Court Opinion

ID: 4142545
Source: CourtListenerOpinion
Date Created: 2017-02-18 03:23:10.076632+00
Date Added: 2024-06-11T14:33:41.669638
License: Public Domain

OFFICE   OF THE ATTORNEY         GENERAL OF TEXAS
                                AUSTIN

Honorable 0. P. Lookhart, Chairman
Beard of Insuranoe commlss10ners
Austin, Texas
Bear   sir:
                                                               ted
                                                               al
                                                               cult
                                                              d
                                                              xerolsl-
                                                em enumera      ill
                                                2 by oomplging with
                                                ments or that Arti-
                                                iole 4983P And re-

                                              n on the above question
and other quest                               t proper to first   set
cat the reots 0                               etter (substituting    a
ilotitioue  nsme                              d), and then take up
eaoh of your qu                               ote given are aa roilows:
                                      is a dome&lo anin-
                                     rganized amI operat-
                                   or Title  105, Ohapter
                                  Statutes of Tens,   1925,
                                  neoeesary (if It be
                           oonpetent to obtain such prir-
                              r operation under, and holds
                              llanoe with, &tloles    4982
                              he Board of Insuranoe Com-

              Question Ho* It
            "Is said U. J. 8. Company a legal entftY,
       snob as is oompecent under our Stjate Constttu-
       txon and Statutea,  to qualify for~eutroisl43 the
       powers entlrnerated In &Mole   4982 by OOmPlYbg
Honorable   0. P. Lookhart,       Page 2

     wI&the        requirements    of that ArtIole-   and
          ”

            ArtI       4982 is as rollows:
           *Am Demon or aasooIetlon      or mmom,
     any State Eankihs corooration     or any th r
     domestic oorooratlon.   or anr oorwra$oneor-
     g I ed under the laws oi any other State,
     p%Ied       ch rorei II corporatl         I
     with the l?&s of th ‘ss State rel%&Wfl      “g-
     suranoe other than lire,   pay exerolse  the
     foxlowIng powers by oomplying with the provi-
     eloms of this subdivision:
           “1.  Qualify as guardIan, ourator,   exeou-
     tor, administrator,  assignee,  reoelver, trustee
     by appointment of any oourt or under will,    or
     depository  of money In oourt, without giving
     bond as sueh.
            “2. Beoome sole guarantor or surety In
     or upon any bond required to be given under
     the laws ot this State, any oiher etetute to
     i:sytrary     notwIthstandIng.   (Underscoring

           Artiole 4983, Vernon’s Annotated Texas UIvIl Btat-
utel, provides that those Ineluded In this subdl~ldon,     In
order to exerolse the owers granted In Artiole     4982 shell:
(1) meko e deposit of $ 50,OCO.CO In the State Treaeuxy; (2)
satisfy the CostmIssIoner of solrenoy;  (3) maintain speciried
premium reserves;   (4) tile annual sworn report;  (5) pay taxes
on business wrItten.
           The U. y. S. Company Is an uninoorporated  joint
etoak oompany organized and operating under the provisions
or Title 105, Chapter 2, Revised Civil Statute6 Or 1925.    An
*unincorporated  joint steak oompanyR has been derided In
Allen v, Long, (Tex. Sup. Ct.) 80 Tex. 261, 25 Texas Jurls-
prudenoe 171, and 20 Rawle C. L. 32l, ae follows:
            *An unincorporated  joint stock company
     may be derined as an assooiatlon     of IndIvI-
     duals r0r the purpose of pmit, pessesslng
     a common oapital oontributed     by the members
     composing   it, auoh oapital   being commonly
     di~vided Into shares, of which eaoh member
Honorable    0. P. Lookhart,       Page   3

      holds one or more, and whIoh are transferable
      by the owner; the business of the asaooletlon
      befnng under the oontrol or oertaln     seleoted
      individuals   oalled direotors   or trusteea.
      Suoh an organization    or assoalatlon   enjoys
      exiatsnce as a legal entlty~ and, Indeed, the
      statue of joint steak oompanles is reoognlud :
      by t,he statutes.    . . .*
            It is our opinion that the U. J. 8. Company, 811un-
Inoorporated   joint atook aompany organized and doing bu0Iness
under the provIsIons of Title 105, Chapter 2, of the BevIsed
Civil Statutes or Teua, 1925, Is em wessooiation      of parsonsv
such hs is competent under our State Oonstitutlon     and statutes
to qualify for exeroising    the pourers enumerated In Artiole 4982
by aomplying with the requirements of ArtIoles 4982 and 4983.

