Court Opinion

ID: 4136021
Source: CourtListenerOpinion
Date Created: 2017-02-18 02:08:58.18526+00
Date Added: 2024-06-11T14:35:03.357334
License: Public Domain

.   -

                        THEATTORNEY                          GENE-L
                                         OF      TEXAS

                                       November       16, 1960

        Honorable William A. Harrison                Opinion No.      WW-958
        Commissioner      of Insurance
        State Board of Insurance                     Re:   May a foreign stock life, health
        International   Life Building                      or accident insurance company,
        Austin,   Texas                                    with par value stock, having a
                                                           par value of less than one dollar
                                                           per share or more than one hun-
                                                           dred dollars per share be granted
                                                           a Certificate  of Authority to trans-
                                                           act the business   of insurance in
        Dear   Mr.   Harrison:                             this State, and related questions.

                 You request     an opinion from    this office    and we quote from    your letter
        as follows:

                         “A foreign stock life insurance company with shares of
                stock of the par value of fifty (5OC) cents per share has filed
                application for a Certificate    of Authority to do business in
                this State.   Article 3. OZa, Texas Insurance Code, provides that
                the par value of each share of stock of a life, health or accident
                company organized or operating under the provisions           of Chapter
                3 ‘shall be for not less than One ($1.00) Dollar nor more than
                One Hundred ($100. 00) Dollars.      ’ Therefore,    a question has
                arisen as to whether or nut this company can be admitted to do
                business in this State.     In considering   this point, it was called
                to our attention that there are at least four (4) such type com-
                panies presently     doing business in this State whose shares of
                stock have been established      at a par value of less than one ($1.00)
                dollar by charter amendments        subsequently   to the date of their
                admission   to do business in this State.      At the time that such
                companies were initially authorized to conduct business in this
                State the par value of their shares was one ($1.00) dollar or more.

                          “In view of the above situations,          it is urgent that we have
                 youropinion at the earliest date possible          concerning the following
                 questions:

                          I’( 1) May a foreign     stock life,    health or accident   insur -
                                                                                            -   .

Hon.   William    A.    Harrison,    page 2   (WW-958)

           ante company,    with par value stock, having a par value
           of less than one ($1.00) dollar per share or more than
           one hundred ($100.00)   dollars per share be granted a
           Certificate of Authority to transact the business of insur-
           ance in this State?

                    r’(2) If a foreign stock life, health or accident
           insurance    company,    doing business in this State, amends
           its charter converting its shares into shares of par value
           less than one ($1.00) dollar or more than one hundred
           ($100. 00) dollars,    should the Certificate  of Authority of
           such company to transact the business of insurance in this
           State be suspended or revoked for non-compliance          with
           the provisions    of the laws of this State? ”

           Your first   question    is answered   in the affirmative.

        Prior to the adoption of the Insurance Code in 1951, what is now
Article 2. 07 of the Code was the only statute dealing specifically with the
value of shares of stock in an insurance company organized in Texas.
At that time it was Article 4704, Vernon’s    Civil Statutes, 1925.

         When the insurance laws of the State were codified,    Chapter 3,
thereof,  entitled “Life,  Health & Accident Insurance, ‘I contained various
subchapters.     Subchapter A is entitled Domestic  Companies while B is
entitled Foreign Companies.

           Contained    in Subchapter    A is Article    3.02a   which reads   in part as
follows:

                   “(a) The stock of any life, health or accident insur-
           ance company organized or operating under the provisions      of
           this chapter may be divided or converted into shares of either
           par value or no-par value, or both, all of which shall be fully
           paid and non-assessable.   If divided or converted into shares
           of par value, each share shall be for not less than One ($1. 00)
           Dollar nor more than One Hundred ($100. 00) Dollars    . . .”

         This provision,  included as it was under the domestic     companies’
subchapter,   was not enacted until 1955 at which time the Code was already
in existence and the division of “domestic”    and “foreign” regulating statutes
already established.     While the Legislature  could have easily expressed
its intention that the minimum par value restriction      should apply to foreign
c

    Hon.   William   A.   Harrison,   page 3   (WW-958)

    companies     as well, it did not choose to amend the subchapter            of the Code
    regulating   foreign companies,    i. e., Subchapter B.

             Generally,  where the Legislature   intended that certain provisions
    of the Code would apply to both foreign and domestic      companies  such has
    been included in both Subchapters A and B. Subchapter A, dealing with
    domestic   companies,    contains several requirements    which are also con-
    tained in B, relating to foreign companies.      For instance,  Subchapter A,
    Art. 3.04,   Sec. 1, 3 requires of domestic   companies:

                      “An affidavit made by two (2) or more of its incor-
             porators that all of the stock has been subscribed    in good
             faith and fully paid for, as required by law, in the amount
             of not less than One Hundred Thousand Dollars     ($100,000)
             capital and that such company is possessed    of at least One
             Hundred Thousand Dollars ($100, 000) surplus,     as required
             by law, in addition to its capital.  . ~”

    That requirement,   insofar as it relates       to capital   and surplus,     is also    con-
    tained in Subchapter B, Art. 3.22:

                      “No such foreign stock insurance company shall be
             licensed by the Board of Insurance Commissioners          or shall
             transact any such business of insurance’in     this State unless
             such company is possessed      of not less than the minimum
             capital and surplus required by this chapter of a similar
             domestic    company in similar circumstances,      including the
             same character    of investments   for its minimum capital and
             surplus.   . .”

