                         THEAVTORNEY                     GENERAL
                                      OF ?rExAti

  'WILL     WILSON
A-l-X-O-       GENERAL
                                                April    23, 1959


           Mr. William A. Harrison                 Opinion No. WW-602
           Commis5ioner    of Insurance
           International Life Building             Re:   What constitutes   Uoae building
           Austin, Texas                                 site and office building” as used
                                                         in particle 3.40 of the h~surance
           Dear   Sir:                                   Code.

                    You have asked the opinion of this office as to the definition of
           the phrase “one building site and office building for its accommodation
           in the transaction    of its business and for lease and rental” as used in
           Article   3.40 of the,Insurance    Code as well as its application to a spe-
           cific fact situation set ,out in your opinion request a6 follows:

                             “Attached hereto you will find a photostatic
                    copy of a plat of a certain city block.      The entire city.
                    block, is now owned ,by XYZ Life Insurance Company.
                    On tract ‘A’ is a twenty-story      steel frame brick build-
                    ing which is the home office building of XYZ Life In-
                  ‘,:,
                    surance Company.       The company acauired tract ‘A’ on
                    December     27; 1950, at a cost of’$575,000.      The build-
                    ing~was commenced       in January, 1952, and was com-
                    pleted in February,    1953.    At the present time the up-
                    peer nine stories of the building are under a thirty year
                    lease to one tenant, and the remaining eleven stories
                    are occupied by the insurance company and tenants
                    who have short-term       leases.   The insurance company
                    occupies space on seven floors,        which if consolidated
                    would take up only a little more than three floors in
                    the building.

                              “Tract ‘B”is  an ,unimproved concrete and dirt
                     lot, an undivided one-half of which is gowned by Com-
                     pany XYZ and is used for access and parking area.
                     One-half interest in this property was acquired by the
                     company on February     13, 1953 for a cash considera-
                     tion of $125,000.

                             “On tract ‘C’ is a si%-story  concrete parking
                     garage building which is owned by XYZ Life Insur-
                     ance Company.     The tract of land was acquired by the
                     company on December      27, 1950, for a $230,000    cash
                     payment.   Then parking garage was commenced        in Janu-
                     ary, 1952 and completed in February,     1953.    The garage
                                                                                        ‘.




    Mr,. William   A. Harrison,   page 2 (WW-602)                                        .:




            is a public parking facility and the’ income    from,,+     op-
            eration accrues ,to the insurance’compauy.

                     “Tract ‘D’ wa,a acquired in two parcels, the ,first
J         ‘. being on April 1, 1957, for $243,000, and the second par-
     ‘.      ccl on April 1, 1958, for $77,5,000.

                       “Therefore,   Company XYZ, since the purchase of
          ,” one’ori,ginal  building sits or.December      27, 1950; a& the ,’
             completion    of the home <office building and,parking garage
             in February,    ‘1953, hasp made di,rcct cash purchases    of the
             various remaining tracts within the City block on different       .I
             dates and in varying amounts.       The total investment by
             the company in the properties      is $7,912.983.10..,, This doee
             not exceed the percentage     limitation in Articie 3.40.~,:

                      Company XYZ has indicated that it propbses to
            enter into a long term lease with a building corporation
            under the. terms of which the lessee will erect a thirty-                         l
            story office bui.lding on tract ‘D’* The new building will              ,
            be ad’jacent to aad connected with the present home office
          : building of the insurance company and\the parking garage.
            Company~ XYZ will have an option to purchase the building
            from the lessee.”      ,.I  :
                               4,’
             Statutes governing Insurance companies     have uniformly contained
    limitations   on the amount of real estate which such companies     may acquire.
    the manner of its acquisition;   and time limits within which they must dis-
    pose of property whose initial acquisition was permitted but the continued
    retention of which by the companies,was     prohibited.  Article 3.40 of the
    Insurance Code is a representative     example:

