Board of Inaurancs       ConrmlsrIone~a
Austin,   TexEia
Dttar sirat                    Attantlont     Mr. @.a. viul IPleet,
                                              Aotuairy.
                               opinion x0. O-3503
                               Ret   Tha ittvaatmettt of the funds
                                     of' a doaeatlo life fnaumtnoe
                                     aowany in the ahtare or ahare
                                     aeoounta of tha dafinad building
                                     and loan raaoolatlona.
              With   l
                     peolil   rafareaao     to So&Ion   1 of Senate   Bill
Ho. 13 antI to Sootlon 1 ol Senate 8111 lo. 370, Aeta of the 46th
Legialrture,  1939, you have requested a lrgal opinion from thla
deportment     upon the question     aktod    by you 68 f'ollova~
            *Thla quatad portloa or Art101e 4725 ln
     put governa tha inveatwnta        of dbMatIo life
     lnauranee oGqwllaa and preaerlbaa         that   thm
     aurplua of a Teexoa life Iaam8me         aompany over
     and abova the aaount bf Ita raaarvea and asp-
     ltrl   atook mar ba lnvaatad In oartaln atoaka
     whlchwepreauw        to lnalude the ahare or ShaFe
     lo o o utttaor a P o der a a ttvinga and lo a r 6
                                                     t8800ia -
     t&on doptiolled In thia State and the ah8ra or
     ahare aooounta of a building and loan aaaoola-
     tion domiciled in thla Stata,
          "The quokd portion of Art1016 8816-24,
     you will note prorldaa that I faxxsa Inauranoe
     company mey invest any of ita funds in auuh
     ahara or share aooountn.
           3hemfOM‘          youropIlliim la reapeutm1~
     requested aa to which of thssa two Artlelea         la
     0ontmllIng.          That la, vhether  or not the oap-
     Ital stock and the reaa~*ea of a donmatfo life
     inaurattce oompmy tny be Inverted ia the era
     or ahare account8 of the defined Wildtag e.nd
     i0sn  aarooirtlolxa,      or ii only tha auwlua of a
     Texas oompany may be invmited ln lUoh ah-           Or
                                                                                             w3
;

! .                           C~malaai0ne~a.P4go 2
            Borrrdof Inaurfutce
I       ’

                  ohare atxsouttta.”

                        Senata Bill Ilo. 13 of the 46th Leglslstun     (Act8 1939,
            Page 76) wall a ooqprehenalva amettdmmt     of Semate Bill lo. 111
            of the Seoond Called Sassion    of tha t)lst Legislature,   Acts 1929,
            as aamnded, oomnonly knovn aa the Building and Loan Asaoolatlon
            Law (Artlole   8&a, V.A.C.S.).    Us am oonoerwd onlyrlththa
            amndmant to Section 25 thereof vhlah Sormarly nadr
                       *sea. 35. Trust funds.    An admlniatrator,
                 axeoutor,  guardian or tzuatee, or othaa flduolary,
                 my In such oapaoity lo@m       and hold aharaa in
                 any buIldlng and loan aaaoulatton     of thla Stats,
                 and shall hava the same rlghtuand ba subjeot to
                 the same oblig%rtlona urd limitations    as other
                 ahareholdera and be wlthdrawablo by thaw        Any
                 Tows oorporation may invoat la hama         ln any
                 Tams buIldlag and loan aaaoclrtlon."
                         Uxtder San&e Bill Ho. 13, aald Saotlon       25 was amended
            to read,::in:p&t,.ae     follovat
                        "Any Texaiacorporation,inoludlng way
                 lnmarance company organiaed tutdamthe lava of
                 this Btate,   or pny lnsursncr~uaqwry     do%
                 bualnoaa   in thlr Stat8 wade a par&t,      my
                 invest uny of its funds ia the ahwaa or sham
                 aooounta of any bulldlng end low aamolation
                 orgmiced under the lava of this State,       or ln
                 tha ah&m8 or share aooountr of uty Federal
                 $wdnga and L@an Asaoeiatlon domleiled in this
                 Stat.,   and any such lnveatmnta     mada by iruuranca
                 oompanlm till     be eligible   iavoatmenta for tax
                 redwing purposes under Article       7069 and Article
                 4769 of the Bavlaed Oivll bktutos       OS 1925, as
    i             amanded.*

