THE,~TTORNEY GENERAL 

OF%%CXAS 

December 17, 1959 

The Honorable Zollie Steakley 

Secretary of State 

Capitol Station 

Austin 11, Texas 

Opinion No. WW-767 

Re: Autiortty of the Secretary 

of State W approve the application of the Penn Mutual Life Insurance Company of Pennsylvania 

for a certificate of authority 

authorizing the company to tranaact the business in this State of 

loaning its funds. Whether or not 

the inclusion of the word “insurance” within the company name 

is in violation of Arttcle 2.05 or 

other provisions of the Busmess 

Corporation Act, and other related 

quec ttons . 

Dear Mr. Steakley: 

Your opinion request briefly summarized is as follows: 

On February 14, 1950 the Penn Mutual Life Insurance Company 

was issued a permit by your office. The purpose for which it prOposed 

to transact bustness was to loan its funds in Texas. This permit’was 

granted pursuant to the direction of Article 3.27 of the Itisurance Coda. 

which provides: 

“Any life fnaurance company not desiring to 

engage in the business of writing life insurance in thfa 

state, but desiring to loan its funds in this state, may 

obtain a permit to do so from the Secretary of State by 

complying with the laws of this state relating to foreign 

corporations engaged in loaning money in this state, 

without being required to seCure a certificate of authority 

to write life insurance in this state.” 

. 

The current application is an attempt to remrw and extend the 

existing permit. Your first specific question arises by virtue of the fact 

that the Texas Business Corporation Act would seem to prohibit your 

office from issuing a certificate of authority to an insurance company, 

hence might be construed as repealing Article 3.2! of the Insurance 

Code. Article 2.OlB(4) of the Business Corporation Act provides: 
Hon. Zollie Steakley, page 2 (WW-767) 

“No corporation may adopt this act or be organized under this act or obtain authoritv to transact business in this state under this act. I .if any one or more 

of its purposes is to operate any of the following:. . . . 

(d) Insurance companies of every type and character 

that operate under the insurance laws of this state. . .” 

YOU further advise us that after the effective date of the Business 

Corporation Act the Secretary of State adopted a departmental construction to the effect that its provisions are not applicable to insurance companies and that Article 3.27 and 3.57 of the Texas Insurance Code were repealed by implication by said Act. 

The history of Article 3.27 begins in 1907 when the so-called 

Robertson Law became effective. Modeled after corresponding provisions 

in the New York Insurance Law, the Robertson Law imposed much more 

stringent requirements upon foreign companies doing an insurance business 

in this state than formerly was the case. As a result of its passage many 

foreign companies withdrew from the state, some completely, but some 

merely limiting their activities to the loaning of their funds in Texas. The 

Attorney General, after 1907, took the position that the John Hancock Mutual 

Life Insurance Company of Massachusetts was doing business in the state 

illegally and brought suit to cancel its permit. The company had been transacting a loan business in Texas for many years but had never transacted 

a life insurance business here. (The trial court held in favor of the defendant and the appeal was dismissed on a technicality.) Shortly thereafter, 

on February 3, 1909, the Legislature passed Article 4790, the forerunner 

of the present Article 3.27. As stated in Attorney General Opinion No. 2610, 

“We think there can be no doubt of the intention 

of the Legislature in passing this statute, It was 

evidently considered desirable in the interest of the 

public to permit a life insurance company to enter the 

state for the purpose of lending their funds. It was then 

evident that a large number of such companies would 

not enter this state and conduct a life insurance business 

within its borders and subject themselves to the provisions of the Robertson Law. Manifestly, this statute was 

passed to declare specifically that such a corporation was 

permitted and authorized by the State of Texas to engage 

in the business of lending its funds in Texas. It is probable, we think, that the effect of the statute was to do 

away with the Attorney General’s action and position 

taken in the John Hancock case.” 
a--_.. 

Hon. Zollie Steakley, page 3 (WW-767) 

The opinion also points out that “a corporation chartered for 

the purpose of writing life insurance has, in the absence of statutory 

inhibition or express limitations found in the charter, the implied power 

to lend its funds.” In this connection your opinion request states that 

the charter of Penn Mutual Life Insurance Company authorizes it “to 

insure the lives of persons in every insurance appertaining thereto; to 

grant and dispose of an annuity; and to insure against disablement by 

contract supplemental to contracts of life or endowment insurance, and 

generally to transact the business of life insurance on the level premium 

or legal reserve plan as a mutual company.” There is nothing in this 

purpose clause to prevent the company from lending its funds. (Therefore, the answer to your third question, inquiring as to whether the proposed activities of the company in Texas would be outside its charter 

powers, is answered in the negative.) 

