Case Information

*1 OFFlCE OFTHE ATTORNEY GENERAL OFTEXAS

AUSTIN

Hon. trrak 3. Xear Amlrtult s4ewit1e, Cw~t*lonu stcte boontary mst in) Trxar

ikar sir:

sting thr opin- 78 sattsr, hQ8 ::p+ny 18 an inmr- nesa or~alli.l(l life ot th* provisiona statute0 Texas, UI toll to the d8” eantalnlng the tol- *2 Hon. Trank 0. rear, Page So. 8

aadcraiont ooupoar oootalnrd la pol~oiar Llmled the Co ,?cv ~6 arrlgnod rOr that j)uT~Osa.

Vs accordance with unmlmus roclutloa of tbo rtookholderr Century Llfo Imirano~ Con$wky, agree4 that no bitldoadr @hall bo deolartd or ;.a16 on thb oapltsl hook OS the aor,zany until the prlnolpal OS t!Sr oartlifoate an4 all lntsrrst duo oader lt rka11 hava been rotired and paid ln full, and lo event the Cm- pany abculd br lfguidateb the ob:lgatlomumr osrtlfoatr #hall bo prlcr, und perlor thlr .lam that tt* rtoakholdrrs.

=;ltn acoordanoe with thr lawo of the State of Texas anoimt ot t!Ar oertlf~oste tmethar with interat thereon rl;all be payable only out OS the rurplur of tta Cozwny after world- lrq for all the re~orvea and other llabilltier OS the Comjant.

*Tkis oertifioate 1s tranrferablo only oa the bcoks of the Company la person or by duty authorized attorney u;on ltr aurrsnder properly ene0rrea.

=XEl Tl'ML?S3 Xi12W?stha Century ilte lmsur- nnoe Cosqany ha8 oauaod tbl.8 orrtifiostr to be signed by its duly autkorleeb ofttows 6nd lta oori3orete seal to bo herytoDatfpl tk.18 , . by 0r -*

Tras idont . c

Searotary

ghera is no cxpres* itatutcry awth~orlty for Chapter 3 Izmuranoe Cor;o?ation@ to borrow money) neither 18 there any rtatutory &Tohlbltlon aC;alnot tbd exerOie@ Of such :o~er. Thsro im, 0r oOurm, co 8tatutOry au- ttorizatlon ior the lssusnce oi tbeoo ;r:;OSsd eU>luS oe-tlrloate bc:ida.

It la t33:c0ad, as a goneral ;r3;oalt:on, ttat Prlrato oorporotlorm rmy, wlthout oxgrecr rtotutoty au- In the legltlaatr torr-w nosy ttOPlty, u?.en neoesmry *3 non. PTank D. Kecr, ?6&. 30. 3

ocurso oi tlm oorporato brulnrrr. -18 ~~10 wouid, it &eem8, llk6wlse applr to M lnraraooo oo,qorrtion suoh a8 the C*aturf Life Inrumx* Ceqx4. 0f thi8 iOr th0 ?w?o~o~ WI, thsrbr0r0, OOGOO~~,

oplnlon, thot the Century Lilr Irmuranor Col.;a.ny bur tho pawar to borrow annoy rbsn naoessary in tka l~itbtito oourso of itr buslzosr, omflnlr~ ourorlrsr only to thr puertlaa as to ubothw the progor*d 8810 OS uoh murplu8 oortltiaato boa68 rould ba a le it&et@, lartul end au- eSerOlSo ai t&o 8ener a! laplied power to borrow thorissd money* On this question, tCore are no prOOdMt8 in Tarar.

The plm of ISSUing aad 8Olliry to th0 FUbilO 8uob 8ur7l1.u oertlflosto bond8 tho Century Life IJI- wrance Ooqa.ny, whereby lt may raise ~omy, oloarly 18 not tha raploymnt of tte ::auai an& ocrmwclal raotkod of borrowiq money. Tke trrnaaotfon will not embhoo an unequlrooal obligation to return the ;rz?erty borrow- ed at regular int6rvci0, or at a rttited timma nor doe8 It uabreod sthtod, or repbr, or oartnin tfne for tts only,+ obl&atfx to payment of intorest. It draoes repay the IWEJS Mvanoeb olct of thr rurplro i,t t;r*-oab- pnny in 4xoecs 0r g30,OOO. ~auid/or from tho proaeede Of 44rtain 6ndQWASent OWpOnb OOEtaftbd in pOifOie8 i8- sued by the ooiapary assigned tsr pur;~ao~, with tritereast thereon gapable only out cf the 8urslu8 of the ooz.pany. Thera 18 A0 ;ower la thr holder8 0r suah in,nrtrumants to sraot payaftnt, dlthar of ;rlnolpal and interest, at ang atatod time, at any tlzao, ?or that Rattu. The osrtlfloate3veat: in the QPmer a patu in- ters8t in the oa;ital or property oi the oowa4, in ease of llr\Alction, than the stookholder thtceioiVe8 poaseaa; and tto oertlflootor further doalaro the ropap- of tbe'prlcoip4L ttewof with interest, when and ieat it ever dot0 to be superior to right Oi the ItOok- holders to dfvldends. Iurtherzora, In the oontraot of for suoh 06itifiOtte8, fhero n?pwr8 tL:i* rubsoriptioo prorisionr

