Untitled Texas Attorney General Opinion

Au- 11. TlEKAs PRICE DANIEL ATTORNEYGENERAL January 24, 1948 Hon. J. M. Faulkner, Opinion Ho. V-483 Banking Commissioner, Austin, Texas A0: Ellglblllty of tbr, State Treasurar to sot Attakian: as trustee for a corpcvr- Mr. H. L. Bengston, atlon Issuing securities Deputy Banking Com- under Article 1524a missioner. (V.C.S. 1 Construction of a proposed twt agree- ment , and a plicablllt~ . or Article %96 of the lie- vised Civil Statutes. Dear Sir: Your request for an o inion upon the above captioned subject mtter is as fo Plow! ., "The Sam Houston Underur%tero,;Inc. of ROUStOB, Texas Is a domestic corpora- tion haviag been granted a charter by the Secretary of State on’Jaly 3 1947, vlth Sub-Section,&9 of Article 136’2, Rtiaed Civil Statutes of Texis al it8 purpose clause and by virtue 0) iald pawe~8 It 1s under the general superti~sion oi {his Department in accordance with the ptovls- Ions of Article 1524a, Retired Civil Stat- utes of Texas. “Said corporation now proposes to issue and sell to the general public a fifteen-year Maturity Underwriters Bond subject to the provlslo~s of Section 7 of Article 1524ap Revised Civil Statutes of Texas, which provfdes for collaterallza- tlon of all outstanding bonds, notes, cer- tificates, debentures and other obligations sold In Texas by securities of the’ reason- able market value equalling at least at all times the face value of‘ such obligations, which securities shall be placed in the &Bn, J. M. Faulkner - Page 2 (V483) hands of a corporation having trust powers approved by the Ba;nklng Commls- sloner of Texas, as Trustee, under a trust agreement or at the option of any such corporation which sells ln Texas such obligations as heretofore referred to, such corporation may, upon appllca- tlon to and approved by the Banking Corn- missloner~ deposit, seew%t%es-wi%h the State Treasurer ,of Texr,s”wader a trust agreementin lieu.of such deposits with a Trustee as set forth hereinabove. llSubject corporation has submitted foor. the Commissioner’s approval Its trust tidrnture naming the State Treasurer as Erustee, together with a specimen of the bond or obligation which it ~proposes to sell. We enclose said instruments and, 1 ln connection therewith, the foPlow questions are submitted for gouP opln .Y onr “1. Are the terms and conditions of the trust indenture. such as to warrant the approval thereof by : the. Banking Commissioner? “2. Wbuld the’ State Treasurer, ‘by ’ virtue of his .offlclal aapaclty, be eligible to act as Trustee under the terms of the submitted trust in- denture? “3. Is the roposed bond conslder- ed to be ln Pegal form and does It come within the class of Instruments or obligations aentloned 1.n Section 7 of Article 1524a, Revised Civil Statutes of Texas? I;f so, would the provisions of Article 696, Revised Cfvil Statutes, also apply?” We do not apppowe the form of agreement pro- posed by Sam Houston Underwriters, Inc. with the .State Treasurer. The rights, llabllitles, duties, and the like of the parties are statutory and fixed as a matter of law, and any attempt to restate them, explain them, or affect Hon. J, M. Faulkner - Page 3 W-483) them one way or the other tends only to codusfaa and serves no useful or necessary purpose. A short 9 formal instment exscut ed by f&e Corporation, reciting the desire to make deposits of collateral with the State Treasurer in virtue of the tie a plicable statute law Itself of deposit is all that Is necss%ary, sfnce wili be read into the act or agpw and the Treasurer htie no authority to mk% any agreement whatsoever other than’thoee contemplated by the statute Itself 0 This answers your que,etfons 1 and 2. In respect to .mr questloa 3 we Be to advise that Section 7 of Arttcle 15240 (V.’ Co 8-f pm- vldee : “All bonds, notes, certlflcates, de-. bentures, or other obllgatlotis sbld ln Texas by any corporation affected by a pro- vision of this Pet 9 shall be secured by. se- curities of the reaeoneble m?ket velae, .equalllfig at least at all tfmee the face value of such bonds, notes, c%rtlffcato@p debentures, or other obl%gatfozM.” The language *Ior other obllgatfons” means the direct .oblfgatlon of the eorpomtion like the par- titiular Instruments mentfoned, It will be seen f’rom an ex’a&.n&lon ob the specfmen bona accompanying your request that an 61)8en- tlal part of the purpose of t~he eale of bonds is to sell to the purchaser twenty-ff;oe’f’ully paid, non-am- se%+able shares of Class A. capital stock of the company. Obviously, the shares of the ca 4tal %tock of the company constitute no direct obl~fgat 1 on of the company o We are fherefoPe constrafhed to hold that the bond Is net such bond OF o’bffgatfon of the company as comes wfthfn the chss cf fnstPument% or oblfgatfons 0s Seetfon 7 of the statute0 To hold it to be such an ob- lfgation would be ta extend the seeps of the power gfv- en to the company heycnd the plain language of the stat- ute. Hon. J. M. Faulkner - Page 4 (V-483) An extended trust agre4m4nt brtws4n a corporation operat lng under Article 15244, (V.C.S.) and the State Treasurer fs not to be approved. The riFhtS, liabilities pow* ers and duties .gener&y of ba%h palti48 Pro fixed by the statute itself end a formel, brief agreement indlcafia Ch4 porpOd4 Qf the company to make dapos f t8 V@h t?%4 Troabr urer in pursuance of soId articr16 is splff’im cient. The specimen bond submiCf4& $8 not such bond or %ther obligatiaPt" o*thor$c*d or required by the statute to be collateral* lzed sine4 a substantial pwticm ef the ob- ligation is the selling w th4 Wwatfoti to the subscribsr of pa%d ap ShW48 4f if3 capital stock, which IS not a d2rect obh%g&-’ tion of the corporation* Yours very trZtlf, ATTORNEXGEWA$ OF TEXAS OScwb APPROVED C ti* FIR& ASSISTAW ATTORNEYGBURAt