             &estion    Hoa 2:
             *Ia the Board or Insuranoe fXum&sloners
      legally    authorlsed to issue to the U. J. S.
      Company its oertlrloete     shoring suoh oonoernla
      complianoe with Articles     4982 end 4983, and of
      its authority to exerolee     the powers presorlbed
      In Artiole    49821"

            .Fie are or the opinion that the Board or Insuranoe
Commissioners has legel;i~ authority    to issue to U.‘J. S. Coma
pany a certiflaate      showing suoh oonoern has aomplled with
Articles4982     and 4983, and has authority   to exercise   the pourers
presorlbed    In Artlole 4982.    However, auoh oertirioate    should
not be Issued until the Iloard or InsUranOe CommW@Ioners has
been furnished proof that suoh oompfiny is authortied .by its
oharter to engage In suoh business.        In this .aonneotlon we
refer   you, to our answer to @.zostion No. 3.
             Queetion   NO.   2:
             *Is U. J. S. Company, having oomplied with
    ’ the provisions    of Artloles 4962 and 4983, and hav-
      ing received the oertlfloate    or permit therein
     mentioned from the Board of fnsuranoe CommIssloner8,
      legally   authorlaed to write as surety the bonds
      required of insurers and orflolals     of Insurers by
      the provisions    of (1939) Senate Bill 13    Sootion 5,
      (Title 78, Chapter 22, Article 5068-1, 3 ection 517"
             Although Artlole      4982 etates that any of those namsd
therein,    upon a oomplianoe      with said &Mole   and Artiole 4983,
     Honorable   0. P. Lookhart,    Page 4

     “may exercise     the following   powers. . .v, ywt, we think It la
     not to be assumed that a mere eompllsnoe therewith authorizes
     any peraon, assooiation       of persons, or oorporation,   not other-
     wise qualified,      to exeralse the powers therein named. For
     instanoe,    an ordinary domeutlo oorporation,     although It might
     othersise    exeroise the powers enumerated In Article 4982,
     must meet the further requirement        of being so authorized by
     Its c;;.arter.

                In the oaae of Henderson, et al Y. Soott Oil & Re-
     fining Co., et al, 258 S.W. 1082, the Fort Worth Oourt of
     Civil Appeals pointed the way for the determInatlon of the
     po>!era of an un.lnoor,poratsd joint s took company. We quote
     rrom that opinion:

                 “It is quite olear,~ we think, that the
          essoolation     was not a oorporetion,      and we
          agree with appelleea that as Instituted            it
          was not a Massaohusetta trust.           See McCamey
          T. Holllster     Oil Co. (Tex. Civ. App.) 24.l
          a. W. 689, where the subjeot Ia elaborately
          disoussed.      Nor was it a partnership either
          general, or a lImlted one under chapter 1,
          title    102, of our Revised Statutes.         On the
          oontrery,     It is evldezt     that it wae intended
          as an ~unlnoorporatsd       joint-stook    oompany, a
          es designated In ohapter 2 of title           of the
          statutes already rererred to.           Indeed, the
          art:cles    of asaoolatlon     and dealsration     of
          trust so designate the oompany, as well as
          oontain provleions whloh olearly difieren-
          tiate the assooiation       from an inoorporated
          body or a partnership es generally understood.
          It rollows;     we think, that the appellee esso-
          oiation is without legal existence,           entity,
          or authority,      exoept suoh as is given It by
          our statutes and by the terms of the agree-
          ment between the parties.          It ie provided In
          said ahapter of title       102, article    6149, .that
          such oompa~ies ‘may sue or be sued in any
          OOU% of this state having jurIa~iotion             Or
          the subjeot-matter       In Its company or dtstin-
          gulshlng name. * But the status or puvers or
          such association       are not otherwise given.       We
          oan therefore      look only to the terms of the