                      Art&&e 4769, as amended, referrod to ln tha above
            aamndmnt, applies only to *oaoh llPs lmurana~ corqpsay not orgem-
            iaed undar the laws of this Btata,    tranaaoting     buafmtaa in this
            State. ‘ Artlole  7064, (LB ammded, liksviss      referred to, applier,
            to *every inauranae corporation,   Llopch oc reaIp~ooala,         end any
            other ox?gani!zationor eonoarn traMsoting tha buaineaa Of fire,
            marine, marine Inland, aooldent,   credit,   title,    J.lveatocls,  fidelity,
            gwranty,  surety, oasualty,   or my other klttd or ahs*~ter          $f in-
            aurbnoe buaiwss other than thb buaimea8 Of ltfe l.naUre-naa.
Bottrd of In8urance Comiaalortepa,Page        3




           Uesmte Blll lo. 13 na fIwl.ly  loted upon by the 46th
La&alatum    as of April 26, 1939.  It la to be noted that the
1-e       of the WlX%e&t to 8eotloa 25 la ~oap~~~:ve      md
general.

           Senate Bill Ro. 370 of' the 46th bglalatttm (Aata
1939, P4a 397) na an anendweutt to oertain apeaiflo lsvr regu-
latlng partloularly   the lnveatrsnt    of funda of life ln*moe
tmmimnlea orgaalred under the l&V8 of Texna -- Artlale        4725,
Retired Civil Statutes,    88 amended.    It vaa finally  parsed by
the 46th Legislature    a8 of May 1, 1939, and therefore    mpreasnt8
an exprearlonof the Leglrlature       8ubaequent to the final paaaqo
of Sonata Bill go. 13.     Amtrtnining    to the sub lot or your re-
quart, 3eotIon 3 of Senate Bill Xo. 218, Aota 14 31, b?nd Laglr-
lature, Regular S68aion, Chapter X53, Fye 256 (vhleh traa tan-
ahanged by Sanata Bill Ro. $36, Aota 1935, 44th Legi8lature,        Ch.
10, ?. 28, aaendhg ArtiOls 4725 in OthOP partieulnra)na amend-
ed by Senate Bill So. 370 to read as followat

             "4 life   ln8ur8nae   oompany orgu!LUed under
     the bra of thl8 State may invest In or loan upon
     the follovIag aeourltlaa,an4 none othara, vlct
     l   l   ls

           "'3.  Any llia Inauraaae cow      of the
     State, for the purpose of ¶meatIng It8 aurplu8
     or eny part thamof,   over and above tha amount
     of ita reaarve8 md capitil    stock, may puruhaaa
     uid hold as oollatenl   aeaurlt
     debentuma, bills of lxohanga or *the; @am-
     wraiil  notes or bill8 and aoouritleaof any
     rofvent dividend p&yIng OOrpomtIon vhleh has
     not defaulted    in the paynant of amy of Its
     oblQptlm8     for a po~lod of flva  (5) yeara, tha


     k atalltlmea      during    the bontQ%UanOeOf Sueb
     108n at least fifty      (5C$) par OOttt a0re thrn
     ate rumloa~edthe~~ott~        provtded that no au&
     OQ-      shall loan or Inveat In it8 m atote
     mr 50m than five (5$) pai cent Of th* amout
Board of Insurance         Comulauloaara,       Page 4



      of its oapltal rad surplus in the atook of
      any copporatloa,    and providad further that
      no euah oompaxty ahell inveat any of Its funds
      la amy atoek on aooount of which the holder8
      or ottaaratheraof IWAYla any avent, be OP
      become liable to any asoeaameat except for
      taxaa, nor in the atook of eny 011 ooapeay
      OF mmufacturlng     oompeny unleaa such oorpom-
      tion hea oap1te.l atoak of not lass than Five
      XiuiOtt ($5,000,000.00)    Dol1arr and ud.888
      au& oorportation has paid dlvldeada for a
      period of five (5) yeara and has not default-
      ed in the payment of eny of its debts for a
      period of five (5) pars.
               “* l    l.”

