Peter v. The Union Manufacturing Co. et al. Besides the case of Sturgis v. Stetson, 1 Biss., 246, above cited, we cite following: Wood v. Dummer, 3 Mason, 308: Sawyer v. Hogg, 17 Wall., 610; Upton V. Tribilcock, 91 U. S., 45; Sanger v. Upton, 91 U. S., 56. Both of which last two cases are quoted with approval by this Court in the Rouse case, 46 Ohio St., 503; Chubb v. Upton, 95 U. S., 665; Hawley v. Upton, 102 U. S., 314; Scoville v. Thayer, 105 U. S., 143, Flynn v. Bagley, 7 Fed. Rep., 785; Handley v. Stutz, 139 U. S., 417; Camden v. Stuart, 144 U. S., 104; Brigham v. Mead, 10 Allen, 245; Sawyer v. Hoag, 17 Wall., 610; Webster v. Upton, 91 U. S., 65; Pullman v. Upton, 96 U. S., 328; County of Morgan v. Allen, 103 U. S., 498; Hawkins v. Glenn, 131 U. S., 319; Graham v. Railroad Co., 102 U. S., 148 161; Richardson v. Graham, 134 U. S., 30. The English cases seem formerly to have held that a contract of a corporation to issue its shares at a discount is either absolutely void or absolutely good, and that in neither case could any action be maintained to compel payment of its par value: De Beville case, L. R., 7 Eq., 11; Ince Hall, etc., Co., L. R., 23 Ch. Div., 545; Plaskynaston etc., Co., L. R., 23 Ch. Div., 542; Baglaw Hall, etc., Co., L. R., 5 Ch., 346; Waterhouse v. Jamison, L. R., 2 H. L. (Sc.), 29; Currie's case, 3 De G., J. & S., 367; Carling's case, 1 Ch. Div., 115; Smith Middlings Purifier Co. v. McGroarty, 136 U. S., 241; Hollins v. Brierfield Coal Co., 150 U.S., 371; Brown v. Grand Rapids Furniture Co., 58 Fed. Rep., 290; Callahan v. Windsor, 78 Iowa, 193; Republic Life Ins. Co. v. Swigert, 135 Ill., 150; Stein v. Howard, Peter v. The Union Manufacturing Co. et al. 65 Cal., 616. Van Cott v. Van Brunt, 82 N. Y., 535; Taylor on Corporations, section 545; Christensen v. Eno, 106 N. Y., 97; Beach Private Corporations, sections 561-562; Morawetz Corporations, section 818; Cook on Stocks, section 42. The increase of stock was illegal; but holders of the increased stock who took it with knowledge of the facts which made it illegal must be held liable in all respects as if it were entirely valid, and are in like manner assessable for the purpose of paying the debts of the company. But purchasers of the increased stock who had no knowledge of the facts which rendered the increase illegal and never received any benefit from the stock or acted in any way as stockholders, are not liable as such. On the contrary such innocent purchasers of the increased stock are entitled to prove up as claims against the company the sums paid by them respectively therefor. Morawetz, vol. 2, section 763; Scoville v. Thayer, 105 U. S., 143; Veeder V. Mudgett, 95 N. Y., 295; Kansas City Hotel Co. v. Hunt, 57 Mo., 126; Insurance Co. v. Horner, 17 Ohio, 407; Vorhees v. Receivers, etc., 19 Ohio, 463; Clark v. Thomas, 34 Ohio St., 46; Upton v. Hansbrough, 3 Biss 417. That the corporation is liable to holders of spurious stock was held in Bank v. Curtis, 99 Penn. State, 344. Tome v. Parkersburg, etc. Co., 39 Maryland, 36, N. Y. & N. II. R. R. Co. v. Schuyler, 34 N. Y. 30; Bruff v. Mali, 36 N. Y. 200; Kennedy v. Panama etc. Mait Co. L. R. 2 G. B., 579; Gomperty v. Bartlett, 75 C. L. R., 849; Addison Contracts, 2 Edn., 152; Benjamin on Sales, Bennett's {th Ed., section 608; Spring Co. v. Knowlton, 103 U. S., 49; Wood v. Sheldon, 42 N. J. L., 421; Gurney v. mersley, 82 C. L. R., 132. Wo Peter v. The Union Manufacturing Co. et al. That in no event can those purchasers of discount stock, who are also creditors, be relieved from assessment for the unpaid balance of their stock to the extent that such assessment may be necessary for the purpose of paying their own debts, and that the original stockholders who paid par for their stock cannot be held for the payment of these debts until such assessment has been exhausted. There is another point of view from which this error will be manifest. If there is one thing better settled than another in this class of cases, it is that the statutory liability is the ultimate resource of the creditor. The stockholder has a right toinsist that all other assets, including liability for unpaid stock, shall be exhausted before the