R-25 

NEY GENERAL 

PRICh DANIEfL :‘ 

ATTORNEY GENERAL 

Honorable Jeaas 

8C8te Treasurer 

Abtin, Texar 

:I., 

I 

Fbbruary 5, 1947 

James Opimm No. V-26 

l&lb: Alrtlcle 096, RerfseQ 

Civil Statutea, National 

Savings Investment Co., 

Saa Houa ton Underwrit era, 

Inc., Sterling National 

co., 2urthar procedure 

and disposition ot 

securities on deposit 

or above naaed compaaiea. 

Dear Sir: 

You request the Opinion of this department in 

your letters of November 14, 1946, and January 3, 1947, 

.mopeotivelg, upon the questions therein presented, 

which for a statement of facts we quote ae followa: 

"Our recorda show that we hold a8 custodian 

securltier deposited by the above named companies 

u&er piwioiors of Article 095, aa lfsted below: 

Naticnal Savings Investment 00, ' 

Dallas , Teraa 

Deporltrd on April 11, 1930 

City of Borger Funding Bonds 

Nos. 57/62 &p )l,OOO.OO each $6,000.00 

Sam Houston Underwriters, Inc. 

R~IQJ~~, Texas 

Eiaporited on August 13, 1931 

9e1~Hou#toa Lire Ins. 00. Stook 

eertifioate 128 for 400 ihe. & 

awfmieate a 149 for 100 aim. at 

#lb,09 per ahero 5,OQO.OO 

Sterling Blatlena Oompaly 

Houston, Terar 

Deposited on April 3, 1QSS 

Sterlhg Nat'1 Life Ins. Co. 

tzek, Certificate #6 for 500 

. at (IlO. per ahare 5~;000.00 
Honorable Jesse James, Page 2 

“To date, no other deposits have been made 

by said aompaniea as required under Artiale 696. 

On September 26, 1946, we wrote the Secretary 

of State asking if these companies had been 

issued charters to do business in Texas, and if 

so, to pleaee furnish us with the correot addreasea 

of each, We received a reply from the Secretary 

of State October 1, 1946, giving no post office 

addresses s and quoted in part as follows: 

“IWe find that NATIONAL SAVINGS INVESTMENI 

COMPANY, Dallas, Texas has been forfeited July 2, 1932; SAM HOUSTON UNDERWRITERS, Inc, , Ranger, Texas was forfeited 

July 2, 1932 because the Franchise Tax was 

not paid and was also forfeited April 25, 

1933 because of failure to make proof of 

final payment; STERLIm RATIONAL COMPANY, 

Houston, Texas, was forfeited July 2, 1942. t 

*On October 14, 1946, we wrote to each of the 

companies named herein regardi% the requirements of Artiale 696. Our letters to National 

Savings Investment Company and Sam Houston 

Und erwrlt ers , Inc o , were returned unclaimed, 

and no answer was received from Sterling National Company 0 Also no replies were received from the verificatioa letters sent 

out by the State Auditor’s Office ia oonnection with the audit of this department e 

“Therefore, in accordance with the provisions 

of Article 696, we kindly request your written 

advice regarding further procedure and diepmoitieB 

of securities on deposit .I) 

*January 3, 1947 

“On November 14, 1946, we request& your 

written opinion on the further procedure and 

disposition of seourities on deposit with this 

Department under provisions of Artiale 696 ior 

Nstional Saviege Investment Conpang, Sam Houston 

Underwriters, Inc,, and Sterling Kational Co. 

“In conversation with C, K. Ri.chards, it 

was suggested by him that we try to obtain 

more information concerning said companies, 

and accordingly, wrote several letters but to 

no avail, 
Honorable Jesse James, Page 3 

“Therefore, we hand you herewith copies 

and photostat4 of all information which we 

have be4n able to obtain, and await your 

further advice on these matters.” 

Conoretely, your problem is what disposition, 

if any, you should make et this time of the securities 

deposited by the resp4ctive companies mentioned in your 

letter, pursuant to the provisions of’ Article 696, R.C.S. 

You are governed in this matter solely by the 

provisions of Articles 696 to 700, inclusive, R. C. S., 

as we shall presently point out. These statutory provision8 are as followe: 

"Artiale 696. Bach corporation, company 

or individual, doing business In this State 

as a bond investment company, or coapany to 

plac,e or sell bonds, certificates or debentures 

on the partial payment or installment plan, 

shall deposit with the State Treasurer, in 

cash or securities approved by said Treasurer, 

the 5um or five thousand dollars, and shall 

d4p,44~it sni-ennu4lly with said Treasurer, in 

o4.4.b or srmwritierp to be approved by said 

4rnoer, t&a psr orsft or cl1 m4t pruiums 

rr.rZted @Al tIw w d,#?oalit,d uowits to 

on4 hundred thous4nd dollar+. 

