Lord v. Equitable Life Assurance Society of the United States

Woodward, J.: There are two appeals in this case, one from an interlocutory judgment overruling the demurrer of the defendant, the ground stated being that the complaint failed to state facts sufficient to constitute a cause of action, and the other from an order granting a grelmiaary injunetion. It is conceded by all of the parties that if — 254 — the fact's set foi’fch in the complaint are sufficient to constitute a cause of action, then the preliminary injunction is within the discretion of the court at Special Term, and ought not to be disturbed. It will not, therefore, be necessary to devote any part of the discussion to the .order of injunction, and we shall confine ourselves to the questions of law presented upon the appeal from the interlocutory judgment. 'Several parties have been permitted by order of the court to intervene, but no new questions are presented by such interveners, so that the controversy will be treated as between the plaintiff and the defendant, The Equitable Life Assurance Society of the United-States. ■ ... The Equitable Life Assurance Society of the United States was incorporated in 1859, under and in pursuance of the laws of this State relating to corporations, and more especially .under the provisions Of chapter 463 of the Laws of 1853, and amendments thereto. The.plaintiff is the owner and holder of tliirty-six shares of the capital stock of the defendant, twenty-three of which were subscribed for by plaintiff’s father, Daniel D. Lord, he being one of the original corporators. Upon the organization of the defendant society the corporators filed a declaration with the Comptroller of the State, signed by each of them, setting forth their intention to form a company for the purposes named in said act, which declaration" comprised a. copy; of, the charter the said corporators proposed to adopt. This declaration, with the copy of the proposed charter, was submitted. to the Attorney-General of the State in the manner pointed out by the statute, and all of the steps were taken necessary to complete the organization of the company and to launch it in a business career, with a paid-up capital-stock of $100,000, which sum was, ■under the provisions of law, deposited with the Comptroller of the State as a guaranty fund for the benefit of those who should take -out policies of insurance. The charter, after declaring that the Company should bé entitled to all the rights and privileges provided by the statutes, and that it should be subject to all of the obligations ■ imposed by law, provided that the capital- of the defendant should ..-be. $.100,000 in cash, divided into 1,000 shares of''$100 each, which . should be personal property transferable only on the books' of the .-company, in conformity - with its by-laws;. that the holders of the isaid - capital stock might receive a semiannual dividend on the stock — 255 — not to exceed three and one-half per cent; that the earnings and receipts of said company over and above the dividends, losses and expenses thereof, should be accumulated ; that the corporate powers of said company should be vested in a board of directors and should be exercised by them and by such officers and agents as they might appoint; that the board of directors should consist of fifty-two persons, a majority of whom should be citizens of the State of Hew York, and each of whom should be the proprietor of at least five shares of the capital stock of the company ; that the said directors should be chosen by ballot; that a plurality of votes should elect, and that in the election of directors every stockholder in the company should be entitled to one vote for each share of stock held by him and that such vote might be given in person or by proxy. It was likewise provided that at any timé after the incorporation of the. defendant, the board of directors thereof might, after giving notice at the two previous stated meetings of the said board, by á vote of three-fourths of all the directors, provide that each holder of. a life policy of the defendant, who should be insured by the defendant in the sum of not less than $5,000, should be entitled to one vote at the annual election, and that such vote should be given in person* and not by proxy. ' It was also provided that the business of the company should be conducted on the mutual plan, which has been judicially declared to contemplate that the premiums paid by each member for the insurance of his property (or life) constitute a common fund, devoted to the payment of any losses that may occur ( Union Insurance Company v. Hoge, 62 U. S. [21 How.] 35,64); and to still further carry out the idea of mutuality, it was provided that the board of directors might, at stated intervals, determine the condition of the finances o.f the company, and, after making provision for all liabilities accrued and contingent, apportion' an equitable proportion of the surplus among the policyholders, the details of the plan having no particular bearing upon the question here presented. It is alleged, and admitted by the demurrer, that the business' óf’ thé company has