THEAVTORNEY GENERAL 

OF ?rExAti 

'WILL WILSON 

A-l-X-O- GENERAL April 23, 1959 

Mr. William A. Harrison 

Commis5ioner of Insurance 

International Life Building 

Austin, Texas 

Opinion No. WW-602 

Re: What constitutes Uoae building 

site and office building” as used 

in particle 3.40 of the h~surance 

Dear Sir: Code. 

You have asked the opinion of this office as to the definition of 

the phrase “one building site and office building for its accommodation 

in the transaction of its business and for lease and rental” as used in 

Article 3.40 of the,Insurance Code as well as its application to a specific fact situation set ,out in your opinion request a6 follows: 

“Attached hereto you will find a photostatic 

copy of a plat of a certain city block. The entire city. 

block, is now owned ,by XYZ Life Insurance Company. 

On tract ‘A’ is a twenty-story steel frame brick building which is the home office building of XYZ Life In- 

‘,:, surance Company. The company acauired tract ‘A’ on 

December 27; 1950, at a cost of’$575,000. The building~was commenced in January, 1952, and was completed in February, 1953. At the present time the uppeer nine stories of the building are under a thirty year 

lease to one tenant, and the remaining eleven stories 

are occupied by the insurance company and tenants 

who have short-term leases. The insurance company 

occupies space on seven floors, which if consolidated 

would take up only a little more than three floors in 

the building. 

“Tract ‘B”is an ,unimproved concrete and dirt 

lot, an undivided one-half of which is gowned by Company XYZ and is used for access and parking area. 

One-half interest in this property was acquired by the 

company on February 13, 1953 for a cash consideration of $125,000. 

“On tract ‘C’ is a si%-story concrete parking 

garage building which is owned by XYZ Life Insurance Company. The tract of land was acquired by the 

company on December 27, 1950, for a $230,000 cash 

payment. Then parking garage was commenced in January, 1952 and completed in February, 1953. The garage 
Mr,. William A. Harrison, page 2 (WW-602) 

is a public parking facility and the’ income from,,+ operation accrues ,to the insurance’compauy. 

“Tract ‘D’ wa,a acquired in two parcels, the ,first 

J ‘. being on April 1, 1957, for $243,000, and the second par- 

‘. ccl on April 1, 1958, for $77,5,000. 

“Therefore, Company XYZ, since the purchase of 

,” one’ori,ginal building sits or.December 27, 1950; a& the ,’ 

completion of the home <office building and,parking garage 

in February, ‘1953, hasp made di,rcct cash purchases of the 

various remaining tracts within the City block on different . I 

dates and in varying amounts. The total investment by 

the company in the properties is $7,912.983.10..,, This doee 

not exceed the percentage limitation in Articie 3.40.~,: 

‘. 

.: 

Company XYZ has indicated that it propbses to 

enter into a long term lease with a building corporation 

under the. terms of which the lessee will erect a thirtystory office bui.lding on tract ‘D’* The new building will 

be ad’jacent to aad connected with the present home office 

: building of the insurance company and\the parking garage. 

Company~ XYZ will have an option to purchase the building 

from the lessee.” ,.I : 

4,’ 

, 

l 

Statutes governing Insurance companies have uniformly contained 

limitations on the amount of real estate which such companies may acquire. 

the manner of its acquisition; and time limits within which they must dispose of property whose initial acquisition was permitted but the continued 

retention of which by the companies,was prohibited. Article 3.40 of the 

Insurance Code is a representative example: 

“Every such insurance coFnpany may secure* hold 

and convey real prop,erty only for the following purposes 

and inthe following ‘manner: 

“l(a). One building site and office ~building for hits 

accommodation in the~transaction of its business and for 

lease and rental; and such office building may be on ground 

on which the company owns a~ lease. having not bless than 

fifty (50) years to run from the ~date of its acquisition by 

the company, provided that the company shall own, or be 

entitled to the use of. all the improvements :thereon. and 

that the value of such improvements shall at least equal 

the value of the ground, and shall be not less than twenty 

(20) times the annual average ground rentals pa’yable under such lease: and provided such office building s,hall 

have an annual average net rental of at least twice such 

: 

! 

, 
. 

Mr. William A. Harrison, page 3 (WW-602) 

annual ground rental; and provided further, that such company shall be liable for and shall pay all State and local 

taxes levied and assessed against such ground and the improvements thereon, which for the purposes of taxation 

shall be deemed real estate owned by the company. Provided that an acquisition of such an office building on 

leased ground shall be approved by the Board of Insurance Commissioners before such investment. 

