. . . . B ._

3

, OFFICEOFTHEATTORNEY GENERAL OFTEXAS

lWAWC.“AN” lnwaaY O‘IWI. AUSTIN

. .



### HmesPberI+ 19k2,ru tioas 

### 7 aa4 9 in oar our **neon~a*ratl4** 

### slt.h&ma and this-. ,i.;

**Two types**  **of etatutoe**  **are fo**  be 

### foundpertaining to **the oreation**  of **privste** 

### Oorporatlonat **(a) statutes**  authorlg**in@ ths**  **oreation of**  eoorporatioas for **etated ~~rpoaes,**  

### and (b) **statutes presoribfw**  the meohanlam fir sffeati~~ the incorporation. 

### Prior to the 

### paaeag@of ~~rtiole 1302a, 

### :je6tlon 57 of

.-- Artfole 1302 cuthorimd the inoorporetion of title fnnurano~ eoc~plpaniee

and the provision8 of Chapter 2 of Title 32, R. C. s,, 

### proerrlbodthemoohanlemtherefor, 

### with Artiohe 4699 and 47,700 enterbig 

### n4t at all into 

### theirsreatlon. Seotion 23 of Artiale 1302a removed seation 57 of Art1010 1302 a8 en authoriaation for the orentlon of sueh eomppaniee, bnt with oertaln ex- ~optiione (6. $. 

### rjscrtions 2, 6, 8, 10 **mad** 

### 121 hrtlole 1302a 

### did not $arportto alter thenode **br** 

### whloh ewh ompanies are ore- ~~~forth wqloy the msahanlem of Artieloa 4699 and 4700

If the Legislature had **intended** that euoh 

### 0omp6niee 8.8~ reasonebls to a&sum 

### that 10 rotid hate sxplioltly Lb it provided. In the abeenee of euoh a provision oa~polllng be

### ofamoe the aonoluelonthat the generalaorpora&n laws ofmtlnuo ti9 govern the creation**0r** title lneurfinoo ompaniee insofar ae they arm not inmmeleteat with the 

### l xplioit provielone of Artiolo 1302ar It will be 

### notlord that 

### by virtue of Seotion 8 

### of Artlale 13028, the Baird of Ineurenoo 

### Commieeionere is +a&- ed with the duty **of** filing the charter8 of suoh o6nesqnentlJr, whenever 

### appropolato, eafqmniee the Board is to **be** aui eti

### tutedfor **and** 

### to aeeum thedtltilbe of the **irclorotary** 

### of Stata in effeetlngtheproriniom~of Chapter2 of Title 32.

This oonalorritm nmkae iqoeeible the appllaatfon 

### of hrtlolee 4705 and 4706 to title **inaunlooe ootnpaniae~**  **oonsc** 

## qaentiy, **iiueetion Bo.**  **7 %a** 

## tmaered in thenogatlre.

To **hold** othsllusiss would be to eay that tlt1o Inour

### anee eompaniermast iaveet 

### part of 

### t&lr aeeetsaoaorbing to **Artlola** 1725 **(per** Sootlen 6 oi Artiale 13026), tbat they may imeet m.rt of their oapital etook in an ebstraet plant, **that** thsy must invast the remainder er their capital stools in the it- enumerebod br Artiole 4705 that they must invest thalr surplus aooordi~ to Artiole l+7& and, flr~ally, that they **mat** invest their prsnium reswvoe ae~tlding to btfole 4725 (per :*otlon lo of 

### Art&ale 13021~). Such segregation and earnarking br 

### assetswould be 

### well nigh l;nPosslble to sstablleh and al&ala and nould result ifi the Tegdfation Of the in*@&- manta of these oompnies to an extant **far** 

### +waaCsr t&en3.8&ma with life and eesualty insuraaoe ooinpeni~~. 3isoe 

### titleissurenoe :a ouwaotiy bmwn to be a type of lnauranoe 

### lnrhiohHonorabLe 0. PI Loakhart,~ Ghairrman, Paga 

### 3

the risk of lose is very anall and in whloh the pramIume are very large 

### In aoaparlson 4th lose p-to, 

### It Is unlikely that tha Legielatura intended euoh 

### a high degree of regulation.

. . Mareavar, it is oom63on kncnuledga--and Artiole 

### 1302a epeoiiloally rseognfzes-that aarupanlsa doing a tit3.a Inaursnoa bueineee oonduot manyaddltlooal aotiritiea. Moat of theee addItIona notlvities, if standing alone, rould not be ragulated by the State. If Artiolee 

