
    Richard Brown v. William J. Hitchcock.
    1. The individual or personal liability of stockholders, under section 79 of the Corporation Act of May 1, 1852 (1 S. & C. 810); also under section 8 of April 10, 1861, regulating street railroad companies (S. & S. 136), attaches in favor of creditors at the time the debt is contracted or the liability incurred by the corporation.
    2. After such liability attacbcs to a stockholder, it is not discharged by the subsequent assignment or transfer of his stock; but the successive assignees or holders, by accepting the stock, and the benefits arising therefrom, impliedly undertake to indemnify or discharge the assignor from the liability which attached to him as stockholder while he held the stock.
    3. In a suit by creditors to enforce such liability against the stockholders of an insolvent corporation, the existing stockholders are severally chargeable with the payment of such liability.
    4. If, by reason of insolvency, the amount due from any stockholder is not collectible, the assignors of his stock up to the time the liability attached may be charged with the deficiency.
    
      Error to the Court of Common Pleas of Mahoning County. Reserved in the District Court.
    Charles H. Kjlgour v. John J. Hooker.
    Error to the Superior Court of Cincinnati.
    Jonathan H. Winters, et al., v. Gabrial Harman, et al.'
    . Error to the District Court of Montgomery County.
    The cáse of Brown v. Mitohcooh is an action brought by a creditor of a manufacturing corporation, against the corporation and its stockholders, to subject the statutory liabilities of the stockholders to the payment of a judgment previously recovered by Drown against the corporation.
    The amended petition, having alleged the recovery of the judgment against the corporation and the insolvency of the corporation, further says that at the time of the recovery of the judgment against the corporation and of the beginning of the action in which'the amended petition was filed, Hitchcock and all the other persons named as defendants were stockholders and the only stockholders of the manufacturing company; that Hitchcock purchased his stock after the indebtedness on which judgment was rendered was incurred by the corporation, but before said judgment was rendered; and that he purchased said stock well knowing of such indebtedness and subject thereto, and with the understanding and agreement that said stock was chargeable with indebtedness, and that said indebtedness was for property and machinery held and owned by said company at the time said Hitchcock purchased said stock and became a member of said corporation. It also states that no other indebtedness than the said judgment of plaintiff exists against the corporation.
    The defendant, Hitchcock, demurred on the ground : first, that facts sufficient to constitute a cause of action against him ■were not stated, and second, that there was a defect of parties defendant. This demurrer was sustained, because it w'as not alleged that the defendants were stockholders at the time the debt was contracted for which the action was brought, and judgment was rendered in favor of defendant, Hitchcock. On error in the district court, the cause was reserved for the decision of this court.
    The Kilgour case was an action by Charles H. Kilgour against John J. Hooker and others, the object of which was to enforce the statutory liability of the stockholders of the Pendleton Street Railroad Company for the payment of the debts of said company. The petition alleged that the plaintiff was both a creditor of said company and a stockholder therein. That all the defendants, except one (The Franklin Bank), were also stockholders in said company. That the plaintiff had obtained a judgment against the company at the February term, 1868, of the superior court, and that at the same term the Franklin Bank had also recovered a judgment against said company. That the company’s property had all been sold under proceedings in another suit, leaving nothing for the payment of the claims of plaintiff and the Franklin Bank and other claims not in judgment, and that the company was wholly insolvent. That each of said stockholders was liable to the plaintiff and the other creditors of said company pro rata with the other stockholders to such amounts as were unpaid on their stock, and in a sum of money equal to the amount of his stock ■ — or to such proportion thereof as might bo required to pay all the debts of said company. The petition prayed that an account be taken of the debts of the company, and the stockholders’ liability be ascertained, and that assessments on them be made to pay the debts.
    Judgment was rendered against each of the stockholders, among whom was Hooker, for the amount of the assessment on his stock, necessary to pay the debts.
    Hooker riled a petition in error in the general term, where the judgment against him was reversed on the sole ground that the petition did not state that he was a stockholder when the debts of the company were contracted.
    The case of Winters v. Ilarman was an action by Harman and others against Winters and others to enforce the statutory liabilities of the stockholders of the Oakwood Street Railroad Cornpany, a corporation organized under the laws of Ohio, and all who had been stockholders of said corporation.
    The petition alleges the recovery of a judgment against the corporation, the insolvency of the corporation, and the transfer of certain shares of stock, &c., and prays for an account and assessment, &c. Among the defendants were the plaintiffs in error1, Jonathan IT. Winters, John GL .Ziesler, and Benjamin Kuhns, all of whom made sales and transfers of their stock long prior to the suit and the insolvency of the company, but while there were some debts, and which, with the debts incurred subsequently, existed at the time of said suit.
    Winters, in his amended answer, in substance says, that the company, at the time of his transfer, was indebted in but a small amount, while the assets were many times the amount of tlic liabilities; that Isaac ITaas, to whom be made sale and transfer, was then responsible — in fact, reputed wealthy; that the transfer was for a full consideration, and not made with a view to escapo liability, tho stock being passed in the ordinary course of business ; and further, that the road was long thereafter sold for $10,000, an amount many times greater thnn the debts tliat existed against tlie company at the time of his said sale of stock.
    Tho facts in the Ziesler ¿mcl Kuhns amended answers are much the same, — the transfers being at a still later period. Ziesler and Kuhns each state that the transfers were made in the ordinary course of business; that E. A. Parrott, the transferee, was then and is now responsible and able to pay tho full amount of tho statutory liability on the stock so by him purchased.
    The court sustained demurrers to these defenses. Tho court held that the said plaintiffs in error were bound to contribute their portion for the payment of the debts that existed at tho time of the transfers, and that the transferees were only hound to contribute for the payment of the debts incurred subsequent to tho transfers. The decision of the common pleas was affirmed by tho district court.
    It is here sought to obtain a reversal of these judgments.
    