                    “Every such insurance coFnpany may secure* hold
            and convey real prop,erty only for the following purposes
            and inthe following ‘manner:

                    “l(a). One building site and office ~building for hits
           accommodation     in the~transaction of its business and for
            lease and rental; and such office building may be on ground
           on which the company owns a~ lease. having not bless than
           fifty (50) years to run from the ~date of its acquisition  by
           the company, provided that the company shall own, or be
           entitled to the use of. all the improvements    :thereon. and
           that the value of such improvements     shall at least equal
           the value of the ground, and shall be not less than twenty
           (20) times the annual average ground rentals pa’yable un-
           der such lease: and provided such office building s,hall
           have an annual average net rental of at least twice such

                                                                    :


                    !

                                                                ,
.




    Mr.   William   A. Harrison,       page 3 (WW-602)




             annual ground rental; and provided further, that such com-
             pany shall be liable for and shall pay all State and local
             taxes levied and assessed     against such ground and the im-
             provements   thereon, which for the purposes of taxation
             shall be deemed real estate owned by the company.       Pro-
             vided that an acquisition of such an office building on
             leased ground shall be approved by the Board of Insur-
             ance Commissioners      before such investment.
                      I.
                           .   .   .




                     “2. Such as have been acquired in good faith by
             way of security for loans previously contracted or for
             moneys due;

                       “3. Such as have been conveyed to it in the satis-
             faction of debts previously  contracted in the course of its
             dealings;

                     “4. Such as have been purchased at sales under
             judgment or decrees   of court, or mortgage or other liens
             held by such companies.

                      “All such real property specified in Subdivisions
             2, 3 and 4 of this article which shall not be necessary         for                f
             its accommodation      in the convenient transaction     of its
             business   shall be sold and disposed of within five (5) years
             after the company shall have acquired title to the same, or
             within five (5) years after the same shall have ceased to be
             necessary    for the accommodation      of its business.    It shall
             not hold such property for a longer period, unless it shall
             procure a certificate    from the Board that its interest will
             suffer materially    by the forced sale thereof; in which event
             the time for the sale may be extended to such time as the
             Board shall direct in such certificate.       As amended Acts
              1955, 54th Leg., p. 916, ch. 363, § 13.“.

    This particuls& statute is somewhat different from that of other states in
    view of the rather,+uiique limitation    “one building site and office building.”
    We can find no cases construing      such a restriction    in this or any other
    jurisdiction,   nor are we aware of the existence     of similar    limitations   in
    the insurance laws of other states without qualifying language allowing              ; .’
    the acquisition   of real property in addition to an office site where net-            r~
    essary for the accommodation       of the company’s    business.     Statute’s of
    this, kind were primarily    enacted in consort with similar      laws relating
    to corporations    generally  and were designed “to prevent property from
    falling into ‘dead’ or unserviceable    hands or to limit monopolistic        own-
    ership and control of the land by concentrated       wealth of corporations.*
    Great West Life Assurance       Co. v. Courier Journal Job Printing Co..
     Mr.   William   A. Harrison,   page 4 (WW-602)




     288 S.W.Zd 639 (Ky.App.).    Following and as a result of the mellowing
     national attitude toward corporations    many states have greatly liber-
     alized by statutes the permissive    real estate investments allowed in-
     surance companies.     This has not occurred in Texas.

               The forerunner   of Article   3.40 was Article 3096m relating to
     home   life and accident   companies    enacted in 1895. It provided in part:

                       “Article 3096m.   No home company shall purchase
              or hold real estate except for the following purposes and
              in the following manner:    The building in which it has its
              home office and the’ land upon which it stands; such as
              shall be requisite for its accommodation.and    the transac-
              tionof its business in this State, or any other state or
              country; such as shall have been acquired for the accom-
              modation of its business;   such as shall have been mort-
              gaged to it in good faith by way of security for loans pre-
              viously contracted   or for moneys due. . .O”

