advance the interests of its managers, is a modern and wicked invention. 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 been often attempted, but never successfully. The capital paid in, and promised to be paid in, is a fund which the trustees cannot squander or give away. They are bound to call in what is unpaid, and carefully to husband it when received. We are of the opinion that the alleged representation of the non-assessability of the stock held by him was quite immaterial." Again, if full effect is given to the evidence of the defendant and to his claim in this respect, it shows this, and nothing more: He became a stockholder under a certificate signed by the president and secretary that he was entitled to one hundred shares of the stock of $100 each, payable five per cent. on receipt of the certificate; five per cent. in three months; five per cent. in six months; five per cent. in nine months from date; the time or manner of the payment of the residue not being specified. Upon the face of this certificate were stamped in red ink the figures $100,' and in another place was stamped the word 'non-assessable.' This certificate he held until the insolvency of the company in 1873 was known to him. The legal effect of this instrument was to make the remaining eighty per cent. payable upon the demand of the company. We see no qualification of this result in the word non-assessable, assuming it to be incorporated into and to form a part of the contract. It is quite extravagant to allege that this word operates as a waiver of the obliga tion created by the acceptance and holding of a certificate to pay the amount due upon his shares. A promise to take shares of stock imports a promise to pay for them. The same effect results from an acceptance and holding of a certificate. At the most, the legal effect of the word in question is a stipulation against liability to further taxation or assessment after the holder shall have fulfilled his contract to pay the one hundred per cent. in the manner and at the times indicated. We cannot give to it the consequence of destroying the legal effect of the certificate. Still, again, the representations relied upon as a defense, it will be noticed, were as to the legal effect of the defendant's subscription and certificate. It is alleged that the agent represented Citing Sawyer v. Hoag, 17 Wall. (U.S.) 610; Tuckerman v. Brown, 33 N. Y. 297; Ogilvie v. Knox Ins. Co., 22 How. (U. S.) 380; Osgood v. Laytin, 3 Keyes, (N. Y.), 521; 37 How. Pr. (N. Y.) 63, aff'g 48 Barb. (N. Y.) 463; Gross Ill. Stat., p. 356, § 16. ? It was so held in Ogilvie v. Knox Ins. Co., 22 How. (U. S.) 380. 3 Citing Palmer v. Lawrence, 3 Sand., S. C. (N. Y.)161; Brigham v. Mead, 10 Allen (Mass.), 245. that by the laws of the State of Illinois, and by the charter of this company, the defendant might become a subscriber to the amount of $10,000; and, by means of a certificate to be given to him like that exhibited, he would really be liable only to the extent of one-fifth of his said subscription, and that good lawyers had given their advice to this effect. There was here no error, mistake or misrepresentation of any fact. The defendant made the subscription he intended to make, and received the certificate he had stipulated for; and, as there is no evidence to the contrary, it is to be presumed the good lawyers advised as was stated; but, in law, the defendant incurred a larger liability than he anticipated.1 IIe had received, several days before this time, a copy of the charter and by-laws of the company, and then had them in his possession. The twenty-fifth section of the by-laws was as follows: 'Every person who shall subscribe for $10,000 of stock, and pay twenty per cent. thereof, shall be constituted a director of this company, and shall continue such director so long as he shall retain of such stock an amount equal to $10,000; but such $10,000 shall not be reckoned in the election of other directors.' It was under this section and the succeeding one, authorizing the establishment of a branch in any place where such subscription was made, and by which the defendant became a director and might be president thereof, that the transaction took place. That the defendant did not read the charter and by-laws, if such were the fact, was his own fault. It will not do for a man to enter into a contract, and, when called upon to respond