This was a bill filed by appellee against appellants as stockholders in the Coal City Coal & Coke Company, which corporation is alleged to be insolvent. Said complainant was a judgment creditor of said corporation, with a return of “No property found” on an execution on its judgment. The bill al*576leges that the capital stock of said corporation was increased to $200,000.00 and that said increased stock was sold to appellants, P. T. Vaughn and E. E. Bryant, at fifty cents on the dollar, said corporation having issued a circular, offering to sell said stock at that discount.
There was a severance by agreement and P. T. Vaughn and E. E. Bryant join, for themselves alone, in assigning errors.
The.first assignment relates to the action of the court in overruling their demurrers to the bill of complaint and holding their pleas insufficient, and their first contention is that they are not shown by the bill to have been “subscribers” to the capital stock of said company, but that, on the contrary, the bill shows that the stock which they hold was issued to them, without any requirements that any more money was to be paid for the same than was paid.
In other words, they claim that the averments of the bill show that they were purchasers and not subscribers of the stock, and that consequently, they cannot be made liable to pay any more than the agreed purchase price, which has already been paid.
Although, as between the corporation and the purchasing stockholder, such an arrangement would be valid and binding, so that the corporation could not recover any more from the stockholder than he had agreed to pay for the stock, yet, when the question is raised between the stockholder and a creditor, it is entirely different.
When a corporation is organized with a certain amount of capital stock, creditors who deal with it have a right to expect and require that that amount of capital shall be, or has been, paid into the treasury, and no device or agreement, between the corporation and the stockholder, can relieve the latter from the obligation to the creditors to pay the full amount of the par value of his stock into the treasury. — 26 Am. & Eng. Ency. Law, p. 1009; 1 Cook on Corporations (5th ed.) § 42, p. 113; Scoville v. Thayer, 105 U. S. 143; Sawyer v. Hoag, 17 Wall. 610; Union Insur. Co., v. Frear Stone Mfg. Co., 97 Ill. 537.
*577There are a great many authorities on the subject of the liability of a purchaser of stock, which has not been fully paid, and we will not attempt to refer to them in detail.
While there is some conflict among the decisions, yet, after a careful examination, we hold that the best considered cases establish the proposition, that it matters not whether the stockholder acquires his stock by signing a subscription paper, or by purchasing it from the corporation for an amount less than the par value of the stock; he is liable to creditors of the corporation for an amount which, with the sum already paid by him, is equal to the par value of the stock held by him.
The corporation may debar itself from recovering the amount, but no evidence can deprive the creditor of the right to have the full amount of the par value of the stock applied to the payment of his debt after a return of “No property found” on an execution against the corporation. This obligation does not necessarily result from any subscription or promise to pay. V The theory of the law is that, when a corporation holds itself out to the world as having a certain amount of stock paid in, every person who deals with it- does so on the presumption that said amount of money has been or will be paid into the treasury, and it would be inequitable to allow a part of said fund to be held back by the stockholder. The cases generally speak of this principle as being that the capital stock is a trust fund in favor of the creditors of the corporation, but the expression is not in any way to be confounded with the doctrine of trusteeship, which has been repudiated by this Court, to the extent of bolding that the directors hold the property of the corpo ration as -trustees so that they cannot convey it as fully as an individual can his own property.
As said by the Supreme Court of the United States in a case in which it repudiates the doctrine of trusteeship, just as our Court does: “The property of a corporation is doubtless a trust fund for the payment of its debts, in the sense that, when the corporation is dissolved, and all its business wound up, or when it is insolvent!, all its creditors are entitled in equity to have their debts paid out of the corporate property, before any distribu*578tion thereof among the stockholders.* * * * * That doctrine only means that the property must first be appropriated to the payment of the debts of the company, before any portion of it can be distributed to the stocldiolder.” — Hollins v. Brierfield Coal Company, 150 U. S. 384; 1 Cook on Corporations (5th ed.) § 256, p. 556; Merrimack Mining Co. v. Seby, (54 Penn. St. 227), 93 Am. Dec. 697; Thompson v. Reno Savings Bank, 3 Am. St. Rep. 798, and note pp. 808, 810-11, 819, 829, 832, 863-4; Webster v, Upton, 91 U. S. 65, 67; Nicrosi v. Irvine, 102 Ala. 654; 2 Morawetz on Corporations (2nd ed.), § 888, p. 860; 26 Am. & Eng. Ency. Law, 1037; Merrimack Mining Co. v. Bagley, 14 Mich. 501; Visalia etc. R. R. v. Hyde, 110 Cal. 632.
Only to this extent does the trust fund theory apply, just as it would to an individual under like circumstances. — O’Bear Jewelry Co. v. Volfer & Co., 106 Ala. 205; Corey v. Wadstcorth, 118 Ala. 188; Hall & Farley v. Henderson, 134 Ala. 455.
In fact, the attempt on the part of the corporation to release the stockholder from paying the amount which the law requires to be paid on the capital stock is practically a fraud on the creditors, who deal with the corporation on the presumption that said stock will be or has been paid for.
Appellants next raise the question that the transaction was illegal, to-wit, the issue of stock without being fully paid up, and hence no recovery can be had, based on that illegal transaction. Respondents are estopped from making that defense. — 1 Cook on Corporations, § 288.
While this Court has held that no recovery can be had on a, note given for fictitious stock to be afterwards issued, — Ala. Nat. Bank v. Halsey, 109 Ala. 196,— because the consummation of the contract necessarily involved a violation of the law, yet that has no application to a case where the stock is already issued and all that remains to do is to force the party to pay for it, as he should have done before. — Elyton Land Co. v. Warehouse Co., 92 Ala. 407; Beitman v. Steiner Bros., 98 Ala. 241.
*579It is a general principle recognized by numerous 'cases that the equitable remedy of the creditor does not accrue until the insolvency of the corporation, and this is followed by our statute which provides that after obtaining judgment and having a return of “No property found,” the creditor may proceed against the stockholder. — Code of 1896 § 823. So this claim is not barred by the statute of limitations.
The 15th assignment of error is not sustained. The fact (if it be a fact) that complainant made money on the purchase of the land at execution sale, would not effect the equity of this bill. But, if the facts alleged in the 14th plea be true, they raise an equity in favor of the stockholders to insist upon a proper application of the security held by complainant to the payment of its debt, before insisting upon the right claimed to call upon them. Consequently, as claimed in the 16th assignment of error, the court erred in declaring insufficient the plea, numbered 14, to the bill of complaint.
The other parties assigning error have filed no brief or argument insisting on the same, but, at any rate, the assignments seem to be identical with those considered.
The judgment of the court is reversed and the cause remanded.
Reversed and remanded.
McClellan, C. J., Tyson and Anderson, J.J., concurring.