Case Information

*1 B ._ . . . .

, OFFICEOFTHEATTORNEY GENERAL OFTEXAS

AUSTIN

lWAWC.“AN” lnwaaY O‘IWI. . .

HmesPber I+ 19k2, ru 7 aa4 9 in oar

tioas our neon~a*ratl4

slt.h&ma and this *2 -.

,i.;

Two types of etatutoe are fo be found pertaining to the oreation of privste Oorporatlonat (a) statutes authorlg- in@ ths oreation of eoorporatioas for etated ~~rpoaes, and (b) the meohanlam fir sffeati~~ the incorpora- statutes presoribfw tion. Prior to the paaeag@ of ~~rtiole 1302a, :je6tlon 57 of .-- Artfole 1302 cuthorimd the inoorporetion of title fnnurano~

eoc~plpaniee and the provision8 of Chapter 2 of Title 32, R. C. s,, proerrlbod the moohanlem therefor, with Artiohe 4699 and 47,700 enterbig n4t at all into their sreatlon. Seotion 23 of Arti- ale 1302a removed seation 57 of Art1010 1302 a8 en authoriaa- tion for the orentlon of sueh eomppaniee, bnt with oertaln ex- ~optiione (6. $. rjscrtions 2, 6, 8, 10 mad 121 hrtlole 1302a did not $arport to alter the node br whloh ewh ompanies are ore- the Legislature had intended that euoh 0omp6niee

If ~~~forth wqloy the msahanlem of Artieloa 4699 and 4700 it to a&sum that 10 rotid hate sxplioltly 8.8~ reasonebls Lb In the abeenee of euoh a provision oa~polllng be- provided. ofamoe the aonoluelon that the general aorpora&n laws ofmtlnuo ti9 govern the creation 0r title lneurfinoo ompaniee insofar ae they arm not inmmeleteat with the l xplioit provielone of Art- It will be notlord that by virtue of Seotion 8 iolo 1302ar of Artlale 13028, the Baird of Ineurenoo Commieeionere is +a&- ed with the duty of filing the charter8 of suoh eafqmniee o6nesqnentlJr, whenever appropolato, the Board is to be au i eti- tuted for and to aeeum the dtltilbe of the irclorotary of Stata in effeetlng the proriniom~ of Chapter 2 of Title 32. the appllaatfon of

This oonalorritm nmkae iqoeeible hrtlolee 4705 and 4706 to title inaunlooe ootnpaniae~ oonsc qaentiy, iiueetion Bo. 7 %a tmaered in the nogatlre.

To hold othsllusiss would be to eay that tlt1o Inour- anee eompanier mast iaveet part of t&lr aeeets aoaorbing to 1725 (per Sootlen 6 oi Artiale 13026), tbat they may Artlola imeet m.rt of their oapital etook in an ebstraet plant, that thsy must invast the remainder er their capital stools in the it- surplus aooordi~ enumerebod br Artiole 4705 that they must invest thalr

to Artiole l+7& and, flr~ally, that they invest their prsnium reswvoe ae~tlding to btfole

mat lo of Art&ale 13021~). Such segregation (per :*otlon and ear- narking br assets would well nigh l;nPosslble to sstablleh and al&ala and nould result ifi the Tegdfation Of the in*@&- to an extant far +waaCsr t&en 3.8 &ma manta of these oompnies insuraaoe ooinpeni~~. 3isoe title is- with life and eesualty :a ouwaotiy bmwn to be a type of lnauranoe ln rhioh surenoe *3 HonorabLe 0. PI Loakhart,~ Ghairrman, Paga 3