to its obligations, to say that he did not read it when he signed it, or did not know what it contained. If this were permitted, contracts would not be worth the paper on which they are written. But such is not the law. A contractor must stand by the words of his contract; and, if he will not read what he signs, he alone is responsible for his omission. That a misrepresentation or misunderstanding of the law will not vitiate a contract, where there is no misunderstanding of the facts, is well settled. In Fish v. Clelland,3 the principle is expressed in these words: A representation of what the law will or will not permit to be done is one on which the party to whom it is made has no right to rely; and if he does so it is his folly, and he cannot ask the law to relieve him from the consequences. The truth or falsehood of such a representation can be tested by ordinary vigilance and attention. It is an opinion in regard to 19. 1 Citing Leavitt v. Palmer, 3 N. Y. 2 Citing Jackson v. Croy, 12 Johns. (N. Y.) 427; Lies v. Stubbs, 6 Watts. (Pa.) 48; Farley v. Bryant, 32 Me. 474; Coffing v. Taylor, 16 Пl. 457; Slafyton v. Scott, 13 Ves. Jr. 427; Alvanley v. Kinnaird, 2 Mac. & G. 7; 8. c. 29 Beav. 490. 3 33 Ill. 243. The law is presumed to the law, and is always understood as such.'1 be equally within the knowledge of all parties. relieve himself from his liability by proof that he was misinformed as to the effect of his contract when he made it would be a disastrous doctrine. That a defendant, who could not by contract lawfully relieve himself from liability as a stockholder, can accomplish that result by proof that it was fraudulently represented to him that he could so relieve himself, would be strange indeed.2 The rule, that a mistake of law does not avail, prevails in equity as well as at common law. If ignorance of law was admitted as a ground of exemption, the court would be involved in questions which it were scarcely possible to solve, and which would render the administration of justice next to impossible; for in almost every case ignorance of law would be alleged, and the court would, for the purpose of determining this point, be often compelled to enter upon questions of fact insoluble and interminable.' 4 A statement that the insurance company had consulted with good lawyers, and that their opinion was as stated, should have been clear proof to the defendant that a representation of the law was a matter of opinion only." 5 1569. Distinction between the English and American Cases: The Capital Stock of a Corporation a Trust Fund for Creditors. In considering the power of corporations with reference to their capital and shares, it is necessary to note a fundamental distinction between the English and American cases. In 1824 the fertile brain of Mr. Justice Story invented the doctrine that the capital stock of a corporation is a trust fund for the payment of its creditors; and that the creditors have an equitable lien or charge upon it superior to that of the stockholders. This has become the settled doctrine of American courts. If this doctrine means anything more than that the 1 See Starr v. Bennett, 5 Hill (N. Y.), 303; Lewis v. Jones, 4 Barn. & Cress. 506; Rashdall v. Ford, L. R. 2 Eq. 750. Citing Ogilvie v. Knox Ins. Co., 22 How. (U.S.) 380. 3 Bank of U. S. v. Daniel, 12 Pet. (U. S.) 32; Hunt. v. Rousmaniere, 1 Id. 1; 8 Wheat. (U. S.) 174; Mellish ". Robertson, 25 Vt. 603; Leavitt v. Palmer, 3 Comst. (N. Y.) 19. 4 Austin's Jur., vol. II., p. 172; Kerr. 397. 5 Upton v. Tribilcock, 91 U. S. 45. 6 Wood v. Dummer, 3 Mason (U. S.), 308. Story's Eq. Jur., § 1252; Wood v. Dummer, 3 Mason (U. S.), 308; Vose v. Grant, 15 Mass. 505; Spear v. Grant, 16 Mass. 15, 19; Baker v. Atlas Bank, 9 Metc. (Mass.) 192; Mumma v. Potomac Co., 8 Pet. (U. S.) 286; Curran v. creditors of a corporation must be paid before its property can be distributed among its shareholders, then there would be no difference in this respect between the English and American decisions; for this is the rule which obtains in the winding-up of partnerships: the partnership creditors must be paid before the individual partners can divide the social assets among themselves. And, indeed, treating the shareholders as proprietors and this is the only practical juridical conception of their status-this rule is nothing more than that which the law applies to every other debtor; he