TEIEAYTORNEY GENERAL
OF TEXAS
AueTlN 11. TExas
WILL WILSON
A=-rORNRY GENERAL June 22, 1960
Hon. J. M. Falkner Opinion No. WW-861
Commissioner
Department of Banking Re: Whether a company having
Austin, Texas a certificate of authority from
the Secretary of State under Art.
3.27 of the Insurance Code is
subject to the provisions of Art.
1524a V.C.S.
Dear Mr. Falkner:
Penn Mutual Life Insurance Company, a Pennsylvania corpor-
ation, has received a certificate of authority from the Secretary of State
to do business in Texas, for the purpose of “the loaning of its funds in
Texas.” The issuance of such certificate was authorized by virtue of
Article 3.27 of the Insurance Code and was the subject of our Opinion
No. WW-767.
Your request asks whether or not such company is subject to
the provisions of Art. 1524a V.C.S. The question is answered in the
affirmative.
Article 1524a is a regulatory law embracing all corporations
having for their purpose or purposes any or all of the powers author-
ized in Subdivisions 48, 49 and 50 of Art, 1302 and all corporations
having in whole or in part any purpose or purposes authorized in Chapter
275, S.B. #232 of the General and Special Laws of the Regular Session
of the 40th Legislature (1303b). In general, these are corporations whose
purposes include the accumulation and lending of money and the selling
and dealing in notes, bonds, and securities without banking and discount
privileges. Briefly summarized, Article 1524a lays down certain re-
quirements which these corporations must meet in conducting their busi-
ness and provides for their supervision, examination and inspection
by the Banking Commissioner.
Article 3.27 provides that:
“‘Any life insurance company not desiring to
engage in the business of writing life insurance in
this State, but desiring to Iosn its funds in this State,
may obtain a permit to do so from the Secretary of
State by complying with the laws of this State relating
to foreign corporations engaged in loaning money in
Hon. J. hf. Falkner, page 2 (WW-861)
this State, without being required to secure a certi-
ficate of authority to write life insurance in this State.”
Our Opinion WW-767 held that such Article had not been re-
pealed by the Business Corporation Act and that a corporation ad-
mitted to Texas thereunder “can ln no sense be said to be operating
under the insurance laws of this state.” (Had the company in ques-
tion intended to transact any insurance business in Texas it, of course,
could not have obtained a certificate of authority from the Secretary of
State). The company’s business in Texas is limited by its certificate
of authority to “‘the loaning of its funds in Texas.” Since subdivision
48 of 1302 authorizes corporations whose purpose is to ‘“accumulate
and lend money. . .“, subdivision 49 authorizes corporations whose
purpose ls “to accumulate and loan money,” it is obvious that Penn
Mutual Life Insurance Company falls within the regulatory scope of
Art. 1524a V.C.S.
Your opinion request indicates that your office has notified
the company that it is subject to some of the requirements of Art.
1524a and that the company has declined to comply therewith, primar-
ily for the following reasons:
(1) A so-called “‘ruling by the Banking Department” evidenced
by a letter from H. L. Bengston dated Jan. 31, 1947 to M. E. Purnell,
a Dallas attorney, concerning various insurance companies other than
Penn Mutual.
(2) The company does not intend to issue bonds, notes, certi-
ficates, debentures and other obligations for sale to the public.
(3) The company was not created for the purpose of lending
money but rather was created for the purpose of writing insurance.
(4) The company did not receive its permit from the Secre-
tary of State under subdivisions 48, 49 and 50 of Article 1302 or 1303b,
but rather received it under Art. 3.27.
(5) The purpose of Article 1524a is to regulate loan companies.
Ins0fa.r as the letter from Mr. Bengston is concerned, it ad-
vises that certain named insurance companies comparable in status
to Penn Mutual Life Insurance Company were not covered by Article
1524a. Even if we assume that this letter constitutes a departmental
construction, the conclusion reached therein is in error, the unambiguous
wording of API%. 1,524a being to the contrary. 39 Tex.Jur.Sec. 126.
Hon. J. M. Falkner, page 3 (WW-861)
The fact that Penn Mutual does not intend to issue bonds,
notes, etc., for sale to the public has no bearing on the question.
Art. 1524a by its own terms specifically recognizes that some cor-
porations under its purview will not engage in such activity. Much
less stringent requirements are placed on those which do not. Such
corporations need only file annually a statement of its condition on
the previous 31st of December together with a filing fee of $25.00.
The fact that the company was chartered in Pennsylvania for
the purpose of writing insurance and that it was not granted a permit
under subdivisions 48, 49 and 50 of 1302 or under 1303b is likewise
not decisive of the question. As pointed out above, if it contemplated
pursuing the insurance business in Texas, it could not have received
its certificate of authority from the Secretary of State. The certi-
ficate shows that its only “‘purpose” in Texas is to lend money. Art-
icle 1524a encompasses all corporations whose purpose or purposes
include any or all of the purposes of subdivisions 48, 49 and 50 of 1302,
or in whole or in part any purpose authorized by Art. 1303b. Among
these purposes, as pointed out above, the lending of money predom-
inates. Section 10 of Art. 1524a provides that “‘the provisions of this
Act shall apply to foreign corporations who have heretofore been
granted permission to do business in Texas and who may hereafter
be granted permission to do business in Texas having as their pur-
pose or purposes any part of the provisions set out in Sention One of
this Act.“’ It contz no such limitation as that suggested by the
company.
The purpose of Art. 1524a can best be garnered fr~om its 4
corners. Contrary to the company’s suggestion, it is nowhere limited
to ““loan companies ” as the term is commonly understood. Instead,
it specifically regulates all companies who loan money in Texas. The
company likewise suggests that regulation of its activities is not
necessary since it is subject to insurance examination in its home
state. As pointed out in WW-767 and the authorities cited therein, an
insurance company entering Texas by virtue of a certificate of authority
issued by the Secretary of State under Art. 3.27 of the Insurance Code
is in no manner under the regulation, control or supervision of the
Insurance Department of this state. It is reasonable to assume,
therefore, that the Legislature intended that companies such as Penn
Mutual be under the regulation of some other Texas administrative
body in order to protect the interests of Texas citizens, and we accor-
dingly hold that it falls within the purview of Art. 1524a. This conclu-
sion is reenforced by the language of the statute authorizing its
admittance into Texas, Art. 3.27, which requires that such company
must comply v&th the laws of this State relating to foreign corporations
engaged in loaning money in this State.
_... .
Hon. J. M. Falkner, page 4 (WW-861)
SUMMARY
A company having a certificate of
authority from the Secretary of State
under Art. 3.27 of the Insurance Code
1s subject to the provisions of Article
1524a V.C.S.
Very truly yours,
WILL WILSON
Attorney General of Texas
BY
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RVL: lmc
APPROVED:
OPINION COMMITTEE:
W. V. Geppert, Chairman
W. 0. Shultz
Martin DeStefano
Jack Goodman
Wm. H. PooI. Jr.
REVIEWEDFORTHEATTORNEYGENERAL
BY: Leonard Passmore