delivered the opinion of the Court:
The bill in this case was brought by the Union Mutual Life Insurance Company, a corporation existing under the laws of the State of Maine, against the Frear Stone Manufacturing Company, a corporation existing under the laws of the State of Illinois, and the stockholders in the last mentioned company. It is a creditor’s bill, and the facts necessary to an understanding of the question of law raised and discussed may be readily stated, as most of them appear by admission on demurrer.
An act of the General Assembly of the State of Illinois, approved February 23,1867, created a corporation styled the Northwestern Manufacturing Company. Section two, of the charter, provided the capital stock of the company should be $'200,000, and might be increased by resolution of the board of directors to any amount not exceeding $1,000,000, and should be divided into shares of $100 each. The corporation was duly organized, under the charter, in 1867, and after-wards, under the provisions of section two of the charter, the capital stock of the company was increased, by a resolution of the board of directors, to $300,000. The shares were fixed at $100 each. The company thus organized commenced, as it was authorized to do, the manufacture of artificial stone, under the “ Frear patent.”
In 1868, a number of persons, named as defendants in the bill, became subscribers to the capital stock of the Northwestern Manufacturing Company, under an agreement, of which, omitting the date and signatures thereto, the following is a copy, viz: “We, the undersigned, subscribers to the capital stock of the Northwestern Manufacturing Company, of Chicago, do hereby subscribe for, and agree to take, the *543number of shares of $100 each, in the stock of said company, set opposite our names, and pay for the same according to the terms following, and as follows, to-wit:
“ 1st. The stock of the company shall be and remain as it now is, at $300,000, in shares of $100 each.
“2d. The business of the company shall be the manufacture and sale of Frear’s patent artificial stone, stucco, mastic, cement, etc., and the sale or disposal of the patent right to parties in other parts of the State of Illinois.
“3d. Ho assessment shall ever be made upon the stock of the company.
“ 4th. The said company are to pay the present owners of the patent right, above mentioned, $125,000 for such exclusive right in and to the State of Illinois.
“5th. We agree to pay ten dollars upon each share of stock subscribed by us, which is the sum total we shall be held liable to pay.
“6th. Fifteen thousand dollars of the proceeds of the sale of stock, as above, shall go to the company and be used as further working capital, in carrying on the manufacture.
“7th. Fifteen thousand dollars in cash shall be paid the present owners for the manufactory and contents on hand for work, including stock on hand, which shall go to the credit of the company, in part payment for this patent right, leaving due the present owners of the patent right the sum of $110,000, which shall be paid out of the first earnings of the company, or the disposal of patent rights in other parts of the State.”
The total number of shares which the subscribers to the agreement obligated themselves to take, was two thousand five hundred and eighty-five, of the value of $100 each, representing a total value of stock of $258,500. Persons not subscribers to the agreement, took other shares. Certificates of stock were issued to, and accepted by, the subscribers to the agreement. On the 9th day of March, 1869, by an act of the General Assembly, the name of the corporation was *544changed to “The Frear Stone Manufacturing Company,” under which name it continued until it ceased to do business, in January, 1874. On the 8th day of December, 1870, the Union Mutual Life Insurance Co. loaned the defendant corporation the sum of $50,000, which indebtedness was evidenced by a promissory note payable five years after date, with interest, at the rate of eight per cent per annum, and was secured by trust deed on certain real estate owned by the company. The interest was paid on this note until 1872, when default was made. After the maturity of the note, judgment was obtained on it for the sum of $72,254, upon which execution was issued, and, on the 13th day of March, 1877, it was returned by the proper officer wholly unsatisfied. A bill was filed to foreclose the trust deed, and, on decree obtained for the sale of the mortgaged property, it was sold, to complainant for $10,000, which, it is alleged, was twice its value. After giving credit for all that was realized by the mortgage sale, there remained the sum of $65,221.06, still owing to complainant, to recover which the present bill was filed against the corporation and the stockholders. Most of the defendants paid $10 on each share by them held, but others paid nothing, and the allegation of the bill is, that each shareholder is liable for the unpaid portion of his stock, whatever it may be. It is further alleged, no officer or agent of the complaining corporation had any knowledge or notice of the existence of the subscription paper, or that the stockholders had, in any manner, undertaken to limit their liability to pay for the stock by them subscribed, until ¡November, 1876, which was long after the indebtedness to complainant had become due. Other matters are stated in the bill, but, as they are not material to the decision of the case, they need not be noted. Most of the stockholders named as defendants, demurred to the bill; others pleaded discharges in bankruptcy; others answered, and some were defaulted. The circuit "court sustained the demurrér to the bill, and, as the court was of opinion the bill could not be *545maintained against any of defendants, for want of equity, and that no relief could be.decreed in favor of complainant on the facts alleged, on motion of complainant the bill was dismissed as to all of defendants, with the reservation to complainant of the right to assign error on the decision. That decree was affirmed in the Appellate Court, and complainant brings the case to this court on appeal.
