Case Name: The Ridgefield & New York Railroad Company vs. James H. Brush
Court: Connecticut Supreme Court
Jurisdiction: Connecticut
Decision Date: 1875-10
Citations: 43 Conn. 86
Docket Number: 
Parties: The Ridgefield & New York Railroad Company vs. James H. Brush.
Judges: 
Reporter: Connecticut Reports
Volume: 43
Pages: 86–108

Head Matter:
The Ridgefield & New York Railroad Company vs. James H. Brush.
The charter of a railroad provided that the company might he organized and proceed to construct the road when $200,000 had been subscrlb d, and that the corporators should open hooks for subserip'ions under such regulations as they might think proper. The corporators opened the hooks, with a form of subscription, in which it was provided that not over two per cent, should be called in until the whole amount estimated to be necessary for the cons'ruction of the road had been subscribed. The shares were fifty dollars each. The defendant subscribed for ten shares. The estimated expense of completing the road was $535,000 and less than $300,000 was subscribed. The company was organized and directors appointed. Some time after, M §• Co. signed their names upon the book as subscribers for six thousand shares, making the subscription complete as to amount. Their subscription was in the same form with the others, but there was a private agreement with the directors that they should have the contract for building the road, and that they should pay for the stock half in cash and half in work and materials. After the subscription was made a contract was drawn, and signed by MS? Co. and the directors, by which M $• Co. were to construct the road according to the estimates and receive payment half in cash and half in stock. They were not at this time able to pay for the stock in cash, and this was known to the directors, but they were regarded as able to perform their contract for the construction of the road, and it was confidently expected by the directors that the subscription would be paid in full in cash and work in the proportion agreed. In fact however M $• Co. were not able to perform their,contract for building the road and performed but a small part of it. In a suit brought by the railroad company against the defendant to collect his subscription, in which the defence was that the whole sum required had not been legally subscribed, it was held that the subscription of M Co., as a contract binding upon them, could not be affected by the contemporaneous parol agreement as to the mode of paying 1 for the stock, nor by the subsequent written contract for building the road,, and was therefore a valid subscription, in the absence of actual fraud upon the other stockholders, which was not found, and of legal fraud, an inference of which the facts would not warrant. [Two Judges dissenting.]
It appeared that some time after the subscription of M (o. was made, an installment of fifteen per cent, had been called in by the directors and had been paid by the defendant. It however appeared that, although he had learned of the arrangement with J/$- Co., he believed at the time, upon the representation of one of the directors, that they were able to pay for their stock and that the company had a guaranty for their doing so. Held that the defendant was not to be regarded as having waived his light to object to the invalidity of their subscription, and that he was not estopped from denying his obligation to pay further installments upon his subscription by reason of the fact that other subscribers were led by his acts to pay their installments.
The charter authorized the company to organize and proceed to construct the road when $20D,000 was subscribed. The corporators made the subscriptions conditional upon the whole amount required for the completion of the road being subscribed. Held that the condition was not inoperative as being repugnant to the provision of the charter.
And held that after the company was organized and the directors appointed all the subscriptions thereafter taken were to be regarded as received by the directors and not by the corporators, and that therefore any private agreement made with the directors was to be regarded as made with persons whose acts affected the corporation.
Assumpsit, upon a subscription to the stock of the plaintiff corporation; brought to the Court of Common Pleas of Pair-field County and tried to the court, upon the general issue, before Be Forest, J. The court found the following facts: The plaintiffs were incorporated as a railroad company at the May session of the General Assembly in the year 1867, with a capital of $450,000, to be increased at the pleasure of the corporation to $750,000, the same to be divided into shares of fifty dollars each. The 3d section of the charter was as follows:
“The persons named in the first section hereof, or a majority of them, shall open books to receive subscriptions to the capital stock of said corporation at such a time or times and place or places as they or a majority of them may appoint, and shall give such notice of the times and places of opening said books as they shall deem reasonable, and shall receive said subscriptions under such regulations as they may adopt for such purpose.”
