Demon Baby Incident
Summary
The demon baby incident refers to a time when Samael and Lilith (two destroyer angels) stepped out of their purview and tried to create offspring.
As creator archangels, Stewart and Michael's dragons lay eggs. However this is not truly "creation," as only God can create. The eggs simply bind together gathered/recycled spirit energy in preparation for its next life. God then attaches each hatched spirit to a vessel (body) and life is created.
Stewart and Michael have no say in what spirit goes into their own human children, and only God can create archangels/dragons. Sam and Lilith, tried to create their own dragon/angel children, however.
When the children Sam and Lilith produced were stillborn, they tried forcing bits of their own spirit into each vessel, creating autonomous offspring outside of the "natural order." These offspring went on to procreate within the general human population, introducing spiritual sickness.
It caused so many problems that Lilith and Sam had a fight, and upset that she'd been infertile and he kept knocking her up, she bit his knob off and ate it. Now both are incapable of having human children, and they are tasked with cleaning up the hopeless and soulless that are a result of their tainted demon offspring.