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