               P r iothereto
                      r           under     Senate Blll    lo. 218 of the I2nd
Legislature,         sttpra, Seutioa      3 of Arti       4725 had mad a8 fol-
lows*
               "3.     Any Llfa   Iaauraaoe Company of the
      State,  for the purpose of InvestIng  its oep-
      it81 and surplus,  or ray part thereof, OV~P .
      and abova tha amount of its reamvea.     ry
      pumheao and hold MI aollarterel    aauurlty,
      or otherwIre,  and sell and aonvey the aapltel
      8to&,bcmda,bll.la of exchange or othetoor-
      wrolal notes or bills a.nd aesurttles of eny
      solvent dividend paylng oorporstloawhich
      has not defaulted in the payment of cay of
      lta obligationsfor a pericd of five years,
      thr tntrmat mmket value of vh%.ah such atook,
      bonds, bill.8 of exchange, or othttr 00!8ie8rCial
      notes md aaourltiea    ehall be at all tlmaa
      during the osntinuancro of suoh loan at least
      fifty per oaat lore than the sum loaned then-
      on; provided that no such oompmy &all loan
      upon or invest in Its ovn *to&, nor mom
      that five par oentuIII of its oapltnl end surplus
      in tha stock of any corporation,   &ad pravided
      fkrthar that no much company shall invest any
      of its funds la any stock 0~ oooouat of vbioh
      the holders or ovnera thereOf OlY in Uy @vQBt,
      be or baoome liable to any aaaeaameatsXOePt
      for taxes, or in the stook of minime Or 011
    Board of Inaumnce    Cm8nlsaloners,    Pago 5



         oompeniea or in the #took of mf&nufaoturIng aom-
         males ooamoaly kaova as ladustrlea.'
               It la observed that under the 1931 Act a life Insurance
    company orgaulted under the lava of Texaa vaa authorlred      to invest
    its oa it81 and a     lus la the aecurltlea   described, vhereaa under
    the lht,       Se=?    Bi 11 Ao. 370, only It8 8urDlua.
                Inmedlately ve are compelled to recognize thnt the 46th
    Legislature   dtd a ooatradlctory     thing if Senate Bill Xo. 13 of
    the same LbgislatuM     applies to the f%Xa of life lrmurmee oop-
    panlea organized tier      the laws of Texas.      This for the obvIou8
    reatton that under Senate Bill lo. 13 "any Texas oorponstlon,          iu-
    oludlng any inaururanoe c o mp a ny * l l m y F a vea t     o f its funds”
    in the ascruritles   deaoribed, whereas under SenaF =e B&13. go. 370,
    only its aumlua, and t&t tiy          as otherwise restricted.
               That the 46th Leglalatura  did not, hovever, do this but
    rather ooaformed to the historle  legIslatlve  treatmat    of the
    funds of a life iaaurauae ooaipanyorgaalredundertha      laws of
    Texas as a SpeOifiO and repamte   subject of regulation,    la dem-
I   omtrated  by the leglslatlve history of sets partalniag thereto.
               Long ago, In the year 1909, the 31at Legislature     of Tex-
    as decided that investmats     by life lnsuranoe companies orgaalted
    under the lava of Taxas should ba 8peolfloally      regulated, lepazwte
    and apart froa other aorporatlona     and Inaurauee compenIe8.   Seo-
    tioa 10 of SuMa Bill Ho. 291, Aots 1909, 3lst Leglalature,        Chap-
    ter 108, Page 192, provided as follows:
                      .
               "800. 10.    A life Iaauraatw company orgaulted
         under the lava of this state,     may after this lict
         tnkea effect   inve8t In or lonn upon the Solloving
         aacurltlea,   vlst