      
      II. IT. Moses, for plaintiff in error,
    in the case of Brown v. Hitchcock, claimed that by virtue of the statute 1 S. & C. 310, passed for the purpose of carrying out and applying the provisions of article 13 section 3 of the constitution of Ohio, the creditors of a company include all persons who have claims against the company, regardless of the time the debts were contracted. That all stockholders shall be deemed and held liable (to the extent mentioned and limited by the statute) for the purpose of securing all creditors. Wright v. McCormick, 17 Ohio St. 86 ; Umsted v. Buskirk, 17 Ohio St. 113; Middletown Bank v. Magill, 5 Conn. 63 ; Gilman v. Bank of Cincinnati, 8 Ohio, 62; Curtis v. Harlow, 12 Met. (Mass.) 3; Holyoke Bank v. Burnham, 11 Cush. (Mass.) 183 ; Story v. Furnham, 25 N. Y. 214.
    The cases from 32 N. H. 388; 2 Hill, 265; 35 Cal. 155, ehed by counsel for defendant, arose under statutes entirely different from ours. They made the stockholders liable as partners, or as though there was no act of incorporation.
    
      Sidney Sbrong, for defendant in error, Hitchcock:
    For the defendant in error I insist that no sufficient cause of action against him is stated in the amended j)etition, which alleges that he did not become a stockholder until after the corporation ineuned the indebtedness on which the action is brought, and, therefore, that the common pleas properly sustained his demurrer to the amended petition. If Hitchcock is liable on the facts stated in the amended petition, his liability must exist either, first, because it is law, when stock in a manufacturing corporation organized under the statute in question is sold and transferred after a debt is incurred by the company, and before judgment is rendered against the corporation on the debt, that both the seller and the purchaser of the stock are liable, under the expressed limitation of the statute, for the payment of the debt; or, second, because the individual liability in such a ease can be enforced under the statute against the assignee, and not against the assignor of the stock.
    1. As to whether, in such case, both the buyer and seller of stock are individually liable under the statute, see Larrabee 
      v. Baldwin, 35 Cal. 155 ; Moss v. Oakley, 2 Hill, 265; Chesley v. Pierce, 32 N. H. 388 ; Middleton Bank v. Magill, 5 Conn. 38 ; Hooker v. Kilgour, 2 C. S. C. R. 350.
    II. When stock has been sold and transferred after a debt is incurred by the corporation and before judgment is recovered thereon against the corporation, is the stockholder who owns the stock at the date of the judgment and when suit is brought to enforce the individual liability, liable and alone individually liable for such indebtedness, so far as regards the stock which he owns t If the assignee in such a case is alone individually liable on the assigned stock it must be either, first, because the liability does not attach when the debt is made by the corporation, or second, Because the liability, though attaching when the debt is incurred, follows the assigned stock, and the assignor upon making the assignment ceases to be liable and the assignee by the same act becomes liable. Of these two propositions in their order:
    1. For the defendant in error I submit that under the statute the individual liability of the stockholder to any creditor of the corporation arises when the debt is incurred, and then attaches to the stockholders who then own the stock. Wright v. McCormick, 17 Ohio St. 86 ; Umsted v. Buskirk, 17 Ohio St. 113.
    2. If the individual liability provided by the constitution and the law attaches when the obligation of the corporation arises, I maintain that this liability is not assignable and does not pass from the seller to the buyer of the stock. If the creditor, by the transaction in which the obligation of the coloration arises, obtains for his security the individual liability of those who then own the stock, his property in the individual liability of those stockholders is as inviolable as his property in the primary obligation of the company. He has a vested interest both in the primary obligation of the corporation and in the conditional liability-of those who then own the stock. The acts of others cannot deprive him of either or any of his vested rights. It would be, I submit with deference, an '■ act of violence to so construe this statute, enacted for the creditor’s benefit, as to permit him thus to be robbed. The obvious intent of the statute is to afford a real security to creditors. Under it the credit may fairly be said to be given to the corporation and to the individual liability of the present stockholders. The statute warrants the creditor in making his contract, to do so in full reliance on the continuing liability of those who then own the stock. Ilis so-called security becomes a delusion and a snare if those who are bound for his security can of their own will release themselves from the obligation and transfer it to others. Counsel may say that a transfer of stock made for .the purpose of avoiding the liability would be held fraudulent. It would always bo difficult to show the .intent of the transfer, and, be-. sides, the creditor may suffer from assignments made in good faith as well as from those which are fraudulent. The vice inherent in the doctrine that the liability follows the assigned stock is, that without his consent the creditor can thus be deprived of that in exchange for which he parted with' his property, and be .compelled to accept in its place such other security as may graciously be accorded him.
    