increased each year and that there are at present outstanding upwards of 500,000 policies of life insurance written by the defendant, the amount insured aggregating a sum in excess of $1,495,000,000 .; that in éach and every year of such business of the defendant, its assets, .after.deducting all debts and liabilities, have .fully and suffi — 256 — ciently provided for all contingent liabilities upon its policies and otherwise, and that after such provision there has been each year a surplus of such assets over and above -ample provision for all liabilities, actual and contingent, and that these assets have steadily increased; that at the present time the gross assets of the company are sufficient to provide for all its debts and liabilities, actual and contingent, to abundantly secure and cover all liabilities to policyholders, and as -such policies shall mature and become payable, to pay the same off according to the terms of the said policies, and thereafter to provide and leave a large surplus of assets greatly exceeding the said original capital of $100,000, to which surplus and assets thus remaining it is claimed the holders of shares of stock of the defendant are lawfully entitled; that this surplus, which has been accumulated, amounts to upwards of $80,000,000 ; and while, this sum is not to be disposed of in this litigation, it is claimed on the part of the - plaintiff that the stockholders, as the equitable owners of the company’s assets, may not be deprived of the absolute control of this vast fund, as well as the general business of the company, by any change of the charter which shall admit to the voting privileges of the company the thousands of policyholders, as has been attempted by the board of directors. On the l-6th day of February, 1905, steps were taken on the part of certain persons prominently identified with the defendant, to bring about what they were pleased to call a ^mutualization of the Equitable Life Assurance Society of the United States. This movement went through various stages, resulting in the board of directors adopting a proposed new charter for the defendant, under the provisions of section 52 of the Insurance Law (Laws of 1892, chap. 690), as amended by chapter 722 of the Laws of 1901. The salient feature of this proposed new charter, and the one which the plaintiff seeks to prevent going into. operation, provides that of the fifty-two members of the board of directors, twenty-eight shall be chosen by the policyholders and twenty-four by the stockholders, the result to be brought about by the following method: Six of the vacancies occurring annually among the directors, by the expiration each year of the derm of office of one of said four classes, shall be filled by a plurality vote of the stockholders in the company, and each of said stockholders, in the — 257 — election to fill such vacancies, shall be entitled to one vote for every share of stock held by him, such vote to be given in person or by 'proxy. The other seven vacancies so occurring annually shall in like manner be filled by a plurality vote of the policyholders in the company, and in the election to fill such vacancies each policyholder in the company who shall have been such for at least twelve months prior to the date of such election, shall be entitled to one vote, which may be given in person or by proxy. In case the number of directors shall at any time be reduced to less than fifty-two, the numbers elected by stockholders and policyholders respectively, shall be in the proportion of six to seven; and these proportions shall not be changed without the consent of the holders of three-fifths of the stock of the company.” The broad question presented upon this appeal is whether the board of directors of the defendant has the power to take from the stockholders the ultimate power of control over the affairs of the Equitable Life Assurance Society, and vest such control in the policyholders; for it is obvious that if the policyholders may elect a majority of the board of directors under all circumstances, they may absolutely divest the stockholders of the control of the affairs of the company, and may thus, under the other powers vested in the board of' directors, distribute the surplus which has been accumulated in excess of the legitimate needs of safe insurance upon the mutual plan. The plaintiff urges that there is no power in the Legislature to authorize such a change in the management of the affairs of the defendant, and that if such power does exist it has not been exercised, and that the action of the board of directors is without warrant of law and void. The learned court at Special Term* has held with the plaintiff, relying particularly upon the lack of legislative power to amend the defendant’s charter;. and we are thus called-upon to consider the question of the limitations of the legislative power as fixed by the State and Federal Constitutions. Chapter 463 of the Laws of 1853, under which the defendant was organized, and under which, with its Amendments, it has been conducted, provided that any number of persons, not less than thirteen, — 258 — might, in the first