In the view of the case we have taken, it is not material whether the agreement providing that the capital stock of the corporation shall be non-assessable, applies to the whole stock, or only to that held by the subscribers to the agreement, and we shall not now discuss that question.
The charter of the defendant corporation was granted to it by the General Assembly before the adoption of the present constitution, and, consequently, long before the passage of the general Incorporation act, and is not, therefore, affected either by the constitution or the general law on the subject of corporations. It is not claimed the charter imposes any liability on the stockholders beyond their obligation to pay for the stock by them subscribed, or, what is the samé thing, the obligation to pay for such stock implied in the act of subscription. Whether there is any express promise to pay for stock at the time of subscription, or not, the law implies such promise by the acceptance of such stock on the part of the holder. Unless, therefore, the agreement in evidence limits the liability of the stockholders to a less sum, there could be no question as to their liability for the par value of the stock. Upon the construction that shall be given to that instrument, the decision hinges.
It will be noticed the agreement provides : “ First.—The stock of the company shall be and remain as it now is, at $300,000, in shares of $100 each. * * * * “ Third.— No assessment shall ever be made upon the stock of the company. * * * * “Fifth.—We agree to pay ten dollars upon each share subscribed by us, which is the sum total we shall be liable to pay.” It is not'shown the corporation *546ever assented to the limitation agreement, other than by issuing to subscribers stock under it. That may, however, be regarded as an acceptance of the subscriptions for stock on the terms stated in the agreement. The bill is framed on the theory the agreement, so far as the corporation may have consented to the limitation of the liability of the subscribers to pay the par value of the stock issued „to them, is ultra vires, but, having accepted the stock, the stockholders,by that act, became liable to pay the par value of the stock issued to and held by them. It is upon the principle, the assets of a corporation are trust funds for the payment of its debts, and the liability to pay for stock, implied in the act of accepting it, becomes as much a part of the trust fund as any asset of the corporation, and may be reached by the aid of the courts. It seems to be conceded such a limitation as that contained in the agreement, would be void if it should be applied to corporations existing under general or special laws imposing personal liability on the stockholders, as an attempt to set aside or avoid a statutory obligation or duty. The argument in favor of the validity of the limitation agreement, insisted upon by the defence, is, that in the absence of any statute imposing personal liability, such an agreement is valid and binding between the corporation and the stockholders, and, as there is no privity between the creditors of the corporation and the stockholders, whatever equity the creditors may have must be worked out against the corporation. One reason assigned for the position assumed is, the creditors can enforce no obligation against the stockholders the corporation itself could not enforce. The latter proposition has neither principle nor the weight of recent judicial decisions for its support. It is not true that creditors of a corporation can not enforce obligations resting upon stockholders that the corporation might not be able to do. The rule rests on the doctrine of estoppel. The contract in this case may be binding on the corporation that accepted subscriptions to its capital stock on the terms therein expressed. *547It is for the reason it is competent for a corporation to contract with its stockholders. A corporation has no existence apart from its officers conducting its affairs, and who represent the shareholders. As between themselves, any contract fairly entered into would seem to be valid. At all events, a corporation will be estopped to say its contract is ultra vires, and sue its stockholders upon obligations arising by implication of law that it had once solemnly waived. But no such doctrine can be applied to creditors of a corporation. They sustain a widely different relation, both to the corporation and its shareholders. The distinction has its foundation in reason as well as in a sound public policy. The capital stock of a corporation, by most recent decisions, is a trust fund that the directors may not give away or misappropriate to the prejudice of parties whom they have invited to deal with the corporation. The State grants the franchise on the understanding the corporation created will have a capital stock, and the amount is usually fixed before the State parts with the franchise. It is for the security of all persons that deal with the corporation, as well as to afford the means to accomplish the objects of the incorporation. When the charter has fixed the minimum amount