      Healy <& Bram/nan, with whom were Matthews, Ramsey <& Matthews, for plaintiff in error in the case of Kilgour v. Hooker;
    
    I. The statutory liability of a stockholder to the amount of one hundred per cent, over and above the amount of his stock, is not dependent on his being a stockholder when the debt was contracted, but is a burden which attaches to the stock into whosoever hands it passes, except in the case of fraudulent transfers to irresponsible persons for the purpose of avoiding liability. McCullough v. Moss, 5 Denio, 567 ; Story v. Furman, 25 N. Y. 214; 1 Comst. 47; Stanley v. Stanley, 21 Me. 191; Curtis v. Harlow, 12 Metc. 3; Child v. Coffin, 17 Mass. 64; Holyoke Bank v. Burnham, 11 Cush. 183; Bond v. Appleton, 8 Mass. 472; Allen v. Montgomery, 11 Ala. 437; Webster v. Upton, 1 Otto, 65 ; Dauchy v. Brown, 24 Vt. 197; Middletown Bank v. Magill, 5 Conn. 28.
    The question as to what stockholders are to be held upon the liability imposed by statute, has given rise to conflicting deeisions in the different states,- but we think that where it has been held that only those persons are liable who were stockholders at the time the debt was contracted, it will be found that the decision was based on the peculiar phraseology of the statute of the particular state, and also that these cases are, in general, like those in New York, cases where the statute makes the stockholders individually liable for the debt of the corporation, so that the creditor can sue the stockholder directly, just as if it were a private debt.
    
      GolUns <& Herron, for defendant in error, Hooker:
    The statute being enacted 'for the protection of creditors, should be given that construction which will best protect them. "When they give the credit, they are entitled to know who are the stockholders, and to consider how much security there is in the individual liability of the then stockholders. If, after the credit is given, the parties then stockholders can evade their liability by getting their stock off to persons of doubtful responsibility, the protection to the stockholders would decrease, just as the prospect of insolvency to the corporation increased. Savage, C. J., Allen v. Sewell, 2 Wend. 327; Pierce Am. R. R., ch. 20, p. 510; Moss v. Oakley, 2 Hill, 265 ; Adderly v. Storm, 6 Hill, 226; Tracy v. Yates, 18 Barb. 152 ; Judson v. Rossie Galena Co., 9 Paige, 598; Corning v. McCullough, 1 Comst. 117; Stanley v. Stanley, 13 Shepley, 191; Southmayd v. Camp, 3 Conn. 52; Hosmer, C. J., Middletown Bk. v. Magill, 5 Conn. 44-53 ; Deming v. Bull, 10 Conn. 407; Marcy v. Clark, 17 Mass. 330; Chesley v. Pierce, 32 N. H. 388. Story v. Furman, 25 N. Y. 214, does not overrule .the previous line of decisions in that state, but turns upon the peculiar phraseology of the charter of the Woolgrowers’ Manufacturing Company.
    The chief authority relied upon by the other side is the warm opinion of Judge Chapman, in a divided court, in seeking to relieve a hard case. 5 Conn. 28.
    In a case in Massachusetts where the statute permitted it, the court, looking to the protection of the creditors, held not; only those who were members when the debts were contracted, but also those who were members when the debt was sought to be enforced. Deming v. Bull, 10 Conn. 409 ; Curtis v. Harlow, 12 Metc. 3 ; Bond v. Appleton, 8 Mass. 472.
    
      Gvmeliel c& Bowe, for plaintiffs in error, in the case of , Winters v. Harman, claimed that by the assignment of error the following questions were raised.
    1st. Are transferrers of stock bound (to the extent of an amount equal to the stock sold) for the obligations of a company made while they were stockholders — their said stock having been sold in the ordinary course of business, and while the company was largely solvent, although, subsequent to the sale, the company became insolvent, with the debts made prior to the transfer remaining unpaid ?
    2d. Do the liabilities follow the stock, if sales are made in good faith? In other words, do t/ransferees take the stock subject to the existing liabilities ?
    3d. Do not creditors in dealing with corporated companies, under our laws, consent to transfers in good faith, being made with the understanding that in case of insolvency of the company, they will look alone to the corporation assets and the holders of stock at the time of the failure ?
    The questions here raised are of the greatest importance. It is the accepted law among all classes that a transfer of stock, in good faith, rids the seller of all liability. If, however, the law itself be as defendants in error claim, capital will no longer purchase, or loan upon, or deal in, stocks. Corporation enterprises would soon come to an end if there were no safety in transfers, and owners of stocks should be compelled to remain in companies out of self-protection until every dollar óf debt is canceled.
    Debt is incident to all corporations, and sales of stock arc made with reference to that fact; yet, under the erroneous holding herein of the courts below, each transfer of stock creates a responsibility that hangs over the transferrer, although he is powerless to protect himself, and although the creditor has the right and power to enforce his claim while collectible against the corporation, yet does' not. ‘
    
    The following cases support our view: Story v. Furman, 25 N. Y. 214; Cushing v. Shepherd, 4 Barb. 113 ; Dibble v. Rogers, 13 Wend. 536-541; Empire City Bank Case, 8 Abb. Pr. 192 ; Eames v. Wheeler, 19 Pick. 442; Force v. Dahlonga, 22 Ga. 86.
    We claim then that assignors in good faith are not liable', and that the words “ each stockholder ” in section 3 article 43 of the constitution, and “' all stockholders ” in the statute 1 S. & C. 310, evidently mean the stockholders at the time the liability is sought to be enforced. Curtis v. Harlow, 12 Met. 3; 25 N. Y. 221; Ex parte Sutton, 14 Jur. 566, 966 ; Ex parte Croxton, 11 Law & Eq. 227; Cape's case, 19 Law & Eq. 1; 5 Conn. 28 ; 8 Mass. 472; 24 Vt. 197.
    
