Court Opinion

ID: 4140249
Source: CourtListenerOpinion
Date Created: 2017-02-18 02:56:49.619385+00
Date Added: 2024-06-11T14:30:14.431494
License: Public Domain

Hon. J. P. Gibbs                       Opinion No. 0-6064
Casualty Insurance   comml   ssioner   Be:    Questions relating  to
Board of Insurance   Commissioners     title   insurance and rebat-
Austin, Texas                          ing on the part of agents
                                       for such insurance companies
                                       appointed under Section 21,
mar   sir:                             Article   1302(a).
            In your letter of February 12, 1945, you submit the
follcwlng   questions you desire answered in an opinion of this
department:
            It ue stlon No. Jr     May an agent for an in-
      corporated     title  insurance company furnish,    in
      part consideration       of the premium or, as an in-
      ducement to secure the sale of a i It.16 policy,
      the service of preparing deed of conveyance and
      also,  in some instances,      prepare quit claim deeds
      and other curative Instruments for grantor or
      grantee purchasing a title        insurance policy
      through’ said agent, when such policy does not
      provide for furnishing       these services,  and not
      be in violation      of Section 21, Article   1302(a)
      or any other law which should be considered by the
      Hoard?                                               ‘,

            “Ouestl~a             If the agent of the title
      aompany Is a partnership;      one member of which
      firm or partnershlp     is a licensed   attorney and
      such attorney prepares deed of conveyance or quit
      claim deeds and Cther auratlve lrm truments for
      grantor or grantee busring a title      insurance pol-
      icy through the agency in which said attorney has
      a partnership   interest,   would the fact that the
      attorney makes no charge and collects        no fee from
      grantor or grantee constitute       a rebating practice
      on the part of the agent of the title        company un-
      der Section 21, Article     1302(a) or any other law
      which this Board should consider?”
           Article 1302(a),  Vernon’s Annotated Civil Statutes,
provides in Section 1 for the creation   of private corporations
for the following  purposes:
                                                   --

Hon. J. P. Gibbs,   page 2    (0-6064)

           1. To compile     and own     or to acquire and own
     reaordsor  abstracts     of titie    to laud and interest
     in laud; and
           2.   To insure title     to lands or interest   there-
     in           and indemnify the owners of such lands,
     or ihi &ders       of interests   in all liens on such
     land, against loss or damage an account of encum-
     brances upon or defects In the title        to such lands
     or interests    therein.

            In Section 3 of ~said statute It is specifically       pro-
vided that such corporations     shall operate in Texas under tlz
control and supervision    and under such uniform rules and regu-
lations  as to forms of polfcies    and underwriting    contracts
and premiums~therefor,    as may be from time to time prescribed
by the aoard of Insurance Commissioners of Texas.         No title
policy or mortgage certificate     or underwriting contract      other
than under the provisions    of the act, rules and regulations
of the Board shall be permitted;      no title policy shall be is-
sued or valid unless written by a corporation       complying with
all provisions    of and authorized or qualjfied    under the act j
every form of mortgage policy,     guaranteed certificate     or title
insurance must be approved by~the Board and no form may be
used until after stuns shall have. been approved by the Board.
             Also In Section 3 it is made the duty of the Board
to fix and promulgate the rates of premium to be charged by
corporations     created or operating thereunder on policies         or
certificates     and underwriting   contracts,     it being expressly
provided that the rates shall be reasonable to the public and
non-confiscatory      to the .aompany. The Board of Insurance Com-
missioners    is authorized to require any company to submit data
in such form as the Board may deem proper and to be, used for
the purpose of determi.nl.hg proper rates to be fixed.            Such
data may ,include all ‘information      as to.. loss. experience,   ex-
pense of operation and other Qaterial matter for then Board’s
conslderat ion.
                                         .
             It Is further provided~ In then above mentioned Sec-
tion of the law that no rate of premium shall be charged dif-
ferent from that fixed and promulgated by the Board.
            Seation 4~ provides that corporations~ organized under
 the laws of any other State. shall be permitted to- do business
 in this State on exactly the same basis and subject to the same
 rules,  regulations,  and prices and supervision  as fixed for
 Texas corporations.                         ~‘,
Hon. J. P. Gibbs,       page 3   (0-6064)

              Section   21 of said   statutes   provides:
            “No commissions,    rebates,    discounts,   or other
     device   shall be paid, allowed or permitted by any
                domestic or foreign       doing the business
     ~~%f%       for in this Act , .re 1 sting to title    policies
     or underwriting     contracts;   provided this shall not
     prevent any title     company from appointing as its
     representative    in any county any person        firm or
     corporation    owning and operating an abs t ract plant
     in such county and making such arrangements for
     division   oft premiums as may be approved by the
     Board of Insurance Cornmissioners.”

