Untitled Texas Attorney General Opinion

Board of Inaurancs ConrmlsrIone~a Austin, TexEia Dttar sirat Attantlont Mr. @.a. viul IPleet, Aotuairy. opinion x0. O-3503 Ret Tha ittvaatmettt of the funds of' a doaeatlo life fnaumtnoe aowany in the ahtare or ahare aeoounta of tha dafinad building and loan raaoolatlona. With l peolil rafareaao to So&Ion 1 of Senate Bill Ho. 13 antI to Sootlon 1 ol Senate 8111 lo. 370, Aeta of the 46th Legialrture, 1939, you have requested a lrgal opinion from thla deportment upon the question aktod by you 68 f'ollova~ *Thla quatad portloa or Art101e 4725 ln put governa tha inveatwnta of dbMatIo life lnauranee oGqwllaa and preaerlbaa that thm aurplua of a Teexoa life Iaam8me aompany over and abova the aaount bf Ita raaarvea and asp- ltrl atook mar ba lnvaatad In oartaln atoaka whlchwepreauw to lnalude the ahare or ShaFe lo o o utttaor a P o der a a ttvinga and lo a r 6 t8800ia - t&on doptiolled In thia State and the ah8ra or ahare aooounta of a building and loan aaaoola- tion domiciled in thla Stata, "The quokd portion of Art1016 8816-24, you will note prorldaa that I faxxsa Inauranoe company mey invest any of ita funds in auuh ahara or share aooountn. 3hemfOM‘ youropIlliim la reapeutm1~ requested aa to which of thssa two Artlelea la 0ontmllIng. That la, vhether or not the oap- Ital stock and the reaa~*ea of a donmatfo life inaurattce oompmy tny be Inverted ia the era or ahare account8 of the defined Wildtag e.nd i0sn aarooirtlolxa, or ii only tha auwlua of a Texas oompany may be invmited ln lUoh ah- Or w3 ; ! . C~malaai0ne~a.P4go 2 Borrrdof Inaurfutce I ’ ohare atxsouttta.” Senata Bill Ilo. 13 of the 46th Leglslstun (Act8 1939, Page 76) wall a ooqprehenalva amettdmmt of Semate Bill lo. 111 of the Seoond Called Sassion of tha t)lst Legislature, Acts 1929, as aamnded, oomnonly knovn aa the Building and Loan Asaoolatlon Law (Artlole 8&a, V.A.C.S.). Us am oonoerwd onlyrlththa amndmant to Section 25 thereof vhlah Sormarly nadr *sea. 35. Trust funds. An admlniatrator, axeoutor, guardian or tzuatee, or othaa flduolary, my In such oapaoity lo@m and hold aharaa in any buIldlng and loan aaaoulatton of thla Stats, and shall hava the same rlghtuand ba subjeot to the same oblig%rtlona urd limitations as other ahareholdera and be wlthdrawablo by thaw Any Tows oorporation may invoat la hama ln any Tams buIldlag and loan aaaoclrtlon." Uxtder San&e Bill Ho. 13, aald Saotlon 25 was amended to read,::in:p&t,.ae follovat "Any Texaiacorporation,inoludlng way lnmarance company organiaed tutdamthe lava of this Btate, or pny lnsursncr~uaqwry do% bualnoaa in thlr Stat8 wade a par&t, my invest uny of its funds ia the ahwaa or sham aooounta of any bulldlng end low aamolation orgmiced under the lava of this State, or ln tha ah&m8 or share aooountr of uty Federal $wdnga and L@an Asaoeiatlon domleiled in this Stat., and any such lnveatmnta mada by iruuranca oompanlm till be eligible iavoatmenta for tax redwing purposes under Article 7069 and Article 4769 of the Bavlaed Oivll bktutos OS 1925, as i amanded.