## THE ATTORNEY GENERAI. OF TEXAS

March 27, 1989

Mr. Kenneth W. Littlefield Opinion No. JM-1032 Commissioner Texas Department ofBanking Re: Appointments of foreign 2601 North Lamar Blvd. trust company as trustee for Austin, Texas 78705-4294 Texas residents (RQ-1488)

Dear Mr. Littlefield:

Onbehalf ofthe Department ofBanking you have asked about a foreign trust company accepting appointments to serve astrustee. your letter reads:

The Department ofBanking has received an inquiry as to the interpretation of §105A of the Texas Probate Code. The inquiry was submitted on behalf of a Missouri trust company (referred to herein as the "Trust Company"). The Department therefore requests your opinion as towhether aforeign trust company, operating as described in this letter, can accept appointments by Texas residents to serve as trustee under living and testamentary trusts.

Plan ofBusiness

The Trust Company is anaffiliate ofa brokerage firm which does business in Texas. The brokerage firm proposes to supply its brokers with information about the Trust Company which would be distributed to customers who inquire about the availability of trust services.

Brokers may from time to time discuss with existing clients ofthe brokerage firm the advantages of professional trust services. The brokers would discuss the ability of the Trust Company toprovide these services only inresponse tothe client's inquiries as to the providers of such services. The brokers would have new account forms which would be made available to inquiring customers. The completed forms would be forwarded by the

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customer directly to the Trust Company's offices in Missouri. There would be no general advertising of any kind inTexas and
nomailings to Texas residents other than statements and other correspondence regarding specific accounts.

Upon opening an account, the Trust Company would serve as trustee under living and testamentary trusts created by Texas residents. The trusts would be administered in Missouri. All property other than real property would be held in Missouri and all trust records would bekept inMissouri. The Trust Company would not establish any branch office, agency orother place ofbusiness in Texas. The Trust Company has made the filings required by 5105A(b) of the Probate Code.

ADDliCable Law

Article 342-1110 ofthe Texas Banking Code prohibits a foreign trust company from doing business as a trust company in Texas orexercising inTexas those powers referred to in Article 342-1101 of the Banking Code, except asprovided by 5105A of the Probate Code. Section 105A(a) of the Probate Code provides inpart:
Any bank ortrust company organized under the laws of and having its principal office in, . . . any . . .state of the United States of America, other than the State ofTexas, . . .having the corporate power to soact, may be appointed and may serve in the State ofTexas as trustee (whether of a personal or a corporate trust), executor, administrator, guardian ofthe estate, or inany other fiduciary capacity, whether the appointment be by will, deed, agreement, declaration, indenture, court order or decree, or otherwise, when and to the extent that . . . [the] other state inwhich such foreign bank ortrust company isorganized and has its principal office grants authority to serve in like fiduciary capacity to a bank or trust company organized under the laws of, and having

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itsprincipal office in, the State of Texas . . . . Missouri permits Texas trust companies to act ina fiduciary capacity in Missouri upon compliance with requirements similar to those set forth in 5105[A](b) ofthe Texas Probate Code. See 5362.600 MO. Rev. Stat.[l]

Subsection (c)of 5105A prohibits a foreign trust company from establishing a branch office, agency or other place of business within Texas and prohibits in any way the solicitation, directly or indirectly, of any fiduciary business in Texas of the types described in Subsection (a) of 5105A. Subsection (e) of §105A states that the provisions of g,l05A are inaddition to and not alimitation onthe provisions of Tex. Rev. Civ. Stat. Art. 1513a, 51, which in 1987 was codified asArticle 342-1101 of the Texas Banking Code.

The term **solicitation**is defined by the Texas statutes inonly one place, although itand its relatives appear inother statutes. In article 4582b, dealing with funeral directing and embalming, subsection 1Mstates:

'solicitation' means a direct or indirect contact with [certain persons] for the

1. The conclusion that Missouri permits Texas trust companies to act inafiduciary capacity pursuant to section 362.600 of the Missouri statutes is questionable. The Missouri statute defines "foreign corporation" to mean a bank orother corporation organized under the laws of "any state of theUnited States, which state adioins or next adioins the state of Missouri.*' (Emphasis added.) Texas does not adjoin Missouri, but does adjoin states that do. However, the phrase "next adjoins" is not defined or elsewhere used byMissouri statutes, and the only Missouri
case using the phrase that wehave found uses it in the
same sense as "adjoins." See Wann v. Gruner, 251 S.W.Zd 57, 58 (MO. 1952). See also Irons v.American Rv. Ex ress Co., 300 S.W. 283 (MO. 1927) ("next adjoining circuit"). Cf. MO. Rev. Stat. 5362.925-l(1) ("adjoining-state bank holding company" defined): Enoerlv v. Mercantile Trust and Savinas Bank of Ouincv. Ill., 457 S.W.2d 1 (MO. 1967) (Illinois corporation).

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purpose of securing the right to provide funeral services ormerchandise . . . .

