OFFICE OF THE ATTORNEY GENERAL OF TEXAS 

AUSTIN 

"Our prlnoipal objootloaa to t&e olauae me 

Do rollwr: 

* 1) A&iok 50s. O&.8., ana P.C. Artioh 57 Q dsr lnD 0Dr ta n l otiom OS oorutitutlq 
flomroblo 0. P. Liokhort, MO 0 

forbidden dirorl8lMtlw cad r&at 

hots uo the offer, ule, or other %! 

, uong~~ 

l pooltlon of 

l 

la 

tu

the 

k

polloy 

or , other 

a0 

ri&to 

u induoement 

u&d roolPrltloo 

to lnouraneo. 

nol xpryd t 

~umo to. IO that thv 0lame, hero u&r oonol&ratioa, primrilf viol&e* tho l pirlt and oamoo rlthirr tha watiin( lf a0 

a P. c. ArrtLolo 57 Q 

th l&tar of Artiolo 5053 

in that it p&o00 the pollop 

holder upon aboolllto the m rutsa& 81th the 

ounu 0r uhatevu nu% r of oharoo of *took uw 

h8Ut.d In th. b-1 oI&d thd the @iO)ho~U'O 

l ta tuo lo no t sa p4 that Qr 8 0-n l twk h o ldu, 

but thst of a proforrod l toakholdor, ownimg tho 

EWU 0r r hu00 thuah l 0t rorthj md tht~ tb 

poUo*oldor boo &ll the bonofito of l oamoa or 

poforrod l tookholdor, rithout of the burdono 

of l wh a stoakholbr, uid rlthou “I won the mmlnal 

QYnu~p or a OzJlg lO tuk o huo in the o wp uly. 

( 8) The l & uoo wr bo 

r 

ullrrly 8loloadLng to the 

r 

ooppot%vo polio older, aad poullrr1J l PoOoptl lo to 8l8roproooat8tloA to hlB, + to 

~$uamt of dlvfdendo to bo ro8lisod under l uoh 

Aeouw, SW hotmoe, that in ordu to r ol ll *&OOO Ufo polloy the agent offrro tha 

!z 

oopeot l wtlolg4tirlf rldu lathlr form filled 

in l wh ua r a 8 o l a it10 him to dividend8 

equal to thooo 08 rive or tu ehwor or OS 

or proforrod l took. This so wd~ lik e l bonuoa. 

ma agent ~mpbuiaoo th8t thlo ontitles tho @lop 

holder to dlvldondm wm.l to tho(u 011 fir0 03 ton 

ohavorulrhDmMdtho8,ulthoucovuhav 

to bw or p4 for or l oouno the omuship, ri 2 , 

burdono, 8ad bother ot the ohwoo. Tha bgont 

then pUnto 8 roe7 ploturo as to put l walngs 

orthooapMy,wdprw 

p” 

tit0 ratura 0 

and mDko0 it round like br dlvldeudo 

IOM tbm par for the polloy~ ulwrou, in truth, 

if the o hueo of l took be nan-gu, value or even 

'0" 