      Alfred A. Thomas, for defendant in error,
    Harman, claimed hat under our constitutional provision, and the statute authorizing this corporation, those stockholders are liable to a creditor on the statutory liability who were stockholders when tlie debt was contracted. Const. art. 13, § 3 ; 1 S. & C. 134; 1 Sup. Ct. R. 236; 2 Id. 350; 2 Wend. 343; 2 Hill, 68; 9 Paige, 598 ; 1 N. Y. 5, 56; 10 N. Y. 459 ; 14 Wis. 701; 17 Mass. 333 ; 46 N. H. 374; and cases cited by counsel in the other cases.
   White, J.

The statutory liability of stockholders involved in the case of Brown v. Hitchcock, arises under section 78 of the act of May 1, 1852, to provide for the creation and regulation of incorporated companies (S. & C. 310); the liability in the other two eases arises under section 8 of the act of April 10, 1861, to provide for and regulate street railroad companies (S. & S. 136).

The first question arising for determination is, when does such liability attach in favor of creditors ?

It was held, in Wright v. McCormack (17 Ohio St. 86), that the liability “ is not a primary resource or fund for the payment of the debts of the corporation; but is collateral and conditional to the principal obligation which rests on the corporation, and is to be resorted to by the creditors only in case of the insolvency of the corporation, or where payment cannot be enforced by ordinary process.”

The question whether the individual or personal liability of stockholders attached in favor of creditors at the time the debt was contracted, or the' liability incurred by the corporation, did not arise in that case. Nor would it be a material inquiry in any case where there was no change in the stockholders from the time of the incurring of the liability by the corporation, tq the enforcement of the personal liability of the stockholders.

The conditional character of the liability spoken of in the ease referred to has reference to the condition to which its enforcement by creditors is subject, and is not intended to in-r dicate that its taking effect as an obligation in favor of creditors is conditional or contingent. The condition to which the liability is subject is, that it is not available to creditors, as a security, until they are unable to obtain payment of theii? demands from the corporation. ¡

The question now is, when does this individual or personal-liability of stockholders to creditors, as a security, in addition, to the liability of the corporation, take effect í not, when may it be resorted to by creditors to obtain payment of their, demands ? ;

. The constitution, in providing for the creation of corpora^ tions by the general assembly, prescribes, as a condition tq, their creation, that the creditors of such corporations, in addition to the liability of the corporation, shall be secured by the individual liability of the stockholders. The constitutional provision is as follows :• — “ Dues from corporations shall be se-; cured by such individual liability of the stockholders, and other^ means, as may be prescribed by law; but in all cases, each, stockholder shall be liable, over and above the stock by him ois her owned, and any amount unpaid thereon, to a further ¡sumí at least equal in amount to such stock.” Art. 13, § 3. , ,

The corporation act of May 1, 1852, above referred to,- was; the first act passed on the subject of corporations aftqr the-adoption of the constitution. Section 78, as amended .April, 17, 1854, was intended to carry the constitutional provisino into operation. The section is as follows: “ All stockholders of any railroad, turnpike or plank-road, magnetic telegraph or bridge company, or any joint-stock company organized under the provisions of this act, shall be deemed and held liable to an amount equal to their stock subscribed, in addition to said stock, for the pwrpose of seorwring the creditors of such company, and the trustees or directors of pvery society or association incorporated under section 66 of this act, shall be deemed and held individually liabl&for all debts contracted by them, for their respective societies or associations.” S. & C. 310 ; 4 Curwen, 2582.

Under these provisions, it seems to us that the security furnished by the stockholder’s liability, in addition to that of the corporation, attaches in favor of creditors at the time the debt is contracted or the liability incui'red by the corporation.

, The coiporation itself is a mere legal entity, existing only in legal contemplation, and is created lor the convenience and benefit of the stockholders. All its dealings are for and on their account. It can contract no debts except under the authority, express or implied, of the stockholders, and through their corporate agents. Our constitution and laws therefore make it an essential condition to persons thus availing themselves of the instrumentality of a corporation for the transaction of business that the security of their personal liability shall attach to and attend all corporate liabilities.

In speaking of this liability of stockholders, in Corning v. McCullough (1 Comst. 47, 55), the court say: “ It is a liability which every stockholder must be understood to assume and take upon himself and to be under to those who deal with the company. Dealers contract with the corporation on the faith of that security for the performance of the contract. The credit they give is giveir, and they trust, as well to the personal liability of the stockholders, as to the responsibility of the corporation for the fulfillment of the engagement; and each stockholder incurs that liability to the creditor the moment the contract of such creditor with the company is consummated.” *And again, on p.'54 it is said: It is virtually and in effect a liability upon a contract, and tbe mutual agreement of tbe parties ; not indeed in form an express personal contract, but an agreement of equally binding obligation, consequent upon and resulting from the acts and admissions or implied assent of tbe parties.”

Tbe same principle is laid down by tbe supreme court of tbe United States. Hawthorne v. Calef, 2 Wall. 10. In this last ease it was held that a statute impairing tbe right of existing creditors to resort to such liability of stockholders for payment, was void, as impairing tbe obligation of a contract. See, also, Ochiltree v. Railroad Co., 21 Wall. 219, 252.

