Untitled Texas Attorney General Opinion ( 1958 )

Mr. William A. Harrison Opinion No. WW-397
Commissionerof Insurance
InternationalLife Bldg. Re: Whether a corporationwhich
Austin, Texas does not meet the requirements
of Article 1513a, V.C.S., may
continue to act as an attorney-
in-fact for a ~reciprocalor
inter-insuranceexchange under
the provisionsof Chapter 19,
Dear Mr. Harrison: Texas InsuranceCode.~
You have requested our opinion in answer to five ques-
tions concerning the licensing of corporationsto act as agent
for a reciprocal or inter-insuranceexchange. Your first ques-
tion is as follows:
"Immediatelyprior 'tothe enactment of Arti-
cle 1513a, V.C.S. was the Board of InsuranceCorn-
missioners authorized by law to license a corpora-
tion organised under the laws of this State to act
as an attorney-in-factfor the subscribersat a
reciprocal or inter-insuranceexchange?"
Prior to the enactment of Article 1513a, Vernon's Civil
Statutes; there was no provision under the law governing corpora-
tions in Texas which would permit the creation of a domestic
corporationor the issuance of a permit to a foreign corporation
for the purpose .ofacting as an attorney-in-factfor the .sub-
scribers of a reciprocal or inter-insuranceexchange. It has
been a well establishedrule of law in Texas that, prior to the
enactment of the Texas Business CorporationAct, which became
effective in 1955, no domestic corpora~tionin Texas could be
created, and no foreign corporationcould obtain a permit for a
purpose not authorized by statute. Prior to the enactment of
Article 1513a there was no statutory provision authorizinga
corporationto be formed for the 'purposeof acting as agent or
attorney-in-factfor a reciprocal or inter-insuranceexchange.
Bowever, sub-division49, Article 130.2,and Article
1303b, Vernon's Civil Statutes, did provide that corporations
might be created nto act as trustee under any lawful express
. ’
I,?.William A. Raarrison,page 2 (15%397)
trust committed to them by contract and as acent for the ner-
formance of anv lawful act*',*and thereaftervarious domestic
corporationswere sought to be created, and foreign corpora-
tions sought to obtain permits to act as general agents for
various insurance companies,including reciprocal or inter-in-
surance exchanges by the use of the purpose clause above set
forth. This departmenthas held, commencingwith an opinion by
Honorable William M&raw dated September 22, 1938, addressed to
Wr. George Van Fleet, Actuary for the Roard of InsuranceCommis-
sioners, and in subsequentopinions b Honorable Gerald C. &nn,
being Opinion No. o-3250, dated May 1c , 1941, addressed to Hon-
orable Earvin Rail? Fire Insurance Commissioner,by Honorable
Grover Sellers, being Opinion NO. o-7302, dated August 9, 1946,
addressed to Honorable E'arvinRail, Fire InsuranceCommissioner,
that corporationsso formed could not act as agents for various
types of insurers,,includingreciprocal or inter-insuranceex-
changes, for tho reason, among others, that such corporations
E Fbject to,the provisions of Section 1, Article 1524a,
which provides that corporationshaving the purposes
a%e'aescribed cannot "carry on the business of another."
-'Article'l524a,V.C.S., was not repealed by the pass-
age of the Texas Business CorporationAct (Article9.PjB) and,
in addition, Article 2,01B(4)(d)of the Business Corporation
Act provides that no corporationmay adopt, or be organized,or
obtain authority to transact business in Texas under the act if
any one or more of its purposes is to operate as %orporate
attorneys-in-factfor reciprocal or inter-insuranceexchanges. I'
Chapter 388 Acts 55th Leg. R.S. 1957,
(codifiedas Article 1513a, Vernon's &vi1 ktatutesP'p%fded
that trust companiesmay be created, and any corporationhow-
ever created may amend its charter or a foreign corporation
may obtain a certificateof authority to do business in Texas
for the following purpose, II.. . to act as attorney-in-fact
for a reciprocal or inter-insuranceexchange." Ssc. 5, Art.
15l3a, provides that such corporationmust have a fully paid in
capital of ,j500,000.00.
It is the opinion of this office that prior to the
enactment of Article 1513a, Vernon's Civil Statutes, since no
domestic corporationcould be created nor a permitbe issued to
a foreign corporationfor the purpose of acting as agent or
attorney-in-factfor a reciprocal or inter-insuranceexchange,
the Board of InsuranceCommissionerswas without power or au-
thority to issue a license to such corporationsfor the purpose
of acting in that capacity, and the answer to your first ques-
tion is therefore %o".
