           THJGA~~RNEY               GENERAL
                         OFTEXAS




Hon. Jesse James                   Opinion No. WW- 497
State Treasurer
Austin, Texas                      Re:   Can the Commissioner of
                                         Insurance delegate the
                                         responsibility of~_,approving
                                         the securities deposited
                                         with the State Treasurer
                                         under Articles 3.15, 6.09,
                                         8.05, 14.10 and 17.25,
                                         Section 4, of the Insurance
                                         Code? Is a general court
                                         order placing an insurance
                                         company in receivership
                                         sufficient authority for
                                         the Treasurer to release
                                         such deposits to the re-
Dear Mr. James:                          ceiver?
          You have requested from this office an opinion
on the following questions:
          A. Whether the State Board of Insurance and/or
the Commissioner of Insurance has the authority to delegate
to any employee of the State Board of Insurance other than
the Board members or the Commissioner of Insurance the power
of approval of securities for deposit with the State Treasurer
under Articles 3.15, 6.09, 8.05, 14.10 and 17.25, Section
4, of the Insurance Code, the withdrawal of such securities
so deposited and/or the substitution of other securities
for the securities withdrawn.

          B. Whether a general court order placing a com-
pany in receivership is sufficient authority for this depart-
ment to release any collateral deposited in this office by
the affected company to the liquidator.
          The articles in question require or permit deposits
of securities with the State Treasurer by certain classes
of insurers in the State and in connection therewith either
refer to action by the "Board of Insurance Commissioners"
or "the Board".
Hon. Jesse James, page 2 (WW-497)


          All of the "powers, functions, authorities, preroga-
tives, duties, obligations or responsibilities" formerly vested
in the State Board of Insurance Commissioners have been vested
in the State Board of Insurance by Article 1.02(b), Acts
1957, 55th Leg., ch. 499, p. 1454, Sec. 2. These powers,
functions, etc..,by the terms of the same article are to be
"exercised, performed, carried out and administered" by the
Commissioner of Insurance as the chief executive and rdministra-
tive officer of the Board. The duties of the Board Itself
are limited primarily to those of a supervisory nature. There-
fore, the Commissioner of Insurance has the authority to per-
form all of the acts formerly required of the "Board of In-
surance Commissioners" or "the Board" in connection with the
above mentioned deposits, Opinion No. WW-166. The question
then arises as to whether such authority and responsibility
can be delegated, it being fundamental that powers and functions
which are discretionary or which require the exercise of
judgment cannot be delegated by a board or official to a
subordinate in the absence of express statutory or constitutional
authority. 73 C.J.S. 381. The 'approval" of securities for
deposit clearly involves the exercise of discretion. See
Gustafson v. Wethersfield Tp. High School Dist., 49 N.E.2d 311
(App. Ct. of Ill. 1943). The only provision of the Insurance
Code which could possibly be considered as granting such
authority is Section (g) of Article 1.09 of the Insurance
Code, Acts 1957, 55th Leg., ch. 499, p. 1458, Sec. 2, which
provides:
         "The Commissioner of Insurance shall appoint
    such deputies, assistants, and otherpersonnel as
    are necessary to carry out the duties and functions
    devolvinF uponhim and the State Board of Insurance
    under the Insurance Code of this state, subject
    to the authorization by the Legislature in its
    appropriations bills or otherwise, and to the rules
    of the Board." (Rnphasls added.)
          It is our opinion that this provision, while clearly
allowing the Commissioner to delegate his ministerial responsi-
bilities to the assistants appointed pursuant thereto, does
not constitute legislative authorization for the delegation
of powers and functions which require the exercise of judgment.
Public Adm. Law, 42 Am. Jur. 387.
          We have been furnished a copy of a letter signed by
Commissioner Harrison informing you that two named employees
of the Insurance Board "have been authorized to sign on be-
half of the Commissioner of Insurance the deposit and with-
drawal forms for securities placed with the State Treasurer. ..."
.    -




    Hon. Jesse James, page 3 (WW-497)


