Statement of Facts. The plea, after setting out with particularity the various issues of bonds, secured by mortgages, by the St. Paul and Pacific Railroad Company, and by the First Division of the St. Paul and Pacific Railroad Company, and the appointment of successive trustees under those mortgages; and alleging that, upon a bill filed in 1873 by Kennedy and others, on behalf of all the bondholders under a mortgage of $15,000,000 on the first of those railroads, Farley was appointed by the court, on August 1, 1873, receiver of that railroad, and accepted the trust, and took possession of and managed the road from that date until it was sold and delivered to the defendant railway company under a decree of foreclosure, as stated in the bill; that on October 9, 1876, Kennedy and two others, as trustees, under and pursuant to mortgages on the second of those railroads, took possession of it; and that from that date until it was delivered to the purchaser under a decree of foreclosure, those trustees held and operated it, and Farley was the general manager of it for them, and had full control of the management thereof; continued and concluded as follows: "That the said plaintiff never at any time informed the said Kennedy, nor any of the holders of any of said mortgage bonds, of his interest in the project for purchasing said bonds, or of his interest in the project of acquiring by means of said bonds the said mortgaged property, which he alleges in his bill of complaint; nor did the said Kennedy, nor any of said bondholders, know, suspect, or have any information or belief, at any time until after the confirmation of all said foreclosure sales, that the plaintiff ever claimed to have any such interest, or any interest in said projects, or either of them. "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 Statement of Facts. bonds of said $15,000,000 issue, and was a fraud upon this court, whose receiver he was. "And that as general manager for the trustees in said mortgages of the lines of railroad of said First Division Company the said plaintiff occupied a position of trust and confidence toward his employers, the said trustees, and towards the holders of the bonds secured by said mortgages; and that by making the agreement and engaging and continuing in the enterprise of purchasing the said bonds and said mortgaged property mentioned in his said bill, the said Farley was guilty of a breach of trust towards and a fraud upon the said trustees and the said bondholders. "And these defendants say that by reason of the said fiduciary positions occupied by the plaintiff, as aforesaid, he is not entitled to the aid of a court of equity to enforce as against these defendants any of the agreements mentioned in said bill, or any rights claimed by him and growing out of said agreements. "Therefore these defendants do plead all and singular the matters aforesaid in bar to the plaintiff's said bill, and pray the judgment of this honorable court whether they should be compelled to make any further answer to the said bill, and pray to be hence dismissed, with their reasonable costs and charges in this behalf most wrongfully sustained." Annexed to the plea were a certificate of counsel, that it was in their opinion well founded in point of law; and an affidavit of the defendant Hill, that the plea was true in point of fact, and was not interposed for delay, and that the defendant Kittson was absent from the State and District of Minnesota. The plaintiff filed a general replication to the plea, and on his motion the demurrer of the railway company and the plea of Kittson and Hill were set down for hearing. The demurrer of the company was overruled, and on its application it was ordered that the plea of Kittson and Hill should stand as the joint and several plea of all the defendants. 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 Opinion of the Court. above 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 Circuit Court, assuming it to be proved that the plaintiff informed Kennedy of his interest, yet held that the agreement of the plaintiff with Kittson and Hill was unlawful and void, and on that ground sustained the plea and dismissed the bill. 4 McCrary, 138. The plaintiff appealed to this court. Mr. George F. Edmunds and Mr. Henry D. Beam for appellant. Mr. Edward D. Cooke was with them on the brief. Mr. William M. Evarts and Mr. George B. Young for appellees. Mr. H. R. Bigelow was with them on the brief. MR. JUSTICE GRAY, after stating the case as above reported, delivered the opinion of the court. Opinion of the Court. A brief abstract of the pleadings will help to make clear what is presented for decision upon this record. The suit was brought by Farley to enforce an agreement by which he and the defendants Kittson and Hill agreed to purchase, for their joint and equal benefit, the bonds, secured by mortgages, of two railroads, of one of which he was receiver, by appointment of the court, and of the other of which he was the general manager, by appointment of the trustees named in the mortgages. 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 Opinion of the Court. organized 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 individual defendants filed a plea, which, on the motion. of the defendant corporation, was ordered to stand as its plea also, consisting of three parts: First. A restatement in detail of some of the facts alleged generally in the bill. Second. Averments that the plaintiff never informed Kennedy or any of the bondholders of his interest in the project for purchasing the bonds and thereby acquiring the mortgaged property, as alleged in the bill; and that neither Kennedy nor the bondholders knew, suspected, or had any information or belief, that the plaintiff had or claimed to have any interest in the project, until after the foreclosure sales. Third. Averments that the making by the plaintiff of the agreement sued on, and his engaging in the enterprise of purchasing the bonds and thereby acquiring the railroads, were, as to that railroad of which he was receiver, unlawful, a breach of his trust as such receiver, and a fraud upon the bondholders and the court; and, as to the railroad of which he was general manager for the trustees under the mortgages, a breach of trust towards the trustees and the bondholders, and a fraud upon them; and that by reason of the fiduciary positions so occupied by him the plaintiff was not entitled to the aid of a court of equity to enforce the agreement or any rights growing out of it. To this plea the plaintiff filed a general replication, and the hearing in the Circuit Court was upon the issue thus joined. The pleader and the court below appear to have proceeded upon the theory that by a plea in equity a defendant may aver 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, if he fails to prove those facts, take any objection to the case |