The 4th section was as follows:
“ The persons named in the first section hereof, or a major ity of thorn, are hereby authorized to call the first meeting of the stockholders of said corporation, in such way and at such time and place as they may appoint, whenever two hundred thousand dollars or more of the capital stock of said corporation shall have been subscribed for, to choose directors and perfect the organization of said corporation; and in all meetings of the stockholders of said corporation each share shall entitle the holder thereof to one vote, which vote may be given by said stockholder in person or by lawful proxy; and whenever said corporation shall have been so organized, it may proceed to commence the construction of the railroad hereinafter specified.”
The corporators, under the authority of the 4th section of the charter, met on the 29th day of July, 1867, and adopted the following resolution with regard to the form and conditions of the subscriptions to be taken to the stock of the company, which resolution and form of subscription were entered in a book prepared and kept for such subscriptions, and all the subscriptions taken were made upon the same book and underneath the form so prepared.
“ Resolution adopted by the board of corporators of The Ridgefield and New York Railroad Company, at a lawful meeting holden by them at Ridgefield, on the 29tli day of July,1867:
“ Resolved, That no assessment shall be laid upon the stock subscribed of more than three per cent, until the whole amount of stock shall have been subscribed, estimated to be necessary for the completion of the road from Ridgefield to such point as shall be decided on by the company, and no assessment shall be made until $200,000 shall have been subscribed for the Stamford route, or $350,000 for the Greenwich route.
“The undersigned hereby agree to take the number of shares of the capital stock of The Ridgefield and New York Railroad Company, set to our respective names, subject however to, and payable on, the terms of the foregoing resolution, and only on condition that the southern point of said road shall' terminate in the town of Greenwich or Port Chester. Dated Ridgefield, August 9th, 1867.”
The defendant subscribed his name to this form of subscription, taking ten shares of the stock.
At the time the defendant subscribed less than $300,000 of the stock had been subscribed for, and the subscription remained for some time incomplete. The expense of the entire construction of the road, as estimated by the engineers of the company, was $534,973.
Sooñ after the corporators called the first meeting of the stockholders, at which the company was organized and elected a board of directors.
Afterwards, at a meeting of the directors, held on the 31st day of March, 1870, a firm by the name of Lawrence W. Myers & Co., consisting of L. W. Myers, A. D. Myers, and E. N. Myers, signed their names to the plaintiffs’ subscription list for six thousand shares of stock, making the total amount of stock subscribed for enough to cover the estimated expense. "Without the subscription of Myers & Co., a sufficient amount of stock to cover the estimated expense has never been subscribed for.
The subscription of Myers & Co., as it stood on the'plaintiffs’ subscription books, was apparently upon the same terms as the defendant’s subscription, and there was nothing upon the subscription books to indicate that Myers & Co.’s stock so subscribed for by them was to be paid for in work or materials, or in any other way than in cash. By a private parol arrangement, however, between the directors of the railroad company and Myers & Co., it was agreed before the subscription was made that Myers & Co. should have the contract for constructing the road, and that only fifty per cent, of the stock so subscribed for was to be paid for in cash, and that the remainder of the price was to be paid in the work and labor and materials furnished by Myers & Co. in performing their contract and building the road; and their subscription was made pursuant to this understanding and agreement. It was well known to the directors at the time the subscription was made that Myers & Co. had not the pecuniary ability to pay for the stock in cash beyond the fifty per cent, thereof, and it was not by them expected that they would so pay for it, but they did in good faith expect that the subscription would be fully paid in work and materials and in cash, in the proportion .above mentioned.