    The act of signing such forms on behalf of the Commissioner
    and at his direction Is a ministerial act falling within
    the purview of Section (g) above cited, provided the actual
    approval or disapproval of the securities involved is made
    by the Commissioner himself. See 107 A.L.R. 1477 and anno-
    tation following.
              To answer your second question correctly it must
    first be determined whether or not a receiver becomes en-
    titled to these deposits by the mere fact that the depositing
    company has been placed in receivership. None of the enumerated
    articles makes any provision for turning such deposits over
    to the ~receiver. Article 21.28, dealing with the liquidation,
    rehabilitation, reorganization or conservation of insurers,
    provides in Section 2(a) that:
               "Whenever under the law of this State
          a court of competent jurisdiction finds that
          a receiver should take charge of the assets of
          an insurer domiciled in this State, the liquidator
          designated by the Board of Insurance Commissioners
          as hereinafter provided for shall be such re-
          ceiver. The liquidator so appointed receiver
          shall forthwith take possession of the assets
          of such insurer and deal with the same in his
          own name as receiver or in the name of the in-
          surer as the court may direct." (Emphasis added.)
    Subsections,    Section 2, of the above article provides
    that "the property and assets of such insurer shall be in the
    custody of the court as of the date of the commencement of
    such delinquency proceedings." It would appear, then, that if
    the deposits in question constitute "assets" of the depositing
    corporation the receiver is entitled to their possession.
    Section l(cj defines "assets" for the purposes of this article
    as meaning "all property, real or personal, whether specifically
    mortgaged, pledged, deposited, or otherwise encumbered for
    the security or benefit of specified persons, or a limited
    class or classes of persons. The word lassett, as used in
    this Article, includes all deposits and funds of a special
    or trust nature.U
              This definition is the result of an amendment to
    Section l(c), being Acts 1955, 54th Leg., ch. 267, p. 737,
    Sec. 1. Prior to such amendment and since 1939, "assets"
    as used in this section was defined as follows:
                "*General assets' means all property, real
           or personal, not specifically mortgaged, pledged,
         . deposited or otherwise encumbered for the security
Hon. Jesse James, page 4 (WW-497)


    or benefit of specified persons or a limited
    class or classes of'persons, and as to such
    specifically encumbered property the term in-,
    eludes all in excess of the amount necessary
    to discharge the sum or sums secured. Assets
    held in trust and assets held on deposit, for
    the security or benefit of all policyholders,
    or all policyholders and creditors, in the
    United States, shall~be deemed general assets."
          Deposits similar to those required under the In-
surance Code have been construed by the courts as constituting
special funds for the benefit of a particular class of creditors,
while others have been construed as being nothing more than
a deposit as security for the policyholders generally. The
importance of the distinction is shown by People v. Granite
State Provident Association, 161 N.Y. 492, 55 N.E. 1053, but
does not affect the answersto your questions. It will be
noted, however, that there is at least a question as to whether
or not those,deposlts constituting special funds were included
within the "assets" which the receiver was authorized to take
possession of prior to the amendment of Section l(c).
          There ~1s a line of authority construing Article
74gF (i) (1897), forerunner of the present Article 698, re-
lating to de,positsrequired to be made by bond investment
companies as a condition precedent to doing business in this
State. The article, unlike those in question, specifically
provided for the receivership contingency in the following
terms:
          II
           .;~.Incase of the failure of any company
     covered by this act, the district court of the
     county or city in which the principal office is
     located, upon the application of one or more
     shareholders, shall appoint a receiver for such
     company, whose duty it shall be to wind up the
     affairs, liquidate its debts, and distribute its
     assets, using therefor, upon the order of the
     court, the deposit previously made, to secure the
     shareholders, with the State Treasurer, and the
     State Treasurer is hereby authorized to pay out such
     deposit in accordance with requisitions made upon
     the State Comptroller by said receiver, and approved
     by the court, upon the warrant of the State Comp-
     troller."
          It was concluded that such language made ,the deposit
unavailable to,the receiver until final adjudication of the
Hon. Jesse James, page 5 (WW-497)