               “(a)    It 88~ lnve8t any.of its funds or ae-
         ourmlatloua in the bond8 of the United Stat88 or
         of any State,     county, or city of the United States,
         or the bonds, of any lndopeadeat or common school
         dlatriat,    ot flmt uortgage bond8 of any dividend
         paying railroad     or electiie  railway cow    duly
         iatyx-poratsd under the lava of the United Stat&a
         or any state thereof.
                “(b) It my loan any of its fund8 end ao-
         cumulatlona, taking as seourlty therefor     such
         collateral  as uader the pzrevlaua subdlvlaloa    it
Board of Inaumnce    COILtaalonora*    page 6


     may 5.nveat In; and upon firat         llama upon real
     estate,     the title     to Which la valid end the
     value of which fa double the aammt loaned thore-
     ant provided, that if any pert of such value is
      in buildlnga,      such bulldinga shall be insured
     against loas by fire for at lesat fifty per cent
     of the value themof,          vlth loaa olauae payable
     to such colagany. It rmry al80 sake loeua&y$on
     the aeaurlty of or purchase lta ovn polloiea,
     but no loan on any policy ahall uoeed the re-
     aerve value thereof.          lo lnveatment or loan,
     except policy loana, ah811 be mde by any such
     insurance colspany unleaa the aame ahail firat
     have been authoriaed by the board of directors,
     or by .a comlttee         cbmged ,vlth the duty of auper-
     rising such inveatnnta           or Loans.   lo suoh mm-
     pany ah811 aubacrib to or partlalpate            in any
     underwrltlng of the purchase or arle of aecurl-
     ties or property or enter into any luQh trana-
     aotlon for a ua hpurpose, or lell on aaaount of
     amh congwrg Jointly with may otkmr person,
     firm or corporation,         nor ekmll UrJ such aaqpmp
     enter Into any agreement to vithhold froa# aale
     any of it8 property,         but the dlapoaftfon   of ita
     property ahall be at all tlmea vlthln the uon-
     trol of ita board of dlresetora.           Every auah oom-
                          o f ua eta no t luthorlred
     p a ny p o a a ea a ed                            by thla
     Act ahell dlapoao of the enme wlthln five ye-8
     after the taking effeat          of Wa Act, unleaa auuh
     Mmm;ao~gndod            for good cause $f the Cormia-
                      atlranae and Banking.
            This vaa folloved by Senate Bill Iio. 297, Act8 1929,
41at Leglalatw,     Regular Seaafon, Chapter 237, Page 497, emand-
lng in oertain partlotiera    the 1909 Act vhich had beome Artiale
4725 In the 1925 revlalon.     It 18 notevorthy   tha4t thla Yea the
name Leglalatura   which in lta Seeond Called Ssaalon enacted ohe
Building and Lmm Aeaoaiatlon     Law vhioh contUned the atabmmt
in Seutlon 25 "any Texas aorporation~~y       Invest in aharea in enJr
Texas  build-    and loan aaaooiatlon.
              Subsequently,  in 1931, the &rid Leglalature    ln amend-
ed the lav regulating; the l.nvestmeata of the funda of 1  T fe inaur-
tj,nae ~~rapaniee  organiaed under the law8 of Textba and for the flr@t
the included the aubjeat mtter        contained in Beotion 3 of Aptide
4725.     Seation 3 of the 1931 tmtmdatorg Act haa been quoted above.
Board of Inwrance          CormLi.aalonero, P-0    7



         Again in 1935, the outhoait~ of life    lnaur8nu com-
panies           under the lavs of Tour
          org8ni8ed                       to invest their funds
vaa broadened to aid the Natlon8.I Houalng Act epaoted by the
Congreaa of the United atatea.           Section   3 of Article   4725 re-
mained utmhanged.

