TEIEAYTORNEY GENERAL 

OF TEXAS 

AueTlN 11. TExas 

WILL WILSON 

A=-rORNRY GENERAL June 22, 1960 

Hon. J. M. Falkner Opinion No. WW-861 

Commissioner 

Department of Banking Re: Whether a company having 

Austin, Texas a certificate of authority from 

the Secretary of State under Art. 

3.27 of the Insurance Code is 

subject to the provisions of Art. 

1524a V.C.S. 

Dear Mr. Falkner: 

Penn Mutual Life Insurance Company, a Pennsylvania corporation, has received a certificate of authority from the Secretary of State 

to do business in Texas, for the purpose of “the loaning of its funds in 

Texas.” The issuance of such certificate was authorized by virtue of 

Article 3.27 of the Insurance Code and was the subject of our Opinion 

No. WW-767. 

Your request asks whether or not such company is subject to 

the provisions of Art. 1524a V.C.S. The question is answered in the 

affirmative. 

Article 1524a is a regulatory law embracing all corporations 

having for their purpose or purposes any or all of the powers authorized in Subdivisions 48, 49 and 50 of Art, 1302 and all corporations 

having in whole or in part any purpose or purposes authorized in Chapter 

275, S.B. #232 of the General and Special Laws of the Regular Session 

of the 40th Legislature (1303b). In general, these are corporations whose 

purposes include the accumulation and lending of money and the selling 

and dealing in notes, bonds, and securities without banking and discount 

privileges. Briefly summarized, Article 1524a lays down certain requirements which these corporations must meet in conducting their business and provides for their supervision, examination and inspection 

by the Banking Commissioner. 

Article 3.27 provides that: 

“‘Any life insurance company not desiring to 

engage in the business of writing life insurance in 

this State, but desiring to Iosn 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 
Hon. J. hf. Falkner, page 2 (WW-861) 

this State, without being required to secure a certificate of authority to write life insurance in this State.” 

Our Opinion WW-767 held that such Article had not been repealed by the Business Corporation Act and that a corporation admitted to Texas thereunder “can ln no sense be said to be operating 

under the insurance laws of this state.” (Had the company in question intended to transact any insurance business in Texas it, of course, 

could not have obtained a certificate of authority from the Secretary of 

State). The company’s business in Texas is limited by its certificate 

of authority to “‘the loaning of its funds in Texas.” Since subdivision 

48 of 1302 authorizes corporations whose purpose is to ‘“accumulate 

and lend money. . .“, subdivision 49 authorizes corporations whose 

purpose ls “to accumulate and loan money,” it is obvious that Penn 

Mutual Life Insurance Company falls within the regulatory scope of 

Art. 1524a V.C.S. 

Your opinion request indicates that your office has notified 

the company that it is subject to some of the requirements of Art. 

1524a and that the company has declined to comply therewith, primarily for the following reasons: 

(1) A so-called “‘ruling by the Banking Department” evidenced 

by a letter from H. L. Bengston dated Jan. 31, 1947 to M. E. Purnell, 

a Dallas attorney, concerning various insurance companies other than 

Penn Mutual. 

(2) The company does not intend to issue bonds, notes, certificates, debentures and other obligations for sale to the public. 

(3) The company was not created for the purpose of lending 

money but rather was created for the purpose of writing insurance. 

(4) The company did not receive its permit from the Secretary of State under subdivisions 48, 49 and 50 of Article 1302 or 1303b, 

but rather received it under Art. 3.27. 

(5) The purpose of Article 1524a is to regulate loan companies. 

Ins0fa.r as the letter from Mr. Bengston is concerned, it advises that certain named insurance companies comparable in status 

to Penn Mutual Life Insurance Company were not covered by Article 

1524a. Even if we assume that this letter constitutes a departmental 

construction, the conclusion reached therein is in error, the unambiguous 

wording of API%. 1,524a being to the contrary. 39 Tex.Jur.Sec. 126. 
Hon. J. M. Falkner, page 3 (WW-861) 

The fact that Penn Mutual does not intend to issue bonds, 

notes, etc., for sale to the public has no bearing on the question. 

Art. 1524a by its own terms specifically recognizes that some corporations under its purview will not engage in such activity. Much 

less stringent requirements are placed on those which do not. Such 

corporations need only file annually a statement of its condition on 

the previous 31st of December together with a filing fee of $25.00. 

The fact that the company was chartered in Pennsylvania for 

the purpose of writing insurance and that it was not granted a permit 

under subdivisions 48, 49 and 50 of 1302 or under 1303b is likewise 

not decisive of the question. As pointed out above, if it contemplated 

pursuing the insurance business in Texas, it could not have received 

its certificate of authority from the Secretary of State. The certificate shows that its only “‘purpose” in Texas is to lend money. Article 1524a encompasses all corporations whose purpose or purposes 

include any or all of the purposes of subdivisions 48, 49 and 50 of 1302, 

or in whole or in part any purpose authorized by Art. 1303b. Among 

these purposes, as pointed out above, the lending of money predominates. Section 10 of Art. 1524a provides that “‘the provisions of this 

Act shall apply to foreign corporations who have heretofore been 

granted permission to do business in Texas and who may hereafter 

be granted permission to do business in Texas having as their purpose or purposes any part of the provisions set out in Sention One of 

this Act.“’ It contz no such limitation as that suggested by the 

company. 

The purpose of Art. 1524a can best be garnered fr~om its 4 

corners. Contrary to the company’s suggestion, it is nowhere limited 

to ““loan companies ” as the term is commonly understood. Instead, 

it specifically regulates all companies who loan money in Texas. The 

company likewise suggests that regulation of its activities is not 

necessary since it is subject to insurance examination in its home 

state. As pointed out in WW-767 and the authorities cited therein, an 

insurance company entering Texas by virtue of a certificate of authority 

issued by the Secretary of State under Art. 3.27 of the Insurance Code 

is in no manner under the regulation, control or supervision of the 

Insurance Department of this state. It is reasonable to assume, 

therefore, that the Legislature intended that companies such as Penn 

Mutual be under the regulation of some other Texas administrative 

body in order to protect the interests of Texas citizens, and we accordingly hold that it falls within the purview of Art. 1524a. This conclusion is reenforced by the language of the statute authorizing its 

admittance into Texas, Art. 3.27, which requires that such company 

must comply v&th the laws of this State relating to foreign corporations 

engaged in loaning money in this State. 
_... . 

Hon. J. M. Falkner, page 4 (WW-861) 

SUMMARY 

A company having a certificate of 

authority from the Secretary of State 

under Art. 3.27 of the Insurance Code 

1s subject to the provisions of Article 

1524a V.C.S. 

Very truly yours, 

WILL WILSON 

Attorney General of Texas 

RVL: lmc 

APPROVED: 

OPINION COMMITTEE: 

W. V. Geppert, Chairman 

W. 0. Shultz 

Martin DeStefano 

Jack Goodman 

Wm. H. PooI. Jr. 

BY 

al 

REVIEWEDFORTHEATTORNEYGENERAL 

BY: Leonard Passmore