“Article 697 a If any swh doPurstio corporatlon, shnll fail, for sfxtf day4 after ito 

organization, to make with the State Treeaurbr 

the ,deposit rscuired by thir title, it shel? 

be oesst$ezed to bras irnW~&e8 ita charter; 

and the Attorney General shall upon information 

therror, bring suit In the name of the State to 

Hera such oharter or certifiaate of incorporatlo@ drelared forf4it.4d, @ the oourt, upon 

w $iaQfql, sbak3. Qaelore a4gsfi charter fertiit# aaQ app&nt 4 r,4ast?4* for su4h cempany, 

w4~ duby it shsll be, uaftJr the order of the 

04**, to distrWute to $W rh4r4holUer4 ‘th4 

awe.ti# oi the co&span 

r 

T&s oourt shall out sf 

1u4pqil ua44ta maka equ, tebllr oompensation for the 

r4o4irer, 

“Articls 898. In 4444 or ths failure of 

any suoh aompanys the dirtrict court of tka 

csurtty in whiah the prinbipal offioe ia lobated, 

upon the appliaation of one or more shareholders, 
Honorable Jesse James, Page 4 

shall appoint a receiver for auoh oompany, whose 

duty it shall be to wind up its affairs, liquidate its debts, and distribute its assets, using 

therefor, upon the order of the court, the deposit 

previously made with the State Treasurer to secure the shareholders. Said Treasurer is authorized to pay out such deposit upon the warrant o? 

the Comptroller in accordance with requisitions 

made upon the Comptroller by said receiver, approved by the court, 

“Article 699. On request of any such company, 

the State Treasurer is authorized to permit snoh 

company to interchange cash for the securities or 

securities for the cash deposited by such company 

under the provisions of this title with said 

Treasurer, such securities always to be approved 

by said Treasurer on the written advice of the 

Attorney General, 

“Article 700, If any such company shall 

oease to do business in this State and satisfy 

the Comptroller and the Attorney General that it 

has no liabilities in this State, the Comptroller 

ahall issue his warrant to the State Treasurer; 

and said Treasurer upon such warrant of the Comptroller, shall return to such oonpeny the cash or 

seouritiee deposited by it under the provisiona 

0r this title.” 

Justice Sharp, of the Supreme Court in the case 

of Bankers Union Life Insurance Company v. Sheppard, 117 

S. W. 26 770, 116 A. L, R. 961, stated the main objective of these statutory provisions ia lsn&uage as follow0 : 

“(1) To require each corporation doing 

business in this State as a bond investment 

oompeny to place oash or certain securities 

with the State Treasurer, in the sum of $5,000, 

es a deposit; and to deposit semi-aniwlly ten 

per c4nt. of all net profits receirod, until 

the sum of $100,000 is deposited. 

I’(2) To require the Attorney General, in 

the event any such corporation shall fail to 

make such deposit as required, to bring suit to 

have the charter of such company declared forfeited, and to have a receiver appointed for 
Honorable Jesse James, Page 5 

such cempanys whose duty it shall be, under the 

orders oi the court, to distribute to the shareholders the asseta of the oompany. 

“(3) To provide, in case of the failure of 

say ruoh company, that upon applioation or one 

or more shareholders the district oourt shall 

appoint a receiver for suoh oompang, whore duty 

it shall be to wind up its af’fairs, liquldate 

ita debts, and distribute its assets, using 

therefor, upon the order of the court, the deposit previously msde with the State Traasurer. 

“(4) To permit the interohange of the dopost 0 

“(!I) To provide, in the event any suah 

eon any shall oeaae to do business in this 

Sta & e and shall satisfy the Comptroller and 

the Attorney General that it has no liabilities 

in this State, that the Comptroller shall issue 

his warrant to the State Treasurer, and aaid 

Treasurer upon euoh warrant shall return to 

rush oomprny the cash or seourities depoaitsd 

$9 it under the previeienr of law.” 

