Page:The Green Bag (1889–1914), Volume 18.pdf/422

 STOCK WITH EXCLUSIVE VOTING POWER

391

are as to the policyholders the trustees of this control. Both the stockholders and policyholders are in legal contemplation "parties" to the charter whose legal rela tions are defined in it. As a general propo sition, based upon the cases cited, these relations and the rights of the parties grow ing out of them are contractual, and these rights and their acts are to be determined, not by the test of the formal shadow, but by the substance which it represents or effects. While the form may affect the remedy, it will not defeat it, and in the absence of a remedy, regarding the form, the form will be disregarded, and a remedy found based upon the substance. Where precedents fail, and modern con ceptions prove a bar to effective justice, it may still be possible to fall back on general principles and inherent equities, and bring to light the residuum of the chancery powers that at one time exercised a salutary control

not only over the soulless corporation, but over the acts and consciences of individual men, whose legal rights, resting on precedent when they shocked the consciences of the chancellor, became subject to his restrain ing hand. Certainly this would be prefer able in public policy to the sight of lawyers and judges standing helpless before this "divine right of property," claimed, exer cised, and defiantly abused by a captain or brigand of modern finance. Public opinion may prove an effective substitute for law, but when it does so, and is so considered, then the promise of beneficent anarchy will seem capable of realization. It lies of course with the legislature to make new laws, but it is or should be within the equity power of the courts to prevent the perpetu ation of fraud whatever the form or author ity to which it clings. »

NOTE. — Since the above article went to press, the new charter of the Equitable Life Assurance Society has been adopted by its stockholders and directors. This charter gives to the policyholders owning $400,000,000 of its assets, the right to elect twenty-eight directors, leaving twenty-four to be elected by the $100,000 stock — a clearly inadequate and seemingly deceptive remedy. It repeals the plain provision authorizing mutualization by a vote of the directors (see Art. 4 of Charter supra) and the more essential provisions of Article 6, upon which all proprietary rights of the policyholders have always rested. This article as amended, provides only that " The insurance business of the Company shall be con ducted upon the Mutual Plan " and omits the provisions giving " each policyholder ... an equitable share " of the Society's surplus, thus taking from the policy-holders their existing mem

bership in the corporation and the beneficial ownership of its assets, and leaving them only such contractual interest in the insurance fund as is given by their policies within the broad limits of " the mutual plan," an interest which under the decision in Greeff v. Equitable Life Ass. Soc., 160 N.Y. 19, does not necessarily attach to the surplus of $80,000,000. With new force and meaning, the amended charter reaffirms the provisions of Article 3 (relating to the stock) that "The earn ings and receipts of said Company over and above the dividends, losses, and expenses shall be accum ulated." Under Sec. 83 of the Insurance Law as amended this year, an annual distribution of surplus is provided for future policies, but it is not clear that this protects present policyholders in the present surplus, or takes the place of the charter provisions thus omitted.

NEW YORK, N. Y., June, 1906.