after stating the case: It will not be necessary to state the testimony introduced to support the second of the findings of fact, as it appears above, or the twenty-fourth, as it appears in the referee’s report, the judge having held that there was evidence sufficient to warrant the finding, in which ruling we concur, and disapproved the finding upon the ground only that the testimony in support of it is incompetent. The evidence is substantially like the facts found by the referee, and the question is whether it was competent to hear the evidence and consider those facts in coming to a decision of the case. We think it was, as the evidence had no tendency to contradict, vary, or alter any writing, nor to show that one contract of subscription was being substituted for another, but simply proved that the parties had adopted a convenient way of paying for the stock which was subscribed by R. A. Mills, T. W. Grimes, T. A. Butner, and S. F. Yance, amounting in all to 144 shares, or $3,600, the par value of each share being $25.
There was great stress laid in the argument upon the erroneous supposition that there had been two subscriptions of stock, one by the parties who signed the list and the other by the four subscribers above named, whereas there was only one subscription by the incorporators, and the transaction in regard to the list was merely an indirect method adopted by the parties for the payment of the latter subscription; that is, the one by the incorporators. The company, nevertheless, received payment pro tanto for the stock they subscribed, and for their part of the balance the court has given a judgment against the appellants. This judgment, though, is too large, as they have not received proper credit out of the amount that was paid in under the preliminary agreement between the shareholders. The company, and consequently the creditors, in this way having received a payment once, or what is equivalent *507to it, on tbe capital stock, bas no right to demand another or a double payment, but is entitled only to judgment for any balance due after giving proper credit for the payments. The money, so far as paid in cash, has gone into the treasury of the company and become a part of its assets for the payment of its obligations. If it has been squandered or misapplied, the creditors have no right to ask the stockholders, as such, to replace it for their use and benefit, but must look for indemnity to those who were guilty of the misappropriation of it. The ruling of the court was based upon a misapprehension of the true legal character of the transaction. There were not two subscriptions to the stock, but only one, and the list which was signed by the parties whose names appear thereon was intended to be nothing more than the means or instrumentality by which to raise the mpney to pay for the stock taken by the four incorporators, and the money received on that list has been so paid to the company. This was the only agreement, and the whole thereof, as found by the referee, for he states that “The Grimes-Mills Drug Company accepted the parties whose names appear on the subscription agreement as subscribers to its capital stock of one hundred and forty-four shares [italics ours], and received the money paid by them as payments on this capital stock, and issued certificates as hereinbefore set forth, in evidence thereof.JJ The company also attempted to collect from those whose names were on this list and who had not paid, the money due by them, to be applied to the payment of the balance owing for the 144 shares. The last statement is the substance and effect of the finding, as the referee had already found that there was only one subscription, and that was the one made by the four incorporators for the 144 shares, and that the money collected on the list was to be applied to the payment of that stock, and no other. The case of Gilmore v. Smathers, 167 N. C., 440, is an authority for the ruling of the referee, though this ease is not, perhaps, as clear in its facts .bearing upon the subject of payment as was that .one; but it is clear enough. In the Gilmore case we recognized fully the principles underlying the trust fund doctrine, as thus stated:
1. The 'capital stock, including unpaid subscriptions therefor, of a corporation constitutes a trust fund for the benefit of creditors of the corporation, and the creditors have a right to examine into the affairs of the corporation to ascertain if the subscriptions of stock, have been paid, and how.
2. Each subscriber for stock in a corporation thereby becomes liable for the amount of stock subscribed by him, and he can only be discharged by paying money or money’s worth in the manner provided by the charter and by-laws.
3. A subscriber cannot discharge his liability as against creditors for his subscription by substituting shares paid up by another subscriber.
*5084. Parol evidence will not be received to vary tbe terms of subscription or to sbow a discharge from liability on tbe part of a stockholder in any other way than that prescribed by tbe charter and by-laws.