On the 4th day of April, 1870, a written agreement was executed by Myers & Co. on the one part, and by the president and secretary of the railroad company on the other, under which Myers & Co. were to construct the road for the sum estimated as the cost of its construction, the part of which agreement important to the present case is as follows:
“ Payments to be made as stated herein monthly, on the engineer’s estimate, at the village of Portchester, New York. It is further mutually agreed, by and between the parties hereto, that said parties of the first part shall receive in payment for all work done under this contract, fifty per cent, in United States currency, and fifty per cent, in the capital stock of the said Ridgefield & New York Railroad Company at par, and no assessments shall be laid for cash on the six thousand shares to the capital stock subscribed for this day by the first party hereto. But said stock (or certificate therefor) shall be issued to said first party for payment of the work as hereinbefore described.’
The parol agreement between Myers & Co. and the directors, which existed at the time of Myers & Co.’s subscription, and the provisions of the contract afterwards executed pursuant to the agreement, were unauthorized by the other stockholders and unknown to them, and the defendant had no knowledge of them at the time the subscription of Myers & Co. was made and the contract for the construction of the road entered into.
The first assessment upon the defendant upon his subscription was paid May 27th, 1870, under the following circumstances :—The defendant was called upon by Henry Keeler, one of the directors, who was collecting assessments, being-authorized by power of attorney from the treasurer so to do, and who had full knowledge of the circumstances under which the subscription of Myers- & Co. was made, and of the provisions of the contract subsequently made by the directors with them, for fifteen per cent, of the stock subscribed for by him, being the amount of the first assessment made upon the stock. The defendant, who had heard some rumors concerning the subscription of Myers & Co., but who had received and been able to obtain no definite information in relation to it, stated to Keeler that he had heard that one very large subscription, that of Myers & Co., was by an irresponsible party, and that it was not a subscription in accordance with the contract which he had made in his subscription; that he had no great objection to the directors stretching a link, provided it was their bond fide intention to build the road, but that he had heard that Myers & Co. could not respond if called upon to pay for their stock, and that it was rumored that a part of their subscription was payable in work and materials. Upon this Keeler stated to the defendant that it was true that a part of their subscription was payable in work and materials, but he further stated, and assured the defendant, that the matter was all right; that the directors had no intention of stretching their powers; that Myers & Co. could respond if called upon to pay for their stock; that L. W. Myers was worth a considerable amount, and that the railroad company had a guarantee that he would respond. The defendant thereupon said that, since he gave him such assurances, he would pay that assessment, but that if his representations turned out incorrect he should pay no further assessment. And the defendant then, and after the conversation above detailed, relying upon the assurances thus given him by Keeler, gave his check for the amount of said assessment of fifteen per cent., which check was paid upon presentation.
Myers & Co. were never in fact able to pay for their stock in cash, or to perform their contract for building the road, and they never have in any manner paid for the stock, and are insolvent and wholly unable to carry out their contract for building the road or in any other manner to pay for their stock, or any part thereof, except that they were able to, and did in fact, perform in part their contract by grading the road to a considerable extent, and paid by check the assessment upon their stock in part, but there was no evidence to show whether the check was paid or not. And the railroad company had no guarantees that Myers & Co. could perform their contract or pay for their stock, except that they were recommended to the directors of the company by President Lyman of the Air Line Railroad, and by Peter C. Corning ; and L. W. Myers himself, at the time he agreed to take the stock, assured the dirctors that he had $30,000 in cash and had friends to back him.
When the defendant was called upon by the collector for the second assessment he declined to pay the same, and ever since has uniformly refused payment of any further sum upon his subscription.
Upon the foregoing facts the plaintiffs claimed as matter of law:—
1. That the defendant’s subscription must be regarded as unconditional, because the charter of the railroad company does not require that subscriptions for the stock of the company should be conditional, and therefore that the company and all the stockholders have a right to treat all subscriptions as though they were unconditional.
2. That if the defendant’s subscription is to be regarded as upon condition that enough stock should be subscribed for to cover the estimated expense of the road before an assessment should be made, yet said conditions have been fulfilled, and the subscription of Myers & Co. was such a subscription as was contemplated in the condition.