* Art&&e 4769, as amended, referrod to ln tha above aamndmnt, applies only to *oaoh llPs lmurana~ corqpsay not orgem- iaed undar the laws of this Btata, tranaaoting buafmtaa in this State. ‘ Artlole 7064, (LB ammded, liksviss referred to, applier, to *every inauranae corporation, Llopch oc reaIp~ooala, end any other ox?gani!zationor eonoarn traMsoting tha buaineaa Of fire, marine, marine Inland, aooldent, credit, title, J.lveatocls, fidelity, gwranty, surety, oasualty, or my other klttd or ahs*~ter $f in- aurbnoe buaiwss other than thb buaimea8 Of ltfe l.naUre-naa. Bottrd of In8urance Comiaalortepa,Page 3 Uesmte Blll lo. 13 na fIwl.ly loted upon by the 46th La&alatum as of April 26, 1939. It la to be noted that the 1-e of the WlX%e&t to 8eotloa 25 la ~oap~~~:ve md general. Senate Bill Ro. 370 of' the 46th bglalatttm (Aata 1939, P4a 397) na an anendweutt to oertain apeaiflo lsvr regu- latlng partloularly the lnveatrsnt of funda of life ln*moe tmmimnlea orgaalred under the l&V8 of Texna -- Artlale 4725, Retired Civil Statutes, 88 amended. It vaa finally parsed by the 46th Legislature a8 of May 1, 1939, and therefore mpreasnt8 an exprearlonof the Leglrlature 8ubaequent to the final paaaqo of Sonata Bill go. 13. Amtrtnining to the sub lot or your re- quart, 3eotIon 3 of Senate Bill Xo. 218, Aota 14 31, b?nd Laglr- lature, Regular S68aion, Chapter X53, Fye 256 (vhleh traa tan- ahanged by Sanata Bill Ro. $36, Aota 1935, 44th Legi8lature, Ch. 10, ?. 28, aaendhg ArtiOls 4725 in OthOP partieulnra)na amend- ed by Senate Bill So. 370 to read as followat "4 life ln8ur8nae oompany orgu!LUed under the bra of thl8 State may invest In or loan upon the follovIag aeourltlaa,an4 none othara, vlct l l ls "'3. Any llia Inauraaae cow of the State, for the purpose of ¶meatIng It8 aurplu8 or eny part thamof, over and above tha amount of ita reaarve8 md capitil stock, may puruhaaa uid hold as oollatenl aeaurlt debentuma, bills of lxohanga or *the; @am- wraiil notes or bill8 and aoouritleaof any rofvent dividend p&yIng OOrpomtIon vhleh has not defaulted in the paynant of amy of Its oblQptlm8 for a po~lod of flva (5) yeara, tha k atalltlmea during the bontQ%UanOeOf Sueb 108n at least fifty (5C$) par OOttt a0re thrn ate rumloa~edthe~~ott~ provtded that no au& OQ- shall loan or Inveat In it8 m atote mr 50m than five (5$) pai cent Of th* amout Board of Insurance Comulauloaara, Page 4 of its oapltal rad surplus in the atook of any copporatloa, and providad further that no euah oompaxty ahell inveat any of Its funds la amy atoek on aooount of which the holder8 or ottaaratheraof IWAYla any avent, be OP become liable to any asoeaameat except for taxaa, nor in the atook of eny 011 ooapeay OF mmufacturlng oompeny unleaa such oorpom- tion hea oap1te.l atoak of not lass than Five XiuiOtt ($5,000,000.00) Dol1arr and ud.888 au& oorportation has paid dlvldeada for a period of five (5) yeara and has not default- ed in the payment of eny of its debts for a period of five (5) pars. “* l l.” P r iothereto r under Senate Blll lo. 218 of the I2nd Legislature, sttpra, Seutioa 3 of Arti 4725 had mad a8 fol- lows* "3. Any Llfa Iaauraaoe Company of the State, for the purpose of InvestIng its oep- it81 and surplus, or ray part thereof, OV~P . and abova tha amount of its reamvea. ry pumheao and hold MI aollarterel aauurlty, or otherwIre, and sell and aonvey the aapltel 8to&,bcmda,bll.la of exchange or othetoor- wrolal notes or bills a.nd aesurttles of eny solvent dividend paylng oorporstloawhich has not defaulted in the payment of cay of lta obligationsfor a pericd of five years, thr tntrmat mmket value of vh%.ah such atook, bonds, bill.8 of exchange, or othttr 00!8ie8rCial notes md aaourltiea ehall be at all tlmaa during the osntinuancro of suoh loan at least fifty per oaat lore than the sum loaned then- on; provided that no such oompmy &all loan upon or invest in Its ovn *to&, nor mom that five par oentuIII of its oapltnl end surplus in tha stock of any corporation, &ad pravided fkrthar that no much company shall invest any of its funds la any stock 0~ oooouat of vbioh the holders or ovnera thereOf