                              Au-       11. TlEKAs
PRICE  DANIEL
ATTORNEYGENERAL
                                    January 24, 1948

            Hon. J. M. Faulkner,                Opinion   Ho. V-483
            Banking Commissioner,
            Austin, Texas                      A0:    Ellglblllty     of tbr,
                                                      State Treasurar     to sot
                  Attakian:                           as trustee  for    a corpcvr-
                  Mr. H. L. Bengston,                 atlon Issuing securities
                  Deputy Banking Com-                 under Article    1524a
                  missioner.                          (V.C.S.  1 Construction    of
                                                      a proposed twt      agree-
                                                      ment , and a plicablllt~      .
                                                      or Article   %96 of the lie-
                                                      vised Civil Statutes.
             Dear Sir:
                            Your request    for an o inion     upon the above
             captioned    subject mtter     is as fo Plow!         .,
                           "The Sam Houston Underur%tero,;Inc.
                    of ROUStOB, Texas Is a domestic corpora-
                    tion haviag been granted a charter by the
                    Secretary of State on’Jaly 3 1947, vlth
                    Sub-Section,&9  of Article  136’2, Rtiaed
                    Civil Statutes of Texis    al it8 purpose
                    clause and by virtue 0) iald pawe~8 It
                    1s under the general superti~sion oi {his
                    Department in accordance with the ptovls-
                    Ions of Article  1524a, Retired Civil Stat-
                    utes of Texas.
                            “Said corporation   now proposes to
                    issue and sell to the general public a
                    fifteen-year    Maturity Underwriters Bond
                    subject to the provlslo~s     of Section 7 of
                    Article    1524ap Revised Civil Statutes of
                    Texas, which provfdes for collaterallza-
                    tlon of all outstanding bonds, notes, cer-
                    tificates,    debentures and other obligations
                    sold In Texas by securities     of the’ reason-
                    able market value equalling     at least at all
                    times the face value of‘ such obligations,
                    which securities     shall be placed in the
&Bn,   J. M. Faulkner - Page 2    (V483)


       hands of a corporation     having trust
       powers approved by the Ba;nklng Commls-
       sloner of Texas, as Trustee, under a
       trust agreement or at the option of any
       such corporation which sells ln Texas
       such obligations     as heretofore  referred
       to, such corporation     may, upon appllca-
       tlon to and approved by the Banking Corn-
       missloner~ deposit, seew%t%es-wi%h the
       State Treasurer ,of Texr,s”wader a trust
       agreementin    lieu.of   such deposits with
       a Trustee as set forth hereinabove.

              llSubject corporation   has submitted
       foor. the Commissioner’s   approval Its trust
       tidrnture naming the State Treasurer as
       Erustee, together with a specimen of the
       bond or obligation   which it ~proposes to
       sell.   We enclose said instruments and, 1
       ln connection therewith,     the foPlow
       questions are submitted for gouP opln   .Y onr

           “1.   Are the terms and conditions
           of the trust indenture. such as to
           warrant the approval thereof by
         : the. Banking Commissioner?
          “2.    Wbuld the’ State Treasurer, ‘by        ’
          virtue of his .offlclal   aapaclty,  be
          eligible   to act as Trustee under
          the terms of the submitted trust in-
          denture?
          “3. Is the roposed bond conslder-
          ed to be ln Pegal form and does It
          come within the class of Instruments
          or obligations   aentloned 1.n Section
          7 of Article   1524a, Revised Civil
          Statutes of Texas?      I;f so, would the
          provisions   of Article    696, Revised
          Cfvil Statutes,   also apply?”
             We do not apppowe the form of agreement pro-
posed by Sam Houston Underwriters,    Inc. with the .State
Treasurer.   The rights, llabllitles,   duties, and the like
of the parties are statutory and fixed as a matter of law,
and any attempt to restate them, explain them, or affect
Hon. J, M. Faulkner - Page 3               W-483)


them one way or the other tends only to codusfaa                      and
serves no useful or necessary purpose.
                A short 9 formal instment     exscut ed by f&e
Corporation,     reciting   the desire to make deposits     of
collateral    with the State Treasurer in virtue       of the
tie
a plicable    statute
      law Itself
of deposit
                          is all that Is necss%ary, sfnce
                   wili be read into the act or agpw
              and the Treasurer htie no authority      to mk%
any agreement whatsoever other than’thoee         contemplated
by the statute Itself 0
                   This answers your que,etfons         1 and 2.
            In respect to .mr questloa  3 we Be                       to
advise that Section 7 of Arttcle 15240 (V.’ Co 8-f                    pm-
vldee :
                     “All bonds, notes, certlflcates,          de-.
            bentures, or other obllgatlotis         sbld ln
            Texas by any corporation       affected     by a pro-
            vision of this Pet 9 shall be secured by. se-
            curities     of the reaeoneble    m?ket     velae,
           .equalllfig at least at all tfmee the face
            value of such bonds, notes, c%rtlffcato@p
            debentures,     or other obl%gatfozM.”
              The language *Ior other obllgatfons”   means
the direct .oblfgatlon   of the eorpomtion    like the par-
titiular Instruments mentfoned,
            It will be seen f’rom an ex’a&.n&lon ob the
specfmen bona accompanying your request that an 61)8en-
tlal part of the purpose of t~he eale of bonds is to
sell to the purchaser twenty-ff;oe’f’ully    paid, non-am-
se%+able shares of Class A. capital     stock of the company.
              Obviously,    the shares of the ca 4tal %tock
of   the company constitute    no direct obl~fgat 1 on of the
company o We are fherefoPe constrafhed       to hold that the
bond Is net such bond OF o’bffgatfon      of the company as
comes wfthfn the chss       cf fnstPument% or oblfgatfons     0s
Seetfon 7 of the statute0       To hold it to be such an ob-
lfgation   would be ta extend the seeps of the power gfv-
en to the company heycnd the plain language of the stat-
ute.
Hon. J. M. Faulkner - Page 4     (V-483)




               An extended trust agre4m4nt brtws4n a
        corporation   operat lng under Article  15244,
        (V.C.S.) and the State Treasurer fs not to
        be approved.    The riFhtS, liabilities    pow*
        ers and duties .gener&y     of ba%h palti48 Pro
        fixed by the statute itself     end a formel,
        brief agreement indlcafia     Ch4 porpOd4 Qf
        the company to make dapos f t8 V@h t?%4 Troabr
        urer in pursuance of soId articr16 is splff’im
        cient.
                The specimen bond submiCf4& $8 not
        such bond or %ther obligatiaPt"    o*thor$c*d
        or required by the statute    to be collateral*
        lzed sine4 a substantial    pwticm ef the ob-
        ligation   is the selling  w th4 Wwatfoti
        to the subscribsr    of pa%d ap ShW48 4f if3
        capital   stock, which IS not a d2rect obh%g&-’
        tion of the corporation*
                               Yours very trZtlf,
                           ATTORNEXGEWA$ OF TEXAS




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                           APPROVED
                                  C

                           ti*
                            FIR& ASSISTAW
                            ATTORNEYGBURAt
