R-25



## NEY GENERAL

PRICh DANIEfL :‘ ATTORNEYGENERAL

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 Houaton Underwrit era, Inc., Sterling National co., 2urthar procedure and disposition ot securities ondeposit or above naaed compaaiea.
Dear Sir:
You request the Opinion of this department in your letters of November 14, 1946, andJanuary 3, 1947, .mopeotivelg, upon the questions therein presented, which for a statement of facts wequote ae followa:

"Our recorda show that wehold a8 custodian securltier deposited bythe above namedcompanies u&er piwioiors of Article 095, aalfsted below:
Naticnal Savings Investment 00, ' Dallas
,Teraa Deporltrd onApril 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 onAugust 13, 1931 9e1~Hou#toa Lire Ins. 00. Stook eertifioate 128 for 400 ihe. & awfmieate a149 for 100 aim. at #lb,09 per ahero 5,OQO.OO Sterling Blatlena Oompaly Houston, Terar Deposited onApril 3, 1QSS Sterlhg Nat'1 Life Ins. Co. tzek, Certificate #6 for 500

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

“To date, noother deposits have been made by said aompaniea as required under Artiale 696. OnSeptember 26, 1946, wewrote the Secretary ofState asking if these companies hadbeen issued charters to dobusiness in Texas, and if so, to pleaee furnish uswith the correot addreasea of each, Wereceived a reply from the Secretary of State October 1, 1946, giving no post office addresses sand quoted in part as follows:

“IWe find that NATIONALSAVINGSINVESTMENI COMPANY,

Dallas, Texas has been forfeited July 2, 1932; SAMHOUSTONUNDERWRITERS,Inc,
, Ranger, Texas was forfeited July 2, 1932 because the Franchise Taxwas not paid andwas also forfeited April 25, 1933 because of failure to make proof of final payment; STERLIm RATIONALCOMPANY, Houston, Texas, was forfeited July 2, 1942.t *OnOctober 14, 1946, wewrote to each of the companies namedherein regardi% the requirements of Artiale 696. Our letters to National Savings Investment Companyand SamHouston Underwrlt ers, Inco,were returned unclaimed, and noanswer was received from Sterling National Company0 Also no replies were received from the verificatioa letters sent out bythe State Auditor’s Office ia oonnection with the audit of this department e

“Therefore, in accordance with the provisions of Article 696, wekindly request your written advice regarding further procedure and diepmoitieB of securities on deposit .I) *January 3, 1947

“OnNovember 14, 1946, we request& your written opinion on the further procedure and disposition of seourities on deposit with this Department under provisions of Artiale 696ior Nstional Saviege Investment Conpang, SamHouston Underwriters, Inc,, andSterling Kational Co.

“In conversation with C, K. Ri.chards, it was suggested by himthat wetry to obtain more information concerning said companies, andaccordingly, wrote several letters but to noavail,Honorable Jesse James, Page 3

“Therefore, wehand you herewith copies and photostat4 of all information which we have be4n able to obtain, and await your further advice onthese 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 bythe provisions of Articles 696 to 700, inclusive, R. C. S., as weshall presently point out. These statutory provision8 are as followe:

"Artiale 696. Bach corporation, company or individual, doing business In this State as abond 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 bysaid Treasurer, the 5um or five thousand dollars, and shall d4p,44~itsni-ennu4lly with said Treasurer, in o4.4.bor srmwritierp to be approved by said 4rnoer, t&apsr orsft or cl1 m4tpruiums rr.rZted @Al tIww d,#?oalit,duowits to on4 hundred thous4nd dollar+.

