   OFFICE   OF   THE   ATTORNEY     GENERAL     OF   TEXAS
                           AUSTIN




                 objootloaa
     "Ourprlnoipal                   to   t&e   olauaeme
Do rollwr:
    * 1) A&iok 50s. O&.8., ana P.C.Arti-
oh 57Q dsr lnD0Dr ta n
                     lotiom OS oorutitutlq
flomroblo0. P. Liokhort,
                       MO                0


    forbidden dirorl8lMtlw     cad r&at    , uong~~
    hots uo the offer, ule, or other %! l
    ltuk or, other   ri&to  u&d roolPrltloo
    la the polloy a0 u induoement    to
                                            pooltlonof
                                                 xpryd
                                        lnouraneo.
                                                             nolt
    ~umo to. IO that thv 0lame, hero u&r                     oonol&ra-
    tioa,primrilf viol&e*     tho lpirltand oamoorlth-
    irr tha watiin( lf a0 th l&tar of Artiolo5053
    a P. c. ArrtLolo   57Q in that it p&o00the pollop
    holderuponaboollltothe m         rutsa&   81th the
    ounu 0r uhatevu    nu% r of oharoo of *took  uw
    h8Ut.d      In th. b-1             oI&dthd    the @iO)ho~U'O
    lta tuolo no    t
                    sa p 4      that      Qr 80-n ltwk h o ldu,
    but thst of a proforrod             ltoakholdor, ownimgtho
    EWU              thuah
           0r r h u 00                   l0t   rorthj   md   tht~   tb
    poUo*oldor boo &ll the bonofito of l oamoa or
    poforrod ltookholdor,rithout     of the burdono
                                  “I won the mmlnal
    of lwh a stoakholbr, uid rlthou
    QYnu~p       o r a OzJlg lO
                             ltuk o h u o in the o wp uly.

             ‘( 8)Thel& uo o wr          b o    ullrrly8loload-
    Lng to the      ooppot%vo          polior older, aad poullrr-
    1J lPoOoptl  rlo to 8l8roproooat8tloAto hlB, + to
    ~$uamt       of dlvfdendo to bo ro8lisodunder luoh
               Aeouw, SW hotmoe, thatin ordu to
    r ol  ll
          *&OOO Ufo polloythe agent offrro tha
      oopeotl wtlolg4tirlfrldu lathlr form filled
    !z in lwh ua r a 8 o la it10him to dividend8
    equal to thooo 08 rive or tu ehwor or OS
    o r proforrod ltook.  T h isso wd~ lik e
                                           l bonuoa.
    ma agent~mpbuiaooth8t thloontitlestho @lop
    holder to dlvldondm wm.l to tho(u 011fir0 03 ton
    ohavorulrhDmMdtho8,ulthoucovuhav
    to bw or p4 for or loouno the omuship, ri2                           ,
    burdono, 8ad bother ot the ohwoo. Tha bgont
    then pUnto 8 roe7 ploturo as to put lwalngs
    orthooapMy,wdprw           tit0 ratura 0
    and mDko0 it round like p”
                             br dlvldeudo
    IOM tbm par for the polloy~ulwrou, in truth,
                           be nan-gu, valueor even
    if the o h u e o of ltook
        value,with omll value
     10, or even In ml7 00noa1v8r lo -
    '0"                                *, lWh the
                                     olttrutlon,.‘
    rotwl dAvldM dor y b e Ouuu th a n  ~~y ltp
    a ndlroller th8n thaw mdlmrll7
    putioi thqg   poll0100, md thor t r polloJbofd@r
    lo boo vod 8nd mloled to his urlous 4urr.
           P
Hoaoroble
        0. P. Lookhut,pIge                                  3



             ~OUV lottor 0r hbrwr~                                 15,lg4,,lo ln put                   a0
r0iim01

             9 8 0r m th 8t
                          tb                                              r0
                                                        r utta lir r uutu00p
     on vhfoh wo deoi~                      th0 reweoted opinion to k
     pdloetea                may    lppeu             with @oator           uaet1twA.,
     allovuo to4Boadando   lonoat ear or-      ro-
                       ig4Y irrthe r0u08ia(r roo-