OlY in Uy @vQBt, be or baoome liable to any aaaeaameatsXOePt for taxes, or in the stook of minime Or 011 Board of Inaumnce Cm8nlsaloners, Pago 5 oompeniea or in the #took of mf&nufaoturIng aom- males ooamoaly kaova as ladustrlea.' It la observed that under the 1931 Act a life Insurance company orgaulted under the lava of Texaa vaa authorlred to invest its oa it81 and a lus la the aecurltlea described, vhereaa under the lht, Se=? Bi 11 Ao. 370, only It8 8urDlua. Inmedlately ve are compelled to recognize thnt the 46th Legislature dtd a ooatradlctory thing if Senate Bill Xo. 13 of the same LbgislatuM applies to the f%Xa of life lrmurmee oop- panlea organized tier the laws of Texas. This for the obvIou8 reatton that under Senate Bill lo. 13 "any Texas oorponstlon, iu- oludlng any inaururanoe c o mp a ny * l l m y F a vea t o f its funds” in the ascruritles deaoribed, whereas under SenaF =e B&13. go. 370, only its aumlua, and t&t tiy as otherwise restricted. That the 46th Leglalatura did not, hovever, do this but rather ooaformed to the historle legIslatlve treatmat of the funds of a life iaaurauae ooaipanyorgaalredundertha laws of Texas as a SpeOifiO and repamte subject of regulation, la dem- I omtrated by the leglslatlve history of sets partalniag thereto. Long ago, In the year 1909, the 31at Legislature of Tex- as decided that investmats by life lnsuranoe companies orgaalted under the lava of Taxas should ba 8peolfloally regulated, lepazwte and apart froa other aorporatlona and Inaurauee compenIe8. Seo- tioa 10 of SuMa Bill Ho. 291, Aots 1909, 3lst Leglalature, Chap- ter 108, Page 192, provided as follows: . "800. 10. A life Iaauraatw company orgaulted under the lava of this state, may after this lict tnkea effect inve8t In or lonn upon the Solloving aacurltlea, vlst “(a) It 88~ lnve8t any.of its funds or ae- ourmlatloua in the bond8 of the United Stat88 or of any State, county, or city of the United States, or the bonds, of any lndopeadeat or common school dlatriat, ot flmt uortgage bond8 of any dividend paying railroad or electiie railway cow duly iatyx-poratsd under the lava of the United Stat&a or any state thereof. “(b) It my loan any of its fund8 end ao- cumulatlona, taking as seourlty therefor such collateral as uader the pzrevlaua subdlvlaloa it Board of Inaumnce COILtaalonora* page 6 may 5.nveat In; and upon firat llama upon real estate, the title to Which la valid end the value of which fa double the aammt loaned thore- ant provided, that if any pert of such value is in buildlnga, such bulldinga shall be insured against loas by fire for at lesat fifty per cent of the value themof, vlth loaa olauae payable to such colagany. It rmry al80 sake loeua&y$on the aeaurlty of or purchase lta ovn polloiea, but no loan on any policy ahall uoeed the re- aerve value thereof. lo lnveatment or loan, except policy loana, ah811 be mde by any such insurance colspany unleaa the aame ahail firat have been authoriaed by the board of directors, or by .a comlttee cbmged ,vlth the duty of auper- rising such inveatnnta or Loans. lo suoh mm- pany ah811 aubacrib to or partlalpate in any underwrltlng of the purchase or arle of aecurl- ties or property or enter into any luQh trana- aotlon for a ua hpurpose, or lell on aaaount of amh congwrg Jointly with may otkmr person, firm or corporation, nor ekmll UrJ such aaqpmp enter Into any agreement to vithhold froa# aale any of it8 property, but the dlapoaftfon of ita property ahall be at all tlmea vlthln the uon- trol of ita board of dlresetora. Every auah oom- o f ua eta no t luthorlred p a ny p o a a