Court Opinion

ID: 4136212
Source: CourtListenerOpinion
Date Created: 2017-02-18 02:11:04.914383+00
Date Added: 2024-06-11T14:36:39.321830
License: Public Domain

THE,~TTORNEY                          GENERAL
                                      OF%%CXAS

                                    December        17, 1959

The Honorable       Zollie     Steakley                  Opinion   No.   WW-767
Secretary     of State
Capitol    Station                                      Re: Autiortty       of the Secretary
Austin    11, Texas                                     of State W approve         the applica-
                                                        tion of the Penn Mutual Life In-
                                                        surance Company of Pennsylvania
                                                        for a certificate      of authority
                                                        authorizing     the company to trana-
                                                        act the business       in this State of
                                                        loaning its funds.        Whether    or not
                                                        the inclusion     of the word “insur-
                                                        ance” 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 organ-
            ized under this act or obtain authoritv      to transact  busi-
            ness 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      construc-
tion 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 re-
pealed 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 trans-
acting 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 defen-
dant 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 provi-
            sions 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 prob-
            able, 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.              (There-
fore, the answer to your third question,             inquiring   as to whether       the pro-
posed 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 con-
                trol.   Indeed, it is not authorized      to transact    such a busi-
                ness, 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 jurisdic-
                tion has ever been given to the Commissioner                of Insur-
                ance over such companies           and the bare presence        of a
                foreign   corporation,    which may write insurance,           and in-
                deed 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 insur-
ance company had the implied      power to enter this state solely for the pur-
pose 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   posi-
tion 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 pur-
pose.

          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 incor-
poration and not certificates       of authority as stated in your opinion request.
Article 2.05 applies in general to domestic corporations              unless the cop-
trary 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        author-
izes 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 pri-
                 vate 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 pro-
                 visions   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 Insur-
                 ance 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