THE,~TTORNEY GENERAL
OF%%CXAS
December 17, 1959
The Honorable Zollie Steakley Opinion No. WW-767
Secretary of State
Capitol Station Re: Autiortty of the Secretary
Austin 11, Texas of State W approve the applica-
tion of the Penn Mutual Life In-
surance Company of Pennsylvania
for a certificate of authority
authorizing the company to trana-
act the business in this State of
loaning its funds. Whether or not
the inclusion of the word “insur-
ance” within the company name
is in violation of Arttcle 2.05 or
other provisions of the Busmess
Corporation Act, and other related
quec ttons .
Dear Mr. Steakley:
Your opinion request briefly summarized is as follows:
On February 14, 1950 the Penn Mutual Life Insurance Company
was issued a permit by your office. The purpose for which it prOposed
to transact bustness was to loan its funds in Texas. This permit’was
granted pursuant to the direction of Article 3.27 of the Itisurance Coda.
which provides:
“Any life fnaurance company not desiring to
engage in the business of writing life insurance in thfa
state, but desiring to loan 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 this state,
without being required to seCure a certificate of authority
to write life insurance in this state.” .
The current application is an attempt to remrw and extend the
existing permit. Your first specific question arises by virtue of the fact
that the Texas Business Corporation Act would seem to prohibit your
office from issuing a certificate of authority to an insurance company,
hence might be construed as repealing Article 3.2! of the Insurance
Code. Article 2.OlB(4) of the Business Corporation Act provides:
Hon. Zollie Steakley, page 2 (WW-767)
“No corporation may adopt this act or be organ-
ized under this act or obtain authoritv to transact busi-
ness in this state under this act. I .if any one or more
of its purposes is to operate any of the following:. . . .
(d) Insurance companies of every type and character
that operate under the insurance laws of this state. . .”
YOU further advise us that after the effective date of the Business
Corporation Act the Secretary of State adopted a departmental construc-
tion to the effect that its provisions are not applicable to insurance com-
panies and that Article 3.27 and 3.57 of the Texas Insurance Code were re-
pealed by implication by said Act.
The history of Article 3.27 begins in 1907 when the so-called
Robertson Law became effective. Modeled after corresponding provisions
in the New York Insurance Law, the Robertson Law imposed much more
stringent requirements upon foreign companies doing an insurance business
in this state than formerly was the case. As a result of its passage many
foreign companies withdrew from the state, some completely, but some
merely limiting their activities to the loaning of their funds in Texas. The
Attorney General, after 1907, took the position that the John Hancock Mutual
Life Insurance Company of Massachusetts was doing business in the state
illegally and brought suit to cancel its permit. The company had been trans-
acting a loan business in Texas for many years but had never transacted
a life insurance business here. (The trial court held in favor of the defen-
dant and the appeal was dismissed on a technicality.) Shortly thereafter,
on February 3, 1909, the Legislature passed Article 4790, the forerunner
of the present Article 3.27. As stated in Attorney General Opinion No. 2610,
“We think there can be no doubt of the intention
of the Legislature in passing this statute, It was
evidently considered desirable in the interest of the
public to permit a life insurance company to enter the
state for the purpose of lending their funds. It was then
evident that a large number of such companies would
not enter this state and conduct a life insurance business
within its borders and subject themselves to the provi-
sions of the Robertson Law. Manifestly, this statute was
passed to declare specifically that such a corporation was
permitted and authorized by the State of Texas to engage
in the business of lending its funds in Texas. It is prob-
able, we think, that the effect of the statute was to do
away with the Attorney General’s action and position
taken in the John Hancock case.”
a--_..
Hon. Zollie Steakley, page 3 (WW-767)
The opinion also points out that “a corporation chartered for
the purpose of writing life insurance has, in the absence of statutory
inhibition or express limitations found in the charter, the implied power
to lend its funds.” In this connection your opinion request states that
the charter of Penn Mutual Life Insurance Company authorizes it “to
insure the lives of persons in every insurance appertaining thereto; to
grant and dispose of an annuity; and to insure against disablement by
contract supplemental to contracts of life or endowment insurance, and
generally to transact the business of life insurance on the level premium
or legal reserve plan as a mutual company.” There is nothing in this
purpose clause to prevent the company from lending its funds. (There-
fore, the answer to your third question, inquiring as to whether the pro-
posed activities of the company in Texas would be outside its charter
powers, is answered in the negative.)
