Opinion of the Court.

of power and authority in the defendant to make the bonds and coupons in suit was an averment of a legal conclusion.

The court sustained the demurrer, and rendered judgment for the defendant; and the plaintiff sued out this writ of error.

Mr. J. E. McDonald for plaintiff in error. Mr. John M. Butler was with him on the brief.

Mr. Thomas F. Davidson for defendant in error.

MR. JUSTICE GRAY, after stating the case as above reported, delivered the opinion of the court.

The town of Covington had no general power to issue negotiable bonds. If the general statute of Indiana of June 11, 1852, under which it was incorporated, conferred any power upon towns to issue bonds, it was only for certain municipal purposes therein specified; and the general statute of May 15, 1869, authorized towns to issue bonds for the purchase and erection of lands and buildings for school purposes only. 1 Gavin & Hord's Stat. 623-626; Davis's Supplt. 116.

The bonds in suit containing no statement of the purpose for which they were issued, and no recital which can bind the town by way of estoppel, any one suing upon the bonds is bound to allege and prove the authority of the town to issue them.

The plaintiff relies on the statement of Mr. Justice Swayne in Gelpeke v. Dubuque, 1 Wall. 175, 203, repeated by him and by Mr. Justice Clifford in later cases, that "when a corporation has power, under any circumstances, to issue negotiable securities, the bona fide holder has a right to presume they were issued under the circumstances which give the requisite authority, and they are no more liable to be impeached for any infirmity in the hands of such a holder than any other commercial paper," Supervisors v. Schenck, 5 Wall. 772, 784; Lexington v. Butler, 14 Wall. 282, 296; San Antonio v. Mehaffy, 96 U. S. 312, 314; Macon County v. Shores, 97 U. S. 272, 279.

But the circumstances thus spoken of were the preliminary facts requisite to the exercise of the power, not the limits, fixed

Opinion of the Court.

by law, of the objects and purposes for which the power could be exercised at all. In each of the cases cited, the defects suggested were in the requisite preliminary proceedings, and the bonds sued on appeared by recitals on their face to have been issued according to law. When the law confers no authority to issue the bonds in question, the mere fact of their issue cannot bind the town to pay them, even to a purchaser before maturity and for value. Marsh v. Fulton County, 10 Wall. 676; East Oakland v. Skinner, 94 U. S. 255; Buchanan v. Litchfield, 102 U. S. 278; Dixon County v. Field, 111 U. S. 83; Hayes v. Holly Springs, 114 U. S. 120; Daviess County v. Dickinson, 117 U. S. 657.

A demurrer admits only facts, and facts well pleaded. The town having but a limited authority to issue bonds for certain purposes, it is not enough for the plaintiff to aver in general terms that the town was authorized to issue the bonds in suit; but he must state the facts which bring the case within the special authority. There is nothing in this declaration, or in the copies of instruments annexed to and made part of it, which shows, or has any tendency to show, for what purpose the bonds were made. The averment, that the defendant is a municipal corporation under the laws of Indiana, "with full power and authority, pursuant to the laws of said State, to execute negotiable commercial paper," if understood as alleging a general power to execute negotiable commercial paper, is inconsistent with the public laws of the State, of which the courts of the United States take judicial notice. The averment, that the bonds held by the plaintiff were executed pursuant to the laws of the State, is but a statement of a conclusion of law, which is not admitted by demurrer. The declaration is fatally defective for not stating the facts necessary to enable the court to judge for itself whether that conclusion of law has any foundation in fact. Pumpelly v. Green Bay Co., 13 Wall. 166, 175; Cragin v. Lovell, 109 U. S. 194; Kennard v. Cass County, 3 Dillon, 147; Broome v. Taylor, 76 N. Y. 564; Cotton v. New Providence, 18 Vroom, 401.

Judgment affirmed.

Statement of Facts.

PAINE v. CENTRAL VERMONT RAILROAD

COMPANY.

ERROR TO THE CIRCUIT COURT OF THE UNITED STATES FOR THE DISTRICT OF VERMONT.

Argued April 8, 1886.-Decided May 10, 1886.

In an action in the Circuit Court of the United States, submitted by stipula tion of the parties, in accordance with the practice prevailing in the State where the court is held, to the decision of the judge "as referee," the only matter reviewable by this court is error of law in the judgment of the court upon the facts found by the referee.

A promissory note payable on demand, with interest, was made by a railroad corporation to a stockholder for money lent, and with the understanding that assessments to be laid on his shares should, when payable, be considered as payments upon the note. Assessments to a greater amount than the note afterwards became payable, and the difference only was paid by him. Held, That the note was paid as between the corporation and the payee, and as against a subsequent endorsee taking the note when overdue. By the statutes of Massachusetts and of Vermont, promissory notes payable on demand are overdue in sixty days after date.

