B ._
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3
, OFFICEOFTHEATTORNEY GENERAL OFTEXAS
AUSTIN
lWAWC.“AN”
. .
lnwaaY O‘IWI.
HmesPber I+ 19k2, ru
tioas 7 aa4 9 in oar
our neon~a*ratl4
slt.h&ma and this
-.
,i.;
Two types of etatutoe are fo be found pertaining to
the oreation of privste Oorporatlonat (a) statutes authorlg-
in@ ths oreation of eoorporatioas for etated ~~rpoaes, and (b)
statutes presoribfw the meohanlam fir sffeati~~ the incorpora-
tion. Prior to the paaeag@ of ~~rtiole 1302a, :je6tlon57 of
.-- Artfole 1302 cuthorimd the inoorporetion of title fnnurano~
eoc~plpanieeand the provision8 of Chapter 2 of Title 32, R. C. s,,
proerrlbod the moohanlem therefor, with Artiohe 4699 and 47,700
enterbig n4t at all into their sreatlon. Seotion 23 of Arti-
ale 1302a removed seation 57 of Art1010 1302 a8 en authoriaa-
tion for the orentlon of sueh eomppaniee, bnt with oertaln ex-
~optiione (6. $. rjscrtions 2, 6, 8, 10 mad 121 hrtlole 1302a did
not $arport to alter the node br whloh ewh ompanies are ore-
If Legislature
the had intended that euoh 0omp6niee
~~~forth wqloy the msahanlem of Artieloa 4699 and 4700 it
8.8~ reasonebls to a&sum that 10 rotid hate sxplioltly Lb
provided. In the abeenee of euoh a provision oa~polllng be-
ofamoethe aonoluelon that the general aorpora&n laws ofmtlnuo
ti9govern the creation 0r title lneurfinoo ompaniee insofar ae
they arm not inmmeleteat with the l xplioit provielone of Art-
iolo 1302ar It will be notlord that by virtue of Seotion 8
of Artlale 13028, the Baird of Ineurenoo Commieeionere is +a&-
ed with the duty of filing the charter8 of suoh eafqmniee
o6nesqnentlJr, whenever appropolato,the Board is to be aui eti-
tuted for and to aeeum the dtltilbeof the irclorotary of Stata
in effeetlng the proriniom~ of Chapter 2 of Title 32.
This oonalorritm nmkae iqoeeible the appllaatfon of
hrtlolee 4705 and 4706 to title inaunlooe ootnpaniae~ oonsc
qaentiy, iiueetion Bo. 7 %a tmaered in the nogatlre.
To hold othsllusiss would be to eay that tlt1o Inour-
anee eompaniermast iaveet part of t&lr aeeets aoaorbing to
Artlola 1725 (per Sootlen 6 oi Artiale 13026), tbat they may
imeet m.rt of their oapital etook in an ebstraet plant, that
thsy must invast the remainder er their capital stools in the
it- enumerebod br Artiole 4705 that they must invest thalr
surplus aooordi~ to Artiole l+7& and, flr~ally, that they
mat invest their prsnium reswvoe ae~tlding to btfole 4725
(per :*otlon lo of Art&ale 13021~). Such segregation and ear-
narking br assets would be well nigh l;nPosslble to sstablleh
and al&ala and nould result ifi the Tegdfation Of the in*@&-
manta of these oompnies to an extant far +waaCsrt&en 3.8 &ma
with life and eesualty insuraaoe ooinpeni~~. 3isoe title is-
surenoe :a ouwaotiy bmwn to be a type of lnauranoe ln rhioh
HonorabLe 0. PI Loakhart,~ Ghairrman, Paga 3
the risk of lose is very anall and in whloh the pramIume are
very large In aoaparlson 4th lose p-to, It Is unlikely
that tha Legielatura intended euoh a high degree of regulation.
. .