department, associate for the purpose of forming a corporation to engage in life insurance and every insurance appertaining thereto or connected therewith,, .and to grant, purchase or dispose of annuities. By -section 3 of said act it was provided that these persons should be known as corporators, and they were required to file in the office of the Comptroller a declaration signed by each of the corporators, setting forth their intention to form' a company for the purposes named in the act, which declara- • tion was to comprise a copy of the charter proposed to be adopted by them, and the said charter was to set. forth the name of the" com •, • pany; the. place where it, was to- be located the kind of business .to be undertaken ; the mode and manner In which, the corporate powers were to be exercised; the manner of electing the trustees or directors and officers, a majority of whom • should be, citizens of this State, and the time of such election; the manner of filling vacancies; the .amount of capital to be employed, and -such other particulars as might-be necessary to explain and make manifest -the-objects and purposes of the company and the manner in which it was to be conducted. Other sections provided the details of perfecting the organization, but- they are not important to be considered here, and by section 11, “ all companies formed under this act shall be deemed and taken to be bodies corporate and politic, in. fact(and in name, and shall be subject to all the provisions of the Revised Statutes in relation- to corporations, so far as the same are applicable, except in regard to- annual statements, and other matters herein otherwise specially provided for.” At the time the defendant was organized, section 8 of title 3 of chapter 18, of part 1 of the. Revised Statutes (1 R. S. 600) provided that the “ charter of every corporation that shall -hereafter be granted by the Legislature, shall be subject to alteration,, suspension and repeal, in the discretion of the Legislature,” and it seems to be conceded that if this provision related ’"'to the defendant, it is conclusive upon the power of the Legislature to make changes in the corporate management 'of the company. But it is urged tiia,t life insurance companies organized under the provisions, of chapter 463 of the Laws of- 1853 are exempt from this particular provision "of the Revised Statutes, because of the exemption clause in section 11, and of the provisions of section 20 of the’ same act, which declares that “ every charter created by or — 259 — under the laws of this State for the purposes aforesaid, shall continue until repealed.” This, it is claimed, is one of the “other matters herein otherwise specially provided for,” within the meaning of section 11 of the act, and takes life insurance companies out of the control of the reserved power contained in the Revised Statutes. Our attention is called to the fact that the Legislature in the same year adopted, chapter 466, providing for- the incorporation of fire insurance companies, and that this act contains no similar provision to that of section 20 of. chapter 463 of the Laws of 1853, and that it does contain a provision in section 26 thereof reserving' to the Legislature the power to alter, amend or repeal the charter, and this is said to indicate an intention on the part of the Legislature to perpetually waive tlie right to alter or amend the defendant’s charter. We are not impressed with this reasoning; it seems to us entirely clear that the Legislature undertook in the two acts of 1853 to adopt an insurance law which should provide for two different classes of insurance, and that the provision of section 20 of chapter 463 of the Laws of 1853 was designed solely for the purpose of enabling life insurance companies to have the power to carry out their life contracts with policyholders, and not as a limitation upon the power of the Legislature or as a repeal of the Revised Statutes, in so far as they provided for the reservation of power in the Legislature to alter, amend or repeal the charters of insurance companies. Chapter 308 of the Laws of 1849, as amended, constituted the General Insurance Law up to 1853. Section 15 of that act provided that all “ charters formed or extended under this act shall be of thirty years’ duration each, except those of life insurance, but the Legislature may at any time alter, amend or repeal this act, or dissolve and provide for the closing up the business and affairs of any company formed under it.” Section 17 provided that all provisions, of the Revised Statutes in relation to corporations should apply so far as the same were applicable, the same as was provided subsequently in section 11 of chapter 463 of the Laws of 1853. When the Legislature came to separate the Life Insurance Law from the Fire Insurance Law, it provided that fire insurance companies might have charters which were to endure for thirty years, subject to the right of the Legislature to alter, amend — 260 — and repeal (Laws of 1853, chap. 466, § 26), and that the charters of life insurance companies should “ continue until repealed.” (Laws of 1853, chap. 463, § 20.) If we consider