            OFFICE OF'IHE A’ITORNEY GENERALOF-
                                AU0TIN




xonorable 0. P. Lockhart, Chalmmn
Board of Inauranoe Comnlissloners
Auemn, Texas

Dear Slrr                         opinion 80. o-4065
                                  Ret IS the plan of the Reserve Loan
                                       Life IXWUW.lOe COUipq end the
                                       American Liberty Oil Company as
                                       desoribed lawful?

            YOUZ' letter reQU88tiJQ dillOpinion of this d8partXl8nt on
th8 &bove mtated qu8StiOn reads as fOllOWb;
            "'pheR86erVe LO038 L.ife IlMlUl'aBO8Compaay Of
     Dal&m, Texas, Se organlsed pursuant to Chapter 3,
     Title 78, Revised 01~11 Statute8 of Texan, vith
     $250,000 capital, and the Ammriaan Liberty Oil Oom-
     pany, as it8 ndane indloates, Is presumably lnoor-
     porated for the purpose of producing, refining, and
     marketing orude 011 and Its products, iaoludlng re-
     tail distribution.   Mr. Clint MurcUsonandLlr.
     Toddle Lee Wynne are Stookholders and director8 In
     the life $neuranoe company, and are the principal
     stockholders In the 011 company.

          “A plan haa been Submitted to us for approval
     in a policy fom and +pplioatlon form vhersby life
     polioies are bff8rQd to the publia generally by the
     Insurance company for whlah the first year premiwns
     are agreed to b8 paid, and actually paid in advanoe,
     jointly by the Bmployer of the asetied and by the oil
     company in oertaln agr88d proportions, and these facts
     are reflected in the face of the polioiea themselves.

         *We understand the 011 oom@any has set up a fund
    of $50,00O'to b8 Used for this purpose and charged to
    adV8rtAdIkg of the 011 oompany, vhose name, of course,
    appears in the faoe of the polioy as having donated
  . its share of th8 first year premiums.  Obviously the
    plan Is designed also to increase the business of the
                                        .




Roiorable    0. P. Lookbart, Chalmaan,      Page 2



        bUminC8   compeny, and thus this 8Oh8mS rebounds to
        the benefit of the ocunmon 8tOCkhOldr88 In th8 two
        oompani8S at both ends of the line.

             “The    authorities cited in "Insurance,". 24 Tex.
       .JlW.,    Sections 137, and 231, and In Couch on Inaurano8.
        ~Sectlona 107, 350, 605, and 606 seem to indicate that
        8inC8, 80 far aa Ye h8V8 been able t0 dlaoover, Ye
        have no statute forbidding the practice mentioned a-
        bOV8, it I8 not illegal tie88 by r88aon Of the com-
        munity of ownership, interest,    and control aa between
        the two oompanIe8 which might be 8 form of rebating,
        dIacrlml~tlon,     or Other practioe forbidden by the
        atatUt88    hereafter m8ntIOn8d. Or OOntram t0 public
        polloy generally.

             'We respectfully Invite your attention to the
        provisions of Art10183 568, 569 and 578 of the Penal
        COdS, end Artlolea 5053, 5056 end 5064 ,of th8 R8VI88d
        Civil Statutes, vhioh may have aon8 bearing upon the
        questions here propounded.

             %8  reapectiully ask your OpkIOn 88'tO vhether
        the plan above outlined Is lavful and should be ap-
        proved by ua in polIolea end applioation forms), or
        vhether the scheme contravenes the provlalons of en$
        oonatitution or statutory provialon or la oontrery
        t0 publPo pOli.ay OtherWIse In View Of~the COmBunIty Of
        Oi?n8rahlp, iPt8F88t, and OOntrOl (LB betVe8n the tV0
        COlIlp.Sn188."

             btiOl8       .  53, Vernon18
                                  Annotated Civil Statutea, among
other thlnga,         prov50de8 in 8ff8Ot
                                  that no inducement t0 in8UranO8
ahalL b8 m&d8 U~~l88a ap8oified in th8 poliay or OOntreCt Of In-
8Ul"IXLO8. Apparently this requIr8ment ha8 been complied with by
inaertbng  into the tiSUIWlC8 pO11C3.88 Ol? COntr8cta the fOllOWIll
p8regr8pht       '

             'This policy Is Iaaued in cOn8Id8ratIOn of the
        eppllcat1on therefor, a copy of which Ia attaahed
        hereto and made 8 part hereof, end of the p8gment
        in advane of the first    premium of $
        C8dpt ~Of #FhlCh is h8IWby 8Ck330v18dg8d~iOkh&%
Bonorable 0. P. Lo&hart,        (W&man,    Peg8 3



       maintain this DO~IOP In for08 for the D8riOd termI-
       mating on the -    kayof             , i9     and'
       it Vi11 b8 Conm8d    in for08 UpOn %h8 &8r      pay-
       ment of $     on said date and bn the        day OS
       every    -         thereafter until thmicy      anni-
       versary nearest tie date on which the Insured at-
       tains the age of         years or until the prior
       death of the iDaui%i%ie    said first prcuuiumonly
       to be paid jointly bj,
        employer of the insured) end
        oor.poratlon)."
             h&V8
                w808Z'8fully oonSId8red the St8t&ll8ntiOll8d in
your   letter
            and are of the opieion that the proposed plan of
the Reserve Loan Life Inaumnae Campeny and the Ameriaan Liberty
Oil Company does pot contravene any of these statutes.
                It la stated In Wuohla    Cyalopedla of InauHnae   Law,
Vol. 3, pOg8 1962, thatc
            "Paynent of Insurance   premIuma la not neceaaar-
       Ily the personal act of the 111aured, oonsequently,
       end as ageneral rule, anyonemaypeythe       premIuma
       or 8aaeiraaientaon 911 Insurance polloy or benefit aor-
       tISIaat8, vlth the result that, if rooepted‘ the p8y-
       ment Is as valid as IS made by the Lnatand hizaaelf,
       and t&Is vhether the payment was voluntary, or pw-
       auant to request of,:or 8 contraat with, the person
       or persona responsible for such payment, this being
       8sp8cl8llg true In the case of request or express
       contraot, provided, of aourae, that there are no ele-
       ments of vagering aufflclimt to avoid the aontraot
       of Insurance, or auoh payments are not prohibited by
       8 statute, and are not made after the polloy he8
       C8888d to b8 a valid and enforceabla OOntr8Ct. l + l m

