          OFFlCE OFTHE ATTORNEY GENERAL OFTEXAS
                          AUSTIN




    Hon. trrak    3. Xear
    Amlrtult     s4ewit1e,   Cw~t*lonu
    boontary     stcte
                 of
    mst in) Trxar
    ikar sir:




                                                sting thr opin-
                                                78 sattsr, hQ8

                                              ::p+ny 18 an inmr-
                                              nesa or~alli.l(llife
                                                  ot th* provisiona
                                                statute0  or Texas,
                                              UI and toll to the
                                         d8” eantalnlng the tol-




.
Hon. Trank       0. rear, Page So. 8

   aadcraiontooupoar oootalnrd la pol~oiar Llmled
   by the Co ,?cv ~6 arrlgnod rOr that j)uT~Osa.
         Vs accordancewith unmlmus     roclutloa    of
   tbo rtookholderr   of the  Century Llfo Imirano~
   Con$wky, it    18 agree4 that no bitldoadr @hall
   bo deolartd or ;.a16on thb oapltsl hook OS the
   aor,zany until the prlnolpal OS t!Sr oartlifoate
   an4 all lntsrrstduo oader lt rka11 hava been
   rotired and paid ln full, and lo event the Cm-
   pany abculd br    lfguidateb the ob:lgatlomumr
   thlr    osrtlfoatr #hall bo prlcr, und lperlor
   .lam        to that or   tt*   rtoakholdrrs.

       =;ltn
           acoordanoe with thr              lawo of the State of
   Texas the anoimt ot t!Ar               oertlf~oste   tmethar
   with the interat  thereon             rl;all be payable only
   out OS the rurplur of tta             Cozwny after world-
   lrq for all the re~orvea              and other llabilltier
   OS the Comjant.
       *Tkis oertifioate 1s tranrferablo only oa
   the bcoks of the Company la person    or by duty
   authorized attorney u;on ltr aurrsnder properly
   ene0rrea.


          =XElTl'ML?S3
                     Xi12W?stha Centuryilte lmsur-
   nnoe Cosqany ha8 oauaod tbl.8 orrtifiostr to be
   signed  by its duly autkorleeb ofttows     6nd lta
   oori3oreteseal to bo herytoDatfpl      tk.18
   by     0r                         ,    .   .   -*



                        Searotary                      Trasidont.c
       ghera is no cxpres* itatutcry awth~orltyfor
Chapter 3 Izmuranoe Cor;o?ation@ to borrow money) neither
18 there any rtatutory &Tohlbltlon aC;alnottbd exerOie@
Of such :o~er. Thsro im, 0r oOurm, co 8tatutOry au-
ttorizatlon ior the lssusnce oi tbeoo ;r:;OSsd eU>luS
oe-tlrloate bc:ida.
         It la t33:c0ad,  as a goneral ;r3;oalt:on,ttat
Prlrato oorporotlormrmy, wlthout oxgrecr rtotutoty au-
ttOPlty,   torr-w nosy   u?.en neoesmry In the legltlaatr
non. PTank D. Kecr, ?6&. 30. 3

