DISSENTING OPINION.
WiLKES, J.I cannot concur with the opinion of the majority in this case. The very late hour of the term at which the able and elaborate opinion of the majority was prepared and presented, will not admit of any elaborate presentation of my individual views of the question involved, having had only a portion of the morning to prepare this paper.
So far as the result of this case is concerned, these views have no value, as I stand alone, and I state them with the utmost deference for the views of the majority, but I deem it incumbent to briefly express these views in view of the fact that almost daily questions of a similar character are being presented to the Court in connection with the collapse of nominal, not to say fraudulent, corporations, and the winding up of boom speculations, in which promoters and parties interested seek to escape personal liability upon technical grounds.
I am of opinion that the individual defendants in this case are personally liable, as parties composing *163the purchasing syndicate known as the Clifton Hill Land Company, for the balance of the purchase money for the Oakland farm, after exhausting the proceeds of the land upon which the lien was retained, and that complainants, under their pleadings, are entitled to a recovery.
, This property, in my view of the case, was purchased by the syndicate when they accepted the Ly-erly option previous to February 28, 1887, the date when that option expired. It was certainly purchased by some one during ■ the life of that option, ^and it could not have been by the corporation, because no steps to organize that was taken until March 17, 1887, nor was there any organization thereunder, nor any stock subscribed until June 9, 1887. Until the latter date, the corporation had no officers, no agents, no stock, no life, no final determination to incorporate.
The syndicate became the equitable owner of the land, and its members equitably bound for the purchase money, whatever may have been their liability in an action at law for- want of a direct promise on the part of each to pay.
The notes executed April 14, 1887, clearly indicate, to my mind, that the purchase was that of the syndicate, and the notes of the members of the syndicate, and not of the corporation, which then had no legal existence, no organization, no stock, nothing but a void charter not then accepted.
E. Watkins, at that date, was president of the syndicate, but not of the corporation, for he did not *164become president of the corporation until two months afterward, and the note signed by him as president of the Clifton Hill Lan,d Company, was the note of fhe partnership of that name, and not of- the corporation which subsequently organized under that name. J3ut if any doubt remains upon this point it is entirely removed by the action of the stockholders on June 9, 1887, when, on motion of John A. Hart, it was resolved that this company, that is, the corporation, buy from the original purchasers of the Watkins farm all their interest therein, and pay them therefor, in paid up stock of this company, the sum of $250,000, and assume their liability of $90,000, as due to Mrs. Watkins, the original vendor. ' It is clear from this, that the land was bought from Mrs. Watkins by the partners, and not by the corporation, and that the corporation bought from the promoters, and agreed to pay them in stock for the purchase.
With all due respect for the exceedingly able opinion of the majority,. I think it proceeds upon an erroneous idea in holding that certain acts done and transactions made were the acts • of the corporation, when, as a matfer of fact, they were the acts of the individuals operating under the name of the Clifton Hill Land Company, as a partnership designation, before it was incorporated under the same name. In my view, the corporation, as such, did no act to connect it with this transaction until the ninth day of June, 1887. Up to that time, *165all that -was clone was clone as individuals, and not as a corporation. The change to a corporation was made June 9, 1887, when the shrinkage in value had set in, and it was important to interpose the corporation to shield from individual liabilities. No one but these promoters had any interest in the. land, or had incurred a liability to Mrs. Watkins for the i purchase money, up to. that time.
We have not the opportunity to carefully analyze the pleadings in the two cases with a view of showing that complainants all the time have proceeded upon the idea of the original liability of the partners individually, supplemented by that of the corporation after it came into existence.
The substance of it all is, that complainants insisted all the time upon individual liability, and the main contention by them was that the subsequently formed void corporation could not relieve from this liability. I think there is an utter absence of proof that the defendants stipulated against individual liability, nor do 1 understand the opinion of the majority to so hold or intimate.
In this connection I remark that I can place but little weight upon the acts of Mr: J. A. Caldwell as working an estoppel upon complainants. If he was agent for them, he was at the same time agent and attorney for the defendants individually and as a corporation.
