of this view our attention is called to the fact, admitted by the demurrer, that the full value of the property, rights, and privileges conveyed to appellant did not exceed $1,300,- 000, the amount at which the capital stock was fixed ; and, consequently, it is argued, the $2,600,000 of bonds were issued without any consideration received in money, property, or labor, and represented only a fictitious indebtedness. In other words, appellant’s vendors were fully compensated for their interests by taking to themselves its entire stock.

Recurring to the language employed in the Arkansas constitution, we are of opinion that it does not necessarily indicate a purpose to make the validity of every issue of stock or bonds by a private corporation depend upon the inquiry whether the money, property, or labor actually received therefor was of equal value in the market with the stock or bonds so issued. It is not clear, from the words used, that the framers of that instrument intended to restrict private corporations — at least when acting with the approval of their stockholders — in the exchange of their stock or bonds for money, property, or labor, upon such terms as they deem proper ; provided, always, the transaction is a real one, based upon a present consideration, and having reference to legitimate corporate purposes, and is not a mere device to evade the law and accomplish that which is forbidden. We cannot suppose that the scheme whereby the appellant acquired the property, rights, and privileges in question, for a given amount of its stock and bonds, falls within the prohibition of the state constitution. The beneficial owners of such interests had the right to fix the terms upon which they would surrender those interests to the corporation of which they were to be the sole stockholders. And that subsequent holders of stock might not be misled, each certificate of stock states upon its face that the holder takes this stock subject to $2,850,000 of mortgage bonds of the company, which are secured by two mortgages duly recorded. All that was done was, to reorganize the Little Rock & Memphis Railroad Company upon the same basis, substantially, as to capital stock and bonded indebtedness, as existed, in respect to these properties, nghts, and privileges, before the adoption of the state constitution, and while they were held and controlled by the companies which preceded the appellant in the ownership. There was, consequently, no fictitious increase by appellant of its sock or indebtedness. Under these circumstances it cannot e fairly said that the bonds secured by the mortgage were p. 300issued without any consideration whatever actually received in property.

It results, from what has been said, that the validity of the bonds cannot be disputed upon any of the grounds stated. Neither the constitution nor the statutes of Arkansas p. 301interpose any obstacle to the full performance by the appellant of the terms and conditions upon which only it acquired the ownership of the interests in question.

The right of subrogation is not founded on contract. It is p. 302a creature of equity; is enforced solely for the purpose of accomplishing the ends of substantial justice; and is independent of any contractual relations between the parties. All that the appellees can, in good conscience, demand, is reimbursement for their outlay in protecting the mortgaged property against the prior lien of the state. When relief to that extent is accorded, they will have no just ground to complain, especially as the debt held by the state was not the personal debt of the appellant. There was no agreement between them and the appellant in respect to interest upon any sum they might be compelled to pay in order to relieve the property from prior incumbrances. If, therefore, they are adjudged to have a lien upon the mortgaged property for the whole amount actually paid to the state, with interest thereon, from the date of such payment, at the rate established by law in the absence of an agreement as to rate, they will be fully indemnified. It is not for the court or for parties to say that the rate of interest fixed by law in the absence of an agreement, is not adequate compensation for delay in the payment of money. It results that the decree, so far as it allows to appellees interest in excess of six per cent, per annum, on the aggregate amount of principal and interest paid by them to the state, is erroneous.

One other question remains to be determined. The appellant insists that the court below erred in giving judgment against it for $29,580.87, the amount found to be due the appellees for services and counsel fees herein and for costs paid out by the appellees in this suit. We are of opinion that the decree in this respect was right. This allowance, as to its amount, is fully sustained by the evidence in the cause. And it is authorized by that clause and condition in the mortgage of May 2, 1877, which provides that the appellant “will from time to time, as incurred, pay all charges, costs, and expenses of the appellees, or either of them, “ in and about the execution of the trust,” and “ will indemnify and hold harmless the appellees “ against all costs, charges, damages, and expenses which they or either of them may sustain or be put to m consequence of accepting this trust, or of anything which may be done or omitted to be done under it, saving only such damages p. 303as may be incurred by or arise from the culpable act or neglect ” of said appellees.

A bill in equity to enforce a contract between the plaintiff and the defendants to purchase for their joint benefit the bonds, secured by mortgages, of two railroads, of one of which the plaintiff was receiver, and of the other general manager under the trustees in the mortgage, alleged that he performed the agreement on his part; that the defendants purchased the bonds through an agent of the bondholders, and afterwards purchased the railroads under decrees of foreclosure, and entered into possession and made large profits, and refused to account to the plaintiff for his share; and that the plaintiff, pending the negotiations for the purchase of the bonds, informed the agent of the bondholders of his interest, and at all times answered to the best of his knowledge and ability all inquiries of the bondholders or their agent, or of the trustees or any person interested in the property, and always acted honestly and in good faith towards all such persons. The defendants filed a plea, averring that neither the agent nor the bondholders had any notice of the plaintiff’s interest until after the sale of the railroads under the decrees of p. 304foreclosure, and that the agreement sued on was a breach of his trusts as receivei’ and as manager, and did not entitle him to relief in equity. A general replication was filed, and at the hearing the truth of the fact averred in the plea was disproved. Held, that the plea must be overruled, and the defendants ordered to answer the bill.

That most of the purchases of bonds were made under an agreement with the holders that they should not be paid for till the railroads were sold under decrees of foreclosure, and that the sellers of the bonds should then have the option of vo l . cxx—20 p. 306being paid in cash, or of taking new bonds issued by a company to be organized by the purchasers, and secured by mortgage upon the same property.