             Section 24 provides that the terms and p,rovisions      of
the Act are conditions    upon which corporations     doing business
thereunder are permitted to exist and that failure         to comply
with any of its terms and provisions      or a violation     of any
.of the terms of the Act shall be proper cause for revocation
of the permit and forfeiture     of charter of any such domestic
 corporation   or the permit of a foreign corporation.

            It appears settled    that title insurance is a busi-
ness affected    with the public interest,   affected  by public
use, and the Legislature      has power to provide reasonable    rules
and regulations     governing its policies,  forms and rates.     New
York Title and Mortgage Corn any v, Tarver       51 Fed. 2d 584, and
authorities   cited therein,    g2 Cor. Jur. 16%.

          Generally,  the right of an inswance         agent to com-
pensation . . . for selling,     and effecting    contracts    of ln-
sursnce or performing services     in relation    thereto,   is depend-
ent upon the terms of the contract      existing    between the agent
and the company. In the absence of special circumstances,
including contractual  or statutory     provisions,    an agent of the
Insurer who solicits  or effect’s   insurance clearly      is not an
agent of the insured.    29  Amer.  JUT.  Par.   89   p.  112,  133; Vol,.
2 Couch Encyc.  on Insurance Law, Par. 459, 74 A.L.R. 475.
           In order to place a reasonable limit on our endeavor
in the broad field    of agency and its relationships      brought
about by your use of the term “agent”,        you have informed us
that you have in mind and refer in your questions to such in-
dividuals  or firms authorized      and appointed as the representa
tive of title   insurance companies referred      to In Sec. 21 Art.
1302a, V.A.C.S.     It is therefore    apparent from your ques c Ions
and we assume that such representatives        or agents are authorized
to and do effectuate     contracts   of insurance for their principal
  .” to insure the title     to lands and liens thereon, performing
Hon. J. P. Gibbs,   page 4   (0-6064)

all other incidental    acts in respect to such business,  and
consequently  representing   the principal beyond the point of
mere acting In a supervisory    capacity.
           There is this noted distinction    Involved in the two
questions which you present.     In Question No. 1 the term
“agent” may or may not Include a licensed     attorney,   member
of the State Bar who effects   the contract of insurance.     In
Question No. 2 the licensed   attorney,   member of the State Bar
has an Interest  in the agency partnership,    which agency ef-
fects the contract  of insurance.    The identical   service, free
of separate charge, is involved in both questions.

             We therefore  assume and interpret   the factual rela-
tionship    in the two questions as the same on this point      that
is, that both the agent and agency receive a division        oh the
premium or a commission from the title      insurance company for
effectuating    the contract  and that such service Inquired of
and rendered, involves no separate charge therefor.

           Your letter  and the questions propounded apparently
assume continuity   in the rendering of such service,   its per-
formance, either (a> or (b) .‘ However, same having been held
not to be a necessary incident     to the business of insuring
titles,  it would necessarily   follow that the rendering of
such service is not a necessary incident     in making “title
search” or “title   examination” within the Board’s rule in-
cluding the charge therefor within the premium schedule.
           Giving full import to that part of your questions
stating such service performed “In part consideration      of the
premium” we not only assume that no separate charge is made
for such service as stated in the second question above set
forth but that there are facts necessarily    in existence    to
bring the furnishing   of such service  as an Inducement to the
applicant for insurance to effectuating    the contract of insur-
ance.   In other words in order for such service to be render-
ed “In nart consldera c Ion of the premium”, the rendering of
such service was a necessary inducement to accomplish,       com-
plete   produce or bring about the Issuance of the title      policy
for w!Iich a percentage of the premium Is allowed the agent.
           Our attention    is directed  to the case of Hexter
Title and Abstract Company et al. v. Brievance Committee,
State Bar of Texas et al.      179 S.W.2d 946, Opinion by the
Supreme Court.    In review 1ng this case, we particularly    no:;
that same was decided upon an agreed statement of facts.           -
cording to Paragraph 3 In the opinion,      the defendant, a title
and abstract corporation,     admitted that occasionally   in the
past and will occasionally     in the future ‘prepare or draw deeds,
notes, mortgages,
             .      releases   and other instruments necessary in
Hon. J. P. Gibbs,    page 5    (0-6064)

