Untitled Texas Attorney General Opinion ( 1939 )

OFFICE OF THE A7TORNEY GENERAL OF TEXAS
AUSTIN
fionorable C. E. Alvia, Jr.
County Attorney
Corysll Collutp
Gatesvilla, Texas
Dear Sir:
v
Oplnlon So, O-1470
8s: Reservation or aximp
Vie appraolat4 ve or HoYember 7,
eat out in the
d Jrou hosewith
yetma a praotloe haa
n@anies and real mtatc)
n thle oounty but alao
ng a part of the PltnsxeiI
-gurpow OS charter have followed suit. As a se-
suit of thie praatlae apparently, wide laiaeraf.
h&din&a are being b&t up by ~,OrWratf~aU *ibh
were chartered r0r a dirrerent puq3oee. In ether
words a number or theaa aorgoratlons are doing a
big oil bua~nass when the 8aPO iS~nOt uOOlb886;PY,
fnoldantal or pr+r fn the 81e``iae of their
true, proper, a&d obartered B¬ions.
2
&norable C, E. Alvls, Jr., Page 2
*It QQ~XWJ to me that auoh operations are in
violation of Chapter 4, TltlQ 32, Art. 1359, et seq.
or the Revised Ci~ll Statutes or Texas. -her-
more, the traditional polloy 0r the law: @at or
the rm4. a114sat1oh 0r laad end the lntsrests
therein, does not seem to be well served by the
vast aocmulatlon et suoh interests by great
corporate organlsatlons.
0. . .
41 vamld like to hay4 your views on this mat-
ter, aa I bellQve ltwlll prove to be of Qven wider
ihterest to Texas ln‘the iuture."
Slnae we da not have th4 charter of. Amy speaif~a ln-
sursnoe Qospahp or real estnte 108s oorporatlon before us, aud
Ilkewlseg sin04 w4 have been turixlshed with no apecirio fasts
and airsmstsnQes relative to the aQquiSitlOn oi any partlou-
lar traot of land OF the exQeptlon or ressrvatlon Qr any ser-
tab+ -era1 interest by any suob aompaay, the preparatifon of
a a~Qret.4 opinion sn the qnestiohs presented In your letter
hss been dlffloult; and to a Qonslderable extent thatuhloh
r0iti8 represents no mrs'than a Qollatlan or p8rkinent
auth&.tlee.
We indulge In t.hQ asmsptlon that the lahda rererred I,
te were) lawfULly aoqulred by iorQQlo8urs proaesdlaga or other-
wlee, either to Qnsble the corporation to carry on Its buslnesa,
or to'seouro the paymnt of lndebtedneva or liability due, or
belonging to the corporation, or for other Msful purposes.
Then, upon Bubsequent sale, a uinQv8l interest was *rQtaluQdm;
aud w4 prQsuPe that when you speak oi SUQh aorgoratlons vre~
talnlng a part OS the alneral lntetwts in lands", you refer
to the oreation of SOJW suoh estate as ocourr~d in Way vs. Venus
(C, C. A. 19511, 35 8. 81. (Zd) 467, or XlQln vs. Eusble Oil&
Berlnlng co. (T. c; A. 19541, 67 S. W. (26) 9ll, whloh might
opsiate as a seversaoe of the mineral estate and reserve a
vested title in scum portion of the minerals in the lnsuranse
or real estate loa~eoryratlons involved. See Texas Coqmny
vs. Uaugherty [lVl5), 107 TAX. 226, 176 5. PI* 717, L. R. A.,
1917F 989, Stephen8 County vs'; Hid-Kansas Oil A-. Gas Company
(lo+113 Tex. 160, 254 S. K. 290, 89 A. L. R. 566.
IU this mmneation, Chapter~4 of Title 32 of the
Revised civil Statute8 of Texas, 19%. dealing with the pm-
Honorable C. IL Alvls, Jr., Page S
ahase and OonYQyEUOQ of lands br aorporatlons gene&l.l~, la
relevant (s tg the &YYiS%d Civil tjtatutes 0r
1925 provldes that the laws governing aorporatlone in general
shall apply to ahd govern lnfiuranoe companies lnoorporated
in this 2tate,, insofar as the same are not inconsistent with
those statutes dealing ep4olrlaally with lnaurancQ companies),
and we quote the r0114sing Art&lea rro0 suah ahapterr
*Article ZG39. COndltlOnS Of pUrChaS4~ -HO
private corporamn shall be permitted to pur-
ahaee any lands under any provision of thfs ohapter,
unless the lands so purchased are neaessary to
enable such aorporation to do business 1~ this
State, or except where suoh laud 1s purohaeeQ in
due course or business to semre the payment or
debt.'