the risk of lose is very anall and in whloh the pramIume are very large In aoaparlson 4th It Is unlikely lose p-to, intended euoh a high degree of regulation. that tha Legielatura . . it is oom63on kncnuledga--and Artiole 1302a Mareavar, epeoiiloally rseognfzes-that aarupanlsa doing a tit3.a Inaur- snoa bueineee oonduot many addltlooal aotiritiea. Moat of theee addItIona notlvities, if standing alone, rould not be ragulated by the State. If Artiolee 4705 and 4706 wore to be lmpoeed on these eoqmnlae, these aotititiee ae wall ae lneunmoe business would be eubjeoted to extreme the title regulatl on. It aeama reasonable to believe that the Legi- laturs Intended that the rsserves e5tablIehad by ssotloae and 10 oi Artiale 1302a should isolate a portion of the aeeets of theee o~paniee for the proteotlon of the holder8 of title and that tha ramfader of such aeaeta Ineurknoe peliolee, should be rree and unencumbered for uee In the other aotivl- tie5 oi euob otapaaleer the es-

1IInally. our oonolusIon is etremgthaed kbllebed praotioe of your department. Although pour orIgIna opinion requeet aekad *. * . %a our oonetruotIon oorreot that (Artlole 1302al me&e8 the provIeIone oi Artlola 4705 applioa- . . .I rour let&jr oi iGore!nber 4th atatee that you have ble never ocmsidereQ Artloloo 4705 en4 4705 applioable ts title lneuranoe osmpaales and that say 1atImatIon to the sentrary letter was *erroneoue and iaad+ertentw. Aa- la your orIginal letter a5 eabodpl~ a oornet aepting your met reoglt etata- losnt of your departrmntal praotloe, It Is aignifloant that during the thirteen yearn einoe the passago of Artilole 13026 the Legielature has never sawn fit to questlon or to alter 9uoh an aetabllahed. oonstruotltm whan ooupled your praotloe. wIt& aelaplete Leglalati*e

eilenoe and, praeuniablr, aoquloe- oenoe lends weight to the opinion above axpreeeed,,

;Zn,etion fzo. 9 In Opinion Blo. 0-4587 wsu aopleb tram your su;.plementsl ra;luest for oplnlfm and reads ae followar

*In studying the sOhsdtis 0r e5eets aoooa- panyfw the affidavit of the inwrpomtare, whloh asset5 will be tenderad in paymant of o.apital etook and surplus (b&ore aotual fllln& the ohar5er wi31 probably be rewritten sa tie to divide theee a5ueB6 up into a mfnimum of ~100,000 capita.2 stook and $5,000 au~lue) wo observe t&t tha aaseta are af- dI50105ed to ambrace (a) fee titles to firmatlvsly *4 Iimoreble 0. 3. Lookhart, Ghdam&n, PW3e 4

roe1 eatate, (b) real estate purohaee oontrerote, and (0) notes or other sohetary obligations ae- oured by rlret lfen upon reel e&ate, 8~ of all , .three of whloh are loocited in the State of IZew

Sexloo end some i!:: the Stata of Texas. Of oourae, before either atmrtering or llaensfne, this Company, this Department will disohergo its responsibility of detar?airzi~ whether or not that assets so llsted in the eoheduls to the ai'fidavit &re actually valid fee tiblee, real estate purohaase oontraota ehd obll- &etIons eeoured by first liens upon reel estate, ar?i! tho ioautioh thereof (whether in Texae or New %exLoo) and the value thereof. Sut, for the purpoee of detarmIniu$ the legal elirsibility of the various olasses of assets so tendered In payment of the au- thorleed oapital atook and the eurplue funds whioh may be set u;l initially in lncorporatird this Com- pany, we ask you to amwer spebiflcallg the folleu- ln,g questions Ln addition to those mopouhded here- tofore, regardless orwhether you hold Artlolee 4705 and 4706 applioable, or whether you holo Art- lole 1302A or some other article or artiolea af the at&&es a~)glioabla, wItArefcrer;oe to the in- -vestment of the oaplte.1 arti surplus Amds ljf tiiis

Company;

Are foe title.9 to ret31 estate situated in Ye% ell,yible to be received In noymnt of the oepital stool, funds of this Company?