I”
Bonorabls   0. P. Lockhart,   Page 5

     e.greeioents between the parties   to amertain
     its powers.    . . .*
          (Note;     Title 102, referred  to above,   is now Title
105; and Artiole    6149 is mm Artiole   6133.)
           Our opinion,   controlled   by the holding in the above
case, is that the ternis of the agreement between the parties
?ormlng an uninoorporstsd    Joint stock company suoh as the
U. J. S. Oompany, determine whether such a ooageny, upon oom-
plianoe with Artiales   4982 and 4983, is legally      authorized to
write as surety the bonds required of Insurers and officials
of 3nsurces by the provisions      ci Article   5068-1, Section 5.
If by the tarns of such agrseuent the compaay is 80 authorie-
ed, and it has oozplied with Artloles        4982 and 4983, then it
Is our opinion that the Board of Insurance CommIssionem is
legally authorized to issue to said oompany its oertlficate
of authority   to exercise   the powers presoribed      in Axtiole
4982.
           The amendsent of the articles   of association,     se-
lied upon by the ooapany,   hs authorieing  it to traasaot ,suoh
businefls, (omitting the signatures and substtitutiag     fioi%tlous
names) is as follows:
            “AKWOWNT OF ‘ETEORIGINALARTIDLESOF TEE
                        U. J. S. COKPANY
            “1%&%3h~T TO OPlGWl’BUNDERARTSCLX4982
           WAneeting of the stookholders  and officera
     or the U. J. S. Ccmpaay, of Palo Alto, Texas was
     held on Deeember 5, 194l, and the meeting was
     oalled for the purpose of adopting the following
     amendmnts:
           WAnotion was made by Lee Marvin, Vloe-
     President of the company, to amend the purpose-
     olauses of the articles of assmiation.
           “Since the campany had deposited the etat-
     utory deposit with the Irlf%lranee Departmeat to
     qualify to write fidelity,    surety, ana warantv
     uader Article    4982, the amendment is to provide
     th,e segregation   oi asset8 of the oonspany as
     zco:Llows:
            “1.    All asaets and 1iablLitier under all.
                   other purpossa are to be kspt entirely
Honorable   0. P. Lockhart,   Page 6

                  separate, and a separate statement mdde
                  to the Securities Dlvlsion of the Secre-
                  tary of State.
            “24   All premiums colleoted   ana other
                  assets presumably liable   I’or the
                  payment of the company~s obligationa
                  incurred during its operations under
                  Artiole 4982, are to be kept and re-
                  ported to the Insurance Department in
                  the following manner:
                    “a.     Unearned premium reserve
                     b.     Claim reserve
                     0.     Investnents to meet requ.irWente
                            of the insurance laws
                     d. Cash
                     e., Contingent reserve,     tax reserve,
                          : etc.
                     f;‘, Acccunts Reoelvable

            “3.   The oompany*s operations under Article
                  b982 shall be acoordlng to Statutory
                  provisIons which are as follows?
                    ‘ai   Quality as guardian, curator
                          exeoutcr,  administrator,  ass i gnee,
                          reoeiver,  trustee by appolntient
                          of any coutt or under will,     or
                          depository   of money in ccurt,
                          without giving bond as euch,
                          Beoome sole guarantor or surety
                          In or upon q    bond required tc
                          be given under the laws of this
                          State, any other statute to the
                          contrary notwfthstandlng,
            *A vo:ta was taken and the amenbent   carried,
     there being si%ty Percent of the outstanding stook
     =&resented,    and the foXloWing off’iaers were &re-
     Tent and votedt     Li Mi Barretti President1 Lee
     Marvin, Vibe-President;    and Jsmes Ci Wcsterfall;
     Secretary-Treasurer+~.
           “In siQness whew,thfs    aptwntient is aimed
     b:r the companyrs President end attested by its
     Seoretar@‘masurer,     and Its seal hereunto affixed,
Honorable 0. P. Lockhart,        Page 7

