390
THE GREEN BAG
gentlemen right, and is the moral wrong legally protected? It is to be noted that the actions already brought against Mr. Hyde charge him for his unlawful gains acquired as a director. It yet remains for the' management or the policyholders to sue him on his possibly greater liability for all that he has acquired directly or indirectly through his control of the stock ownership. Our second question — have the courts power to in any way restrict or cancel the control vested in this so-called voting stock, on proof of its fraudulent abuse? — is one of greater importance and even greater difficulty, to which we must look long for an almost hopeless answer. Starting with the clear and hopeful recognition of the fact that a trust relation exists, we land hard and roughly against the stone wall of a body corporate, supported by precedent and principle in the claim that its chartered organization is inviolable against judicial attack. Certainly it seems without prece dent that a court of equity should amend a corporate charter, to take away the voting power from the class holding it under the charter, or should enjoin the voting by such class merely on proofs of past abuses, and give power to vote to another class, or should name its own trustee to cast such vote and thereby control the management and business of the corporation. In all these respects our courts are in a degree controlled both by precedent and by statute. The Philadelphia Savings Institution case affords an instance of so-called "stock holders" in a similar institution, whose "stock" represented a mere security fund, not entitled to a share in the management. But it would seem impossible for our courts, by reason of the wrong of Mr. Hyde, to deprive the minority stockholders of the right to vote, a right of little value so long as the majority stock is held by one man. The least impracticable remedy in the exist ing state of affairs would probably be an act of the legislature, authorizing a court upon proof of fraud by the holder or holders
of a majority stock, to transfer to the policyholders the voting power of the stock par ticipating in such fraud. Such an act lias been suggested to the chairman of the New York legislative investigating committee, and one of the remedial measures proposed is apparently based upon the principle suggested by it, that this control can only be taken away by a judicial proceeding based upon the recognition of the trust and of its unlawful abuse. The question is one of great difficulty, if any effective remedy is to be found. We pride ourselves in these latter days upon our legal ingenuity in using or abusing the form and license of incorporation, but these astute gentlemen of '59 evolved a corporate puzzle before which we stand in awed confusion. Neither more nor less than a trust cloaked and shielded in a corporate guise, it bids defiance to an array of legal precedents that cannot touch it. We can not, however, admit that our courts are in fact powerless to deal with the situation It is this very defiance, this very fact of an anomaly that evades us, that calls upon the courts, without the possibility of a refusal, to find a remedy that will be both adequate and sound. The legal relations involved in a corporate form are generally simple, and our precedents and principles are based very largely upon the ordinary corporate form. But this form, we now observe, is not stereotyped, and the legal relations may be quite com plicated. They may effect a trust relation ship such as we are considering, in which recognized principles and precedents fail to effect substantial justice. The Equitable Life Assurance Society as a legal entity is not, as has been suggested, the trustee for its policyholders. It has not made, and cannot make, any profits that do not belong to the policyholders. Its assets, as a corporation, belong to them as its beneficial "members." The stock holders holding the "legal title" to the control, without the beneficial ownership,