Mareavar, it is oom63onkncnuledga--and Artiole 1302a
epeoiiloally rseognfzes-that aarupanlsa doing a tit3.a Inaur-
snoa bueineee oonduot many addltlooal aotiritiea. Moat of
theee addItIona notlvities, if standing alone, rould not be
ragulated by the State. If Artiolee 4705 and 4706 wore to
be lmpoeed on these eoqmnlae, these aotititiee ae wall ae
the title lneunmoe business would be eubjeoted to extreme
regulatlon. It aeama reasonable to believe that the Legi-
laturs Intended that the rsserves e5tablIehad by ssotloae 6
and 10 oi Artiale 1302a should isolate a portion of the aeeets
of theee o~paniee for the proteotlon of the holder8 of title
Ineurknoe peliolee, and that tha ramfader of such aeaeta
should be rree and unencumbered for uee In the other aotivl-
tie5 oi euob otapaaleer
1IInally. our oonolusIon is etremgthaed by the es-
kbllebed praotioe of your department. Although pour orIgIna
opinion requeet aekad *. * . %a our oonetruotIon oorreot that
(Artlole 1302al me&e8 the provIeIoneoi Artlola 4705 applioa-
ble . . .I rour let&jr oi iGore!nber 4th atatee that you have
never ocmsidereQ Artloloo 4705 en4 4705 applioable ts title
lneuranoe osmpaales and that say 1atImatIon to the sentrary
la your orIginal letter was *erroneoueand iaad+ertentw. Aa-
aepting your met reoglt letter a5 eabodpl~ a oornet etata-
losnt of your departrmntal praotloe, It Is aignifloant that
during the thirteen yearn einoe the passago of Artilole 13026
the Legielature has never sawn fit to questlon or to alter
your praotloe. 9uoh an aetabllahed. oonstruotltm whan ooupled
wIt& aelaplete Leglalati*e eilenoe and, praeuniablr, aoquloe-
oenoe lends weight to the opinion above axpreeeed,,
;Zn,etion fzo. 9 In Opinion Blo. 0-4587 wsu aopleb
tram your su;.plementsl ra;luest for oplnlfm and reads ae followar
*In studying the sOhsdtis 0r e5eets aoooa-
panyfw the affidavit of the inwrpomtare, whloh
asset5 will be tenderad in paymant of o.apital etook
and surplus (b&ore aotual fllln& the ohar5er wi31
probably be rewritten sa tie to divide theee a5ueB6
up into a mfnimum of ~100,000 capita.2 stook and
$5,000 au~lue) wo observe t&t tha aaseta are af-
firmatlvsly dI50105ed to ambrace (a) fee titles to
Iimoreble 0. 3. Lookhart, Ghdam&n, PW3e 4
roe1 eatate, (b) real estate purohaee oontrerote,
and (0) notes or other sohetary obligationsae-
oured by rlret lfen upon reel e&ate, 8~ of all
, .three of whloh are loocitedin the State of IZew
Sexloo end some i!::the Stata of Texas. Of oourae,
before either atmrteringor llaensfne,this Company,
this Departmentwill disohergo its responsibility
of detar?airzi~whether or not thatassets so llsted
in the eoheduls to the ai'fidavit&re actually valid
fee tiblee, real estate purohaaseoontraota ehd obll-
&etIons eeoured by first liens upon reel estate,
ar?i!tho ioautioh thereof (whetherin Texae or New
%exLoo) and the value thereof. Sut, for the purpoee
of detarmIniu$ the legal elirsibility of the various
olasses of assets so tendered In payment of the au-
thorleed oapital atook and the eurplue funds whioh
may be set u;linitially in lncorporatirdthis Com-
pany, we ask you to amwer spebiflcallgthe folleu-
ln,gquestions Ln addition to those mopouhded here-
tofore, regardless orwhether you hold Artlolee
4705 and 4706 applioable,or whether you holo Art-
lole 1302A or some other article or artiolea af
the at&&es a~)glioabla, wItArefcrer;oeto the in-
-vestment of the oaplte.1 arti surplus Amds ljf tiiis
Company;
Are foe title.9to ret31estate situated
in Ye% ell,yibleto be received In noymnt of the
oepital stool,funds of this Company?