cannot keep and enjoy his property leaving his debts unpaid. § 1570. Continued: American Doctrine that Directors are Trustees for Creditors. But the American cases which declare and apply the rule in question mean more than this. They mean that the directors and other corporate officers who have charge of the corporate assets are in a sense trustees of the creditors of the corporation; and some of these decisions have gone so far as to make them personally liable at the suit of creditors, for the mismanagement and waste of the corporate assets.1 § 1571. Source of the American Doctrine that the Capital Stock of a Corporation is a Trust Fund, etc. Although the Arkansas, 15 How. (U. S.) 304; Tarbell v. Page, 24 Ill. 46; Ogilvie v. Knox Ins. Co., 22 How. (U. S.) 387; Payson v. Stoever, 2 Dill. (U. S.) 431; Sawyer v. Hoag, 17 Wall. (U. S.) 610; Burke v. Smith, 16 Wall. (U. S.) 390; New Albany v. Burke, 11 Wall. (U. S.) 96; Hightower v. Thornton, 8 Ga. 486; s. c. 52 Am. Dec. 412; Robinson v. Carey, 8 Ga. 530; Reid v. Eatonton Man. Co., 4 Ga. 102; s. c. 2 Am. Rep. 563; Slee v. Bloom, 19 Johns. (N. Y.) 456; s. c. 10 Am. Dec. 273; Briggs v. Penniman, 8 Cow. (N. Y.) 387, 395; s. c. 18 Am. Dec. 454; Mann v. Pentz, 3 N. Y. 422; Hurd v. Tallman, 60 Barb. (N. Y.) 272; Bank of St. Marys v. Powers, 25 Ala. 612; Carey v. Woodward, 53 Ala. 375; Smith v. Huckabee, 53 Ala. 195; Pas chall v. Whitsett, 11 Ala. 472; Allen v. 1 Schley v. Dixon, 24 Ga. 273; cases cited by Mr. Justice Story in the leading case on this subject would not so indicate, it may be conjectured that the American doctrine on this subject was adapted from the English rule that the property of a charitable corporation is a trust fund, and that the court of chancery has jurisdiction over its custodians as trustees.2 1572. This Doctrine not Found in Modern English Books. We do not find in the modern English books any distinct trace of such a doctrine. On the contrary, the doctrine. that the directors of a corporation are trustees for its creditors has been distinctly denied in a late case in the English Court of Appeal. Moreover, the primary object of the English winding 1 Wood v. Dummer, 3 Mason (U. S.), 308. 2 See Green's Brice's Ultra Vires, 2d ed. 50, and American notes. Poole's Case, 9 Ch. Div. 322, 328. In this case three directors of a company, who had not been called upon to pay anything upon their shares, made themselves liable upon their personal guaranty for money advanced to the company by a bank. The company got into difficulties, and the bank recovered a judgment against the directors on their guaranty. The directors then passed a resolution that, in order to reduce the balance due to the bank in question, "it is recommended that the directors do pay up the amount of their shares," etc., "as contemplated in the company's prospectus." The amounts thus due were then paid in and were immediately paid over to the banking company. Two days afterwards the company was ordered to be wound up. Vice-Chancellor Bacon held that this transaction could not stand. It was the duty of the directors to retain the assets of the company and to distribute them according to law, and not to give any one creditor a preference over another; and any contriv ance by which, in contemplation of bankruptcy or winding up, the assets were intercepted in favor of one creditor to the exclusion of another was unlawful and invalid under the Company's Act, 1862, § 164. But this decision was reversed in the court of Appeal (Jessel, M. R., James and Bramwell, L. JJ.). In giving the judgment of this court, Jessel, M. R., said: "The vice-chancellor decided the question upon this ground, that the directors were trustees of all their powers. So, no doubt, they were. But it is further said that they exercised their powers in breach of trust and for their own benefit, and, therefore, that the act which they did was nugatory. But it appears to me that the question is, for whom were they trustees? It does not appear that the vice-chancellor considered this point; but it makes all the difference whether they were trustees for the persons who were injured by what had been done in this case, namely, the other creditors of the company. has always been held that the directors are trustees for the shareholders, that is, for the company. They are the managing partners of the company, and if they abuse their powers, which they It |