ocurso oi tlm oorporato brulnrrr. -18 ~~10 wouid,  it
&eem8, llk6wlse applr to M lnraraooo oo,qorrtion suoh
a8 the C*aturf Life Inrumx* Ceqx4.
       WI,  thsrbr0r0,  OOGOO~~,    iOr  th0 ?w?o~o~    0f thi8
oplnlon, thot the Century Lilr Irmuranor Col.;a.ny       bur tho
pawar to borrow annoy rbsn naoessary in tka l~itbtito
oourso of itr buslzosr,    omflnlr~     ourorlrsr   only to thr
puertlaa as to ubothw    the progor*d 8810 OS luoh murplu8
oortltiaato boa68 rould ba a le it&et@,          lartul end au-
thorissd     eSerOlSo    ai   t&o   8ener a!   laplied    power to    borrow
money*     On this      question, tCore are no prOOdMt8               in
Tarar.
       The plm of ISSUing aad 8Olliry to th0 FUbilO
8uob 8ur7l1.u oertlflosto bond8 by tho Century Life IJI-
wrance Ooqa.ny, whereby lt may raise ~omy, oloarly 18
not tha raploymnt of tte ::auai  an& ocrmwclal   raotkod
of borrowiq money. Tke trrnaaotfon will not embhoo
an unequlrooal obligation to return the ;rz?erty borrow-
ed at regular int6rvci0,  or at a rttited timma nor doe8
It uabreod l sthtod, or repbr, or oartnin tfne for tts
payment of intorest. It draoes   only,+ obl&atfx    to
repay the IWEJSMvanoeb olctof thr rurplro i,tt;r*-oab-
pnny in 4xoecs 0r g30,OOO. ~auid/orfrom tho proaeede
Of 44rtain     6ndQWASent OWpOnb OOEtaftbd           in    pOifOie8    i8-
sued by the ooiapary and assigned tsr that      pur;~ao~, with
the tritereast   thereon gapable only out cf the 8urslu8 of
the ooz.pany.     Thera 18 A0 ;ower la thr holder8 0r suah
in,nrtrumants   to sraot payaftnt, dlthar of ;rlnolpal and
 interest, at ang atatod time, or at any tlzao,?or that
Rattu. The osrtlfloate3veat:        in the QPmer a patu    in-
ters8t     in the oa;ital or property oi the oowa4, in
ease of llr\Alction, than the stookholder thtceioiVe8
poaseaa; and tto oertlflootor       further doalaro the ropap-
ieat   of tbe'prlcoip4L ttewof with interest, when and
 it ever dot0 to be superior to the right Oi the ItOok-
holders to dfvldends. Iurtherzora, In the oontraot of
 rubsoriptioo    for suoh 06itifiOtte8,   fhero n?pwr8 tL:i*
 prorisionr
         *oa co.l;llathn    of t. Is subecrl;tionltls al80
     *reed   that f&ore stall      be doilvored to m nith-
     out ,Cilrtl;sr  osat     s?.:clsas3 the ospltal   st ..ak
     of the century      iX%%eurance      can';any,ruiiy
    lion.?rank 0. Seat, Pa&e lo. 4

          ia and non-Mae88abie, uhloh aaid ltea k
                                                ha8
        %em dmvooltd with tha ooacant tor tbl8 pur-
        po80~"