the nature of life insurance, that it is a continuing contract, and that each policyholder in the payment of his annual premium is not only' paying the insurance of the current year but is paying for the privilege of having the insurance continue when he could not get insurance, we shall see that section 20 of the. Life Insurance Law, as it was enacted in 1853, has no other purpose than to extend the life of such companies, so that they may at any time . enter into a contract which, they will be prepared to carry put, subject only to the right of the Legislature to repeal the same. At most it is a pledge on the part of the State that the Charter, in so far as it relates to the rights of policyholders, shall remain intact unless the Legislature should elect to repeal the same, in which event it must be presumed that the Legislature would provide some means of fulfilling the contracts which were then in existence. ■ It does not pretend to limit the power of the Legislature; it is a declaration, merely of the perpetuity of the charter, as it relates to the contracts with third persons, until the Legislature shall elect to repeal the same. “We agree with the court below,” say the court in New Work Life Ins. Co. v. Statham (93 U. S. 24, 30), “ that the contract is not an assurance for a single year, with a privilege of renewal from year to year by paying the annual premium, but that it is an entire contract of assurance for life, subject to discontinuance and forfeiture for non-payment of any of the stipulated premiums. Such is the form of the contract, and such is its character. * * * . Each instalment is, in fact, part consideration of the entire insurance for life. * * * The value of assurance for one year of a man’s life when he is young, strong and healthy is manifestly hot the same as when he, is old and decrepit.” (See, also, People v. Security Life Ins. & Annuity Co., 78 N. Y. 114, 124; Whitehead v. New Work Life Ins. Co., 102 id. 143,152.) A life insurance company which was limited in its life to thirty years could not enter into a life contract with any man whose expectancy reached beyond that period. The sole purpose of section 20 in the Life Insurance Law of 1853 was to remove all time limit and to permit companies organized under its provisions to — 261 — make life contracts of insurance. Or, in other words, it was the purpose of the Legislature to enable companies organized under this law to make the contracts and to execute them in conformity with the obvious purpose of such contracts. It was not designed to limit the' provisions of the Revised Statutes in reference to the power to amend, alter and repeal charters, but took the place of the thirty years’ limitation to be found in the Eire Insurance Act of the same year. If we are correct in this conclusion, that the defendant’s charter was subject to the provisions of the Revised Statutes —that it was “ subject to alteration,, suspension and repeal, in the discretion of the Legislature ”,—then it is unnecessary to consider the effect of the provisions of section 1 of article 8 of the Constitution of this State. However, as the learned court at Special Term determined the question, and the importance of the litigation demands that all phases of the matter should be finally disposed of at the earliest possible moment, it may not be out of place briefly to revert to the constitutional aspects of the case. This provision of the Constitution is that “ corporations may be formed under general laws; but shall not be created by special act, except for municipal purposes, and in cases where, in the judgment of the Legislature, the objects of the corporation cannot be attained under general laws. All general laws and special acts passed pursuant to this section may be altered from time to time or repealed.” This provision of the Constitution has existed as a constitutional provision since 1846; prior to that time the last sentence was substantially contained in the Revised Statutes (supra) and as a statutory provision it is now contained in section 40 of the General Corporation Law (Laws of 1892, chap. 687, added by Laws of 1895, chap. 672), and was concededly adopted to avoid the rule established in Da/rtmouth College v. Woodward (4 Wheat. 518), which was decided in 1819, and it seems to us that it is late in the history of the jurisprudence of this State to attempt to make a distinction between the power to alter or repeal a general or special law and the power to amend or repeal the charter of a corporation organized under such general or special law by means of an amendment to the law. It is undoubtedly true that the Legislature, in the absence of a reservation of such power, may not amend or repeal a — 262 — charter in such a manner as to take away vested rights of property. It may not create a corporation and give it authority to become possessed of franchises and other property, and, when the same have become vested, arbitrarily step in and by a repeal or amendment of the charter transfer such franchises or other property to third persons, or confiscate them, to the uses of the State. This was clearly the extent of the decision