            Likewise “A: by way of Article          3. 02, deals with domestic  companies
    and the requirements   for incorporating        same, while “B” regulates    the same
    subject matter as to foreign companies          through Articles  3.20 and 3.2 1.

           In light of the foregoing, the requirement  in Subchapter A that
    shares of par value stock shall be not less than $1. 00 nor more than $100. 00
    does not necessarily   become applicable to foreign companies,    especially
    when Subchapter B contains no express requirement      of par value stock
    minimum or maximum for foreign companies.

            In 1959, the Legislature      amended    Article     2 1.43   of the Insurance    Code
    to read in part as follows:
Hon.   William   A.   Harrison,   page 4   (WW-958)

                 “No foreign or alien insurance    corporation  shall be
         denied permission    to do business within this state for the
         reason that all of its authorized  capital stock has not been
         fully subscribed  and paid for; provided

                  ‘I( 1) that at least the minimum dollar amount of
         capital stock of such corporation      required by the laws of
         this state (which may be less than all of its authorized
         capital stock) has been subscribed       and paid for; and

                  “(2) that it has at least the minimum dollar amount
         of surplus required by the laws of this state for the kinds of
         business    such corporations   seek to write; and

                 “(3) that such corporation    has fully complied   with all
         laws of its domiciliary  state relating to authorization   and
         issuance of capital stock. ”

        Again, no mention of minimum or maximum par value for foreign
companies   is made, but rather Section (3) above implies that such matters
shall be controlled by the “laws of its domiciliary state. ”

        As far as can be determined,     no Texas court has been called upon
to decide the question.    Consequently,  we have examined the decisions  of
foreign jurisdictions   for guidance and direction.  In 8 ALR2d 1196, there
is contained the most concise statement of existing authority:

                  “It is now well settled that, in the absence of unmis-
         takable language to the contrary,     an intention to exclude a
         foreign corp”ration   from doing business in a state will not
         be inferred merely because no provision is made by the law
         thereof for the organization    of domestic   corporations  similar
         in stock structure,   as based upon an issue or issues,     or divi-
         sions of, a particular kind of stock, to that of the applicant.”

         A closely analogous    case is State ex rel Standard Tank Car Company
v. Sullivan,   (1920) 282 MO. 261, 221 S.W. 728.     There the Missouri     Supreme
Court held that a foreign corporation     could not be refused the right to do
business in Missouri     for the reason that a part of the capital stock which the
foreign company had issued had no par value and it (the foreign company)
could not,: for that reason,   have been organized as a domestic     corporation.
The Court stated that where there was no intention or established        policy
to exclude foreign corporations     merely because the domestic laws forbade
.   c

        Hon.   William   A.   Harrison,    page 5    (WW-958)

        the particular kind of corporate       structure possessed     by such foreign cor-
        poration,   this reason alone could not be used to exclude the foreign com-
        pany from doing business in Missouri,          at least in the absence of a more
        express prohibition.        Three additional states have adopted this precise
        construction    and in each instance the authoritv is that of the hiehest court
        in the respective    state.    State ex rel Fibreboard     Products v. &kle,     (1928)
        147 Wash. 10, 264 P. 1010; Northh American           Petroleum    Co. v. Hopkins,
        (19 19) 105 Kan. 16 1, 18 1 P. 625; Commonwealth
                                                     lmonwealth Acceptance     Corp. v. Jordan,
        (1926) 198 Cal. 618, 246 P. 796.

                 The basic reasoning behind those cases mentioned above, with which
        we agree,   is that a state, acting through its legislature,     in a proper case
        anu subject to limitations   of the Federal and state constitutions,      has the
        power to control and regulate domestic and foreign corporations           equally,
        insofar as they operate within the state, including issuances        of corporate
        stock, and can determine     the legal effect of such activities.     The only
        critical question is one of construction    of those legislative   acts.

