Mr. William A. Harrison OpinionNo. WW-397

Commissionerof Insurance International

Life Bldg. Re: Whether a corporation which Austin, Texas does not meet the requirements of Article 1513a,V.C.S., may continue to act as an attorneyin-fact for a ~reciprocal or inter-insurance

exchangeunder the provisionsof Chapter 19, Dear Mr. Harrison: Texas InsuranceCode.~

You have requested our opinion in answer to five questions concerningthe licensing of corporations to act as agent for a reciprocal or inter-insurance exchange. Your first question is as follows:

"Immediately

prior 'tothe enactment of Article 1513a, V.C.S. was the Board of InsuranceCornmissionersauthorizedby law to license a corporation organisedunder the laws of this State to act as an attorney-in-fact for the subscribers at a reciprocal or inter-insurance exchange?" Prior to the enactment of Article 1513a,Vernon's Civil Statutes;there was no provisionunder the law governingcorporations in Texas which would permit the creation of a domestic corporationor the issuance of a permit to a foreign corporation for the purpose .of acting as an attorney-in-fact for the .subscribers of a reciprocalor inter-insurance exchange. It has been a well established rule of law in Texas that, prior to the enactment of the Texas Business Corporation Act, which became effective in 1955, no domestic corpora~tion in Texas could be created,and no foreign corporationcould obtain a permit for a purposenot authorizedby statute. Prior to the enactment of Article 1513a there was no statutoryprovisionauthorizinga corporationto be formed for the 'purpose of acting as agent or attorney-in-fact

for a reciprocal or inter-insurance exchange.
Bowever, sub-division 49, Article 130.2,

and Article 1303b, Vernon's Civil Statutes, did provide that corporations might be created nto act as trusteeunder any lawful express. ’

I,?. William A. Raarrison, page 2 (15%397)

trust committed to them by contract and as acent for the nerformance of anv lawful act*',* and thereaftervarious domestic corporations

were sought to be created,and foreign corporations sought to obtain permits to act as general agents for various insurance companies,includingreciprocal or inter-insurance exchanges by the use of the purpose clause above set forth. This department has held, commencingwith an opinion by HonorableWilliam M&raw dated September 22, 1938, addressed to Wr. George Van Fleet, Actuary for the Roard of InsuranceCommissioners,and in subsequentopinions b being OpinionNo. o-3250, dated May 1 c Honorable Gerald C. &nn,

, 

### 1941, addressedto Honorable Earvin Rail? Fire InsuranceCommissioner, by Honorable Grover Sellers, being Opinion NO. o-7302, dated August 

### 9, 1946, addressed to HonorableE'arvin Rail, Fire InsuranceCommissioner, that corporationsso formed could not act as agents for various types of insurers,,including reciprocalor inter-insuranceexchanges, for tho reason, among others, that such corporations E Fbject to,the provisionsof Section 1, Article 1524a,

which provides that corporations having the purposes a%e'aescribed cannot "carry on the business of another."

-' Article'l524a,

V.C.S ., was not repealed by the passage of the Texas Business CorporationAct (Article

### 9.PjB) and, in addition,Article 2,01B(4)(d)of the Business Corporation Act provides that no corporation may adopt, or be organized,or obtain authority to transactbusiness in Texas under the act if any one or more of its purposes is to operate as %orporate attorneys-in-fact

for reciprocal or inter-insurance exchanges. I' Chapter 

### 388 Acts 

### 55th Leg. R.S. 

### 1957, (codified

as Article 1513a, Vernon's &vi1 ktatutes P' p%fded that trust companiesmay be created, and any corporationhowever created may amend its charter or a foreign corporation may obtain a certificateof authority to do business in Texas for the following purpose, II.

. . to act as attorney-in-fact for a reciprocal or inter-insurance exchange." Ssc. 

### 5, Art. 15l3a, provides that such corporationmust have a fully paid in capital of ,j500,000.00.

It is the opinion of this office that prior to the enactment of Article 1513a, Vernon's Civil Statutes, since no domestic corporationcould be created nor a permitbe issued to a foreign corporationfor the purpose of acting as agent or attorney-in-fact

for a reciprocal or inter-insurance exchange, the Board of InsuranceCommissioners was without power or authority to issue a license to such corporationsfor the purpose of acting in that capacity,and the answer to your first question is therefore %o".
* Emphases throughoutare supplied.Mr. William A. Harrison,page 3 (WW-397)

Your second question is as follows: "Immediately

prior to the enactmentof Article 1513a, V.C.S. was the Board of Insurance Commissioners

authorizedby law to license a reciprocal or inter-insurance exchangeand its attorney-in-fact

if the attorney-in-fact was a foreign corporation?"

