EX PARTE KOEHLER.

107

protection against the cletims made by the bill. It is sufficient for present purposes that the discharges may be available in part to protect them against the relief sought. The application has been presented as though the discharges may be set up by way of supplemental answer. The correct practice requires this to be done by means of a cross-bill. Miller v. Fenton, 11 Paige, 18; 1 Daniell, Ch. Pl'. 607; Story, Eq. PI. § 393; Taylor v. Titu8, 2 Edw. 135. Leave is granted defendants to file a cross-bill setting up their discharges, unless complainants elect to amend the prayer of their bill so as to waive any recovery against the defendants for a debt which was not created by fraud, or while they were acting in a fiduciary character.

----Ex parle KOEHLER, Receiver, etc.

rOhCttit COUlt, D. 01'egon. June 26,1885.)
MUTUAL AND DEPP;NDEN'f COVENANTS,

The covenants in the agreement of Oecemller 14, 1882, made between the Northern Pacific Terminal Company, of the first part, and the Northern Pacific, the Oregon Hailway& Naviga:i"n, and the Oregon & California Hailway Companies, of the second part" whereby the former undertook to furnish the latter terminal facilities at Portland, for which they agreed to pay, in certain proportions. the in.erest on the terminal company's bonds and the expense of maintaining such facilities, and i,eeping up it'! organization, as rent for the use of such facilities, are mutual and dependent, and therefore the terminal company, having failed to furnish said facilities, is not entitled to the payment of said interest and expenses. and the receiver of the Oregon & California Railway is inst.ructed to act accordingly.

In Equity. DEADY, J. On December 14, 1882, an agreement was entered into between the Northern Pacific Terminal Company, of the first part, and the Northern Pacific Railway Company, the Oregon Railway & Naviga. tion Company, and the Oregon & California Railway Company, of the second part, by which the terminal company undertook to construct, furnish, and maintain adequate terminal facilities, for the use of the parties of the second part,at and near Portland, including a railway bridge across the Wallamet, for the term of 50 years; in consideration of which said parties did "jointly and severally covenant, promise, and agree to and with the party of the first part, and for the benefit of each and every person who shall, or may at any time hereafter become a holder of said bonds, (meaning the bonds, not to exceed five millions of dollars in value, to be issued by the terminal company for the purpose of furnishing said terminal facilities,) or of any coupons therennto belonging, to pay to the party of the first part, as rental therefor, the following snms :
John W. Whalley, for the reCeIver.

108

FEDERAL REPORTER.

"(1) A sum equal to the interest, at the rate of 6 per centum per annum, on ail said bonds then or at any time outstanding, to be paid in semi-annual installments. (2) A sum sufficient to create a sinking fund for the redemption of said bonds, to be paid in semi-annual installments, commencing ten years from the date of said agreement. (3) A sum sufficient to pay all taxes and insurance on the property of the terminal company, and all repairs thereon, together with the expense of maintaining its organization and the issue and payment of said bonds and coupons, to be paid qlIarterly."

It is also provided in said agreement that said payments shall be made by the three parties of the second part in the following proportions: By the Northern Pacific Railway and the Oregon Railway & Navigation Companies, 40 per centum thereof, each, and by the Oregon & California Company, the remaining 20 per cent1,1m; and that if either of said parties shall fail to pay its proportion of said rental, the same shall be paid by the others of said parties; and if said failure shall in any case continue 30 days, the party of the first part may forfeit and annul all the rights of said defaulting party under said agreement; and shall do so at the request of either of the others of said parties; but the defaulting party shall not thereby be released from any obligation under said agreement. On June 19th, Mr. Richard Koehler, the receiver of the Oregon & California Railway, in the suit of Ha'rrison v. Oregon et California ,Company, filed his petition in this court, stating that no terminal facilities had been furnished to said corporation by said terminal company, except a depot building on the east side of the Wallamet river, worth' not to exceed $6,000, and not absolutely necessary to its busi. ness, which is also used by the Oregon Railway & Navigation Company, and an appliance, consisting of railway tracks and barges, for the transfer of cars from one bank of the ri,er to the other; and that the Oregon & California Company has been compelled to furnish, at great expl:)nse, its own terminal facilities on each sida of the river; that the Oregon & California Company has paid under said agreement its share of the interest on the bonded debt of the terminal company up to December 31, 1883, amounting to $30,858, and that since then and up to December 31, 1884, such interest has been paid by the Northern Pacific Railway and the Oregon Railway & Navigation Companies, and that a semi-annual installmeht thereof will fall due on June 25th; that no demand was ever made on the Oregon & California Company for payment of any of the expenses and charges incurred under said agreement, except as follows: On January 5, 1885, an account was presented for such charges and expenses up to September ao, 1884, for the sum of $7,371.87; on February 10, 1885, one from October 1 to December 81, 1884, for the sum of $1,078.15; on March 21, 1885, one from January 1, 1R83, to January 1, 1885, for tb.e-aum of $2,589.96; and payment of. the same requested, which was not made, but as the petitioner believes payment thereof was made by the Northern Pacifio Railway and the Oregon Railway & Navigation Companies.

EX PARTE KOEHLER.