      this 5th day of December, 1941, A. D.”           (Under-
      suoring ours)
            Section   16 of the original    articles   of association
is as follows:
              “The fiscal  year of the Orricers shall end
     as of December 31 of each year.         Annual meetings
     of the stockholders      for the transaotion    of busi-
     ness shall be held at any orfice        of the Company
     in the State of Texas, or any other designated
     o:lfice,    on the first Monday before Deoember 31
     in each year beginning with the year 1939 of
     which meetings notice shall bc given by the
     Secretary by mail to each stockholder         at his
     registered     address at least ten days before said
     meetings.      Speoial meetings of the stockholders
     may be called at any time by bm days notice as
     above stated when ordered by the President.           At
     all meetings of the stockholders        each holder of
     shares oi stock shall be entitled         tc one vots
     flor each share held by him and each stockholder
     may vote by written prosy.       51s of the votes
     o’ast shall determine any question under considera-
     tzon or the election      of any 0ffioer.e
           l&wever,    Section    22 of&d   articles   provides:
            "This Agreement shall not be altered or
     amended by the Ofrioera,    btlt only by the stock-
     holders at any regular meeting or special meet-
     ing oalle-d for that purpose and then by a vote
     or rl$ of the outstanding shares of the oonpsnyvs
     s,took.”
          Thus, while Section 16 authorizes     the determination
of other questions by a vote of 51% of the votes cast, yet
Section 22 requirea,   for an amendment of the Arti=       of Agree-
mnt, a favorable vote OS 51% of the outstanding shares of
        %‘e note that the amendment submitted doee not Zx3Oite
 ao s &wing
w*              that notices of the stockholders*   meeting of
Deeembcr 5, 1941, were mailed as provided ior in Section 16.
It &OWS that that 60$ of the outstanding stook was rep=+-
sent& in the meeting, but not that 5l'$ Of the outstanding
stook WCIBvoted in favor of the amendment. Nor does there
appear to be any other evidence of such fact8 before the board.
Honorable   0. P. Lookhart,    Page 8

              We think the amendment, if it wae passed in aoOo+
danoe with the provisions     of the Article8 of Agreement, i8
sufficient     to authoriee the oompany to engage in the sotlvities
provided for under Artiole     4982, but that the Board of Insur-
anoe brOlUiSSiOn0r8    8hould not reOo@lize it until it 18 proven
to be a valid amndntent.

            &mstion   No. 2:

              "fn making exfmhetiooa       of the arialrs      of
     this oompany se provided bylaw,             and partloulafi
     ly in satlefylng       itself'  in ao.oordanOe with Seo-
     tion 2 of Artiole        4983 88 to whether euoh oom-
     pany '18 8olvent and ha8 made the required do-
     posit'      18 It (1) the legal duty (2) the legal
     privilege      of thie Board in its dleoretion,          to
     eramine all Of the assets,         liabilities,      airair
     and oondltion of the oompany throughout Its ao-
     ttVitie8      both under Artiole 4982 and OtherWi8e
     and to determine ite solvenoy in the light 0r
     till such matters,      a8 this Board Oonoeivea it8
     duty end right to be, or 18 thie Department
     restricted      by law to en examination or the assets,
     llabilitiee,      airairs    and oonditlon      or 8u0h cam-
     pany only in 80 rar a8 they are dlreotlyinvolv-
     eld in Artlole     4982 operations     a8 contended by
     the Gompeny?v
           Seotion 2 or Article 4983 requires   that, before the
oompany operate8 under the provision8   of Art1016 &982, it shall
*aatlsry the Commissioner 0r its 6ol~enOy.~    Under Article
l+682a sll the powers, duties and prerogatives   formerly vested
in or devolving upon the Oommissioner of Insurenoe are nom
conrerred upon the Board of Insuranoe Commissioners.
            Seotion 2 does not limit the question       of.' 8OlVenOy
to a detemlnatlon     of the financial     status of the Artiale    4982
busiNs     of the company, stsndlng alone and without relation
&ti ita other business.     On the oontrary, the import oi the
language used is that the oompany must be determined to be
solvent as a whole.      This partioularly     le true In view 0r
the fact that some of the oompany'e pmspeotive          aseets under
Its Artiicle I+982 operations   (for instanQe, undivided profits
over 63 above the statutory deposit and prenium reeerve)
will be liable    for Its debte inoarred under other operatione.
          we are of the apin%on that the Boati of InsummJe
Commlssloners has both the prb~vilege and the duty to deter-
F

