Untitled Texas Attorney General Opinion

Mr. William A. Harrison Opinion No. WW-397 Commissionerof Insurance InternationalLife Bldg. Re: Whether a corporationwhich Austin, Texas does not meet the requirements of Article 1513a, V.C.S., may continue to act as an attorney- in-fact for a ~reciprocalor inter-insuranceexchange under the provisionsof Chapter 19, Dear Mr. Harrison: Texas InsuranceCode.~ You have requested our opinion in answer to five ques- tions concerning the licensing of corporationsto act as agent for a reciprocal or inter-insuranceexchange. Your first ques- tion is as follows: "Immediatelyprior 'tothe enactment of Arti- cle 1513a, V.C.S. was the Board of InsuranceCorn- missioners authorized by law to license a corpora- tion organised under the laws of this State to act as an attorney-in-factfor the subscribersat a reciprocal or inter-insuranceexchange?" Prior to the enactment of Article 1513a, Vernon's Civil Statutes; there was no provision under the law governing corpora- tions in Texas which would permit the creation of a domestic corporationor the issuance of a permit to a foreign corporation for the purpose .ofacting as an attorney-in-factfor the .sub- scribers of a reciprocal or inter-insuranceexchange. It has been a well establishedrule of law in Texas that, prior to the enactment of the Texas Business CorporationAct, which became effective in 1955, no domestic corpora~tionin Texas could be created, and no foreign corporationcould obtain a permit for a purpose not authorized by statute. Prior to the enactment of Article 1513a there was no statutory provision authorizinga corporationto be formed for the 'purposeof acting as agent or attorney-in-factfor a reciprocal or inter-insuranceexchange. Bowever, sub-division49, Article 130.2,and Article 1303b, Vernon's Civil Statutes, did provide that corporations might be created nto act as trustee under any lawful express . ’ I,?.William A. Raarrison,page 2 (15%397) trust committed to them by contract and as acent for the ner- formance of anv lawful act*',*and thereaftervarious domestic corporationswere sought to be created, and foreign corpora- tions sought to obtain permits to act as general agents for various insurance companies,including reciprocal or inter-in- surance exchanges by the use of the purpose clause above set forth. This departmenthas held, commencingwith an opinion by Honorable William M&raw dated September 22, 1938, addressed to Wr. George Van Fleet, Actuary for the Roard of InsuranceCommis- sioners, and in subsequentopinions b Honorable Gerald C. &nn, being Opinion No. o-3250, dated May 1c , 1941, addressed to Hon- orable Earvin Rail? Fire Insurance Commissioner,by Honorable Grover Sellers, being Opinion NO. o-7302, dated August 9, 1946, addressed to Honorable E'arvinRail, Fire InsuranceCommissioner, that corporationsso formed could not act as agents for various types of insurers,,includingreciprocal or inter-insuranceex- changes, for tho reason, among others, that such corporations E Fbject to,the provisions of Section 1, Article 1524a, which provides that corporationshaving the purposes a%e'aescribed cannot "carry on the business of another." -'Article'l524a,V.C.S., was not repealed by the pass- age of the Texas Business CorporationAct (Article9.PjB) and, in addition, Article 2,01B(4)(d)of the Business Corporation Act provides that no corporationmay adopt, or be organized,or obtain authority to transact business in Texas under the act if any one or more of its purposes is to operate as %orporate attorneys-in-factfor reciprocal or inter-insuranceexchanges. I' Chapter 388 Acts 55th Leg. R.S. 1957, (codifiedas Article 1513a, Vernon's &vi1 ktatutesP'p%fded that trust companiesmay be created, and any corporationhow- ever created may amend its charter or a foreign corporation may obtain a certificateof authority to do business in Texas for the following purpose, II.. . to act as attorney-in-fact for a reciprocal or inter-insuranceexchange." Ssc. 5, Art. 15l3a, provides that such corporationmust have a fully paid in capital of ,j500,000.00. It is the opinion of this office that prior to the enactment of Article 1513a, Vernon's Civil Statutes, since no domestic corporationcould be created nor a permitbe issued to a foreign corporationfor the purpose of acting as agent or attorney-in-factfor a reciprocal or inter-insuranceexchange, the Board of InsuranceCommissionerswas without power or au- thority to issue a license to such corporationsfor the purpose of acting in that capacity, and the answer to your first ques- tion is therefore %o". * Emphases throughoutare