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3
,                           OFFICEOFTHEATTORNEY                GENERAL OFTEXAS
                                             AUSTIN

lWAWC.“AN”


                      . .
lnwaaY       O‘IWI.




                      HmesPber I+ 19k2, ru
                      tioas 7 aa4 9 in oar
                      our neon~a*ratl4
                      slt.h&ma and this
                                                                                       -.
                                                                                   ,i.;




              Two types of etatutoe     are fo be found pertaining   to
   the oreation   of privste   Oorporatlonat (a) statutes authorlg-
   in@ ths oreation    of eoorporatioas  for etated ~~rpoaes, and (b)
   statutes  presoribfw     the meohanlam fir sffeati~~   the incorpora-
    tion.    Prior to the paaeag@ of ~~rtiole 1302a, :je6tlon57 of
.-- Artfole 1302 cuthorimd      the inoorporetion  of title   fnnurano~
    eoc~plpanieeand the provision8   of Chapter 2 of Title 32, R. C. s,,
    proerrlbod the moohanlem therefor,      with Artiohe    4699 and 47,700
    enterbig n4t at all into their sreatlon. Seotion 23 of Arti-
    ale 1302a removed seation 57 of Art1010 1302 a8 en authoriaa-
    tion for the orentlon of sueh eomppaniee, bnt with oertaln ex-
    ~optiione (6. $. rjscrtions  2, 6, 8, 10 mad 121 hrtlole    1302a did
  not $arport to alter the node br whloh ewh                ompanies are ore-
             If Legislature
                   the      had intended that euoh 0omp6niee
  ~~~forth wqloy the msahanlem of Artieloa 4699 and 4700 it
  8.8~ reasonebls  to a&sum that 10 rotid hate sxplioltly   Lb
  provided.  In the abeenee of euoh a provision  oa~polllng  be-
  ofamoethe aonoluelon that the general aorpora&n laws ofmtlnuo
  ti9govern the creation 0r title lneurfinoo ompaniee insofar ae
  they arm not inmmeleteat   with the l xplioit  provielone of Art-
  iolo 1302ar It will be notlord that    by virtue of Seotion 8
  of Artlale 13028, the Baird of Ineurenoo Commieeionere    is +a&-
  ed with the duty of filing  the charter8 of suoh eafqmniee
  o6nesqnentlJr, whenever appropolato,the Board is to be aui eti-
  tuted for and to aeeum the dtltilbeof the irclorotary of Stata
  in effeetlng the proriniom~ of Chapter 2 of Title 32.
                   This oonalorritm nmkae iqoeeible        the appllaatfon    of
  hrtlolee        4705 and 4706 to title  inaunlooe       ootnpaniae~ oonsc
  qaentiy,        iiueetion   Bo.   7 %a   tmaered in   the nogatlre.
              To hold othsllusiss would be to eay that tlt1o Inour-
  anee eompaniermast iaveet      part of t&lr aeeets aoaorbing to
  Artlola   1725 (per Sootlen 6 oi Artiale 13026), tbat they may
  imeet    m.rt of their oapital etook in an ebstraet     plant, that
  thsy must invast the remainder er their capital      stools in the
  it-     enumerebod br Artiole 4705 that they must invest thalr
  surplus aooordi~     to Artiole l+7& and, flr~ally,   that they
  mat invest    their prsnium reswvoe    ae~tlding to btfole     4725
  (per :*otlon lo of Art&ale 13021~). Such segregation       and ear-
  narking br assets would be well nigh l;nPosslble     to sstablleh
  and al&ala and nould result ifi the Tegdfation Of the in*@&-
  manta of these oompnies to an extant far +waaCsrt&en 3.8 &ma
  with life and eesualty insuraaoe ooinpeni~~.     3isoe title is-
  surenoe :a ouwaotiy bmwn to be a type of lnauranoe ln rhioh
HonorabLe 0. PI Loakhart,~ Ghairrman, Paga 3


the risk of lose is very anall and in whloh the pramIume are
very large In aoaparlson 4th lose p-to,                    It Is unlikely
that tha Legielatura       intended euoh a high degree of regulation.
  . .