~hrtiale l%G. 9~4 0r SURPLUS. - AU pi+
vate oorpomtione authorized by the laws of Texas,
to do business in this State, whose maln pur-goee
18 not the aoqulsition or ownership Of le.nd8,WaXoh
hsve'or.may aaeuire by leeee. marchas or other-
wise more land than is seaessary to enable them
'to carry on their buelness. Shall. Within fifteQn
years fmm the date said land w be aoqnlred. In
pod faith sell and convey in iS4 elmple all lands
so acquired which are not necessary ror the trans-
aotion 0r their buSln688.s (Undersooring ours)
wArtl~l~ 1961. Liquidation. - An lands
aoaulred by aorporatlona in pament *due
o
such comorations shall be sold and eomeped ae
herein vrovlded, within flfte4n~y~rw3 iron the
date of the aaQuiaition of suoh land.* (Under-
scoring oursl
mArtiole $362. Corpoxetions prohibited. -
No private oorporatlon heretofore or herearter
Qhartered or oreated whose main ptargose of busl-
ness 1s the aoquieltio&or ownership or laud by
purchzme, lease or othekslse, shall hereatter
be perdtted to aoqulre aaj land withlc this
State by purahase, lease es otherw1oe.e
nfU%iCIQ 1364. &Cheat pI'OQQQdin&J. - All
corporations holding lands aontrary to the pro-
vls10na OS this law shall hold the same subject
Honorable C. E. Ahis; Jr., Page 4
to forfeiturs and eacheat proceedings. The Attorney
Oenernl, or any aistrict or oounty attorney,
when either of thez ha8 rea8on to believe that
any corporation 3.8 holding landa In violation
of this law, shall institute atit in the naae
of the'Stats Of Texas, In Travis County, or in
any couatg in Texas where such oorporetion may
have an agent, or In any county where any part
or the lend may be situated, against such OOIC
poretion, ~8 i8 provided for the esoheat of
estates of deeeased persona dying without devise
thereof end havine; no heir8.v
*Article 1565. Dieposition of penalties. -
If it be dsteinined upon the trial of said suit
that land8 are held aontrary to this law, the
court trytbg said oau8e shall enter judgment
condsmning nuo& land8 and ordering them to be'
sold a8 under execution, the prooeeds of aueh
sale to be first applied to the payment of cost8
of 8UCh suit, and the balance to be paid into
the State Treasury subjeat to be paid to the
stookholders, or person8 entitled to receive
the 8aae as owners, upon proper proor made
within twelve months from date of aale. Ii the
legal representatives of euoh aorporation fail
to claim the said balance of money reallred
on sale of aaid land, then it ahall e_xcheat to
the State and be applied to the available sahool
fund. The aourt trying said aause shall allow
the attorney representing the State a reaeon-
able fee, to be taxed a8 cost in the suit.
In no ease shall the State be liable for cost8
or fees U&e88 it 18 SUoOe88fUl in said atit."
The progenitor of these artioles was Senate Bill 4,
Chapter 33, General Laws of Texas, 1893, 25rd Legislature,
Vol. lo, p. 466, Sea. 4, whiah reeds ln part a8 follwa:
%eo. 4. That all private aorporetions
authorized by the l.aW8 of Texas, es provided in
Chapter 101, Article 566, Aote of 1891, Twenty-
second Legialaturs, to do business in thf8
State, whose Biain purpose is not the aoquisi-
tion or ownership OS lands, a8 mentioned In
the precedih$ seCtions, whloh haVS heretofore
or may hereefter aaquire, by lease, purchase,
or atherwi88, wore land than is neae88avy to
Honorable C. E, blvls, Jr., Page 5
enable thera to carry on their busiue88, aball,
rithin fifteen year8 from the time thts act
tak88 sffeot. or the date said land may be here-
after acquired in good faith sell and convey
-i fee eimz4e all land 80 acauired dhih
a& not necessary for the traneaatio~ofwth&
business. tid no private aor:?oratlon ehall be
perslitted to purchase any land under the pro-
viaions of this and the preceding aeations
unless the lands 80 purchased are neceeaary to
enable suoh aorporetion to do business in this
State, or except where such land ie lurahesed
in due course of business to secure the payment
of debt.. . .v (Unberscorlng ours )
W al.60 aall your attention to Article l320, Revised
Civil Stztutssj: 1925, nhioh reads In part as followst
*Xvery private corporation a8 such has
pwer:
*. . .