supplied. Mr. William A. Harrison, page 3 (WW-397) Your second question is as follows: "Immediatelyprior to the enactment of Arti- cle 1513a, V.C.S. was the Board of Insurance Commissionersauthorized by law to license a re- ciprocal or inter-insuranceexchange and its attorney-in-factif the attorney-in-factwas a foreign corporation?" It is also a well settled rule of law in Texas that a foreign corporationis restricted to the purposes and powers which may be exercised lawfully by corporationscharteredunder the laws of Texas, and the rule of comity would not permit a foreign corporationto obtain a permit to do business in Texas for a purpose not authorized or exercise powers which.couldnot be lawfully exercised under the laws of Texas, even though the purpose for which such corporationwas formed and the powers 'soughtto be exercised thereunderwere lawful in the State where the foreign corporationwas chartered. Western Service C . v. Neharz. Secretarv f State 116 Tex. 193 197, 288 S.W. &'tl(1926); Ii-A, Tex. .I$., SectIon 7%-k,p. 176. Since the Secretary of State .wasnot authorizedtunder ;,thelaws of Texas to issue'a.permitto a foreigncorporation ~to act.as agent or attorney-in-factfor a'reciprocalor inter- insurance exchange prior'to the enactment of Article 1513a, V.C.S., the Board of Insurance Commissionerswas without au- 'thorityto issue a license to such corporationto act in that capacity, and the answer to your second question is “no". Your third and fifth questions are as follows: "If your answer to either of the first two questions is in the negative may the present State Board of Insurance conEinue to license such reciprocal or inter-insuranceexchange with a corporate attorney-in-factif the corporate at- torney-in-factdoes not meet the requirementsof Article 1513a?" '%ay a reciprocal or inter-insuranceexchange now be admitted and licensed to do business in this State when its attorney-in-factis a foreign car-' poration which does not meet the requirementsof Article 1513a, V.C.S.?" Your third and fifth questions have been considered and will be answered together. Since it is our opinion that prior to the enactment of Article lsl3a, V.C.S., the Secretary of State was without authority to issue a charter to a domestic r - I@. William A. 'Harrison,page corporationor grant a permit to a foreign corporationfor the purpose of acting as agent or attorney-in-factfor a reciprocal or mter-insurance excnange, any license heretofore granted by you or your predecessorBoards of Insurance Commissionersto such corporationwas without legal authority. However, where a domestic corporationhas amended its charter, or a foreign cor- poration has received a certificateof authority under the pro- visions of Section 2, Article 1513a, from the Secretary of State which authorizes such corporationto act as attorney-in-fact for a reciprocal or inter-insuranceexchange, you would have the legal authority to issue a license to such corporationto act as attorney-in-factfor a reciprocal or inter-insuranceexchange, provided such attorney-in-factfor the reciprocal or inter- insurance exchange has fully complied with the provisionsof the Insurance Code, and particularlythe provisionsof Chapter 19 thereof. If such domestic or foreign corporationdoes not meet the requirementsof Article 15'13a,V.C.S.6,the Secretary of State would be without authority to either grant or amend a charter of a domestic corporationor issue a certificateof au- thority to a foreign corporation thereunder,and hence you would be without authority to issue a license to such corporation since it would be doing business in Texas in violation of law. Your fourth question is predicatedupon an affirma- tive answer to either questions 1 or 2, and since both of these questionshave been answered in the negative no discussion thereof is deemed necessary. suMMARY Prior to the enactment of Article 15;13a,V.C.S., no.domestic corporationcould be chartered,and no foreign corporationcould receive a permit to act as agent or attorney-in-factfor reciprocal or inter- insurance exchanges, The Commissionerof Insurance may legally issue a license to act as attorney-in- fact for a reciprocal or inter-insuranceexchange to any domestic or foreign corporationwhich has been qualified by the Secretary of State under the provi- sions of Section 2, Article 15lja, V.C.S. Yours very truly, WILL WILSON Attorney Gene,ralof Texas Mr. William A. Harrison, page 5 ON-397) APPROVED: OPINION COMMITTEE Geo. P. Blackburn, Chairman Wallace Finfrock Morgan Nesbitt Richard B. Stone REVIXWEDFOB THEATTOBNEYGENEFUL BY: W. V. Geppert