     This provision was greatly restricted     by the enactment in.1909 of Article
     4726, Acts 1909, p. 1.96, Sec. 11, relating to life, accident and health com-
     panies and expressly  repealing Article 3096m:
                                                                          d.,
                   )’ “Sec. 11. Every such insurance company may se-
              cure, hold and convey real property only for the following
              purposes and in the following manner:

                       “(1): One building ‘site and office building for its
              accommodation     in the transaction  of its business and for
              lease and rental. : Such as shall have been acquired in
              good faith by way of security for loans previously      con-
              tracted or for moneys due. . 0w

      That the provision as to “one building site and office building” was delib-
     erately restrictive can be seen by the fact that corresponding     statutes af-
     fecting fire. marine and inland insurance companies     in effect for many
     years prior to 1909 contained no such limitation;    nor did those statutes
     affecting casualty insurance companies.enacted    in 1911.

              The modern judicial tendency has been toward a liberal inter-
     pretation of these restrictions.   For example,    it is now well settled
     that an insurance company operating under these or similar         restrictions
     is not limited in the size of its building to a structure merely adequate
     to its then existing needs and no larger.    Rather it may construct      or ac-,
     quire as large an edifice as the prudence of its board of directors,        and
     other applicable statutes relating to insurance company investments,
     dictate.   Those portions of the building not yet required by the company
     itself can be made available to tenants.    Vol. 18, Appleman on Insurance
     Law and Practice,    Sec. 10,015, p* 62, Nat’l. Reserve    Life Ins. Co. v.



..
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    Mr. William    A. Harrison,     page 5 (WW-602)



    Moore, 219 Pac. 261, Volunteer State Life Ins. Co. v. Dunbar, 181 S.W.
    myclopedia         of Insurance Law, Couch, Vol. 1, Sec. 248, p. 585.     This
    conclusion   is reenforced   in Texas by the addition to the statute of the
    words “and for lease and rental,” an appendage not usually added to this
    type of statute in other states.

              Likewise,    the concept of what is properly within the meaning of
    the phrase “for its accommodation            in the transaction     of its business”
    and others of similar import has been greatly expanded by judicial
    construction.     The purchase by an insurance company of a hospital to
    be u,sed primarily      but apparently not exclusively        for the treatment      of
    its employees     afflicted with tuberculosis       was upheld as being “requisite
    for its convenient accommodation            in the transaction     of its business.’
    People ex rel. Metropolitan         Life Insurance Co. v. Hotchkiss,           120 N.Y.
    ~UPP. 649 (1909) . In tw o cases involving the proposed ownership by in-
    surance companies        of housing projects,      such ownership being specifi-
    cally authorized by the insurance laws in force, it was contended that
    this would violate constitutional        prohibitions    against corporate       owner-
    ship of real property       “except such as may be necessary            and proper for
    its legitimate    business”    or not “actually occupied by such corporation
    in exercise    of its franchise.*      In both it was held that this’proposed
    use did not violate the constitutional         provision,   the rationale apparently
    being that it was necessary        for present day insurance companies             to
    have a large field of permissive          investments     and that by making such
    investments     the companies were acting in furtherance              of tlieir business.
    The fact that the real estate in question (now comprising                 one city block)
    has been purchased in piecemeal            fashion over a period of time is en-
    titled to but little significance      in determining     whether or not it constitutes
     “one building site.”      An analogous situation is discussed           in the case of
    Board of Ed;cation        of Orange-County      v. Forrest,    et al., 130 S.E. 621
    jN.C.Sun.1.    There the Board of Education selected a site for a consoli-
    dated school building containing slightly over six acres.                 This six acres
    was composed       of two parcels of land s one of five plus acres and the
    other of 1.09 ac,res with a ‘“street, road or alleywayW intervening.                  The
    Board was able to purchase the five acres immediately                  and’proceeded
    to build the school building thereon.           Being unable to reach an agreement
    as to price regarding the 1.09 acre tract, condemnation proceedings
    were instituted, such additional land to be used as a playground,                  It was
    contended that the Board was empowered               to condemn only for school pur-
    poses or school buildings and was not authorized to condemn property for
    playgrounds     contiguous thereto.        The Court, however, points out that the
    Board is allowed to acquire title to “siteso” for buildings throughout its
    district and in this connection has the following to say:

