Untitled Texas Attorney General Opinion ( 1943 )

OFFICE OF THE ATTORNEY GENERAL OF TEXAS
AUSTIN
objootloaa
"Ourprlnoipal to t&e olauaeme
Do rollwr:
* 1) A&iok 50s. O&.8., ana P.C.Arti-
oh 57Q dsr lnD0Dr ta n
lotiom OS oorutitutlq
flomroblo0. P. Liokhort,
MO 0
forbidden dirorl8lMtlw cad r&at , uong``
hots uo the offer, ule, or other %! l
ltuk or, other ri&to u&d roolPrltloo
la the polloy a0 u induoement to
pooltlonof
xpryd
lnouraneo.
nolt
~umo to. IO that thv 0lame, hero u&r oonol&ra-
tioa,primrilf viol&e* tho lpirltand oamoorlth-
irr tha watiin( lf a0 th l&tar of Artiolo5053
a P. c. ArrtLolo 57Q in that it p&o00the pollop
holderuponaboollltothe m rutsa& 81th the
ounu 0r uhatevu nu% r of oharoo of *took uw
h8Ut.d In th. b-1 oI&dthd the @iO)ho~U'O
lta tuolo no t
sa p 4 that Qr 80-n ltwk h o ldu,
but thst of a proforrod ltoakholdor, ownimgtho
EWU thuah
0r r h u 00 l0t rorthj md tht~ tb
poUo*oldor boo &ll the bonofito of l oamoa or
poforrod ltookholdor,rithout of the burdono
“I won the mmlnal
of lwh a stoakholbr, uid rlthou
QYnu~p o r a OzJlg lO
ltuk o h u o in the o wp uly.
‘( 8)Thel& uo o wr b o ullrrly8loload-
Lng to the ooppot%vo polior older, aad poullrr-
1J lPoOoptl rlo to 8l8roproooat8tloAto hlB, + to
~$uamt of dlvfdendo to bo ro8lisodunder luoh
Aeouw, SW hotmoe, thatin ordu to
r ol ll
*&OOO Ufo polloythe agent offrro tha
oopeotl wtlolg4tirlfrldu lathlr form filled
!z in lwh ua r a 8 o la it10him to dividend8
equal to thooo 08 rive or tu ehwor or OS
o r proforrod ltook. T h isso wd~ lik e
l bonuoa.
ma agent~mpbuiaooth8t thloontitlestho @lop
holder to dlvldondm wm.l to tho(u 011fir0 03 ton
ohavorulrhDmMdtho8,ulthoucovuhav
to bw or p4 for or loouno the omuship, ri2 ,
burdono, 8ad bother ot the ohwoo. Tha bgont
then pUnto 8 roe7 ploturo as to put lwalngs
orthooapMy,wdprw tit0 ratura 0
and mDko0 it round like p”
br dlvldeudo
IOM tbm par for the polloy~ulwrou, in truth,
be nan-gu, valueor even
if the o h u e o of ltook
value,with omll value
10, or even In ml7 00noa1v8r lo -
'0" *, lWh the
olttrutlon,.‘
rotwl dAvldM dor y b e Ouuu th a n ``y ltp
a ndlroller th8n thaw mdlmrll7
putioi thqg poll0100, md thor t r polloJbofd@r
lo boo vod 8nd mloled to his urlous 4urr.
P
Hoaoroble
0. P. Lookhut,pIge 3
~OUV lottor 0r hbrwr~ 15,lg4,,lo ln put a0
r0iim01
9 8 0r m th 8t
tb r0
r utta lir r uutu00p
on vhfoh wo deoi~ th0 reweoted opinion to k
pdloetea may lppeu with @oator uaet1twA.,
allovuo to4Boadando lonoat ear or- ro-
ig4Y irrthe r0u08ia(r roo-
"Theputloulu partlol#tloaokuoo quoted
fn th0 00008d paugraph 0r 0~0 origial &ttu is
not now peadirrp orl&bl8l
o ur tip & h u t under Ar tioT-l
l 4749, @IId
but rr-
hu alrow
br
boonrikd,vltho~ lmpllodQIpr0~1,aadi@be
Lo g
used lurrent1.Jla oonusrtlonvlth lpg~oved
r0ru Or ~OUO~OS. In bddition to the qu0t.d
0h00, u hat0 4u0* u ru0 0th0r rm 0r
gut101patinglleuoeo,*ub*tMtUll~ ldentloal
vlththo quoted form, but porhapa with rll@tly
dirru0nt ~0rdbg, kt00d br 0th~ 00mpa0~.
