Court Opinion

ID: 4138746
Source: CourtListenerOpinion
Date Created: 2017-02-18 02:39:57.189811+00
Date Added: 2024-06-11T14:36:53.639439
License: Public Domain

R-25

                                           NEY         GENERAL

PRICh  DANIEfL         :‘
ATTORNEYGENERAL
                                      Fbbruary    5,    1947

           Honorable   Jeaas   James      Opimm        No. V-26
           8C8te Treasurer
           Abtin,    Texar                l&lb: Alrtlcle 096, RerfseQ
                                                Civil   Statutea,   National
                                                Savings Investment      Co.,
                                                Saa Houa ton Underwrit era,
                                                Inc.,   Sterling   National
:I.,                                            co.,   2urthar procedure
       I                                        and disposition     ot
                                                securities     on deposit
                                                or above naaed compaaiea.

           Dear Sir:

                         You request the Opinion of this department in
           your letters     of November 14, 1946, and January 3, 1947,
           .mopeotivelg,      upon the questions   therein presented,
           which for a statement      of facts   we quote ae followa:

                        "Our recorda   show that we hold a8 custodian
                 securltier   deposited   by the above named companies
                 u&er piwioiors       of Article 095, aa lfsted below:

                       Naticnal  Savings Investment 00,           '
                       Dallas , Teraa
                       Deporltrd  on April 11, 1930
                       City of Borger Funding Bonds
                       Nos. 57/62 &p)l,OOO.OO each                $6,000.00

                       Sam   Houston Underwriters,   Inc.
                       R~IQJ~~,   Texas
                       Eiaporited on August 13, 1931
                       9e1~Hou#toa    Lire Ins. 00. Stook
                       eertifioate      128 for 400 ihe. &
                       awfmieate      a 149 for 100 aim. at
                       #lb,09    per ahero                            5,OQO.OO

                       Sterling   Blatlena     Oompaly
                       Houston,   Terar
                       Deposited    on April 3, 1QSS
                       Sterlhg    Nat'1 Life Ins. Co.
                       tzek,    Certificate     #6 for 500
                            . at (IlO.      per ahare                 5~;000.00
Honorable   Jesse   James,   Page 2

           “To date, no other deposits    have been made
     by said aompaniea as required    under Artiale    696.
     On September 26, 1946, we wrote the Secretary
     of State asking if these    companies had been
     issued charters   to do business   in Texas, and if
     so, to pleaee furnish   us with the correot    addreasea
     of each,   We received  a reply from the Secretary
     of State October 1, 1946, giving     no post office
     addresses s and quoted in part as follows:

            “IWe   find that NATIONALSAVINGS INVESTMENI
            COMPANY,Dallas,     Texas has been for-
            feited    July 2, 1932; SAM HOUSTONUNDER-
            WRITERS, Inc, , Ranger, Texas was forfeited
            July 2, 1932 because     the Franchise   Tax was
            not paid and was also forfeited      April 25,
            1933 because of failure to make proof of
            final    payment; STERLIm RATIONAL COMPANY,
            Houston, Texas,    was forfeited   July 2, 1942. t

            *On October 14, 1946, we wrote to each of the
            companies named herein regardi%           the require-
            ments of Artiale     696.    Our letters     to National
            Savings Investment      Company and Sam Houston
            Und erwrlt ers , Inc o , were returned      unclaimed,
            and no answer was received       from Sterling      Na-
            tional   Company 0 Also no replies        were re-
            ceived   from the verificatioa      letters    sent
            out by the State Auditor’s       Office     ia oon-
            nection    with the audit of this department e

             “Therefore,    in accordance   with the provisions
      of Article     696, we kindly request     your written
      advice   regarding    further  procedure   and diepmoitieB
      of securities      on deposit .I)

            *January   3,    1947

             “On November 14, 1946, we request&             your
      written     opinion   on the further     procedure    and
      disposition      of seourities     on deposit    with this
      Department under provisions           of Artiale    696 ior
      Nstional     Saviege    Investment    Conpang, Sam Houston
      Underwriters,       Inc,,   and Sterling    Kational   Co.
           “In conversation     with C, K. Ri.chards,  it
      was suggested    by him that we try to obtain
      more information    concerning  said companies,
      and accordingly,    wrote several   letters  but to
      no avail,
Honorable   Jesse    James,    Page 3

            “Therefore,     we hand you herewith    copies
     and photostat4       of all information   which we
     have be4n able       to obtain,  and await your
     further   advice     on these matters.”

              Conoretely,  your problem is what disposition,
if any, you should make et this time of the securities
deposited    by the resp4ctive   companies mentioned    in your
letter,    pursuant to the provisions    of’ Article  696, R.C.S.
             You are governed in this matter solely       by the
provisions     of Articles  696 to 700, inclusive,    R. C. S.,
as we shall     presently  point out.   These statutory    pro-
vision8    are as followe:

             "Artiale 696.          Bach corporation,     company
      or individual,         doing business     In this State
      as a bond investment           company, or coapany to
      plac,e or sell        bonds, certificates       or debentures
      on the partial         payment or installment       plan,
      shall    deposit      with the State Treasurer,        in
      cash or securities           approved by said Treasurer,
      the 5um or five          thousand dollars,      and shall
      d4p,44~it sni-ennu4lly          with said Treasurer,        in
      o4.4.b or srmwritierp         to be approved by said
      4rnoer,      t&a psr orsft or cl1 m4t pruiums
      rr.rZted     @Al       tIw w      d,#?oalit,d uowits     to
      on4 hundred thous4nd dollar+.

