The opinion
Edward T. Bartlett, J.
(dissenting). I agree with the views expressed by Judge Yarn in reference to the following important questions presented by this appeal. The opinion states that the primary question is whether the legislature had power to pass the act of 1906, and adds after discussing the question in detail: “Our conclusion upon the primary question involved is that both by the Constitution and the Revised Statutes the Legislature has the reserve power to so amend the law under which a charter has been taken out as to carry with it a corresponding amendment of the charter itself, either directly, or by authorizing the corporation to make the . change.”
The opinion further states: “We think the act of 1906, so far as it is now before us, is a valid exercise of legislative power, forbidden by neither State nor Federal Constitution,”
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The opinion also states in substance that where the legislature authorizes a course of procedure, whereby a charter may be acquired, or amended, “ action in conformity thereto does not create the charter or make the amendment, but both come into existence through the operations of the statute. ”
I am unable, however, to agree with the views expressed in the opinion, as follows: “ We now reach the final question. The Legislature authorized the directors of the defendant to enfranchise policy holders, with the consent of stockholders holding at least a majority of the capital stock. The stockholders owning 667 shares out of 1,000 in all, voted for the amendment, while those owning 114 shares, including the plaintiff's testator, voted against it. Thereupon the directors by the unanimous vote of all who were present, thirty-three in number, adopted the amendment, which conferred upon policy holders the right to vote for twenty-eight out of the fifty-two directors and limited stockholders to the right to vote for but twenty-four.”
Without further quoting from the opinion it is in substance held that the power given the original stockholders to vote for all of the directors is a vested property right of which they cannot be deprived; that the act of 1906, so far as it seeks to accomplish this result, ought not to be upheld.
I am unable to agree with this statement of the law as applied to the facts disclosed by this record. This case in many of its features is
sui generis.
There are upward of five hundred thousand outstanding policies of insurance; amount insured nearly a billion and a half of dollars; gross surplus upward of $80,000,000 ; accumulations for the benefit of policyholders upwards of $410,000,000. It is argued on behalf of the plaintiff not only that the right of the stockholders to vote for a majority of the directors is a property right oi which they cannot be deprived, but that the policyholders of the defendant are merely creditors. In the light of the impressive figures above quoted, it is very clear that the law governing the rights of directors as applied to such corporations as railroads and other business companies has no appli
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cation to the case at bar. The policyholders are in no legal sense mere creditors, but are the real parties in interest and the beneficiaries of the vast accumulations of the Equitable Company; at least this is the fact so long as the corporation is a going concern. The capital stock of the defendant is $100,000, divided into one thousand shares of $100.00 each. At the time of its incorporation under the General Insurance Law of 1853, as in force in 1859, the entire amount of the capital was deposited with the comptroller of the state, apparently as a guaranty fund. The fund necessary for conducting this, enormous business during these many years last past was furnished by the policyholders. The charter of the company provided, among other things, that the holders of the capital stock might receive a semi-annual dividend on the same not to exceed three and one-half per cent; in other words, these original stockholders were limited in the aggregate to a return of seven thousand dollars a year on their investment.
It seems very clear under the facts here disclosed that it was never contemplated that these original stockholders and their successors should be entitled-to the perpetual control of the business of this society. At the time the affairs of the defendant were examined by the superintendent of insurance it was disclosed that one young man held a majority of the stock and was practically in control. The situation was relieved by the consent of this stockholder to join in the creation of a stock trust which has been declared valid.
I agree with the argument of the learned counsel for the respondent that the original charter of the Equitable did not contemplate a perpetual control of the society, or a perpetuai right to elect directors thereof, since it was provided in article IY of the charter that “At any time hereafter the board of directors after giving notice at the two previously stated meetings, by a vote of three-fourths of all the directors, may provide that each life policy holder who shall be insured in not less than five thousand dollars, shall be entitled to one vote at the annual election of directors, but such vote etoU be in person and not by proxy.” This amendment 9Í
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the charter made it possible, by a change in electing directors, to deprive the stockholders of the right to control the society, or to elect the board of directors.
The respondent’s counsel further argues that the charter, as amended by the law of 1906, is “less radical than the change provided for in the original charter, since it retains for the stockholders the right to elect twenty-four of the fifty-two directors, instead of conferring upon policy holders the right to vote for all of the directors as provided by the original charter. It removes the restriction as to the amount of policy, so as to give the policy holders the right to vote without regard to amount, and it authorizes the vote to be given by proxy as well as in person, and in these respects is more liberal than the scheme provided for by article IY of the original charter. The point on which we insist, however, is that the original charter anticipated that in some form and to some extent the power to elect directors might be given to policy holders by the board of directors, and to that extent the right to elect directors might be taken from the stockholders. It is, therefore, evident that the right to elect directors was not regarded by the original subscribers as an inalienable or perpetual property right, but as a right which might be taken from them in the future.”
I am, therefore, of the opinion that the act of 1906, in so far as it authorizes the policy holders to vote for twenty-eight out of the fifty-two directors and limits stockholders to the right to vote for but twenty-four, is constitutional and should be sustained. Notwithstanding the fact that I agree with my brother Yann as to the disposition made by him of several of the important questions in this case, I dissent from the decision about to be made.
Cullen, Ch. J., Werner, Willard Bartlett, Hiscock and Chase, JJ., concur; Edward T. Bartlett, J., reads dissenting opinion.
Order and judgment reversed, etc.