,
OFFICE: OF THE A’ITORNEYGENERAL OF TEXAS
AUSTIN
Board of Insuwnce Commissioners
AustJn, Texas'
Gsntlemex:
!fherequest of
former Chaf~nan of
-our ~opsxilon in the
received by this de
letter as folla;ss
es Ansocia-
rated -a
fTexasln
charter was
to& proviaing~for
tic13 under uh3t is
o 78, mviaed civil
AssocLation has been
co that date to February
lnsuruncc on the niltual.
atlon of t&t9 orgwization
ember 31, 1333, at which time
Board of lnsuranoe Co*m&ssionors, page 2
would not be renewed because it was constdered
the number of pol%cles in forco d3.d not comply
with the law 3.n that respect. We have had zome
corPenpOnd.enco Fmd COnikiWnCe3 with t-he officers
olnco this notice trns ~,iv~:n, and it was mutually
agreed tbzt the Association would either btild
up Its nombershlp to the require? a:-:omt o” dls-
SOlYO, Harch 1, 1g2, vat3 CgrY%il upon a.3 I213
date vhm som definite d5.sposi~Lim vould bo made
of tha Association’s affa%a. IJust p??For to
March 1st we had a conference with rapreoeatatives
of tke AssocLatlo~, which confor~\~c was ottcndcd
bg your Assista.nt, Kr. Armstrong. It was furthor
agmed in this conference that the Association
would dissolve and file with the Ds:.artment of
Tnsuranco all necessary dLosolution papers,
“We have now recel.ved dissolution papers from
the Association which are attached for your tifor-
mation in rendering the optiion now requested. It
will be noted from these papers that Pars, Dabneg
,llhlte, on8 of the officers of the Association 1s
the only rcna3.nLu& pollc&older and that iu dis-
solving ths AssocZatfon is It proposed to distri-
bute to her the remaintiC assets of $36,738.&6.
“lirasmuch as this presents an unusual sLtua-
tion in that If the dissolution gapers are accept-
ed by the Department and the Compsngfs charter
canceled, it results in turning over the assets
named to one policyholder, gou are requested to
advise us if we should accept these ao3s0hti0n
papers as filed, cancel the Company’s charter and
permit the distrLbution of Its assets in ths msaner
set out in these pagers.”
We also have before us for examlnatlon the two in-
struments constitutLng the dissolution papers of the assccia-
Mon.
While a number of stetos have enacted statutes PO-
gulatin the distribution of the assets of Lnsu.rance coiY>au-
les upo: dissolution, we have been unable to fLnd any T&as
Board of IhsurWlce Commissioners, Page 3
statute applicable to the problem here invol.ved. We have,
lfkariise, failed to PiM any Texas cases in which tfrLn ques-
tion has been either decided or discussed,
A mutual insurance cor?orntion, like other corpora-
ttons, 0-v-m the property, but the me:nbers own the corporatio;l.
In the case OP Smith vs. iI\mt~:rtc~ Count,y Mutual El.ro ksur-
ance conpany, 41 Hj, 3. Eq. b73, 4 Atl. 652,‘the court hda
that the surplus should bo dl~M..ed among all. the policyholders,
past as well as present, who ha?. c(xntributed to the BI.ZI*~~LIS.
ThL8 holding, horrcvor, has not o;l!.y failed to receive support
In subsequent cases, but has b?en cr%ticized on a n&ocr of
grounas . In Titcomb vs. X:cnneb%G: Ilutu?l Fire Insurance Com-
pry, 79 :&tie 335, 9 Atl. 732, the court in hoZU.ng that
t x e rule, requiring all person s who have error bozn mem??ers
of h corporation to be recognized In 3 distribution of a eur-
plus by the corporation, was entirely %mpractlcable, used
the follov;lng language,
“To distribute among them a small amount of
assets; and to determine what each former pblicg-
holder’s share ought in equ.ity to be, uould be
attended with dfPPlculty and an amount oP labor
vhich. the end vould not justiPy.”
m HU~W VS. mrth?, 127 WISC. 412, 105 w. w. 1031,
the court critiofzed the rule jllvolved In the Smith case, supra,
as being illogical .!mclevidently based 61 erroneous interpreta-
tion of the holding In Carlton vs. Southerzl Mutual Insurance
Conpang, 72 Ga. 371, which turned ups a oonstruction of
language in the charter which tho Goorgziacourt felt bound to
&old was used to make everyone vho contributed to the corporate
surplu3 a nembsr or stockhholder, for the purposa of any distrf-
bution o$ such surplus.
The better vieii, therefore, appear3 to be that
after the payment of debts the assets belong to those who
are members at the time of dissolution, wuch j,u tne absence
of a charter provision to the contrary, includes only
polscyholaors. Huber vs. Hartin, supra, 14 R. C. L. See. =-E
p. 8491 25) Am; SW. Sec. 73, 106; Stoma vs. TTcx%hi*estern
kktual 13onefl.t Association, 65 Wch. 31.7, 32 if. W. 71.G; Aclams
vs. JXorthwestern Eudowment snd L-?gacy AssucSetim, 6;i I.Xnn.
Board of Insurance Commlasion0rs, Page 4
184, 65 I{. W. 360; note in 7 of Ann. cases 412; Uote in 3
L. R. A. (new serleo) 653. We know of no reason why the
rule should be any different where, as under the facts sub-
ultted, only one st0ck~0lam- or member remains at the time
of the di33oZutioll.
While we have not had the chart8r of the Ginners
Mutual Undexz~rfters Association submitted to us for esa!x&a-
tion, we presume from the request letter that it contains
no provisko;l3 declarln; r?ho 3hal.l bc considered a membsr for
the purpose of distributing assots on dissolution of the
corporation.
In view of sn’apyarent misconstruction frequently
placed upon the holding ln Titcomb vs. Xennebmk Mutual
Fire Insurance Compny case, aupra, YB deem it advisable
to mention it here. This case did hold that after the dis-
solution of a mutual insurance company the remaining as-
sets vented in the otate, the court holding that neither
the former policyholders nor the corporators had any interest
in the assets. but in that case the last ~ollcv had exxired
It Gas absolutely
In view of the authorities heretiabove mentioned,
you are respectfully advised that it Is the opinion of this
department that, under the fact3 submitted, your question
should be answered in the affirmative and it is 80 answered.
v0ry truly yours
EP:ej