- “4 To purahase, hold, sell, mortgage or
othetilbe aonvep such real estate and personal
.
estate a8 the uurnose8 of the aornoration shall
require, and also to take;~Id and aonvey auah
other property, real. person & mixed, or lair)
shall be reaufeIte for suah ao~morntlon to ao-
auire in order to obtain or aeaure the mwaent
or any Indebtedness or liability due, or belon -
ing to, the cornoration.* (Underscoring ourslg
Article X@, Revised Civil Statutes, 1925, 18 also
pertinent; end reads tn part aa Sollows:
*l?o aorporation, doan#stlo OT roreign, doing
buainesa in this State, shall employ or use its
8toOk; means, a88,&8 or other property, dlreot-
ly or indireotly'@or any purpose whatever other
then to aoaompliah the legltlmate buaineas of
it8 creation, or those ourposes otherwise per-
mLtted by law; . . ."
*IKITE! The power or acquiring lends is not confined
to corporationa formed to deal in real ea$bto. City of San
ktonio 9.8. Salvation &my (CiV. App.), 127 8. 91. 660, error
rsfu8Sd.
Efonorabls C. E. Alvia, Jr., Fege 6
Thus, with reepeat to corporations generally, it
may be soen that the Legislature bas deolared the publia
polfoy of the State to be'that ooorporetions whose main pur-
pose i8 or WAS (at the time of the pas8a;e of the Act) the
acpuiaition of lend are and xere forbidden to acquire land
to any extant (see Article 1362, aupre), and oorporationa
whose main purpose is not the aaquisition of lend, may ea-
quite the bfme only when neoeeaary for bUSiM88 ;>urposea or
in due eour8e of business $0 seaum the peymant of debt.
See Tjestbrook v8. ~88OUd~'ibX85 Lsnd & Irrigation Company~,
(C. C. A. 1917), 195 S. Vi. 1155; Ca?n;rbellva. Rood, (&as.
App. 1931) 35 S. Y;. (26) 93, 85 A, L. R. 266. It is apparent
that the intention of the Lsglelaturs a8 exemplified by the
original enactment of 1893 was that in no event should land
be ?urohsaed by corporations unless these conditions were
present, end in it8 wisdom it further provided for the llquida-
tion of aueh land8 within fifteen yeai- when too muahwaa
aaqulred.,
Artiale 4726 of the Revised Civil Statutea, a8 amend-
ed, de&s s=ERlV with life, health and accident lneur-
anoe.o0z~miea, and by Artiole 4Sl9 of the Revised Civil
Statutes, Chapter 3 of Title 78 of the Revlaed Civil Statute8
is made applicable to mutual life insuranoe ooxpanles.
We quote Article 4726:
*Every such insurance compsny may aeoure, hold,
and aonvey real property only for the follnting
~rpoaea and in the following manners
"1. One building afte and office building for
its accommodation in the ttiansaation 0r its bu8ine88
end for lsaee and rentals end auah office building
may be on ground on whlah the Company 0wns a lease
having not leas. thsn fifty year8 to run from the
date of its acquisition by the Company, provided
that the C-pony shell own.or be entitled to
the use oT, all the improvessnta tinereon, wd
that the value of such ~provementa.afiall et
lea‘t equal the velne of the ground, end shall
be 1ot leas thaa twenty timea the ennuel average
graund rentaL payable under such lease; end
provided, eueh offias buildi shall have an
snnuel avera*;e net rental 0r9"et least twice
suoh annual gound rental; end, provided, fur-
ther, that suoh Company &all be Liebl8 for
and shall pay all State and local taxes levied
en& sS8eS8ed 3gsihSt 8*uoh BxOUnd end the im-
proveLbents thereOn whioh iOr :1ur~8aa Of tami-
t:on, 8bal.l be deamed real estates owned by the
Coapeny. Provi&ed, that aa RoqUi8itiOn of auoh
an oftlae bullding on leased ground shall be
approved by the iicmrd ot Insurance Co``IsaIoners
of the Stete ot Texas before such Investment.