It will be observed that Article 6.96 desaribes 

how the deposit shall be made. Articles 697 and 698 provide for the appointment of a receiver in the event that 

the oompany feils to make suoh a deposit, or in the event 

or the raflure or such ooapany. It doea not appear ,from 

the information before us that any reoeivershlp prooeedings ,have, up to this time, been instituted as to .any 

of the oompauiea in question, hsnos Artioleo 6.97 and 

698 are not epplloabls and need not , for the punpose or 

this o ,inion, be rurther oonridered. The same~~is true 

or Art ,! 010 698 whiah 

P 

rovidss ror lntarohange end rub- 

~;titt,iu0sr or se0wit OS. Whether or not the quartion 

di golve,noy or insolvency or there ‘oompanler ir *new 

prorent or may arise in the future, we do not find it 

nroesrery to deoide, nor could wo deoldo this qu@rtion 

W n bhu mt0 subrnltted. It dso8 appaar, howevrr, 

t r at t’$cir right tc continue their oerporata a6t ritier have bew forreited for railurn to psy rran his0 

*axes or 0Oh~rr raaaenai , and that they are net ns E aotire eorporate ooneerna, b,ut the fact still remains 

that t&y are not in reoeivershlpO 

Thora romaine, therefore, the quastibn Of 
-. 

Honorable Jesse James, Page 6 

whether you are authorized under the provisions of Art. 

700, supra, to dispose of these securities as therein 

provided 0 This Article does not purport to provide that 

the deposit made under Article 696 be retained for the 

benefit of the shareholders of the corponstions. Bankers Union Life Insuranoe Co. v. Sheppard, supra. It ia 

to be returned by the State Treasurer upon the oertirioate of the Ooaptroller or Pub110 Acoounts only upon a 

showing that the depositor has no liebilirties in thi4 

State which have not been fully discharged, and this 

must be to the setiafaotian of the Coaptroller and the 

Attorney General. We bhink the burden rests upon the 

shareholders or the part148 claiming the return of suoh 

seourities to present sufficient evidence and 1nrorm.e 

tion to the Comptroller and the Attorney General to, 

Qustiiy them in restohing a ocnolusian aa to whsther or 

not the provisions of Article 700 have been met. 

From the information contained in your opinion 

request, it does not appear that eny demand haa bee4 

made. for the return of these aeourities by any party authorized under th4 stmtute te make 4 damand ard reeefre 

them, or that thera has heretofore been preset&ad to 

the Comptroller and the Attorney General any iaieraeti~n 

upon which the Attorney General could recommend te the 

Comptroller the issuance of his certificate upen you 

for the disposition of the seouritiea to anyone at this 

time, and until this has been done, you are authorized 

to retain these securities as you have in the pan,t. 

We think the case of Bankera Union Life Insurance Company v, Sheppard, supra, affords a safe guide 

ror us in this matter; and while in that case the Carptroller was ordered to return the seou,rities by a arndamu4 prooeeding instituted for that purpQae, the u&d:iaplrted facts in that case justified the o4urt’s asti44~ 

But here we are net able te 441 tWt Ok r4et8 jruttiy 

you iI& t&king a#y retf6n la ragera $6 thea~a aemi*iw**, 

ot&ar t&4 ta ke4p thrm aea@W&g 4s gem have In the Mast 

titil r4ecir4~hip proceedings are instituted as pr4rided for in Articles 697 and 69S, supw, Or until a proper 

#&owiag has been dlade to the Qomp~tro&lar. and Attorney 

General as provided for in Artlola 106, supra, whiah 

would justlip the Comptroller in i$suing his certificate 

for your direction in the diapeaitisn ef the seourities. 

We take your letter, lieweve2, es suffia$at& notice to this Department to justify appropriate leg41 aotion under Articles 697-698 or 7095, R. C. S., end expect 

to prooead accordingly. You will in due course be ad- 
Honorable Jesoe James, P8ge 7 

vised as to th% rurther dirpooitisn rt tL0s.e secufities upon the sulminatiog of our 4fferts ts clear this 

matter up by apprepriata lags& aotfm. 

The State Traaoursr is not authorized to nf 

turn securities deporit4d with him by oorpohtioU 

doing bwineso in this State aa a bond itiv%rtm%M 

company, or company to place or ssll bonds, cetifficates or debentures on the psrti%l payment or installment plan, as required by Artiolo 696, R.C.S., 

except in reoeiverohlp pxowedi*err %a p*vi(d far 

in Artioles 697, 69&8T 709?r, RICiSI, or upcn a 

showing satisraotorg to t&4 Comptrsllsx and th% 

Attorney General t&at ,gha 6o~r@aTatlcn haol o%ssed 

to do bu&&nsso In tih@ Stat,r 8Bd has &w lieb1’1ltiu 

unsatirfi5d as requihd by Ortidla 760, R. C. S. 

Your8 vary truly 

ATTORBBY 0-L OF TBXAS 

LPL:AldM:jrb 

Approved Opinion Committee 

By BWB, Chairman