In Norris v. Wrenschall (34 Md. 496) and in Hager v. Cleveland (36 Md. 476), tbe stockholders’ liability to creditors is beld to be in tbe nature of a contract. The court say: “ It is a debt under tbe statute, due from tbe stockholder to tbe creditor, springing out of, and co-existent with, tbe contract between tbe corporation and tbe creditor.” And such being its nature, it is also said: “It is clear that no act by tbe stockholder, without tbe consent of the creditor, can exonerate him from tbe liability thus incurred.”

Whether tbe liability is joint and several, or several only, does not affect tbe question as to tbe time at which the-obligation attaches to the stockholder in favor of tbe creditor. In Corning v. McCullough, supra, tbe liability was joint and several ; but before tbe stockholder was liable to suit, there must have been an execution against tbe corporation returned unsatisfied.

In tbe Maryland cases tbe liability was limited and several . only.

Tbe language of tbe constitution is that “ m all eases each stockholder shall Toe liable, over and above the stock by him or her owned . . . to a further sum, at least equal in amount to such stockand of tbe statute that, 11 All stockholders . . . shall be deemed and beld liable to an amount equal to their stock subscribed, in addition to said stock,” &c.

To bold that this language embraces only those who may turn out to be stockholders at tbe winding up or settlement of tbe affairs of tbe corporation is, it seems to us, unwarranted. These provisions are intended to guard against improvidence in contracting debts on behalf of corporations, and to give security to creditors. These objects are best accomplished by attaching the liabilities to those under whose control the corporation is operating, and who' are known to those dealing with it as the persons interested. And certainly, when admissible, such a construction ought to be adopted as will promote these ends.

This view is further fortified by section 74 of the act of 1852, which provides for reducing the amount of the capital stock of corporations, and the nominal value of all the shares thereof; but provides “that the rights of creditors shall not be affected, or in anywise impaired, by the reduction of the capital stock of any such corporation.”

The act of April 3,1868, providing for the reduction of capital stock, contains in section 5 a similar provision, applicable to corporations not created under the act of 1852. S. & S. 242.

The next question is, whether, after the liability attaches to a stockholder, it is discharged by the subsequent assignment or transfer of his stock. "VYe think it is not. The liability, it is true, attaches to him in respect to his stock, but aftér it has attached' in favor of creditors it becomes as obligatory upon him personally as an express agreement. Ilis successive assignees or holders, by accepting the stock and all the rights and benefits arising therefrom, impliedly undertake to indemnify or discharge him from the liability which attached to him as a stockholder while he held the stock.

Each successive owner*, stands in his shoes as respects the stock and the liabilities growing out of it. This arises out of the nature of the property and the relations of the parties to it and to creditors, iu connection with the equitable principle that he who derives all the advantages ought to bear the burdens. For applications of this principle see Sutliff v. Atwood, 15 Ohio St. 186, 194; Johnson v. Underwood, 52 N. Y. 203, 211; Hodkinson v. Kelly, L. R. Eq. C. 6, 496, 503 ; Cape’s Ex’r’s. Case, 2 De Gex, M. & G. 562; In the Matter of the Mexican & S. A. Co., Giesewood & Smith’s Case, 4 De Gex & J. 544, 555.

• The expression, “ all stockholders,” must be regarded, in the absence of any legislative indication to the contrary, as including not only those who were such at the time the indebtedness was incurred, but all those who successively stand in their shoes in respect to the same stock.

The extent of the liability is not increased, whether the stockholder first liable retains the stock or transfers it; and the extent of -the security of the creditors, both as to the stock and the personal liability, is the same as it would have been if no-transfers had been made.

In a suit to enforce the liability against the stockholders of the insolvent corporation, the existing stockholders are severally chargeable with such liability. If, by reason of insolvency, the amount due from any stockholder is not collectible, the assignors of his stock successively, up to the time the liability attached, may be charged with the deficiency. Such suit, in this state, must be in equity, and prosecuted for the benefit of all the creditors. Umsted v. Buskirk, 17 Ohio St. 113. And where equity has jurisdiction, the liabilities of the parties are so marshaled as to first charge those who, as between themselves, are ultimately liable.

The constitution of the state of New York of 1816'(article 8), declares that all dues from corporations shall be secured by such individual liability of the corporators and othor moans as may be prescribed by law; and that stockholders in every banking association, issuing bank notes after January 1, 1850, shall be individually responsible to the amount of their respective shares for all its debts and liabilities contracted after that date. State Constitutions, part 2, 1363.

April 5, 1819, the legislature of that state passed an act to enforce this responsibility of stockholders in banking corporations. 1 Statutes at Large, 151. Section 3 of the act declares this responsibility to attach primarily to the person who is a stockholder at the time the debt or liability is contracted by the company; but also provides that it may be shifted entirely from him to another, declaring that lie shall be exonerated in respect to any stock which shall have been transferred on the books of the company (previous to any default in the payment of the debt or liability) to a resident of the state, of full age, in g.ood faith, and without any intent to evade such responsibility; and the assignee is made responsible to the extent of such stock in the same manner as if he had been the owner at the time of the contracting of the debt, with the same power to transfer this liability to another by like assignment.

Without a transfer, as therein provided, it is evident the liability of the stockholder who was such at the time of the contracting of the debt, would continue as to the creditor.

The constitutionality of this act was upheld in the case of the Empire Bank, 6 Abb. Pr. 385; s. c., 18 N. Y. 199.