Opinion No. 2610 continues by pointitig out that, 

“An insurance company coming into this state under 

the provisions of Article 4790 (Article 3.27) does not 

apply to the Insurance Commissioner for its permit. It 

must apply to, and the permit must be obtained from, the 

Secretary of State. It is subject to the control of that 

officer in such cases as made and provided. It does not 

enter this state for the purpose of providing any business 

which the Commissioner of Insurance is designed to control. Indeed, it is not authorized to transact such a business, and the doing of such a business without color of 

authority would result in the forfeiture of its permit to 

do business in this state.” 

. . * , 

“Since there is nothing to indicate that jurisdiction has ever been given to the Commissioner of Insurance over such companies and the bare presence of a 

foreign corporation, which may write insurance, and indeed may be formed for that purpose in the state of its 

creation, in this state for a purpose other than that of 

writing insurance is entirely insufficient to operate in 

behalf of such jurisdiction.” 

We see then that prior to Article 3.57 (or Article 4760) an insurance company had the implied power to enter this state solely for the purpose of loaning its funds by securing a permit from the Secretary of State 

so to do; further, that Article 3.27 was passed to correct the contrary position taken by the Attorney General in the matter. Therefore, an insurance 

company entering the state solely to loan its funds and obtaining a certificate 
Hon. Zollie Steakley, page 4 (WW-767) 

therefor from the Secretary of State, although doing so under the express 

authority of Article 3.27, can in no sense be said to be operating under 

the Insurance Laws of this State. This being true, your office has the 

authority under the Business Corporation Act to issue a certificate of 

authority to the Penn Mutual Life Insurance Company for the stated purpose. 

Your second question asks whether or not the inclusion of the 

word “insurance” within the company name indicates or~iniplies that it 

would be authorized to transact business in this state for any purpose 

other than that set forth in the certificate of authority in violation of 

Article 2.05 or any~other provision of the Texas Business Corporation 

Act. Article 2.05A(2) reads:, 

“‘It (the corporate name) ,shall not contain any 

word or phrase which indicates~ or implies that it is 

organized for any purpose other’ than bne or more of 

the purposes contained in its. articles of incorporation.“ 

It wtll be noted that this provtsion relates to articles of incorporation and not certificates of authority as stated in your opinion request. 

Article 2.05 applies in general to domestic corporations unless the coptrary appears in a particular section. For example, 2.05B provides 

that “any domestic or foreign corporation having authority to transact 

business in this state, may do so under an’assumed name. 0 *” No such 

reference to foreign corporations appears in 2.05(Z). On the other hand, 

Article 8.03 is the general article dealing with the “corporate name of 

Forelgn Corporations” and as such is controlling of the question ,bcforC 

us. It contains no provision similar to that in 2.05(Z) and hence ,sve find 

hit unnecess’ary to decide whe&er, or not the name in question violates such 

requirement. 

Your ,last que,stion inquires as to whether in the event you ares 

authorized to approve subject application for a certificate of authority, 

such certificate should be limited by the restriction “without banking, 

discounting or insurance privileges”. You refer us in this connection 

to our Opinion WW-440. The reasoning of such opinion is not applicable 

to the inbtant situation for the reason that Article 3.27 specifically authorizes a certificate of authority for the purpose requested. WW-440 dealt 

with a situation in which the restrictive words quoted above were a part 

of the statutory purpose clause prior to the passage of the, Business CO+ 

poratton Act. This demonstrated by the second paragraph of the summary 

of WW-440 whL:h reads: 
- -- 

Hon. Zollie Steakley, page 5 (WW-767) 

“Words of limitation or restrictive provisions 

contained in lawful statutory purpose clauses of private corporations for profit in effect prior to the 

enactment of the Business Corporation Act are still 

in full force and effect as to any lawful purpose for 

which a corporation may be formed under the provisions of Article 2.01A, Business Corporation Act.” 

SUMh4ARY 

The office of the Secretary of State has the 

authority to issue a certificate of authority to Penn 

Mutual Life Insurance Company of Pennsylvania 

authorizing the company to transact the business ixi 

this state of loaning its funds, Art. 3.27 of the Insurance Code not having been repealed by the Business 

Corporation Act. It may do so without the addition 

of restrictive wording. The proposed purpose is 

within the charter powers of the company. 

Very truly yours, 

WILL WILSON 

Attorney General of Texas 

RV~L : Lmc 

APPROVED: 

OPINION COMMITTEE: 

W. V. Geppert, Chairman 

C. K. Richards 

B. H. Timmins 

W. 0. Schultz 

Robert Bud Lewis 

REVIEWED FOR THE ATTORNEY GENERAL 

BY: Leonard Passmore