McNeal Pipe & Foundry Co. v. Samuel R. Bullock & Co.

Citations

• 174 Pa. 93
• 34 A. 594
• 1896 Pa. LEXIS 852

Syllabus

<p>Corporation — Capital stock as trust fund for creditors.</p> <p>The capital of a corporation is a trust fund for the creditors of the company, but not for the creditors of contractors who construct the plant of the corporation.</p> <p>A water company entered into a contract with a firm, of contractors to construct its plant, agreeing to deliver to the contractors as the work progressed a large amount of the stock and bonds of the water company. The contractors borrowed money from a firm of bankers on their notes, giving the bonds of the water company as collateral security. Subsequently the contractors, the bankers and a firm of pipe manufacturers, who were the creditors of the contractors, entered into a tripartite agreement by which the bankers were to advance to the pipe manufacturers a large sum of money, and the latter were to complete the water plant. The securities of the water company were to remain in the hands of the bankers and the pipe manufacturers to secure them in completing the contract. The contractors subsequently became insolvent, owing plaintiff a large sum of money for supplies furnished for the water plant. Plaintiff filed a bill in equity against the three parties to the tripartite agreement and the water company, praying that the securities of the water company should be declared a trust for the construction of the plant, and that the plaintiff be decreed subrogation under the tripartite agreement, or that the agreement be declared fraudulent and void as to the plaintiff. Held, (1) that the water company owed no duty to the plaintiff, because it owed it no debt; (2) that the tripartite agreement involved no actual or constructive fraud affecting the plaintiff’s rights; (3) that the securities of the water company in the hands of the contractors or their transferees were not affected by any trust in favor of the plaintiff; (4) that plaintiff had no equity which would entitle it to subrogation as a party to the tripartite agreement; (5) that