             Mareavar, it is oom63onkncnuledga--and Artiole 1302a
epeoiiloally     rseognfzes-that        aarupanlsa doing a tit3.a Inaur-
snoa bueineee oonduot many addltlooal            aotiritiea.     Moat of
theee addItIona       notlvities,     if standing alone, rould not be
ragulated by the State.           If Artiolee  4705 and 4706 wore to
be lmpoeed on these eoqmnlae,            these aotititiee     ae wall ae
the title    lneunmoe business would be eubjeoted to extreme
regulatlon. It aeama reasonable to believe that the Legi-
laturs Intended that the rsserves e5tablIehad by ssotloae 6
and 10 oi Artiale 1302a should isolate            a portion of the aeeets
of theee o~paniee       for the proteotlon       of the holder8 of title
Ineurknoe peliolee,       and that tha ramfader of such aeaeta
should be rree and unencumbered for uee In the other aotivl-
tie5 oi euob otapaaleer
          1IInally. our oonolusIon is etremgthaed  by the es-
kbllebed praotioe of your department. Although pour orIgIna
opinion requeet aekad *. * . %a our oonetruotIon  oorreot that
(Artlole 1302al me&e8 the provIeIoneoi Artlola 4705 applioa-
ble . . .I rour let&jr oi iGore!nber 4th atatee that you have
never ocmsidereQ Artloloo  4705 en4 4705 applioable      ts title
lneuranoe osmpaales and that say 1atImatIon to the sentrary
la your orIginal letter was *erroneoueand iaad+ertentw. Aa-
aepting your met reoglt letter     a5 eabodpl~ a oornet       etata-
losnt of your departrmntal praotloe,   It Is aignifloant    that
during the thirteen yearn einoe the passago of Artilole 13026
the Legielature  has never sawn fit to questlon or to alter
your praotloe.   9uoh an aetabllahed. oonstruotltm whan ooupled
wIt& aelaplete Leglalati*e eilenoe and, praeuniablr, aoquloe-
oenoe lends weight to the opinion above axpreeeed,,
          ;Zn,etion fzo. 9 In Opinion Blo. 0-4587 wsu aopleb
tram your su;.plementsl ra;luest for oplnlfm and reads ae followar
           *In studying the sOhsdtis 0r e5eets aoooa-
     panyfw the affidavit     of the inwrpomtare,     whloh
     asset5 will be tenderad in paymant of o.apital etook
     and surplus (b&ore aotual fllln&        the ohar5er wi31
     probably be rewritten    sa tie to divide theee a5ueB6
     up into a mfnimum of ~100,000 capita.2 stook and
     $5,000 au~lue)    wo observe t&t tha aaseta are af-
     firmatlvsly  dI50105ed to ambrace (a) fee titles to
Iimoreble 0. 3. Lookhart, Ghdam&n, PW3e 4


     roe1 eatate, (b) real estate purohaee oontrerote,
     and (0) notes or other sohetary obligationsae-
     oured by rlret lfen upon reel e&ate,   8~   of all
  , .three of whloh are loocitedin the State of IZew
     Sexloo end some i!::the Stata of Texas. Of oourae,
     before either atmrteringor llaensfne,this Company,
     this Departmentwill disohergo its responsibility
     of detar?airzi~whether or not thatassets so llsted
     in the eoheduls to the ai'fidavit&re actually valid
     fee tiblee, real estate purohaaseoontraota ehd obll-
     &etIons eeoured by first liens upon reel estate,
     ar?i!tho ioautioh thereof (whetherin Texae or New
    %exLoo) and the value thereof. Sut, for the purpoee
     of detarmIniu$ the legal elirsibility of the various
     olasses of assets so tendered In payment of the au-
     thorleed oapital atook and the eurplue funds whioh
    may be set u;linitially in lncorporatirdthis Com-
     pany, we ask you to amwer spebiflcallgthe folleu-
     ln,gquestions Ln addition to those mopouhded here-
     tofore, regardless orwhether you hold Artlolee
     4705 and 4706 applioable,or whether you holo Art-
     lole 1302A or some other article or artiolea af
     the at&&es a~)glioabla,   wItArefcrer;oeto the in-
 -vestment of the oaplte.1 arti surplus Amds ljf tiiis
    Company;

              Are foe title.9to ret31estate situated
    in Ye%   ell,yibleto be received In noymnt of the
    oepital stool,funds of this Company?
         '53 . Cm Tee titles to real estate outside of
    I'exnsbe  reoei~ved
                      in p!lyr;lent of capital stook of
    t&is hmpsr.y~?