in People v. O'Brien (111 N. Y. 1), for, in Mayor, etc., v. Twenty-third Street R. Co. (113 id. 311, 31T), it was said: “ It is difficult tó put precise limits upon the power of the Legislature thus reserved over corporations created by it or under its authority. Under its reserved power it cannot deprive a corporation of its property, ór interfere with, or annul its contracts with third persons,” citing the' O'Brien Case (supra). “ But it may,” continue, the court, “ take away its franchise to be a corporation, and may regulate the exercise of its corporate powers. As it has' the power utterly to deprive the corporation of its franchise to be a corporation, it may prescribe the conditions and terms upon which it may live and exercise such franchise. It may enlarge or limit its powers, and it may increase or limit its burdens.” This is the construction the Court of Appeals places upon the statutory and constitutional provisions which are involved in the case now before us, and a long line of cases cited by the court at page 318 amply sustains this construction. The obvious intent of the constitutional provision is that the Legislature in adopting a.statute under which a corporation is to be created reserves to itself the power to alter or repeal the law, and an alteration of the law which went to the regulation of the corporate affairs of the company, without affecting its property rights or the contractual rights of third parties, would clearly be within the reserved power. In the O'Brien Case (supra), which is relied upon by the plaintiff, the court say: '‘We must also be understood as referring only to such franchises as are usually authorized . to be transferred by statute, viz., those requiring for their enjoyment the use of corporeal property, such as railroad, canal, telegraph, gas, water, bridge and similar companies, and not to those which are in their nature purely incorporeal and inalienable, such as the right of corporate life, the exercise of banking, trading and insurance powers, and similar privileges. The franchises last referred to,, being personal in character and dependent upon "the — 263 — continued existence of the donee for their lawful exercise, necessarily expire with the extinction of corporate life, unless special provision is otherwise made.” The discussion in that case is to be considered in connection with the facts there involved, in connection with a corporation having public franchises, and has no relation to a corporation such as the Equitable Life Assurance Society of the United States. In the recent case of Hinckley v. Schwarzsahild dh S. Co. (107 App. Div. 470) Mr. Justice Hatch reviewed the authorities upon the question of the reserved powers of the Legislature in reference to corporations under the provisions of the State Constitution and says: “ These cases would seem to authorize the conclusion that acts which do no more than regulate and control the internal management of a corporation, so far as it has relation to the public and concerns the policy of the State are within the power to alter and • repeal, even though the exercise of the power adds to the burden of the stockholder by increasing his liability or diminishes the value of his stock or changes the name, offices or proportion in management and control of the corporation. Within this power, under this rule, must necessarily fall the right to change the capital stock of the corporation as to amount, kind and classification. In effect it must be deemed to exhibit the policy of the State adopted to promote the corporate purpose, enhance its welfare and extend its business.” While the authorities are, as we believe, clear upon the proposition stated by Mr. Justice Hatch in reference to corporations generally, we are equally persuaded that in reference to life insurance companies the power may be very appropriately exercised. As we have already pointed out, the character of life insurance contracts is peculiar; the annual premiums not only pay the current risk, but they constitute partial payments upon the full life term, subject to forfeiture under certain stated conditions, and the policyholders are peculiarly interested in the life of the company and the method of its management. In fact, as a practical proposition, although the policyholders technically occupy the relation of creditors to the corporation they are the capitalists; they are the ones who furnish the money upon which the business is conducted. “ The insured parties are associates in a great scheme. This associated relation — 264 — exists whether the company be a mutual one or not. Each is interested in the, engagements of all; for out of the co-existence of many risks arises the law of average, which underlies the whole business.” (New York Life Ins. Co. v. Statham, 93 U. S. 24, 31.) The Original stock' subscription of $100,000 under the provisions' of the law as it stood at the time of the organization of the, defendant com-' pany- was invested in securities and deposited with the Comptroller,' and this capital has never been employed in the business except as it has stood as a guaranty fund for the payment of policies. All the