The provision in our constitution as to individual liability, is modeled after that in the New York constitution, though somewhat varied in terms; and the principle of liability, as applied to banking corporations in New York, is declared by our constitution to apply to all corporations.

The constitution of California, adopted in 1819, in article 1 provides:

“ Section 32. Dues from corporations shall be secured by such individuad liability of the corporators and other means as may be prescribed by law.”

“ Sec. 36. Each stockholder of a corporation or joint stock association shall be individually and personally liable for his ¡proportion of all its debts and liabilities.” State Constitutions, pt. 1, 199.

It was held in French v. Techemaker, 21 Cal. 539, that section 36 was not self-executing, but required legislation to carry it into operation. In the subsequent case of Larrabee v. Baldwin, 35 Cal. 155, it rvas held that the legislature had power to limit the stockholders’ liability to his proportion of all the debts and liabilities of the company contracted or incurred during the time he was a stockholder*.

In England, under the joint stock companies act of 1862, a person who has ceased to bo a member for a year or upwards, prior to the commencement of winding up proceedings, is not liable to contribute to the payment of debts, nor is a past member liable to contribute with respect to a debt or liability contracted by the company after he ceased to be a member; and no past member can be required to contribute unless the existing members are unable to'pay. Wordsworth on Joint Stock Companies, 59, 60.

In the eases before us, the general assembly have not undertaken to prescribe the extent of the liability nor to regulate its enforcement, further than to adopt the minimum liability allowable by the constitution, leaving it to be enforced by the judiciary upon such legal and equitable principles as should be found appropriate to the subject.

It is said, in Umstead v. Buskirk, supra, that “ the right arising out of this liability is intended for the common and equal benefit of all the creditors; ” but no question there arose as to the liability of successive stockholders of the same stock, as between themselves or to creditors, and that language must be understood as limited to the case then before the court.

The language cf section 8, in the act regulating street railroad companies, is as follows: “ The stockholders of every company organized under this act, shall be liable for the dues of such company over and above the stock by him or her owned, and any amount unpaid thereon, to a further sum equal in amount to such stock.”

This section does not substantially differ from that already considered in the corporation act of 1852, and. the liability of the stockholders to the creditors is the same in both.

In the case of Brown, the judgment is reversed, the demurrer to amended petition overruled, and cause remanded.

In the case of Kilgour, the judgment in general term is reversed and that of the special term is affirmed.

In the case of Winters et ak, the judgments are reversed and the cause remanded for marshaling of the liabilities of the stockholders according to the principles above stated.

McIlvaine, J.

I regret', that upon a question of so much importance, a difference of opinion should exist among the members of the court; but beiug unable to agree with the majority, I deem it a duty to state very briefly the grounds of my dissent.

, Admitting that section 3, article 13, of tlie constitution does not execute itself, it is nevertheless true that the statutes passed in pursuance thereof, and involved in the eases before us, do not pretend to vary the minimum liability of stockholders as fixed by the section of the constitution above named, and which reads as follows : Dues from corporations shall be secured by such individual liability of the stockholders and other means, as may be provided in law; but in all cases, each stockholder shall be liable, over and above the stock by him or her owned, and any amount unpaid thereon, to a further sum at least equal in amount to such stock.” (

A majority of the court hold that the individual liability of the stockholder, provided for in the last clause quoted, attaches in favor of the creditor and against stockholders owning stock at the time credit is given. If this be so, the judgment in the case is clearly right; for I admit, that a stockholder, upon ■whom the constitution fixes the liability, cannot, by a transfer of his stock, discharge his liability to a creditor in whose favor it attached, although, as between successive owners of the same stock, the primary liability, by virtue of an implied contract obligation, may rest upon the owner who may be such at tliq winding up of the corporation. But, on the other hand, if the liability firci attaches to the stockholders, .who may be such at the time suit is brought to enforce it, I apprehend that no one will contend that prior owners of die stock, can, under such circumstances, where good faith has been observed, be held liable to creditors.

I also admit, that the security for dues from corporations thus provided, was intended to induce and does induce credit to be given to them; aud that in giving credit, an accurate knowledge of the solvency of the security offered is an important element. But, after all this is admitted, the question, whether knowledge of the solvency of the stockholders at the time credit is given to a corporation can be regarded as an element inducing the credit, depends entirely upon the solution of ithe main question: Does the constitution (or the statute), fix the liability in question upon such stockholders 1

■ In determining this main question, it must be assumed that the framers of the constitution had in mind the transferable nature of corporate stock, and every thing that is implied or understood therefrom; and it-must also be assumed, that persons giving credit to corporations u¡3on the faith of the individual liability of stockholders as provided by the constitution, must have in mind the same facts; so that the argument that a knowledge of the solvency of stockholders, at the time credit is given, induces such credit, although persuasive, is not conclusive as to the true interpretation of this clause of the constitution. Indeed, the persuasive power of the argument is almost, if not altogether, lost, when we admit the observance of good faith toward the creditor of the corporation in the making of transfers of stock. If such faith is kept, and it must be, I see no reason for apprehending that stockholders at the winding up of corporations will not be as responsible for such individual liability as the stockholders who were such at the time credit was given, whether the period between the dates be short or long. Between the date of contracting the debt and the enforcing of the individual liability, many years may intervene, and many successions in the ownership of stocks; yet, it seems to me, that no reason exists for believing, that, as a general rule, the stockholders at the latter date will be less able to respond, than those of the date of contracting the debt. .