The formation of the corporation did not relieve the individuals, but the' corporation assumed the debt *166of the individuals, ’ and, as to the creditors, became surety for the individuals.
In Broyles v. McCoy, 5 Sneed, 602, this Court said: “It is well settled that when an association which has existed as a mere copartnership, becomes incorporated, and the corporation then accepts an assignment of all the property of such association for the purpose of carrying out their object, they are primarily and jointly and severally liable for all the debts incurred before the act of incorporation. In such a case, the responsibility of the corporation for contracts previously made with the association does not become substituted so as to exempt the members from . individual liability; and it' does not change the case if the members' of the company had it in view to procure a future Act of incorporation when it was first formed.”
This case has been often approved in our own Courts and the Courts of other States, and is, I think, conclusive of this feature of the case.
I do not deem it important to dwell upon that feature of the case which seeks to hold the members or stockholders, upon the idea that the charter is void. Upon this point I virtually agree with the rnajority.
In the second place, I am of opinion- that the individual defendants who were stockholders of the defendant corporation are severally liable upon their respective subscriptions to the capital stock of the corporation, in a sum sufficient to pay the balance *167of the purchase money clue the complainants, the said stock being for the most part unpaid.
The Act of 1875, Ch. 142, Sec. 5, p. 237, contains a provision in these words: “The amount of any unpaid stock due from a subscriber to the corporation, shall be a fund for the payment of any debts due from the corporation; nor shall the transfer of stock by any subscriber relieve him from payment, unless his transferee has paid up all or any balance due on said original subscription.” Code, §1708.
This provision is incorporated in the charter of this corporation, and is binding on all subscribers for stock. I think the language of the statute and charter is clear and plain, and that all stock, whenever subscribed, is liable for all debts whenever contracted. The charter virtually declares- on its face, to the world, that when the stock shall be subscribed and paid, it will constitute a fund for the payment of the debts of the corporation. Independent of the statute, the same rule results under the general principles of equity and the trust fund doctrine. All unpaid original subscriptions are assets for the, payment of debts. I need not consider the question where there is an increase of stock after the original subscriptions are paid. In this case, however, the stock was subscribed at the same time and by the same instrument under which the corporation assumed the debt. I think the fact abundantly shown that the capital stock of this company *168had been fixed and subscribed before complainants extended credit to it, or at the time the contract was assumed by the corporation. We have neither time, nor would it serve any useful purpose, to dwell upon this feature of the case.
Upon the general doctrine of the liability of the stockholders for unpaid subscriptions, I understand that I am in accord with the majority, and 'that I differ only in the application of the doctrine to the facts in this case. The remaining question is whether the defendants are liable for any unpaid subscriptions. As I understand the opinion of the. majority, they are not, because their stock has been paid in full in property which the stockholders agreed to receive in satisfaction of the subscriptions, and whether this was a bona fide actual payment cannot be questioned, inasmuch as the stockholders agreed to so regard it, unless the transaction shall be directly impeached for fraud by proper allegations in the bill. In other words, it matters not what fictitious values shall be placed upon property received in payment of stock, it will be treated as payment if the stockholders so regard it, and it cannot be questioned except upon an allegation of a fraudulent combination ai^d purpose upon the part of the stockholders.
It is well settled that corporations may receive in payment of stock subscription property which it may lawfully purchase, and which is suitable and' applicable to the purposes for which it was organized, but it must be taken in good faith, at its fair, *169bona fide value. Searight et al. v. Payne, 6 Lea, 285; Albitztigui v. Quadalupe Mining Co., 8 Pickle, 605.