of capital stock, what warrant have the stockholders for saying a less sum shall constitute the capital stock? It would simply abrogate, by private agreement, that provision of their charter. Any device, by which the members of a corporation seek to avoid the liability which the law imposes upon them, is void as to creditors, whether binding or not as between themselves. Of this character is an agreement among the members that the shares of the capital stock of the corporation shall be regarded as “ fully paid up.” Such shares so issued are said to be ultra vires, at least to the extent that, on the winding up of the corporation, such shareholders will be adjudged contributories, unless it shall appear they have given for such stock the equivalent in money or in money’s worth. Nor is it in the power of the shareholders, by pri*548vate agreement with the corporation, to make the shares of stock issued to them noil-assessable so as to excuse payment for such stock at its par value. That would deprive creditors of all security, which is the very thing the Legislature intended to guard against by the provision in its charter, the corporation should have a certain capital stock. The authorities that sustain these views are cited in Thompson’s Liability of Stockholders, section 129, and in Green’s Brice’s Ultra Vires 143.
The contract in this case comes within the inhibition of the principle stated. It was an attempt, by a secret agreement between the shareholders, to limit their liability to the corporation for stock issued to them, to $30,000, when the charter, under which the company acted made the par value of the stock $300,000. It is said, the shareholders having made’one contract for themselves, the courts can not make another for them. The fallacy of the argument in support of.this proposition is, that the limitation sought to be imposed is valid as against the creditors. It is subversive of their rights, and therefore inoperative as to them. It is a breach of trust for the directors to issue shares of stock under such restrictions, and shareholders knowingly participating can derive no benefit from such a contract. In the case at bar, the General Assembly had fixed the capital stock the corporation should have, and certainly it was not within the power of the shareholders to say they would fix it at a less sum. It is doubtful whether a corporation can change its capital stock without legislative sanction. The weight of authority is against the right. This would seem to beso on principle. Stockholders are integral parts of the corporation, and if the constituent parts can not, it is a logical sequence the body they compose can not do it.
There is no ground for believing the State would have granted a franchise to this corporation, had it been known its capital stock would not exceed the sum fixed by the stockholders. Such an agreement is inimical to the rights of *549creditors, and plainly against a sound public policy. Whether so intended or not, it might be the source of injury to persons trusting the corporation on the faith of its capital stock. The books showed the stock had all been issued, and a person dealing with the corporation may have known the shareholders were responsible, and so given credit to the concern. It would be a novel doctrine if shareholders, after the corporation had incurred large liabilities on the faith of the security supposed to be afforded by the stock held by them, will be permitted to avail of a private agreement between themselves and the corporation whose stock they hold, to the effect, no assessment shall ever be made on the stock of the company, or as in this case, that they have paid ten dollars on each share of stock by them subscribed, and that shall be the sum total they will be held liable to pay. It would be difficult to conceive of a contract more mischievous in its effects, or more at variance with our sense of justice and right. Availing of the benefits of the franchises conferred by the charter, fair dealing would require the shareholders should bear the burdens it imposed. It would be singular, indeed, if the shareholders could appropriate to themselves all profits that might be realized by the corporation, and yet contract to exempt themselves from all losses that might be sustained. Such is not the law, and a contract that would have that effect is- clearly void, as being inhibited by a sound public policy. As was said, in Upton v. Tribilcock, 1 Otto, 45, “ equally unsound is the opinion that the obligation of a subscriber to pay his subscription, may be released or surrendered to him by the trustees of the company. This has often been attempted,but never successfully.” Most of the cases, certainly in this country, recognize and are based on the doctrine, the capital stock of a corporation is a trust fund for the security of its creditors that the directors have no rightful authority to misappropriate or give away. Miller, J., in Sawyer v. Hoag, 17 Wall. 610, speaks of this as a doctrine of modern date, and adds, “ it is no solid objection to such a principle that *550it is modern, for the occasion