I. 

. . . 

“2. Such as have been acquired in good faith by 

way of security for loans previously contracted or for 

moneys due; 

“3. Such as have been conveyed to it in the satisfaction of debts previously contracted in the course of its 

dealings; 

“4. Such as have been purchased at sales under 

judgment or decrees of court, or mortgage or other liens 

held by such companies. 

“All such real property specified in Subdivisions 

2, 3 and 4 of this article which shall not be necessary for 

its accommodation in the convenient transaction of its 

business shall be sold and disposed of within five (5) years 

after the company shall have acquired title to the same, or 

within five (5) years after the same shall have ceased to be 

necessary for the accommodation of its business. It shall 

not hold such property for a longer period, unless it shall 

procure a certificate from the Board that its interest will 

suffer materially by the forced sale thereof; in which event 

the time for the sale may be extended to such time as the 

Board shall direct in such certificate. As amended Acts 

1955, 54th Leg., p. 916, ch. 363, § 13.“. 

f 

This particuls& statute is somewhat different from that of other states in 

view of the rather,+uiique limitation “one building site and office building.” 

We can find no cases construing such a restriction in this or any other 

jurisdiction, nor are we aware of the existence of similar limitations in 

the insurance laws of other states without qualifying language allowing 

the acquisition of real property in addition to an office site where net- 

; .’ 

essary for the accommodation of the company’s business. Statute’s of 

r~ 

this, kind were primarily enacted in consort with similar laws relating 

to corporations generally and were designed “to prevent property from 

falling into ‘dead’ or unserviceable hands or to limit monopolistic ownership and control of the land by concentrated wealth of corporations.* 

Great West Life Assurance Co. v. Courier Journal Job Printing Co.. 
. . 

Mr. William A. Harrison, page 4 (WW-602) 

288 S.W.Zd 639 (Ky.App.). Following and as a result of the mellowing 

national attitude toward corporations many states have greatly liberalized by statutes the permissive real estate investments allowed insurance companies. This has not occurred in Texas. 

The forerunner of Article 3.40 was Article 3096m relating to 

home life and accident companies enacted in 1895. It provided in part: 

“Article 3096m. No home company shall purchase 

or hold real estate except for the following purposes and 

in the following manner: The building in which it has its 

home office and the’ land upon which it stands; such as 

shall be requisite for its accommodation.and the transactionof its business in this State, or any other state or 

country; such as shall have been acquired for the accommodation of its business; such as shall have been mortgaged to it in good faith by way of security for loans previously contracted or for moneys due. . .O” 

This provision was greatly restricted by the enactment in.1909 of Article 

4726, Acts 1909, p. 1.96, Sec. 11, relating to life, accident and health companies and expressly repealing Article 3096m: 

d., 

)’ “Sec. 11. Every such insurance company may secure, hold and convey real property only for the following 

purposes and in the following manner: 

“(1): One building ‘site and office building for its 

accommodation in the transaction of its business and for 

lease and rental. : Such as shall have been acquired in 

good faith by way of security for loans previously contracted or for moneys due. . 0 w 

That the provision as to “one building site and office building” was deliberately restrictive can be seen by the fact that corresponding statutes affecting fire. marine and inland insurance companies in effect for many 

years prior to 1909 contained no such limitation; nor did those statutes 

affecting casualty insurance companies.enacted in 1911. 

The modern judicial tendency has been toward a liberal interpretation of these restrictions. For example, it is now well settled 

that an insurance company operating under these or similar restrictions 

is not limited in the size of its building to a structure merely adequate 

to its then existing needs and no larger. Rather it may construct or ac-, 

quire as large an edifice as the prudence of its board of directors, and 

other applicable statutes relating to insurance company investments, 

dictate. Those portions of the building not yet required by the company 

itself can be made available to tenants. Vol. 18, Appleman on Insurance 

Law and Practice, Sec. 10,015, p* 62, Nat’l. Reserve Life Ins. Co. v. 
. 

Mr. William A. Harrison, page 5 (WW-602) 

Moore, 219 Pac. 261, Volunteer State Life Ins. Co. v. Dunbar, 181 S.W. 

myclopedia of Insurance Law, Couch, Vol. 1, Sec. 248, p. 585. This 

conclusion is reenforced in Texas by the addition to the statute of the 

words “and for lease and rental,” an appendage not usually added to this 

type of statute in other states. 