3. That if the defendant’s subscription was conditional, and the condition thereof has never been performed, yet the defendant has waived his right to refuse payment for his stock on the ground that the condition has not been performed, by paying the assessment of fifteen per cent., under the circumstances above detailed.
But the court ruled against these claims of the plaintiffs and decided that the defendant’s subscription must be considered as conditional, and that the subscription of Myers & Co. was not such a subscription as was contemplated by the condition, and that there had been no waiver by the defendant.
Tiie court having rendered judgment for the defendant, the plaintiffs moved for a new trial for error in the above rulings of the court.
J. H. Olmstead, in support of the motion.
0. Cf. Child, contra.
The case was argued by the same counsel at the January Term, 1875, and by order of the court was re argued at the present term. It was very ably and exhaustively argued on both sides, but as the questions involved in the case are so fully discussed in the prevailing and dissenting opinions of the court, the briefs of counsel are omitted.

Opinion:
Carpenter, J.
The defendant subscribed for ten shares of the capital stock of the plaintiff corporation. He paid an assessment thereon of fifteen per cent., and the balance having been regularly called for, he refused payment, and this action is brought for the recovery thereof.
The charter provides that certain corporators therein named shall open the subscription books under such regulations as they may deem proper, that the company may be organized whenever $200,000 of the stock shall have been subscribed for, and that the company may thereupon proceed to commence the construction of the railroad.
In July, 1867, the corporators met and opened the subscription books under the following regulations:
" Resolved that no assessment shall be laid upon the stock subscribed of more than two per cent, until the whole amount of stock shall have been subscribed, estimated to be necessary for the completion of the road from Ridgefield to such point as shall be decided upon by the company, and no assessment shall be made until $200,000 shall have been subscribed for the Stamford route, or $350,000 for the Greenwich route. We the undersigned hereby agree to take the number of shares of the capital stock of the Ridgefield & New York Railroad Company set to our respective names, subject however to, and payable only on, the terms of the foregoing resolution, and only on condition that the southern point of said road shall terminate in the town of Greenwich or Port Chester. Dated at Ridgefield August 9th, 1867. Shares fifty dollars each according to the charter."
The estimated expense for the completion of the road was $534,973. Subscriptions were obtained for an amount less than $300,000.
In April, 1870, L. Myers & Co. signed their names to the subscription list for six thousand shares of the stock, making the total amount subscribed enough to cover said estimated expense. Without their subscription it was insufficient for that purpose.
Myers & Co. subscribed apparently upon the same terms and conditions as the other stockholders, and all the subscriptions were payable in cash.
By a secret parol arrangement between Myers '& Co. and the directors it was agreed, before Myers & Co. subscribed, that they were to have the contract for the construction of the road, and that only fifty per cent, of their stock was to be paid for in cash, and the remainder was to be paid for in labor and materials in building the road, and the subscription was made pursuant to this arrangement.
After the subscription was made a contract was made and executed between the company and Myers & Co., the material parts of which are as follows:—"Payments to be made as stated herein monthly, on the engineer's estimate, at the village of Port Chester, New York. It is further mutually agreed by and between the parties hereto, that said parties of the first part shall receive in payment for all work done under this contract fifty per cent in United States currency, and fifty per cent, in the capital stock of the said Ridgefield & New York Railroad Company at par, and no assessments shall be laid for cash on the six thousand shares to the capital stock subscribed for this day by the first party hereto. But said stock (or certificate therefor) shall be issued to said parties of the first part for payment of the work as hereinbefore described."
Before considering the main question in the case we will briefly notice some questions of minor importance.