for it could not sooner have arisen.” The principle is in accord with our sense of justice and fair dealing. A rule that would permit stockholders to covenant with each other that the shares they hold might be taken at a nominal value, and be non-assessable, when the law makes them of par value, would work an injury to creditors the law will not tolerate. Cases of acknowledged authority on the liability of stockholders are: Burke v. Smith, 16 Wall. 300; New Albany v. Burke, 11 id. 96; Sawyer v. Hoag, 17 id. 610; Upton v. Tribilcock, 1 Otto, 45; Sawyer v. Upton, 1 id. 56; Henry v. Fer. & Ash. R. R., 17 Ohio, 187; Noale v. Callender, 20 Ohio St. 199; Hartford & New Haven R. R. v. Kennedy, 12 Conn. 499; White Mt. R. R. v. Eastman, 34 N. H. 124; Ogilvie v. Knox Ins. Co. 22 How. 380 ; Sagory v. Dubois, 3 Sandf. Ch. 466. Many of these cases on examination will be found to contain reasoning appropriate to the facts of the case in hand. Sagory v. Dubois is a well reasoned case, and declares the salutary principle, the capital stock fixed by such associations and specified in their certificates, is the amount the legislature required to be paid or secured, as the foundation of the operations the statute permits them tó carry on, and is imperatively demanded for the public security. In Melvin v. Lamar Ins. Co. 80 Ill. 446, this court had occasion to discuss questions analogous with those involved in this decision. It was there said, “the subscribed stock of a corporation," as also its other property, is a trust fund, for the benefit of the general creditors of the corporation, and its governing officers can not, by agreement with a stockholder, release him from his obligation, except by fair and honest dealing for a valuable consideration,” citing with approval some of the cases cited supra. The same doctrine was declared in Zirkel v. Joliet Opera House Co. 79 Ill. 334.
It is sought to take a distinction between the cases cited and the one now before the court, and the reason assigned is, defendants do not set up a release of any liability once as*551sumed, but rest upon the terms of a contract between the corporation and the stockholders, under which there was no liability to pay beyond the amount fixed by such contract. The vice of the argument in support of this proposition, lies in the assumption the contract in this regard was valid and operative as against creditors of the corporation:—an assumption, as we have seen, that is unwarranted. An objection much like the one taken in this case, was insisted upon in Melvin v. The Lamar Ins. Co., and was regarded as untenable. In that case a large number of shares were issued to stockholders, coupled with the right, on their part, to surrender them and take back their money. It was said, “such an agreement will be disregarded, and the party be held bound to all the responsibilities of a bona fide subscriber.” So in this case. A large number of shares were issued to defendants—an amount in the aggregate nearly equal to the entire capital stock of the company—coupled with an agreement the stock should be non-assessable, and that the stockholders should only be bound to pay ten dollars on each share held by them as the sum total for which they should be liable. On the books of the corporation defendants appeared to be bona fide holders, each, of the number of shares for which he had subscribed. The allegation of the bill, admitted by the demurrer to be true, is that no officer or agent of complainant, when it became a creditor of the corporation, had any notice or knowledge of the existence of the agreement purporting to limit the liability of the stockholders. These facts bring the case within the principle of Melvin v. Lamar Ins. Co., and that case answers the objection taken in this case.
In White Mt. R. R. Co. v. Eastman, 34 N. H. 124, defendant subscribed for stock and took an agreement in writing that he might, within one year, surrender a part of the shares taken by him and be discharged. The agreement was held void as a fraud upon other subscribers. The principle sanctioned is, that every subscriber must bear his just proportion of the common burden, to which he professes to bind himself *552by the contract he holds out to the public as his contract with the corporation. Other cases, cited supra, sustain the same doctrine.
So far as the record before this court discloses, defendants appeared to all persons dealing with the corporation, to be stockholders, with no notice of any agreement their liability for shares held by them was less than what the law would impose in case of an unconditional subscription to the capital stock of a corporation. The secret agreement of the shareholders in this case must be regarded as void—certainly as to creditors of the corporation without notice—and the stockholders held to be bound to all the responsibilities of bona fide subscribers.
The judgment of the Appellate Court will be reversed, and the cause remanded for further proceedings not inconsistent with this opinion.
Judgment reversed.
Dickey, Ch. J. and Cbaig, J.: We can not concur in the foregoing opinion or decision.