"2. Suah a8 have been aoqulred in good
faith by way of security for loans previously
contracted or for moneys due.
*3. Such n8 have been oonveyed to it in
the satisfaction of debta prevlouslp~contractcd
in the course of its dealInga.
"4. Suah as have been purohaeed at sale8
under judgment OP decrees of oourt, or mortgage
or other lien8 held by such oos~paniee.
*All euah.real property 8peoIfled In sub-
divieions 2, 3 8nd 4 of this Article whleh @hall
not be neoeseary for it8 acoonmodatloh la the
oomrenient transaction of it8 burdnese shall be
Consequently, It may be eeen that vith respect to life,
health ehd accident lnsurance'compaeiee, the Legialatula ha8
8hortened to five years the period for legal corporate holdlng,
6s eet out in Chapter 4 of Title 32 or the Revised Civil
Statutes (Articles 1360-1301~.
A further limltatlon oa Artlolrs X%30-1561 of the
2evIsed Clvll Stetutes, supra, ?aap be found in
an& 5008 or the Revised Civil Stetutes,
insurance canpanles. Fe quote!
"Art. 5007. 80 8ueh company ahall be per-
mftted to purchase, hold of Uonvey real estate,
Honorable C. E. Alvls, JP., Page 8
except tor the purpose and in the manner herein
S8t fQPthi
='I. BOP the ereotlon and malnteuance or
buildings St least ample aad adequate ror the
transaation 0r It.6 ownbusiness.
“2. Such as Shall hove been mortgaged to
it in good faith for money due.
"3. Suoh a8 shall hove been oonveyed to
it in the Satieraotion 0r debts PeViOU84 oon-
trrrcted in the course of its dea P ings and which
muSt be taken fn by the company on aaaouat o$
the debt SecruPed by suoh mortgage.
-4. Such as ahall have been purohased at
sales upon judgments, decree8 OP znortgagee ob-
talned or made for such debts. No compeay ln-
corporated a8 aforsoald shalJ. puTshase, hold
OP convey real estate in any other oaess or ror
any otheP.przrpose.*
*Art. 5008. All real eatate 80 aoqUlred,
eXOfmt as 18 004u``ed by buildlllgs used in whole
or in Dart for the aocommodetioa of such oorapanfss
'illthe tPaAlZba4tiOnOr it8 bUSiine88: 8half. t4XOODt
a8 hereinafter orovided. be mid agd dlswsed of
Within ten years after such 001u~aay 8hall have
aosulred title to the same. Ifo maeh aompany shall
have euoh real estate for e lonucr DeriCtd than
that above mentioned, Unleae th; said company
shall prooure a certificate rrom the Commiealoaer
that the interests of the company will suffer
materially by a rorced Pals of. such real eatate,
in which event the time ror the sale may be ex-
tended to euah time 88 the Commlsaioner Shall
direct in said 4ertlfiaate.v (Undersooring oUr8)
Likewise, a spe4ial statute ha8 been enaoted With
Peepeot to building and l*n aeaoeiatioas, Artiola 882a46
ef the Revised Civil Stat&k OS 1925, which reads in part
88 fO11OWS:
289
Table 0. E. Alvie, JP., Page 9
been acquired unless (a) there shell be 8 bulld-
‘i e thereon ocoupled by it a8 an orri 08; OP (bf
t:, Banking coami ssioner or Texae on application
of th b rd of dlrectors shall have extend d
the t~ze"~lthln which enoh aele ehall be mmie.
. . .R (3ndereaorlng oure)
The facts set rorth in~your let%er are not in +b-
selves euixcl0nt to present 8 situat,ion falling within th&
purview of Articlea 1549, SSla-14, 46Rl, or 4999, Revised
Civil Statutes, 1925, so a8 to enable the Attorney General to
rorreit the charter 0r euch corporetlon. Westbrook va.
Missouri-Texas Land k Irrigation Co. (C. A. A. 1917),,,1955S, W,
ll54; Alamo Club vs. The State (C. 0. A.), 147 S. W. S59,i
writ refused; Union Men's Pmternal & Senerlalary AE+Q'VS.
The State (C. C. A.), 190 S.W. 242: Kaplan Dry Goode'Co. ~8.
Say; Bra;. ('2.C. A.), 214 8. W. 4S5; 10 Tex. Jurle. para.
