The sun., 1905-07-31
|bES EQUITABLE DIRECTORS
costtmas6 from First Page.

| / N.NSVDstWtSW fVVys rWe~ s.sS~s 80 : 7
tion IL pointed toward the general man.
aeemsut Of the company. As an incident
to this management specific acts viii mecca
sarily be- inquired into and disclosed, but
tho point is that the court will look into tho
management and disposltion Of tho funds
| Of the aociety In order TO zee whether any
funds have been wasted or lost which ought
to be returned 10 the treasury OF the society.
-The question involved In the syndicate
transactions Is not 20 much the MANAGE
mont and disposition OF the funds Of the 90
cisty. - whether certain persons have BY
virtue Of their trust relation TO the society
profted. It may, be necessary to bring
separate actions against the particular
individuals who proHted In these particu-
lar transactions: but II may possibly be that
these transactions can be inquired into
In the action now brought. Il Will ,bo
noted slso that tho provision for remov-
Ing defendant from his Office a. officer
or director II broader under Section i7Si
Of the Code than under Section SO Of the
insurance law. Under the latter section;
tho thing prohibited u specific thing.
to wit No director or officer Of an insur-
anoe corporation doing business In this
State shall receive any money or valuable
thing for negotiating, procuring or rec om-'
mending any loan from any such corpora
ton or for selling or aiding In the sale OF
any stocks TO It by such corporation. Any
person violating the provisions Of this SEQ
tion shall forfeit his position as such director
after holding any such Office In any insur-,
ance corporation
'The contention Of tho corporation and
insurance lawyers Is that Section 80 Ii
limited to prohibiting the receipt Of money
or value by way Of commission for neso-
tiatng loan or for selling or aiding In the
sale Of any stocks or securities II Is
claimed by these lawyers that there Is no
prohibition against the sale by director
or officer to the company Of property or
the obtaining OF a loan from the company
as distinguished from getting a commits
sion for doing either Of the above things.
Section SO has never been construed by
tho courts and thus it's meaning Is from q
lawyers standpoint much In doubt
'Under Section 1881. subdivision 4, how
over, . defendant can be removed from his
ONCE upon proof Of whatever the court may
regard as misconduct. Thus, II the court
finds that the management has been ex-
trsvagant in salaries. In the system Of
agents advances. In the placing out Of large
sums on deposit In subsidiary companies
at small rates Of interest the court might
likewise find that such acts were miscon-
duct Of tbe kind to justify removal under
Section 1881. subdivision I. These legal
questions and distinctions must be borne
In mind because the field from a technical
and legal standpoint is practically unex-
plored, and while there are adjudicated
cases involving broad principles, there is
q dearth Of judicial construction upon the
specific points above referred to. In order,
however, to include both those directors
who are said to have done active wrong
and those who neglected their duty, the
action is brought against all. It is for the
court to determine. and an administrative
officer such as the Attorney-G General Is not
to say definitely that one or the other should
be relieved from a proceeding in court the
purpose Of which is the judicial supervision
Of the corporation and it's officers and d.
rectors. - .'+ n'
The second purpose Of The action IL to
endeavor to get an adjudication on the very
important question OF the rights OF the
policyholdeB. This has been tried before
(Swan vs. Mutual Reserve F. L. Assn, 15s
N. Y, Q. Greet VS.. Equitable Insurance
Society, 100 N. Y, 10. Hackett vs. Equita-
BILE Life Assurance Society, 50 App. DIV.
2eS), but without success; but has never
been tried in suit instituted by the Attor-
ney- General. Section SO OF the Insurance
law restricts such suit 80 that it can only
be brought upon the application OF the
Attorney General on his own motion or
after his approval Of a request in writing
therefor Of the Superintendent Of Insurance,
or an accounting can be sought in an action
by Judgment creditor or in supplementary
proceedings. or course, no action can ever
be brought as a matter Of practical fact by
q Judgment creditor. because the company
has always paid judgments rather than per-
nit any such action to be brought. Thus,
fair test has really never been had in the
cases hereinabove just mentioned, because
tho Attorney General has never brought
the action either on his own motion or upon
request Of the Superintendent Of Insurance.
It is TO be remembered that this branch
OF the action involves very intricate and
difficult questions, but this branch Of the
action IL branch In which 1t is believed
that the large number Of polioyholders take
the deepest interest.
Preference to the charter Of the COM
pany will show that 1t was provided in
article thereof the earnings and re-
ceipts Of said company over and above the
dividends, losses and expenses shall be
accumulated; also in article Q, each
polioyholder shall be credited with an
equitable share Of said surplus &c. All
Of article is we'll worth reading in this
connection and is referred to sufficiently
in the complaint. The testimony Of
McGutnness before the Superintendent Of
Insurance shows that in the reports to the
Tax Commissioners in New York the officials
Of the insurance company for q number
Of years have treated the surplus as be-
longing to the policyholders so as to avoid
taxation thereon.
.The importance Of getting determine
tion at this point will be manifest. II the
policyholders have share in the surplus