In determining the true meaning of this provision in the constitution, it must be observed, that each stockholder, who is made liable at all, is made liable, over and above the stock by him or her owned, and any amount unpaid thereon, to a further sum at least equal in amount to such stock. The language is,“but, in all cases, each stockholder shall be liable,” &c. There is no doubt about the meaning of these words. The meaning is, that whenever this liability attaches in favor of a creditor and against a stockholder, such stockholder is bound to the last farthing of the liability fixed, before such creditor shall lose a farthing of his claim.. A less liability on the part of the stockholder will not give such creditor .the security intended. By the decision of the court, as I understand it, the effect given to this provision is the same as if it read, “ but, in all cases, the successive owners -of each share of stock, in the aggregate, shall be liable,” &e. So that, if the owner at the winding up discharges the liability named, all previous owners of the same stock are exonerated, although creditors, who gave credit while they were owners of the stock, receive payment of their claims only in part. While I admit that the amount of security raised for the creditors in the aggregate by the payment by all the stockholders at the time of winding up, of the full amount of the individual liability fixed by the constitution, is all that was intended to be secured, it does not make “ each stockholder ” upon whom the liability attached, according to the decision, liable for the amount named in the provision. The effect of the decision is to attach the liability to the'stock and not to the stockholder.

There is no disagreement between the members of the court, in this: that the aggregate security for the duos of a corporation thus provided, is the aggregate stock of the corporation and all amounts unpaid thereon, together with a further sum equal to the total amount of the stock,- and no more; nor is there any disagreement between us as to the rule that the security thus provided, when realized, must be distributed jpro rata among all the creditors of the corporation, without regard to the time when credit was given, and -without respect to the persons who owned stock when the debt was contracted. The correctness of these views being conceded, it appears to me, beyond doubt, that the terms of the provision, 4‘ in all cases, each stockholder shall be liable, over and above the stock by him or her owned and any amount unpaid thereon, to a further sum at least equal in amount to such stock,” point directly and plainly to stockholders who may be such at the time the liability may be enforced, and that each stockholder who is liable at all, is liable unconditionally for the full amount named.

It has heretofore been decided by this court, upon unquestioned reasoning, that the individual liability of stockholders, under our constitution, is not a primary resource or fund for the payment of the debts of a corporation; that is to say, it cannot be resorted to by a creditor in the first instance and for his own benefit.' That it is a security for the exclusive benefit of creditors, over which the corporation has no control. That it can be resorted to by creditors only in case of the insolvency of the corporation, as where payment cannot be enforced by ordinary process. And that no creditor can acquire any priority over such fund, or institute a suit for the enforcement of such liability in his own behalf. 17 Ohio St. 87,113.

In addition to the points thus decided, it can safely be asserted that this liability can be enforced but once. I am not now discussing the power of the legislature over this subject, but simply affirming that the liability fixed by the constitution can be enforced only once. And this being so, it seems to me that after its enforcement the corporation can no longer have a rightful existence, for the reason that it is essential to the rightful existence of a corporation that the individual liability of the stockholders shall inure as a security for all debts contracted; hence, when such security is exhausted, the rightful existence of the corpoi’ation must cease.

Now, in view of these principles, the time meaning of the constitution is manifest. Each stockholder shall be liable.” When liable ? The answer is patent, — at the winding up of the corpoi’ation. Liable for what ? The dues of the corporation. To what extent? “In a sum at least-equal to the amount of the stock by him or her owned.” By whom owned ? By the stockholder so made liable. Owned by him or her when ? At the time the liability is sought to be enforeed. But this sum is not the only liability of “ each stockholder.” The stock by him or her owned is also made liable. Not the stock which he or she may have transferred, but the stock which he or she may then own. And further, for any amount unpaid on such stock. It matters not who may have subsci’ibed the stock, or who may have owned it at the time the debt was contracted, or whether calls had been made or not; it is enough that the stockholder is the owner at the time the liability is enforced. Such ownership at that time makes him liable to creditors for any amount unpaid thereon. ■ . '

Not only is the plain, and obvious meaning of the words of the constitution against the construction of the majority of the court, but, I think, every consideration of trade and public policy. The sale and transfer of' corporate stocks are impeded. Responsibility for unfaithfulness in the future management of corporations remains with the vendor after his ownership, interest and power of control are transferred. The principle of repose after unreasonable delay in the enforcement of claims, is also disregarded. The statute of limitations can afford no relief to such a surety. The creditor and the corporation may continue the liability for indefinite periods. Even the ordinary privilege of a surety to compel his principal to pay the assumed debt after maturity cannot be asserted by a person liable under this provision of the constitution.

The construction which I have adopted I believe is not only consistent with the terms of the constitution, and the intention of the framers, but is the only one which can work out com- • píete justice between all parties. As between successive owners of stock, its justice is plain. The value of stocks depends in a large measure upon, the relations between the assets and liabilities of the corporation.: The assets are at all times held in trust for creditors and stockholders, and the management of ■ the trust devolves upon-the stockholders and officers for the tóme being. ■ • The vendee of stock, therefore, impliedly engages with his vendor that the assets shall be faithfully applied. And having purchased 'at a price determined by the excess of assets over liabilities, as between vendor and vendee, the lattei’, alone, should be burdened with the payment of debts. *

And it does no violence .to the faith in the securities upon which credit is given to the corporation. The transferable nature of corporate stock is universally understood. A creditor has no right to expect that the stock, will not be sold and bought. All that he has a right to expect is that the stock will not be fraudulently transferred, with a view to diminish liis security in. the individual liability of stockholders. And while he is entitled to the increased security which may be afforded by the succession of solvent to insolvent stockholders, be should submit to the diminished security of insolvent successors, where no bad faith has been practiced.