value, with omll value 

10, or even In ml7 00noa1v8 r lo -olttrutlon, *, l Wh the .ë 

rotwl dAvldM do r y b e Ouuu th a n ~~y ltp 

a nd l roller th8n thaw mdlmrll7 

putioi 

lo boo P 

thqg poll0100, md thor t r 

vod 8nd mloled to his 

polloJbofd@r 

urlous 4urr. 
Hoaoroble 0. P. Lookhut, pIge 3 

~OUV lottor 0r hbrwr~ 

r0iim01 

15, lg4,, lo ln put a0 

98 0r m th8t tb r utta l ir r uutu000 

on vhfoh wo deoi~ th0 reweoted opinion to k 

rp 

pdloetea may l ppeu with @oator uaet1twA., 

allovuo to4Boadando lonoat ear or- roig4Y irr the r0u08ia(r roo- 

"The putloulu partlol#tloa okuoo quoted 

fn th0 00008d paugraph 0r 0~0 origial &ttu is 

not now peadirrp orl&bl8l 

o ur tip & hut under Ar tio T-l l 4749, @IId butrr- hualrow br 

boon rikd,vltho~ lmpllod QIpr0~1,aadi@ be 

Lo g used l urrent1.J la oonusrtlon vlth l pg~oved 

r0ru Or ~OUO~OS. In bddition to the qu0t.d 

0h00, u hat0 4u0* u ru0 0th0r rm 0r 

gut101pating l leuoeo, *ub*tMtUll~ ldentloal 

vlth tho quoted form, but porhapa with rll@tly 

dirru0nt ~0rdbg, kt00d br 0th~ 00mpa0~. 

8ubotuMmlly ldontlcirl jwovlolono *lo&to any 

or th0 tow Or mi0i00 4709, 4755, 5036 md 

l o p eo la*uy s> wo do o lro 

0-t JOU had tb8t th0 

Qugr lJdoa n i00 Ia 

QUO t ti r0n rioht00’uy 

l r a0 gr0ti0i~ 0r or 

u to *h&her *e Uvo FL 

l ~ah 0it04 0ei0a00, 

powor end duty in the 

sta ted l lr o uo tMooo to WltMuw OUT 

TO th0 l tWt that thr firOt pWg?aph Of OU? 

