Court Opinion

ID: 4136696
Source: CourtListenerOpinion
Date Created: 2017-02-18 02:16:31.791041+00
Date Added: 2024-06-11T14:35:11.862036
License: Public Domain

THEATTORNEY                       GENERAL
                                OF’ TEXAS

                                 February    18, 1958

Hon. William A. Harrison                          Opinion    No, WW-204-A
Commissioner    of Insurance
State Board of Insurance                          Re:    Amount of a vendor’s
Austin 14, Texas                                  lien   note that may be car-
                                                  ried   by an insurance    com-
                                                  pany    against a buiiding which
                                                  was    previously   the home of-
Dear   Mr.   Harrison:                            fice   of the insurance   company.

       We have for reconsideration   your opinion request submitted to this
office on October 9, 1957, and in answer to which we released    to you on
October 23, 1957, our Opinion Number WW-284.        Your request for the
opinion at that time reads as follows:

                    “Article 3.40 of the Texas Insurance Code
       authorizes    a life insurance   company to own a home office
       building with no limitation on the amount of the value of
       the building that may be admitted as an asset except that
       the total investment of the company in the building must
       not be in excess of 33-l/3%       of the company’s   total ad-
       mitted assets.      Article 3.39, Section 2. authorizes   a life
       insurance company to invest in first liens upon real es-
       tate, the title to which is valid and the value of which is
       40% more than the amount loaned thereon.

                   ‘ABC Life Insurance Company owns a home
       office building which has a value of $100,000, which amount
       is less than 33-l/3%    of the total admitted assets of the com-
       pany. In this situation the entire value of the building would
       be an admitted asset.    ABC Life Insurance Company then
       sells the building to a purchaser    for $100,000 with no down
       payment and takes a vendor’s first lien mortgage        upon the
       building in the amount of $100,000.      We respectfully   re-
       quest your opinion as to whether the entire $100,000 mort-
       gage is admissible,   or whether the company must receive
       sufficient down payment to make this mortgage a proper
       investment under the requirements       of Section 2 of Article
       3.397’

        Section 2 of Article   3.39, Texas   Insurance    Code,   is in part as
follows:

                   ‘U may also make loans upon first liens upon
       real estate, the title to which is valid and the value of which
       is forty (40%) percent more than the amount loaned thereon.
            I
       . .
Hon. William    A. Harrison,    page 2 (WW-284-A)

        Under the factual situation contained in your request, the insur-
ance company has sold its home office building for a consideration
consisting   of a vendor’s   lien note in the sum of $lOO,OOO,.which repre-
sents the total sale price of the building.        Article   3.40 prohibits   the
investment of more than 33-l/3%           (50% with permission       of the Board)
of its admitted assets in home office property           provided, however,     that
surplus funds over and above such percentage             may be invested in home
office property so long as such surplus investment is not shown as an
admitted asset.     The superior    title to a building sold under these cir-
cumstances     remains in the seller and so the company’s           equity remain-
ing in the building must be considered         an investment in home office
property and must be considered          in calculating   the percentage    permitted
to be invested in this category of property.          The company may elect to
treat this transaction    as a completed sale by selling for cash and
simultaneously    lending part of the purchase price via a first mortgage.
This would remove the investment from the category               of home office
property   but the mortgage     would be a loan and fall under Section 2 of
Article 3.39.

      Our Opinion No. WW-204,   released  under date of October 23,
1957, is hereby withdrawn and this opinion is substituted in lieu thereof.

                                   SUMMARY

       Where a life insurance company sells home office prop-
       erty retaining vendor’s  lien, the amount of the note so se-
       cured must be considered    an investment in home office
       property and must be considered     in calculating the per-
       centage of investment permitted    in this category of prop-
       erty by Article  3.40.

                                                    Yours    very   truly,

                                                   WILL WILSON
                                                   Attorney General          of Texas

                                                   Assistant

FBW:dac
APPROVED:                                          Assistant
OPINION   COMMITTEE:
Ceo. P. Blackburn, Chairman
Houghton Brwmlee,   Jr.
Marietta Payne
REVIEWED     FOR THE ATTORNEY             GENERAL      .“i
BY: W. V. Geppert