8ubotuMmlly ldontlcirl
jwovlolono*lo&to any
or th0 tow 4709, 4755,5036 md
Or mi0i00
lo p eo la*s
u>ywo do o lrQur
o g lJdoa n
i0Ia0
0-t JOU had tb8t th0 QUO t ti r0n rioht00’uy
lr a0 gr0ti0i~ 0r or l~ah 0it04 0ei0a00,
u to *h&her *e Uvo FL powor end duty in the
sta ted
llr o uo tM o otoo WltMuw OUT
TOth0 ltWt that thr firOt pWg?aph Of OU?
ori&laal letter mar have ofhnvoyed
the l8prooolon
thattherm ir, qwotionuoookrltt0dorlgi-
``~uOAOWJM~O~QW``Q.F ti fL?Ot
tL#, tho ol@nol inquiry lo huebr amended.
%I th 0~0 or the 008pny W* the pro-
OiOe fOPNIqUQtOd %I&w ~8gFaph 0f 0~
l0008d
orlglnal Ytor, it lo rbprooutodto aa the stook-
boldarebwo by lpproprlek wrlttonreoartl OOQ-
rentedthatdivldoMe to polloyholdosolzIlooord-
an08rlth luah quoted proviolmehoul&be paid
mner8blo 0. P. -t,P4@4
b0ro39 or 8t tho em tlmodivibud, @hall be paid
01th1 r lt0ok 0r th6 0 wo doolro your epln-
ion a&so u to vhet&or
opa b.uLal; th0 k6uit op iu080utl or
Ee rmu009p EL Vlththo I our utloko above
0lt.d. The rouQ0 we "@"~ro````~@
rdditldpointlo tbtln
~00``ir y lob0t00tiu4 th0 lm ru8 0~ put;-
01 tiogol8a8o,aoPenyru aothvobeen
M Piw, taken or t000rd bf the 0Ioekholdoro or
lnvolvod, ooeuntin#to the pa-at
Of dft
th0 ‘YIPOAdOt0 po~O~b%V?S iA 8OOOHblOO Ufth
the putloalar pmtiolpating oleuao ievolvod~
Md IIS, thWfoCI, do8f.W t0 knOtI Ub6thOT SUSh
0r u&t0 ur~00mpmOt0Oth0 -toi ltoJ-
hoMore lo ma popor lrltulm r= dotorriw
oonrormlt~ or Mn~wfQomlty to tha statoto~
pov~olonr oitoddr
m. . . .l
nb0 p0a0ip0t* 0~ w 00mri00t0 to b0 Ot-
tw0d t0 xii0 p o u0f0~ 0r l h00Oti0 0t00k iii0 s.00~0000
oagmt, lnoorpomted udu Cha u I, Tltla 78, Yernw~o Isl-
n0tmdatii 8t0tut00, IO OS r0 @ ,~llt
%mh0d t0 urd
go.
Vhlo poli0~o&l1 partlolpato ln thm luv-
lw larniqp oftho Q-u lp r$madadb``‘k$e
Lord of Dfreotom, born no: c
rod 0r tho l00Ond polio~ ym end maually thuo-
ubruhllo thi@&U``~irlntuU rO?Oo. suoh
Eonoreble 0. P. Lookhort, page 3
dividend0ohollloortm tra JlortaUty &via(lo, Rc
lo r vo o roloa8od
on lapsodpoU0100 a0001 lntereot
oumf~6~ utd other peoslto on t&a bompukpe pti-
llpatln#lmruroo u prNtkd b;r the Iawe of t&
8tOt0 0r w00.