                 Regarding the construction    problem,    with respect to a statute of the
        kind in question,   particularly if it does not expressly    state whether it is
        applicable to foreign corporations,     it is said in 23 Am.   Jur. 108, Foreign
        Corporations,    Section 10 1:

                         “In the construction   of statutes applicable to corpor-
                ations, it is not to be presumed that the legislature        intended
                to grant greater rights to foreign than to domestic         corpora-
                tions and to favor them with rights and privileges         greater
                than those conferred upon domestic        corporations.     No prin-
                ciple of comity requires that foreign corporations         be placed
                in a more favorable    situation under the local statutes than
                similar domestic corporations.        However,     statutory provi-
                sions dealing with the incorporation      or organization     of cor-
                porations,   rather than with their business in the state, are
                ordinarily   deemed inapplicable    to foreign corporations,       as
                are local laws concerned with strictly corporate acts as dis-
                tinguished from those which may be done by agents. ”

                When it is remembered     that Article 3. OZa, insofar as it applies to
        par value stock, is a prohibitory   statute that obviously applies to domestic
        corporations,   the following must likewise be considered with respect to
        such a prohibitory   statute:

                          “A general      law prohibiting   corporations   from   exer-
Hon.   William   A.   Harrison,   page 6   (WW-958)

        cising particular    powers and privileges    ordinarily  oper-
        ates on foreign as well as on domestic       corporations  for
        the reason that the exercise     by a foreign corporation    of
        such powers in the enacting state would violate the public
        policy thereof as indicated by the general restraint im-
        posed on its own corporations.        On the other hand, all the
        limitations  imposed by local statutes upon domestic        cor-
        porations do not necessarily     apply to foreign corporations.
        If an act forbidden is of such a nature that the right to per-
        form it exists inherently in all corporations      unless special-
        ly denied, or if the prohibition is designed to establish not
        a general public policy toward corporations,        but merely a
        more effective exercise     of visitorial  power over them, a
        prohibitory   statute which does not in terms refer to foreign
        corporations    may be held not to apply to them. ” 23 Am. Jur.
        109, Foreign Corporations,      Sec. 103.

         The only language of Article 3.02a which could possibly         be construed
to include a foreign company is that portion which reads:

                “The stock of any life, health or accident insurance
        company organized or operating under the provisions     of
        this chapter. ~ .”

        The language of this Article makes provision for regulating domestic
companies which came into existence after codification  of the insurance
laws, thus were “organized”   under Chapter 3.

        The term “operating”  refers to those domestic companies which were
organized under the insurance laws as they existed before the creation of
Chapter 3.   Though organized before Chapter 3 was created,   these domestic
companies are now subject to its requirements,   thus are “operating” there-
under.

         Consequently,  those domestic companies whxch were organized under
Chapter 3 and those domestic    companies which were organized under prior
law but are now operating under Chapter 3 are both regulated thereunder
and the language makes allowance for both situations.     As previously  dis-
cussed,   such language alone does not indicate an intention on the part of the
Legislature   to make foreign companies  subject to its requirements.

        Inasmuch      as there is no provision    establishing  limits for par value
stock for foreign     life, health and accident   companies    contained in Subchap-
Hon.   William   A.   Harrison,   page 7   (WW-958)

ter B of Article 3 of the Texas Insurance Code; and inasmuch as any control
relative thereto would have to be derived from statutes dealing with domes-
tic companies   only, we feel that the conclusion reached above conforms to
existing authority and is consistent with the intent of the Legislature.

        Since we have held that foreign life, health and accident companies
may have stock with a par value of less than One Dollar ($1. 00) or more than
One Hundred Dollars      ($100.00) per share, we answer your second question in
the negative.   Thus, the Certificate    of Authority of a foreign stock life, health
or accident company,      doing business in this State, should not be revoked for
non-compliance     with Texas insurance laws, if, subsequent to its date of ad-
mission to do business here, it amends its charter converting its shares into
shares of par value less than One Dollar ($1.00) or more than One Hundred
Dollars ($100.00).     Certainly if a foreign corporation   may enter the State
with less than One Dollar ($1. 00) par value, it may subsequently      amend its
charter so as to provide for shares having less than One Dollar ($1. 00) par
value.

                                     SUMMARY

                   1. A foreign stock life, health and accident company,
         with par value stock, having a par value of less than One
         Dollar ($1.00) per share or more than One Hundred Dollars
         ($100.00)   per share, may be granted a Certificate   of Authority
         to transact the business of insurance in this State.

                  2. A foreign stock life, health and accident insurance
         company,    doing business in this State, who amends its charter,
         converting its shares into shares of par value less than One
         Dollar ($1. 00) or more than One Hundred Dollars ($lOO.,OO)
         should not have its Certificate  of Authority suspended or revoked
         for non-compliance    with the provislons  of the laws of this State.

                                           Very    truly yours,

                                           WILL WILSON
                                           Attorney General       of Texas

                                           By    c      “&a&
                                                C. Dean Davis
                                                Assistant  Attorney   General

CDD/pe
Hon.   William   A.   Harrison,   page 8   (WW-958)

APPROVED:

OPINION    COMMITTEE

Morgan Nesbitt,       Chairman
Ray Loftin
Arthur Sandlin
Vernon Teofan

REVIEWEDFORTHEATTORNEYGENERAL
BY:       Leonard Passmore