                      II
                       a D s The meaning of the word ‘site’ as used in the
             statute is broad enough to embrace    such land, not exceed-
             ing the statutory limit, as may reasonably    be required for
             the suitable and convenient use of the particular   building;
             and land taken for a playground in conjunction with a school




      ‘.
     Mr.    William   A. Harrison,   page 6 (WW-602)



               may be as essential  as land taken for the schoolhouse          it-
               self. 24 R. C. L. 582, B 31.

                         “It appears in the statement of facts that the plain-
               tiff, after deciding to consolidate    the scho&.      selected as
               a site for the building a lot of more than six acres includ-
               ing the lot in question; that upon the reasonable        assump-
               tion that title to each lot could be acquired by purchase,
               the plaintiff erected a modern school building on the five-
               acre lot; and that afterwards     it~became necessary       to con,-
               demn the lot in controversy.       In all these matters the
               plaintiff was acting in the exercise      of a discretion   with
               which the courts seldom interfere.         (Citing cases.)

                        “Under the judge’s findings of fact the recess      of
               acquiring title to the five-acre    lot by purchd
               one-acre   lot by condemnation    may be regarded as sepa-
               rate stages m the accomplrshment         of a common’purpose
               to appropriate   both lots for the benefit of the school.
               Otherwise the plaintiff’s   original purpose would’ be’de-
               feated. 0 s 0m (Emphasis    supplied.)                 -?

      It would appear then that the determination   of whether ,=:&en   tract of !
    * land qualifies as “or@ building site” within the purview of Article 3.40
      presents a question of fact which must be resolved by you.                   .

               H&ever,   it shoul& be pointed lout that the manner in which
     property is purchased is but:one of the factors which should be taken
     into consideration    by you iA resolving     the question. The matter is ex-
     cellently  summarized     in Garfield v. Equitable Life Assurance     Society,
     164 N.Y.S.Zd    823 (N.Y.Sup.),   as follows:

                      “Singleness   is to be determined not solely        by the
              purchase but by the plan as well and its essential          and
              natural implications,   its purposes and policy.n

     Of course,  unrelated acquisitions of separate parcels  of real estate which
,
     do not reasonably   appear to be motivated by any particular  plan looking
     toward their ultimate utilization as a ““unitwwould be beyond the purview
     of Article 3.40.

                What constitutes an ,“offlce building” within the meaning of Article
     3.40   likewise presents a fact.question    which you must determine.

             In Rice, Att”y. Gen. v. Board of Police Com’re.    of City of Woon-
     socket, 97 A. 19 (R.I.Sup.) it was contended that c&tain    connected struc-
     tures constituted a “building” within a statutory wrohibition against the
     issuance of a liquor license-for  the sale of liquor in any build&g within
     200 feet of a school.   The Court held that the structures   in question rep-
     resented three distinct buildings. basing this conclusion’on    the following
Mr.~ William      A. Harrison.    page 7 (WW-602)



facts:   “It was built at a different ti.me, upon a different plan, and for a
different purpose.     There is no interfor connection ore means of passage
between the two.” On the other hand, we find the case ,of, State v. Crause,
 104 A. 525 (Me.Sup.)!   which announces that~ ‘a bitilding~ may ‘constitute an
entire block, consisting    ofseparate   and independent tenements,   one~of
which may be occupied for a dwelling house and another for a store?
Citing State v. Spence, 38 Me. 32.