'53 . Cm Tee titles to real estate outside of reoei~ved in stook of I'exns p!lyr;lent of capital t&is hmpsr.y~?

V. Can fee titles to real estate In Texas be aocepted in pnyuent of aurplun fuui?s of thla GOElQW$?

"3 Can fee tItlei to real estata outs&do of '1'emw bi aoce2ted in pn;rLlent of surplus of this Company? "Es. Can real eatate QUrOfMie OontlYiOt8 UWSl

real )ropertf in Texas be aoospted in pa~wt Of oapital stoc, of this Sompe~?

Eonosablo 0. P. Lookhext, fihalm, Peg* 5

“P. Can real r&ate puroherre oontmeta upon t-1 property sl tunted ootsldo OS Texas be sooept- ed in payment or oapftal atoek o? thla Company? I .

*a. Ccc real e&&e purohass oontrriate upon property in Terser be aoooyted in payment car mm- plus or thfe Conpany?

*Ii. Can real estate purohane crontraets upon real property outside of Texas be aooepted in pap mont ot surplus or tblo 0ompeuy?

“1. Can notes or other aonetary obllga6loxm oeoured by flrsrt lieno upon real eatate in Toxea reo@lVed In payment bf aepitel etook of thir ~on?panjl

"J. Can notea or abhor obli&ations rwurod firat llcnr upon real e&eta eltoated outsid* of T~JRLII bs noolted In payment ot aapital atook

or thi6 COIWBQJT Urn notes er other obligatlone wowed %

by ntlel lleiicl upon real ootetr ln %wwl dtlueGo4 be reoslred In papant of surplus of this Compenfp Can not&r aad other obligations seaumd liaw upon real 8stato slteetod outadd. by Xl::; of Toxne be roooirod in paymod of tha mrplur oi thLs Coup?'

%o do not attempt to answer subdiridona X, IT 0, sitwe tkm term Veal eetate purohees 00ntra&8w and El JOal not 1 Q te this departma& sufrllelont feobl upon which to hew en opinion. Alao M are dlsrsgaraiag the phraao “or otiwr mnetery obllpatlone* oonteined in su$dlvlsiona I, J, K end L, beomae muoh phraoe is too indefinite to be the bar18 Qf M opltion.

The protlaion~ in the genowl odap~mitlon Iawn reletlve to the wsaipt of property for oapital 8teOk em four@ In Article 1308r (1125-1126911273 Cepfkal &oak.--

"Ax% 1306. Ekfore bhe aherter of a ptlvete oo?poration omated ior profit can be tiled by the S;sOfe~ry of %ate,

Honorable 0. P. Lookhert, ChaIracm, Pago 6

the full amount of itr authmised oapltal stook must be in good faith subaorlbed It.s Dtockholderrr end fifty per Cent thereof p&Id in aash, or its squiva-. . . lent in other property or lnbor done, the produot

of wblcb shall be worth to the cmpeny the aotual value at whloh it was taken or et whiah the property wacI r0oeim34. The afTldavlt of tihoar who exeeuted the absrtcr shal.l be famishad to the i>earetery of Stats, ahawlngr

*1. The news, resldonoe and poatof'fioe ed- dress or eaah eubsorl8er to the aepltel atook ot suoh oonpauy~ Th8 amount 8nbrorltmd by eaah, end the “2.

aaouat paid by @+a&~ “3. T~Q each value of any property reoeirrU,

p,i~ina its desorlptlen, location end from whm end the pAor at whloh It war .noalred; *4. The amount, ahemotor end value or Ubor done, tron whom,~ aad prloe et whleh It we$ reoeived, (Aotis 1901, p. 18; Aote 189 , p. 192; ziote 1907, p. 309; 0. L. *ol. 10, p. 246. ” ,I

It ~$11 be notiwd tlmt this etatute eslploye the word “propertyR without ettmptlse: to 8peoiSy psmlsalble kinde of property. Bcwstm’, Artials8 1359 @md 1360 p~‘@Vide: *Article 1359. (11751 Condltlon8 oi purehaee.~

