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 *94$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 *95that 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 *96Keeler, 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 *97case 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*98able 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 *99have 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 *100made; 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*101tion, 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.
*102In this opinion Foster and Pardee, Js., concurred.