rest of the capital, with a surplus of $80,000,00.0, has been contributed by, the policyholders in a company which pledged itself in its charter to conduct its business on the mutual plan and to distribute at intervals an equitable proportion of the surplus after providing for all of the liabilities of the company, The original investment is. .hardly a factor in the affairs of the company; it has never been invested in the sense that capital is invested in a manufacturing corporation, and while the stockholders $re technically the equitable owners of the assets of the corporation the policyholders who have life contracts to be fulfilled and who have been promised an equitaible distribution of the surplus, are the ones who '.have furnished all of the active capital, as well as, all the vast surplus. ¡Nearly dné and one-half billions of dollars of these policies are now outstanding ; over a half a million of people are annually contributing to. the resources of the defendant, and each one of these contributors, if he is the holder of a life policy, has an interest in the company, a tangible interest in the surplus and the continued solvency of the corporation. Why, then, if the Legislature should deem it imprudent to trust ¡these assets and the corporate business to the directors, chosen by the representatives of the $100,000 of the original capital stock, should there be any question as to the authority of the sovereign power of the State to change the method of elect-* ing directors? The stockholders would not be deprived of any property; they would still have their stock; they would still have the right to participate in the assets of the corporation to the extent of their holdings in the event of the corporation going into; dissolution ; they Would still have a right to participate in the choice of directors; they would still have equitable rights which, the courts ; might protect in the event of abuses in the management of the — 265 — company; they would have all of the rights which they now have, except the right of the representatives of $100,000 of idle capital to control the millions of dollars of assets of the defendant which are dedicated to the interests of policyholders, and in this they would have a voting power all out of proportion to the amount of their investment. What is there in this inconsistent with the light of the Legislature to amend the.charter, and to take from the stockholders a portion of their powers over the affairs of a corporation in which so many are vitally and financially interested ? There is no presumption that directors elected by policyholders would be false to their trusts, or that they would arbitrarily exert their power, even though they constituted a majority of the board. They would still be charged with the duty of honestly managing the affairs of the corporation in the interests of the corporation; it would still be their duty to administer the funds belonging to the corporation under the letter and the spirit of the law, and every dollar’s worth of stock would be owned by the same persons who own it now, or their assigns, and the stockholders would have the same property interest in the corporation that they now have. Surely, it may not be said that it is not within the reserve power of the State to so regulate the internal affairs of one of its own creations that the creature may not be compelled to carry Out in good faith the purposes for which it was created, and what is necessary in this regard is within the discretion of the Legislature. Whether the scheme which is proposed, and which is now before us, is a good one or not is not here for determination ; we are dealing now with a question of power, and we have no doubt that the Legislature might, if it saw fit, so amend the law of this State as to permit of the choice of a majority of the directors of the defendant company. Whether it has done so is quite another question, which we will now discuss. The authority to make the radical change in the control of the defendant’s corporate affairs is claimed by the appellant to be found in section 52 of the Insurance Law, as amended by chapter 722 of the Laws of 1901, in connection with the original statute of 1853 under which the company was organized. Section 52 of the Insurance Law, as thus amended, provides as follows: “ Any domestic corporation ’existing or doing business at the time'this chapter takes effect, may, by a vote of a majority of its directors or trustees, — 266 — accept provisions of this chapter and amend its charter to conform with the same, upon' obtaining the consent of the Superintendent of Insurance, thereto in writing; and thereafter it shall be deemed to have been incorporated under this chapter, and every such corpora-' tion "in reincorporating under this provision, may for that purpose so adopt in whole or in part a new charter, in conformity herewith, .and include therein any or.all provisions of its existing charter, and any or all changes from its existing charter, to cover and enjoy any or all the privileges and provisions of existing laws which might 'be so included and enjoyed if it were originally incorporated .thereunder,, and it shall, upon such adoption of and after obtaining the consent, as in this section before provided, to such charter, and filing the same and the record of adoption and con'sent in the office of the Superintendent of Insurance, perpetually enjoy the same as and be such corporation, and'which is declared tó be a continuation of such Corporation which existed prior to such reincorporation. * * * Every domestic- insurance corporation may amend its charter or certificate of incorporation by inserting therein any staterment or' matter which might have been originally inserted therein; and the same proceedings shall be taken upon the presentation of such amended charter or certificate to the Superintendent of Insurance as are required by this chapter to be taken with-respect to an original.charter or certificate, and if approved by the Superintendent . of Insurance, and his certificate of authority to do business thereunder is granted, the corporation shall thereafter be deemed to possess the -samé powers and be subject to the samé liabilities as if sucli amended charter or certificate had been its original charter or certificate of incorporation^ but without prejudice to any pending action or proceeding or any rights previously accrued.” . It seems entirely clear to ns that the provisions of section 52 of the Insurance Law do not contemplate any radical change' in the character of any domestic insurance company; the Insurance Law is in effect a codification of the Insurance Law of the State as. it . existed at the time Of the enactment, and the provisions of section 52 are merely intended to permit companies organized under special acts,-Or under. previously existing statutes, to come Within the particular provisions of the-codified law, more as" a matter of • convenience than as One of substance, and it Was not thought neces — 267 — sary to require more than the action of the board of directors to accomplish this purpose. If it had been contemplated that existing stock corporations were to have the power to enlarge the electorate, or to radically change the control, it can hardly be doubted that the act would have required greater conservatism in action. The clause of the last sentence of the section as quoted siopra, which provides that “ every domestic insurance corporation may amend its charter or certificate of incorporation by inserting therein any statement or matter which might have been originally inserted therein,” does not, in our opinion, contemplate a revival of the statutes as they may have existed at the time of the incorporation of the Equitable Life Assurance Society of the United States, but is merely intended to permit of corrections or alterations in, a charter to make it conform with the law as it now exists, or to meet any particular situation which the law now sanctions. It certainly was not intended to permit a company organized half a century ago to amend its charter in accord with the law of that time in respect to matters in which the policy of the State has changed, and it fulfills its obvious purpose when limited to permission to make such changes as the law now contemplates. But even were this not so, we are unable to find in the Life'Insurance Law of 1853, as modified and limited by the Be vised Statutes of that time, any justification for admitting to the electorate of life insurance companies the policyholders thereof. Section 3 of chapter 463 of the Laws of 1853, under which the defendant was organized, provided that the incorporators should file in the office of the Comptroller a declaration, which should comprise a copy of the charter they proposed to adopt, and the said charter “shall set forth the name of the company; the place where it is to be located; the kind of business to be undertaken ; * * * the mode and manner in which the corporate powers of the company are to be exercised ; the manner of electing the trustees or directors and officers, a majority of whom shall be citizens of this State, and the time of such election,” etc.; and it is claimed that under this provision in reference to the manner of electing directors, it was competent for the original incorporators to include a plan for permitting the policyholders to participate in the election, and that this may now be done under the provisions of section 52 of the Insurance Law. — 268 — But as we read the provisión of the Life Insurance Law' as it existed in 1853, in connection with the Revised Statutes of those days, the intent was no.t to permit the incorporators to enfranchise policyholders or others outside of' the stockholders, hut to point out the manner of election; to determine whether the fifty-two directors should be elected annually in a body on a single ticket or individually or-in groups, a portion retiring each- year. The power given to the corporators was to determine, the manner of elections, not the qualifications of electors, and in the)absence of special statutory provisions no one would be entitled to a vote in the choice of directors Unless he was a member of the corporation ; unless he had legal-interests involved in the election. The statute dealt with