ori&laal letter mar have ofhnvoyed the l8prooolon 

that therm ir, qwotionuoookrltt0dorlgi- 

~~~uOAOWJM~O~QW~~Q.F ti fL?Ot 

tL#, tho ol@nol inquiry lo huebr amended. 

%I th 0~0 or the 008pny W* the proOiOe fOPNI qUQtOd %I& w l 0008~8gFaph d 0f 0~ 

orlglnal Ytor, it lo rbprooutod to aa the stookboldare bwo by l pproprlek wrltton reoartl OOQrented that divldoMe to polloyholdoso lzI l ooordan08 rlth l uah quoted proviolm ehoul& be paid 
mner8blo 0. P. -t,P4@4 

b0ro39 or 8t tho em tlmo divibud, @hall be paid 

011 th r l t0ok 0r th6 0 

ion a&so u to vhet&or 

wo doolro your eplnEe 

opa b.uLal; th0 k6uit 

rmu009p EL Vlththo I 

op iu080utl or 

our utloko above 

0lt.d. The rouQ0 we "@"~ro~~~~~@ 

rdditldpointlo tbtln 

~00~~ir y l ob0t00tiu4 th0 l m ru8 0~ put;- 

01 tiogol8a8o,aoPenyru aothvobeen 

M P iw, taken or t000rd bf the 0 I oekholdoro or 

th0 ‘YIP 

lnvolvod, ooeuntin# to the pa-at 

Of dft OAdO t0 po~O~b%V?S iA 8OOOHblOO Ufth 

the putloalar pmtiolpating oleuao ievolvod~ 

Md IIS, thWfoCI, do8f.W t0 knOtI Ub6thOT SUSh 

0r u&t0 ur~00mpmOt0Oth0 -toi l toJhoMore lo ma popor l rltulm r= dotorriw 

oonrormlt~ or Mn~wfQomlty to tha statoto~ 

pov~olonr oitoddr 

m l . . . . 

nb0 p0a0ip0t* 0~ w 00mri00t0 to b0 Ottw0d t0 xii0 p o u0f0~ 0r l h00Oti0 0t00k iii0 s.00~0000 

oagmt, lnoorpomted udu Cha 

n0tmdatii 8t0tut00, IO OS r0 @ 

u I, Tltla 78, Yernw~o Isl- 

,~llt 

%mh0d t0 urd 

go. 

lw 

Vhlo poli0~ o&l1 partlolpato ln thm l uvLord 

l arniqp oftho Q-u l p 

of Dfreotom, born no: c 

r$madadb~~‘k$e 

rod 0r tho l 00Ond polio~ ym end maually thuoubruhllo thi@&U~~~irlntuU rO?Oo. suoh 
Eonoreble 0. P. Lookhort, page 3 

dividend0 oholl l oortm tra JlortaUty &via(lo, Rc 

l o r voo roloa8od on lapsod poU0100 a0001 lntereot 

oumf~6~ utd other peoslto on t&a bompukpe ptil lpatln# lmruroo u prNtkd b;r the Iawe of t& 

8tOt0 0r w00. 

l AEX 8UCE AUUUAL DIYIo QlAP PD a tTITOO gTBuHD 8 

POLIOX n A%Y CALUDU? mAit, 8uLL La Rrn xma rBA8 

~~sBDIB~DDIIQ~H)DXTB1BoIBD~DpIR~~ 

AHDPAIDTOfiiB8TOCZlCOLDER8 Oi'fB.E8OUT5AU8TAXS8 

LIPS X8TmAxCP QalPANx II 8lJcH XluR oil 8HARm 

OP5CWoI 8TQQIQPTHH80- STA~LIFPi 

x8uRAJlcR OQNPANT. 

l m00uted h its h o 

194 

dy of 

8t th0 OffiOO 0f ~OU#UA stotO0 uf0 

IAs~o CapMy, Eouston, Tox80." 

I, 8eood 

W 8 ‘WtiOiwta PliOr, ’ br *L?tU0 0s thO POvloiono of rhioh tho l.noupod lo entitled to sham 

in th0 sur p ll us nfr q0r 0 the o o mp aia ey propor - 

tion t0 tbo prri- p8id 0 th0 mm 0r hi0 

r 

lloy. Phiomharobt&our@rum8ybe~~blo 

0 him, at the O~tiM Of the O-, 8t 8 OOrt& 

flxod period 0.v u divldmdo. In tb aboonro of 

8 l t&t8t0Pr ~povlola~, the tine Of distribution 

o f l l UV~hO t0 gOl.lO~ holdoro mlido OB t& dieorotlon of tho dlrootaro oi the l -n l xeopt 

00 fO8 80 it U, b. btO88fAOd by th. ObUtOr, Of 

the ooqa~,o, v0lldb~lm(8oth0hlldv~ llrr 

Xork ure IAO. co., 97 Ill. App. 547). Wader 8 

r 

Uoy l ntltllJlg the Lprarod to pertioipdo la 

& diotrlbutlo a or the ourplaooo l ooordlq to 

owh prlnol~oo 80 ml@& bo rd 

pony, the iaourod hoe no title ? 

‘ted by tbo oomo Way ouoh sepluo uetll a Uotrlbutlon 10 8o4o by the 0rri00ro 

