Hon. Jesse James

State Treasurer hustin, Texas
Dear MrOJames:

Your request ter, i,s as follows: Opinion No. O-5820 Re: Construction, of S.B, No. 8of the Regular Session, 48th Legislature, amending Article 4740, R.C.S., and Incidental questions o for anopinion on the above subject mat-

“According to the General and Special Laws of Texas, 48th Legislature, Regular Session, 1943, Life Insurance Companfes - Deposits of Securities, Chapter s$$ S,B. NO. 8, Page 206, AnQct to amendArticle

Revised Civil. Statutes of 192Fa was passed which reads, fn part, as follows:

“‘The physical delivery of such securities to the Board of Insurance Cimmissioners shall be sufficient without being accompanied by awritten transfer of any lien securing themas
Wince this Department holds, as custodian, securitfes for companies under the supervision of the State Board of Insurance Commissioners, as well as the State Bankfng Department) wekindly request your opinion on the followfng questions:

“1.D Is the above Act retroactive covering a.11deposits madeprior %oth.is amendment, or does it app1.y only to deposits madeafter the effective date of this law?

“20 Has there been asimi.lar amendment enacted for Senate Bi.11 No. 165 removing the requirement of transfers of vendor’s l,ien or mortgage notes on deposits madeby companies under the supervi,slon of the State Bmkfng Department? If so9 what is the effective date of said amendment?
“3Q Under any condition fn which transfer of 11en is required by law, does the endorsement written on the margin of vendor’s lien or mortgage notes ‘without recourse’ and signed by the company constitute alegal transfer of lien?”Hon. Jesse James, page 2 (O-5820)

Article 4740 of the Revised Civil Statutes of 1925 as amended.by S.B. No. 8of the 48th Legislature at its Regdar Session, provides:

“Any life insurance company now or which mayhereafter be incor:2orated under the laws of this state may ;Is-i;osit with the Board of Insurance Commissioners for t!;e commonbene_“i.t of all the holders of its policies an annuity bonds, securities of the kinds in which, by the laws of this state, it is permitted to invest or loan its ca;sitil, surplus, and/or reserves, equa.1to tlr 1c:al reserve on all its outstanding policfss in force ewhich securities shall be held by said 9oard of Insurance Comni.ssioners in trust for the purpl:!se and objects herein specified. The physical delivery of such securities to the Board of Insurance Commissioners shal,l be sufficient without being accompanied by a t:ritten transfer of any lien securing them. Anysuch company maydeposit lawful money of the United States in lieu of the securities above referred to, or any portion thereof, and mayalso for the purposes of such deposit, convey to said l!oard of Insurance Commissioners in trust the real estate in which any portion of its said reserve maybe lawfully invested. In such case, the Board of Insurance Commissioners shall hold the title thereto in trust until other securities in lieu thereof shall be deposited with it, whereupon it shall reconvey the sameto such company. Said Board of Insurance Commissioners maycause any such securities or real estate to be appraised andvalued prior .totheir being deposited with, or conveyed to, it 9.n trust as aforesaid, the rea.sonable expense of such ap- >raisement or val,uation to be paid by the company. Under the ;:rovi,s-Ins of th.is Article, registered aswell as unregistered United States Government securities may be deposited.”
It is the general rule that legislative acts speak proL;)2”tivel.y ind not retrospectively, unless such retrospective featuae is c!~::.rly maniSest from the language of the Bill. We find nothing ii1th;? above-quoted amendment that would take the case out of the ordinary rule. Sothat, your first question is answered that the Act is not retroactive so as to cover all deposits madeprior to the effective date of the amendment, but that it applies on.1.yto deposits madeafter the effective date of the law.
Weassume that your reference to S.B. No. 165 in your second question is to S.B. No. 165, Chapter 165 of the 42d Legislature at its regular session in 1931. (Rev.Civ.Stat-Art. 1524a, Vernon’s Codification) oHon. Jesse James, page 3 (O-5820)

This Act does not purport to require transfers (actually) of the liens securing debts or obligations--sec,ur?.ties-- deposited with any corporate trustee in the manner they-in pointed outo

There has been no ‘amendmentof the Act in thi,s respect.
In this connection, however, wewill say thcst 1.tmay have been the departmental practice of the Banking Commissioner in approving deposits \<ith trustees, under the terms of S.R. 165 to require th;zt where~liens were ,involved awrittei~ t,?:::~nsi‘er of the iien, as ;:‘e!.l as the notes or securities themselves, should be executed. Authority to tiake such requ.iremer:ts is implied from the statute requiring deposits, and such aprac;~Ice should be followed. See our Opinion 1Yc.O-4535.

Alien upon property 1s such hds no legal existence in 5:::-l?i.$z from the debt or obligation srcured thereby. Sothat, mything that would operate to transfer the note or other ,fhstrument evidencing the debt, would operate in law to transfer the equitable lien securing it. Such e+itable transfer, however, :!ould not be adeouste to meet the St&es s requirement of deposit, Yor it would not Lbesubject to regi,stration to protect the hol.ders of such securi.ties agaimt the supervening right of ahinno- :e,zt purchaser of the mortgaged prosert:.

Yox ?:tllrL :i:;;?r:tion is answered in the negative. The

~~‘yi;j~o:y cjc::.,;,:;it,

upon :I,v$Tn,::.c;;

*s lien or mortgage note of the words,

“1.: 1t;ho,- ;t recour;:f:“
, has mthing t,o dowith the cLuestim of the transf ’::r 2 i:‘.,!.:?nsecmsing such noteD It merely operates to ~-mid 1i.ibiii.t:~ of th.: endorser as,aguarantor of payfient, but 1: does n~ot,,f??ct the completeness of the transfer evid~enced~by .the sigmture -,:’the transferor. Hs:3bove explained, this transfer of ths not;. (as by endorsement) I:tould operate to trunsfe? the equitable title to the lien, bl:t not the legal. title. For these reasons, in order to transfer the legal. tit1.e to the lien, it should be done by aproperly executed instrument of writing. Weso heid in Cpini3n No. C-4525, dealing with a similar question of securities deposited with the Board of Insurance Comissiohers under nrticle 4982 of the Revised Civil Statutes.

Whatweh:ive said about the registration of liens, however, refers only tc liens upon land. Chattel mortgage liens, however, while they maynot be registered in the way that liens upon realty are registered, are nevertheless subject to the statutes regulating chattel mortgages u?on personal property generally, but with reference to automobiles, specifically, by compliance with the provisions of the Certificate of Title Act.Hon. Jesse James, page 4 (O-5820)

These suggestions thus volunteered maybe of little or novalue in your particular inquiry, however, as the securities thus deposited, whether with acorporate trustee or with the State Treasurer, under the most recent amendment of the Statute (1937)have to be approved by the Banking Commissioner.

The-principles applicable are discussed in Woodv. Sparks, 59S.W. (2) 361, 63S.W. (2) 1109.

In oral explanations of your question No, 3,you have made it plain that your inquiry concerning the method of transferring liens securing deposit notes concerned liens securing deposits madeby loan andbrokerage companies under Senate Bill 165. Trusting that what wehave said fully answers your inquiries, we are Very truly yours ATTORNEY

GENERAL

OFTEXAS
/s/ Ocie Speer BY Ocie Speer, Bssistant
APPROVED

FEB21, 1944 /s/ Grover Sellers ATTORNEY

GENERALI

OFTEXAS APPROVED:t&INI~AZ'NCOM4TTEE BY: 8 OS-MR:wb