-.Y+ .’ Eo private ooxporntlon @hell be pomitted to pu+

obase any lands under any proolalon of this ohapter, anlese the lands .RO ,ptarQhaae4 am neoossary to 8~ able suoh oorporatlon to be, bualnes8 in tbls Xato, or exoept where: s?loh land 1s purohased in due 00~Wae of busisess to ~eouxe thr payment of debt. (A&8 p. 48; 0. 2. vol. 10, 19. Ig93, p, 36; Aota t897, 466, 1102.)

- (11761 Sale of surplua.-4ll aArtlala 1360.

prIvat,s aorpomtlons eutborleed by the Lawa of Terna, ti.0 do bueinese in this %ate, wt.otie i4.n purpos* 16 not the aoquisltion ox cmnrsshlp oi’ lands, tiubieh have or my aoq,ulre by lome, purohssa OX! otherwlso

lionorable 0. ?. LdthWt, Ohhaim, %ge

&ore iand thnn is MlsessiHuy to enable thm to oarry on their bu#lnese, ahell, withsn fiit8Oll y0ers Proa the date said iana aray be aoguir8a, 1 *in @me faith sell -8 UonVey in f88 siDlple all

1enEa so aaqulrsd whicrh am not neaeesary far thn twnnaction of their buainesa.n

And Artiole 1364 dealarea t&t:

“Art. 1364. (1160) E88heat pm000aingO.- All oorporetiona holding l~da ooctrary to the ~rotialons of this law oball hold the l ame sub- fsot to forfeiture alta amheat prooeebinge. The Attorney General, or any dlstriot or oouaty et- toraey, when either of them haa roaaon to beliers any oorporation is holding land8 fn viola- t&at tion or tale law shall iLnetltute suit in the name oi the State 0r Ln*, in Tray18 Couatp, or In mf oounty in Texas where muoh Borporation mar hare aa agent, or fn any county whore anr part OS the laml ianr be SittuRt8a, againat auoh oorporation, a@ 58 for the em&ant at eat&er, or a0008i8di provided persons Uping dthout devise thereof and havi helm. (Act& 1893, p. 36~ 0. L, nel.. 10, p. z6ya

In the oa8e at Campbell v. %a& 35 S. W. (24) 9) (Cam. App.), the oourt raldt

V@r many years it haa beea the eetabliahed polior of our stets oorporationm, wiQh to prohibit oertain exceptlone, iron! aequlrlng It land. . .

fs true, a6 argued br the plalntirfs In. error, that if the oorporatioa has oonmunimted the deal acquiring the lasida no oae oouk? hey8 questioned lte title sxoept the 8tat8.w

We oe~ find no law requiring the refusal of a oorporato aharter bsoeusts a portion of its oepltal etook haa bsm purah&ued with realty uhioh ths corporation is not authorixed to ho&l. In aooordanoe with the language of the above case, we feel that or such property my only be questioned by the the aoquisftlon State through es&eat proaeedlfqs uuder ArtioZe 1364 and, in an appvpriets case, through q&tra rims prooeadlngs. 1306 doe8 It wllf ruther be notloed that Article

not ayeo$fy that grope&y 80 rrooived &all looatsd within *8 Honorable ;I. 7. Lockhart, Chairman, Pa@ 8 'onse:~uerMy

the state. we enswer subdivisions A, 3, C, and r? of .&astion 140. 9 in the afr~rmatire.

-. . For tht roaaOm above state9 and f3r the additional

reasori that private oorporationa are mder uo disablllty with respeot to aoc',uirkg and hdding r,otas oeaurod by first ilens I, J, E Eudi L or 2leotion Ho. 9 are upon realtp, subdivisions also answered I.B the afflrmatioe.

Trusting that the r0rbg0ia fully answrs your fn- quiriee, we are

, R. Ceaab?aorhud Asielstsnt