o f the o o mp wy, ud u& w l uehprrorlolont& OQpcuy’ lo not roqtired t0 distr$buto t& 0At&O SUPpiU0 (c&00f V. EpUitAbiO uf0 diO@UP. 800.1 tdo 

51 1.x. 7l@, 46 t.R.A. L88 73 Aa. 8t. 

). 

rovuolng 57 H.X. 8upp. 8$1 40 A 

If the arght 0r 8 polio7 koldrr T0 
Honor&lo 0. P. Leokhut, gmgo 6 

fUUd 1 0 l OAta OAt a h i0 l OAtiwUntil th0 l XJ?iUtioOA i the 0.r . 

M rf@t t0 SW fC 8 OhUO Qf 

l . . . l 

%Zm r ule that 

t;g;yot l wh l r ig h t ao ontitlod hl8 to on 

. . . . 

0 l . , . 

‘mVideAd# MoPa On 8 PO1107 Of iAOWMO0 

mwt, oi oouroo, bo Mid aasqd to the rontraoto 

undor vhloh the 

Co. v* Jlomlo, 1 

8oorw (CUtlsao 9 Iat. I& l Ino. 

04 Ark. 288 118 S.Y. 1019 f 

r 

ovlolon that tha pe110@&or ohall bo @aLtAm 

0 dl*1d6Ado d0.0 no t l oAtaplat0 that th o la - 

l ~0d 8a7 a0t0t0 th0 880-t or atidOia th0t " 

shall k duluod, or qwstloa tlw rooult aftor 

the dloorotien or the mnagoro hao ken oxorolo~d 

in thl~ behalf. The omtrmt lo that tho lziouod 

@hall &VO tbO bOMfit Of l POk ditidurdr W th0 

It10 stated lnCoaoh'o Oyilopodi* of Iaourmoo Law, 

Volmo 6, p4o 647)I 
Honorbblr 0. P. WOkhUt, WA0 7 

'In Aetormlnlng tho l urplu8 to b8 arodited 

a0 dftid~ndr t0 iir0 in0~rur00 p0ii0iO0, p0ii0i00 

may bo AirideA into oloooo8 oonoloting of thooo 

hOr ing 8 OOBBOA 

3: 

l U Of ~OOWAOO, l ge Of 8ppii0a, kin4 0r p0 ior, md mount 0r pr~airpsr -id. 

But, l lthoqh 0rAlaarily iii0 ~~lloleo a0 olaoood 

l ooording to the year of loow, or l ooordbg to 

% z :: EZGYrP~$0Z :?%:2b: 

ti0t4 0r •UPQ~W ai4 i0rit0 uloq 01~8000, the 

plan 0r larluanoo se P eotod, rather thRa the &to 

of loow and age of tho lnourod, d8tsrmlneo tho 

proper olaoriflcatlon; othervioe, the 18v of aver8@0, 00 ~0DMt.i~ t0 life iWWOQO8, 18 1OOt OX' 

oarlouol7 ourtailed. And oluoiflootlon for pur30 

0800 Of dirtribution of 8urplW or prOfit must 

llmftod to polloyholdOro vho hwe contributed 

thereto, l nb A8'0000~117 1nOhdeo 811 vho hove 00 

ooAtrlbuteA. yut'th8rmOF0, under l OOntr8Ot Of life 

lnouranco vhloh proVlde8 that the polloyholdrr 

till b8 ontitled to ohnre in th8 Al8trfbutlou of 

the OCBpM,'O l UPp1U8 aooordlng to the 88thO&8 Aad 

prlnolploo ado 

P 

tod by tho oompany Sor tho dlotrlbutlon of l urp u8, mad under vhlah only ruoh proportion Of the l urplu8 88 ogultrbly belongs to 

tho polla, lo to be orvdltOA to it ond po%A to the 

polloyhddu, tha proportion AOrl&Mtvd must ba 

@ooert~lned and detOrmlnod bofavo the polloyholdor 

OU UfAkiiJ M outlon et &V to reoover 4uly portion of the 8urp1uo. And, in l a u a portlolpatlng 

pollo7 provlAe8 for m 'vwltable @hors of the 

Alviolble surplus,* It vi11 AOt be cowl&rod 

thbt th0 OAtirO pFOfft0 VOX’0 iAtOndOd to b8 dlvzded amfq t&0 polloyholdero, bat ouoh a 0har8 0~07 

80 tha mumgore of the company may, In the exoraloe of their Alooretlon and good faith, declare 

a8 prOfit8, thO7 hovlng in ViOV 8 rv88onab1e urd 

~oaoouy provision for tho safety of the ow." 

We oonrtrue said partiolpotlng clsuoO or oertifioote 

AOt l 8 8 gu4rurtre by thr oompony that it vi11 ever dsalorv 

