        ,




       OFFICE: OF THE A’ITORNEYGENERAL           OF TEXAS

                              AUSTIN




Board of Insuwnce       Commissioners
AustJn, Texas'

Gsntlemex:




             !fherequest of
 former Chaf~nan of
-our ~opsxilon in the
received by this de
letter  as folla;ss
                                               es Ansocia-
                                               rated -a
                                               fTexasln
                                               charter was
                                        to& proviaing~for
                                        tic13 under uh3t is
                                        o 78, mviaed   civil
                                  AssocLation has been
                                  co that date to February
                                   lnsuruncc  on the niltual.
                                atlon   of t&t9 orgwization
                            ember 31, 1333, at which time
Board of lnsuranoe     Co*m&ssionors,     page 2


     would not be renewed because it was constdered
     the number of pol%cles in forco d3.d not comply
     with the law 3.n that respect.             We have had zome
     corPenpOnd.enco        Fmd COnikiWnCe3     with t-he officers
     olnco   this notice trns ~,iv~:n, and it was mutually
     agreed tbzt the Association            would either btild
     up Its nombershlp to the require? a:-:omt o” dls-
     SOlYO,     Harch 1, 1g2,         vat3 CgrY%il upon a.3 I213
     date vhm som definite             d5.sposi~Lim    vould bo made
     of tha Association’s          affa%a.       IJust p??For to
     March 1st we had a conference with rapreoeatatives
     of tke AssocLatlo~,          which confor~\~c was ottcndcd
     bg your    Assista.nt,     Kr. Armstrong.        It was furthor
     agmed in this conference             that the Association
     would dissolve         and file with the Ds:.artment of
     Tnsuranco all necessary dLosolution               papers,
             “We have now recel.ved dissolution    papers from
      the Association   which are attached for your tifor-
      mation in rendering the optiion now requested.          It
      will be noted from these papers that Pars, Dabneg
    ,llhlte,   on8 of the officers    of the Association   1s
      the only rcna3.nLu& pollc&older      and that iu dis-
      solving ths AssocZatfon      is It proposed to distri-
      bute to her the remaintiC assets of $36,738.&6.

            “lirasmuch as this presents an unusual sLtua-
     tion in that If the dissolution        gapers are accept-
     ed by the Department and the Compsngfs charter
     canceled,    it results   in turning over the assets
     named to one policyholder,      gou are requested to
     advise    us if we should accept    these  ao3s0hti0n
     papers as filed,     cancel the Company’s charter and
     permit the distrLbution      of Its assets in ths msaner
     set out in these pagers.”
            We also have before us for examlnatlon the two in-
struments   constitutLng the dissolution papers of the assccia-
Mon.
          While a number of stetos    have  enacted statutes  PO-
gulatin  the distribution    of the assets of Lnsu.rance coiY>au-
les upo: dissolution,    we have been unable to fLnd any T&as
Board of IhsurWlce   Commissioners,    Page 3


statute applicable   to the problem here invol.ved. We have,
lfkariise, failed  to PiM any Texas cases in which tfrLn ques-
tion has been either decided or discussed,
             A mutual insurance cor?orntion,      like other corpora-
ttons,    0-v-m the property,   but the me:nbers own the corporatio;l.
In the case OP Smith vs. iI\mt~:rtc~ Count,y Mutual El.ro ksur-
ance conpany, 41 Hj, 3. Eq. b73, 4 Atl. 652,‘the          court hda
that the surplus should bo dl~M..ed among all. the policyholders,
past as well as present, who ha?. c(xntributed to the BI.ZI*~~LIS.
ThL8 holding,     horrcvor, has not o;l!.y failed to receive     support
In subsequent cases, but has b?en cr%ticized          on a n&ocr of
grounas . In Titcomb vs. X:cnneb%G: Ilutu?l Fire Insurance Com-
pry,    79 :&tie 335, 9 Atl. 732, the court in hoZU.ng that
t x e rule, requiring    all person s who have error bozn mem??ers
of h corporation      to be recognized   In 3 distribution     of a eur-
plus by the corporation,      was entirely    %mpractlcable,    used
the follov;lng    language,
            “To distribute  among them a small amount of
     assets;   and to determine what each former pblicg-
     holder’s   share ought in equ.ity to be, uould be
     attended with dfPPlculty    and an amount oP labor
     vhich. the end vould not justiPy.”
           m HU~W    VS. mrth?,     127 WISC. 412, 105 w. w. 1031,
the court critiofzed    the rule jllvolved In the Smith case, supra,
as being illogical   .!mclevidently   based 61 erroneous interpreta-
tion of the holding In Carlton vs. Southerzl Mutual Insurance
Conpang, 72 Ga. 371, which turned ups a oonstruction        of
language in the charter which tho Goorgziacourt felt bound to
&old was used to make everyone vho contributed      to the corporate
surplu3 a nembsr or stockhholder, for the purposa of any distrf-
bution o$ such surplus.
               The better vieii, therefore,   appear3 to be that
after the payment of debts the assets belong to those who
are members at the time of dissolution,         wuch j,u tne absence
of a charter provision       to the contrary,   includes only
polscyholaors.       Huber vs. Hartin, supra, 14 R. C. L. See. =-E
p. 8491 25) Am; SW. Sec. 73, 106; Stoma vs. TTcx%hi*estern
kktual 13onefl.t Association,     65 Wch. 31.7, 32 if. W. 71.G; Aclams
vs. JXorthwestern Eudowment snd L-?gacy AssucSetim,        6;i I.Xnn.
Board of Insurance   Commlasion0rs,   Page 4


184, 65 I{. W. 360; note in 7 of Ann. cases 412; Uote in 3
L. R. A. (new serleo)      653. We know of no reason why the
rule should be any different     where, as under the facts sub-
ultted, only  one st0ck~0lam-    or member remains at the time
of the di33oZutioll.
             While we have not had the chart8r of the Ginners
Mutual Undexz~rfters Association     submitted to us for esa!x&a-
tion, we presume from the request letter       that it contains
no provisko;l3 declarln;   r?ho 3hal.l bc considered a membsr for
the purpose of distributing     assots on dissolution   of the
corporation.
            In view of sn’apyarent  misconstruction   frequently
placed   upon the holding ln Titcomb vs. Xennebmk Mutual
Fire Insurance Compny case, aupra, YB deem it advisable
to mention it here.     This case did hold that after the dis-
solution   of a mutual insurance company the remaining as-
sets vented in the otate, the court holding that neither
the former policyholders    nor the corporators   had any interest
in the assets.    but in that case the last ~ollcv had exxired
                                                It Gas absolutely

           In view of the authorities heretiabove  mentioned,
you are respectfully  advised that it Is the opinion of this
department that, under the fact3 submitted, your question
should be answered in the affirmative  and it is 80 answered.
                                      v0ry truly   yours




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