Untitled Texas Attorney General Opinion ( 1947 )

R-25
NEY GENERAL
PRICh DANIEfL :‘
ATTORNEYGENERAL
Fbbruary 5, 1947
Honorable Jeaas James Opimm No. V-26
8C8te Treasurer
Abtin, Texar l&lb: Alrtlcle 096, RerfseQ
Civil Statutea, National
Savings Investment Co.,
Saa Houa ton Underwrit era,
Inc., Sterling National
:I., co., 2urthar procedure
I and disposition ot
securities on deposit
or above naaed compaaiea.
Dear Sir:
You request the Opinion of this department in
your letters of November 14, 1946, and January 3, 1947,
.mopeotivelg, upon the questions therein presented,
which for a statement of facts we quote ae followa:
"Our recorda show that we hold a8 custodian
securltier deposited by the above named companies
u&er piwioiors of Article 095, aa lfsted below:
Naticnal Savings Investment 00, '
Dallas , Teraa
Deporltrd on April 11, 1930
City of Borger Funding Bonds
Nos. 57/62 &p)l,OOO.OO each $6,000.00
Sam Houston Underwriters, Inc.
R~IQJ``, Texas
Eiaporited on August 13, 1931
9e1~Hou#toa Lire Ins. 00. Stook
eertifioate 128 for 400 ihe. &
awfmieate a 149 for 100 aim. at
#lb,09 per ahero 5,OQO.OO
Sterling Blatlena Oompaly
Houston, Terar
Deposited on April 3, 1QSS
Sterlhg Nat'1 Life Ins. Co.
tzek, Certificate #6 for 500
. at (IlO. per ahare 5~;000.00
Honorable Jesse James, Page 2
“To date, no other deposits have been made
by said aompaniea as required under Artiale 696.
On September 26, 1946, we wrote the Secretary
of State asking if these companies had been
issued charters to do business in Texas, and if
so, to pleaee furnish us with the correot addreasea
of each, We received a reply from the Secretary
of State October 1, 1946, giving no post office
addresses s and quoted in part as follows:
“IWe find that NATIONALSAVINGS INVESTMENI
COMPANY,Dallas, Texas has been for-
feited July 2, 1932; SAM HOUSTONUNDER-
WRITERS, Inc, , Ranger, Texas was forfeited
July 2, 1932 because the Franchise Tax was
not paid and was also forfeited April 25,
1933 because of failure to make proof of
final payment; STERLIm RATIONAL COMPANY,
Houston, Texas, was forfeited July 2, 1942. t
*On October 14, 1946, we wrote to each of the
companies named herein regardi% the require-
ments of Artiale 696. Our letters to National
Savings Investment Company and Sam Houston
Und erwrlt ers , Inc o , were returned unclaimed,
and no answer was received from Sterling Na-
tional Company 0 Also no replies were re-
ceived from the verificatioa letters sent
out by the State Auditor’s Office ia oon-
nection with the audit of this department e
“Therefore, in accordance with the provisions
of Article 696, we kindly request your written
advice regarding further procedure and diepmoitieB
of securities on deposit .I)
*January 3, 1947
“On November 14, 1946, we request& your
written opinion on the further procedure and
disposition of seourities on deposit with this
Department under provisions of Artiale 696 ior
Nstional Saviege Investment Conpang, Sam Houston
Underwriters, Inc,, and Sterling Kational Co.
“In conversation with C, K. Ri.chards, it
was suggested by him that we try to obtain
more information concerning said companies,
and accordingly, wrote several letters but to
no avail,
Honorable Jesse James, Page 3
“Therefore, we hand you herewith copies
and photostat4 of all information which we
have be4n able to obtain, and await your
further advice on these matters.”
Conoretely, your problem is what disposition,
if any, you should make et this time of the securities
deposited by the resp4ctive companies mentioned in your
letter, pursuant to the provisions of’ Article 696, R.C.S.
You are governed in this matter solely by the
provisions of Articles 696 to 700, inclusive, R. C. S.,
as we shall presently point out. These statutory pro-
vision8 are as followe:
"Artiale 696. Bach corporation, company
or individual, doing business In this State
as a bond investment company, or coapany to
plac,e or sell bonds, certificates or debentures
on the partial payment or installment plan,
shall deposit with the State Treasurer, in
cash or securities approved by said Treasurer,
the 5um or five thousand dollars, and shall
d4p,44~it sni-ennu4lly with said Treasurer, in
o4.4.b or srmwritierp to be approved by said
4rnoer, t&a psr orsft or cl1 m4t pruiums
rr.rZted @Al tIw w d,#?oalit,d uowits to
on4 hundred thous4nd dollar+.