*oa co.l;llathn of t. Is subecrl;tion ltls al80 *reed that f&ore stall be doilvored to m nith- out ,Cilrtl;sr osat s?.:clsas the ospltal st ..ak century iX%%eurance can';any, ruiiy *4 lion. ?rank 0. Seat, Pa&e lo. 4

ia and non-Mae88abie, uhloh aaid l teak ha8 em dmvooltd with tha ooacant tor tbl8 pur- % po80~"

It ia olear beyorb a4 Cuoatlcm tha tranr- otlonr oonturiplatrd by thr Centw Llfo Inauranoa COB- pany la the sales of tkeoo 8Ul'@UO outifioata bonds are ad 'hUl8- and tho OO~panf f8 uOt *bOrWWin6" a8 thooe t8rt8o S4aook In their ordinUy OMOrOlal a~16 legal 8011Oee In fwt what relrtlon thr,oaa,oany the oer%lfioeta holdu voula l tan6, in a 1-1 senoo, wheth- of a8 8 prsfrrrod as an annuity ouster, staokholde? or ';oJIothln# 018e, %a imatarLll 8UffiO4 for thla opln- ion, than ~$11 oartalnly not br oreeta thr usual ion vt.lah , borrowor-landrr dobtor-ordltor , ralat known arind lllootrrtrd la ordlnaxy oosmreiai tranaaotlonr uksroin !nonoy 18 loamd and borrowed.

It la our oooold4r4d oplnlon that the prlaoiples wnounoed by rr. Juatioac) I3aKeanaa a.?d Butler In the oaae of Taylor ~8. Z%lladokQA and ilsadlag 1al:uay 031~ panf, et al, and UCalsWnt V6 . Ptlla4al~~la and 8sadi~ a5liway OOZ;SMJ, at al, 1 X84. a6p. 386, oorroot;y state the let wpllaabla tho,iaatter under donslderatlon in thir opialon.

At pp So0 391 In abava 08&a, Yr. Suatloe Xoltonnan My8: th4 defendant h88 &I pro+ *X&ataver porrU

iru oar only be found in lto gercnl authxlty borrow ooaoy. Walther In the oEarter oi th8 dofar?dant, 301 in tho 8wzlal aot wLloh m&t&r- 1Z.8 it to sell bcnd8, whioh It cay ~6~0 below par, 18 anything ooztalned to 145alleo t&o oon- it oad be put on tested propoaltion, UdO88 i3OtiRB Ot 8 108fb %a8 them to10 oharaotar? I think p?aia.ry not. It doe8 not proposo to oreate tbo mlatlon debtor and oreditar bo- tween dsfsndant and th8 4UtSOrlb4r8. Tha mozep obtalml tko defeidant oould wt be r8- g4rd4d as borrowed, beoeuso tkat SO-la- iD.plie8 buraezeent, an4 lt la not deaandablo by ;yhX;b- orlbera or gayable by the defendaS. rot the aaarntial and dlotlngulstlng Qml%tie8 *5 of a loan. It oontuplnter l 8tlpul8tlon thnt the rubscrlbere, In oordderatlon of the oua thu, rfxll bo l ntltlod to ro- paid-not lrnt-by oeiro, ln a reaotr and unorrtain oontlngmoy, a portion of drtondant'r l srnlnjje, to be IUD- uro4 by a eertnln rnta per oont, upon three thee the l ume paid by thorn, nnd eftor thnt da11 par- tlolprta 1~1th the ecmsoa rbardoldere in the di- reelduaq l er oing ei By uhat allow- rlelon OS the eblo a0rinitim of l lorn or b o r r oving l uoh a oan be rbrroed I am at a 1088 to eon- ~~in6tloa #or will tho lsrt that it 18 to be l vl- d.nOBi ohango Itr ^[01] 8&d inho?mt $baraoter end brlq with- DrltiIk4 Of tb0 d~f8dUIt Ln the ran@ of a power to alob it ia not other- rlu raforabla.