             "Theputloulu                        partlol#tloaokuoo quoted
     fn th0 00008d paugraph    0r 0~0 origial                                       &ttu          is
     not now peadirrp orl&bl8l
     o ur tip & h u t               under Ar tioT-l
                                                  l                4749, @IId
                                                                          but rr-
                                                                               hu          alrow
                                                                                             br
     boonrikd,vltho~      lmpllodQIpr0~1,aadi@be
     Lo g
        used  lurrent1.Jla oonusrtlonvlth lpg~oved
     r0ru     Or ~OUO~OS.   In                         bddition       to     the   qu0t.d
     0h00,      u hat0 4u0*                             u       ru0   0th0r rm              0r
     gut101patinglleuoeo,*ub*tMtUll~ ldentloal
     vlththo quoted form, but porhapa with rll@tly
     dirru0nt ~0rdbg, kt00d br 0th~ 00mpa0~.


     8ubotuMmlly ldontlcirl
                         jwovlolono*lo&to any
     or th0       tow     4709, 4755,5036 md
                               Or mi0i00
     lo p eo la*s
                u>ywo do o lrQur
                               o g lJdoa n
                                         i0Ia0
     0-t      JOU        had        tb8t        th0     QUO t ti  r0n   rioht00’uy
     lr a0        gr0ti0i~                 0r               or l~ah 0it04 0ei0a00,
     u to *h&her *e Uvo FL                                   powor end duty           in    the
     sta ted
           llr o uo tM o otoo                           WltMuw OUT


     TOth0 ltWt                    that     thr firOt              pWg?aph         Of OU?
     ori&laal letter mar have ofhnvoyed
                                     the l8prooolon
     thattherm         ir, qwotionuoookrltt0dorlgi-
     ~~~uOAOWJM~O~QW~~Q.F                        ti fL?Ot
     tL#,   tho ol@nol      inquiry lo huebr amended.

             %I         th     0~0         or     the 008pny           W*          the pro-
     OiOe fOPNIqUQtOd %I&w       ~8gFaph 0f 0~
                            l0008d
     orlglnal Ytor, it lo rbprooutodto aa the stook-
     boldarebwo by lpproprlek wrlttonreoartl OOQ-
     rentedthatdivldoMe to polloyholdosolzIlooord-
     an08rlth luah quoted proviolmehoul&be paid
mner8blo 0. P. -t,P4@4


       b0ro39           or    8t tho em       tlmodivibud,             @hall be paid
       01th1 r lt0ok 0r th6 0                                  wo doolro your epln-
       ion a&so u to vhet&or
         opa b.uLal;                       th0 k6uit                 op iu080utl            or
       Ee rmu009p    EL                       Vlththo           I our utloko             above
       0lt.d. The rouQ0 we "@"~ro~~~~~@
       rdditldpointlo    tbtln
       ~00~~ir y lob0t00tiu4                             th0    lm       ru8       0~ put;-
       01 tiogol8a8o,aoPenyru           aothvobeen
       M Piw, taken or t000rd bf the 0Ioekholdoro  or
                  lnvolvod,  ooeuntin#to the pa-at
       Of dft
       th0 ‘YIPOAdOt0 po~O~b%V?S    iA 8OOOHblOO   Ufth
       the putloalar                 pmtiolpating          oleuao ievolvod~
       Md        IIS,     thWfoCI,        do8f.W     t0 knOtI Ub6thOT               SUSh




       0r u&t0                   ur~00mpmOt0Oth0                      -toi          ltoJ-
       hoMore lo ma popor lrltulm  r= dotorriw
       oonrormlt~ or Mn~wfQomlty to tha statoto~
       pov~olonr oitoddr
            m. . . .l

                   nb0       p0a0ip0t*         0~              w     00mri00t0           to b0 Ot-
tw0d        t0     xii0       p o u0f0~ 0r    l h00Oti0              0t00k       iii0   s.00~0000
oagmt,           lnoorpomted udu               Cha        u     I, Tltla 78, Yernw~o Isl-
n0tmdatii                 8t0tut00,      IO OS r0 @ ,~llt

                   %mh0d             t0 urd
       go.