“Article 697 a If any swh doPurstio cor-
poratlon, shnll fail, for sfxtf day4 after ito
organization, to make with the State Treeaurbr
the ,deposit rscuired by thir title, it shel?
be oesst$ezed to bras irnW~&e8 ita charter;
and the Attorney General shall upon information
therror, bring suit In the name of the State to
Hera such oharter or certifiaate of incorpor-
atlo@ drelared forf4it.4d, @ the oourt, upon
w $iaQfql, sbak3. Qaelore a4gsfi charter fer-
tiit# aaQ app&nt 4 r,4ast?4* for su4h cempany,
w4~ duby it shsll be, uaftJr the order of the
04**, to distrWute to $W rh4r4holUer4 ‘th4
awe.ti# oi the co&span T&s oourt shall out sf
1u4pqilua44ta maka equ,r tebllr oompensation for the
r4o4irer,
“Articls 898. In 4444 or ths failure of
any suoh aompanys the dirtrict court of tka
csurtty in whiah the prinbipal offioe ia lobated,
upon the appliaation of one or more shareholders,
Honorable Jesse James, Page 4
shall appoint a receiver for auoh oompany, whose
duty it shall be to wind up its affairs, liqui-
date its debts, and distribute its assets, using
therefor, upon the order of the court, the deposit
previously made with the State Treasurer to se-
cure the shareholders. Said Treasurer is author-
ized to pay out such deposit upon the warrant o?
the Comptroller in accordance with requisitions
made upon the Comptroller by said receiver, ap-
proved by the court,
“Article 699. On request of any such company,
the State Treasurer is authorized to permit snoh
company to interchange cash for the securities or
securities for the cash deposited by such company
under the provisions of this title with said
Treasurer, such securities always to be approved
by said Treasurer on the written advice of the
Attorney General,
“Article 700, If any such company shall
oease to do business in this State and satisfy
the Comptroller and the Attorney General that it
has no liabilities in this State, the Comptroller
ahall issue his warrant to the State Treasurer;
and said Treasurer upon such warrant of the Comp-
troller, shall return to such oonpeny the cash or
seouritiee deposited by it under the provisiona
0r this title.”
Justice Sharp, of the Supreme Court in the case
of Bankers Union Life Insurance Company v. Sheppard, 117
S.W. 26 770, 116 A. L, R. 961, stated the main objec-
tive of these statutory provisions ia lsn&uage as fol-
low0 :
“(1) To require each corporation doing
business in this State as a bond investment
oompeny to place oash or certain securities
with the State Treasurer, in the sum of $5,000,
es a deposit; and to deposit semi-aniwlly ten
per c4nt. of all net profits receirod, until
the sum of $100,000 is deposited.
I’(2) To require the Attorney General, in
the event any such corporation shall fail to
make such deposit as required, to bring suit to
have the charter of such company declared for-
feited, and to have a receiver appointed for
Honorable Jesse James, Page 5
such cempanys whose duty it shall be, under the
orders oi the court, to distribute to the share-
holders the asseta of the oompany.
“(3) To provide, in case of the failure of
say ruoh company, that upon applioation or one
or more shareholders the district oourt shall
appoint a receiver for suoh oompang, whore duty
it shall be to wind up its af’fairs, liquldate
ita debts, and distribute its assets, using
therefor, upon the order of the court, the de-
posit previously msde with the State Traasurer.
“(4) To permit the interohange of the do-
post 0
“(!I) To provide, in the event any suah
eon any shall oeaae to do business in this
Sta &e and shall satisfy the Comptroller and
the Attorney General that it has no liabilities
in this State, that the Comptroller shall issue
his warrant to the State Treasurer, and aaid
Treasurer upon euoh warrant shall return to
rush oomprny the cash or seourities depoaitsd
$9 it under the previeienr of law.”
