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