Johnson, J.

I fully concur in the foregoing opinion of Judge Mcllvaine. The difficult nature of the question involved, the importance of the case, and the effect of the opinion of the majority on the character and value of property in the state, represented by corporate shares, induce me to state briefly one or two of the reasons for my dissent.

Under the liberal policy of past state legislation, authorizing-corporations for almost every kind of business, having its inception and a large development under the constitution of 1802,. and a still larger one under that of 1851, a vast amount of the individual property of the state is represented by shares in such corporations.

Any legislation or any decision which materially affects the character and value of this species of property, heretofore so-liberally fostered and encouraged, is a matter of great public concern.

The constitutional provision under consideration was intended. to remedy an existing evil, and to provide an additional security to creditors. Prior to its adoption, there was no individual responsibility (except by legislative enactment in a few instances), of those who had the management of the corporate business. 'Hence the provision that: “ Hues from corporations shall be secured by such individual liability of the stockholders and other means as may be prescribed by law; but in all cases each stoelcholder shall be liable over and above the stock by him or her owned, and any amount unpaid thereon to a further sum, at least equal in amount of such stock.”

One of the peculiar and valuable features of corporate shares, arises out of their transferability without the vexatious restraints imposed upon the sale and transfer of partnership or other common property.

Prior to the adoption of this provision, it was well settled, that stockholders could dispose of their interest in the corporation by a sale of their shares, as fully as they could any other species of property, and by a transfer cease to be stockholders The transferee became a stockholder and the owner of the stock, charged with all duties and liabilities as such. He was invested with all the powers and rights, and was subject to all the responsibilities as if lie had been an original subscriber.

This alienable quality of corporate shares added greatly to their value. Of course, a sale to hinder, delay, or defraud creditors, did not release the assignor, any more than a like sale of other property; but a bona fide sale was just as valid as a like sale of other property.

The scope and intention of the constitutional provision and the statute were simply to further secure creditors when the assets of the corporation were insufficient to pay all debts, by imposing a liability on the owners of the shares of stock, at least, equal to its par value. The liability at common law was to lose the investment. This loss fell on the owner of the stock, not on the assignor’. In addition to this loss, the object of the statute, as well as this constitutional provision, was to impose upon the same person an individual liability.

It is a misnomer to call one a stockholder ” and the owner of stocks,” and so liable to assessment, who has long since ceased to he such by a bona fide sale and transfer. The transferees are such stockholders and owners in fact and in law, and are entitled to represent this stock in all proceedings of the corporation.

The statute containing this liability clause, clearly shows, in other clauses on the same subject, that this is its true meaning.

The corporators, their associates, meoessors and assigns, are clothed with all corporate powers, and as a legal consequence, are charged with all the duties and liabilities imposed on owners of stock. The obligations and duties of stockholders go hand in hand with and are inseparable from their rights and privileges.

Section 7 of this act gives a statutory remedy for the collection of unpaid stock, and makes the transferee or assignee liable.

In case of a sale, the assignee by that section is the stockholder and owner, made liable in case the stock does not sell for sufficient to pay the amount due. This unpaid amount on stock is the same debt mentioned in the .constitution and in the liability clause of this statute as unpaid stock, and the person who is liable under the one as an owner, is liable under the other. Under section Y, it is the assignee in case of a sale that is liable as the owner, and for equally strong reasons, the same meaning should be given to the liability clause, both being used in reference to the same subject matters.

Again, sound principles of justice would dictate, that those who are in law the stockholders for the purpose of receiving' dividends and enjoying the rights incidental to ownership, should be liable to pay the losses, when by their mismanagement, fraud or from other causes, the creditors go unpaid.

This statutory liability is collateral and conditional. It can only be resorted to in equity, when the assets of the corporation prove insufficient. Wright v. McCormack, 17 Ohio St. 86; Umstead v. Buskirk, 17 Ohio St. 113.

.Being collateral and conditional, no primary liability attaches, or can attach, when the debt is created. No liability attaches, nor does any right of action accrue to creditors, until the condition happens that fixes the liability. To hold that this liability attaches to those who are stockholders when the debt is contracted, and that in case of a transfer the creditor must first exhaust the assignee when the contingency arises, presents an anomaly. It compels the creditor to resort to a stranger to his contract before he can pursue the man he trusted.

Again, if the assignor is liable in case of default of his assignee, he is guarantor of the solvency of the latter, when the time arrives to resort to the stockholders. He becomes liable for an indefinite period for the conduct of stockholders over whom he has no control.

Much stress is laid upon the assumed, not actual, fact that every creditor looks to the stockholders when he trusts the corporation. Admit that this is so, yet ho also is presumed to know, that each stockholder has the right at any time to retire, and it may be properly said, he trusts the corporation, subject to this right of transfer.

If such a contingent liability is to hang over • a stockholder for an indefinite period after he has parted with his stock and lost his power to control, no prudent man will care to invest in such shares.

If, on the other hand, we apply the same rules that govern the alienation of other property, and that governed the sale and transfer of stock prior to this provision of the organic law, we preserve the harmony of the law relating to sales of all other property.

For these and other reasons that I have not time to write out, I dissent from the opinion of the majority. ,  