Likewise, the concept of what is properly within the meaning of 

the phrase “for its accommodation in the transaction of its business” 

and others of similar import has been greatly expanded by judicial 

construction. The purchase by an insurance company of a hospital to 

be u,sed primarily but apparently not exclusively for the treatment of 

its employees afflicted with tuberculosis was upheld as being “requisite 

for its convenient accommodation in the transaction of its business.’ 

People ex rel. Metropolitan Life Insurance Co. v. Hotchkiss, 120 N.Y. 

~UPP. 649 (1909) I . n tw o cases involving the proposed ownership by insurance companies of housing projects, such ownership being specifically authorized by the insurance laws in force, it was contended that 

this would violate constitutional prohibitions against corporate ownership of real property “except such as may be necessary and proper for 

its legitimate business” or not “actually occupied by such corporation 

in exercise of its franchise.* In both it was held that this’proposed 

use did not violate the constitutional provision, the rationale apparently 

being that it was necessary for present day insurance companies to 

have a large field of permissive investments and that by making such 

investments the companies were acting in furtherance of tlieir business. 

The fact that the real estate in question (now comprising one city block) 

has been purchased in piecemeal fashion over a period of time is entitled to but little significance in determining whether or not it constitutes 

“one building site.” An analogous situation is discussed in the case of 

Board of Ed;cation of Orange-County v. Forrest, et al., 130 S.E. 621 

jN.C.Sun.1. There the Board of Education selected a site for a consolidated school building containing slightly over six acres. This six acres 

was composed of two parcels of land s one of five plus acres and the 

other of 1.09 ac,res with a ‘“street, road or alleywayW intervening. The 

Board was able to purchase the five acres immediately and’proceeded 

to build the school building thereon. Being unable to reach an agreement 

as to price regarding the 1.09 acre tract, condemnation proceedings 

were instituted, such additional land to be used as a playground, It was 

contended that the Board was empowered to condemn only for school purposes or school buildings and was not authorized to condemn property for 

playgrounds contiguous thereto. The Court, however, points out that the 

Board is allowed to acquire title to “siteso” for buildings throughout its 

district and in this connection has the following to say: 

II 

a D s The meaning of the word ‘site’ as used in the 

statute is broad enough to embrace such land, not exceeding the statutory limit, as may reasonably be required for 

the suitable and convenient use of the particular building; 

and land taken for a playground in conjunction with a school 

‘. 
Mr. William A. Harrison, page 6 (WW-602) 

, 

may be as essential as land taken for the schoolhouse itself. 24 R. C. L. 582, B 31. 

“It appears in the statement of facts that the plaintiff, after deciding to consolidate the scho&. selected as 

a site for the building a lot of more than six acres including the lot in question; that upon the reasonable assumption that title to each lot could be acquired by purchase, 

the plaintiff erected a modern school building on the fiveacre lot; and that afterwards it~became necessary to con,- 

demn the lot in controversy. In all these matters the 

plaintiff was acting in the exercise of a discretion with 

which the courts seldom interfere. (Citing cases.) 

“Under the judge’s findings of fact the recess of 

acquiring title to the five-acre lot by purchd 

one-acre lot by condemnation may be regarded as separate stages m the accomplrshment of a common’purpose 

to appropriate both lots for the benefit of the school. 

Otherwise the plaintiff’s original purpose would’ be’defeated. 0 s 0m (Emphasis supplied.) -? 

It would appear then that the determination of whether ,=:&en tract of ! 

* land qualifies as “or@ building site” within the purview of Article 3.40 

presents a question of fact which must be resolved by you. . 

H&ever, it shoul& be pointed lout that the manner in which 

property is purchased is but:one of the factors which should be taken 

into consideration by you iA resolving the question. The matter is excellently summarized in Garfield v. Equitable Life Assurance Society, 

164 N.Y.S.Zd 823 (N.Y.Sup.), as follows: 

“Singleness is to be determined not solely by the 

purchase but by the plan as well and its essential and 

natural implications, its purposes and policy.n 

Of course, unrelated acquisitions of separate parcels of real estate which 

do not reasonably appear to be motivated by any particular plan looking 

toward their ultimate utilization as a 

of Article 3.40. 

““unitw would be beyond the purview 

What constitutes an ,“offlce building” within the meaning of Article 

3.40 likewise presents a fact.question which you must determine. 

