# GENERAL



# TEIEAYTORNEY

OF TEXAS
AueTlN 11. TExas WILL WILSON A=-rORNRY GENERAL June 22, 1960



### Hon. J. M. Falkner Opinion No. WW-861 Commissioner Department ofBanking Re: Whether a company having Austin, Texas a certificate ofauthority from the Secretary ofState under Art. 3.27 of the **Insurance** Code is subject to the provisions ofArt. 1524a V.C.S.
Dear Mr. Falkner:

Penn Mutual Life Insurance Company, aPennsylvania corporation, has received a certificate ofauthority from the Secretary ofState 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 ofArt. 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 inSubdivisions 48, 49 and 50 ofArt, 1302 andall corporations having inwhole or inpart any purpose or purposes authorized in Chapter 275, S.B. #232 of the General and Special Laws ofthe Regular Session ofthe 40th Legislature (1303b). Ingeneral, these are corporations whose purposes include the accumulation and lending ofmoney and the selling and dealing innotes, 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 theBanking Commissioner.

Article 3.27 provides that:

“‘Any life insurance company not desiring to engage inthebusiness ofwriting life insurance in this State, but desiring to Iosn its funds in this State, may obtain apermit to do so from the Secretary of State by complying with the laws of this State relating toforeign corporations engaged in loaning money inHon. J. hf. Falkner, page 2 (WW-861)

this State, without being required to secure a certificate of authority towrite life insurance in this State.”
Our Opinion WW-767 held that such Article had not been repealed by theBusiness Corporation Act and that a corporation admitted to Texas thereunder “can lnno sense be said tobe operating under the insurance laws of this state.” (Had the company inquestion intended to transact any insurance business inTexas it, of course, could not have obtained a certificate ofauthority from theSecretary of State). The company’s business inTexas is limited by its certificate of authority to “‘the loaning of its funds inTexas.” 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 thatyour office has notified the company that it is subject to some of the requirements ofArt. 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 toM. E. Purnell, aDallas 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 ofwriting insurance.

(4) The company did not receive its permit from the Secretary ofState under subdivisions 48, 49 and 50 ofArticle 1302 or 1303b, but rather received it under Art. 3.27.

(5) The purpose ofArticle 1524a is to regulate loan companies.
Ins0fa.r as the letter from **Mr.** Bengston is concerned, itadvises that certain named insurance companies comparable in **status** to Penn Mutual Life Insurance Company were not covered by Article 1524a. Even ifwe assume that this letter constitutes a departmental construction, the conclusion reached therein is inerror, the unambiguous wording ofAPI%.1,524abeing 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 onthose which donot. Such corporations need only file annually a statement of its condition on the previous 31st of December together with afiling fee of $25.00.

The fact that the company was chartered inPennsylvania for the purpose ofwriting insurance and that itwas 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 inTexas, it could not have received its certificate of authority from the Secretary ofState. 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 inwhole or inpart any purpose authorized byArt. 1303b. Among these purposes, as pointed out above, the lending ofmoney predominates. Section 10 ofArt. 1524a provides that “‘the provisions ofthis Act shall apply toforeign corporations who have heretofore been granted permission to do business inTexas and who may hereafter be granted permission to do business inTexas having as their purpose or purposes any part of the provisions set out inSention One of this Act.“’ It contz no such limitation as that suggested by the company.

The purpose ofArt. 1524a can best be garnered fr~omits 4 corners. Contrary to the company’s suggestion, it is nowhere limited to ““loan companies ” as the term is commonly understood. Instead, itspecifically 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** inWW-767 and the authorities cited therein, an insurance company entering Texas by virtue of a certificate ofauthority issued by the Secretary ofState under Art. 3.27 of theInsurance Code is inno 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 toprotect the interests ofTexas citizens, andwe accordingly hold that itfalls within the purview ofArt. 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&ththe laws of this State relating toforeign corporations engaged inloaning money in this State._... .

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

SUMMARY
A company having a certificate of authority from the Secretary ofState under Art. 3.27 ofthe Insurance Code 1ssubject to the provisions ofArticle 1524a V.C.S.
Very truly yours, WILL WILSON Attorney General ofTexas

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