Tbe following cases support this doctrine: Foundry Co. v. Killian, 99 N. C., 501; Sawyer v. Hoag, 17 Wall. (U. S.), 620; Burge v. Smith, 16 Wall. (U. S.), 390; New Albany v. Burke, 11 Wall. (U. S.) 96, where it was substantially held that though it be a doctrine of modern date, it is now well established that the capital stock of a corporation, especially its unpaid subscriptions, is a trust fund to be secured and administered for the benefit of the general creditors of the corporation, subject, of course, to the claims of lienors entitled to priority. We said in Gilmore v. Smothers: “If we consider the rapid development of corporations as instrumentalities of the commercial and business world in the last few years, with the corresponding necessity of adapting legal principles to the new and varying exigencies of this business, it is no solid objection to such a principle, that it is modern, for the occasion for it could not sooner have arisen. The governing officers of a corporation cannot, by agreement or other transaction with the stockholders, release the latter from their obligation to pay, to the prejudice of creditors, except by fair and honest dealing and for a valuable consideration. Such conduct is characterized as a fraud upon the public, who were expected to deal with them. This equitable principle has been as firmly rooted in our jurisprudence as any we now recall, and with good reason, as it is eminently fair and just,” citing, among other cases, Heggie v. B. and L. Assn., 107 N. C., 581; Hill v. Lumber Co., 113 N. C., 176; Cotton Mills v. Burns, 114 N. C., 355; Bank v. Cotton Mills, 115 N. C., 513; and McIver v. Hardware Co., 144 N. C., 484. We adhere fully to that equitable doctrine; but it in no way answers the appellants’ contentions, or interferes with the granting of the relief they demand in this case. They are as much favored by equity in the claim they now prefer as a creditor would be, whose right is protected by that doctrine. They are both founded upon the same just and equitable principles. This is no attempt to substitute one person for another who has subscribed for corporate stock, nor to vary the terms of a written contract, nor to show a discharge in any other way than by payment of money or money’s worth; nor is there any denial of a creditor’s right, under the trust-fund doctrine, to inquire whether the stock subscriptions have been paid up, and how they were paid. They have exercised this right already, and the Court simply gives them that which is theirs, and requires them to turn loose that which is not. That carries this beneficent doctrine to its fullest extent in favor of the creditors. We will return to this subject when considering another exception of the appellants which we will overrule under the same doctrine. As said in Gilmore v. Smathers, supra, and the same *509is relevant bere: “While we fully recognize the doctrine as thus established, and now relied on by the plaintiff (trustee), we do not perceive its application to the finding of facts in this case, for here there was no unpaid subscription. The transaction was a simple one as described by the Court in its findings.” And again: “When the subscriptions were thus validly made, certificates issued and the stock paid for, these stockholders were discharged from any further liability to the company and its creditors on their subscriptions, because they had done all that they had contracted to do. If a person has subscribed for stock, he is liable to the corporation and its creditors upon his subscription, and he cannot be relieved of this liability until he has paid for the stock taken by him.” The referee in this case has found that there were 144 shares of stock taken by the incorporators, and this was the total subscription, and also that the company accepted the tentative list, and the money collected thereon, in payment of the said subscriptions for 144 shares. Will the law permit the company thus to act, or to receive this money for stock which they issued and the parties accepted upon the faith of having paid for it, and then allow the creditors, through the company, to collect for it again? This would be unfair and unjust if not a fraud, against which equity would steadily set its face and turn a deaf ear'to the creditor who should ask that it be done. The trust-fund doctrine protects the creditor, but when he asks for the equity which it is ready to give he must also do equity. We close this reference to the Gilmore case with its concluding words: “The case needs no further elaboration. It depends more upon a clear understanding of the facts, which have been so well stated, than upon the application of any special principle of law, which is not perfectly familiar to all of us. Defendants admit their liability for the 20 shares not paid for, or $200.”