‘In one reepeot, nad in one 0~~17, door plan propored ruamblo l loan, rod thet 10 In the resiilt to be attained. They are both txpodhnte tor rrifilq money, Jut tbg *tbo& g ~00omx418~- Justioo At 2~ 398 and 395, in oonourri~,ti. Butler l ny e : “That dsir,?naatr hnre ;ouor to borrov monay 18 not quostiozrd, oould not be. WC.. pl8latlffr ~p~;eltlon OAlm derendnnte The assert, l ob8me but bo?rou mo~b~, l that hox*r*r, ttle it la trlotlv not a that, l? it a proicsltlon borrow - oonoedlng 10 not, buC rlrtuall~ 18 to sell stook, thy hare no latiul authcrlty T hr l rltal to oarry it out. 18SUO of 1&W 18 ehbarp1y dorlned Md preesnte6.

It lr GIN thnt ndthsr nqxiroe nor admit8 oi *t- tsrdsd dteousel.on. Btery h.ilaelbh d0mfti0n or the term borrow loan, am ap;lled to rrmay acd oousrrolel transactloss, embrrooe an obl.lga- *6 Eon. lrack D. wear, ?age Uo. b

tlon to rmarn the ~mpwtr borrowA A loan of awn.7 i8 u!iirorMl~ underdocad to b8 the dellwry O? l Oertdn em t0 wOW8r, on oon- for its cdu.rn 68&l8=117 with tnot inter*et, 88 OOCtp~n8StiOfI ?Of It8 dOt8CtiOn UIb ~80. Ts t0 s:?OthaZ, who 18 Oall tb. pSm8ot Of GoW7 to ?oOein en6 PWIanMtl~ r+kia is l 8 hle Ovn, in OOIi8ld~~tiO~ ?OP Ut MLIIUi b4n8fls 02 3ZW?lt, 8 lOM, would Saw to be l P18h d8P8@ Of hn- 6uW..

men 18 SO 8Uoh thw kfIOW t0 8W?OO or trraMOtion# in WOO87 l 8 M 1rrwIwmable 10~ in 8SnoS bera 1nvolVed. @o+wnfMnf8 bale 18WIed Obl~&itiOzl8 WitbOUt $rOVi@lOn 8ti&&a- tlon for c(l~ym& of the grlnaripal borrouedg but euoh Obl@tiUIe are r*detmable at plwuure.

Rumlng, howwe?, for aa lnd~flc1t.o tiae, vlth no pziwer in the holder to oxaot prymeat, bare oor& bo Peg&r&ad Se lrredewaable usan lnreataent in them 18, themtore, traetei and deeOrlb,sd, not 08 a loa0, but a8 the pUI%hW Of

ain ooiImsrul0l tremea0t1on*. App171Iq thlr tort th. DrODO8- ition here uador tocsfderatlon, It b4om8 plain that tba treomotlon oo:~tes>lsted 18 not a lo-. fUn&arsocrlry ours) *.*"

Purther, frooi t&e not0 to tb0 *bore Oase, l t pa 39s we quote:

l m * 6 In tke oa ae of Eo ct T. ~ulokellror ;aln. Co. 70 X.Y. 139, 0.6 ooc;5n7 being ia nS86 of fu&de, the rtoolcholder~ adopted 4 bplav pro- tldlzq that rtookholdorr who 8hOdd 8tUPa%d8?

t&dim Oel%ffiO¶t88 an4 38~ five do115?8 00 each sm. of etoak ahould bo ntltlad $0 the -e nuabor a? 8hSr@8 of >rOfm-~d rt.:~ &culd be entitled to 3 :er oat tk:::~ to be