             “Article     697 a If any swh doPurstio cor-
      poratlon,     shnll    fail,     for sfxtf    day4 after      ito
      organization,       to make with the State Treeaurbr
      the ,deposit    rscuired       by thir title, it shel?
      be oesst$ezed       to bras irnW~&e8          ita charter;
      and the Attorney         General shall       upon information
      therror,    bring suit In the name of the State to
      Hera such oharter         or certifiaate        of incorpor-
      atlo@ drelared        forf4it.4d,     @    the oourt,      upon
      w $iaQfql,      sbak3. Qaelore a4gsfi charter          fer-
      tiit#     aaQ app&nt         4 r,4ast?4*   for su4h cempany,
      w4~      duby it shsll        be, uaftJr the order of the
      04**,     to distrWute         to $W rh4r4holUer4          ‘th4
      awe.ti# oi the co&span              T&s oourt shall     out sf
      1u4pqilua44ta maka equ,r tebllr oompensation             for the
      r4o4irer,

           “Articls 898.   In 4444   or ths failure  of
      any suoh aompanys the dirtrict    court of tka
      csurtty in whiah the        prinbipal offioe ia lobated,
      upon the appliaation         of one or more shareholders,
Honorable   Jesse   James,   Page 4

     shall   appoint a receiver    for auoh oompany, whose
     duty it shall    be to wind up its affairs,       liqui-
     date its debts,    and distribute    its assets,     using
     therefor,    upon the order of the court,      the deposit
     previously    made with the State Treasurer      to se-
     cure the shareholders.       Said Treasurer    is author-
     ized to pay out such deposit      upon the warrant o?
     the Comptroller    in accordance   with requisitions
     made upon the Comptroller      by said receiver,      ap-
     proved by the court,

              “Article     699.   On request    of any such company,
     the State Treasurer          is authorized    to permit snoh
     company to interchange           cash for the securities    or
     securities        for the cash deposited      by such company
     under the provisions           of this title   with said
     Treasurer,        such securities     always to be approved
     by said Treasurer          on the written    advice  of the
     Attorney      General,

             “Article     700,   If any such company shall
     oease to do business          in this State and satisfy
     the Comptroller        and the Attorney    General that it
     has no liabilities         in this State,   the Comptroller
     ahall issue       his warrant to the State Treasurer;
     and said Treasurer         upon such warrant of the Comp-
     troller,     shall    return to such oonpeny the cash or
     seouritiee       deposited    by it under the provisiona
     0r   this title.”

           Justice Sharp, of the Supreme Court in the case
of Bankers Union Life Insurance      Company v. Sheppard,    117
S.W. 26 770, 116 A. L, R. 961, stated       the main objec-
tive of these statutory   provisions    ia lsn&uage as fol-
low0 :

           “(1) To require    each corporation      doing
     business   in this State as a bond investment
     oompeny to place oash or certain        securities
     with the State Treasurer,      in the sum of $5,000,
     es a deposit;    and to deposit   semi-aniwlly         ten
     per c4nt.   of all net profits    receirod,      until
     the sum of $100,000    is deposited.

             I’(2) To require the Attorney   General,     in
     the event any such corporation      shall   fail   to
     make such deposit      as required,  to bring suit to
     have the charter      of such company declared     for-
     feited,      and to have a receiver  appointed   for
Honorable    Jesse    James,   Page 5

      such cempanys whose duty it shall be, under the
      orders oi the court,  to distribute to the share-
      holders  the asseta of the oompany.

             “(3) To provide,      in case of the failure        of
      say ruoh company, that upon applioation            or  one
      or more shareholders        the district  oourt shall
      appoint a receiver       for suoh oompang, whore duty
      it shall be to wind up its af’fairs,         liquldate
      ita debts,     and distribute    its assets,    using
      therefor,     upon the order of the court,       the de-
      posit    previously   msde with the State Traasurer.

             “(4)     To permit   the   interohange      of   the do-
      post   0

            “(!I) To provide,    in the event any suah
      eon any shall    oeaae to do business in this
      Sta &e and shall   satisfy   the Comptroller       and
      the Attorney   General that it has no liabilities
      in this State, that the Comptroller          shall   issue
      his warrant to the State Treasurer,          and aaid
      Treasurer   upon euoh warrant shall       return to
      rush oomprny the cash or seourities          depoaitsd
      $9 it under the previeienr       of law.”