Opinion No. 2610 continues by pointitig out that,
“An insurance company coming into this state under
the provisions of Article 4790 (Article 3.27) does not
apply to the Insurance Commissioner for its permit. It
must apply to, and the permit must be obtained from, the
Secretary of State. It is subject to the control of that
officer in such cases as made and provided. It does not
enter this state for the purpose of providing any business
which the Commissioner of Insurance is designed to con-
trol. Indeed, it is not authorized to transact such a busi-
ness, and the doing of such a business without color of
authority would result in the forfeiture of its permit to
do business in this state.”
.. * ,
“Since there is nothing to indicate that jurisdic-
tion has ever been given to the Commissioner of Insur-
ance over such companies and the bare presence of a
foreign corporation, which may write insurance, and in-
deed may be formed for that purpose in the state of its
creation, in this state for a purpose other than that of
writing insurance is entirely insufficient to operate in
behalf of such jurisdiction.”
We see then that prior to Article 3.57 (or Article 4760) an insur-
ance company had the implied power to enter this state solely for the pur-
pose of loaning its funds by securing a permit from the Secretary of State
so to do; further, that Article 3.27 was passed to correct the contrary posi-
tion taken by the Attorney General in the matter. Therefore, an insurance
company entering the state solely to loan its funds and obtaining a certificate
Hon. Zollie Steakley, page 4 (WW-767)
therefor from the Secretary of State, although doing so under the express
authority of Article 3.27, can in no sense be said to be operating under
the Insurance Laws of this State. This being true, your office has the
authority under the Business Corporation Act to issue a certificate of
authority to the Penn Mutual Life Insurance Company for the stated pur-
pose.
Your second question asks whether or not the inclusion of the
word “insurance” within the company name indicates or~iniplies that it
would be authorized to transact business in this state for any purpose
other than that set forth in the certificate of authority in violation of
Article 2.05 or any~other provision of the Texas Business Corporation
Act. Article 2.05A(2) reads:,
“‘It (the corporate name) ,shall not contain any
word or phrase which indicates~ or implies that it is
organized for any purpose other’ than bne or more of
the purposes contained in its. articles of incorporation.“
It wtll be noted that this provtsion relates to articles of incor-
poration and not certificates of authority as stated in your opinion request.
Article 2.05 applies in general to domestic corporations unless the cop-
trary appears in a particular section. For example, 2.05B provides
that “any domestic or foreign corporation having authority to transact
business in this state, may do so under an’assumed name. 0 *” No such
reference to foreign corporations appears in 2.05(Z). On the other hand,
Article 8.03 is the general article dealing with the “corporate name of
Forelgn Corporations” and as such is controlling of the question ,bcforC
us. It contains no provision similar to that in 2.05(Z) and hence ,sve find
hit unnecess’ary to decide whe&er, or not the name in question violates such
requirement.
Your ,last que,stion inquires as to whether in the event you ares
authorized to approve subject application for a certificate of authority,
such certificate should be limited by the restriction “without banking,
discounting or insurance privileges”. You refer us in this connection
to our Opinion WW-440. The reasoning of such opinion is not applicable
to the inbtant situation for the reason that Article 3.27 specifically author-
izes a certificate of authority for the purpose requested. WW-440 dealt
with a situation in which the restrictive words quoted above were a part
of the statutory purpose clause prior to the passage of the, Business CO+
poratton Act. This demonstrated by the second paragraph of the summary
of WW-440 whL:h reads:
- --
Hon. Zollie Steakley, page 5 (WW-767)
“Words of limitation or restrictive provisions
contained in lawful statutory purpose clauses of pri-
vate corporations for profit in effect prior to the
enactment of the Business Corporation Act are still
in full force and effect as to any lawful purpose for
which a corporation may be formed under the pro-
visions of Article 2.01A, Business Corporation Act.”
SUMh4ARY
The office of the Secretary of State has the
authority to issue a certificate of authority to Penn
Mutual Life Insurance Company of Pennsylvania
authorizing the company to transact the business ixi
this state of loaning its funds, Art. 3.27 of the Insur-
ance Code not having been repealed by the Business
Corporation Act. It may do so without the addition
of restrictive wording. The proposed purpose is
within the charter powers of the company.
Very truly yours,
WILL WILSON
Attorney General of Texas
RV~L : Lmc
APPROVED:
OPINION COMMITTEE:
W. V. Geppert, Chairman
C. K. Richards
B. H. Timmins
W. 0. Schultz
Robert Bud Lewis
REVIEWED FOR THE ATTORNEY GENERAL
BY: Leonard Passmore