connection with perfecting        titles    upon which it is issuing or
plans to issue title     policies      relating   to the property rights
of others.     It further admitted that such Instruments have
been and thereafter     will be prepared in connection with trans-
actions In the course of which the company issues or obligates
itself   to issue policies     of title     insurance.   It further ad-
mitted that it advises interested           parties as to the purpose
and legal effects     of the Instruments drawn by it.
            The Supreme Court held under these       facts,   and we quote:
            “It (defendant)  therefore    advise others as to
      the secular law, and draws deeds and other papers
      relating  to secular rights within the inhibition
      of the above statutes.     These acts when performed
      for a consideration,   constitute    the practice of
      law, both within the terms of the statute above re-
      ferred to and the deCiS%:ans of the courts on the
      subject.    (Citing authoritles)i’.
            On the question of consideration,      the defendant’s     ad-
mission in the statement of facts was to the effect         that “it
openly solicits   verbally   and: by advertisement the business of
issuance of title   policies   and represents    that it will prepare
the instruments referred     to in Paragraph 3 thereof,     making no
separate charge for such service.       Upon such facts,    the court
held that there was within the provision        of the statute,    :‘a con-
sideration,   reward or pecuniary benefit’ within the above refer-
red to provisions   of Article    430a, Penal Code of Texas flowing
to the defendant for the legal services        so rendered.    (Citing
cases) II
          As disclosed  by the record in the Hexter case, said
defendant acted as agent for a title  insurance company, and as
such agent makes contracts  for its nrincinal  to insure the titlg
to land and liens thereon.

             Apparently following   the decision   in Peoples v. Law-
yers Title Corporation,      282 No. N.Y. 513, 27 N.E.2d 30, the
court held that the preparation      of such title   papers was not a
nece s s W-Y incident  of the business of insurine titles.
            It should further be noted as was pointed out in the
Hexter case, that the dealsion       did not involve a mere isolated
transaction    in which a legal document had been prepared as a
pure gratuity but the case involved a corporation        as agent hold-
ing Itself    out as being qualified    to perform the legal services
and that it did so with continuity       for the purpose of increasing
the legitimate    business of Its principal.
Hon. J. P. Gibbs,   page 6   .(o-6064)

           It has been held that it Is not within the province
of the Board of Insurance Commissioners to regulate the prac-
tice of law and the schedule of fees tendered in connection
with this request cannot operate to legally    empower a title
insurance company to perform acts which constitute    the practice
of law.   Stewart Abstract Company v. Judicial   Commission of
Jefferson  County et al.,  131 S.W.2d 686.

            Neither the language in Section 21 above quoted or
any rule promulgated by the Board can be interpreted,        in the
light of the authorities    cited in the Hexter case, as permit-
ting the owner or operator of an abstract       plant to violate   the
legal practice     act. Any division   of premiums therein permitted
and approved by the Board are not to be consldered as allowed
for Illegal    services or services   not necessarily   a part of the
business of the principal.      It is apparent that the Legislature
recognized   that in insuring titles,    the services generally    per-
formed by an abstracter,    such as search of the records and pre-
paration of an abstract for the title       examination was au inci-
dent of the business of the title      company engaged in insuring
titles.
          In Words and Phrases, Volt 7, Permahent Edition,   P.
817, It is stated that “commissions” Is a word without technical-
meaning, but, when used to express compensation for services    ren-
dered, it usually denotes a percentage on the amount of moneys
paid out or received.   Purifoy v. Godfrey, 16 So. 701.
            Other than in the proviso clause of Section 21 the
entire act, Article    1302a, deals with the company entire 1y as
distinguished   from its agents.      The word lldevice’l as associated
with the words “rebate and discount” in this section of the stat-
ute is indicative   of Its meaning and clearly      has reference   to
unlawful rebate and discount of the premiumor any portion there-
of promulgated by the Board.       Section 3 of the Act provides that
under no circumstances     shall any rate or premium be charged for
policies   or underwriting   contracts   different  fromthose fixed and
promulgated by the Board.       There Is no penal provision,     however,
directed   to the agent in any of the provisions       of this act.
           We entertain    some doubt that the Legislature     intended
the language nrebate” etc. immediately following       the word llcom-
missions”,  to anywise relate to such lawful commissions as might
be paid to its appointed representatives      or agents.    Regardless
of a proper interpretation     of Sect,ion 21 under a strict      con-
struction  applicable   thereto and in light of the foregoing,       we
deem it unnecessary to determine whether or not there is a Vio-
lation thereof   in view of other statutes    directly   involved.
.   .    I.