It is also a well settled rule of law in Texas that a foreign corporationis restricted to the purposesand powers which may be exercisedlawfully by corporations charteredunder the laws of Texas, and the rule of comity would not permit a foreign corporationto obtain a permit to do business in Texas for a purpose not authorizedor exercise powerswhich.couldnot be lawfully exercisedunder the laws of Texas, even though the purpose for which such corporation was formed and the powers 'soughtto be exercised thereunder were lawful in the State where the foreign corporation was chartered. Western Service C

. v. Neharz. Secretarv f State 116 Tex. 193 197, 288 S.W. &'tl (1926);Ii-A, Tex. .I$., SectIon 7%-k, p. 176. Since the Secretary of State .wasnot authorizedtunder ;,the laws of Texas to issue'a. permitto a foreigncorporation ~toact.as agent or attorney-in-fact for a'reciprocalor interinsuranceexchange prior'to the enactment of Article 1513a, V.C.S., the Board of InsuranceCommissioners was without au- 'thority

to issue a license to such corporationto act in that capacity,and the answer to your second question is “no".

Your third and fifth questionsare as follows:
"If your answer to either of the first two questions is in the negative may the present State Board of Insurancecon inue E to license such reciprocal or inter-insurance exchangewith a corporateattorney-in-fact if the corporateattorney-in-fact

does not meet the requirementsof Article 1513a?" '%ay a reciprocal or inter-insurance exchange now be admitted and licensed to do business in this State when its attorney-in-fact is a foreign car-' porationwhich does not meet the requirementsof Article 1513a, V.C.S.?"
Your third and fifth questionshave been considered and will be answered together. Since it is our opinion that prior to the enactment of Article lsl3a, V.C.S., the Secretary of State was without authority to issue a charter to a domesticr -

I@

. William A. 'Harrison, page

corporationor grant a permit purpose of acting as agent or to a foreign corporationfor the attorney-in-fact

for a reciprocal or mter-insurance excnange,any license heretoforegranted by you or your predecessorBoards of InsuranceCommissioners to such corporation

was without legal authority. However,where a domestic corporation has amended its charter, or a foreign corporationhas received a certificateof authorityunder the provisions of Section 2, Article 1513a, from the Secretary of State which authorizes such corporationto act as attorney-in-fact for a reciprocal or inter-insurance exchange,you would have the legal authority to issue a license to such corporationto act as attorney-in-fact

for a reciprocalor inter-insurance exchange, provided such attorney-in-fact for the reciprocal or interinsurance exchange has fully compliedwith the provisionsof the InsuranceCode, and particularlythe provisionsof Chapter 19 thereof. If such domestic or foreign corporationdoes not meet the requirementsof Article 15'13a, V.C.S.6,

the Secretary of State would be without authority to either grant or amend a charter of a domestic corporationor issue a certificateof authority to a foreign corporationthereunder, and hence you would be without authority to issue a license to such corporation since it would be doing business in Texas in violation of law.

Your fourth question is predicated upon an affirmative answer to either questions 1 or 2, and since both of these questionshave been answered in the negative no discussion thereof is deemed necessary.
suMMARY

Prior to the enactment of Article 15;13a, V.C.S., no.domestic corporationcould be chartered,and no foreign corporationcould receive a permit to act as agent or attorney-in-fact for reciprocal or interinsurance exchanges, The Commissionerof Insurance may legally issue a license to act as attorney-infact for a reciprocalor inter-insurance exchange to any domestic or foreign corporation which has been qualified by the Secretaryof State under the provisions of Section 2, Article 15lja, V.C.S.
Yours very truly,
WILL WILSON Attorney Gene,ral

of TexasMr. William A. Harrison , page 5 ON-397)

APPROVED:
OPINIONCOMMITTEE
Geo. P. Blackburn,Chairman Wallace Finfrock Morgan Nesbitt Richard B. Stone
REVIXWEDFOB THEATTOBNEYGENEFUL
BY: W. V. Geppert