Court Opinion

ID: 4130437
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:04:17.185868+00
Date Added: 2024-06-11T14:32:18.814412
License: Public Domain

THE      ATTORNEY            GENERAI.
                                   OF   TEXAS

                                   March   27, 1989

Mr. Kenneth W. Littlefield                      Opinion   No.   JM-1032
Commissioner
Texas Department   of Banking                   Re:  Appointments  of foreign
2601 North Lamar Blvd.                          trust company as trustee    for
Austin, Texas    78705-4294                     Texas residents   (RQ-1488)

Dear    Mr.    Littlefield:

        On behalf of the Department  of Banking you have     asked
about    a  foreign  trust company  accepting   appointments    to
serve    as trustee.  your letter reads:

              The Department    of Banking has received         an in-
              quiry as to the      interpretation     of § 105A      of
              the Texas    Probate    Code.      The    inquiry    was
              submitted    on   behalf     of   a Missouri       trust
              company   (referred    to    herein as     the    "Trust
              Company").     The Department     therefore    requests
              your opinion as      to whether      a foreign     trust
              company,    operating     as    described     in    this
              letter,    can   accept    appointments      by    Texas
              residents   to   serve as     trustee under       living
              and testamentary     trusts.

              Plan   of Business

              The Trust Company is      an affiliate   of a bro-
              kerage firm    which    does business    in   Texas.
              The brokerage     firm   proposes to    supply    its
              brokers   with    information    about   the   Trust
              Company   which     would   be    distributed      to
              customers  who inquire about the       availability
              of trust services.

              Brokers may from     time to     time discuss       with
              existing clients     of the    brokerage     firm    the
              advantages  of   professional       trust    services.
              The brokers would discuss the ability of             the
              Trust Company to provide these services             only
              in response to the      client's    inquiries    as   to
              the providers   of such services.        The   brokers
              would have new account       forms which would        be
              made available   to    inquiring    customers.       The
              completed  forms    would    be forwarded      by    the

                                           p. 5333
Mr.   Kenneth    W. Littlefield     - Page   2    (JM-1032)

          customer    directly     to  the   Trust   Company's
          offices    in Missouri.       There   would    be   no
          general advertising      of any kind in Texas      and
          no mailings     to   Texas residents     other    than
          statements   and other correspondence      regarding
          specific   accounts.

          Upon opening     an account,      the Trust    Company
          would   serve    as   trustee    under    living    and
          testamentary    trusts    created by     Texas    resi-
          dents.    The trusts    would be administered         in
          Missouri.      All   property     other   than     real
          property would be      held in Missouri       and   all
          trust records would be kept in Missouri.            The
          Trust Company would not establish         any   branch
          office, agency or other place of business             in
          Texas.     The   Trust    Company    has   made     the
          filings required by 5 105A(b) of the           Probate
          Code.

          ADDliCable      Law

                Article   342-1110 of the Texas Banking Code
                prohibits   a   foreign    trust    company     from
                doing   business     as  a   trust    company     in
                Texas or exercising     in Texas those       powers
                referred to     in Article     342-1101     of   the
                Banking Code, except as provided         by 5 105A
                of the Probate     Code.    Section 105A(a)       of
                the Probate Code provides       in part:

                Any bank or trust company organized             under
                the   laws    of   and   having     its    principal
                office in, . . . any . . . state             of    the
                United States of       America,    other than      the
                State of Texas, . . . having the corporate
                power to so act, may be appointed           and    may
                serve in    the State      of Texas     as   trustee
                (whether of      a personal      or    a corporate
                trust), executor,      administrator,       guardian
                of the estate, or       in any other       fiduciary
                capacity,   whether     the appointment        be   by
                will,     deed,     agreement,         declaration,
                indenture,     court    order    or    decree,      or
                otherwise,     when     and     to     the     extent
                that . . . [the] other state in which such
                foreign bank or trust company is organized
                and   has   its     principal      office      grants
                authority     to   serve    in   like      fiduciary
                capacity    to    a bank     or    trust     company
                organized   under    the laws      of, and     having

                                       P. 5334
Mr.   Kenneth   W. Littlefield    - Page    3     (JM-1032)

                its principal    office     in,     the   State   of
                Texas . . . .