This was an action of assumpsit, brought October 1, 1878, in the Circuit Court of the United States for the District of Vermont, by a citizen of New York as endorsee, against a Vermont corporation as maker, of the following promissory note:

"$5000.

Boston, July 10th, 1873.

"On demand after date, with interest, we promise to pay to the order of H. B. Wilbur, Treasurer, five thousand dollars. "CENTRAL VERMONT R. R. Co.,

"As Receivers and Managers Vermont Central, and Vermont and Canada R. R.

"By H. B. WILBUR, Treasurer.

"No. 8. Value received. Approved.

"J. GREGORY SMITH, President. "H. B. WILBUR, Treasurer."

On August 28, 1879, the defendant pleaded the general issue,

Statement of Facts.

with a specification of defence, in accordance with the statutes of Vermont, (Gen. Stat. 1862, ch. 30, $$ 15, 32; Rev. Laws 1880, §§ 908, 909,) that the defendant was organized as a corporation on May 27, 1873; that on July 10, 1873, it delivered the note in suit to John Q. Hoyt, an original subscriber to the defendant's capital stock, and then holding shares of that stock of the par value of $50,000, only partially paid for; that on that day the defendant being in urgent need of money and not having time to regularly lay and collect an assessment on its capital stock, Hoyt advanced to the defendant $5000, and the defendant gave him this note, under an agreement that he should hold it until an assessment covering that amount should be made on his stock, and it was understood and agreed by and between him and the defendant that, when such assessment should be made, the $5000 so advanced should be applied in payment thereof, and the note should be thereby paid and extinguished, and should be surrendered; that on August 10, 1873, such an assessment was made by the defendant upon its capital stock, including Hoyt's shares; that on October 28, 1873, the $5000 advanced as aforesaid was duly applied in payment of that assessment, whereby the note was paid and extinguished, and the note was suffered to remain in his hands through inadvertence; and that the plaintiff received the note from Hoyt long after its payment and extinguishment as above stated, as security for a pre-existing debt from Hoyt to the plaintiff, and with full knowledge of such satisfaction and payment, and after the note had ceased to be current.

On May 16, 1882, the counsel of the parties signed and filed an agreement in writing, by which it was "stipulated and agreed to refer this case to Hon. Hoyt H. Wheeler to try and decide this case as referee."

On September 6, 1882, the referee filed his report, the material parts of which were as follows:

"On the hearing, it appeared from the evidence that in 1872 several persons were in possession of and operating the Vermont Central and Vermont and Canada Railroads as receivers and managers of the Court of Chancery of the State, in Franklin County, and had prepared to issue a series of long-time

Statement of Facts.

bonds, called income and extension bonds, a part of which had not been negotiated. The defendant was chartered with power to temporarily operate those roads, subject to the order of that court, and to assume the contracts of the receivers and managers. Subscriptions to the capital stock of the defendant were opened, and two millions in amount subscribed for April 30, 1873, of which John Q. Hoyt, of the city of New York, subscribed for $50,000, and it was expected by the subscribers that when the company should be organized it would be appointed receiver of those roads, and assume the obligations of the other receivers. Five per cent. of the subscriptions was required by the commissioners of subscription to be paid down. The receivers were in need of funds, and by arrangement with them one of the subscribers advanced $200,000, ten per cent. of the subscriptions, in behalf of all the subscribers, as a temporary loan to the receivers pending the organization of the company and proceedings to carry out the expectations of the subscribers, and a note of that amount was made, and, with $400,000 in amount of the income and extension bonds as collateral security for its payment, delivered to the subscriber making the advance, upon the understanding that the note should be paid if the defendant company did not come into possession of the roads and assume the obligations of the receivers, and stand against the subscriptions for stock if it did.

"The defendant company was organized May 27, 1873; was appointed receiver and manager of the roads June 21, 1873; and went into possession of the roads, assuming the obligations of the former receivers and managers, July 1, 1873. An assessment of thirty per cent on the subscriptions for stock was laid June 24, another of ten per cent August 13, and another of ten per cent October 28, 1873, the last payable on or before December 1, 1873. The assessment of June 24 was paid by the subscribers respectively, including Hoyt. After the arrangement for making the defendant receiver of the roads was consummated, the note of $200,000 was given up, and new notes of the defendant were given, running to the subscribers separately, each in proportion to the amount of his subscription. The other subscribers paid to the one who made the advance