1. The plaintiffs insist that the provision in the charter allowing the company to organize, &c., whenever $200,000 or more shall have been subscribed, is inconsistent with the regulation adopted by the corporators, and therefore that the subscriptions must be regarded as made under the charter, and that the condition contained in the subscription is inoperative. If this be so, it follows that, inasmuch as more than $200,000 were subscribed without the subscription of Myers & Co., the subscription by the defendant is valid without reference to the disputed stock. But we do not think that this is so. The resolution adopted by the corporators, although it imposed a condition which is not in the charter, nevertheless is not repugnant to the charter; violates none of its provisions, and does not in any sense contravene any principle of law or of public policy. It is simply a declaration in the contract, to which all the subscribers are parties, and therefore it amounts to an agreement that the corporation will not avail itself of the privilege of commencing the construction of the road until all the necessary funds to complete it are subscribed. Each subscriber agreed to contribute of his funds to the prosecution of this enterprise upon the conditions contained in the resolution and not otherwise.
The court correctly ruled that the contract was a conditional one.
2. It is next objected that all the subscriptions, including that of Myers & Co., must be regarded as received by the persons named in the charter, and not by the directors, and therefore that the .agreement with the directors could not affect the subscription. The language of the charter is that the persons named may call the first meeting of the stockholders "whenever $200,000 or more of the capital stock of said corporation shall have been subscribed for, to choose directors and perfect the organization of the corporation."
After this was done we think all the affairs of the corporation, including that of receiving subscriptions to the capital stock, were subject to the control of the directors.
3. The plaintiffs further claim that the defendant, by paying the first installment of his stock, waived any right he might otherwise have had to object to the validity of Myers & Co.'s subscription.
The defendant was informed that the subscription of Myers & Co. was payable in part in labor and materials, and had heard that they were irresponsible, but he was assured by Keeler, wlio he had reason to suppose knew all the facts, that the matter was all right, that Myers & Co. could respond if called upon to pay for their stock, that Myers was worth a considerable amount, and that the railroad company had a guarantee that he would respond. Upon these assurances he paid the assessment. Under these circumstances we do not think there was any intentional relinquishment of a known right. He acted upon representations that were not strictly true. H ad he known the facts he might have acted differently. For the same reasons there is no estoppel in the case. The defendant, instead of misleading others, was himself misled in respect to his rights as he viewed them.
We come now to the more important and vital question in the case. Did Myers & Co. subscribe for the stock within the meaning of the charter, and within the meaning of the resolution adopted by the corporators ?
1. The contract which Myers & Co. signed was, on its face, precisely the same as that signed by the defendant. , All the subscribers signed the sanie contract and assumed the same obligations. Each had reason to suppose that all the others stood in every respect upon the same footing with himself. In this respect the case differs from that of New York, Housatonic & Northern Railroad Co. v. Hunt, 39 Conn., 75. In that case the contractor did not subscribe for stock at all; he simply contracted to do the work and furnish' materials and take stock in payment. He did not in any sense become a stockholder until he had earned the stock and received it in payment. We held that inasmuch as the stock was not subscribed for, and to be paid for in money, like the stock of the other subscribers, it was not a subscription within the meaning of the charter.
2. Myers & Co. attached to their signature no qualification or condition peculiar to their own subscription. It was not expressed to be payable partly in work and materials, and there was no reference in any part of the document to any other contract or writing, and no other contract was then in existence which by any rule of interpretation we can regard as a part of the subscription contract. In this respect the case differs from some of the cases cited and relied on by the defendant's counsel.
In Troy & Greenfield R. R. Co. v. Newton, 8 Gray, 596, the contractors subscribed for stock, qualifying the subscription by the words " being a portion of the twenty-five per cent, named in our contract for graduation." The contract provided that the stock was to be paid t'o him at par, or in case any stock was issued by the corporation below par then at the rate of the lowest issue. It was held not to be a subscription. The court say, " This subscription was, it is obvious, not a cash subscription, and not a promise to pay any cash assessment'on the same." In the case before us there is a subscription carrying with it in contemplation of law an unqualified promise in writing to pay all assessments in cash.