See V.T.C.S. art. 2372p-3 ("soliciting*'); V.T.C.S. art. 4495b, 53.07(c); V.T.C.S. art. 9023a (*~solicitations~~); Educ. Code §4.21 (llsolicitql); Hum. Res. Code 512.001(b); Ins. Code art. 21.49-1, §5 (l'solicitationl'). Coutlakis v. State, 268 S.W.2d 192 (Tex. Crim. App. 19% (*'solicitl').

The precise language of subsection (c)of section 105A of the Probate Code reads:

(c) No foreign bank or trust company shall establish or maintain any branch office, agency or other place of business within this state, or shall in anv way solicit, directlv or indirectlv. any fiduciarv business inthis state ofthe types embraced by subdivision (a)hereof. Except as authorized by the laws of this state, no foreign bank ortrust company shall act ina fiduciary capacity inthis state. Nothing inthis Section shall be construed to authorize foreign banks and trust companies to issue or to sell or otherwise market or distribute in this state any investment certificates, trust certificates, or other types of securities (including without limiting the generality ofthe foregoing any securities ofthe types authorized by Chapter 7ofthe Insurance Code of 1951 prior to the repeal thereof), orto conduct any activities
orexercise any powers ofthe type embraced and regulated by the Texas Banking Code of 1943 other than those conducted and exercised inafiduciary capacity under the terms and conditions hereof. (Emphasis added.)

Aviolation isa misdemeanor. Prob. Code §l.O5A(f). Paae v. State, 492 S.W.Zd 573 (Tex. Crim. App. 19% (solicitation ofdrinks).

We think both the language and the intent of subsection (c)of article 105A areplain. The foreign corporation solicits fiduciary business inviolation ofthe statute, in
our opinion, by furnishing "new account forms" to the brokers employed by an affiliated brokerage agency and by otherwise acting inconcert with the brokerage firm with the expectation and intent that the forms will be completed on behalf of Texas residents --especially, Texas residents prompted to inquire ofthe brokers about available providers

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oftrust services. The statute prohibits not only adirect
or indirect solicitation of such business from consumers: it also prohibits solicitations inthis state of such business by the use of, or from, intermediaries, whether the intermediaries are technically agents of the soliciting trust company or not. The phrase, "in any way" means inanvway. m United States v. Thaver, 209 U.S. 39 (1908). Cf. Murnhv v. Camnbell Sour, co., 40 F.2d 671 (D.C.D. Mass. 1930) (activities onbehalf of foreign corporation); Frazer v.McGowen, 502 A.2d 905, 909 (COnn. 1986) (**organizational network likely toprompt [business]"): && &Barton v. Walker, 21 S.W. 687 (Tex. Civ. App. 1893) (activities inother states).

InUnited States v. Thaver, sunra, acase originating inTexas, the United States Supreme Court considered a federal statute forbidding any person to "solicit in any manner whatsoever" political contributions on government property. Mr. Justice Holmes, writing for the Court, held that letters sent to federal employees violated the statute. Hewrote:

Of course it is possible to solicit by

letter aswell as inperson. It is equally clear that the person who writes the letter and intentionally puts it in the way of delivery solicits, whether the delivery is accomplished by agents of the writer, by agents of the person addressed, or by independent middlemen, if ittakes place in the intended way. Itappears to usno more open to doubt that the statute prohibits solicitation bywriting aswell asby spoken words. It,forbids all persons to solicit 'in anymanner whatever.'

209U.S. at 42.

There isadifference between lVsoliciting business" and

--without design -- merely "taking orders" for business from persons not prompted, asked or importuned directly or indirectly to place orders. See Sanderfur-Julian Co. v. State, 77S.W. 596 (Ark. 1903). However, ageneral inquiry about the availability oftrust services isnot a request about the availability of trust services furnished by a particular company, and such an inquiry isnot the attempted placement of anorder with any company.

Adesign toprompt inquiries, orto respond to general inquiries with apresentation ofthe benefits offered by the foreign trust company and its services, i,sa design to circumvent the statute, we believe. Accordingly,

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appointments of the foreign trust company astrustee obtained pursuant to aplan ofbusiness such asyou describe would beviolative ofthe Texas statute. &R Bittiker v. State Bd. ofReaistration for Healina Arts, 404 S.W.Zd 402 (MO.App. 1966). Cf. Smallwood v. Pearl Brewina F.2d 579, 599 (5thG.), cert. denied, co., 489 419U.S. 873 (1974) (solicitation ofproxies); B.C. Turf &Countrv Club, Ltd.
v. Dauahertv, 210 P.2d 760 (Cal. APP. 1949) (corporate shares).

SUMMARY

The action of a foreign trust company in supplying information and forms to brokers employed by an affiliated Texas brokerage firm with the intention that they be distributed to customers of the brokerage firm whomake general inquiries about the availability of trust services violates article 105A(c) of the Texas Probate Code. Appointments as trustee obtained by the foreign trust company pursuant to such aplan ofbusiness would be violative of the Texas statute.

JI-M MATTOX Attorney General of Texas

MARY KELLER First Assistant Attorney General

LOUMCCREARY Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY Special Assistant Attorney General

RICK GILPIN Chairman, Opinion Committee
Prepared by Bruce Youngblood Assistant Attorney General

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