         V. Can fee titles to real estate In Texas
    be aocepted in pnyuent of aurplun fuui?sof thla
    GOElQW$?

         "3 Can fee tItlei to real estata outs&do of
                                of surplus of this
    '1'emwbi aoce2ted in pn;rLlent
    Company?
         "Es. Can real eatate QUrOfMie OontlYiOt8   UWSl
    real )ropertf in Texas be aoospted in pa~wt      Of
    oapital    stoc,   of this Sompe~?
    Eonosablo       0. P.    Lookhext,      fihalm,      Peg* 5



                    “P.     Can real      r&ate     puroherre   oontmeta upon
            t-1     property sltunted ootsldo OS Texas be               sooept-
            ed in    payment or oapftal            atoek o? thla   Company?
     I .
                  *a. Ccc real e&&e purohass oontrriate upon
            property in Terser be aoooyted in payment car mm-
            plus or thfe Conpany?
                    *Ii. Can real estate purohane crontraets upon
            real    property outside of Texas be aooepted in pap
            mont ot surplus          or   tblo    0ompeuy?

                  “1.  Can notes or other aonetary obllga6loxm
            oeoured by flrsrt lieno upon real eatate in Toxea
            be reo@lVed In payment bf aepitel   etook of thir
            ~on?panjl
                    "J.     Can notea or abhor obli&ations rwurod
            by firat llcnr upon real e&eta eltoated outsid*
                     bs noolted In payment ot aapital atook
            of T~JRLII
            or thi6 COIWBQJT
                  %   Urn notes er other obligatlone wowed
            by ntlel lleiicl
                           upon real ootetr dtlueGo4 ln %wwl
            be reoslred In papant of surplus of this Compenfp
                       Can not&r aad other obligations seaumd
            by Xl::; liaw   upon real 8stato slteetod outadd.
            of Toxne be roooirod in paymod of tha mrplur oi
            thLs Coup?'
               %o do not attempt to answer subdiridona      X, IT 0,
    and    El         term Veal
                  sitwe tkm        eetate purohees 00ntra&8w    JOal
    not Q1te this departma& sufrllelont feobl upon which to hew
    en opinion. Alao M are dlsrsgaraiag      the phraao “or otiwr
    mnetery obllpatlone*    oonteined in su$dlvlsiona   I, J, K end
    L, beomae muoh phraoe is too indefinite      to be the bar18 Qf
    M opltion.
              The protlaion~               in the genowl        odap~mitlon Iawn
    reletlve to the wsaipt                of property for       oapital  8teOk em
    four@ In Article 1308r

                  "Ax% 1306.   (1125-1126911273  Cepfkal &oak.--
            Ekfore bhe aherter of a ptlvete oo?poration  omated
            ior profit can be tiled by the S;sOfe~ry of %ate,




1
Honorable   0. P. Lookhert,     ChaIracm, Pago 6


     the full amount of itr authmised     oapltal stook must
     be in good faith subaorlbed by It.s Dtockholderrr end
     fifty  per Cent thereof p&Id in aash, or its squiva-.
 . . lent in other property or lnbor done, the produot
     of wblcb shall be worth to the cmpeny the aotual
     value at whloh it was taken or et whiah the property
     wacIr0oeim34. The afTldavlt    of tihoar who exeeuted
     the absrtcr shal.l be famishad   to the i>earetery of
     Stats, ahawlngr

           *1. The news, resldonoe and poatof'fioe ed-
     dress or eaah eubsorl8er  to the aepltel atook ot
     suoh oonpauy~

            “2.    Th8 amount 8nbrorltmd     by eaah,   end the
     aaouat paid     by @+a&~

            “3.    T~Q each value of any property reoeirrU,
     p,i~inaits     desorlptlen,location  end from whm end
     the pAor      at whloh It war .noalred;
           *4.  The amount, ahemotor end value or Ubor
     done, tron whom,~aad prloe et whleh It we$ reoeived,
     (Aotis 1901, p. 18; Aote 189 , p. 192; ziote 1907, p.
