Page:The Green Bag (1889–1914), Volume 19.pdf/433

 THE GREEN BAG is adaptable to the case of every corpora tion having the characteristics indicated above, formed under a general statute, and having power under the statute to amend its cliarter so as to cancel the exclusive voting power. Our assumption is that this exclu sive power has been fraudulently abused, and that there is no express or reserved power in the charter by which the non voting stockholders or members may cancel the exclusive voting feature. The remedy proposed is analogous to that found in the decree of the lower court in the Northern Securities Case, 120 Fed. 721, 732-733, affirmed on appeal in 193 U.S. 197, 354-355. The gist of that action was the conspiracy of the defendant individuals and the illegality of the defendant company; illegal in its inception and necessary opera tions, because a corporate instrument cre ated by the individuals to evade the Anti trust Act of 1890. The bill was directed at the life or living functions of the defen dant company, and the decree restrained it from exercising those functions, but added a proviso that nothing therein should pre vent the company from returning the stock of the constituent companies in cancella tion of its own stock outstanding. This was merely a new application of equitable prin ciples and remedies long established. In the case of the Equitable Life, or of any other corporate trust so created and abused, the corporate organism itself becomes the direct object of attack, which must be de stroyed or radically reformed by whatever means are best adapted to that end. The statute under which it was created, the sovereign consent that gave it being, con sents also to its reformation by act of the parties inter se, and it is within the power of the court acting in personam to make this reformation a condition of its further existence. Manifestly where the trust exists and by reason of the fraud, the right to the exclu sive control has become forfeited, its con tinued exercise is a continuing injury to the

cestuis que trustent, and the existing manage ment and exercise of corporate functions {which is the exercise of the trust) is the very thing that they have a right to attack and enjoin. A court of equity has ample power to restrain corporate acts, and acts of. offi cers and stockholders, in violation of equi table rights. It may use these powers in furtherance of an equitable remedy. It may, therefore, in the case supposed re strain the officers representing the trust con trol from further handling the assets of the corporation, and it may restrain the stock holders having this control from voting upon their stock. But it may also, to make the remedy fit the wrong, add to its decree a proviso, permitting these stock holders to amend the charter, so as to cancel the exclusive control, and restore to all the members of the corporation that voice in the management of their own property, which is the normal incident of ownership and the surrender of which is the essential element of a trust; further providing that such an amendment of the charter shall satisfy the decree. When this is done, the appropriate remedy is complete. The trust is revoked, but the corporation and its busi ness, and in the case of the Equitable, the policies and insurance rights of the policy holders are saved. Some question is made as to the nature and extent of the voting power thus to be given to the members of the corporation. In the case of a stock corporation, the one share one vote principle is now recognized as the normal rule. In the case of the in surance company, we are thrown back on the common law rule giving each member one vote. In either case recourse must be had to the statute. Sec. 52 of the amended insurance law in New York expressly authorizes the amendment of the charter of a domestic mutual stock corporation giving to the policyholders the right to vote in the election of anv or all of the directors.1 1 L. 1906, ch. 326, sec. 13.