             Thus we arrive at the 46th Leglalmture vhlch oaended
the Building and Loan Association Act by Senate Bll.1 Ro. 13,
and, later,    amended Sectian 3 of Artlole  4725 by 3erute Bill
No. 370.     lo aogni8ance vaa taken, OP hoa ever been taken,    by
the Legislature    of the possible or intended applioatlon    of the
goner81 language of the Building and Lo8n Act, 8nd amendmmt8
thereto,    to the field of i.nveataenta by dvstlo   life inrurence
o~ea.
            It ia seen that ulnae 1909 t&e Leglalaturea      of Texas
heve regulated the lnveatadnta    of the funda of life lnaurume
coabpanisa orgaaired under the lava oi' T-8       aa a separate,  di8-
tin& 8nd exalusive    field OS legislation.      The lava thereupon
have been apeelal 8nd Natrioted.       Suaaeedlng Legl8l8tureaof
Texas have 8urrounded these a~08            with prrtctiouhr and @peel-
flc rogulation8.    %knate Bill lo. 370 f8 th4 last upnaalon        of
the Leglal8ture   in this reapeatt it further reatPiat8 lnvort-
menta by theae cromiea.
           It la obvloua that the reatrlotlona         pve been dellberate-
1~ amted.     ~thebeglnningl8          tlulmaguage      alife     lasuruwe
cmpaay orgenlaed under the lava 'of this f3tate n8y lpert              ln.or
loan upon the folloving    aeaurltio8,     8nd nona otheP8.         In Se&ion
3 tha lnveatment of the aurplua 18 furth4r reatriated             b'y the pro-
vlao "provided that no 8uoh dospuV shall loan op lnvoat l l l
more than five (5) par cent of tha 8yunt of its aeplt8l               and au-
plus ¶a the ltoek of any eoorporddcm. m this pro*180 the Legis-
18ture indlrput8blydeQ*red     that    no do8erfio 1lSe inaur8nue ao8+
pany shall 18&e an lnvestvnt,       ~a8 o th o r vialllov4d,
                                                      e          bemnd a
aeptaln amount In any one oorpomtl.OIi.         Yet if th0    uI*zldpullt t0
the Build&g 8nd Loan AOt by Samto          Bill lo. 13 ba held aPPll--
ble to domaatla llfa inaurawm tmmanlea, the Leglalrtlve                mandate
ln this respeot would be entirely       abrogated aad a doaitatie life
ln8umoe    cm       would be permitted to invest anY or 811 of lt@
funds in one building and lo8n a8aoal~tlcar.
              AccordlnglJ     wo auuaot hold that      the 46th Lagltl8tuZW,
h   the   e~ctasnt    of    Senate Ml1   lo. 13 and later     of Senate Bill
go. 370, adopted a~ inaonalatent    8nd unintended go@ltlon.             A@
,,&j.d by the SUP-  COlWt, ill Cd.Il V. 8tat0,  20 fox. 355,           361l
  Board of Insruanoe    Comalaafonepa,         Peg0 8


              "The acme Legislature         ia supposed to be
       ectuated,     in 811 that it doer, by tha ama
       ml@, spirit,      end l.ntention,      and to havg, et
       all t-8,       the seme goverM.ag obfeota end
       policy.      Tha artificial      being la uuppoaed
       to have but one mind, and that a rational
       and intelligent     sindt 8nd hence the aogency
       of the presumption,         afflmd     by the conatltu-
       tlon, thst it vrll not chtuage from day to
       day during the 8m           session,   and undo to-day
       vhst was done with so w& dellbentlon                ti
       lolenafty yesterday.           It la not to be sup-
       posed, nothing short of expre8alona            ac plafn
       and poaltlve     aa to ferce upon the mind an
       lrreaiatlble     mavlctlon,       or *baolute neoea-
       alty, will justify        a court in pre8
       that   it was the intention cf the Leg18    urinf;-
       turs that tbeLr sets passed at the 88m8
       aeaalon, should abrogate 8nd annul oae en-
       other.     0 0 a,*