### 4705 **and** 

### 4706wore to 

### be lmpoeedon these eoqmnlae, these aotititiee ae wall ae the title lneunmoe business would 

### be eubjeotedto 

### extreme regulatl

on. It aeama reasonable to 

### believe that theLegilaturs Intended that the rsserves e5tablIehad by **ssotloae** 

### 6 and 10 oi Artiale 1302a should isolate a portion of the aeeets of theee o~paniee for the proteotlon of the holder8 of title Ineurknoe peliolee, and that tha 

### ramfader of such aeaeta should be rree and unencumbered for uee In the 

### otheraotivltie5 oi euob otapaaleer

1IInally. our oonolusIon is etremgthaed **by** 

### the eskbllebed praotioeof yourdepartment. Althoughpour orIgIna opinion 

### requeetaekad *. *

. %aour oonetruotIon 

### oorreot **that** (Artlole 

### 1302alme&e8 the provIeIoneoi Artlola 4705 applioable

. . .I rour let&jr oi iGore!nber 4th **atatee** that you have never ocmsidereQ Artloloo 4705 en4 

### 4705 applioable ts title lneuranoe osmpaales and that say 1atImatIon to the sentrary la your orIginal **letter** was 

### *erroneoueand **iaad+ertentw. Aa**  aepting your met reoglt letter a5 

### eabodpl~ a oornet etatalosnt of your departrmntal praotloe, It Is aignifloant that during the thirteen **yearn** einoe the passago of Artilole 13026 the Legielature has never sawn fit to questlon or **to** alter your praotloe. 9uoh an aetabllahed. oonstruotltm whan ooupled wIt& aelaplete Leglalati*e eilenoe and, praeuniablr, aoquloeoenoe lends weight to the opinion above axpreeeed,,

;Zn,etion fzo. 9 In Opinion Blo. 0-4587 wsu aopleb tram your su;.plementsl ra;luest for oplnlfm and reads ae followar

*In studying the sOhsdtis 0r e5eets aoooapanyfw the affidavit of the inwrpomtare, whloh asset5 will be tenderad in paymant of o.apital etook and surplus (b&ore aotual fllln& the ohar5er wi31 probably be rewritten sa tie to divide theee a5ueB6 up 

### into a mfnimumof ~100,000 capita.2 stook and $5,000 au~lue) wo observe t&t tha aaseta are affirmatlvsly dI50105ed to ambrace (a) fee 

### titles to

### Iimoreble0. 3. Lookhart,Ghdam&n, PW3e 4

roe1 eatate, (b)real estatepurohaee 

### oontrerote, **and** 

### (0)notesor othersohetaryobligationsaeouredby rlretlfen uponreel e&ate, 

### 8~ of all

, .threeofwhloh are loocited **in** 

### the Stateof IZew Sexlooend some i!:: the Stata 

### of Texas. Of oourae, beforeeitheratmrteringor llaensfne, this Company, thisDepartment

will disohergoits responsibility 

### of detar?airzi~

whetheror not that assets so llsted in the eohedulsto the ai'fidavit &re actuallyvalid fee tiblee,real 

### estatepurohaase oontraotaehd obll- &etIonseeouredby first liensupon reel estate, ar?i! 

### tho ioautiohthereof (whetherin Texae or New 

### %exLoo)and thevalue thereof. Sut, 

### for the purpoee of detarmIniu$the legalelirsibility of thevarious olassesof assetsso tenderedIn paymentof the authorleedoapitalatook and the 

### eurpluefundswhioh may be setu;l

initiallyin lncorporatirdthisCompany,we ask you to amwer spebiflcallg the folleuln,g questionsLn additionto thosemopouhded heretofore,regardlessorwhether you hold Artlolee 4705 and 4706applioable,or whetheryou holoArtlole 1302Aor someotherarticleor artioleaaf the at&&es a~)glioabla, wItArefcrer;oe

to the in- -vestment of the oaplte.1artisurplus Amds ljftiiis Company; 

