Hoaorabie 0. P. Lockhart 

Board of,Insurance hmissfoners 

Austin, Texas 

Dear Sir: opinion Ho. o-3979 

Rer The duties of a receiver and 

the fuuotion of the Attorney General. 

Your request for nn eplnion has been reoeived by this department. 

Delow we net out the body of your letter. 

"Thfs letter will be acco~~~ied by a 26-page report of the investigation 

of theaffair. of the Southern Underwriters and the United Employers Casual* Compauy of Houston, Texas, the latter now in reoeivership and in 

process of liquidationby uur Consemator, Mr. Vi11 0. Knox. 

"Please study this report and, assuming the findings oan be substantiated 

by legal, competent proof, pleaee give us your opinion upon the follwing 

points in ocnnection with the matter refleoted by suoh report. 

"1. Was the aapital stock of the United Employers Casualy Company 'subscribed in good faith and fully paid for' a6 required by Artioles 4991 

and 49931 

“2. Do you think it lawful and proper for your Department to institute 

and prosecute a oivil aotion for the recovery of $ZgO,OOO subsoribed 

oapital atook, and for such other srprs as may be recovered from+hose 

who appear to be liable therefor asreflected by tie report and as may 

be found by further imvestigatiom, such suit to be filed on~behalf of 

the State and this Board for the benefit of the oreditors of the United 

Ymployers Casualty Company?' 

“3. Do you find that the provisd.ws of any ariminal'or penal laws of 

the State have been violated by any persons in the transactions reflected by the report, ,and if so, 611 your Department alone, or in oonjunction with the proper subordinate,>er local prosecuting atterneys, institute and prosecuteto a final eonelusion the meoessary criminal proceedings?" 

A epitome of tho report mentioned im your letter, in so far as 

it oonoerns our question, is as follO~.S: A, and associates, proposed to 

organize and promote Y insurance Company. B, the principa, stockholder 

in X Insurance Company, alledgedly leans A, and associates, money which 

is deposited in a bank amd represented to be subscribed and paid-up 
- 

. 

Hon. 0. Y. Loakhart. page 2 (O-3979) 

oapital stook of i-ho Y Iusuranoe Compauy. On the b@mia of aa affidavit 

sipsd by the bank presidst thnt tha msnsy bsloagsd ts and was at ihe 

disposal of Y Insurance Company, ths latter company is granted a ohartsr 

and a psrmit to do business in thir Stat.. A wd assosiatss than agres 

to b\l(y a building from X Insuranss Cs8~. (h that suy day, Y aonpany 

withdraws by oheok the entire au~unt pariously on dopssit. The oheok 

Is sndorssd by B. 

Your question nusberad on iaquirss if X wmpa8y.s sapital #took 

was "subsoribsd in good faith and fully paid for" as required by statutory 

provisions. It is the considered opinion of this doprtmwt that the question is one of oaot, and, in aooordana ulth doparWsntal pliq, ~6 must 

dooline to pass upOa it. 

Your question nuukred two rsquests this deparknt's opinion as 

uhether or not it would bs lawful and proper for tha Attomy Caneral to 

instituts oiril prooeedingr, looking ts ths rowvery of the alleged oapital stook of the saw for the bsnefit sf the wsditors of the defunot 

oonoern. We have bssn unable to find upr statutory prmision ossmanding 

or authorizing this dspartuent to intsrasds oa behalf of tho orsditers 

of a defunct inmrauoo oompsw. This iunotion rould appsar to ba the. 

positive duty of the Liquidator prsvidsd for in Artiols M)680, Vornon*s 

Annotatsd Civil Statutss. The psrt$nrt, part of that Article reads: 

'The said reosiror and his mooemors in offiss sbll he wstod v opsration of law dth the title ts all of the propsrty, oontraots and rights 

of aotion of sush insursri . . . 

"Upon taking possession of the assets of a delinquent insurer the reoeivl r shall, subjoot te the direotion of the osurt. imnediatoly proaeed to 

oonduct the business of the inqurer, or to take suoh step8 as may bs nsssssary to oonserVe the assets and proteot the rights of pelioyholdsrs 

and olaimants for the purpom of liquidating, rehabilitating, roinauring, 

reorgsnixing, or oomervimg the affsirs of the insurer. . . 9, 

the oapital stock of any oorporatisn is irrevocably dedioated to 

the satirfaotion of all the Obligation6 the oonsarn My assuue. It is 

the ummt of money oontributed by the shu6 omers 66 the flnanoial hEi 

for the proseoution of tha oorporats business. It is for the soourity of 

ths publis rho ahsose to transaot buSine86 with that prtioulu oonoarn. 

'Ihe liquidator or nseivsd is ohargod dth it8 oontrol and adninistration 

for the banefit of ury olaimant or oroditm of ths oorparation. The 

Stat0 as a gorsmusntal agsn0y has no fimatoial interest in *s oapital 

stock. I%O rights of ths individual 'alai-f will hs adequatsly pratsotad in this situation by the 8tatutory liquidator. 
. - 

Hon. c. “. Lo&hart, p*ge 3 (O-3978) 

Y&r third question inquires if any ariminal or penal 

statute has bean violated. If so, you ask if this department will 

conduat,a prosecution. We advise that this should be discussed with 

the ~local prosecuting attorney who is expressly charged by statwte 

pi& the conduct of any ariminal proseoution. 

Yours very truly 

ArlTORNiY GENEBAL OF TEDS 

~% /a/ lb* J. 'Fanning 

Wm. J. Fhnning 

Assi slant 

% /8/ Gnlndy m.1lia.m 

Grundy Williams 

Opinion Conmittee 

ByBWB 

ohairman