'53 . Cm Tee titles to real estate outside of
I'exnsbe reoei~ved
in p!lyr;lent of capital stook of
t&is hmpsr.y~?
V. Can fee titles to real estate In Texas
be aocepted in pnyuent of aurplun fuui?sof thla
GOElQW$?
"3 Can fee tItlei to real estata outs&do of
of surplus of this
'1'emwbi aoce2ted in pn;rLlent
Company?
"Es. Can real eatate QUrOfMie OontlYiOt8 UWSl
real )ropertf in Texas be aoospted in pa~wt Of
oapital stoc, of this Sompe~?
Eonosablo 0. P. Lookhext, fihalm, Peg* 5
“P. Can real r&ate puroherre oontmeta upon
t-1 property sltunted ootsldo OS Texas be sooept-
ed in payment or oapftal atoek o? thla Company?
I .
*a. Ccc real e&&e purohass oontrriate upon
property in Terser be aoooyted in payment car mm-
plus or thfe Conpany?
*Ii. Can real estate purohane crontraets upon
real property outside of Texas be aooepted in pap
mont ot surplus or tblo 0ompeuy?
“1. Can notes or other aonetary obllga6loxm
oeoured by flrsrt lieno upon real eatate in Toxea
be reo@lVed In payment bf aepitel etook of thir
~on?panjl
"J. Can notea or abhor obli&ations rwurod
by firat llcnr upon real e&eta eltoated outsid*
bs noolted In payment ot aapital atook
of T~JRLII
or thi6 COIWBQJT
% Urn notes er other obligatlone wowed
by ntlel lleiicl
upon real ootetr dtlueGo4 ln %wwl
be reoslred In papant of surplus of this Compenfp
Can not&r aad other obligations seaumd
by Xl::; liaw upon real 8stato slteetod outadd.
of Toxne be roooirod in paymod of tha mrplur oi
thLs Coup?'
%o do not attempt to answer subdiridona X, IT 0,
and El term Veal
sitwe tkm eetate purohees 00ntra&8w JOal
not Q1te this departma& sufrllelont feobl upon which to hew
en opinion. Alao M are dlsrsgaraiag the phraao “or otiwr
mnetery obllpatlone* oonteined in su$dlvlsiona I, J, K end
L, beomae muoh phraoe is too indefinite to be the bar18 Qf
M opltion.
The protlaion~ in the genowl odap~mitlon Iawn
reletlve to the wsaipt of property for oapital 8teOk em
four@ In Article 1308r
"Ax% 1306. (1125-1126911273 Cepfkal &oak.--
Ekfore bhe aherter of a ptlvete oo?poration omated
ior profit can be tiled by the S;sOfe~ry of %ate,
1
Honorable 0. P. Lookhert, ChaIracm, Pago 6
the full amount of itr authmised oapltal stook must
be in good faith subaorlbed by It.s Dtockholderrr end
fifty per Cent thereof p&Id in aash, or its squiva-.
. . lent in other property or lnbor done, the produot
of wblcb shall be worth to the cmpeny the aotual
value at whloh it was taken or et whiah the property
wacIr0oeim34. The afTldavlt of tihoar who exeeuted
the absrtcr shal.l be famishad to the i>earetery of
Stats, ahawlngr
*1. The news, resldonoe and poatof'fioe ed-
dress or eaah eubsorl8er to the aepltel atook ot
suoh oonpauy~
“2. Th8 amount 8nbrorltmd by eaah, end the
aaouat paid by @+a&~
“3. T~Q each value of any property reoeirrU,
p,i~inaits desorlptlen,location end from whm end
the pAor at whloh It war .noalred;
*4. The amount, ahemotor end value or Ubor
done, tron whom,~aad prloe et whleh It we$ reoeived,
(Aotis 1901, p. 18; Aote 189 , p. 192; ziote 1907, p.