                 It will be observed          that Article      6.96 desaribes
how the deposit          shall be made.          Articles    697 and 698 pro-
vide for the appointment              of a receiver        in the event that
the oompany feils           to make suoh a deposit,            or in the event
or the raflure         or   such ooapany.          It doea not appear ,from
the information          before    us that any reoeivershlp            prooeed-
ings ,have, up to this time, been instituted                     as to .any
of the oompauiea in question,                 hsnos Artioleo       6.97 and
698 are not epplloabls             and need not , for the punpose or
this o ,inion, be rurther             oonridered.         The same~~is true
or Art ,!010 698 whiah            rovidss     ror lntarohange       end rub-
~;titt,iu0sr       or se0wit    P OS.    Whether or not the quartion
di golve,noy or insolvency              or   there ‘oompanler ir *new
prorent or may arise            in the future, we do not find it
nroesrery        to deoide,     nor could wo deoldo this qu@rtion
 W n bhu mt0            subrnltted.        It dso8 appaar, howevrr,
 t r at t’$cir right tc continue             their    oerporata    a6t ri-
 tier have bew         forreited      for railurn to psy rran his0
 *axes or 0Oh~rr raaaenai , and that they are net ns E ao-
 tire      eorporate    ooneerna,     b,ut the fact still         remains
 that t&y are not in reoeivershlpO

              Thora    romaine,    therefore,      the   quastibn    Of
                                                                   -.

Honorable    Jesse   James,   Page 6

whether you are authorized         under the provisions         of Art.
700, supra,     to dispose   of these securities        as therein
provided 0 This Article       does not purport       to provide     that
the deposit    made under Article      696 be retained        for the
benefit    of the shareholders      of the corponstions.          Bank-
ers Union Life Insuranoe       Co. v. Sheppard,        supra.     It ia
to be returned by the State Treasurer            upon the oertiri-
oate of the Ooaptroller       or Pub110 Acoounts        only upon a
showing that the depositor         has no liebilirties      in thi4
State which have not been fully          discharged,     and this
must be to the setiafaotian         of the Coaptroller        and the
Attorney General.       We bhink the burden rests          upon the
shareholders      or the part148 claiming      the return of suoh
seourities    to present   sufficient     evidence     and 1nrorm.e
tion to the Comptroller       and the Attorney       General to,
Qustiiy    them in restohing a ocnolusian        aa to whsther or
not the provisions      of Article    700 have been met.

              From the information     contained   in your opinion
request,    it does not appear that eny demand haa bee4
made. for the return of these aeourities by any party au-
thorized    under th4 stmtute te make 4 damand ard reeefre
them, or that thera has heretofore          been preset&ad to
the Comptroller     and the Attorney     General any iaieraeti~n
upon which the Attorney        General could recommend te the
Comptroller     the issuance    of his certificate    upen you
for the disposition      of the seouritiea      to anyone at this
time, and until     this has been done, you are authorized
to retain     these securities    as you have in the pan,t.

             We think the case of Bankera Union Life Insu-
rance Company v, Sheppard,           supra, affords     a safe guide
ror us in this matter;         and while in that case the Carp-
troller   was ordered      to return the seou,rities        by a arnda-
mu4 prooeeding      instituted      for that purpQae, the u&d:iaplr-
ted facts    in that case justified          the o4urt’s    asti44~
But here we are net able te 441 tWt Ok r4et8 jruttiy
you iI& t&king a#y retf6n         la ragera $6 thea~a aemi*iw**,
ot&ar t&4 ta ke4p thrm aea@W&g 4s gem have In the Mast
titil   r4ecir4~hip       proceedings     are instituted      as pr4rid-
ed for in Articles        697 and 69S, supw,         Or until   a proper
#&owiag   has been dlade to the Qomp~tro&lar. and Attorney
General as provided        for in Artlola       106, supra, whiah
would justlip     the Comptroller        in i$suing    his certificate
for your direction        in the diapeaitisn        ef the seourities.

           We take your letter,      lieweve2, es suffia$at&   not-
ice to this Department to justify appropriate         leg41 ao-
tion under Articles     697-698 or 7095, R. C. S., end expect
to prooead accordingly.       You will   in due course be ad-
Honorable    Jesoe   James,   P8ge   7

vised as to th% rurther   dirpooitisn   rt tL0s.e secufi-
ties upon the sulminatiog    of our 4fferts   ts clear this
matter up by apprepriata   lags& aotfm.

             The State Traaoursr         is not authorized       to nf
      turn   securities      deporit4d     with him by oorpohtioU
      doing bwineso         in this State aa a bond itiv%rtm%M
      company, or company to place or ssll               bonds, cetiff-
      icates    or debentures       on the psrti%l      payment or in-
      stallment     plan, as required         by Artiolo     696, R.C.S.,
      except in reoeiverohlp          pxowedi*err      %a p*vi(d       far
      in Artioles       697, 69&8T 709?r, RICiSI,          or upcn a
      showing satisraotorg          to t&4 Comptrsllsx        and th%
      Attorney    General t&at ,gha 6o~r@aTatlcn haol o%ssed
      to do bu&&nsso In tih@ Stat,r 8Bd has &w lieb1’1ltiu
      unsatirfi5d      as requihd       by Ortidla     760, R. C. S.

                                              Your8   vary   truly

                                         ATTORBBY0-L          OF TBXAS

LPL:AldM:jrb

Approved Opinion Committee
       By BWB, Chairman