ea a ed by thla Act ahell dlapoao of the enme wlthln five ye-8 after the taking effeat of Wa Act, unleaa auuh Mmm;ao~gndod for good cause $f the Cormia- atlranae and Banking. This vaa folloved by Senate Bill Iio. 297, Act8 1929, 41at Leglalatw, Regular Seaafon, Chapter 237, Page 497, emand- lng in oertain partlotiera the 1909 Act vhich had beome Artiale 4725 In the 1925 revlalon. It 18 notevorthy tha4t thla Yea the name Leglalatura which in lta Seeond Called Ssaalon enacted ohe Building and Lmm Aeaoaiatlon Law vhioh contUned the atabmmt in Seutlon 25 "any Texas aorporation~~y Invest in aharea in enJr Texas build- and loan aaaooiatlon. Subsequently, in 1931, the &rid Leglalature ln amend- ed the lav regulating; the l.nvestmeata of the funda of 1 T fe inaur- tj,nae ~~rapaniee organiaed under the law8 of Textba and for the flr@t the included the aubjeat mtter contained in Beotion 3 of Aptide 4725. Seation 3 of the 1931 tmtmdatorg Act haa been quoted above. Board of Inwrance CormLi.aalonero, P-0 7 Again in 1935, the outhoait~ of life lnaur8nu com- panies under the lavs of Tour org8ni8ed to invest their funds vaa broadened to aid the Natlon8.I Houalng Act epaoted by the Congreaa of the United atatea. Section 3 of Article 4725 re- mained utmhanged. Thus we arrive at the 46th Leglalmture vhlch oaended the Building and Loan Association Act by Senate Bll.1 Ro. 13, and, later, amended Sectian 3 of Artlole 4725 by 3erute Bill No. 370. lo aogni8ance vaa taken, OP hoa ever been taken, by the Legislature of the possible or intended applioatlon of the goner81 language of the Building and Lo8n Act, 8nd amendmmt8 thereto, to the field of i.nveataenta by dvstlo life inrurence o~ea. It ia seen that ulnae 1909 t&e Leglalaturea of Texas heve regulated the lnveatadnta of the funda of life lnaurume coabpanisa orgaaired under the lava oi' T-8 aa a separate, di8- tin& 8nd exalusive field OS legislation. The lava thereupon have been apeelal 8nd Natrioted. Suaaeedlng Legl8l8tureaof Texas have 8urrounded these a~08 with prrtctiouhr and @peel- flc rogulation8. %knate Bill lo. 370 f8 th4 last upnaalon of the Leglal8ture in this reapeatt it further reatPiat8 lnvort- menta by theae cromiea. It la obvloua that the reatrlotlona pve been dellberate- 1~ amted. ~thebeglnningl8 tlulmaguage alife lasuruwe cmpaay orgenlaed under the lava 'of this f3tate n8y lpert ln.or loan upon the folloving aeaurltio8, 8nd nona otheP8. In Se&ion 3 tha lnveatment of the aurplua 18 furth4r reatriated b'y the pro- vlao "provided that no 8uoh dospuV shall loan op lnvoat l l l more than five (5) par cent of tha 8yunt of its aeplt8l and au- plus ¶a the ltoek of any eoorporddcm. m this pro*180 the Legis- 18ture indlrput8blydeQ*red that no do8erfio 1lSe inaur8nue ao8+ pany shall 18&e an lnvestvnt, ~a8 o th o r vialllov4d, e bemnd a aeptaln amount In any one oorpomtl.OIi. Yet if th0 uI*zldpullt t0 the Build&g 8nd Loan AOt by Samto Bill lo. 13 ba held aPPll-- ble to domaatla llfa inaurawm tmmanlea, the Leglalrtlve mandate ln this respeot would be entirely abrogated aad a doaitatie life ln8umoe cm would be permitted to invest anY or 811 of lt@ funds in one building and lo8n a8aoal~tlcar. AccordlnglJ wo auuaot hold that the 46th Lagltl8tuZW, h the e~ctasnt of Senate Ml1 lo. 13 and later of Senate Bill go. 370, adopted a~ inaonalatent 8nd unintended go@ltlon. A@ ,,&j.d by the SUP- COlWt, ill Cd.Il V. 8tat0, 20 fox. 355, 361l Board of Insruanoe Comalaafonepa, Peg0 8 "The acme Legislature ia supposed to be ectuated, in 811 that it doer, by tha ama ml@, spirit, end l.ntention, and to havg, et