l
AEX8UCE
AUUUAL
DIYIo QlD
AP P a tTIO
TOg
TBu8
HD
POLIOX n A%Y CALUDU? mAit, 8uLL La Rrn xma rBA8
``sBDIB~DDIIQ~H)DXTB1BoIBD~DpIR``
AHDPAIDTOfiiB8TOCZlCOLDER8
Oi'fB.E8OUT5AU8TAXS8
LIPSX8TmAxCPQalPANxII 8lJcH
XluRoil 8HARm
OP5CWoI 8TQQIQPTHH80- STA~LIFPi
x8uRAJlcR
OQNPANT.
lm00uted
th is
th o dy of
194 8t th0 OffiOO 0f ~OU#UA stotO0 uf0
IAs~o CapMy, Eouston, Tox80."
I, 8eood
W 8 ‘WtiOiwta PliOr, ’ br *L?tU0 0s thO PO-
vloionoof rhiohtho l.noupod
lo entitled to sham
inth 0sur p lus
lunfr q0r0th eo o mp aiaepyropor-
tion t0 tbo prri- p8id 0 th0 mm 0r hi0
lloy. Phiomharobt&our@rum8ybe``blo
r 0 him, at the O~tiM Of the O-, 8t 8 OOrt&
flxod period 0.v u divldmdo. In tb aboonro of
8 l t&t8t0Pr ~povlola~,the tine Of distribution
o fl lUV~hO t0 gOl.lO~ holdoromlido OB t& die-
orotlonof tho dlrootaro oi the l-n lxeopt
00 fO8 80 it U, b. btO88fAOd by th. ObUtOr, Of
the ooqa~,o, v0lldb~lm(8oth0hlldv~ llrr
Xorkure IAO. co., 97 Ill. App. 547). Wader8
Uoy lntltllJlgthe Lprarodto pertioipdola
r & diotrlbutlo a or the ourplaooolooordlq to
owh prlnol~oo80 ml@& bo rd ‘tedby tbo oom-
pony,the iaourodhoe no title ? o Way ouoh se-
pluo uetlla Uotrlbutlon10 8o4oby the 0rri00ro
o fth eo o mp wy,
ud u& wluehprrorlolont&OQ-
pcuy’lo not roqtired t0 distr$buto t& 0At&O SUP-
piU0 (c&00f V. EpUitAbiO uf0 diO@UP. 800.1 tdo
51 1.x. 7l@, 46 t.R.A. L88 73 Aa. 8t.
rovuolng 57 H.X. 8upp.8$1 40 A
). If the arght 0r 8 T0
polio7koldrr
Honor&lo 0. P. Leokhut,gmgo 6
fUUd 1 0lOAta OAt a h i0lOAtiw-
Until th0 lXJ?iUtiOo ith
A e 0.r .
M rf@t t0 SW fC 8 OhUO Qf
l
. . . l
%Zm r u le that
t;g;yot lwh l r ig h t ao ontitlodhl8 to on
....
0l . , .
‘mVideAd# MoPa On 8 PO1107 Of iAOWMO0
mwt, oi oouroo, bo Mid aasqd to the rontraoto
undor vhlohthe 8oorw 9
(CUtlsao Iat. I& l Ino.
Co. v* Jlomlo, 104 Ark. 288 118 S.Y. 1019f
ovlolon that
tha pe110@&or ohallbo @aLtAm
r0dl*1d6Ado d0.0 no tloAtaplat0 that th ola -
l~0d 8a7 a0t0t0 th0 880-t or atidOia th0t "
shall k duluod, or qwstloa tlw rooult aftor
the dloorotien or the mnagoro hao ken oxorolo~d
in thl~ behalf. The omtrmt lo that tho lziouod
@hall &VO tbO bOMfit Of lPOk ditidurdr W th0
It10 stated lnCoaoh'o Oyilopodi* of Iaourmoo Law,
Volmo 6, p4o 647)I
Honorbblr 0. P. WOkhUt, WA0 7
'In Aetormlnlng tho lurplu8 to b8 arodited
a0 dftid~ndr t0 iir0 in0~rur00 p0ii0iO0, p0ii0i00
may bo AirideA into oloooo8 oonoloting of thooo
h Or ing8 OOB B OA lU Of ~OOWAOO, lge Of 8ppii-
0a, kin4 0r p0 3:
ior, md mount 0r pr~airpsr -id.