           Vhlo poli0~o&l1 partlolpato ln thm luv-
        lw larniqp oftho Q-u        lp r$madadb~~‘k$e
       Lord of Dfreotom, born                                  no: c
       rod 0r tho l00Ond polio~                     ym         end    maually           thuo-
       ubruhllo thi@&U~~~irlntuU                                       rO?Oo.           suoh
Eonoreble 0. P. Lookhort,                 page 3


     dividend0ohollloortm tra                           JlortaUty         &via(lo, Rc
     lo r vo o roloa8od
                      on lapsodpoU0100                                   a0001 lntereot
     oumf~6~ utd other peoslto on t&a bompukpe pti-
     llpatln#lmruroo u                      prNtkd              b;r the    Iawe        of t&
     8tOt0 0r w00.
               l
               AEX8UCE
                     AUUUAL
                          DIYIo QlD
                                AP P a tTIO
                                         TOg
                                           TBu8
                                             HD
    POLIOX      n       A%Y   CALUDU?       mAit,       8uLL        La Rrn      xma      rBA8
     ~~sBDIB~DDIIQ~H)DXTB1BoIBD~DpIR~~
     AHDPAIDTOfiiB8TOCZlCOLDER8
                             Oi'fB.E8OUT5AU8TAXS8
     LIPSX8TmAxCPQalPANxII 8lJcH
                               XluRoil   8HARm
     OP5CWoI    8TQQIQPTHH80-      STA~LIFPi
     x8uRAJlcR
             OQNPANT.
               lm00uted
                    th is
                        th o                                dy      of
     194            8t th0 OffiOO 0f ~OU#UA                              stotO0       uf0
     IAs~o             CapMy,    Eouston, Tox80."


I, 8eood

     W      8 ‘WtiOiwta                  PliOr,        ’ br     *L?tU0     0s    thO     PO-
     vloionoof rhiohtho l.noupod
                              lo entitled to sham
     inth 0sur p lus
                  lunfr q0r0th eo o mp aiaepyropor-
     tion t0 tbo prri-                    p8id     0      th0       mm       0r hi0
        lloy.           Phiomharobt&our@rum8ybe~~blo
     r 0 him,        at the      O~tiM       Of the       O-,             8t 8 OOrt&
     flxod period 0.v u divldmdo.   In tb aboonro of
     8 l t&t8t0Pr ~povlola~,the tine Of distribution
     o fl lUV~hO t0 gOl.lO~ holdoromlido OB t& die-
     orotlonof tho dlrootaro oi the l-n    lxeopt
     00 fO8 80 it U, b. btO88fAOd by th. ObUtOr, Of
     the ooqa~,o,                v0lldb~lm(8oth0hlldv~                             llrr
     Xorkure IAO. co., 97 Ill. App. 547). Wader8
        Uoy lntltllJlgthe Lprarodto pertioipdola
     r & diotrlbutlo a or the ourplaooolooordlq to
     owh prlnol~oo80 ml@& bo rd ‘tedby tbo oom-
     pony,the iaourodhoe no title ? o Way ouoh se-
     pluo uetlla Uotrlbutlon10 8o4oby the 0rri00ro
     o fth eo o mp wy,
                     ud u& wluehprrorlolont&OQ-
     pcuy’lo not roqtired t0 distr$buto t&                                 0At&O         SUP-
     piU0      (c&00f         V. EpUitAbiO        uf0       diO@UP. 800.1          tdo
                        51 1.x. 7l@, 46 t.R.A. L88 73 Aa. 8t.
                         rovuolng 57 H.X. 8upp.8$1 40 A
                     ).       If the arght 0r 8                          T0
                                                              polio7koldrr
Honor&lo       0.     P.     Leokhut,gmgo             6


                                     fUUd 1 0lOAta OAt a h i0lOAtiw-
                                       Until th0 lXJ?iUtiOo ith
                                                             A e 0.r .
                                        M  rf@t  t0 SW fC 8 OhUO Qf




               l
                    . . . l


                %Zm        r u le   that




           t;g;yot          lwh l          r ig h t   ao ontitlodhl8 to on
                           ....
                0l    . ,      .