all t-8, the seme goverM.ag obfeota end policy. Tha artificial being la uuppoaed to have but one mind, and that a rational and intelligent sindt 8nd hence the aogency of the presumption, afflmd by the conatltu- tlon, thst it vrll not chtuage from day to day during the 8m session, and undo to-day vhst was done with so w& dellbentlon ti lolenafty yesterday. It la not to be sup- posed, nothing short of expre8alona ac plafn and poaltlve aa to ferce upon the mind an lrreaiatlble mavlctlon, or *baolute neoea- alty, will justify a court in pre8 that it was the intention cf the Leg18 urinf;- turs that tbeLr sets passed at the 88m8 aeaalon, should abrogate 8nd annul oae en- other. 0 0 a,* We are therefore wmpelled to honor the p~~Vlri@m of Pea8te Bill no. 370, amndlng Seetlon 3 of Artlo& 47P5, aa applleable and aontc61’1lng rem3ng the lntrsstxmnta of the funds of llfe iMure!me a~awnfaa oFg8nlsed under the bV8 of f-8. AM the proviriona of Seneto Blll No. 13, aaeaQ%q the &$lLdi"p Md Li;m A88OaiatiOSI bV8, a8 without a~io8tiOn then- . We now Khrertbriefly to the CpAeatloa ntlpaerted in your letter a8 to vhethec action 3 of Artlale 4725, aa ameM&, in- aludea the ahare or ehere aecounta ot a building cad loan a8aoa- lation vlthin the 8eavrltlea de8crlbed. In ouv opinion, by lvom mmnablo intendaent, these seourftiea are lnoluded. The phrase 'a8pitd 8toUk,* of aourae, may be used ln variousran8081 a8 the suthorired oapital eatually aubaorlhdt OP tbm had paid in) or ~$the caplt4l of the oorporatlon, whether in money or pwperty~ or, aa popularlyuaad, the eggregste of the atoak -de up of the ahmea of the atockholdera. It amy be defined PI the money or property put into the oorporate funda by the aub8oribelra fos their 8tock, aad a ahere of cepital stock 18 the rlgat to partake, acoordln6 to the aBlougit put 3.nto th8 rwa, of the surplus profita- See Staples v. Kirby Petrolewa Company, 250 8. v. 2935 tiWWB coplppall v: gollifield, 184 E. u. 776. Artlcle~856, Revlaed Civil SUt*b*, Pl’Qvlde@l Board of Xnrumnce Cosrieslonero.Page 9 Yhe authorlred capital stock of suoh 88socla- tion ahall be dlrlded into shares having a par value o f not lea s than l l l .* Artlole 881.a-29, Vernon’s Annotated Civil Statutea, requir&s the follov:;ng to be s&own ln the articles of asaoaia- tlon incident to the incorporation of a build- and loan aa- aoclatlont "4. The amount of its authorleed capital dock, vhloh shell be divided into sharee of the maturity or par value of not luse than one hun- drod (103) dollars eaeh. “6. The amount of aapltal ratually paid in vhtch shell In no event be lea8 than one thowsnd (1000) dollarr If 4 l l. All payment8 for ahares or ehare aoaounta of required paid-in; aapitil steak met bo In lawi% m@ner of the UnIted Staten uad met be ln the auatody of the psnonr named aa the iint board of direatora." You are therefore re8pectfullysdvlaed, ln anever to the specific question you have subsltted,that It is the eon8ldered opinion of this department that a life lnmraa~o aompany organized under the lava of Texam Is aontrollod,rlth reamat to invertmanta in the share or share aoaounta of the Ceflned bulldlng end loan assoclatlona,by &&ion 3 of Artiole 4725, 68 amended, and not by Smbotlon 25 of Senate Bill No. Ill of the Second Called Seralon of the 41at Legtslature (Article &la-24, VA.&&.), as amended by Senate Bill IO. 13 of the 46th Leglalature. We have pretemitted a discuamion of uy queetlom of conatltutloml lnw inhering in this aubjeot in vlev of your request otiy for a aonstmction of the statutes Involved. very truly yours ATTORIFWC - OF l%!CAS