Robinson, J.,
delivered the opinion of the Court.
The appellant was the holder of ten shares of stock in the Franklin Land and Loan Company of the par value of $400 per share, upon which the weekly dues paid by him, and the dividends to which he was entitled, amounted to •$1715.30.
He was also the holder of shares in the Chesapeake Mutual Land and Building Association, upon which he had paid $1238.70.
On the 20th of July, 1874, the Franklin Company ■passed a resolution directing the sale of certain property •belonging to the Company, and authorizing the purchaser [442]*442to pay two-thirds of the purchase-money in the stock of the Company.
On the same day the Chesapeake Association passed a resolution to the like eifect.
On the 5th of August following, the two companies offered at public sale one hundred and eight pieces of property on the following terms: One-third cash, one-third in six months and one-third in twelve months, or one-third cash, and the balance payable in stock of the Chesapeake Mutual Land and Building Association, or the Franklin Land and Loan Company at par, or at one hundred cents on the dollar, of the amount paid in.
•If these terms are to be construed as meaning that the purchaser had the option of paying two-thirds of the purchase money in the stock of either or both companies, it is plain that such terms were not authorized by the resolutions of the 20th of July.
By these resolutions the purchaser had the option of paying two-thirds of the purchase money of property belonging to the Franklin Company in the stock of that Company, but not the option of paying in. the stock of the Chesapeake Association—And so with the payment of purchase money for property belonging to the Chesapeake Association.
- At the above sale the appellant bought a lot of ground belonging' to the Chesapeake Association for $3675, and, in the payment of the purchase money, he was allowed by the company $1238.70, being the entire amount paid by him on account of his subscription to the stock of that company, and also the sum of $1211.30 of the $1715.30-paid by him on the shares of the.Franklin Company. The balance of the $1715.30 he transferred to the wife of Solomon Rider.
The property was conveyed to him by the Chesapeake Association, and thereupon the following entry was made by the secretary of the Franklin Company on the books of said Company:
[443]*443“ Moses Eider, Dr.
“To the Chesapeake M. Land & Building Asso.
“Eider stock, cancelled hy purchase of Chesapeake property................................................$1211.30.”
This entry was made hy the secretary in pursuance of what he understood to be the meaning of the resolution passed by the directors in reference to the sale of the property.
The appellant having thus paid but $1715.30 on account of his ten shares of stock in the Franklin Company, this suit is brought by the appellees, duly appointed receivers of said Company, to recover the unpaid instalments due thereon, and the appellant relies on the entry of cancellation of his stock hy the secretary of the Company, and upon the transfer to Mrs. Eider,-and the settlement with the Chesapeake Association as a defence to the action.
In respect of the cancellation of the stock by the secretary, it is clear that no such action hy him could in any manner release the appellant from liability, if any existed, for the unpaid instalments due on his stock. And this too, whether such entry was made hy the secretary with or without the direction of the board of directors. It was not within the power of the secretary or the board of directors to release the appellant from the payment of his subscription to the stock of the company.
The unpaid subscription to the capital stock of a corporation constitutes a trust fund to be held by the corporation for the benefit of creditors and shareholders, and directors have no power to release a subscriber to the prejudice of such creditors or to the injury of other stockholders. In Burke vs. Smith, 16 Wallace, 395, the Supreme Court say:
“ It has been settled by very numerous decisions, that the directors of a company are incompetent to release an original subscriber to its capital stock, or to make any [444]*444arrangement with, him by which the company, its creditors, or the State shall lose any of the benefit of his subscription.”
And in the case of the Bedford Railroad Company vs. Bowser, 48 Penna., 37, the Court say:
l< It is an abuse of their trust, wholly unauthorized, and at war with the design of the charter, to single out some of the stock subscribers and release them from their liability. No such authority in them has ever been recognized.” Alford vs. Miller, 32 Conn., 543; Jones vs. Terre Haute & Richmond R. R. Co., 57 N. 7., 196.
Something was said in the argument about the transfer of the balance of the paid up stock to Mrs. Soloman Rider, and as to the power of a subscriber to transfer his stock and thus escape all further liability on account of the same. Whatever may be the English doctrine on this subject, it is well settled in this country that the transfer of shares of stock in a failing corporation, to a man of straw, and made for the purpose of escaping liability as a shareholder, is void as to the creditors and other stockholders of the company. Nathan vs. Whitlock, 3 Edwards’ Ch. Rep., (215,) and affirmed on appeal, 9 Paige, 152; Provident Saving Inst. vs. Jackson Place Skating Rink, 52 Mass., 557; Marcy vs. Clark, 17 Mass., 330.
And for the reason that in this'country the capital stock, embracing both paid and unpaid subscriptions, is a trust fund for the benefit of creditors and shareholders, and it would be inconsistent with the nature of such a trust to permit subscribers to transfer their stock to insolvent persons, and thus escape liability for the payment of their subscription.