            It   ia olear beyorb a4     Cuoatlcm  that tha tranr-
    lotlonr oonturiplatrd
                        by thr Centw           Llfo Inauranoa COB-
    pany la the sales of tkeoo        8Ul'@UO outifioata bonds
    are ad 'hUl8- and tho OO~panf f8         uOt    *bOrWWin6" a8
    thooe t8rt8o S4aook In their ordinUy OMOrOlal a~16
    legal 8011Oee In fwt what relrtlon         to thr,oaa,oany   the
    oer%lfioeta holdu voula l      ta n6 in,a 1-1 senoo, wheth-
    of a8 8 prsfrrrod    staokholde?    or as an annuity      ouster,
    or ';oJIothln# 018e, %a imatarLll 8UffiO4 for thla opln-
    ion, than ~$11 oartalnly       not br oreeta     thr usual
    dobtor-ordltor    , borrowor-landrr   , ralat ion vt.lah18
    known arindlllootrrtrd la ordlnaxy oosmreiai          tranaaotlonr
    uksroin !nonoy18 loamd and borrowed.
            It la our oooold4r4doplnlon that the prlaoiples
    wnounoed by rr. Juatioac) I3aKeanaaa.?d Butler In the
    oaae of Taylor ~8. Z%lladokQA and ilsadlag1al:uay 031~
    panf, et al, and UCalsWnt V6. Ptlla4al~~la and 8sadi~
    a5liway  OOZ;SMJ, at al, 1 X84. a6p. 386, oorroot;y   state
    the let wpllaabla to tho,iaatterunder donslderatlon in
    thir opialon.
           At pp So0 and 391 In the abava 08&a, Yr. Suatloe
    XoltonnanMy8:
            *X&ataver   porrU   th4   defendant    h88 &I the pro+
        iru oar only be found in lto gercnl       authxlty
        to borrow ooaoy. Walther In the oEarter oi th8
        dofar?dant,301 in tho 8wzlal aot wLloh m&t&r-
        1Z.8 it to sell bcnd8, whioh It cay ~6~0 below
.       par, 18 anything ooztalned to 145alleot&o oon-
        tested  propoaltion, UdO88  it oad be put on the
        i3OtiRB  Ot 8 108fb  %a8 it them to10 oharaotar?
        I think p?aia.rynot. It doe8 not proposo to
        oreate tbo mlatlon of debtor and oreditar      bo-
        tween the dsfsndantand th8 4UtSOrlb4r8.       Tha
        mozep obtalml by tko defeidant oould wt be r8-
        g4rd4d  as borrowed, beoeuso tkat iD.plie8   SO-la-
        buraezeent,an4 lt la not deaandablo by ;yhX;b-
         lorlbera or gayable by the defendaS.
         rot the aaarntial and dlotlngulstlngQml%tie8
        of a loan. It oontuplnter l 8tlpul8tlon thnt
        the rubscrlbere, In oordderatlon of the oua
        paid-not   lrnt-by   thu, rfxll bo lntltlod     to ro-
        oeiro, ln a reaotr and unorrtain oontlngmoy, a
        portion of the drtondant'r lsrnlnjje,to be IUD-
        uro4 by a eertnln rnta per oont, upon three thee
        the lumepaid by thorn, nnd eftor thnt       da11 par-
        tlolprta 1~1ththe ecmsoarbardoldere         in the di-
        rlelon OS the reelduaq       ler o ingBye uhat
                                                    i allow-
        eblo a0rinitim      of l lorn or b o r r o ving
                                                      luoh a
        ~~in6tloa       oan be rbrroed  I am at a 1088 to eon-
                  #or will tho lsrt that it 18 to be lvl-
        d.nOBi     01   the   8&d   DrltiIk4       Of   tb0    d~f8dUIt
        ohango Itr inho?mt $baraoter end brlq it with-
        Ln the ran@ of a power to alob  it ia not other-
        rlu raforabla.
            ‘In one reepeot, nad in one 0~~17, door the
        plan  propored ruamblo l loan,  rod thet 10 In the
        resiiltto be attained.  They are both txpodhnte
        tor rrifilq money, Jut tbg *tbo& g ~00omx418~-




                 At 2~ 398 and 395,    in      oonourri~,ti.         Justioo
    Butler     lny e :
              “That the dsir,?naatr  hnre ;ouor to borrov
        monay 18 not quostiozrd,and oould not be. WC..
        pl8latlffr   assert,   hox*r*r, that ttle 18 not a
.       ~p~;eltlon    to bo?rou mo~b~, but l lob8me to 8011
                   The derendnnte OAlm that it la l   trlotlv
         a proicsltlon   to borrow - oonoedlng that,    l? it
         10 not, buC rlrtuall~   18 to sell stook, thy hare
         no latiul authcrlty   to oarry it out.   Thr     l rltal
         18SUOof 1&W18 ehbarp1ydorlned Md preesnte6.
         It lr GIN thnt ndthsr    nqxiroe nor admit8 oi *t-
         tsrdsd dteousel.on. Btery lh.ilaelbh d0mfti0n
         or the term borrow or loan, am ap;lled to rrmay
         acd oousrrolel transactloss,embrrooe an obl.lga-
Eon. lrack D. wear, ?age Uo. b