          Missouri   permits Texas trust companies   to act
          in a   fiduciary    capacity   in Missouri    upon
          compliance   with requirements   similar to those
          set forth in 5 105[A](b)     of the Texas Probate
          Code.    See 5 362.600 MO. Rev. Stat.[l]

          Subsection    (c) of 5 105A prohibits      a    foreign
          trust   company    from   establishing       a branch
          office, agency     or   other place     of    business
          within Texas     and prohibits     in any     way    the
          solicitation,    directly or indirectly,       of    any
          fiduciary business      in Texas     of    the    types
          described    in   Subsection      (a) of        5 105A.
          Subsection    (e) of    § 105A    states     that    the
          provisions   of g,l05A are     in addition to        and
          not a limitation      on the   provisions     of   Tex.
          Rev. Civ.    Stat. Art.     1513a, 5 1, which         in
          1987 was codified as Article       342-1101 of       the
          Texas Banking Code.

      The term **solicitation** is defined by the Texas     stat-
utes in only one place, although     it and its relatives  appear
in other statutes.    In   article 4582b, dealing with    funeral
directing  and embalming,   subsection  1M states:

          'solicitation'    means   a      direct    or  indirect
          contact   with    [certain        persons]    for    the

    1. The conclusion       that    Missouri     permits    Texas    trust
companies   to act in a fiduciary       capacity pursuant     to section
362.600 of    the   Missouri     statutes     is   questionable.       The
Missouri   statute    defines "foreign       corporation"    to   mean    a
bank or other corporation       organized     under the laws of       "any
state of    the United     States, which      state adioins      or   next
adioins the state of       Missouri.*'      (Emphasis added.)        Texas
does not adjoin     Missouri,    but does     adjoin states that       do.
However,    the   phrase    "next    adjoins"     is   not   defined     or
elsewhere   used by Missouri      statutes,    and the only      Missouri
case using the     phrase that      we have    found uses      it in   the
same sense as "adjoins."        See Wann v. Gruner, 251 S.W.Zd 57,
58 (MO.    1952).   See also Irons v. American Rv. Ex ress Co.,
300 S.W. 283 (MO. 1927) ("next adjoining           circuit").     Cf. MO.
Rev. Stat.     5 362.925-l(1)      ("adjoining-state       bank   holding
company" defined):     Enoerlv v.     Mercantile     Trust and    Savinas
Bank of    Ouincv. Ill.,      457 S.W.2d 1 (MO.    1967)    (Illinois
corporation).

                                    p. 5335
Mr.   Kenneth   W. Littlefield     - Page    4   (JM-1032)

          purpose   of   securing the   right   to  provide
          funeral   services or merchandise   . . . .

See V.T.C.S.     art.   2372p-3    ("soliciting*');    V.T.C.S.    art.
4495b, 5 3.07(c);      V.T.C.S.    art.   9023a    (*~solicitations~~);
Educ. Code § 4.21 (llsolicitql); Hum. Res. Code           5 12.001(b);
Ins.    Code    art.    21.49-1,    § 5     (l'solicitationl').
Coutlakis    v. State,    268 S.W.2d 192     (Tex. Crim. App.     19%
 (*'solicitl').

     The precise language of subsection              (c) of section       105A
of the Probate Code reads:

              (c) No     foreign       bank    or   trust     company
          shall    establish      or     maintain      any     branch
          office, agency       or    other place       of   business
          within    this    state,      or    shall    in   anv    way
          solicit,      directlv        or     indirectlv.         any
          fiduciarv   business     in this state of the types
          embraced by subdivision           (a) hereof.        Except
          as   authorized               by    the   laws    of    this
          state, no foreign bank or trust company shall
          act in a     fiduciary     capacity      in this     state.
          Nothing in this Section shall be construed                 to
          authorize    foreign banks        and trust      companies
          to issue or     to sell or        otherwise     market     or
          distribute     in    this     state     any     investment
          certificates,     trust      certificates,       or    other
          types    of    securities          (including       without
          limiting the generality          of the foregoing        any
          securities    of the types authorized           by Chapter
          7 of the Insurance       Code of 1951 prior to           the
          repeal thereof),      or to conduct any activities
          or exercise    any powers        of the type       embraced
          and regulated     by    the Texas       Banking Code       of
          1943 other than those conducted             and exercised
          in a fiduciary     capacity       under the terms        and
          conditions    hereof.       (Emphasis added.)

A violation   is a misdemeanor.           Prob. Code § l.O5A(f).
Paae v.   State,   492   S.W.Zd         573   (Tex. Crim.   App.          19%
(solicitation   of drinks).