309; 0. L. *ol. 10, p. 246.,I ”
It ~$11 be notiwd tlmt this etatute eslploye the
word “propertyR without ettmptlse: to 8peoiSy psmlsalble
kinde of property. Bcwstm’, Artials8 1359 @md 1360 p~‘@Vide:
-.Y+ *Article 1359. (11751 Condltlon8 oi purehaee.~
.’ Eo private ooxporntlon @hell be pomitted to pu+
obase any lands under any proolalon of this ohapter,
anlese the lands .RO ,ptarQhaae4 am neoossary to 8~
able suoh oorporatlon to be, bualnes8 in tbls Xato,
or exoept where:s?lohland 1s purohased in due 00~Wae
of busisess to ~eouxe thr payment of debt. (A&8
Ig93, p, 36; Aota t897, p. 48; 0. 2. vol. 10, 19.
466, 1102.)
- aArtlala 1360. (11761 Sale of surplua.-4ll
prIvat,s aorpomtlons eutborleed by the Lawa of Terna,
ti.0 do bueinese in this %ate, wt.otie i4.n purpos* 16
not the aoquisltion ox cmnrsshlp oi’ lands, tiubieh
have or my aoq,ulre by lome, purohssa OX!otherwlso
lionorable 0. ?. LdthWt, Ohhaim, %ge 7
&ore iand thnn is MlsessiHuy to enable thm to
on their bu#lnese, ahell, withsn fiit8Oll
oarry
y0ers Proa the date said iana araybe aoguir8a,
1 *in @me faith sell -8 UonVey in f88 siDlple all
1enEa so aaqulrsd whicrh am not neaeesary far
thn twnnaction of their buainesa.n
And Artiole 1364 dealarea t&t:
“Art. 1364. (1160) E88heat pm000aingO.-
All oorporetiona holding l~da ooctrary to the
~rotialons of this law oball hold the lame sub-
fsot to forfeiture alta amheat prooeebinge. The
Attorney General, or any dlstriot or oouaty et-
toraey, when either of them haa roaaon to beliers
t&at any oorporation is holding land8 fn viola-
tion or tale law shall iLnetltute suit in the name
oi the State 0r Ln*, in Tray18 Couatp, or In mf
oounty in Texas where muoh Borporation mar hare aa
agent, or fn any county whore anr part OS the laml
ianr be SittuRt8a, againat auoh oorporation, a@ 58
provided for the em&ant at eat&er, or a0008i8di
persons Uping dthout devise thereof and havi
helm. (Act& 1893, p. 36~ 0. L, nel.. 10, p. z6ya
In the oa8e at Campbell v. %a& 35 S. W. (24) 9)
(Cam. App.), the oourt raldt
V@r many years it haa beea the eetabliahed
polior of our stets to prohibit oorporationm, wiQh
oertain exceptlone, iron! aequlrlng land. . . It
fs true, a6 argued br the plalntirfs In. error,
that if the oorporatioa has oonmunimted the deal
by acquiring the lasida no oae oouk? hey8 questioned
lte title sxoept the 8tat8.w
We oe~ find no law requiring the refusal of a oorporato aharter
bsoeusts a portion of its oepltal etook haa bsm purah&ued with
realty uhioh ths corporationis not authorixed to ho&l. In
aooordanoe with the language of the above case, we feel that
the aoquisftlon or such property my only be questionedby the
State through es&eat proaeedlfqs uuder ArtioZe 1364 and, in
an appvpriets case, through q&tra rims prooeadlngs.
It wllf ruther be notloed that Article 1306 doe8
not ayeo$fy that grope&y 80 rrooived &all be looatsd within
Honorable ;I.7. Lockhart, Chairman, Pa@ 8
the state. 'onse:~uerMy we enswer subdivisions A, 3, C,
and r? of .&astion140.9 in the afr~rmatire.
-. . For tht roaaOm above state9 and f3r the additional
reasorithat private oorporationaare mder uo disabllltywith
respeot to aoc',uirkgand hdding r,otas oeaurod by first ilens
upon realtp, subdivisions I, J, E EudiL or 2leotionHo. 9 are
also answered I.Bthe afflrmatioe.
Trusting that the r0rbg0ia fully answrs your fn-
quiriee, we are
,
R. Ceaab?aorhud
Asielstsnt
Untitled Texas Attorney General Opinion
Combined Opinion