Han; Walter C. Woodward Opinion No. -0-1788 

Chairman of the aboard .Rer Is Article 1302a of the 

Hon. R.G. Waters “Title Guaranty Law” applicable to 

Casualty Ins. Commissioner an extension agreement with regard 

Board of Insurance Com- to a policy which had been issued 

missioners before the enactment of the said 

Austin, Texas “Title Guaranty Act”. 

Dear Sirs: 

Your letter requesting an opinion has been received 

and considered by this department. 

As a necessary preliminary to a correct understanding 

of the question presented we quote’ as follows from your request: 

11 * * * 

“The’~Pioneer Abstract and Guarantee Title Company is 

a corporation organized in’ 1919 under Sec. 57 of Article 

1302, Revised Civil Statutes, 1925, and has neverbeen authorized to write title insurance under Article 1302a. 

Prior to the passage of the title act, mortgagee policies 

were issued containing the following provision: 

“I* * * Payment, discharge or satisfaction of the 

said indebtedness secured by the said instruments, except 

by foreclosure or the extension of said indebtedness or any 

part thereof without the consent of the company shall fully 

terminate, avoid and annul this policy and all liability of 

the company hereunder. ’ 

IWe request your opinion on the following questions: 

“1. Is the Pioneer Abstract and Guarantee Title Company acting in violation of Article 1302a, Section 3, in 

offering to extend policy Re:2871, issued prior to the passage of the title act to cover refinancing of loan, (a) if 

period of extension does not exceed the original maturity 

of the pOliCyj (b) if policy is extended for period extending beyond the original maturity date? 

"2. If the Pioneer Abstract and Guarantee Title Company is within its rights.in extending policy to cover refinancing, is company acting in violation of Section 3, 
Hon. Walter C.- Woodward 

Ron. R. G. Waters, page 2 (O-1788) 

Article 1302a in charging a fee? 

“3. Is it required that fee for such extension be 

calculated on schedule of premiums promulgated by the Board 

of Insurance Commissioners now in effect? 

“4. Does the Board of Insurance Commissioners have authority under Section 24, Article 1302a, to prohibit such 

practice, and what procedure should be followed?” 

. 

The kct under consideration is commonly known as the 

Texas “Title Guaranty Law”, being Chaptes 40, p. 77, Acts 1929, 

Forty-first Legislature (R.S.) and codified as Article .1302a 

in Vernon’s tinotated Revised- Civil Statutes. The Act, after 

making provision for incorporation under the terms thereof, provides, insofar as applicable here, in Section 3 as follows: 

“Corporations so formed as well as foreign Corporations.and those created under Subdivision 57, aticle 1302 

of the Revised Statutes of 1925, or under Chapter 18, Title 

78, Revised Statutes of 1925, or any other law insofar as 

the business of either may be a title insurance business! 

shall ooerate in Texas under the control and supervision 

and under such uniform rules and regulations as to forms 

of policies and underwriting contracts and premiums therefor, as may be from time to time prescribed by the Board 

of Insurance Commissioners of Texas; and no Texas or foreign corporation whether incorporated under this Act or 

any other law of the State of Texas shall be permitted to 

issue any title policy or mortgage certificate or underwriting contract on Texas property other than under this 

Act and under such rules and regulations. No policy of 

title insurance or guarantee of any character on Texas 

titles shall be issued or valid unless written by a corporation complying with all provisions of and authorized or 

qualified under this Act. *** 

“The Board of Insuranck~~Commissioners shall have the 

right- and it shall be its duty to fix and promulgate the 

rates to be charged by corporations created or operating 

hereunder for premiums on policies or certificates and underwriting contracts. ***II 

The pertinent port& of Section 20 of said Act is as 

follows: 

“If any corporation. domestic or foreign, while holding a-certificate of authority to transact business in 

this State, shall fail or refuse to comply with any of the 

provisions or requirements of this Act, the Board of 
Hon. Walter C. Woodward 

Hon. R. G. Waters, page 3 (O-1788) 

Insurance Commissioners, upon ascertaining this fact, shall 

notify such company .by actual notice in writing delivered 

to an executive officer of such company, of his intention 

to revoke Its certificate of authority to transact business 

in this State at the expiration of thirty days af-;er the 

mailing of such registered letter, or the date upon whi,ch 

such actual notice is served. If such provisions or requirements are not fully complied with upon the expiration of 

said thirty’days, it shall beg then duty of said Board to revoke the certificate of authority of such com*)any. ***‘I 

Further, Section 24 of the Act provides that: 

liThe terms and provisions of this kct are cond:tions 

upon which corporations doin g the business provided fcr 

herein may continue to exist, and failure to comply with 

any of them or a violation of any of the terms of this Act 

shall be proper cause for revocation of the permit and forfeiture of charter of a domestic corporation or the permit 

of a foreign corporation.tl 

The rules and regulations announced by thi.s Act became 

effective on June 1, 1931. 