### Are foe title.9 to ret31

estate situated in Ye% ell,yible

to be receivedIn noymnt of the oepitalstool,

funds of thisCompany? '53

. Cm Tee titlesto real estateoutsideof I'exns be 

### reoei~ved in p!lyr;lent of capital 

### stookof t&ishmpsr.y~?
V. Can fee titlesto real estateIn Texas be aoceptedin pnyuentof aurplunfuui?s of thla GOElQW$? 

### "3 Can fee tItleito real estataouts&doof '1'emw bi aoce2tedin pn;rLlent of surplus 

### of this Company? "Es. 

### Can real eatate **QUrOfMie OontlYiOt8**  **UWSl** 

### real )ropertfin Texasbe aoospted in pa~wt Of oapital stoc, **of** this Sompe~?**Eonosablo 0.**  **P.** Lookhext, **fihalm, Peg** * **5**

**“ P.**  Can real r&ate puroherre 

## oontmetaupon t-1 

### propertysl **tunted** 

### ootsldoOS Texasbe sooept**ed** in payment or oapftal atoek o? thla Company? I

. *a. Ccc real e&&e purohass oontrriate upon property in Terser be aoooyted in payment carmmplus or thfe Conpany? *Ii. Can **real** estate purohane crontraets **upon** real property outside **of Texas**  

### be **aooepted in**  **pap mont**  **ot surplus**  **or tblo**  **0ompeuy?**

**“ 1.**  Can notes or other aonetary obllga6loxm oeoured by flrsrt lieno upon real eatate in Toxea **be** reo@lVed In payment bf aepitel etook of thir ~on?panjl "J. 

### Can notea or abhorobli&ationsrwurod **by** 

### firat llcnrupon real e&eta eltoated outsid* 

### of T~JRLII

bs **noolted** 

### In paymentot aapital**atook** or **thi6** COIWBQJT **%** 

### Urn notes er otherobligatlonewowed by ntlel 

### lleiicl

uponreal ootetr dtlueGo4 

### ln %wwl be reoslredIn papant of surplus of this Compenfp

Can not&r **aad** other obligations seaumd by Xl::; liaw upon real 8stato 

## slteetod **outadd.** of Toxne be roooirod in paymod of tha mrplur oi thLs Coup?'

and El %o do not attempt to answer subdiridona X, IT 0, 

### sitwetkm term Veal eetate purohees 00ntra&8w JOal 

## not 1 Q te this departma& sufrllelont feobl upon which to hew **en** 

### opinion. Alao M are dlsrsgaraiag the phraao “or otiwr mnetery obllpatlone* oonteined in su$dlvlsiona I, J, K end L, **beomae muoh**  phraoe **is too**  **indefinite to**  **be** the bar18 Qf M opltion. The protlaion~ in the genowl odap~mitlon Iawn reletlve to the wsaipt of property for oapital **8teOk** em four@ In Article **1308r**

"Ax% 1306. (1125-1126911273 Cepfkal &oak.-- Ekfore bhe aherter of a ptlvete oo?poration omated ior profit can be tiled **by the**  **S;sOfe~ry of**  **%ate,** 

# 1Honorable 0. P. Lookhert, ChaIracm, Pago 6

the full amount of itr authmised oapltal **stook must**  be in good faith subaorlbed **by** It.s Dtockholderrr end fifty 

### per Cent thereof p&Id in aash, or its squiva-.

. . lent in other property or lnbor **done,** the produot of wblcb shall be worth to the cmpeny the aotual value at 

### whloh it was taken or **et** whiah 

### theproperty wacI r0oeim34. The afTldavlt **of** tihoar who 

### exeeuted the absrtcr shal.l be **famishad** 

### to the i>earetery of Stats, ahawlngr *1. The news, resldonoe and poatof'fioe eddress or eaah eubsorl8er to the aepltel atook ot suoh oonpauy~

“2. Th8 amount 8nbrorltmd 

## byeaah, end the 

## aaouatpaid **by @+a&~** 

“3. 

### T~Q eachvalue of any property 

### reoeirrU, p,i~ina

its 

### desorlptlen,

location **end** from whm end the pAor at whloh It war .noalred; *4. The amount, ahemotor end value or 

### Ubor done, tron whom,~

aad prloe et whleh It we$ reoeived, (Aotis 1901, p. 18; Aote 189 , p. 192; ziote 1907, p. 309; 

### 0. L. *ol. 10, p. 246. ” ,I It ~$11 be **notiwd tlmt**  **this etatute**  eslploye the word “propertyR without ettmptlse: to 8peoiSy psmlsalble kinde of property. Bcwstm’, **Artials8** 1359 @md1360 p~‘@Vide: -.Y+ *Article 1359. (11751 Condltlon8 oi purehaee.~