         An analogy to the restrictions     of Article 3.40 is furnished by
corresponding    constitutional  provisions    and statutes relating to banking
which contain limitations     as to a “banking house* and engaging in busi-
ness at more than “one place.”        A proposa’$ to house banking facilities
in a building to be constructed     in the next block to the existing banki- .
connected by pneumatic tubes and a closed~ circuit TV was held a viola-
tion of Article 342~903,in    Attorney General Opinion WW-22.         A similar
addition, joined to the original by a tunnel below the street, was held
within the statutory and constitutional     limitation in Attorney General
Opinion V-1046:

                    “if the new structure,  when built, becomes a part
           of the bank’s ‘banking house’ then the proposed plan will
           not violate the provisions   of said Article.
    r..
                    “The contemplated      new structure,   although to be
    ,. 1


           erected across the street from the original “banking,
           house,’ will be physically     joined thereto by a tunnel un-
           der the street, which you state will be suitable for pas-
           sage back and forth.     It is evident that besides being
           joined physically,   the new structure,    including the pas-
           sageway, will be in close proximity       to the present build-
           ing. It will be used in connection with the original build-
           ing’ and as a unit will be devoted to one general common
           purpose.    It is our opinion that the two structures     will in
           reality be one and ‘when used in the manner proposed will
           constrtute the bank’s ‘bankmg house.”        D 0 am (hmphasls
           supplred.)

           Also   pertinent   is Attorney   General   Opinion R-1746:

                    “The emphasis appear%. to be on the singleness
           of the place at which thenbanking operation is conducted.
           . . .

                    “The sole question is. then, whether the separate
           building or installation  planned will constitute a separate
           place, or banking house or will constitute but a part of
           one place or banking house.     To resolve that question
           will require an examination    into all of the facts and cir-
           cumstances   throwing light on the question, many of which
         Mr.   William   A. Harrison,   page 8 (WW-602)


                                                                       ,
                    are not yet in existence.    Physical proiimity    will be but
                    an evidentiary fact for c’onsideratiorl.   Physical cdmmu-
                    nication by pneumatic tube is of siinilex limited signifi-
                    cance.   Any hypothesis   must neceesarily    assume i&en-
                    tion to use the separate ‘buildings’ at an integrated,    single
                   ‘business location.   Intention is’ always a fact question if
                    disputed.”
                                                            ..
                    While obviously in the banking field the emphasis is not onthe
,.,‘.-   singleness     of the physical structur,e,‘the   above are illustrative’of   the
         liberality with which restrictions,      of this type are interpreted    and may
         be of some ,benefit to you in passing upon these questions,.

                  We have been furnished :as. a supplement to’the bpinion request
         with. a brief summary    of’various insurance buildings which in the past
         have been considere~d by the Board and, the Commissioners.       A compari-
         son of those which have been rejected .and those which have not shows
         that these matters have been treated correctly    as questions  of fact and
         the determining  factor in each case has been whether or not the struc-
         ture was considered    by,the Bpard as an *architectural.unit.?

                   In determining   whether or not the pr’oposed plan comprises   an
          “architectural   unitm the Board has apparently taken into c~onsideration
         all the particular   facts’ involved, such as its proposed use both present
         and future, its physical aspects,     design and plan, the manner in wh$ch
         it was acquired, etc.                        .

                                            SUMMARY

                          Whether or n.0t.a ,particular re,al estate
                          investment    of a’ life insuranc~e company
                          constitutes   “ones building site and office
                          building,” as the phrase is used in Arti-
                          cle 3.40 of the Insurance Code, is a ques-,
                          tion of fact for determination     by ,the Corn-
                          missioner    of Insurance.

                                                     Very   truly your.s,

                                                     WILL    WILSON’
                                                                                 as


                                                     BY




         RVL:lm




                                                 .
Mr.    William   A. Harrison,   page 9 (WW-602)




APPROVED:

OPINION     COMMITTEE:

Geo.    P. Blackburn.   Chairman

J. Arthur Sandlin
William R. Hemphill
Tom I. McFarling,
John Reeves

REVIEWED    FOR THE ATTORNEY             GENERAL
BY:
     W. V. Geppert