the formation of the corporation.; there -were no policyholders when the corporation' was organized, and there could, therefore, be no authorization for' the voting of any such persons at the first election, and, in the absence of legislative provisions, there could be no justification for adding to the electorate those who would not have been authorized to vote at the first meeting for the election of directors. The statute creates a body composed of individual stockholders ; these are the members of the corporation, and they áre the only ones, having 'any rights until it is organized arid begins the transaction of business. The policyholder does not become a member of tlie corporation; he is athi-rd party, holding a contractual relation with the corporation as a distinct entity, and while he holds á relation which the State may properly protect by giving him a voice in the election of directors, we do not think that the Legislature has ever provided for doing this, and' in the. absence of a specific provision of this kind, we think the general language of section ‘52 of the Insurance Law, and the provisions of th¿ statute under which the defendant was organized, in connection with the Revised Statutes as then in force, do not operate to-give the board of directors.of the defendant power to entirely alter the corporate control of the company. Section 20. of the Stock Corporation Law (Laws of 1892, chap; 688, as amd. by Laws- of 1901, chap. 354) provides as follows: ‘- Tlie directors of every-stock corporation shall be chosen at the time and place fixed by the by-laws- of the corporation by a plurality of the votes-at such election. Each-director shall be a stockholder unless otherwise- provided in the certificate or in á by-law adopted — 269 — by a stockholders’ meeting,” andyby necessary inference, the choice is to be made by the stockholders, who alone constitute the membership in the corporation. By the same section it is provided that policyholders of an insurance corporation shall be eligible to election as directors, and section 27 of the same act makes policyholders of insurance corporations eligible to election or appointment as officers of such corporations, but nowhere in the laws of this State do we find any provisions authorizing the policyholders to take upon themselves the duties or obligations of members of the corporation to the extent of becoming the electorate of such corporation. It would naturally seem as though, if it were intended by the Legislature that persons occupying merely contractual relations with the corporation were to be intrusted with the power to elect, and thus to control the corporation, there would be some provision for making the policyholders' answerable in some measure at least for the conduct of the corporation, but we look in vain for any provision of this kind; all of the " duties and responsibilities are confined to the members of the corporation and the corporation itself, acting throúgh its board of directors, while there are no duties imposed upon the policyholders. The policyholder does not even contract to keep his policy in force for any given length of time; he contracts for a life term, subject to forfeiture if he.fails to pay his premiums, and this is the extent of his liability. He may fail to pay his premiums at any time and his obligations cease, and it would be strange if the Legislature, without some provisions for conserving the rights of stockholders, should turn over the control of insurance companies, by the mere action of the board of directors, to the control of those who might be without a particle of interest in the affairs of the corporation before the end of the period for which the directors were elected. We do not say that the Legislature has not the power to do this; that is a question which may be disposed of when it has attempted to exercise such a power, but we do say that in the absence of positive enactments giving the power of control over to policyholders, the courts ought not to seek for strained construction to give this power, even though it be called mutualization. So radical a change in the policy of the State in respect to this most important branch of its policy ought to be clearly manifest in the statutes of the State before it is pu-t into operation by the mere vote of a board of direct270 ore, who were not chosen with any view to- the possibility of such action. " The interlocutory judgment appealed from should be affirmed, with costs, and the order of injunction, should be sustained, with costs. ■ ^ ' Bartlett, Rich and Miller, JJ., concurred; Bartlett,. J., in separate memorandum; Hooker, J.,. read for reversal. Willard Bartlett, J.: -I concur in the result, on the-ground that under existing laws there is no power in the board of directors Of the. Equitable Life Assurance' Society so tó amend its charter as to deprive a stockholder of the right to participate in the election of every director of the corporation. While the. board may permit policyholders to, vote for every director, it cannot lawfully exclude'stockholders from the exercise of the samé right. , , Footnotes [*] 47 Misc. Rep. 187.— [Rep.