Untitled Texas Attorney General Opinion ( 1989 )

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
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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
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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).
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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,
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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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