July 29, 1988 

Honorable Mike Driscoll 

Harris County Attorney 

1001 Preston, Suite 634 

Houston, Texas 77002 

Opinion No. JM-935 

Re: Whether a bondsman 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) 

Dear Mr. Driscoll: 

YOU ask: 

. _ 

May a bondsman, 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 in which 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 this Act but in no event less than $50,000 

except in counties with populations of less 

than 250,000 persons by the most recent 

federal census., the amount for applicants in 

said counties shall be $10,000 to be held in 

p. 4694 
Honorable Mike Driscoll - Page 2 (JM-935) 

a special fund to be called the bail security 

fund. (Emphasis added.) 

Article 3.49-1, section 2, of the Insurance Code 

permits any insured to transfer or assign any policy or any 

right or interest therein, except as prahibited by the terms 

of the policy, to "any person, persons, partnership, 

association, corporation or other legal entity, or any 

combination thereof" and provides that such assignee shall 

have at all times an insurable interest in the life of such 

person. 

Your question is prompted by the following facts: 

A bondsman who has a $100,000 Certificate 

of Deposit (CD) deposited with the Harris 

County Treasurer as collateral on his license 

would like to withdraw that CD and 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 is whether 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 

JZ 11 aa v. Mu- 4 S.W. 361 

t~rm"*Oeguivalent io 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 'its equivalents;' but to be equivalent 

to cash must be something commercially as 

good as cash, or, as we 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' is defined in Webster's New International Dictionary, 2nd Edition, Unabridged 

as \B. A quantity of money, C. minted or 

current coin. 2. Corn. a. money, especially 

ready money; strictly coin or specie, but 

also, less strictly, bank notes, siaht drafts 

p. 4695 
Honorable Mike Driscoll - Page 3 (JM-935) 

or demand 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 in the 

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, in construing a will, the 

meaning of the word ncash*' has been given a broader meaning 

when it was necessary to carry out the intent of the 

testator and prevent from passing in intestacy a portion of 

his estate. In such instances the words "cash" and "money" 

have been construed to "include all kinds of property, real 

and personal." 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 in the instant statute. The definition 

of "cash" in JCYhom~son would appear closer to what was 

intended by the term %ash equivalent" in article 2372p-3. 

We so conclude because it is clear that, whatever else the 

legislature may have intended to embrace with the phrase 

"cash equivalent," it certainly meant an instrument that is 

readily convertible to cash or may be converted to cash 

within a reasonable time and with reasonable effort. The 

question, then, is whether an assignee of a life insurance 

policy who holds the policy merely as collateral security 

for a debt has the right to readily convert the policy, 

i.e., to surrender it and demand its then cash surrender 

value. We conclude that he does not. 

In j a on' 

127 S.W.2d 188 (Tex. 1939), szt 

co., 

aside on other arounds, 128 

S.W.2d 790 (Tex. 1939), the court addressed the issue of 

whether an assignee of a life insurance policy, who holds 

same merely as collateral security for a debt, has the 

authority, by virtue of being such assignee, to surrender 

such policy to the company issuing it and demand its cash 

surrender value. The court concluded that he does not. 

While noting that authorities in other jurisdictions are 

divided on the issue, the court concluded that the better 

rule was set forth in Cooley's Briefs on Insurance, 2d Ed., 

Vol:7, p. 6527: 

p. 4696 
Honorable Mike Driscoll - Page 4 (JM-935) 

'JJl Dledaee of an 

holdseit as collateral, 

insurance policy, who 

in the 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 does wrongfully surrender the policy 

-tie debt 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 nis but a chose in action and is governed by the 

same principles applicable to chases in action in general." 

127 S.W.2d at 192. It "is not 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 the policy. See 45 Tex. 

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 the policy for its 

cash value. 

I Very truly ye 

JIM MATTOX 

Attorney General of Texas 

MARYKELLER 

First Assistant Attorney General 

MU MCCREARY 

Executive Assistant Attorney General 

JUDGE ZOLLIE STEAKLEY 

Special Assistant Attorney General 

p. 4697 
Honorable Mike Driscoll - Page 5 (JM-935) 

RICK GILPIN 

Chairman, Opinion Committee 

Prepared by Tom G. Davis 

Assistant Attorney General 

P 

p. 4698