The transaction must be free from fraud. The property must be of such character and value that the corporation would be authorized ■ to purchase it with money if the stockholders had first paid the amount of their subscriptions into the treasury of the company. It must be received at money’s worth, and, if it have no settled and ascertained value, it cannot be received at all, unless under special circumstances. Morawetz on Cor., Secs. 425, 426, 428, and 825; Cook on Stockholders (2d Ed.), Sec. 13; Camden v. Stewart, 144 U. S., 105. The fraud most frequently practiced in such transactions is to put a grossly exaggerated value upon the property conveyed to the corporation. Mr. Cook, in his work on Stock and Stockholders, says that the method most frequently resorted to in schemes for issuing watered stock, or stock as paid up when it is not, is that of conveying to corporations property at an overvaluation. ITe further says that fraud of this character in issuing stock is the most difficult to prove and the least easy to remedy. Cook on Stockholders, Sec. 35 (3d Ed.). It has been repeatedly held, in cases where it appears that the overvaluation was intentional, that that fact alone was sufficient evidence of its fraudulent character, and made out a case for relief. Cook on Stockholders (3d Ed.), Secs. 45-47 (note *170on page 72). In a case where property worth $64,000 was transferred in payment of stock to the amount of $300,000, the Court.held, as a presumption of law, that the transaction was fraudulent. Douglass v. Ireland, 73 N. Y., 100. Where stock worth $100,000 was issued for property worth $50,000, in the absence of evidence to explain it and rebut the presumption of fraud, the Court held the transaction was fraudulent. Boynton v. Andrews, 73 N. Y., 93.
Indeed, this case will come within the doctrine laid down in Camden v. Stewart, where it is held that, if the property turned in is practically worthless, or is unsubstantial and shadowy in its nature, the Court will hold that there has been no payment at all, and that the stockholders are liable on the stock. Camden v. Steward, 144 U. S., 104.
But it is said that, unless the transaction is impeached for fraud, directly and pointedly alleged in the pleadings, the question of overvaluation cannot be made effectual. In other words, the subscribers say: “We are stockholders, and have paid for our stock.” “How have you paid it?” “In property.” “Did you pay that property in at its fair cash valixe, as the statute prescribes ? ” “I need not answer that further than to say my associates agreed to receive it as payment, and it must stand as such, unless you impeach it for fraud on my part and that of my associates.”
This rule may apply between the stockholders, *171but it should not prevail as against creditors. I am ready to concede that fraud may be charged, and should be, in all proper cases, and the question thus raised; but I do not think relief can be denied because of the failure to charge fraudulent overvaluation, where the proof abundantly shows fraud or an excessive overvaluation. The plea in this case is payment. The burden of proving it is on the party setting it up. It devolves upon him to affirmatively show payment. This he can do by showing that money was paid. It may also be sustained, under the statute, by showing that property instead of money was paid; but it must be property at a fair cash .valuation.
It is as much incumbent on the defendant to show the fair cash valuation of the property as it is to show that the property was paid. Until that is done the plea of payment is not sustained. As between themselves, the stockholders may agree that they will treat even a simulated payment as such, but as against creditors this should not be allowed to prevail. The true rule is to credit the stockholder with the fair cash value of his property upon his subscription, and require him to pay the balance in cash, at least to the extent of the demands of creditors. A margin may, and should, be allowed for honest differences of opinion as to values, but when an overvaluation is grossly excessive and intentionally made, even though there is no actual fraud, it is invalid as to corporation creditors, who *172may proceed against the stockholders individually for their unpaid stock subscriptions.
The case of Elyton Land Co. v. Birmingham Warehouse and Elevator Co., 92 Ala., 407 (S. C., 25 Am. State Kep., 65), is an able presentation of this doctrine, and, in my opinion, correctly lays down the law as far as this feature is involved. It is there held that any arrangement between stockholders and the corporation to issue stock' as fully paid, though only partly paid in fact, either in money or property, and by which the corporation does not get the benefit of the full price of the stock in good faith, may be valid and binding between the stockholders and the corporation, but it is invalid as to creditors, and may be set aside ' at. their instance, and full payment of the stock enforced for. the satisfaction of corporate debts.