“Article 697a 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; andthe Attorney General shall upon information therror, bring suit In the 

### nameof the State to Hera such oharter or certifiaate of incorporatlo@ drelared forf4it.4d, @ the oourt, upon w $iaQfql, sbak3. Qaelore a4gsficharter 

### fertiit# aaQapp&nt 4r,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&soourt shall out sf 1u4pqil ua44ta maka equ,tebllr oompensation for the r4o4irer,

“Articls 

### 898. In 4444 or ths failure of 

### anysuoh 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 upits affairs, liquidate its debts, and distribute its assets, using therefor, upon the order of the court, the deposit previously madewith 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 madeupon the Comptroller by said receiver, approved by the court,

“Article 699. Onrequest 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 onthe written advice of the Attorney General,

“Article 700, If anysuch company shall oease to dobusiness in this State and satisfy the Comptroller andthe Attorney General that it has noliabilities in this State, the Comptroller ahall **issue** his warrant to the State Treasurer; andsaid 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 Companyv. Sheppard, 117 S. W. 26 770, 116A. 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 abond investment oompeny to place oash or certain securities with the State Treasurer, in the sumof $5,000, es a deposit; and to deposit semi-aniwlly ten per **c4nt.** of all net profits receirod, until the sumof $100,000 is deposited.
I’(2) To require the Attorney General, in the event anysuch corporation shall fail to makesuch deposit as required, to bring suit to have the charter of such company declared forfeited, and to have a receiver appointed forHonorable 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 msdewith 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 dobusiness in this Sta& eandshall 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 6.96desaribes howthe deposit shall be made. Articles 697 and 698 provide for the appointment of areceiver in the event that the oompany feils to makesuoh a deposit, or in the event or the raflure or such ooapany. It doea not appear ,from the information before usthat any reoeivershlp prooeedings ,have, up to this time, been instituted as to.any of the oompauiea in question, hsnos Artioleo 6.97and 698 are not epplloabls and need not, for the punpose or this o,inion, be rurther oonridered. The same~~istrue or Art 010 698whiah

,! **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 wodeoldo this qu@rtion Wnbhu mt0 subrnltted. It dso8 appaar, howevrr, trat t’$cir right tc continue their oerporata a6t ritier have bew forreited for railurn to psy rran his0 *axes or 0Oh~rrraaaenai, E and that they are net ns 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 madeunder 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 Pub110Acoounts 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. Webhink 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 themin restohing a ocnolusian aa to whsther or not the provisions of Article 700have been met.

Fromthe information contained in your opinion request, it does not appear that eny demandhaa bee4 made.for the return of these aeourities by any party authorized under th4 stmtute te make 4damandard reeefre them, or that thera has heretofore been preset&ad to the Comptroller andthe Attorney General any iaieraeti~n uponwhich 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, anduntil this has been done, you are authorized to retain these securities as you have in the pan,t.

Wethink the case of Bankera Union Life Insurance Companyv, Sheppard, supra, affords asafe guide ror us in this matter; andwhile in that case the Carptroller was ordered to return the seou,rities by aarndamu4prooeeding 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 $6thea~aaemi*iw**, ot&ar t&4 ta ke4p thrm aea@W&g 4s gemhave In the Mast titil r4ecir4~hip proceedings are instituted as pr4rided for in Articles 697 and 69S, supw, Or until aproper #&owiag has been dladeto the Qomp~tro&lar.andAttorney General as provided for in Artlola 106, supra, whiah would justlip the Comptroller in i$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. Youwill 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 upby apprepriata lags& aotfm.

TheState Traaoursr is not authorized to nf turn securities deporit4d with himby oorpohtioU doing bwineso in this State aa a bond itiv%rtm%M company, or company to place or ssll bonds, cetifficates or debentures onthe psrti%l payment or installment plan, as required by Artiolo 696, R.C.S., except in reoeiverohlp pxowedi*err %ap*vi(d far in Artioles 697, 69&8T 709?r, RICiSI, or upcn a showing satisraotorg to t&4Comptrsllsx and th% Attorney General t&at ,gha6o~r@aTatlcn haolo%ssed to dobu&&nsso In tih@Stat,r **8Bd** has &wlieb1’1ltiu unsatirfi5d as requihd byOrtidla 760, R. C. S.
Your8 

### vary truly
ATTORBBY

0-L OFTBXAS

LPL:AldM:jrb Approved Opinion Committee ByBWB,Chairman