OFFICE OF'IHE A’ITORNEY GENERALOFAU0TIN 

xonorable 0. P. Lockhart, Chalmmn 

Board of Inauranoe Comnlissloners 

Auemn, Texas 

Dear Slrr opinion 80. o-4065 

Ret IS the plan of the Reserve Loan 

Life IXWUW.lOe COUipq end the 

American Liberty Oil Company as 

desoribed lawful? 

YOUZ' letter reQU88tiJQ dill Opinion of this d8partXl8nt on 

th8 &bove mtated qu8StiOn reads as fOllOWb; 

"'phe R86erVe LO038 L.ife IlMlUl'aBO8 Compaay Of 

Dal&m, Texas, Se organlsed pursuant to Chapter 3, 

Title 78, Revised 01~11 Statute8 of Texan, vith 

$250,000 capital, and the Ammriaan Liberty Oil Oompany, as it8 ndane indloates, Is presumably lnoorporated for the purpose of producing, refining, and 

marketing orude 011 and Its products, iaoludlng retail distribution. Mr. Clint MurcUsonandLlr. 

Toddle Lee Wynne are Stookholders and director8 In 

the life $neuranoe company, and are the principal 

stockholders In the 011 company. 

“A plan haa been Submitted to us for approval 

in a policy fom and +pplioatlon form vhersby life 

polioies are bff8rQd to the publia generally by the 

Insurance company for whlah the first year premiwns 

are agreed to b8 paid, and actually paid in advanoe, 

jointly by the Bmployer of the asetied and by the oil 

company in oertaln agr88d proportions, and these facts 

are reflected in the face of the polioiea themselves. 

*We understand the 011 oom@any has set up a fund 

of $50,00O'to b8 Used for this purpose and charged to 

adV8rtAdIkg of the 011 oompany, vhose name, of course, 

appears in the faoe of the polioy as having donated 

. its share of th8 first year premiums. Obviously the 

plan Is designed also to increase the business of the 
. 

Roiorable 0. P. Lookbart, Chalmaan, Page 2 

bUminC8 compeny, and thus this 8Oh8mS rebounds to 

the benefit of the ocunmon 8tOCkhOldr88 In th8 two 

oompani8S at both ends of the line. 

.JlW., 

“The authorities cited in "Insurance,". 24 Tex. 

Sections 137, and 231, and In Couch on Inaurano8. 

~Sectlona 107, 350, 605, and 606 seem to indicate that 

8inC8, 80 far aa Ye h8V8 been able t0 dlaoover, Ye 

have no statute forbidding the practice mentioned abOV8, it I8 not illegal tie88 by r88aon Of the community of ownership, interest, and control aa between 

the two oompanIe8 which might be 8 form of rebating, 

dIacrlml~tlon, or Other practioe forbidden by the 

atatUt88 hereafter m8ntIOn8d. Or OOntram t0 public 

polloy generally. 

'We respectfully Invite your attention to the 

provisions of Art10183 568, 569 and 578 of the Penal 

COdS, end Artlolea 5053, 5056 end 5064 ,of th8 R8VI88d 

Civil Statutes, vhioh may have aon8 bearing upon the 

questions here propounded. 

%8 reapectiully ask your OpkIOn 88'tO vhether 

the plan above outlined Is lavful and should be approved by ua in polIolea end applioation forms), or 

vhether the scheme contravenes the provlalons of en$ 

oonatitution or statutory provialon or la oontrery 

t0 publPo pOli.ay OtherWIse In View Of~the COmBunIty Of 

Oi?n8rahlp, iPt8F88t, and OOntrOl (LB betVe8n the tV0 

COlIlp.Sn188." 

btiOl8 . 53, Vernon18 Annotated Civil Statutea, among 

other thlnga, prov 50 de8 in 8ff8Ot that no inducement t0 in8UranO8 

ahalL b8 m&d8 U~~l88a ap8oified in th8 poliay or OOntreCt Of In8Ul"IXLO8. Apparently this requIr8ment ha8 been complied with by 

inaertbng into the tiSUIWlC8 pO11C3.88 Ol? COntr8cta the fOllOWIll 

p8regr8pht ' 

'This policy Is Iaaued in cOn8Id8ratIOn of the 

eppllcat1on therefor, a copy of which Ia attaahed 

hereto and made 8 part hereof, end of the p8gment 

in advane of the first premium of $ 

C8dpt ~Of #FhlCh is h8IWby 8Ck330v18dg8d~iOkh&% 
Bonorable 0. P. Lo&hart, (W&man, Peg8 3 

maintain this DO~IOP In for08 for the D8riOd termImating on the - kayof , i9 and' 

it Vi11 b8 Conm8d in for08 UpOn %h8 &8r payment of $ on said date and bn the 

every - 

day OS 

thereafter until thmicy anniversary nearest tie date on which the Insured attains the age of years or until the prior 

death of the iDaui%i%ie said first prcuuium only 

to be paid jointly bj, 

employer of the insured) end 

oor.poratlon)." 

w8 h&V8 08Z'8fully oonSId8red the St8t&ll8ntiOll8d in 

your letter and are of the opieion that the proposed plan of 

the Reserve Loan Life Inaumnae Campeny and the Ameriaan Liberty 

Oil Company does pot contravene any of these statutes. 