     309; 0. L. *ol. 10, p. 246.,I ”
           It ~$11 be notiwd  tlmt this etatute eslploye the
word “propertyR without ettmptlse:     to 8peoiSy psmlsalble
kinde of property.   Bcwstm’, Artials8    1359 @md 1360 p~‘@Vide:

  -.Y+      *Article 1359.  (11751 Condltlon8 oi purehaee.~
   .’ Eo private ooxporntlon @hell be pomitted    to pu+
      obase any lands under any proolalon  of this ohapter,
     anlese the lands     .RO ,ptarQhaae4   am   neoossary   to 8~
     able   suoh oorporatlon to be, bualnes8 in tbls Xato,
     or exoept where:s?lohland 1s purohased in due 00~Wae
     of busisess to ~eouxe thr payment of debt.      (A&8
     Ig93, p, 36; Aota t897,   p. 48; 0. 2. vol. 10, 19.
     466, 1102.)
    -       aArtlala 1360.   (11761 Sale of surplua.-4ll
     prIvat,s aorpomtlons    eutborleed   by the Lawa of Terna,
     ti.0 do bueinese in this %ate, wt.otie i4.n purpos* 16
     not the aoquisltion    ox cmnrsshlp oi’ lands, tiubieh
     have or my aoq,ulre by lome,       purohssa OX!otherwlso
lionorable     0. ?. LdthWt,         Ohhaim,        %ge     7



       &ore    iand   thnn   is   MlsessiHuy   to   enable      thm   to
           on their bu#lnese, ahell, withsn fiit8Oll
       oarry
     y0ers Proa the date said iana araybe aoguir8a,
  1 *in @me faith sell -8 UonVey in f88 siDlple all
     1enEa so aaqulrsd whicrh am not neaeesary far
     thn twnnaction  of their buainesa.n
And Artiole      1364 dealarea        t&t:

             “Art. 1364.    (1160) E88heat pm000aingO.-
       All oorporetiona    holding l~da ooctrary to the
       ~rotialons   of this law oball hold the lame sub-
       fsot to forfeiture    alta amheat prooeebinge.    The
       Attorney General, or any dlstriot     or oouaty et-
       toraey, when either of them haa roaaon to beliers
       t&at  any oorporation    is holding land8 fn viola-
       tion or tale law shall iLnetltute suit in the name
       oi the State 0r Ln*, in Tray18 Couatp, or In mf
       oounty in Texas where muoh Borporation mar hare aa
       agent, or fn any county whore anr part OS the laml
       ianr be SittuRt8a, againat auoh oorporation,    a@ 58
       provided for the em&ant at eat&er,                   or a0008i8di
       persons Uping dthout devise thereof      and havi
       helm.      (Act& 1893, p. 36~ 0. L, nel.. 10, p. z6ya
          In the oa8e at Campbell              v.   %a&         35 S. W. (24)   9)
(Cam. App.), the oourt raldt
            V@r many years it haa beea the eetabliahed
      polior of our stets    to prohibit   oorporationm,    wiQh
      oertain exceptlone,    iron! aequlrlng land. . . It
      fs true, a6 argued br the plalntirfs       In. error,
      that if the oorporatioa     has oonmunimted the deal
      by acquiring   the lasida no oae oouk? hey8 questioned
      lte title   sxoept the 8tat8.w
We oe~ find no law requiring     the refusal of a oorporato  aharter
bsoeusts a portion   of its oepltal  etook haa bsm purah&ued with
realty uhioh ths corporationis not authorixed       to ho&l.  In
aooordanoe with the language of the above case, we feel that
the aoquisftlon    or such property my only be questionedby the
State through es&eat proaeedlfqs      uuder ArtioZe 1364 and, in
an appvpriets    case, through q&tra rims prooeadlngs.
             It wllf ruther          be notloed      that     Article  1306 doe8
not   ayeo$fy that grope&y           80 rrooived       &all     be looatsd  within
Honorable ;I.7. Lockhart,     Chairman, Pa@ 8


 the state.   'onse:~uerMy we enswer subdivisions    A, 3, C,
 and r? of .&astion140.9 in the afr~rmatire.
-. .         For tht roaaOm above state9 and f3r the additional
 reasorithat private oorporationaare mder uo disabllltywith
 respeot to aoc',uirkgand hdding    r,otas oeaurod by first ilens
 upon realtp,   subdivisions I, J, E EudiL or 2leotionHo. 9 are
 also answered I.Bthe afflrmatioe.
               Trusting that the r0rbg0ia fully answrs your fn-
 quiriee,     we are




                                                                    ,
                                                R. Ceaab?aorhud
                                                       Asielstsnt
