THE EQUITABLE LIFE ASSURANCE SOCIETY This trust differs in form from an ordi nary trust. The legal title is placed in the corporation, the control in C, and the own ership in A. and B. The corporation in its control, in its' officers and management, is the creature of C.; in its business and assets it is the property of A. and B. A. and B. are not in any event entitled to the stock of C. C. has no title or control over the stock of A. and B. This stock as to each represents primarily the property rights of each in the corporation. C.'s stock repre sents a nominal ownership of or claim upon its assets, together with the exclusive vot ing power. The stock of A. and B. repre sents the substantial ownership of the entire assets of the corporation, perpetually de prived of any voting power. The vesting of the voting power in C, the denial of that voting power to A. and B. whose property is the property of the corporation, estab lishes the relationship of a trust between the two classes of stock, and between the owners, for the time being and successively, of the two classes of stock, each divisible and transferable, and the stock represents the rights — as well as the duties — of each in the corporation, and against and toward each other. The owner, for the time being, of this stock has the rights, owes the duties, and is subject to the liabilities belonging to or imposed upon the stock acquired and held by him, and a purchaser of the stock (certainly a purchaser with knowledge) takes it subject to these rights, duties, and liabilities, including the rights, duties, and liabilities against and to the other members of the corporation. In the case of the Equitable Life Assur ance Society with its $100,000 stock and $400,000,000 assets, the policyholders have all the rights of ownership and member, ship 1 except the right to vote. The origi1 Some question has also been made of the proposition that the policyholders are in fact members of the Equitable Life Assurance Society, a proposition that can be very readily established, even apart from the fundamental proposition that
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nal charter provided for a periodic ascer tainment of the surplus or profits and that "each policyholder shall be credited with an equitable share of the said surplus." 1 The exclusive voting control given to the stock has been notoriously abused, and this abuse has, it is believed, given to the policyholders a definite fixed right to the cancellation of the trust existing in the stock, and to be restored to their full right of joint management of. their own property which they surrendered (while retaining ownership) when they placed it with the society under its original charter. The conclusion that a remedy existed in favor of the policyholders was as far as the writer went in his former article on this subject. It is now desired to suggest a specific remedy, the idea of which has grown out of an effort to apply the foregoing views to a pending case. This remedy, if allowed, ownership is the common law test of membership in a corporation. It will not be denied that in an ordinary stock corporation having $100,000 preferred stock with exclusive voting power, and $400,000,000 common stock without voting power, the common stockholders are members of the corporation. Now, there are three recognized classes of insurance corporations; stock corpora tions, mutual corporations, and "mixed" corpo rations, the latter including all those in which both stockholders and policyholders have a pro prietary interest and membership. Most of the "mixed" corporations are formed under the New York Act of 1853, under which the Equitable is formed. Their chief characteristic is a mini mum stock, contributed as the security fund re quired by this act, and either a joint ownership of assets between stock and policies or an exclu sive ownership by the policies, as in the case of the Equitable, with, in most cases, some conces sion of voting power to the policyholders. The original Equitable charter provided that merely by a vote of the directors the policyholders might be given the voting power. It also made the policyholders the owners of the assets. It can hardly be seriously contended that under this state of facts the Equitable policyholders are any less truly members than those of the other "mixed " companies, or than the non-voting common stockholders of the corporation instanced above. 1 See article in Green Bag, July, 1906.