,* l
I?or do we believe the quest&ma eet forth in your
letter aontemplate a eltuatlon in whioh the land ra8 originally
llle@lly acquired, 80 a8 to enable the Attorney General to
lgstrain the oorporatlon from eoqulrlng more land or vlolat-
ing the legl8letlva manbate a8 set forth in Article 1359 of
th8 Revised Civil Statutes of Tex.68, 8upra. Staeahw ve. Root-
ledge (Sup. Ct.. 1922), 24.1 8. 91. 9951 ye&son VS. Wseteti
Union Telegraph Company,, 269 Fed. 598; lfational'Eqtiteble
f%oaiety, et al ~8. Alexander, et al (C. C. A. 1918), 220 S . W.
lS4; C8mpbell vs. Rood (Corn.App. 1951) 55 S. W. (26) 93,
S5 A. L, R. 266; City of Wink ~8. Griffith Amusement 00.
(Sup. Ct.) 1'3 8. W. (Zd) 695..
As regrettable as it may be that the Legislature
he8 not provided a mr6 8ummry remedy for the eituatlon des-
cribed ln your letter, we believe that it has et least pro-
vided a complete and exclusive one in ~h@pter 4 of Title 52
of the Revised Civil Statutes, rhieh forms a part Of the 18wS
against the craatlon 0r perpetuities. kaaerloan Tribune News
Colony Co. va. Schuler, 34 0. A. 560, 79 S.W. 575.
AS stated in Schaelder ve. SaLlere, 913Ter. 550,
84 5. W. 417, at page 420:~.
"Under the present law of this atate, enacted
mrch 24, 1895, the QOP oration had 15 years from
the passage of the lew kand ee the statute now
reads, 15 years from the aequlsltlon of the land)
Honorable C. E. Alvls, Jr., Page 10
to as11 the land, and the t5.m lms not yet ox-
>lred. Rev. St. lS95, art. 9490. If the State
should seoure a dealaratlou of forfeiture, the
lands would be sold, and the prooeeds diatri-
buted to the stookholders. Revised statutes
1395, Artlole 949e. This shows that the holding
of the land is not unlawful." (Pareathetical
insertion oure)
Cousequently, you are respeotfully advised and It Is
the considered oplnlon of this dspartaent that under the faots
set out in your letter 0r Noveaber 7, 1039, aad those addi-
tional rects assumed$ln this o inlou, insurance oo``p,aatesand
real estate loan corporations fwith the sxoeptioh of the
speoial corporations mentioned in the paragraphs to rollor),
retaining a nineral interest In lands whioh they have origi-
nally, lawfully aoquired by foreolosure or otherwise, and
subsequently sold at private sale, may hold suah lancis or
retain such interests ior a period of 15 years rroiu the date
of original aoquieltion or suah lands In aocoxdanoe with
llrtloles 1560 aad 1351 of the Bevlsed Civil Statutes, befom
,being subjeot to.forfeiture and escheat proceedings lnstltuted
by the Attorney General of Texas aa provided In ArtialiiilJ$h
or the Revised Civil Statutes or 1925.
Elth respeat to life, health and aooident insurano~
Wapanles, you are respeflt?ully advised tlut such oor~ratloops
have rive years In which tb dispose of real estate net necessary
in the crmvenient transaotlon of business, without an extension
or time granted by the Commissioner of Iasuranoe.
Moreover, it is tha opinion of this Department that
general oasualty insuranoe ooa~nies have ten years inwhieh
to die?ose or real estate not aeoessary in the omvenlent
traasaation of business, unless granted an extension or time
*y the commiseioner 0r Insurancs.
It IS the further oplnlon of this departzient that
buildlug and loan assooiatfotnUmxst disjxme of every parcel
Or real estate aoquired by euoh aseoclations within five Yeam,
~10~8 Rrd.ed 83t exk.enaionor tLmeby the RanklagCoxxlssioner
of Texas.
we ~hafl be glad to itirish a mere ap0iriO opinion
v you will iurniah this department inisrmation as to the
parti&lar typ or mr~mtlon and the articles or the Revlsad
Civil Statutes under whhh It was lnoorpy!ated, and ia addi-
,
291
&noreble C. E. Alvis, Jr., Page 11
tion all factzand cireuMtanoes relative to the acquisition
or any particular piece of land and the retention or the
mineral interest.
Yours very truly
Al!TOR?fEX GEEWLLOF TEXAS
BY-R?&&
Walter R. Kmh
Assistant