             We are therefore  wmpelled to honor the p~~Vlri@m
  of Pea8te Bill no. 370, amndlng Seetlon 3 of Artlo&      47P5, aa
  applleable  and aontc61’1lng rem3ng    the lntrsstxmnta of the
  funds of llfe iMure!me a~awnfaa oFg8nlsed under the bV8 of
  f-8.     AM the proviriona   of Seneto Blll No. 13, aaeaQ%q the
  &$lLdi"p Md Li;m A88OaiatiOSI bV8, a8 without a~io8tiOn       then-
    .
            We now Khrertbriefly to the CpAeatloa ntlpaerted in your
  letter a8 to vhethec action  3 of Artlale 4725, aa ameM&,     in-
  aludea the ahare or ehere aecounta ot a building cad loan a8aoa-
  lation vlthin the 8eavrltlea       de8crlbed.          In ouv opinion, by lvom
  mmnablo       intendaent,  these seourftiea           are lnoluded.   The phrase
  'a8pitd    8toUk,* of aourae, may be used             ln variousran8081 a8 the
  suthorired    oapital eatually   aubaorlhdt           OP tbm had paid in) or
~$the caplt4l    of the oorporatlon,    whether         in   money   or    pwperty~   or,
  aa popularlyuaad, the eggregste of the                atoak -de         up of the
  ahmea of the atockholdera.
               It amy be defined PI the money or property put into
  the oorporate funda by the aub8oribelra fos their          8tock, aad a
  ahere of cepital       stock 18 the rlgat to partake,     acoordln6 to the
  aBlougit put   3.nto th8   rwa,  of the  surplus profita-     See Staples
  v. Kirby Petrolewa Company, 250 8. v. 2935 tiWWB               coplppall v:
  gollifield,     184 E. u. 776.
             Artlcle~856,    Revlaed   Civil      SUt*b*,        Pl’Qvlde@l
Board of Xnrumnce Cosrieslonero.Page 9


           Yhe authorlred   capital stock of suoh 88socla-
     tion ahall be dlrlded into shares having a par value
     o f not lea s than l l l .*
           Artlole  881.a-29, Vernon’s Annotated Civil Statutea,
requir&s the follov:;ng to be s&own ln the articles   of asaoaia-
tlon incident to the incorporation    of a build-   and loan aa-
aoclatlont
          "4. The amount of its authorleed capital
     dock,  vhloh shell be divided into sharee of the
     maturity or par value of not luse than one hun-
     drod (103)    dollars   eaeh.


             “6.   The   amount of aapltal ratually paid in
     vhtch shell In no event be lea8 than one thowsnd
     (1000) dollarr If 4 l l. All payment8 for ahares
     or ehare aoaounta of required paid-in; aapitil
     steak met bo In lawi% m@ner of the UnIted Staten
     uad met be ln the auatody of the psnonr named aa
     the iint board of direatora."
          You are therefore re8pectfullysdvlaed, ln anever to
the specific question you have subsltted,that It is the eon8ldered
opinion of this department that a life lnmraa~o aompany organized
under the lava of Texam Is aontrollod,rlth reamat to invertmanta
in the share or share aoaounta of the Ceflned bulldlng end loan
assoclatlona,by &&ion 3 of Artiole 4725, 68 amended, and not
by Smbotlon 25 of Senate Bill No. Ill of the Second Called Seralon
of the 41at Legtslature  (Article &la-24, VA.&&.),    as amended by
Senate Bill IO. 13 of the 46th Leglalature.
          We have pretemitted a discuamion of uy queetlom of
conatltutloml lnw inhering in this aubjeot in vlev of your request
otiy for a aonstmction of the statutes Involved.
                                              very truly yours
                                          ATTORIFWC
                                                  -           OF l%!CAS