statutory liability is enforced. Wright v. Mc Cormack, 17 Ohio St., 86; Brown v. Hitchcock, 36 Ohio St., 667; Bonewitz v. Bank, 41 Ohio St., 78; Barrick v. Gifford, 47 Ohio St., 180. The original stockholders who paid par for their stock have certainly therefore the right to require the creditors to exhaust any assets, which these innocent stockholders are not estopped from claiming to exist for the payment of their claims before any assessment is levied on the statutory liability. The Circuit Court erred in ignoring this fundamental equity. BRADBURY, J. This action was brought in the court of common pleas of Lucas county by a creditor of the Union Manufacturing Company, an insolvent corporation, for the purpose of reaching certain alleged unpaid subscriptions to its capital stock, and to enforce against its stockholders their statutory liability. Peter v. The Union Manufacturing Co. et al. The cause was taken to the circuit court on appeal and there tried on its merits. That court stated its finding of facts separately from its conclusions of law. A number of questions arising out of this finding were argued by counsel at considerable length and with much force and ability. Upon two of those questions this court does not concur in what seem to have been the views of the circuit court. We are by no means certain, however, at least as to one of these questions, that the difference of opinion between the circuit court and this court does not arise out of a different construction, made by the courts respectively, of the finding of facts rather than out of different views of the law applicable to such facts. Be this as it may we will state the conclusions to which we have arrived respecting these two questions; concurring, as we do, with the circuit court upon all the other questions made, we do not regard them of sufficient importance to discuss in this opinion. The two questions considered, are: 1. The relative rights and liabilities of certain stockholders to whom stock was issued at a discount, and those who subscribed and paid par, for their stock. 2. The liability of William Peter to be assessed under the statute on account of certain shares of stock that he transferred to an insolvent transferree, his purpose in the transaction being to escape liability thereon. The unpaid subscription sought to be reached, consist of the difference between the par value of certain stock of the corporation issued at a discount, and the price that was in fact paid. This Peter v. The Union Manufacturing Co. et al. difference made a large sum. The number of shares of stock disposed of at a discount was greater than five thousand, of a par value exceeding $500,000. A small number were issued at fifty cents on the dollar, a few at twenty-five cents on the dollar, but from the other shares, substantially all of them, only twenty cents of the dollar of their par value was realized. The transactions by which this stock was issued took the form of sales, instead of subscriptions, the usual method by which corporations issue their stock. The discount suffered by the corporation on account of these sales of stock below par-that is, the difference between its par value and the sum realized by the corporation-was approximately $400,000. If the purchasers of this stock should be held to owe the corporation this difference, the fund realized from this source should be exhausted before resorting to the statutory liability of stockholders; because being assets of the corporation it is primarily liable for the corporate debts. Wright et al. v. Mc Cormack et al., 17 Ohio St., 86. Wehrman & Co. v. Reakert et al. 1 C. S. C. R. 230. The circuit court did not hold the purchasers of stock at a discount absolutely liable for the entire difference between the discount price and its par value, but did hold them "liable on said stock as and for unpaid stock subscriptions to its par value, less what has been paid the company for it, so far and so far only as may be necessary to pay the claims of those creditors of the company who be come such after the issue and delivery of such stock and without notice that said company had issued said stock at less than its par value.” * * * |