l dlVi&~~& to it8 OtOCkhOlder8, but If It should do SO, then 

it8 p6rtlalpoting polloyholdsro vi11 r008lVO on their pollOioo UI Uowt not lees than the aaoh dlvldaed dealered on 

tho numbor of oharoo otat8A In the oortlfloate. The l txwkholders do not Auoruiteo my @took dividends ever to be 

paid the polloyboldero and no otouk ever p.ssroo to the 

pOliC~hOldU8. It i8 noted that the prrtiOi&Mlq 018U8e 
Honor*ble 0. P. LQokhart, 98ge 8 

Or O~rtirlMte d~# not Ot8tIB th0 WBbW Or 8h~88 Of ths 

omon @took or the oarpug vhloh will bo ~8.d a8 a bar18 In 

detemlnlng the amount of dltldmdr to be paid. A8 VI under8tMd foUr POQUO8t, it 18 foUr 908itiOll tbt th. O=puV 

OOuld diWM iM t0 l 8 t0 OilO~OidW8 bf iA8Wting l dir r er - 

l nt amber or rh8mr or tL OWOkI 8tOOk Or the 008LpU-U in 

the blank oontmmd la the ~tlOlp8ting 0lm8e or Orrtlrloat.. TO illU8tr~t41 fh. OOiOw Bi&ht 8*11 tW0 901101*8 

OS 8 thoauand dOlhF8 eaoh and ln8Wt in One 88rtiiiO~te 

iiT@ 8har.8 Or 8tWk and la the other ton rhuer Oi ItOak. 

Ir th0 OOIBpMy rOiiOWd thi8 pOliOy Md In8OrtOd d%rrWInt 

8harOr or thee oommon 8tOOk to be used a8 4 bar18 in deter8lnlng the uount oi dividend8 to be paid in ldmntlo81 pol101.8, then 8UOh an 8otlon would be in tlolatlon 0r Art101e 

509, Vemon’r Annotated Clvll Statutar, and Artiole 578, 

Vernon'8 Annotated Penal Coda, Bovevw, ior the purporsr 

Or thi8 O@liOn, We mU8t 888-e th8t the Oollouy Win 18@41- 

l~oOndUOtlt8bu8llu88 and th8t088hpO~O$aOldar Of the 

88ma ola88 ~111 bo treated llko over 

ln hi8 01888, and that th oimpeny w I 

othar polla~ol&c 

11 not rerort to any 

. dl8OririlutiOn Vh&8WVbF. fb 9088ibilitr wt th8 OOOLPenJ oould di8orimiMtr bdsveen it8 polio~holder8 dOe8 not 

$Iltifl Y8 in OOIU3iUdirrg tht the OOHI~ Vi11 d0 80. 

ktlOb8 4753 and 5036, Vernon'8 Annotated Civil 

st8tUt88, prorido r0r the arlaU.l4tlon 0r 8Ur9xU8 rw dlvldond pur908e8 and forbid the p@Pwnt of dividend8 out of 

rU& Otbr thur 8t~91U8 prOrit8 a8 dOriM ia 8ad l tiOi88. 

Ta~;al 

r 

tlng elaure or Oertliloate, above quoted, must, 

0 oonstrued 88. permlttlzig the paymat or dlvidendr onl; out 0r ruob i8uru.x rurplu888. lstlole 4729, Vernon@8 Annotatad Cl+11 St8tuter 4180 fOrbid8 tha 

dividend8 OthW m fFGW 8UF9iU8 pOfit8 and iOr r 

pa 0r 

id8 @l8FUrtoed dlVldOd8 to goll@yhhalderr la 0x0088 Oi the amount of 

the l x p enw 0r loalng in the promlum and pFOVid88 rurthw 

th8t in Oal* 0r papent 0r dividend8 in 0X0.88 or the 8moUnt 

Or th0 8XpOIi88 bAdit& ~88WO8 8wi bt3 8d U9 t0 OOIW 

the deilolw&o~ ln net premlum thereby areated. 

In flew 0r the foregoing, it 18 our opinion th8t 

the putlolpatlng a$awbe or oerti.floete, quoted above, doe8 

not ViObtr UIJ prO~i8iCUk Or the b8UI?8ILOO hV8 Or thi8 

(Itate. Theretore, hwlng awered your rir8t quertlon @I 

tlWetOfOre rtated, it 18 JlOt MO888M~ t0 di8OU88 tkW 9OVW8 

0r the Board 0r xn8~ranao commi88iowr8 vlth rrteronee to 
Bonorablr 0. P. Lookhart, page 9 

the r1thdmwa1 0r TOW &p~OYlhl 0r 8UOh roru &Ad other 

uttoro rohtlng thweto a8 mentioned b yOUr lnpuiry. 

Tour8 very truly 

aTTaRaKP OBIrnAL OF TKXAS 

By M&L 

Ardell Y1111ABE8 

A88i8tmt