In Rice, Att”y. Gen. v. Board of Police Com’re. of City of Woonsocket, 97 A. 19 (R.I.Sup.) it was contended that c&tain connected structures constituted a “building” within a statutory wrohibition against the 

issuance of a liquor license-for the sale of liquor in any build&g within 

200 feet of a school. The Court held that the structures in question represented three distinct buildings. basing this conclusion’on the following 
Mr.~ William A. Harrison. page 7 (WW-602) 

facts: “It was built at a different ti.me, upon a different plan, and for a 

different purpose. There is no interfor connection ore means of passage 

between the two.” On the other hand, we find the case ,of, State v. Crause, 

104 A. 525 (Me.Sup.)! which announces that~ ‘a bitilding~ may ‘constitute an 

entire block, consisting ofseparate and independent tenements, one~of 

which may be occupied for a dwelling house and another for a store? 

Citing State v. Spence, 38 Me. 32. 

An analogy to the restrictions of Article 3.40 is furnished by 

corresponding constitutional provisions and statutes relating to banking 

which contain limitations as to a “banking house* and engaging in business at more than “one place.” A proposa’$ to house banking facilities 

in a building to be constructed in the next block to the existing banki- . 

connected by pneumatic tubes and a closed~ circuit TV was held a violation of Article 342~903,in Attorney General Opinion WW-22. A similar 

addition, joined to the original by a tunnel below the street, was held 

within the statutory and constitutional limitation in Attorney General 

Opinion V-1046: 

r.. 

,. 1 

“if the new structure, when built, becomes a part 

of the bank’s ‘banking house’ then the proposed plan will 

not violate the provisions of said Article. 

“The contemplated new structure, although to be 

erected across the street from the original “banking, 

house,’ will be physically joined thereto by a tunnel under the street, which you state will be suitable for passage back and forth. It is evident that besides being 

joined physically, the new structure, including the passageway, will be in close proximity to the present building. It will be used in connection with the original building’ and as a unit will be devoted to one general common 

purpose. It is our opinion that the two structures will in 

reality be one and ‘when used in the manner proposed will 

constrtute the bank’s ‘bankmg house.” D 0 am (hmphasls 

supplred.) 

Also pertinent is Attorney General Opinion R-1746: 

“The emphasis appear%. to be on the singleness 

of the place at which then banking operation is conducted. 

. . . 

“The sole question is. then, whether the separate 

building or installation planned will constitute a separate 

place, or banking house or will constitute but a part of 

one place or banking house. To resolve that question 

will require an examination into all of the facts and circumstances throwing light on the question, many of which 
,.,‘.- 

Mr. William A. Harrison, page 8 (WW-602) 

, 

are not yet in existence. Physical proiimity will be but 

an evidentiary fact for c’onsideratiorl. Physical cdmmunication by pneumatic tube is of siinilex limited significance. Any hypothesis must neceesarily assume i&ention to use the separate ‘buildings’ at an integrated, single 

‘business location. Intention is’ always a fact question if 

disputed.” 

. . 

While obviously in the banking field the emphasis is not onthe 

singleness of the physical structur,e,‘the above are illustrative’of the 

liberality with which restrictions, of this type are interpreted and may 

be of some ,benefit to you in passing upon these questions,. 

We have been furnished :as. a supplement to’the bpinion request 

with. a brief summary of’various insurance buildings which in the past 

have been considere~d by the Board and, the Commissioners. A comparison of those which have been rejected .and those which have not shows 

that these matters have been treated correctly as questions of fact and 

the determining factor in each case has been whether or not the structure was considered by,the Bpard as an *architectural.unit.? 

In determining whether or not the pr’oposed plan comprises an 

“architectural unitm the Board has apparently taken into c~onsideration 

all the particular facts’ involved, such as its proposed use both present 

and future, its physical aspects, design and plan, the manner in wh$ch 

it was acquired, etc. 

. 

RVL:lm 

SUMMARY 

Whether or n.0t.a ,particular re,al estate 

investment of a’ life insuranc~e company 

constitutes “ones building site and office 

building,” as the phrase is used in Article 3.40 of the Insurance Code, is a ques-, 

tion of fact for determination by ,the Cornmissioner of Insurance. 

Very truly your.s, 

WILL WILSON’ 

as 

BY 

. 
Mr. William A. Harrison, page 9 (WW-602) 

APPROVED: 

OPINION COMMITTEE: 

Geo. P. Blackburn. Chairman 

J. Arthur Sandlin 

William R. Hemphill 

Tom I. McFarling, 

John Reeves 

REVIEWED FOR THE ATTORNEY GENERAL 

BY: 

W. V. Geppert