Case Name: Boice v. Hodge et al.
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1894-04-24
Citations: 51 Ohio St. 236
Docket Number: 
Parties: Boice v. Hodge et al.
Judges: 
Reporter: Ohio State Reports, New Service
Volume: 51
Pages: 236–239

Head Matter:
Boice v. Hodge et al.
Corporations — Stockholder's liability.
A holder of stock in an Ohio corporation, who transfers his stock after a corporate debt has been created, is not relieved from his statutory liability for such debt, by an agreement for an extension of the time for its payment; although such agreement be made by the corporation and creditor after such transfer, and without the knowledge or consent of the transferrer.
(Decided April 24, 1894.)
Error to the Circuit Court of Lucas county.
This action was brought in the Lucas county court of common pleas by William R. Hodge, on behalf of himself and other creditors of The Toledo Mower and Reaper Company, a body corpor ate under the laws of Ohio, against said corporation and its stockholders, to enforce the statutory liability of the latter.
The' cause was taken to the circuit court by appeal, and upon the trial there the plaintiff in error established the fact that all of the debts of the company had either been contracted after he had ceased to be a stockholder, -or (if contracted before), had been renewed afterwards, and the time for their payment extended without his consent. The circuit court held that the renewal, after he had sold and transferred his stock, of a debt of the corporation created while he was a stockholder, did not discharge him from liability, although the debt was renewed and the time for its payment extended without his consent.
To reverse this holding the present proceedings were instituted.
Swayne, Swayne & Hayes, for plaintiff in error.
Baker, Smith & Baker and E. W. Tolerton, for defendants in error.

Opinion:
Bradbury, J.
The only question arising upon the voluminous record in this cause, which we deem of sufficient general interest to consider, is that growing out of the refusal of the circuit court to relieve the plaintiff in error from liability on account of debts of the company created while he was a stockholder, the time for the payment of which had been extended, by renewals, after he had disposed of his stock. If a holder of the stock of a corporation is a surety, merely, in his relation to the corporate debts, and his liability is to be measured by the rules of law which g'overn that relation, then an extension by a creditor, of the time for .the payment of a corporate debt, by its renewal after a stockholder had ceased to be such, and without his consent, would relieve him from liability for its payment. Slagle v. Pow, 41 Ohio St., 603; Bank v. Leavitt, et al., Adm'rs, 5 Ohio, 207.
That the liability of a stockholder for the corporate debts in this state is secondary — that is, cannot be resorted to by the corporation creditors until the corporate assets are exhausted, or cannot be reached by the ordinary processes of law— was established by the case of Wright v. McCormack, 17 Ohio St., 86.
This, however, is not a test of the question, for in many cases — in fact usually — the creditor may pursue the principal debtor and his surety, contemporaneously, or even pursue the surety in the first instance, under some circumstances. Wilkins v. Bank, 31 Ohio St., 565; Brandt on Suretyship, section 97.
The liability of the stockholders is founded upon section 3 of article XIII, of the constitution of 1851, and'section 3258 of the Revised Statutes. The subject was of'sufficient importance to have thus secured the attention of the convention that framed our present constitution, and, we think that in view of this constitutional provision, and the legislation founded upon it, the principle of holding stockholders of corporations liable for corporate debts is within the public policy of the state, and that the statute should be construed so as to constitute it a substantial provision for the benefit of the corporate creditors.
One who contracts with a corporation may be presumed to have kept these beneficial provisions in mind at the time. It was his privilege to in quire and ascertain who then constituted the 'corporate body, and investigate their pecuniary responsibility. To require him, however, at his peril, to examine its books every time he may be invoked to renew an existing debt, and ascertain if changes in the corporate membership have occurred since the debt was created, and if so, investigate the comparative pecuniary ability of the new, as compared with that of the old stockholder, would seem to us a long stride in the direction of - nullifying by construction, these constitutional and statutory provisions which, at best, involve much difficulty and delay in their application. The question has received the attention of the courts of a number of the states, Harger v. McCullough, 2 Denio, 119; Hanson v. Donkersley, 37 Mich., 184; Jackson v. Meek, 9 S. W. Rep., 225 (Tenn.); and incidentally touched in some other cases. The decisions have been conflicting.
In Wheeler v. Faurot, 37 Ohio St., 28, and Harpold v. Stobart, 46 Ohio St., 397, this court recognized the conflict among' the authorities upon the question, but did not And it necessary to determine it. In Taylor v. Wheel Co., 9 Am. Law Rec., 28, the court of common pleas of Logan county held that the extension of a corporate debt by a renewal did not discharge a stockholder who was liable as such for the original debt, but who had transferred his stock before the time for payment had been extended, by a renewal of the note. This rule, we think, is in harmony with the spirit of the constitutional and statutory provisions of this state prescribing the liability.
Judgment affirmed.