The appellant admits that he made the transfer to Mrs. Rider without her knowledge or consent, and for the sole purpose of escaping liability on account of the unpaid instalments due on his stock, and we are of opinion, for the reasons above stated, that such transfer constitutes no defence to this action.
[445]*445We come now to the settlement of the Chesapeake property bought hy the appellant. At this time there stood to his credit on the books of the Franklin Company, $1Y15.30, which sum represented the amount paid hy him as dues, together with his proportion of dividends earned hy the Company. Of this sum he was allowed by the Chesapeake Association in part payment of the property, $1211.30, and the balance due to him of $504 he transferred to Mrs. Solomon Rider. And it is argued that by this settlement, the Chesapeake Association became the transferree of the appellant’s stock in the Franklin Company, and as such liable for the unpaid instalments due hy him on account of the same.
This contention is not, we think, supported either hy the terms of sale or by the resolution of the Company, passed on the 20th of July, authorizing the sale to he made.
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Robinson, J.,
delivered the opinion of the Court.
The appellant was the holder of ten shares of stock in the Franklin Land and Loan Company of the par value of $400 per share, upon which the weekly dues paid by him, and the dividends to which he was entitled, amounted to •$1715.30.
He was also the holder of shares in the Chesapeake Mutual Land and Building Association, upon which he had paid $1238.70.
On the 20th of July, 1874, the Franklin Company ■passed a resolution directing the sale of certain property •belonging to the Company, and authorizing the purchaser [442]*442to pay two-thirds of the purchase-money in the stock of the Company.
On the same day the Chesapeake Association passed a resolution to the like eifect.
On the 5th of August following, the two companies offered at public sale one hundred and eight pieces of property on the following terms: One-third cash, one-third in six months and one-third in twelve months, or one-third cash, and the balance payable in stock of the Chesapeake Mutual Land and Building Association, or the Franklin Land and Loan Company at par, or at one hundred cents on the dollar, of the amount paid in.
•If these terms are to be construed as meaning that the purchaser had the option of paying two-thirds of the purchase money in the stock of either or both companies, it is plain that such terms were not authorized by the resolutions of the 20th of July.
By these resolutions the purchaser had the option of paying two-thirds of the purchase money of property belonging to the Franklin Company in the stock of that Company, but not the option of paying in. the stock of the Chesapeake Association—And so with the payment of purchase money for property belonging to the Chesapeake Association.
- At the above sale the appellant bought a lot of ground belonging' to the Chesapeake Association for $3675, and, in the payment of the purchase money, he was allowed by the company $1238.70, being the entire amount paid by him on account of his subscription to the stock of that company, and also the sum of $1211.30 of the $1715.30-paid by him on the shares of the.Franklin Company. The balance of the $1715.30 he transferred to the wife of Solomon Rider.
The property was conveyed to him by the Chesapeake Association, and thereupon the following entry was made by the secretary of the Franklin Company on the books of said Company:
[443]*443“ Moses Eider, Dr.
“To the Chesapeake M. Land & Building Asso.
“Eider stock, cancelled hy purchase of Chesapeake property................................................$1211.30.”
This entry was made hy the secretary in pursuance of what he understood to be the meaning of the resolution passed by the directors in reference to the sale of the property.
The appellant having thus paid but $1715.30 on account of his ten shares of stock in the Franklin Company, this suit is brought by the appellees, duly appointed receivers of said Company, to recover the unpaid instalments due thereon, and the appellant relies on the entry of cancellation of his stock hy the secretary of the Company, and upon the transfer to Mrs. Eider,-and the settlement with the Chesapeake Association as a defence to the action.
In respect of the cancellation of the stock by the secretary, it is clear that no such action hy him could in any manner release the appellant from liability, if any existed, for the unpaid instalments due on his stock. And this too, whether such entry was made hy the secretary with or without the direction of the board of directors. It was not within the power of the secretary or the board of directors to release the appellant from the payment of his subscription to the stock of the company.
The unpaid subscription to the capital stock of a corporation constitutes a trust fund to be held by the corporation for the benefit of creditors and shareholders, and directors have no power to release a subscriber to the prejudice of such creditors or to the injury of other stockholders. In Burke vs. Smith, 16 Wallace, 395, the Supreme Court say:
“ It has been settled by very numerous decisions, that the directors of a company are incompetent to release an original subscriber to its capital stock, or to make any [444]*444arrangement with, him by which the company, its creditors, or the State shall lose any of the benefit of his subscription.”
And in the case of the Bedford Railroad Company vs. Bowser, 48 Penna., 37, the Court say:
l< It is an abuse of their trust, wholly unauthorized, and at war with the design of the charter, to single out some of the stock subscribers and release them from their liability. No such authority in them has ever been recognized.” Alford vs. Miller, 32 Conn., 543; Jones vs. Terre Haute & Richmond R. R. Co., 57 N. 7., 196.