In Cabot West Springfield Bridge v. Chapin, 6 Cush., 50, two hundred shares were subscribed upon condition of paying for them by a transfer of a similar number of shares of the stock of the Connecticut River Railroad Company at their par value of $100 a share, the market price of the same being only $93 a share. It was held that that was not a legal subscription binding upon other shareholders who had not waived the objection. 'Whether the condition was by parol or in writing does not appear. From the statement of the case it may be inferred that it was by parol. But in the case last cited, the same judge gives the opinion of the court, and in referring to this case says:—"Two hundred shares were by the terms of the subscription to be paid for in the stock of the Connecticut River Railroad Company, share for share, &c." Prom this statement we may assume that the condition was expressed on the face of the subscription. If so the distinction between that case and the case before us is obvious. But there is a further distinction. In that case the stock was to be paid for at the rate of $93 for $100. In this case the stock is to be paid for in part by work and materials; but it does not appear that they are not equivalent to cash. If they are, the case is within the rule indicated by Judge Dewey in the case last cited, in which he says, " In our opinion the subscription for the four hundred shares was to be a subscription, pay able in cash, or its equivalent, calculating the shares at the rate of $100 each."
8. When Myers & Co. subscribed, the contract for building the road had not been executed. The subscription therefore was not then affected by the written contract. The parol agreement cannot upon any principle have the effect to vary or qualify the written contract of subscription. It is familiar and elementary law that all negotiations between the parties relating to the subject matter are merged in the written contract. Neither party will therefore be permitted to prove by parol a contract different from that expressed in the written instrument. Is it so that a third party, for the purpose of relieving himself of an obligation, will be permitted to show by parol that this written contract is different from what it purports to be on its face? We are not aware of any principle of law that will justify such a proceeding.
It is not a case of fraud, accident, or mistake. .No actual fraud is shown or claimed. It is only claimed that the transaction, taken together, constitutes in law a fraud. The subscription of Myers & Go. was not, in itself, a fraud upon the defendant. It can only operate as such, ab initio, by giving effect to the parol agreement. But tiro law will not give effect to the parol agreement. Therefore the law will not pronounce the subscription fraudulent.
4. The subscription being valid at its inception, did it become void by reason of anything which subsequently transpired ? It is claimed that the building contract made in pursuance of the previous parol agreement should have that effect.
It will be observed that this is not the ordinary case where two writings, designed to accomplish one object, are executed at the same time, by or between the same parties, and are to be construed together. They were not executed at the same time, although probably upon the same day, for the court has found that the building contract was executed after the subscription. Nor were they, strictly speaking, transactions between the same parties. The contract was between Myers & Oo. and the corporation, and could only be made after the organization of the company. The stockholders as such could have no voice in it. The subscription was a transaction between the stockholders as individuals, and the contract thereby made could be, and usually is, made before the organization of the company. The consideration for the contract of each stockholder proceeds, not from the corporation, for it is not yet in existence, but from the other stockholders. The corporation, when organized, represents the stockholders, and may enforce the contract; the promise, in contemplation-of law, being made to it. The two contracts then may be, and in some respects should be, construed independently of each other, and with a view to carry out the object and purpose which each was designed to accomplish. Viewed in this light it is obvious that Myers & Co. ought not to be permitted to gain an advantage over the other stockholders by means of any secret bargain or collusion with the directors. So far as their contract with the directors operates as a fraud upon the stockholders, it should be declared void. The fraudulent contract should fall and the contract made in good faith should remain in full force. Courts will rarely enforce a fraudulent contract; much less will they do so when the effect will be to destroy an honest one. If therefore this was an action against Myers & Co. on their subscription, it is very clear that a fraudulent arrangement with the directors to the prejudice of the stockholders would be no defense. Henry v. The Vermilion & Ashland R. R. Co., 17 Ohio, 187. This point is virtually conceded-. But why recover upon it unless it is a valid subscription? And if a valid subscription for one purpose, why not for all purposes ? It is no answer to say that Myers & Co., being parties to the fraud, may not take advantage of it, but that the defendant may, because other interests are now involved. Each stockholder has a personal interest in the question. Many of them probably have paid their subscriptions in full. To allow others to withhold their subscriptions for this cause might be the means of defeating the whole enterprise; and that would practically perpetrate a fraud; if not the fraud contemplated, another one quite as objectionable.