* Emphases throughoutare supplied.
Mr. William A. Harrison, page 3 (WW-397)
Your second question is as follows:
"Immediatelyprior to the enactment of Arti-
cle 1513a, V.C.S. was the Board of Insurance
Commissionersauthorized by law to license a re-
ciprocal or inter-insuranceexchange and its
attorney-in-factif the attorney-in-factwas a
foreign corporation?"
It is also a well settled rule of law in Texas that
a foreign corporationis restricted to the purposes and powers
which may be exercised lawfully by corporationscharteredunder
the laws of Texas, and the rule of comity would not permit a
foreign corporationto obtain a permit to do business in Texas
for a purpose not authorized or exercise powers which.couldnot
be lawfully exercised under the laws of Texas, even though the
purpose for which such corporationwas formed and the powers
'soughtto be exercised thereunderwere lawful in the State
where the foreign corporationwas chartered. Western Service
C . v. Neharz. Secretarv f State 116 Tex. 193 197, 288 S.W.
&'tl(1926); Ii-A, Tex. .I$., SectIon 7%-k,p. 176.
Since the Secretary of State .wasnot authorizedtunder
;,thelaws of Texas to issue'a.permitto a foreigncorporation
~to act.as agent or attorney-in-factfor a'reciprocalor inter-
insurance exchange prior'to the enactment of Article 1513a,
V.C.S., the Board of Insurance Commissionerswas without au-
'thorityto issue a license to such corporationto act in that
capacity, and the answer to your second question is “no".
Your third and fifth questions are as follows:
"If your answer to either of the first two
questions is in the negative may the present
State Board of Insurance conEinue to license such
reciprocal or inter-insuranceexchange with a
corporate attorney-in-factif the corporate at-
torney-in-factdoes not meet the requirementsof
Article 1513a?"
'%ay a reciprocal or inter-insuranceexchange
now be admitted and licensed to do business in this
State when its attorney-in-factis a foreign car-'
poration which does not meet the requirementsof
Article 1513a, V.C.S.?"
Your third and fifth questions have been considered
and will be answered together. Since it is our opinion that
prior to the enactment of Article lsl3a, V.C.S., the Secretary
of State was without authority to issue a charter to a domestic
r -
I@. William A. 'Harrison,page
corporationor grant a permit to a foreign corporationfor the
purpose of acting as agent or attorney-in-factfor a reciprocal
or mter-insurance excnange, any license heretofore granted by
you or your predecessorBoards of Insurance Commissionersto
such corporationwas without legal authority. However, where a
domestic corporationhas amended its charter, or a foreign cor-
poration has received a certificateof authority under the pro-
visions of Section 2, Article 1513a, from the Secretary of State
which authorizes such corporationto act as attorney-in-fact
for a reciprocal or inter-insuranceexchange, you would have the
legal authority to issue a license to such corporationto act as
attorney-in-factfor a reciprocal or inter-insuranceexchange,
provided such attorney-in-factfor the reciprocal or inter-
insurance exchange has fully complied with the provisionsof
the Insurance Code, and particularlythe provisionsof Chapter
19 thereof. If such domestic or foreign corporationdoes not
meet the requirementsof Article 15'13a,V.C.S.6,the Secretary
of State would be without authority to either grant or amend a
charter of a domestic corporationor issue a certificateof au-
thority to a foreign corporation thereunder,and hence you would
be without authority to issue a license to such corporation
since it would be doing business in Texas in violation of law.
Your fourth question is predicatedupon an affirma-
tive answer to either questions 1 or 2, and since both of these
questionshave been answered in the negative no discussion
thereof is deemed necessary.
suMMARY
Prior to the enactment of Article 15;13a,V.C.S.,
no.domestic corporationcould be chartered,and no
foreign corporationcould receive a permit to act as
agent or attorney-in-factfor reciprocal or inter-
insurance exchanges, The Commissionerof Insurance
may legally issue a license to act as attorney-in-
fact for a reciprocal or inter-insuranceexchange to
any domestic or foreign corporationwhich has been
qualified by the Secretary of State under the provi-
sions of Section 2, Article 15lja, V.C.S.
Yours very truly,
WILL WILSON
Attorney Gene,ralof Texas
Mr. William A. Harrison, page 5 ON-397)
APPROVED:
OPINION COMMITTEE
Geo. P. Blackburn, Chairman
Wallace Finfrock
Morgan Nesbitt
Richard B. Stone
REVIXWEDFOB THEATTOBNEYGENEFUL
BY: W. V. Geppert