   tlon to rmarn the ~mpwtr borrowA     A loan
   of awn.7 i8 u!iirorMl~ underdocadto b8 the
   dellwry O? l Oer tdn em t0 wOW8r,   on oon-
    tnot    for its   cdu.rn   68&l8=117 with   inter*et,
    88 OOCtp~n8StiOfI?Of It8 dOt8CtiOn UIb ~80. Ts
    Oall tb. pSm8ot Of GoW7 t0 s:?OthaZ, who 18
    to ?o Oein en6P WIa nM tl~ r +k ia is l8        hle Ovn,
    in OOIi8ld~~tiO~ ?OP Ut MLIIUi b4n8fls        02 3ZW?lt,
    8 lOM, would Saw to be l P18h d8P8@             Of      hn-
    6uW..
        men     18 SO 8Uoh thw   kfIOW t0 8W?OO
    or trraMOtion#    in WOO87 l8 M 1rrwIwmable 10~
    in the 8SnoS bera 1nvolVed.    @o+wnfMnf8 bale
    18WIed Obl~&itiOzl8 WitbOUt $rOVi@lOnof 8ti&&a-
    tlon for c(l~ym&     of the grlnaripalborrouedg
    but euoh Obl@tiUIe are r*detmable     at plwuure.
    Rumlng, howwe?, for aa lnd~flc1t.otiae,     vlth
    no pziwerin the holder to oxaot prymeat, the
    bare oor& to bo Peg&r&ad Se lrredewaable usan
    lnreataent in them 18, themtore, traetei    and
    deeOrlb,sd,  not 08 a loa0, but a8 the pUI%hW     Of




                                     ain ooiImsrul0l
    tremea0t1on*. App171Iq thlr tort   to th. DrODO8-
    ition here uador tocsfderatlon, It b4om8 plain
    that tba treomotlon oo:~tes>lsted  18 not a lo-.
    *.*"      fUn&arsocrlryours)
       Purther, frooit&e       not0 to tb0 *bore Oa se,lt pa
39s we quote:
        l m * 6 In tk e oa a e of Eo c t T. ~ulokellror
    ;aln.Co. 70 X.Y. 139, 0.6 ooc;5n7 being ia nS86
    of fu&de, the rtoolcholder~     adopted 4 bplav pro-
    tldlzq that rtookholdorrwho 8hOdd 8tUPa%d8?
    t&dim Oel%ffiO¶t88 an4 38~ five do115?8 00 each
    sm. of etoak ahouldbo lntltlad$0 the l-e
    nuabor a? 8hSr@8 of >rOfm-~d rt.:~
    &culd be entitled to 3 :er oat tk:::~           to be
     I&IA.Prank D. ?har, Pa&O HO. T