I&IA. Prank D. ?har, Pa&O HO. T 0s the o~;any,

paid out 0s the gmfite any 8w- plru tbaraafter to bo dlrld~d pro rata eaoq ooraon Md sr0fmro4 StoOkholder8. Yhe oawt bald tC8t it 414 not fSl1 nlthia the ?ovartO~- borrow aono7, and W&B ultra rlree. lolpr a., 8SJ8: 'It *aa not 8 borrovlag. ?'h. idea t$ bar- r078b.g 8&?earuOt th8t%?OE l jGOUIf8c, Of undorrtandiry i8 nof fiihd 00s tmiOS8 tbOm ^[18] in th@ what 18 borrowed ~111 b8 npd.4 0s roturn- ti th8M t~n8aOtiOn8 1% 1, 18 oslled, but nbai, la :%,pii!i:tl:!h ?eeB4 10, that the oourtr eon- ~,ty8aotlon . 3%. SSIO Of SJMOtt 1. OOEtbfitO~O 06tWiihtd Jllnsm 00.‘ ut al, 808 ?ed. Rep. 881, l~voln6 bond8 18.

rued a oomoratlon by wElsh It aersed to pal thou ?a843 rrlue with interest tit 0s aortafn ?uud8 areated ?rOn the IL& 8ur3h8 in th0 0~cifi4p Of the OOIS3a~ ~6 event of liquidation or 6188O'iutiw, tha ob~igstloo 8bCBl:d attaob to a 1 run&S as& 4SSSt8 Of the O-y, tiT@ather with Other :ZOViSlOll8 t0 th8 8UPJdW 8fSil8l’ ooawfloate boa48 under tonslderstion horeln. ¶%a oaurt held that the in8tntariStS trr curotion Wr8 ad provable tQSili8t th4 08tSt.S O? the batkrupt OOrpUl’StiOn, for th roawn that they oreatrd EO ilxed llabllltiy agalnet it.

It ir, therefore, 0~~~op1ixfon that the graoral lwllod authority 0r tto century Life Inrorsaar co-,any to borrow nonq? roil4 not lSgsllz8 it8 gropoarlt ospedi- l t uP?lUs Oetti? ralrl rw l oat0 bonUa ruoh 8US&Ih whloh O- fSSURn0~ ~6 8Sh ItLOWy,J XUUEiiJ~J, thb Of ocm~anled your letter. in the beglnnb Of tttl8 crpliiioa, tha

A8 obsaned 0s t,xae rolatlng insurance oorgor- . . 8pOOlfiO 8tatUte8 atlow ad petloularly to thos8 ormtod under Obapter 3, Title 78, ibvl~ed Civil stetUb8 O? Tax&o, 1928, a# 8madSd, do not SxprSSely authorit 8uob insuranos Scm- 3snlae to borrow mocby, nor do tksy prohlblt the eXerOlee 8-h ?ower. It 18 8fgCifiM5t, althoe UOt &iVelk OOUttrOiing ?OIW ih thi8 OphiOn, that the lb&htW ia emSting Chapter 1, Tltlo 08, Rarlssd Civil St8tutae l rtrlnl~ mutual lii0 lnsurano8 Oaa- 1928, Of %S8, P~nlbe, &lb s?eo floallt authorlab dVanOO%Ont8 Suoh f lasureno* @0093sDleo by My p o r o oa la a ILmnu l lDll4.T to pursh.40 oi tha pmporod surplus oertliloato to b, ~MOU& by th* Centu?r Lit8 hat&r-* Collgu~. bodr t?hb l uthOriution 10 found iB Arti 48lb, rup ra, m0 ra0t tbd the hgi014tun d*Oti lt ~00r8rarl, t0 OS- pn44ly 4ubhorlx• rueh Cb4pter t ooap4ni.o to rueln 4vuiewmnto in thlo mumo~, definitrly lntlloateo that oonoelted mok pew? to bo ma-alatent la lnour~oo eorporrtlono oreated uader rnd authorlt~ of t&a otat- utro thorotofara anaot.4 by it. Chaptar t of (IOWTOO, mo ori(%n4lly l no ote4 la 1909. fhlr 00n0fd**t10* oar- 1rw aspha to t&o poaftlonrr hare t&m la tdnlf thlo op nlan; nuwll, t&t, oonood~ the powu la m f lnou~0ao4 oorpor8tian ln Tax40 borrow monq, the tur- tbrr gowar lm~~m rurplor o4rSltlo4to bonda, a8 ecm- tenplated b IAS. fnmiranoa WJI~, oaonot tW&nttq bo 14g4ll7 L

You 41-0, themfora, r4opootf~11~ 4dvlsoa that lt lo tha oplaioo of thlo dogrrttaaat thab the Coatury Life Imetwanoe Compaay of fort Worth 06 under the 14wa of T41141, I Toras, lo not autcorti-

4ou4 ruqilar osrtlrloato boadr with th4 term an4 oondltloao la tbr mncrr oontuplated, u 4t out la tziio opinloa aad in your lettw.

WAtob