That “ to all inquiries made by said Kennedy, or any of the p. 307trustees in said mortgages, or by any of the holders of any of the bonds secured thereby, or by any one interested in the property under his charge as manager or receiver, he [the plaintiff] at all times gave full and true answers and information to the best and utmost of his knowledge and ability, and kept the said Kennedy fully informed of all facts, matters and things coming to his knowledge affecting said property, and in all things acted honestly and in good faith towards all persons interested in the property under his control as receiver and manager as aforesaid.”

“And these defendants say, that as receiver of said lines covered by said $15,000,000 mortgage the said plaintiff could not lawfully make the agreement with these defendants mentioned in the bill of complaint, or engage in the enterprise, therein mentioned, of purchasing the bonds of said $15,000,000 issue, or in the enterprise of purchasing the said mortgaged property; and that the making of such an agreement and the embarking in such an enterprise by him was a breach of trust on his part as such receiver, and a fraud on the holders of the p. 310bonds of said $15,000,000 issue, and was a fraud upon this court, whose receiver he was.

The case was then heard upon the bill, plea, replication, and proofs. The only evidence introduced was a stipulation in writing of counsel that the averments of the plea, preceding those p. 311above quoted in full, were true; the bill on which the plaintiff was appointed receiver; an order passed by the court on that bill on May 31, 1878, reciting that Stevens, Smith, Kittson and Hill, under an agreement between them and the bondholders, dated March 13, 1878, were the equitable owners of $11,400,- 000 of the $15,000,000 issue of bonds, and authorizing Farley as receiver to finish the roads with money to be supplied by them; and the deposition of the plaintiff, the substance of which was, that before the completion of the purchase of the bonds he informed Kennedy by a letter (which could not be found) that Kittson and Hill had offered him an interest in it, in answer to which Kennedy, on February 25,1878, wrote him a letter (which he produced), acknowledging the receipt of his letter, and saying, “We think it will pay you to take an interest with Kittson and Hill, and we are glad to hear that they have offered it to you; ” but that the plaintiff did not disclose to Kennedy that he had already the same interest that Kittson and Hill had, because he had agreed with them that he would not make the fact public, for fear that the stockholders might hear of it and apply to the court to have him removed and another receiver appointed, to the detriment of the enterprise, and of the interests of the bondholders; and that he did not inform the court of his interest when the order of May 31,1878, was made.

The bill alleged the making of the agreement; that its object was, by means of the bonds so purchased, to purchase the railroads at sales under decrees of foreclosure in suits then pending; that it was agreed that Kittson and Hill should conduct the negotiations for procuring the necessary funds and purchasing the bonds, and the plaintiff should furnish such facts, information and advice, and render such assistance, from time to time, as should be required of him; that the plaintiff had knowledge, not possessed by the other parties, as to who held the bonds and at what rate, and how they could be procured, and as to the nature and value of the railroads, and as to the pending suits for foreclosure, and his services and cooperation were indispensable to the success of the enterprise; that he performed the agreement on his part; that Kittson and Hill obtained the requisite funds from other persons, and purchased the bonds from the bondholders through one Kennedy, the authorized agent of the latter, and afterwards purchased the railroads at sales under decrees of foreclosure; that pending the negotiations for the purchase of the bonds, the plaintiff informed Kennedy of his interest, and his connection with Kittson and Hill, in the project to purchase them; that the plaintiff at all times, to the best of his knowledge and ability, gave full and true answers and information to all inquiries made by Kennedy, or by any of the trustees or bondholders, or by any person interested in the property under his charge as receiver and as manager, and kept Kennedy fully informed of all matters coming to his knowledge affecting the property, and in all things acted honestly and in good faith towards all persons interested in it; that Kittson and Hill had p. 313organized a new corporation, which was joined as a defendant; and that the defendants had thereby obtained a great amount of property and of profits, and had refused to account to the plaintiff for his share. The bill prayed for a discovery, an account, and other relief.

The pleader and the court below appear to have proceeded upon the theory that by a plea in equity a defendant may uver certain facts in addition to or contradiction of those alleged in the bill; and also not only, if he proves his averments, avail himself of objections in matter of law to the case stated in the bill, as modified by the facts proved; but even, he fails to prove those facts, take any objection to the case p. 314stated in. the bill, which would have been open to him if he had demurred generally for want of equity.

-97. And Mr. Jeremy, in a note to this passage, p. 316commenting on the ordinance of Lord Bacon, observes, “The prominent distinction between a plea and a demurrer, here noticed, is strictly true, even of that description of plea which is termed negative, for it is the affirmative of the proposition which is stated in the bill; ” in other words, a plea, which avers that a certain fact is not as the bill affirms it to be, sets up matter not contained in the bill. That an objection to the equity of the plaintiff’s claim, as stated in the bill, must be taken by demurrer and not by plea is so well established, that it has been constantly assumed and therefore seldom stated in judicial opinions ; yet there are instances in which it has been explicitly recognized by other courts of chancery, as well as by this court. Billing v. Flight, 1 Madd. 230; Steff v. Andrews, 2 Madd. 6 ; Varick v. Dodge, 9 Paige, 149 ; Phelps n . Garrow, 3 Edw. Ch. 139; Rhode Island v. Massachusetts, 14 Pet. 210, 258, 262; National Bank, v. Insurance Co., 104 U. S. 54, 76.