           paid out  0s the gmfite  0s the o~;any,  any 8w-
           plru tbaraafter to bo dlrld~dpro rata eaoq
           ooraon Md sr0fmro4 StoOkholder8. Yhe oawt
           bald tC8t  it 414 not fSl1 nlthia the ?ovartO~-
          borrow aono7, and W&Bultra rlree.  lolpr   a.,
          8SJ8: 'It *aa not 8 borrovlag. ?'h.idea t$ bar-
           r078b.g       i8     nof     fiihd           00s      tmiOS8   tbOm     18   in    th@
           8& ?ea r uOth                 f undorrtandiry
                      t 8t%?OEl jGOUIf8cO,
          that        what      18 borrowed ~111 b8 npd.4                          0s   roturn-
                                                ti   th8M         t~n8aOtiOn8           1% 1,
           :%,pii!i:tl:!h                       it   18 oslled, but nbai,                la
           ?eeB4 ~,ty8aotlon                             10, that the oourtr eon-
                .       .
                 3%.     SSIO         Of SJMOtt             1.    OOEtbfitO~O 06tWiihtd
     Jllnsm00.‘ ut al, 808 ?ed. Rep. 881, l~voln6 bond8 18.
     rued    by a oomoratlon by wElsh It aersed to pal thou
     ?a843rrlue with interest tit 0s aortafn ?uud8 areated
     ?rOn the IL& 8ur3h8     0~cifi4p Of  the   OOIS3a~   ~6  in th0
     event of liquidation or 6188O'iutiw,       tha ob~igstloo
     8bCBl:d   attaob to a 1 the run&S as& 4SSSt8 Of the O-y,
     tiT@ather with Other :ZOViSlOll8  8fSil8l’   t0   th8 8UPJdW
     ooawfloate boa48 under tonslderstion horeln. ¶%a
     oaurt held that the in8tntariStStrrcurotion Wr8 ad
     provable tQSili8tth4 08tSt.SO? the batkrupt OOrpUl’StiOn,
     for th roawn that      they oreatrdEO ilxed llabllltiy
     agalnet it.
                 It     ir, therefore, 0~~~op1ixfon
                                                  that the graoral
     lwllod   authority 0r tto century Life Inrorsaar co-,any
     to borrow nonq? roil4 not lSgsllz8 it8 gropoarlt ospedi-
     lt rw ralrl        ItLOWy,J       thb fSSURn0~ ~6 8Sh
                               XUUEiiJ~J,                    Of
     luP?lUs  Oetti? 7 oat0 bonUa ruoh 88 the 8US&Ih whloh lO-
     ocm~anled your letter.
                 A8     obsaned           in the beglnnb
                                         Of tttl8crpliiioa,
                                                          tha
..   8pOOlfiO          8tatUte8 rolatlng to insurance oorgor-
                                        0s      t,xae
     atlow ad petloularly to thos8 ormtod under Obapter
     3, Title 78, ibvl~ed Civil stetUb8 O? Tax&o, 1928, a#
     8madSd, do not SxprSSely authorit 8uob insuranos Scm-
     3snlae to borrow mocby, nor do tksy prohlblt the eXerOlee
     or 8-h ?ower. It 18 8fgCifiM5t, althoe UOt &iVelk
     OOUttrOiing?OIW ih thi8 OphiOn, that the lb&htW
     ia emSting Chapter 1, Tltlo 08, Rarlssd Civil St8tutae
     Of   %S8,          1928,          lr tr lnl~
                                                to mutual                   lii0    lnsurano8Oaa-
     P~nlbe, &lb s?eof floallt authorlab ldVanOO%Ont8to Suoh
                                                               73




la sur eno@ *
            009 3sD bleo
                      yM y p o r o o la
                                     a a ILmnullDll4 .T
to the pursh.40 oi tha pmporod    surplus oertliloato
bodr  to b, ~M OU& by th* Centu?r Lit8 hat&r-*      Collgu~.
t?h bluth Or iutio 1n 0
                      fo undiB Ar ti     48lb, r up r a ,
m0 ra0t tbd  the hgi014tun   d*Oti  lt ~00r8rarl, t0 OS-
pn44ly 4ubhorlx• rueh Cb4pter t ooap4ni.o to rueln
l4vuiewmnto in thlo mumo~, definitrly lntlloateo that
it oonoeltedmok pew? to bo ma-alatent la lnour~oo
eorporrtlono oreateduader rnd by authorlt~ of t&a otat-
utro thorotofara anaot.4 by it.    Chaptar t of (IOWTOO,
mo ori(%n4lly lno o te4la 1909.    fhlr 00n0fd**t10* oar-
tdnlf   1rw aspha       to t&o poaftlonrr   hare t&m   la
thlo opf nlan; nuwll, t&t,  oonood~   the powu la m
lnou~0ao4 oorpor8tian ln Tax40 to borrow monq, the tur-
tbrr gowar to lm~~m rurploro4rSltlo4to bonda, a8 ecm-
tenplated b tW&nttq      IAS. fnmiranoa WJI~,   oaonot
bo 14g4ll7 L       .

       You 41-0, themfora, r4opootf~11~ 4dvlsoa that lt
lo tha oplaiooof thlo dogrrttaaat thab the CoaturyLife
Imetwanoe Compaayof fort  Worth Toras,    lo not autcorti-
06 under the 14wa of T41141, to I 4ou4 ruqilar osrtlrloato
boadr with th4 term an4 oondltloao     and la tbr mncrr
oontuplated,  u l4t out la tziio opinloa aad in your
lettw.




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