. . . . 

B ._ 

3 

, OFFICEOFTHEATTORNEY GENERAL OFTEXAS 

lWAWC.“AN” 

lnwaaY O‘IWI. 

AUSTIN 

. . 

HmesPber I+ 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 found pertaining to 

the oreation of privste Oorporatlonat (a) statutes authorlgin@ 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,, 

proerrlbod the moohanlem therefor, with Artiohe 4699 and 47,700 

enterbig n4t at all into their sreatlon. 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 $arport to alter the node 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 beofamoe the aonoluelon that the general aorpora&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 au i etituted for and to aeeum the dtltilbe of the irclorotary of Stata 

in effeetlng the proriniom~ of Chapter 2 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 the nogatlre. 

To hold othsllusiss would be to eay that tlt1o Inouranee eompanier mast iaveet part of t&lr aeeets aoaorbing 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 assets would 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&en 3.8 &ma 

with life and eesualty insuraaoe ooinpeni~~. 3isoe title issurenoe :a ouwaotiy bmwn to be a type of lnauranoe ln rhioh 
HonorabLe 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 many addltlooal aotiritiea. Moat of 

theee addItIona notlvities, if standing alone, rould not be 

ragulated by the State. If Artiolee 4705 and 4706 wore to 

be lmpoeed on these eoqmnlae, these aotititiee ae wall ae 

the title lneunmoe business would be eubjeoted to extreme 

regulatl on. It aeama reasonable to believe that the Legilaturs 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 other aotivltie5 oi euob otapaaleer 

1IInally. our oonolusIon is etremgthaed by the eskbllebed praotioe of your department. Although pour orIgIna 

opinion requeet aekad *. * . %a our oonetruotIon oorreot that 

(Artlole 1302al me&e8 the provIeIone oi 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 *erroneoue and iaad+ertentw. Aaaepting 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 mfnimum of ~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 
Iimoreble 0. 3. Lookhart, Ghdam&n, PW3e 4 

roe1 eatate, (b) real estate purohaee oontrerote, 

and (0) notes or other sohetary obligations aeoured by rlret lfen upon reel e&ate, 8~ of all 

, .three of whloh are loocited in the State of IZew 

Sexloo end some i!:: the Stata of Texas. Of oourae, 

before either atmrtering or llaensfne, this Company, 

this Department will disohergo its responsibility 

of detar?airzi~ whether or not that assets so llsted 

in the eoheduls to the ai'fidavit &re actually valid 

fee tiblee, real estate purohaase oontraota ehd obll- 

&etIons eeoured by first liens upon reel estate, 

ar?i! tho ioautioh thereof (whether in Texae or New 

%exLoo) and the value thereof. Sut, for the purpoee 

of detarmIniu$ the legal elirsibility of the various 

olasses of assets so tendered In payment of the authorleed oapital atook and the eurplue funds whioh 

may be set u;l initially in lncorporatird this Company, we ask you to amwer spebiflcallg the folleuln,g questions Ln addition to those mopouhded heretofore, regardless orwhether you hold Artlolee 

4705 and 4706 applioable, or whether you holo Artlole 1302A or some other article or artiolea af 

the at&&es a~)glioabla, wItArefcrer;oe to the in- 

-vestment of the oaplte.1 arti surplus Amds ljf tiiis 

Company; 

Are foe title.9 to ret31 estate situated 

in Ye% ell,yible to be received In noymnt of the 

oepital stool, funds of this Company? 

'53 . Cm Tee titles to real estate outside of 

I'exns be reoei~ved in p!lyr;lent of capital stook of 

t&is hmpsr.y~? 

V. Can fee titles to real estate In Texas 

be aocepted in pnyuent of aurplun fuui?s of thla 

GOElQW$? 

"3 Can fee tItlei to real estata outs&do of 

'1'emw bi aoce2ted in pn;rLlent of surplus of this 

Company? 

"Es. Can real eatate QUrOfMie OontlYiOt8 UWSl 

real )ropertf in Texas be aoospted in pa~wt Of 

oapital stoc, of this Sompe~? 
Eonosablo 0. P. Lookhext, fihalm, Peg* 5 

“P. Can real r&ate puroherre oontmeta upon 

t-1 property sl tunted ootsldo OS Texas be sooepted in payment or oapftal atoek o? thla Company? I . 

*a. Ccc real e&&e purohass oontrriate upon 

property in Terser be aoooyted in payment car mmplus 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 abhor obli&ations rwurod 

by firat llcnr upon real e&eta eltoated outsid* 

of T~JRLII bs noolted In payment ot aapital atook 

or thi6 COIWBQJT 

% Urn notes er other obligatlone wowed 

by ntlel lleiicl upon real ootetr dtlueGo4 ln %wwl 

be reoslred In 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, 

sitwe tkm term Veal eetate purohees 00ntra&8w JOal 

not Q 1 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, 

1 
Honorable 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 the property 

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 by eaah, end the 

aaouat paid by @+a&~ 

“3. T~Q each value 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 @md 1360 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, 

anlese the lands .RO ,ptarQhaae4 am neoossary to 8~ 

able suoh oorporatlon to be, bualnes8 in tbls Xato, 

or exoept where: 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.0 do 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! otherwlso 
lionorable 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 iana aray be aoguir8a, 

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

1enEa so aaqulrsd whicrh am 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 l ame 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 holding land8 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 muoh Borporation 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 many years 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 

We oe~ find no law requiring the refusal of a oorporato aharter 

bsoeusts a portion of its oepltal etook haa bsm purah&ued with 

realty uhioh ths corporation is 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 .&astion 140. 

we enswer subdivisions A, 3, C, 

9 in the afr~rmatire. 

-. . For tht roaaOm above state9 and f3r the additional 

reasori that private oorporationa are mder uo disablllty with 

respeot to aoc',uirkg and hdding r,otas oeaurod by first ilens 

upon realtp, subdivisions I, J, E Eudi L or 2leotion Ho. 9 are 

also answered I.B the afflrmatioe. 

Trusting that the r0rbg0ia fully answrs your fnquiriee, we are 

, 

R. Ceaab?aorhud 

Asielstsnt