        Hon. J. P. Gibbs,     page    7 (~-6064)

                   In the Hexter case, the defendant’s       counsel recog-
        nixed that if the transactions    there involved no wise related
        to defendant’s   business,  the defendant through its agent
        would be practicing    law.  As heretofore   pointed out, the court
        plainly held that such service was not a necessary incident
        of the business of Insuring titles.       In referring    to the busi-
        ness of title   insurance as well as similar service involved
        herein on the part of such companies, the Chief Justice         In his
        opinion stated:

                     “The title    company must accept the title  and
               insure it as it Is, or reject it.       It may examine
               the title,   point out the defects    and specify the
               requirepts      necessary to meet its demands, but it
               b the usiness of the aaulicant for the insurancq
               to cure the defects.”     (Underscoring   ours)

                      Agency is the relationship   which results   from the mani-
        festations    of consent by one person to another that the other
        shall act on his behalf and subject to his control,        and consent
        by the other to so act.     A generals agent is an agent authorized
        to conduct a series of transactions      involving  a continuity   of serv-
        ice.    Restatement of Law of Agency, Par. 1, 3. See Couch on In-
        surance Law, par. 506.
                     We are mindful of the rule that the agent as such, Is
        not in a fiduciary    relationship      with the principal     as to matters
        In whi;hm;;,;s    not employed.      Restatement of Law of Agency, Par.
        390.              the services     referred to in your questions        are ones
        performable    okLy by licensed     attorneys,    members of the State Bar.
        Should such attorneys      hold themselvea out as rendering this serv-
        ice free, they are in one and the same transaction             tending to the
        business of an applicant       for the Insurance, in no wise a neces-
        sary Incident to the agency.          It cannot be reasonably      contended
        that members of the legal profession           In such business transac-
        tions are serving their clients          present or prospective.      The fail-
        ure to charge for such service would not relieve             an attorney from
        the duty owed in such transactions           of special  trust and confidence.
        As to the applicant     for insurance,       such attorney agent is placed
        in the position    of a ballee in procuring Insurance upon the prop-
        erty In his possession       which act inures to the benefit         of the
        owner ; Polly v. Danieis         264 NoYe Sup. 194; Couch Ins. Law Vol.
        2 Par. 451; Broussard et al. V. South Texas Rice CO., 131 kw.
        4i2.
                     Section 16, Art. 5062b, V.A.C.S.,    provides for the sus-
        pension or cancellation   of the license   of either class of agents,
        local  recording agents or solicitors    guilty of rebating   any insur-
        ance premium. Rebating on the part of any agent of an insurer is
. .   .,
                                                                                 .. .

      Hon. J. P. Gibbs,    page 8   (0-6064)                           ..:*

      condemned by the laws of this State as being against public
      policy.   See Art. 5053, V.A.C.S., and Art. 578, Penal Code
      of Texas.

                 Article   578 of the Penal Code in part provides:
                  Wo Insurance company doing business in this
           state . . . nor shall any . . . officer,      agent,
           solicitor  or representative    thereof pay allow or
           give, or offer to pay allow, or give, d rectly or
           indirectly  as an inducement to insurance,     any re-
           bate of premium payable on the policy,     . . . or any
           paid employment or contract for service of any kind,
           or any valuable consideration     or Inducement what-
           ever, not specified    in the policy contract of insur-
           ance j . . . Any officer     or agent of such company
           violating  any provision   of this article   shall be
           fined not less than one hundred nor more than five
           hundred dollars .‘I
                 Answering your questions under the a?uthorities here-
      inabove discussed,      it is the.opini.on      of this department that
      any agent for a title        insurance company who receives      a com-
      mission or percentage of the premium, whether an individual,
      firm or partnership.;      licensed    attorney and member of the State
      Bar or otherwise,      and who, as an inducement to secure the sale
      of a title   insurance policy makes It a practice          of furnishing
      free of charge the service of preparing deeds of conveyance,
      quitc18lm~ deeds and other curative instruments for purchasers
      of such title    policies     effected    through such a ent or agency,
      is engaged in rebati          in violation     of Art. 50%2b, Sec. 16,
      V.A.C.S.,  and Art. 57    3 , Penal Code of Texas.
                  We are not to be understood as ruling on any sing16
      transaction   Involved in either of your questions under circum-
      stances not disclosing    a continuity  oi’ or the agent holding
      himself out as rendering such free services       as an inducement
      to effectuate   the contract.    Such a fact question would involve
      all facts relating    to the particular  transaction   and not before
      this department.
                Nothing herein Is to be construed as passing upon any
      present or proposed rule or regulation    of the Board of Insur-
      ance Commissioners or the necessity    therefor.
      APPROVED  APR’30, 1945          Yours very truly
      /s/ Carlos C. Ashley            ATTORNEY  GENERAL OF TEXAS
      FIRST ASSISTANTATTORNEY GENERAL By /s/ Wm. R. King
      APPROVED:OPINIONCOMMITTEE       Wm. R. King, Assistant
      BY         LPL, CHAIRMAN
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