It la stated In Wuohla Cyalopedla of InauHnae Law, 

Vol. 3, pOg8 1962, thatc 

"Paynent of Insurance premIuma la not neceaaarIly the personal act of the 111aured, oonsequently, 

end as ageneral rule, anyonemaypeythe premIuma 

or 8aaeiraaienta on 911 Insurance polloy or benefit aortISIaat8, vlth the result that, if rooepted‘ the p8yment Is as valid as IS made by the Lnatand hizaaelf, 

and t&Is vhether the payment was voluntary, or pwauant to request of,:or 8 contraat with, the person 

or persona responsible for such payment, this being 

8sp8cl8llg true In the case of request or express 

contraot, provided, of aourae, that there are no elements of vagering aufflclimt to avoid the aontraot 

of Insurance, or auoh payments are not prohibited by 

8 statute, and are not made after the polloy he8 

C8888d to b8 a valid and enforceabla OOntr8Ct. l + l m 

With reference to the payment of premiums on Insureno 

poliolea, the general rule as Stated in Corpus Awls, Vol. 32, p. 

1197, la 8a follovar 
Honorable 0. P.,Lookbart, Ch&lramn, Page 4 

"Premiums may be paid by insured or beneflOi8~, or by someone for him, even though the 

on8 so pay&g has no insurable Interest.' 

App8r8ntly, under tbn general XWleS 8bOV8 mentioned, ' 

the payment of Insuranoe premiums aan be made by anyone vhere 

such payments are not prohibited by statute. Ue have failed to 

find any Texas Statute prohibiting auah payments. 

In the 0888 of Thayer et al vs. Vathem et al, 44 S. W. 

906, it is atat6dt 

"Bec8ua8 the parties oolnpoaing both ocanpaniea 

are the same is no bar to their dealing with e8Oh 

other. All the law requires in ouch cases is that 

the timnaaatlon shall be free from fraud and exeouted in good faith.' 

This Ma 8 suit brought for the oon#truotion of a trust 

agreement, and to requlrq one of the trustees, to aoaept atook of 

the nebv company, and frenafer the franohlaea ehd property of the 

DaU.aa Rapid-Transit R8fiVay Coaqany to the nev aorp~ration ocganized by virtue of said trust agreeawnt. 

In Fletcherta Cyolopeti Corporations Vol. 2, p. 1857, 

it i8 Stated8 

llhenever 8 oorporatlon has psver to BaLs a 

oontract,It can aa&e It vlth anether oorporatlon 

aa veil 88 en Indlvldual. or partnership. Hovever, 

it has been held that oontraota between two oorporations, In order to bind either of them, atuat be 

vlthln the povera of both. 

"If the right to oontraat exists, it is inmaterial if the same offiaers and. stockholders oontrol 

both contracting corporatlone; if there is no b8d 

faith.!' 

Bovever, as v8 understand 

% 

e question before us, v8 do not have 

the pPopO8ition of two aepa 8 oorporations contreating vith each 

other vlth the same offioera and atookholdera. Apparently there 
Honorable 0. P. Lockhart, 

la no contraot whatsoever 

pany and the Reserve Loan 

Ch8irmanl Page 5 

-jr Sl8l'8lJr 8gX'88S t0 p8y 

between the American Liberty Oil ComLife Inauranoe Comp8ny. The 011 aomand $oea pay a part of the pr8mIum 

.~ 

on 811 polIcI8s of a certam aLaa*. 

The question la raised vhether the Amerlaan Liberty 

Oil Company ha8 the leg81 pover and authority t0 perfolln the 

8bOVe m8ntiOn8d act8 as adV8rtiSing for aald oompany. It 18 

stated in Fl8tCh8r'S Cyclopedia on Corporations, Vol. 2, page 

178'7r 

"A corporatlori may adopt any proper means of 

advertising its bualneaa or Its enterprise, lrnd 

make necessary contracts with the publishera of 

newspapers or others for auoh purpose." 

It la further stated in the same volume on page 17881 

'538 moat dlffioult of alI. questions relating 

to implied pqvera la whether, in a partlaular case, 

8 corporetlon m8y rid 8 person or 8 firm or 8nother 

company when Its purpose Jn so doing la to lnoreaae 

its ovn busln888. ThIa queatlon'often arises in 

connection with donations by a oorporatlon to aid 

an enterprLa8, the auaceaa of vh5oh Vi= incre888 

the business of the donating oorpor8tlon, In connea~ 

tlon with the power of the corporation to become a 

guarantor or 8 surety to help a person, Slnn or 

another corporation, where the efSeot'v111 be to enable the corporation tc make a sale or obtain a 

steady customer or to Oth8IWiSe help its buainesa; 

and In various other phases. It moat frequently a+ 

rises in connection with the buaI.neaa of brewing 

c~anles, land companies, street oar oompanI8a and 

the 15.k8. All that can be said la that the olrcumstances of the particular aaae largely control the 

question; that some oourts +re more liberal then 

others In allowing corporations to do acts which a 

level-headed business man, 8s an individual, would do 

to help his business; that the undoubted tandenay; Of 

th8 courts la in the direction of upholding such aota. 

.* + I .u 
HOnOr8bl8 0. P. Loakhsrt, Chelnnan, Page 6 

It is our opinion that the above mentioned plan Is 

not prohibited by law end that the Department of Inaura.noe may 

legally 8pprOV8 application and policy.fonna containing the 

above QUOtWd par8@'8ph. 

Trusting that the foregoing fully enavers your Inquiry, 

we are 

Yours very.truly 

A~alatsnt 

AWtej