  OFFICE OFTHEATTORNEY       GENERAL   OF-I-TEXAS
                    AUSTIN




  ?al1tt3r
%x3.  c.      ‘
              ..
        V:oodward
ChQ2rxnan
2onrd
   of             c\
         Insuroltco
AU8tAl, Teras
                  C0mi8:sicners
                                                ‘.~
Dear Sir:
     Xon. Kalter C. V:ooCtmrd,
                             EEoy.~18,
                                    1939, rage 2


           of the stcckholdornITouldcur,lifyin pny-
           zl.ont
                or tk? cqital atock.
                "In order to coz,$ctc our file on
1          Attorney Conoral opinionzz,
                                     will you pleaoe
           rovim tho opinion of AgAl LE.,1938, snd
           iI you find thatIt~rsci.toaon izgroper
           oonstructionof 'thti:Lzui,~.~~~leese,
                                           0fri0i5iiy
           8dViti;c
                  IX!."
               7he 0pinion:or tt&".hopEtrtxent
                                             written by
    VI-. ElcliirdBroola, X,-r
                          7 il~:22,~.:1930,
                                        to your l%ym%mmt
     upon the mm   quostion,ua8..,to
                                  the effect that notes se-
     owed by roul ostatc where thoholders thereof wore
    :poyora oould not be used:inJwQ?mnt of capitol stock
     .of m inswanoe aonpmy,'       ~'




              Artiolo 4717~,:f&&x&Civil Statutas of Coxan,
    1923, cot& forth the roquirments of~o charter for a life,
    ho&lth and occident insurance compeny end providen in
    pxragmph (5) thereof thiat~tha.chn;-ter shall sot forth
    "the iz:ountof .its capital stock, not less than one hun-
    droa t.l;ousmddollars, cl1 of which cepital steak must be
    suSscribed'a;lil
                   rully pnid up anU in the hands of the in-
    coqorntors before soid articles of incorporationaro.
    PilUd."
              Article 4752, TiavisGdGivil Statutco of TCXCS
    ~192.3,
          provides for the cxation of 8 limited stock cm-
    pcy in accordancenith the provisions ol Article Z&717,
                           A o snd privileges and provides
    cu:)rn,with limitad rig?t
    for a.:?iniuun"actual pnid up czipitalof twenty-five
    tlsxmancidol15r3."
non. Walter C..Y?oadmixdr
                        ticy10, 1933, ToGo 3


          htscla 4705, Xevlsed Civil ZX;t;tutoa
                                              of Texas
1923, enmerates certoln items of xhich the capital
stook of en Incuronce coqmny nay consist and Section
3 thereof roods:
          "in first aosL~tr~,cs
                              upon mimwberod
     ma1 eotnto IE this nttrta,the title to which
     Is valid, end tbo zort~it~o%aluo of which is ~~
    'double the mount lomsd thereon, exclusive
     of buildings, uzlesn~suchbuildings ere insur-
     ed in nom reSp0nsihlo co32pnilyend the poliay
     or policias.transfe;rred:~othe.aorzpanyteking
     suah mort@~gc.*,:~,.,j.'
                            ':
         : It Gas hold bF the Supike Court of Tn&s in
the oase'oi ConorfilE?arklrw~
                            (1:
                              C-nsueltg
                                      'Ensurunco Conpimy
et 01 vo.'?-'noaley
                  ot al, 222 S!TQiIl~thztn note of a
subccriboc? to ccpital~stockin er.izmurmcc company
secixrcb by e uelid fLrsC.r.ic,Yqsc,e
                                    on reel estate to v:b.ich
tha subscriber has title, ~tccc$e$.by t!:ecorpor&tion   in
>aynant for the,stook;~4-c
                        _..'*poyxqf ~&AKLlly rcX?oived"
tiithinthe mmnlng of~~Lrtic&~   22, &XtiOE a of the Con-
stitution and thnrefo:e UaJ.+ ...m: ..
 ~.~
           Chief 47ustS.&k$&.s~     spo?ci~g~in the above
case soid: : ',:~      'i,: :'~
         "1%subsc@b&s       note~&curcd by tlvalid.
    first I!?oxt:~alp?  real
                   U~;OIl       tiststo,occqknd by
    the corporation In Fnyneiltof o'took,cmnot
    1X3held as other IA-m praA70rtyin tha full
    nenoe or the Ccm3titutio:i. T>.ecorporation
    thorehy bbtaina somthing X?Gx@t&m tf1ez~ere
  +~roxise of the oubncrlberto i;oy. it obtoi;ls
    the right to hove bhe lnnd r@?,ro:jr,riatcdto
    the peylcont.
                of t.henote. ?'bisis 0 vdu~hle
    right, a property rIg?.t,9~ fully so cs cny
    contract right, end, in gc-norrtl,  ~13voluubla
    ns my such right. The coxporst;ion     rocoived
    it rind'
           cwns it.  1%  ccx5ti.tut.c: e d.istisct
    ascot in its hondr;;rccognizod, :;cnrmlly,
    ~,s..q~o
           of tht,nest ~~t,eble,  dcsiroblo and
    e~nlly '&r&rtible fdrrin    of property.“
                                                    ‘--.


.‘I,..   -
.                                                          ‘2,




             Ken. r;nltorC. VJoodww.1,
                                     j'li:r
                                         10, 1939, rage 4


             of the CoevxisslonIn tf:i.t
                                      Ou!;eof i'rudantialLiie Insur-
             anaa Cozrpny of Taxctnvs. f'elcxon,222 P.7967.
                       Fe cioh to rx~rticularly call your attention
             tc the fact.that In the cane3 of 'Lashervs. .Smyor(Tex.
             Sup, Ct.) 25i 3-g905 en?.Sxipcion vs. Tlrnt State Fank
             of &arlllo (Tax.'Sup. Ct.) 211 SiY977;aitcd by ?.Yr.     .~,,
             Brook8 In hia oplnion'or&!ril.'Z?;1938,.thc notoe in "
             questionwxe unsecured~cin d tix couz$ rightfullyhold     .~    ~
             them to be %ere promlsos,to spay"and not property with- '~.
             in the msaninn of the:Coxstitution,Article 12, Section
             6, The oase of General Eonding & Cnnusltg Insuranca          :
             coIqmly vs. Ko5clay (Tt?x.~.civ..Ap~i)174 sr:1031, 'also 'I:
             cited by F!riBrooks,.wassrproaslgoverruled by the
             Supreme'Court 'in222 3%'901,:above referred to.         ,'
                       It la, the&ore;'th;c oninion of this Dc~art-         ',
             mentand you are so edvj.r.cr!~that
                                              the pngncnt or capital
             stock.of an Insurance eorcI,nny
                                           w1thzotcr secured by first
             mort&ages on unincumhcix~real estate in Texas in valid,
             aonditlonedupon wstri~t cxnn~lianco  v:ithall the provi-
             sio'nocontained in'Artj.cle              Vieemressly
                                        45X3, ,ceuj?ra.
             ovcrrule~theopinion.of tlZs l:o~artncnt, dated .April
             22; 19W by,,Xr.*o&s,. to ye- contrary.
                      ~*ustlng,that tki&:aotisfactorilyanswers your
             inquiry, we'are    'v




             IA:A!i