    Honorable   0. I?. Lookhart,     Page 9

    mine the eolvenoy of the oompany a8 6 whole.       They may do thi8
    by an eIciaclnatiOn Of all Of the 888et8, llabllitlee,      affair8
    and condition   of the oo:i~pany throughout Its aotlvltles,     both
    under Article   4982 and otherrise.
                guestion   No. 10:
                   “If you en8wer in reaponee to question 9
         that this Board 18 either required or aathor-
         lzed to examine a.0 assQt8, llabilitles,          airairs
         an8 oondltion ot 8UOh oompany involved both
         under Artiole       4982 and other&e,    and to deter-
         mine llss Bolvenoy ln the light OS all suah mat-
         ter8, then please ailviee      ~8 whether in deter-
         mln.ing it8 8olvenoy thlr Board 18 (1) required,
         or autherleed in its dlaoretlon,        by law to apply
         the OrdhWy telrt or 8t6ndCLrdof 801ySgOy           by
         epprovfng as 'admitted aeset8'        at lcQ6'of their
         6j926i8dt      value all 6rS8Qt6 Or the o'arPg8i1)'under
         its *other operatl on8*, as oonknded by the oom-
         pany; or (2) whether, on the other hand, -68 oon-
         osived by thie Board, our examlner8         should ,de-
         termine eolvenoy under       .what may be denominated
         tthe lneurenoe 8tandardt, both under the 4982
         operation8      end it8 other operetione, by admit-
         tjng aasete 0d.y of the OhS8Q8 end with th8
         margins or safety in value provided by the ln-
         8UrtUlO68tatUte8?”
                Artfole    4986, whloh relate8   to oompanlee operating
    under Article     4982, provides:

              *All articles    of the 8tatute8   80 far 68 the
         8ame are applicable    and not lnoonsistent   with
         the provisions   of law governing banks and bank-
         ing OOrpOrEitiOn8 8hal1 6PPJJr to d.l 0@4lPtie8
         doing busine88 hereunder."
                 The ~inaur~~~oe standardv la886 in determining 8olV~Op
    oonsl8ts ln the praotloal      epplloatlon   of the requirement8 Of
    Artloles    47,705, 4706 end 4993, Revised Civil Statute8 of 1925,
    a8 amended - at least, we so understand your u8e of the PhrdSer
    In our conference opinion NO. O-958, addressed to Honorable
    vrata    c, woodward., Chairman or the Board 0r Insuranae Com-
    r&+sfoners, we expressed the opinion that Artiole8         4705 and
    4706 applied only to intturanoe oompenlee areated under Chap-
    ter 2, Tftle 78, Revised Civil       Statute8 of Texas, and th8t
    &tiole     4993 applied only to oasualty     .$mU’W@em~onap~~e~
Honorable   0. P. Lackhart,   -8   10

oraaterd under Chapter 18 of Title 78, We enolose herewith         a
oopy of opinion No. 04958.   As pointed out in your opinion
request,  the company here under oonslderatlon ia organized
under the provl8lon8  of Chapter 2 of Title 105.
             We are therefore    or the op5nion that the Board of
Insursnae Commissioners 18 not authorized to apply suoh "in-
surancre standarda in determining solvenay under the provision8
or Artiole    4983.   We believe that the Legislature,      in using
th8 w8rd v8olv8noy" in this rrtatate, meant that suah aompany
anut satisfy     the Cormlsaioner   (now the Board of Insuranoe Com-
mls81oner8) that it is pO88OsSed 0r assets equal to it8 lie-
bil%isr,    aoupled with an ability    to meet its obligation8     68
they mature, and that its debt8 oan be oolleoted          by legal
             Woodley, et al v. Cottle County, 52 8. W. (2d) 530
w"?z:?;.     Crlppen   282 N P 9 722; Kennedy v. Burr, (Wed. f
l@Jl Pm 1022.     9%;  term ~130iv&tt    when applied to a person,
means that he has property suSSlo!.ent to pay all his debte,
and that all his debt8 oan be oolle8ted        by legal prooeso,*
39 Words and Phrasss 475 (oiting       nuraerou8 caserr).   Thi8, in
our opinion,    1s the etandard to be applied In determining 801-
venoy,, The method of epplytig the standard ie left          to ths
judgment and dleoretlon      or the Board of Insuranoe     ~ommisaionero.
And the deoielon of the Board a8 to solvenoy or insolvensy            18
oontrolling,    unless it app8an by oonvinoing evldenoe that it8
a&ion la plainly arbitrary        and made in bad faith.     United
States %Ving8      Bank va lbrgenthau,   85 F8d. (26) 8ll, 8l4.
             We have re8  otfully  deollned to atlswer  ymr qUOQ-
tions  numbered 4, 5, r , 7 and 8, for the ree8on that the80
inquiriesevidently are the oonoern of the joint stook oom-
pany Itself,    and do not involvs any question whioh is ourrant-
ly before your department in it8 offiolal     oapaolty.
                                            YoWC8 V8l.J’trtily
                                        ATTORNKYGKNKKALOFTKKAS

WRAIQO

KNCLOSURK