## THE,~TTORNEY GENERAL OF%%CXAS

December 17, 1959 The Honorable Zollie Steakley Secretary ofState Capitol Station Austin 11,Texas Opinion No. WW-767
Re: Autiortty of the Secretary ofState Wapprove the application of the Penn Mutual Life Insurance Company of Pennsylvania for a certificate ofauthority 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 inviolation ofArttcle 2.05 or other provisions ofthe 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 apermit by your office. The purpose for which it prOposed to transact bustness was to loan its funds inTexas. This permit’was granted pursuant to the direction ofArticle 3.27 of the Itisurance Coda. which provides:

“Any life fnaurance company not desiring to

engage in the business ofwriting life insurance inthfa state, but desiring to loan its funds in this state, may obtain a permit to do so from the Secretary ofState by complying with the laws of this state relating to foreign corporations engaged in loaning money inthis state, without being required to **seCure** a certificate ofauthority 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 toprohibit your office from issuing a certificate of authority to an insurance company, hence might be construed as repealing Article 3.2! ofthe 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 ofevery type and character that operate under the insurance laws of this state.

. .”
YOUfurther advise us that after the effective date of the Business Corporation Act the Secretary ofState adopted adepartmental construction to the effect that its provisions are not applicable to **insurance com**  panies and that Article 3.27 and 3.57 of the Texas Insurance Code were repealed by implication **by** said Act.

The history ofArticle 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 ofMassachusetts was doing business in the state illegally and brought suit to cancel its permit. The company had been transacting a loan business inTexas for many years but had never transacted a life insurance business here. (The trial **court** held infavor of the defendant and the appeal was dismissed on atechnicality.) Shortly thereafter, onFebruary 3, 1909, the Legislature passed Article 4790, the forerunner ofthe present Article 3.27. As stated inAttorney 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 toenter the state for the purpose of lending their funds. It

### was then evident that a large number ofsuch companies would not enter this state and conduct a life insurance business within its borders and subject themselves to the provisions ofthe Robertson Law. Manifestly, this statute was passed todeclare specifically that such a corporation was permitted and authorized by the State ofTexas toengage in the business of lending its funds in Texas. It is probable, we think, that the effect of the statute was todo 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 ofwriting 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 ofPenn Mutual Life Insurance Company authorizes it “to insure the lives ofpersons in every insurance appertaining thereto; to grant and dispose ofan annuity; and to insure against disablement by contract supplemental to contracts of life or endowment insurance, and generally to transact the business oflife 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 toyour third question, inquiring as towhether 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 ofArticle 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 ofState. 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 ofproviding 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 abusiness without color of authority would **result** in the forfeiture of its permit to do business in this state.”

.. * ,

“Since there is nothing to indicate thatjurisdiction has ever been given to the Commissioner of Insurance over such companies and the bare presence ofa foreign corporation, which may write insurance, and indeed may be formed for that purpose in the state of its creation, in this state for apurpose other than that of writing insurance is entirely insufficient to operate in behalf ofsuch jurisdiction.”
We see then that prior toArticle 3.57 (or Article 4760) an insurance company had the implied power toenter this state solely for the purpose of loaning its funds by securing apermit from the **Secretary** of **State** so todo; 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 certificateHon. Zollie Steakley, page 4 (WW-767)

therefor from theSecretary ofState, although doing so under theexpress authority ofArticle 3.27, can inno sense be said tobe operating under the Insurance Laws of this State. This being true, your office has the authority under theBusiness Corporation Act **to** issue a certificate of authority tothe 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 totransact business inthis state for any purpose other than that set forth inthe certificate ofauthority inviolation of Article 2.05 or any~other provision of theTexas Business Corporation **Act.** Article 2.05A(2) reads:,

“‘It (the corporate name) ,shall not contain any word or phrase which indicates~ or implies that itis organized for any purpose other’ thanbne or more of the purposes contained in its.articles ofincorporation.“
Itwtll be noted that this provtsion relates toarticles of incorporation and not certificates ofauthority as stated inyour opinion request. **Article** 2.05 applies **in** general to**domestic** corporations unless the coptrary appears ina particular section. For example, 2.05B provides that “any domestic or foreign corporation having authority totransact business inthis state, may doso under an’assumed name. 0*” No such reference toforeign corporations appears in2.05(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 thequestion ,bcforC us. It contains noprovision similar tothat in2.05(Z) and hence ,svefind hitunnecess’ary todecide whe&er, or not thename inquestion violates such requirement.

**Your** ,last que,stion inquires as towhether intheevent you ares authorized toapprove subject application for a certificate ofauthority, such certificate should be limited by the restriction “without banking, discounting or insurance privileges”. You refer us inthis connection to**our** Opinion WW-440. The reasoning ofsuch opinion is not applicable tothe inbtant situation for the reason thatArticle 3.27 specifically authorizes a certificate ofauthority for thepurpose requested. WW-440 dealt with asituation inwhich the restrictive words quoted **above were**  **a part**  **of the** **statutory** purpose clause prior tothepassage ofthe,Business **CO+** poratton **Act.** This demonstrated by thesecond paragraph ofthesummary ofWW-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 ineffect prior tothe enactment of the Business Corporation Act are still in full force and effect as toany lawful purpose for which a corporation may be formed under the provisions ofArticle 2.01A, Business Corporation Act.” SUMh4ARY The office of the Secretary ofState has the authority to issue a certificate ofauthority toPenn Mutual Life Insurance Company ofPennsylvania 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 ofTexas

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