We also consider the ~follow~ing constitutional and statutory provisions germane to a proper consideration of your question. 

Art.‘l2, Sec. 1. “No private corporations shsll be 

created except by general laws.” 

,Art. 12, section 2. “General laws shall be enacted providing forthe creation of private corporations, and shall therein 

provide fully for the ad.equate protection of the public, and of 

the individual stockholders.” 

As necessary to his opinion, we also quote Article 1318, 

R.C.S., 1925: 

“1111 charters or amendments to charters under the provisions of this chapter, shall be subject to the power of 

the Legislature to alter, reform or amend the same.” 

The rule of law applicable to the situation now confronting us,. in our opinion, 

477, section 5 as follows: 

is correctly stated in 17 R.C.L. 476, 

n 

. . ..Following -the general principle that a license is 

not a-contract, it is clear that it does not in itself create zany vested right, or permanent right, and that free 

latitude is reserved by’the Legislature to impose new or 
Hon. Walter C. Woodward 

Hon. R. G. Waters, page 4 (O-1788) 

additional burdens on the licensee, OCR to alter the licerise, or to revoke and annul it. And this is the general 

rule . . ..regardless of whether the term for which the license was given has expired. .~. .I’ To the same effect, see 

also Daniel v. Tyrrell & Garth Investment Company, 127 Tex. 

213, 93 SW 2nd 372, Jefferson County Title Guaranty Co. v. 

Tar ver , 119 Tex. 410 

& Loan Association 

29 SW 2nd 316, Shaw v. Lone Star Bldg. 

123 Tex. 373 71 SW 2nd 863, Lloyds of 

Texas v. Bobbitt (6.C.A.) 40 SW &d 897. 

The Supreme Court of Texas speaking in the case of 

Daniel v. Tyrrell & Garth Investment Company, supra, which involved the construction of .Article 1302a (supra) said: 

“Every corporate charter issued by this State is issued 

with the power reserved in the state to ‘alter, reform or 

amend I it. Citing Article 1318, supra,~and commenting that 

the power reserved in the state to ‘alter, reform or amend’ 

charters cannot be contracted away by the corporation.” 

Continuing with its decision, the court said: 

“It is contended by (the plaintiff) that the rules and 

regulations promulgated by the board, by authority of a law 

which became effective after the contract between it and the 

title company was entered into, cannot be applied so as to 

affect such previous contract. We overrule this contention. 

The police power of the state to regulate the business of 

title insurance, as to forms of contracts and rates, cannot 

be contracted away by the title company.ll Citing Shaw v. 

Lone Star Bldg. & Loan Association, 123 Tex, 373, 71 SW 2nd 

863. (Parenthetical insertion ours). 

An extension of an interest bearing agreement is a valid 

contract. 

tion). 

.See 1 Williston on Contracts, Section 122 (Revised EdiAlso, the case of Benson v. Phipps, 87 Texas 578, by 

Gaines, C. J. 

Here, you are respectfully advised that under the authorities cited above, it is our’opinion, that all private corporations, chartered by this State, assuming to write title insurance 

must comply with the provisions of Article 1302a, V.A.C.S. In 

entering into all title insurance contracts, a corporation must 

take cognizance of, and act according to, all those rules and 

regulations which are, and may be, prescribed by the Board of Insurance Commissioners pursuant to that authority vested in them 

by the terms of the Act. Such compliance is in the nature of a 

condition precedent to the validity of any title insurance agreement which said corporation might enter into. This is applicable 
Hon. Walter C. wooaward 

Hon. R. G. Waters. oage 5 (O-1788) 

to all contracts, pertaining to title insurance, bearing a 

date subsequent to that date which marked the effectiveness 

of the “Title Guaranty Act”. The mere fact that a contract. 

is an extension agreement will not afford grounds for any possible exemption from the plain and unambiguous provisions of 

that Act. 

We believe that the answers to your Nos. 1, 2 and 3 

questions are apparent from the foregoing and require no further elucidation. In reply to your fourth question, we direct 

your attention to sections 20 and 24 of Article 1302a, which, 

for your convenience, are set out herein, 

Trusting that the foregoing satisfactorily answers 

your questions, we remain 

Yours very truly 

4TTORNEY GENERAL OF TEXAS 

By /s/ Wm. J. Fanning 

Wm. J. Fanning, Assistant 

By /s/ Grundy Wiiliams 

Grundy Williams 

GW: AW:wb 

APPROVED FEB 2, 1940 

/s/ Gerald C. Mann 

ATTORNEY GEZUR AL OF TEXAS 

APPROVED: ;zNIO$$OM$TEE 

BY: 9