109

In view of these facts the petitioner says be is in doubt whether it is his duty as the receiver of the Oregon & California (1) to pay any portion of the sums claimed by the terminal company; (2) or to pay any portion thereof except such as has accrued since his appointment as receiver; (3) or to pay any portion thereof by him disputed, until the same is adjusted by arbitration; (4) and whether the proper in. terpretation of said agreement does not make the completion of adequate terminal facilities a condition precedent to the right to demand said 20 per centum from the Oregon & California Company; and asks for instructions in the premises. The agreement by the Oregon & California Company to pay 20 per centum of the semi-annual interest on the terminal company's bonds, and the other expenses and charges mentioned therein, appears to me to be, in effect, an agreement to pay so much for the nse of terminal facilities to be furnished by the latter company. The interest on the money used in the construction of the facilities, and the cost of keeping them up, is assumed to 'be the rental value of the same. The .agreement is substantially a contract on the part of the terminal company to construct terminal facilities and lease them to the Oregon & California Company for so much a year, and a contract by the latter company to accept such lease, occupy the premises, and pa;;- the rent therefor, in the manner provided. The parties to this agreement must have contemplated and intended that the construction of the facilities would proceed pari passu with the issue of the bonds, and that the parties of the second part would be in the enjoyment of the same when and as they were called on to pay rent for the use of them. The covenants of the parties to the agreement are mutual and dependent-to be performed concurrently. And therefore neither party can complain of a default by the other, unless it can also show a performance or offer to perform on its part. Neis v. Yowm, 9 Sawy. 24. Upon this view of the matter, and assuming what is alleged in the petition, that no facilities of any consequence have been constructed or furnished to the Oregon & California Company, the terminal compauy is plainly in default, and cannot compel the further payment of the rent by the former, and is not, in justice, entitled to it; and the receiver is so instructed. Whether the contract to pay this interest can, under any circumstances, be construed as having been made with the holder of these bonds, and whether such holder can, therefore, compel payment by the Oregon & California Company of its proportion thereof, directly to himself, is a question not now before the court, as it does not appear that anyone but the terminal company is making any demand for it. But if the terminal company, or the holder of any interest coupon of these bonds, is dissatisfied with this instruction, application may be made for leave to commence legal proceedings against the receiver, when the matter may be further heard and considered.

MOBILE SAVINGS BANK V. BOARD OF

13up'ns

OKTIBBElU.

CO.

(Distriot Oourt, N. D. Mississippi, E. D.
1.

April Term, IllS:>.)

l\IUNTCIPAI, BONDS-COUNTY BONDS IRREGULARLY ISSUED-BoNA FIDE HOLDER.

Where the authority of a county to make subscription and issue bonds in aid of a railroad company is given by statute, and the bonds are issued and put in circulation, and come into the hands of a bona fide purchaser without notice that all the steps have not been taken as required, such holder will not be af. fected by any failure in making the subscription, or in the delivery of the certificate of subscription; the bonds reciting that they are issued in pursuance of the constitution and laws of the state.
SAMIC-INTEREST-REQUIREMENTS OF S'J'ATUTE.

2.

Where the rate of interest which bonds bear does not exceed that provided by the statute authorizing the issuance of the. bonds, though the time of pay· ment may vary fnT:l that provided in the statute. yet the bonds will be held valid.
SAME-BONDS TAKEN IN PAYMENT OF PRE-EXISTING DEBT.

3.

4.

The fact that bonds were taken in payment of a pre-existing debt renders the holder thereof none the less a holder for value.
SAME-BONDS ISSUED ON CONDITION-KNOWLEDGE OF HOLDER.

KnOWledge on the part of the holder of bonds and coupons at the time of their reception that it was agreed between the railroad company and the county that the bonds should beceme null and void if used for any other purpose than the construction of a branch road between certain points in the county, and that the bonds and coupons were used for a ditrerent purpose than that agreed upon, will defeat a recovery by such holder in an action on such bonds.
SAME_ELECTION-MISSISSIPPI CONSTITUTION.

5.

Where two-thirds of those voting at an election vote in favor of the issuance of county bonds in aid of a railroad, such bonds may be lawfully issued, although two-thirds of the registered voters of the county have not voted for such issue. Garrol Go. v. Srnith, HI U. S. 526, 8. C. 4 Sup. Ct. Hep. 539, followed.
SAME-CONSTRUCTION OF STATUTE BY STATE COURT.

6.

Where the subscriptiou for capital stock anri the issuance of bonds was authorized by the voters of the county, no subsequent construction of the consti. tution by the supreme court of the state can annul the authority thus given.
SAME-PLEADING \VANT OF CONsIDERA'rION.

7.

A plea averring that bonds in suit were issued without any consideration valid in law, lind are null and void, as plaintiff well knew when he received them, and that the consideration therefor had failed j but failing to aver any facts constituting such failure,-is insufl:1cieut.

Demurrer to Special Pleas. E. L. Russell, B. B. Boone, and A. J. for plaintiff. Butler cf; Carroll and Muldrow, Nash cf; Alexander, for defendant. HILL, J. The questions now presented arise upon plaintiff's demurrer to defendant's amended special pleas. The first of said pleas in substance alleges that the alleged election ·authorizing subscription for capital stock in the Mobile & Ohio Railroad Company, and the issnance of bonas :in payment thereof, and · the act of the legislature authorizing the same, required that when an election should have been held, and a majority of two-thirds of the ·voters should have legally assented thereto, that the president of tho board of supervisors should subscribe for $12:),000 of the capital. stock, ana a certificate of tho same should be given to the county.