July 29, 1988

Honorable Mike Driscoll Harris County Attorney 1001 Preston, Suite 634 Houston, Texas 77002 Opinion No. JM-935
Re: Whether abondsman may deposit with the county treasurer an assignment of an insurance policy for purposes of complying with article 2372p-3, V.T.C.S. (RQ-1435)
DearMr. Driscoll:

YOU ask:

. _May abondsman, or applicant, deposit with

. . a tne county treasurer an asslgnmenc or an insurance policy as collateral and comply with Article 2372~3-3,Vernon's Texas Civil Statutes? Article 2372p-3, V.T.C.S., governs the licensing and regulation of bail bondsmen. Section 6(f) of article 2372p-3 provides:

(f)UPon notice from the [county bail bond] board that the application has been tentatively approved, the applicant shall then: (1)deposit with the county treasurer of the county inwhich the license is to be issued a cashier's check, certificate of deposit, cash, or cash ecuivalent in the amount indicated bv the annlicant under Subdivision (5)of Subsection la)of Section 6 of thisAct but inno event less than $50,000 except incounties with populations of less than 250,000 persons by the most recent federal census.,the amount forapplicants in said counties shall be $10,000 tobeheld in

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a special fund tobe called thebail security fund. (Emphasis added.) Article 3.49-1, section 2, of the Insurance **Code** permits any insured to transfer orassign any policy or any right or interest therein, except asprahibited by the terms of the policy, to "any person, persons, partnership, association, corporation or other legal entity, or any combination thereof" andprovides that such assignee shall have at all times an insurable interest inthe life of such person. Your question isprompted by the following facts:
A bondsman who has a $100,000 Certificate ofDeposit (CD) deposited with the Harris County Treasurer as collateral onhis license would like towithdraw that CDand replace it with an assignment of a life insurance policy with a cash value of at least the same amount. The issue raised by these facts iswhether the assignment of a life insurance policy with the requisite cash value will qualify as the cash ecuivalent of the amount required to be deposited under article 2372p-3.
An 1887 opinion of the Supreme Court of Texas in JZ11aav. Mu- 4 S.W. 361 t~rm"*Oeguivalentio cash" as 362 (Tex. hollows: 1887) defined the

It is not easy to conceive what is intended to be embraced by the use of the words 'itsequivalents;' but tobe equivalent to cash must be something commercially as good as cash, or, aswe take it, something that could readily be converted into cash at a fixed price. While we find no other Texas cases defining "cash eguivalent," or "equivalent to cash," in Thomnson Thomnson, 236 S.W.2d 779, 790 (Tex. 1951), "cash" wz, defined as follows:

'Cash' isdefined inWebster's New International Dictionary, 2nd Edition, Unabridged as \B. Aquantity ofmoney, C.minted or current coin. 2. Corn.a.money, especially readymoney; strictly coin or specie, but also, less strictly, bank notes, siaht drafts

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ordemand denosits at a bank.' (Emphasis ours.) This same authority gives the phrase 'cash money* as a synonym for the word 'cash*.
A similar certificate was construed inthe case of -se v. First National Bank of it=EF-$ Tex. Civ:App., 196 S.W.2d 48, 171

. . . 516, writ refused, NHE, to be a negotiable instrument, and not to' be ambiguous.
In some contexts, the word %ash" has been given a broad meaning. For example, inconstruing a will, the meaning of theword ncash*'has been given abroader meaning when it was necessary to carry out the intent of the testator andprevent frompassing in intestacy aportion of his estate. In such instances thewords "cash" and "money" have been construed to "include all kinds ofproperty, real andpersonal." Flower v. Dort, 260 S.W.2d 685 (Tex. Civ. APP -Ft.Worth 1953,writ ref'd n.r.e.).
We conclude, however, that the legislature clearly intended that the phrase "cash equivalent" have a much narrower definition inthe instant statute. The definition of "cash" in JCYhom~sonwould appear closer to what was intended by the term %ash equivalent" inarticle 2372p-3. We so conclude because it isclear that, whatever else the legislature may have intended to embrace with the phrase "cash equivalent," itcertainly meant an instrument that is readily convertible to cash ormay be converted to cash within a reasonable time andwith reasonable effort. The question, then, iswhether an assignee of a life insurance policy who holds thepolicy merely as collateral security for a debt has the right to readily convert the policy, i.e., to surrender itand demand its then cash surrender value. We conclude that hedoes not.
In j aon' 127 S.W.2d 188 (Tex.1939), szt co., aside onother arounds, 128 S.W.2d 790 (Tex. 1939), the court addressed the issue of whether an assignee ofa life insurance policy, who holds samemerely as collateral security for adebt, has the authority, byvirtue ofbeing such assignee, to surrender suchpolicy to the company issuing it anddemand its cash surrender value. The court concluded that he does not. While noting that authorities inother jurisdictions are divided on the issue, the court concluded that the better rulewas set forth inCooley's Briefs on Insurance, 2d Ed., Vol:7, p. 6527:

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'JJlDledaee of an holdseit as collateral,insurance policy, who inthe absence of a distinct provision permitting its sale, has onlv the rlaht to collect. and ¬ the riaht to sell or surrender it; and if the nledoee doeswrongfully surrender the policy -tiedebt is. satiefied-to the extent of th; value of the security surrendered. (Emphasis added.) 127 S.W.2d at 191. The court held that, when an insured transfers a life insurance policy as collateral security, the assignee does not acquire legal title. The interest acquired by the assignee nisbut a chose inaction and isgoverned by the sameprinciples applicable to chases inaction in general." 127 S.W.2d at 192. It "isnot negotiable" either by the common law or statute. The court concluded that the assignee has no authority to surrender the policy and demand its cash surrender value without the insured's express consent that the assignee surrender thepolicy. See 45Tex. Jur. 3d, Insurance Contracts and Coverage, 9 248.

An assignment of a life insurance policy to the county treasurer does not constitute deposit of a "cash equivalent" within the meaning of article 2372p-3, section 6(f), where the assignor, bondsman or applicant has not also expressly authorized the County Treasurer to surrender thepolicy for its cash value.

I Very truly ye

JIM MATTOX Attorney General of Texas
MARYKELLER FirstAssistant Attorney General
MU MCCREARY Executive Assistant Attorney General
JUDGE ZOLLIE STEAKLEY Special Assistant Attorney General

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RICK GILPIN Chairman, Opinion Committee Prepared by Tom G.Davis Assistant Attorney General

P

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