It will be found that the discussion in that case answers fully the position taken here. But this very question was in 1894 before one of the highest courts of England in the Chancery Division, presided over by Lord Chancellor HarscheTl, Lord Esher, Master of the Rolls, and the lord justices of the Court of Appeal, three of the latter delivering-opinions, upon facts closely resembling those found by the referee in this case. In re Glory Paper Mills Co., sometimes called Dunster s case, reported in L. R. Oh. Div. (1914) at page 473. It appeared there that T. M. Dunster signed for 100 preferred shares of the Glory Paper Mills Company in his own name. He afterwards applied, in the name of his firm of Dunster & Wakefield, for 100 preferred shares, the par value of each share being £10, and they were allotted to the firm. The company failed in business, and was placed in the hands of a receiver or liquidator, who placed Dunster, individually, on the list of contributors for 100 shares. Dunster petitioned to.have his individual name *510removed from the list. The proof showed that the parties intended to make but one subscription, the signing of Dunster in his own name, and for the firm being but one transaction, though, in form, two separate applications by him. These facts were well known to the company and its stockholders and officials, though not to the creditors. The justice (Vaughan Williams) denied the petition below, but on appeal he was reversed, upon the ground that the Court could look into the transaction and ascertain its real nature, and that, in fact and in law, it was but one transaction and one subscription, the firm being the only subscriber. Lord Justice Lindley said: “I think that the learned judge has not come to a right conclusion in this case. The real question is whether there ivas one agreement to take shares, or two. At the first blush it looked as if there were two agreements; but it is plain from the evidence that the signing of the memorandum by Dunster was in performance of the arrangement that his firm should be the agents of the company, and that his subsequent application on behalf of the firm for 100 shares was xDart of the same arrangement. The documents might have supported two agreements, but the evidence is all in favor of there being only one. How, then, does the matter stand in point of law? Dunster was bound to take 100 shares, and he asked that they should be put in the name of himself and his partner. Why should he be fixed with 200 shares? None of the parties understood that there were to be two agreements; and that is the true solution of this case. . . . Was there one agreement to take 100 shares, or was there an agreement to take 200 shares? My opinion is that there was only one agreement for 100 shares, which Mr. Dunster has taken and which are fully paid up. Consequently Mr. Dunster’s name must be removed from the list in respect of the additional 100 shares.” Lord Juslice Lopes concurred as follows: “I am of the same opinion. I agree in the last observation of my brother Lindley that this is really a question of fact. What was, in point of fact, the true state of the case?” And then, referring to the last subscription in the name of the firm, he added: “It is said that this was a separate and independent agreement from the former, and that Dunster ought to be on the register for 100 shares and the firm on the register for another 100 shares. In my opinion, that is wrong. There were only 100 shares taken. What is afterwards done is simply the performance of the original contract. There was no intention from first to last to take 200 shares. The true meaning of the transaction was that 100 shares were to be taken, and no more.” Lord Justice Davey said: “In my opinion, we should be doing a piece of injustice if we affirmed this order.- We should be imposing a liability on this gentleman which neither he nor any other party to the transaction ever intended or dreamt of his entering into. If we are to believe the statements *511made on oatb, not only by Mr. Dunster biniself but by several other witnesses, not one of whom has been cross-examined, there can be no manner of question that there was one contract, and one contract alone, and that when Dunster signed the memorandum- of association he did so with the intention of carrying out that informal arrangement — informal because it was not binding at that time on the company — that his firm was to take 100 shares in this company.” He then says that the form of the transaction was used “as a piece of machinery” for carrying into effect the real purpose, and that there was nothing in the least inconsistent with Dunster having signed the memorandum, or with his firm having taken the share's, in pursuance of an arrangement with the promoters, before the incorporation, that the firm should be the only shareholder. He then says: “In my opinion, it would be an outrage to hold that there were two sets of 100 shares in this case, and we should be acting contrary to the intention of everybody connected with the transaction. Nor do I think that the documents which are relied on by the respondents, when properly understood, are in the least degree inconsistent with this. ... I -am, therefore, of opinion that there was only one contract in this case, and that was a contract by Mr. Dunster to take 100 shares. It is proved that he entered into that contract on behalf of his firm just as if he had signed the memorandum on behalf of himself and Wakefield, and it is, to my mind, proved that the application in the name of Dunster & Wakefield for 100 shares was only made in pursuance of and for the purpose of carrying out that obligation.” The last one of the justices employs very strong language, which we need not adopt or indorse, and which doubtless was merely employed to express the clear and intense conviction that there was but one subscription, and, therefore, only one obligation, and that it would, therefore, have contravened the plain rules of equity if Dunster had been required to pay for the stock a second time. If there was but one subscription, nobody will deny that a second payment should not have been exacted. There is no such denial in this case, so that the whole matter resolves itself into the single question, Was there one subscription or two? and we answer simply that, in our opinion, there was only one. The principle governing the Dunster case, Gilmore v. Smathers, and this case, is the same, though the special facts in the first named case more nearly resemble those in Gilmore v. Smathers than they do those in this record. However, they are substantially like those we have here, but if there is any difference it is in favor of the appellants.