It will be observed that Article 6.96 desaribes
how the deposit shall be made. Articles 697 and 698 pro-
vide for the appointment of a receiver in the event that
the oompany feils to make suoh a deposit, or in the event
or the raflure or such ooapany. It doea not appear ,from
the information before us that any reoeivershlp prooeed-
ings ,have, up to this time, been instituted as to .any
of the oompauiea in question, hsnos Artioleo 6.97 and
698 are not epplloabls and need not , for the punpose or
this o ,inion, be rurther oonridered. The same``is true
or Art ,!010 698 whiah rovidss ror lntarohange end rub-
~;titt,iu0sr or se0wit P OS. Whether or not the quartion
di golve,noy or insolvency or there ‘oompanler ir *new
prorent or may arise in the future, we do not find it
nroesrery to deoide, nor could wo deoldo this qu@rtion
W n bhu mt0 subrnltted. It dso8 appaar, howevrr,
t r at t’$cir right tc continue their oerporata a6t ri-
tier have bew forreited for railurn to psy rran his0
*axes or 0Oh~rr raaaenai , and that they are net ns E ao-
tire eorporate ooneerna, b,ut the fact still remains
that t&y are not in reoeivershlpO
Thora romaine, therefore, the quastibn Of
-.
Honorable Jesse James, Page 6
whether you are authorized under the provisions of Art.
700, supra, to dispose of these securities as therein
provided 0 This Article does not purport to provide that
the deposit made under Article 696 be retained for the
benefit of the shareholders of the corponstions. Bank-
ers Union Life Insuranoe Co. v. Sheppard, supra. It ia
to be returned by the State Treasurer upon the oertiri-
oate of the Ooaptroller or Pub110 Acoounts only upon a
showing that the depositor has no liebilirties in thi4
State which have not been fully discharged, and this
must be to the setiafaotian of the Coaptroller and the
Attorney General. We bhink the burden rests upon the
shareholders or the part148 claiming the return of suoh
seourities to present sufficient evidence and 1nrorm.e
tion to the Comptroller and the Attorney General to,
Qustiiy them in restohing a ocnolusian aa to whsther or
not the provisions of Article 700 have been met.
From the information contained in your opinion
request, it does not appear that eny demand haa bee4
made. for the return of these aeourities by any party au-
thorized under th4 stmtute te make 4 damand ard reeefre
them, or that thera has heretofore been preset&ad to
the Comptroller and the Attorney General any iaieraeti~n
upon which the Attorney General could recommend te the
Comptroller the issuance of his certificate upen you
for the disposition of the seouritiea to anyone at this
time, and until this has been done, you are authorized
to retain these securities as you have in the pan,t.
We think the case of Bankera Union Life Insu-
rance Company v, Sheppard, supra, affords a safe guide
ror us in this matter; and while in that case the Carp-
troller was ordered to return the seou,rities by a arnda-
mu4 prooeeding instituted for that purpQae, the u&d:iaplr-
ted facts in that case justified the o4urt’s asti44~
But here we are net able te 441 tWt Ok r4et8 jruttiy
you iI& t&king a#y retf6n la ragera $6 thea~a aemi*iw**,
ot&ar t&4 ta ke4p thrm aea@W&g 4s gem have In the Mast
titil r4ecir4~hip proceedings are instituted as pr4rid-
ed for in Articles 697 and 69S, supw, Or until a proper
#&owiag has been dlade to the Qomp~tro&lar. and Attorney
General as provided for in Artlola 106, supra, whiah
would justlip the Comptroller in i$suing his certificate
for your direction in the diapeaitisn ef the seourities.
We take your letter, lieweve2, es suffia$at& not-
ice to this Department to justify appropriate leg41 ao-
tion under Articles 697-698 or 7095, R. C. S., end expect
to prooead accordingly. You will in due course be ad-
Honorable Jesoe James, P8ge 7
vised as to th% rurther dirpooitisn rt tL0s.e secufi-
ties upon the sulminatiog of our 4fferts ts clear this
matter up by apprepriata lags& aotfm.
The State Traaoursr is not authorized to nf
turn securities deporit4d with him by oorpohtioU
doing bwineso in this State aa a bond itiv%rtm%M
company, or company to place or ssll bonds, cetiff-
icates or debentures on the psrti%l payment or in-
stallment plan, as required by Artiolo 696, R.C.S.,
except in reoeiverohlp pxowedi*err %a p*vi(d far
in Artioles 697, 69&8T 709?r, RICiSI, or upcn a
showing satisraotorg to t&4 Comptrsllsx and th%
Attorney General t&at ,gha 6o~r@aTatlcn haol o%ssed
to do bu&&nsso In tih@ Stat,r 8Bd has &w lieb1’1ltiu
unsatirfi5d as requihd by Ortidla 760, R. C. S.
Your8 vary truly
ATTORBBY0-L OF TBXAS
LPL:AldM:jrb
Approved Opinion Committee
By BWB, Chairman