It is also apparent that if Myers & Co. were solvent and able to pay for their stock this question would not have been made; for in that case they must either perform their contract or pay in cash; either of which would have been satisfactory to the defendant; so that their failure to perform, and their inability to respond, come in as necessary elements in the consummation of the alleged fraud upon the defendant. The proposition then must be substantially this: a subscription originally valid becomes void by reason of the subsequent 'inability of the subscriber to pay for his stock; a proposition which the learned counsel for the defendant expressly disclaims.
We have thus far assumed that the contract was fraudulent, either in law or in fact, and have endeavored to show, notwithstanding the fraud, that the subscription is valid and binding, not only upon Myers & Co., but upon all concerned. We come now to inquire whether the contract can properly be regarded as fraudulent by the other stockholders.
It is not pretended that it was executed with a fraudulent design by either party. The finding is that "it was well known to the directors, at the time the subscription was made, that Myers & Co. had not the pecuniary ability to pay for said stock in cash beyond the fifty per cent, thereof, and it was not expected by the directors that they would so pay for the same, but they did in good faith expect that the subscription would be fully paid in work and materials, and in cash, in the proportions above mentioned." That effectually excludes the idea of actual fraud in the transaction. Was it legally fraudulent ?
In answering this question we will consider the contract with reference to three possible contingencies. First; suppose the contract had been fully performed. It is not found, and we cannot presume, that Myers & Co. obtained any undue advantage. So far as we know, or can know, they gave to the company as favorable terms as any other contractors would have given. Presumptively therefore they were to give a fair equivalent for what they were to receive. If so, it is the same as if they had paid for their stock in the usual way, and received in return-cash for their expenditures. That being so, their subscription was equivalent to a cash subscrip tion, and distinguishes this case from the case of Cabot & West Springfield Bridge v. Chapin. That full performance would have been satisfactory to the defendant is apparent, for he was informed of the terms of the contract before he paid the first installment, to which he did not object. His only anxiety seemed to be that the contract would not be performed.
•In the second place, suppose Myers & Co. had broken their contract, and were of pecuniary ability to pay for their stock in cash. They then became not only nominally but really to all intents and purposes cash subscribers, and must pay their assessments like the other stockholders. In that event it will not he pretended that the contract would operate to defraud any one.
In the third place, suppose ihe hi'each of the contract to have been occasioned by their pecuixiary inability to perform it. It xnust be remexnbered that the coixtract was made by both parties in good faith, and was partially performed. Up to the time of the breach therefore there was no taixit of actual fraud, and it is difficult to see how fraud can legally he imputed. The failure of Myex's & Co. was disastrous to the interests of the corporation, axxd the stockholders thereby • suffered pecuniax-y loss. It was unfortunate, but misfortune is xxot fraud. Myers & Co. may have failed by reason of dishonesty or mismanagement; but dishonesty and mismanagement ixi the exeexxtion of a coixtract, do not make the contract fraudulent ab initio. The directors in their anxiety for the success of the enterprise may have made an improvident contract; but improvidence is not fraud. For the same reason they may have misjudged in respect to the ability of Myei*s & Co. to fulfill their engagement; but a mistake in judgment is not fraud. This contract was broken as many other contracts are broken; but a breach of a contract is not necessarily a fraud.
For these reasons a majority of the court are of the opinion that the Court of Common Pleas misjudged as to the legal effect of the subscription of Myers & Co. and of the building contract, and therefore that thei'e must be a new trial.
In this opinion Foster and Pardee, Js., concurred.