The other exceptions are not tenable, and in respect to them the ruling of the court is affirmed. S. F. Vance has been allowed to show a payment fro tanto for his stock, but he cannot show that he made no subscription for himself, except for eight shares, or $200, and is *512not liable for tbe balance. Tliis would contradict bis written contract to take thirty-six shares, and falls within the principle thus stated in Boushall v. Stronach.
1. A written subscription to the stock of a corporation, supported by a valuable consideration, is within the principle that a written contract cannot be impaired or changed by parol.
2. When presons actually subscribe a stated sum for stock of a corporation, the subscription of one may be regarded as a proper consideration for that of the other.
3. When work has been done or expenditures made or debts incurred on the faith of a subscription to the stock of a corporation, it then becomes a binding obligation.
4. When one assumes a pecuniary obligation by writing, a contemporaneous agreement that he shall not be required to pay varies the contract and is not enforcible.
5. The law requires good faith and fair dealing between stockholders, and will not enforce a secret agreement which is for the benefit or to the disadvantage of other stockholders and creditors.
6. The law will not allow one to give or lend his good name to a promotor to assist him in getting other people to take stock, and then relieve him from liability upon an agreement that he would not be required to pay.
We said in Boushall v. Myatt, 167 N. C., 328: “A subscriber may be released in whole or in part from his contract by'the corporation with the consent of all the other shareholders; but he cannot withdraw and surrender his shares without the consent of the corporation; nor can he do so with the consent of the corporation unless the other subscribers consent; nor can he do so with the consent both of the corporation and the other subscribers if the amount due from -him is required to pay corporate debts.”
' It is clear that the evidence offered by S. F. Yance was incompetent to show that while he appeared to be a holder of 36 shares of stock, the subscription as to 34 shares was only apparent and not real, because he had a secret agreement with the’other incorporators, but not all the other stockholders, or the creditors, that the cash paid in should be first applied to his subscription, which would leave the other in-corporators more largely indebted on their stock and require other interested parties, including creditors, to rely on this indebtedness. He cannot thus change his contract without their consent, by practically substituting the personal liability of this associates for his own. He must stand by his contract, unless the collateral agreement received the sanction of others interested and who may be prejudiced by it. We would not only vary the contract, but substitute one debtor for another, if we enforced the alleged parol agreement, and this is for*513bidden to be done. Those on the preparatory list have an interest in this question, as,stockholders, and neither they nor the creditors have consented to the change. The doctrine is well expressed in 1 Thompson on Corporations (2 Ed.), secs. 567-569 : “Subscriptions to the capii-tal stock of a corporation are governed by the same rule as other writings, in that parol evidence of a special agreement made prior to or concurrently with the subscription is not admissible to vary or in any manner alter the terms or effect of the subscription; nor can parol evidence be introduced to show that the subscription was made upon a condition not expressed in the instrument. Such secret and undisclosed -parol agreements on condition not expressed are regarded as a fraud upon other subscribers.” The following authorities support the rule: 1 Cook on Corporations (6 Ed.), sec. 137; Upton v. Triblecock, 91 U. S., 45; Cartwright v. Dickinson, 88 Tenn., 476; McNulta v. Com. Belt Bank, 164 Ill., 427; Burke v. Smith, 16 Wall., 390. One subscriber to stock cannot be substituted for another except with the full consent of all interested parties.