.’ Eo private ooxporntlon @hell be pomitted to pu+ obase any lands under any proolalon **of this**  **ohapter,** 

### anlesethe **lands .RO** ,ptarQhaae4 **am neoossary**  **to 8~**  able suoh **oorporatlon** to be, bualnes8 in tbls Xato, 

### or exoeptwhere:

s?loh land 1s purohased in due **00~Wae** of busisess to ~eouxe thr payment **of** debt. **(A&8** Ig93, p, 36; Aota t897, p. 48; 

### 0. **2.** 

### vol. 10, 19. 466, 1102.)

- aArtlala 1360. (11761 Sale of **surplua.-4ll** prIvat,s aorpomtlons eutborleed by the Lawa of 

### Terna, ti.0do bueinese in this %ate, wt.otie i4.n purpos* 16 not the aoquisltion ox cmnrsshlp oi’ lands, tiubieh have or my aoq,ulre by lome, purohssa OX!

### otherwlsolionorable 0. ?. LdthWt, Ohhaim, %ge **7**

&ore iand thnn is MlsessiHuy to **enable thm**  **to oarry**  on their bu#lnese, ahell, withsn fiit8Oll y0ers Proa 

### the date said 

### ianaaray be 

### aoguir8a, 1 *in @me faith sell -8 UonVey in **f88** siDlple all 

### 1enEa so aaqulrsdwhicrham not neaeesary far thn twnnaction of their buainesa.n And **Artiole 1364**  **dealarea t&t:** 

“Art. **1364.** 

### (1160) **E88heat** 

### pm000aingO.- All oorporetiona holding l~da ooctrary to the ~rotialons of this law oball hold the lame subfsot to forfeiture alta amheat prooeebinge. The Attorney General, or any dlstriot or oouaty ettoraey, when either of them haa roaaon to beliers t&at any oorporation is 

### holdingland8 fn violation or tale law shall iLnetltute suit in the name 

### oi **the State**  

### 0r Ln*, in Tray18 Couatp, 

### or In mf oounty in Texas where muohBorporation mar hare aa 

## agent, or fn any county whore anr part OS the laml ianr be SittuRt8a, againat auoh oorporation, a@ 58 **provided for**  **the em&ant**  **at eat&er,**  

### or a0008i8di **persons Uping**  **dthout devise**  **thereof** and havi helm. (Act& 1893, p. 36~ 0. L, nel.. 10, p. **z6ya** In the oa8e at **Campbell v.**  **%a& 35**  **S. W.**  **(24) 9)**  (Cam. App.), the **oourt raldt** 

V@r manyyears it haa beea the eetabliahed polior **of our**  stets **to prohibit**  oorporationm, wiQh oertain exceptlone, iron! aequlrlng land.

. . It fs true, a6 argued br the plalntirfs In. error, that if the oorporatioa has **oonmunimted the**  deal by **acquiring** the lasida no oae oouk? **hey8** questioned lte title sxoept **the 8tat8.w**  Weoe~ find no law requiring the **refusal of**  **a oorporato**  **aharter bsoeusts**  a portion of its oepltal **etook haa**  bsm purah&uedwith realty uhioh ths 

### corporationis not **authorixed** to ho&l. In aooordanoe with the **language** of the above case, we feel **that** the aoquisftlon or such property my only **be** 

### questioned**by the**  State through es&eat proaeedlfqs uuder ArtioZe **1364 and,**  **in** an appvpriets case, through q&tra rims prooeadlngs.

It wllf ruther be notloed that Article 1306 

## doe8 not ayeo$fy that grope&y 80 rrooived &all **be** looatsd within

### Honorable ;I. 7. Lockhart, 

### Chairman,Pa@ 8

the state. 

### 'onse:~uerMy and r?of 

### .&astion140. we enswer subdivisions A, 3, C, 

### 9 in the afr~rmatire.

-. . For tht roaaOm above state9and f3r the additional 

### reasori that private 

### oorporationa are mder uo disablllty with respeotto aoc',uirkg and hdding r,otas oeaurod by first ilens upon realtp, subdivisions I, 

### J, E Eudi L or 2leotion

Ho. 9 are alsoansweredI.B

the afflrmatioe. Trustingthat the r0rbg0ia fullyanswrs your fn**quiriee, we**  are

, 

### R. Ceaab?aorhud Asielstsnt