               ‘mVideAd# MoPa                     On 8 PO1107     Of   iAOWMO0
           mwt, oi oouroo, bo Mid aasqd                         to the rontraoto
           undor vhlohthe 8oorw         9
                                 (CUtlsao              Iat. I& l Ino.
           Co. v*   Jlomlo,         104 Ark. 288 118 S.Y. 1019f
             ovlolon    that
                          tha pe110@&or ohallbo @aLtAm
           r0dl*1d6Ado d0.0 no tloAtaplat0 that  th ola -
           l~0d 8a7 a0t0t0  th0 880-t or atidOia  th0t "
           shall k duluod,    or qwstloa tlw rooult aftor
           the dloorotien or the mnagoro hao ken oxorolo~d
           in thl~ behalf. The omtrmt lo that tho lziouod
           @hall &VO         tbO bOMfit        Of lPOk ditidurdr       W   th0




               It10 stated lnCoaoh'o Oyilopodi* of Iaourmoo Law,
Volmo 6, p4o 647)I
Honorbblr 0. P. WOkhUt,        WA0   7


          'In Aetormlnlng tho lurplu8 to b8 arodited
    a0 dftid~ndr t0 iir0 in0~rur00 p0ii0iO0, p0ii0i00
    may bo AirideA into oloooo8 oonoloting of thooo
    h Or ing8 OOB B OA lU Of ~OOWAOO, lge Of 8ppii-
    0a,    kin4 0r p0 3:
                       ior, md mount  0r pr~airpsr -id.
    But, llthoqh 0rAlaarily iii0 ~~lloleo a0 olaoood
    looording to the year of loow, o rlooordbg to
    %   z    :: EZGYrP~$0Z               :?%:2b:
    ti0t40r •UPQ~Wai4 i0rit0 uloq 01~8000, the
    plan 0r larluanoo seP eotod, rather thRa the &to
    of   loow   and age   of tho lnourod, d8tsrmlneo tho
    proper olaoriflcatlon; othervioe, the 18v of aver-
    8@0, 00 ~0DMt.i~ t0 life iWWOQO8,       18 1OOt OX'
    oarlouol7 ourtailed. And oluoiflootlon for pur-
      0800 Of dirtribution of 8urplW or prOfit must
   30 llmftod to polloyholdOro vho hwe contributed
    thereto, lnb A8'0000~117 1nOhdeo 811 vho hove 00
    ooAtrlbuteA. yut'th8rmOF0, under l OOntr8Ot Of life
    lnouranco vhloh proVlde8 that the polloyholdrr
    till b8 ontitled to ohnre in th8 Al8trfbutlou of
    the  OCBpM,'O lUPp1U8aooordlng to the 88thO&8Aad
    prlnolploo ado tod by tho oompanySor tho dlotrl-
    butlon of lurpP u8, mad under vhlah only ruoh pro-
    portion Of the lurplu8 88 ogultrbly belongs to
    tho polla, lo to be orvdltOA to it ond po%A to the
    polloyhddu,     tha proportion AOrl&Mtvd must ba
    @ooert~lned   and detOrmlnod bofavo the polloyholdor
    OU UfAkiiJ M outlon et &V to reoover 4ulypor-
    tion of the 8urp1uo. And, in la u a portlolpatlng
    pollo7 provlAe8 for m 'vwltable @hors of the
    Alviolble surplus,*   It vi11 AOt be cowl&rod
    thbt th0 OAtirO pFOfft0 VOX’0 iAtOndOd to b8 dlvzd-
    ed amfq t&0 polloyholdero, bat ouoh a 0har8 0~07
    80 tha mumgore of the company may, In the exor-
    aloe of their Alooretlon and good faith, declare
    a8 prOfit8, thO7 hovlng in ViOV 8 rv88onab1e urd
    ~oaoouy     provision for tho safety of the ow."

           We oonrtrue said partiolpotlng clsuoO or oertifioote
AOt l8 8 gu4rurtre by thr oompony that it vi11 ever dsalorv
l dlVi&~~&   to it8 OtOCkhOlder8, but If It should do SO, then
it8 p6rtlalpoting polloyholdsro vi11 r008lVO on their poll-
Oioo UI Uowt     not lees than the aaoh dlvldaed dealered on
tho numbor of oharoo otat8A In the oortlfloate. The ltxwk-
holders do not Auoruiteo my @took dividends ever to be
paid the polloyboldero and no otouk ever p.ssrooto the
pOliC~hOldU8.     It i8 noted that the prrtiOi&Mlq   018U8e
  Honor*ble 0. P. LQokhart, 98ge 8