In that case, parties organized a corporation with a capital stock of <§250,000, and gave in payment therefor, without actual fraud, a bond for title for land worth $50,000, and for which, they had only paid $5,000 in part, the corporation assuming the balance of the purchase money. It was held .that the stockholders were liable to the creditors of the corporation to the extent of the differences between the actual value of the property and the amount of their subscriptions. The statutory provision for payment of capital stock in property at its money value is substantially the same in Alabama as in this State. See the authorities cited in this case, and *173the rule as laid do>vn in Cook on Stock and Stockholders sharply questioned. In the Alabama case it was insisted that fraud should be charged and proved, but the Court said the statements of fact in the bill support the conclusions therein averred that the transaction by which payment for stock was attempted to be made was only colorable; that it waS not really a payment, but had only the outward appearance without the substance of payment. Such being the case, the individual defendants are still liable on their stock subscriptions to the extent that the attempted payment falls short of a bona fide compliance with the terms of the contract, and the allegations as to excessive valuations of the property were sufficient under the rules above stated. To the same effect see Crawford v. Rohoer, 59 Md., 599; Carr v. Lefere, 27 Pa. State, 413; Scoville v. Thayer, 105 U. S., 143; Jackson v. Traer, 64 Iowa, 469 (S. C., 52 Am. Rep., 449); Osgood v. King, 42 Iowa, 478; Douglass v. Ireland, 73 N. Y., 100; Witherbee v. Baker, 35 N. J. Eq., 501; Bailey v. Pittsburg Coal Co., 69 Pa. State, 334. See also 78 Wis., 427; 23 Am. State Rep., 417; 3 Am. State Rep., 817; 124 N. Y., 302.
The cases relied upon in the opinion of the majority of the Court are commented on in this case of Elyton Land Co. v. Birmingham Warehouse and Elevator Co., 25 Am. State Rep., 65-83, and, I think, with fatal effect.
The case of Kelley Bros. v. Fletcher, 94 Tenn., *1741, decided at the present term, did not meet my approval, and I reserved the right to file a written dissent, and I make this my dissent in that case as well as in this on the points involved.
Now, in the case at bar we have this remarkable condition of affairs: The defendants plead payment of a subscribed capital stock of $250,000. To sustain this, they show they have actually paid $35,000 in cash, and have transferred to the corporation property which had been bought for $125,-000, and on which there was an incumbrance of $90,000, with only $35,000 paid in cash. It is well to remember that the stockholders do not assume this incumbrance of $90,000, but attempt to shift it to the corporation as a debt of the corpi*-ration. Even if the property had not depreciated, then the defendants would be in the attitude of paying up their capital stock of $250,000 with $35,000 in actual money, and the property actually put in as payment was thus overvalued, even on its “boom price.” But it abundantly appears that, when this transaction took place, the property had already depreciated more than the cash payment. The boom had collapsed, and the shrinkage was on in full vigor, and to the full extent of the cash payment; so that we have these gentlemen, who bought this property as individuals, putting into a corporation for $250,000, not the property itself, but only their equity in it arising out of the $35,000 cash advanced upon it, which, in view of *175the shrinkage, was absolutely nothing. This does not constitute payment, and is, in my view, a clear evasion of the statutory requirement.
It is said that some of the parties did not intend to, nor did they, actually subscribe for stock, but they were under the impression that they were only stockholders to the amount actually paid in on the cash payment. And yet, these same parties, after the cash payment had been made, paid assessments, and knew that a balance was to be paid on the purchase money. Suppose this <§90,000 of purchase money unpaid had been actually paid after-wards, would these parties have insisted that they had no further stock interest by virtue of such payment, but that their stock was still only the amount of the cash paid in ?
I am thoroughly convinced that complainants in this case are entitled to their recovery in this case on the best and safest rules of law and equity. It was said in argument that it would be inequitable to hold these defendants, all of whom are business men of the 'highest order, liable for the fictitious value of this property, depending on the boom inflation of value. But it is equally against good conscience to deprive these ladies, who are not prominent business men,. of the price which the proof shows they could have realized from the property from other parties during the continuance of the boom, but which they were prevented from receiving by the existence of this contract with the defendants.