The apellants seek to set off debts of the corporation to them against their liability for their stock subscriptions. This cannot be done. It has been held by a court of high authority that capital stock or shares, especially the unpaid subscriptions, constitute a trust fund for the benefit of the general treasury of a corporation. A stockholder indebted to an insolvent corporation for unpaid shares cannot, therefore, set off against this trust fund for creditors a debt due him by the corporation. The fund arising from such unpaid shares must be equally divided among all the creditors. The relations of a stockholder to the corporation and to the public who deal with the latter are such as to require good faith and fair dealing in every transaction between him and the corporation of which he is part owner and controller, which may injuriously affect the rights of creditors or of the general public, and a rigid scrutiny will be made into all such transactions in the interest of creditors. Sawyer v. Hoag, 17 Wall., 610, 624 (21 L. Ed., pp. 731, 732). And the same Court afterwards said: “The directors of a company are incompetent to release an original subscriber to its capital stock, or to make any arrangement with him by which the company, ■ its creditors, or the State shall lose all the benefits of his subscription. Conditions attached to subscriptions which, if valid, lessen the capital of the company, are a fraud upon the grantor of the franchise and upon those who may become creditors of the corporation, and upon conditional stockholders. The principle is not applicable, to a condition allowing a transfer of the stock originally subscribed to another party on his subscribing, where no capital is lost, *514by tbe transfer. <. In sueb ease, if tbe transfer is made, tbe original ■subscribers are not liable to creditors for tbe amount of tbe stock tbus transferred.” Putnam v. R. R., 16 Wall., 390, 402 (21 L. Ed. 361). A shareholder cannot set off against bis liability for a subscription to stock a debt due him by tbe corporation, tbe creditors being entitled to' an equal distribution among them of tbe assets, and tbe allowance of such a set-off would violate this rule of equality. Sawyer v. Hoag, supra; Handley v. Stutz, 139 U. S., 417; Cook on Stock and Stockholders (7 Ed.), sec. 193.
Tbe claim of a credit by T. A. Butner as to tbe amount paid by him on tbe Zimmerman stock cannot be sustained. He cannot tbus bind other interested parties by such a transaction without their consent. Tbe money was paid, not on bis subscription, but on that of Zimmerman. Tbe principles already stated fully cover this exception.
Tbe reference in Gilmore v. Smathers, supra, to tbe excessive subscription of stock did not apply to its legal effect with regard to creditors, or nonassenting stockholders, but was merely made for tbe purpose, as appears, of aiding tbe view then taken by tbe Court, that a payment was intended, and not two subscriptions, as there would hardly be a subseriptiqn in excess of tbe limit already fixed, unless it bad been authorized. An apparent subscription above tbe normal limit would, therefore, be a circumstance tending to show that it was not really one and not intended as a new subscription, or as an addition to tbe stock, but stood for something else and represented one already made.
Tbe application for a jury to try tbe issue framed by S. F. Vance is disallowed. He did not except to tbe reference, or otherwise save bis right to a jury. Driller Co. v. Worth, 117 N. C., 515; Ogden v. Land Co., 146 N. C., 443.
There were numerous assignments of error by S. E. Vance and T. A. Butner, many of them substantially alike. We have stated tbe general principles which govern them, and they were all overruled, except tbe one to tbe refusal of tbe court to allow, as a payment on tbe subscription of 144 shares of stock ($3,600), tbe amount actually paid in on tbe list, as found by tbe referee, which refusal was based on tbe alleged incompetency of tbe evidence. This assignment is sustained, and tbe judgment will be modified accordingly, tbe costs of this Court to be taxed one-balf against tbe plaintiff and tbe other half against tbe defendants jointly.
Error.