  Or O~rtirlMte d~#              not Ot8tIBth0 WBbW               Or 8h~88        Of ths
  omon @took or the oarpug vhloh will                    bo ~8.d a8 a bar18 In
  detemlnlng           the amount of dltldmdr         to be paid. A8 VI under-
  8tMd       foUr     POQUO8t,   it 18  foUr    908itiOll     tbt       th.    O=puV
  OOuld diWM iM t0 l8 t0                OilO~OidW8           bf    iA8Wting l dir r er -
  lnt amber or rh8mr or              tL    OWOkI     8tOOk        Or   the    008LpU-U   in
  the blank oontmmd        la the ~tlOlp8ting         0lm8e or Orrtlrl-
  oat.. TO illU8tr~t41        fh. OOiOw      Bi&ht 8*11 tW0 901101*8
  OS 8 thoauand dOlhF8       eaoh and ln8Wt in One 88rtiiiO~te
  iiT@ 8har.8     Or 8tWk and la the other ton rhuer Oi ItOak.
  Ir   th0 OOIBpMy   rOiiOWd   thi8  pOliOy    Md In8OrtOd d%rrWInt
  8harOr   or thee oommon8tOOk to be useda8 4 bar18 in deter-
  8lnlng the uount oi dividend8 to be paid in ldmntlo81 pol-
  101.8, then 8UOh an 8otlon would be in tlolatlon 0r Art101e
  509, Vemon’r Annotated Clvll Statutar, and Artiole 578,
  Vernon'8 Annotated Penal Coda, Bovevw, ior the purporsr
  Or thi8 O@liOn, We mU8t 888-e           th8t the Oollouy Win 18@41-
  l~oOndUOtlt8bu8llu88         and th8t088hpO~O$aOldar           Of the
  88ma ola88 ~111 bo treated llko over othar              polla~ol&c
  ln   hi8 01888,   and that th oimpeny w I11 not rerort to any
. dl8OririlutiOn Vh&8WVbF.          fb    9088ibilitr     wt   th8 OOOL-
  PenJ oould di8orimiMtr bdsveen it8 polio~holder8 dOe8 not
   $Iltifl   Y8 in OOIU3iUdirrg tht    the OOHI~       Vi11 d0 80.

                    ktlOb84753 and 5036, Vernon'8   Annotated Civil
  st8tUt88,   prorido r0r the arlaU.l4tlon0r 8Ur9xU8 rw           dlvl-
  dond pur908e8 and forbid the p@Pwnt of dividend8 out of
  rU&    Otbr thur 8t~91U8 prOrit8 a8 dOriM           ia 8ad     ltiOi88.
  Ta~;al           tlng elaure or Oertliloate, above quoted, must,
                r 0 oonstrued 88. permlttlzigthe paymat or dlvi-
  dendr onl;     out 0r ruob i8uru.xrurplu888. lstlole 4729, Ver-
  non@8 Annotatad Cl+11 St8tuter 4180 fOrbid8 tha pa                    0r
  dividend8 OthW m           fFGW 8UF9iU8 pOfit8    and iOr r id8 @l8FUr-
  toeddlVldOd8 to goll@yhhalderrla 0x0088 Oi the amount of
  the lx p enw0r loalng in the promlum and pFOVid88 rurthw
  th8t in Oal* 0r papent 0r dividend8 in 0X0.88 or the 8moUnt
  Or th0  8XpOIi88   bAdit&    ~88WO8   8wi    bt3 8d U9 t0 OOIW
  the deilolw&o~ ln net premlumthereby areated.
             In flew 0r the foregoing, it 18 our opinion th8t
  the putlolpatlng a$awbe or oerti.floete,quoted above, doe8
  not ViObtr    UIJ prO~i8iCUk Or the b8UI?8ILOO hV8   Or thi8
  (Itate. Theretore, hwlng     awered your rir8t     quertlon @I
  tlWetOfOre          rtated,   it 18 JlOtMO888M~            t0 di8OU88 tkW 9OVW8
  0r   the    Board     0r   xn8~ranao commi88iowr8           vlth rrteronee to
Bonorablr 0. P. Lookhart, page 9


the r1thdmwa1 0r TOW &p~OYlhl 0r 8UOh roru &Ad other
uttoro rohtlng thweto a8 mentioned b yOUr lnpuiry.


                                   Tour8 very truly
                             aTTaRaKPOBIrnAL OF TKXAS

                             By M&L
                                         Ardell Y1111ABE8
                                               A88i8tmt