          With reference to the payment of premiums on Insureno
poliolea, the general rule as Stated in Corpus Awls, Vol. 32, p.
1197, la 8a follovar
 Honorable 0. P.,Lookbart, Ch&lramn, Page 4



                 "Premiums may be paid by insured or benefl-
            Oi8~, or by someone for him, even though the
            on8 so pay&g has no insurable Interest.'

          App8r8ntly, under tbn general XWleS 8bOV8 mentioned, '
the payment of Insuranoe premiums aan be made by anyone vhere
such payments are not prohibited by statute. Ue have failed to
find any Texas Statute prohibiting auah payments.

                       In the 0888 of Thayer   et al vs. Vathem et al, 44 S. W.
906,        it    is    atat6dt


                 "Bec8ua8 the parties oolnpoaing both ocanpaniea
            are the same is no bar to their dealing with e8Oh
            other. All the law requires in ouch cases is that
            the timnaaatlon shall be free from fraud and exe-
            outed in good faith.'

           This Ma 8 suit brought for the oon#truotion of a trust
agreement, and to requlrq    one of the trustees, to aoaept atook of
the nebv company, and frenafer the franohlaea ehd property of the
DaU.aa Rapid-Transit R8fiVay    Coaqany to the nev aorp~ration oc-
ganized by virtue of said trust agreeawnt.

                     In Fletcherta Cyolopeti      Corporations Vol. 2, p.   1857,
it     i8        Stated8

                 llhenever 8 oorporatlon has psver to BaLs a
            oontract,It can aa&e It vlth anether oorporatlon
            aa veil 88 en Indlvldual. or partnership. Hovever,
            it has been held that oontraota between two oorp-
            orations, In order to bind either of them, atuat be
            vlthln the povera of both.

                 "If the right to oontraat exists, it is inma-
            terial if the same offiaers and. stockholders oontrol
            both contracting corporatlone; if there is no b8d
            faith.!'

Bovever, as v8 understand e question before us, v8 do not have
                          % 8 oorporations contreating vith each
the pPopO8ition of two aepa
other vlth the same offioera and atookholdera. Apparently there
Honorable 0. P. Lockhart, Ch8irmanl   Page   5


la no contraot whatsoever between the American Liberty Oil Com-
pany and the Reserve Loan Life Inauranoe Comp8ny. The 011 aom-
-jr Sl8l'8lJr
            8gX'88S t0 p8y and
                           .~ $oea pay a part of the pr8mIum
on 811 polIcI8s of a certam aLaa*.

          The question la raised vhether the Amerlaan Liberty
Oil Company ha8 the leg81 pover and authority t0 perfolln the
8bOVe m8ntiOn8d act8 as adV8rtiSing for aald oompany. It 18
stated in Fl8tCh8r'S Cyclopedia on Corporations, Vol. 2, page
178'7r
          "A corporatlori may adopt any proper means of
     advertising its bualneaa or Its enterprise, lrnd
     make necessary contracts with the publishera of
     newspapers or others for auoh purpose."

          It la further stated in the same volume on page   17881
          '538 moat dlffioult of alI. questions relating
     to implied pqvera la whether, in a partlaular case,
     8 corporetlon m8y rid 8 person or 8 firm or 8nother
     company when Its purpose Jn so doing la to lnoreaae
     its ovn busln888. ThIa queatlon'often arises in
     connection with donations by a oorporatlon to aid
     an enterprLa8, the auaceaa of vh5oh Vi=   incre888
     the business of the donating oorpor8tlon, In connea~
     tlon with the power of the corporation to become a
     guarantor or 8 surety to help a person, Slnn or
     another corporation, where the efSeot'v111 be to en-
     able the corporation tc make a sale or obtain a
     steady customer or to Oth8IWiSe help its buainesa;
     and In various other phases.  It moat frequently a+
     rises in connection with the buaI.neaa of brewing
     c~anles,   land companies, street oar oompanI8a and
     the 15.k8. All that can be said la that the olrcum-
     stances of the particular aaae largely control the
     question; that some oourts +re more liberal then
     others In allowing corporations to do acts which a
     level-headed business man, 8s an individual, would do
     to help his business; that the undoubted tandenay; Of
     th8 courts la in the direction of upholding such aota.
    .* + I .u
HOnOr8bl8 0. P. Loakhsrt, Chelnnan, Page 6



           It is our opinion that the above mentioned plan Is
not prohibited by law end that the Department of Inaura.noe may
legally 8pprOV8  application and policy.fonna containing the
above QUOtWd par8@'8ph.

           Trusting that the foregoing fully enavers your Inquiry,
we   are
                                          Yours very.truly




                                                      A~alatsnt

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