rights of the parties interested in the fund had been made
and the'debts established. Ex Parte Stevens; 94 S.W.  327
(Sup.Ct. 1906), and Hart v. Stevens, 1Om.     135 (Sup.Ct. 1907).
          Phillips v. Perue, 229 S.W. 849 (Sup.Ct. 1921), con-
strued Article 4930 now repealed, relating to deposits re-
quired to be made bi surety and guaranty companies, said article
containing no directions to the State Treasurer as to the diB-
position to be made of such depOSitB in the event of insolvency.
We find therein the following:
         "We think it clear that the District Court
    of Walker County, under the circumstances shown,
    had the power to appoint a receiver of the fund,
    and also to disburse it through its receiver
    rather than through the State Treasurer. The
    law makes no provision for the Treasurer's con-
    verting the deposit into money, or for its distribu-
    tion in the case of numerous claimants. To make
    an equitable distribution under such conditions
    was peculiarly within the province of a court
    of equity. ... There is nothing in the law that
    under the circumstances here present would re-
    quire the court to disburse the fund through
    the Treasurer to the exclusion of its receiver."
          Also applicable to our problem is the case of Holloway
v. Federal Life Insurance Company, 21 F, Supp. 516 (Dist.Ct.
W.D. MO., W.D. 19371. The Superintendent of Insurance rather
than the State Treasurer is custodian of the deposits required
or permitted to be made by insurance companies doing business
in Missouri. The case arose upon his refusal to turn such
deposi-tsover to a receiver. In determining he should be re-
quired to do so, the Court made the following observations:
          II
           ...A paramount question arises as to
     how the superintendent of insurance can apply
     the securities now held by him. He is not an
     executive receiver; he is not authorized to
     liquidate the company; and, moreover, the
     Federal Reserve Life Insurance Company is no
     longer a going concern. It was his duty to
     hold securities while the company was doing
     uusiness and to do so as trustee for policy-
     holders in Missouri.
          "A court of competent jurisdiction has
     taken over the Federal Reserve Life Insurance
     Company. It becomes the duty of the court to
Hon. Jesse James, page 6 (WW-497)


     direct the collection by its receiver of
     all the assets of the company so that same'
     can be equitably and properly applied to
     the discharge of the obligations of said
     company. The court alone is capable of
     determining what priorities, preferences,
     and liens may be allowed and enforced
     against said assets. The responsibility
     of the superintendent of insurance as an
     executive officer is completely discharged
     when a court, whose duty it is to administer
     the estate, calls for a surrender and delivery
     of said assets."
          In accordance with the reasoning of the Phillips
and Holloway cases and in view of the present definition
of "assets" in Section l(c) of Article 21.07 of the Insurance
Code, we conclude that the receiver is entitled to any sums
deposited with the State Treasurer under the above articles.
This being the case, a general Court order placing a company
in receivership,such as you transmitted to us with your re-
quest which directs the receiver to take possession of "any
statutory or special deposit made by or for,the benefit of"
any insurance company "with any officer or agency of the
State of Texas" is sufficient authority for your department
to release any collateral so deposited.
          It should be pointed out that by this opinion we
are not to be considered as determining the proper method
or forum to be utilized in requiring the Treasurer to turn
such deposits over to a receiver in the event of his refusal
to do so voluntarily.




                       SUMMARY
         The Commissioner of Insurance is not au-
         thorized to delegate the discretionary
         responsibility of approving securities
         for deposit with the State Treasurer but
         may delegate any purely ministerial acts
         in connection therewith.
Hon. Jesse James, page 7 (WW-497)

            A general Court order placing an insur-
            ance company in receivership is sufficient
            authority for the Treasurer to release the
            securities deposited with him under Arti-
            cles 3.15, 6.09, 8.05, 14.10 and 17.25,
            Section 4, of the Insurance Code.

                            Very truly yours,
                            WILL WILSON
                            Attorney General of Texas



                            BY   R.,   1   qk        fj--
                                 R. V. Loftin, Jr.
                                 Assistant
RVL:ph
APPROVED:
OPINION COMMITTEE:
Geo. P. Blackburn, Chairman
Jack Goodman
Leonard Passmore
REVIEWED FOR THE ATTORNEY GENERAL
BY:
    'W. V. Geppert