Something was said in the argument about the transfer of the balance of the paid up stock to Mrs. Soloman Rider, and as to the power of a subscriber to transfer his stock and thus escape all further liability on account of the same. Whatever may be the English doctrine on this subject, it is well settled in this country that the transfer of shares of stock in a failing corporation, to a man of straw, and made for the purpose of escaping liability as a shareholder, is void as to the creditors and other stockholders of the company. Nathan vs. Whitlock, 3 Edwards’ Ch. Rep., (215,) and affirmed on appeal, 9 Paige, 152; Provident Saving Inst. vs. Jackson Place Skating Rink, 52 Mass., 557; Marcy vs. Clark, 17 Mass., 330.
And for the reason that in this'country the capital stock, embracing both paid and unpaid subscriptions, is a trust fund for the benefit of creditors and shareholders, and it would be inconsistent with the nature of such a trust to permit subscribers to transfer their stock to insolvent persons, and thus escape liability for the payment of their subscription.
The appellant admits that he made the transfer to Mrs. Rider without her knowledge or consent, and for the sole purpose of escaping liability on account of the unpaid instalments due on his stock, and we are of opinion, for the reasons above stated, that such transfer constitutes no defence to this action.
[445]*445We come now to the settlement of the Chesapeake property bought hy the appellant. At this time there stood to his credit on the books of the Franklin Company, $1Y15.30, which sum represented the amount paid hy him as dues, together with his proportion of dividends earned hy the Company. Of this sum he was allowed by the Chesapeake Association in part payment of the property, $1211.30, and the balance due to him of $504 he transferred to Mrs. Solomon Rider. And it is argued that by this settlement, the Chesapeake Association became the transferree of the appellant’s stock in the Franklin Company, and as such liable for the unpaid instalments due hy him on account of the same.
This contention is not, we think, supported either hy the terms of sale or by the resolution of the Company, passed on the 20th of July, authorizing the sale to he made. By this resolution the purchaser of property belonging to the Chesapeake Association was allowed the option of paying two-thirds of the purchase money in the stock of that company. It did not authorize the purchaser to pay in the stock of the Franklin or any other company. If the terms of sale are to he construed as conferring this option, it is very clear that under them the purchaser was to he allowed only on account of the stock paid in hy him. In other words if he paid the entire amount due on account of his stock, such stock was to he taken in part payment of the purchase money at par, or if he had paid hut part he was to he allowed one hundred cents on the dollar of the amount paid in.
The fact is, these two companies occupied the same building, were managed pretty much by the same persons, and the properties belonging to them were sold on the same day, at the same place, and hy the same officers, and in allowing the appellant the credit of $1211.30, the Chesapeake Association meant as to that amount to become a creditor of the Franklin Company. We cannot suppose [446]*446for a moment that it intended to allow him not only dollar for dollar on the amount paid hy him on his stock in the Franklin Company, but also to become liable in his •stead for the unpaid instalments due by him on account of the same.
Whether the Chesapeake Association had the power-under its charter and by-laws to sell its property and to •allow the purchaser the option of paying two-thirds of the purchase money in the stock of another company, is a ■question not involved in this appeal.
This is a suit by the receivers of the Franklin Company against the appellant to enforce the payment of a balance due by him on his subscription to the stock of the Company, and his liability for the amount due by him is in no manner affected either by the cancellation of his stock by the secretary of the Company or by the settlement made between him and the Chesapeake Association for property purchased of that company.
It follows from what we have said, that the evidence ■offered under the first exception was inadmissible. It was not within the power of the directors of the Franklin Company by resolution or otherwise, to release the appellant from liability on account of his subscription to the stock of the Company. If this be so, the fact that the Chesapeake property was bought by the appellant with the understanding that he rvas to have the option of paying two-thirds of the purchase money in the stock of the Franklin Company, and that by such payment his stock was to be cancelled, were matters not pertinent to the issues before the jury. Whether the Company had the right to sell its property on such terms, and what are the rights and liabilities of the appellant as purchaser, are questions not involved in this appeal.
The record shows that the appellant was the holder of ten shares of stock in the Franklin Company of the par -value of $400 per share, upon which he had paid but [447]*447$1715.30, and the sole question is whether he is liable in a suit brought by the receivers of said Company representing its creditors and shareholders, for the balance due on said stock ? There is nothing to show either a valid transfer of said stock, or a release of liability for the unpaid instalments due on the same, and we are of opinion that there was no error in granting the prayers offered by the plaintiffs, and in rejecting those offered by the defendant.
(Decided 2nd July, 1880.)
Judgment affirmed.