THEATTORNEY GENERAL
OF’ TEXAS
February 18, 1958
Hon. William A. Harrison Opinion No, WW-204-A
Commissioner of Insurance
State Board of Insurance Re: Amount of a vendor’s
Austin 14, Texas lien note that may be car-
ried by an insurance com-
pany against a buiiding which
was previously the home of-
Dear Mr. Harrison: fice of the insurance company.
We have for reconsideration your opinion request submitted to this
office on October 9, 1957, and in answer to which we released to you on
October 23, 1957, our Opinion Number WW-284. Your request for the
opinion at that time reads as follows:
“Article 3.40 of the Texas Insurance Code
authorizes a life insurance company to own a home office
building with no limitation on the amount of the value of
the building that may be admitted as an asset except that
the total investment of the company in the building must
not be in excess of 33-l/3% of the company’s total ad-
mitted assets. Article 3.39, Section 2. authorizes a life
insurance company to invest in first liens upon real es-
tate, the title to which is valid and the value of which is
40% more than the amount loaned thereon.
‘ABC Life Insurance Company owns a home
office building which has a value of $100,000, which amount
is less than 33-l/3% of the total admitted assets of the com-
pany. In this situation the entire value of the building would
be an admitted asset. ABC Life Insurance Company then
sells the building to a purchaser for $100,000 with no down
payment and takes a vendor’s first lien mortgage upon the
building in the amount of $100,000. We respectfully re-
quest your opinion as to whether the entire $100,000 mort-
gage is admissible, or whether the company must receive
sufficient down payment to make this mortgage a proper
investment under the requirements of Section 2 of Article
3.397’
Section 2 of Article 3.39, Texas Insurance Code, is in part as
follows:
‘U may also make loans upon first liens upon
real estate, the title to which is valid and the value of which
is forty (40%) percent more than the amount loaned thereon.
I
. .
Hon. William A. Harrison, page 2 (WW-284-A)
Under the factual situation contained in your request, the insur-
ance company has sold its home office building for a consideration
consisting of a vendor’s lien note in the sum of $lOO,OOO,.which repre-
sents the total sale price of the building. Article 3.40 prohibits the
investment of more than 33-l/3% (50% with permission of the Board)
of its admitted assets in home office property provided, however, that
surplus funds over and above such percentage may be invested in home
office property so long as such surplus investment is not shown as an
admitted asset. The superior title to a building sold under these cir-
cumstances remains in the seller and so the company’s equity remain-
ing in the building must be considered an investment in home office
property and must be considered in calculating the percentage permitted
to be invested in this category of property. The company may elect to
treat this transaction as a completed sale by selling for cash and
simultaneously lending part of the purchase price via a first mortgage.
This would remove the investment from the category of home office
property but the mortgage would be a loan and fall under Section 2 of
Article 3.39.
Our Opinion No. WW-204, released under date of October 23,
1957, is hereby withdrawn and this opinion is substituted in lieu thereof.
SUMMARY
Where a life insurance company sells home office prop-
erty retaining vendor’s lien, the amount of the note so se-
cured must be considered an investment in home office
property and must be considered in calculating the per-
centage of investment permitted in this category of prop-
erty by Article 3.40.
Yours very truly,
WILL WILSON
Attorney General of Texas
Assistant
FBW:dac
APPROVED: Assistant
OPINION COMMITTEE:
Ceo. P. Blackburn, Chairman
Houghton Brwmlee, Jr.
Marietta Payne
REVIEWED FOR THE ATTORNEY GENERAL .“i
BY: W. V. Geppert