      We think both the language and the intent of subsection
(c) of    article 105A    are plain.      The foreign     corporation
solicits   fiduciary  business   in violation   of the statute,      in
our opinion,     by  furnishing    "new   account    forms"    to  the
brokers employed by      an  affiliated   brokerage   agency and     by
otherwise   acting in concert with the brokerage        firm with the
expectation    and intent that    the forms will be completed        on
behalf of    Texas residents     -- especially,     Texas   residents
prompted   to inquire of the brokers about available        providers

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Mr.   Kenneth   W. Littlefield    - Page   5   (JM-1032)

of trust services.         The statute prohibits     not only a direct
or indirect solicitation       of such business     from consumers:      it
also prohibits     solicitations    in this state of such        business
by   the  use     of,    or from,    intermediaries,      whether      the
intermediaries     are   technically    agents    of   the    soliciting
trust company      or   not.    The phrase,     "in   any    way"    means
in anv way.     m      United   States    v.  Thaver,     209 U.S. 39
(1908).   Cf.     Murnhv    v.  Camnbell Sour,    co.,    40 F.2d 671
(D.C.D. Mass. 1930) (activities        on behalf of foreign        corpo-
ration); Frazer v. McGowen,        502 A.2d 905, 909 (COnn.         1986)
(**organizational network likely to prompt          [business]"):     &&
& Barton    v.    Walker, 21 S.W. 687 (Tex.     Civ.    App.    1893)
(activities    in other states).

      In United States v.     Thaver, sunra, a case        originating
in Texas,    the  United    States Supreme     Court    considered     a
federal statute    forbidding    any   person to    "solicit    in  any
manner whatsoever"     political     contributions     on   government
property.    Mr. Justice Holmes,      writing   for the Court,     held
that letters sent to federal employees        violated    the statute.
He wrote:

              Of course     it is possible to         solicit     by
           letter as well as      in person.       It is   equally
           clear that the person       who writes the        letter
           and intentionally      puts     it   in the     way    of
           delivery   solicits,    whether the       delivery     is
           accomplished    by   agents     of   the   writer,     by
           agents   of   the     person     addressed,     or     by
           independent   middlemen,     if    it takes place      in
           the intended way.      It appears to       us no    more
           open to    doubt   that    the     statute    prohibits
           solicitation    by writing as well as by          spoken
           words.   It, forbids all persons to solicit           'in
           any manner whatever.'
209 U.S.    at 42.

      There is a difference   between lVsoliciting business"       and
-- without   design -- merely "taking       orders" for     business
from persons not prompted,     asked or importuned     directly     or
indirectly  to   place orders.     See Sanderfur-Julian      Co.    v.
State, 77 S.W. 596 (Ark. 1903).      However,   a general    inquiry
about the availability     of trust services     is not a    request
about the   availability  of   trust   services   furnished     by   a
particular  company, and such an inquiry is not the attempted
placement  of an order with any company.

      A design to prompt inquiries,   or to respond to      general
inquiries with a presentation    of the benefits   offered by the
foreign trust   company    and its  services,    i,s a design     to
circumvent    the    statute,    we   believe.        Accordingly,

                                     p. 5337
                                                                               I

Mr.   Kenneth   W. Littlefield      - Page     6    (JM-1032)

appointments  of   the foreign    trust company    as trustee     ob-
tained pursuant   to a plan   of business    such as you    describe
would be violative     of the Texas    statute.   &R   Bittiker    v.
State Bd. of Reaistration    for   Healina Arts, 404 S.W.Zd       402
(MO. App. 1966).     Cf. Smallwood   v.    Pearl Brewina co.,     489
F.2d 579, 599 (5th G.),      cert. denied, 419 U.S. 873        (1974)
(solicitation   of proxies);  B. C.    Turf & Countrv Club,      Ltd.
v. Dauahertv,    210 P.2d 760 (Cal.    APP.   1949)    (corporate
shares).

                                SUMMARY

              The action of a      foreign trust company        in
          supplying   information     and forms     to   brokers
          employed by    an    affiliated     Texas    brokerage
          firm   with    the    intention      that    they     be
          distributed   to    customers    of   the    brokerage
          firm who make     general     inquiries    about    the
          availability     of    trust    services      violates
          article 105A(c)      of the    Texas Probate      Code.
          Appointments     as   trustee    obtained     by    the
          foreign trust company pursuant        to such a plan
          of business would be       violative    of the    Texas
          statute.

                                                J I-M    MATTOX
                                                Attorney  General   of Texas

MARY KELLER
First Assistant      Attorney     General

LOU MCCREARY
Executive  Assistant     Attorney         General

JUDGE ZOLLIE STEAKLEY
Special Assistant  Attorney         General

RICK GILPIN
Chairman,  Opinion     Committee

Prepared by Bruce Youngblood
Assistant Attorney General

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