But, llthoqh 0rAlaarily iii0 ``lloleo a0 olaoood
looording to the year of loow, o rlooordbg to
% z :: EZGYrP~$0Z :?%:2b:
ti0t40r •UPQ~Wai4 i0rit0 uloq 01~8000, the
plan 0r larluanoo seP eotod, rather thRa the &to
of loow and age of tho lnourod, d8tsrmlneo tho
proper olaoriflcatlon; othervioe, the 18v of aver-
8@0, 00 ~0DMt.i~ t0 life iWWOQO8, 18 1OOt OX'
oarlouol7 ourtailed. And oluoiflootlon for pur-
0800 Of dirtribution of 8urplW or prOfit must
30 llmftod to polloyholdOro vho hwe contributed
thereto, lnb A8'0000~117 1nOhdeo 811 vho hove 00
ooAtrlbuteA. yut'th8rmOF0, under l OOntr8Ot Of life
lnouranco vhloh proVlde8 that the polloyholdrr
till b8 ontitled to ohnre in th8 Al8trfbutlou of
the OCBpM,'O lUPp1U8aooordlng to the 88thO&8Aad
prlnolploo ado tod by tho oompanySor tho dlotrl-
butlon of lurpP u8, mad under vhlah only ruoh pro-
portion Of the lurplu8 88 ogultrbly belongs to
tho polla, lo to be orvdltOA to it ond po%A to the
polloyhddu, tha proportion AOrl&Mtvd must ba
@ooert~lned and detOrmlnod bofavo the polloyholdor
OU UfAkiiJ M outlon et &V to reoover 4ulypor-
tion of the 8urp1uo. And, in la u a portlolpatlng
pollo7 provlAe8 for m 'vwltable @hors of the
Alviolble surplus,* It vi11 AOt be cowl&rod
thbt th0 OAtirO pFOfft0 VOX’0 iAtOndOd to b8 dlvzd-
ed amfq t&0 polloyholdero, bat ouoh a 0har8 0~07
80 tha mumgore of the company may, In the exor-
aloe of their Alooretlon and good faith, declare
a8 prOfit8, thO7 hovlng in ViOV 8 rv88onab1e urd
~oaoouy provision for tho safety of the ow."
We oonrtrue said partiolpotlng clsuoO or oertifioote
AOt l8 8 gu4rurtre by thr oompony that it vi11 ever dsalorv
l dlVi&``& to it8 OtOCkhOlder8, but If It should do SO, then
it8 p6rtlalpoting polloyholdsro vi11 r008lVO on their poll-
Oioo UI Uowt not lees than the aaoh dlvldaed dealered on
tho numbor of oharoo otat8A In the oortlfloate. The ltxwk-
holders do not Auoruiteo my @took dividends ever to be
paid the polloyboldero and no otouk ever p.ssrooto the
pOliC~hOldU8. It i8 noted that the prrtiOi&Mlq 018U8e
Honor*ble 0. P. LQokhart, 98ge 8
Or O~rtirlMte d~# not Ot8tIBth0 WBbW Or 8h~88 Of ths
omon @took or the oarpug vhloh will bo ~8.d a8 a bar18 In
detemlnlng the amount of dltldmdr to be paid. A8 VI under-
8tMd foUr POQUO8t, it 18 foUr 908itiOll tbt th. O=puV
OOuld diWM iM t0 l8 t0 OilO~OidW8 bf iA8Wting l dir r er -
lnt amber or rh8mr or tL OWOkI 8tOOk Or the 008LpU-U in
the blank oontmmd la the ~tlOlp8ting 0lm8e or Orrtlrl-
oat.. TO illU8tr~t41 fh. OOiOw Bi&ht 8*11 tW0 901101*8
OS 8 thoauand dOlhF8 eaoh and ln8Wt in One 88rtiiiO~te
iiT@ 8har.8 Or 8tWk and la the other ton rhuer Oi ItOak.
Ir th0 OOIBpMy rOiiOWd thi8 pOliOy Md In8OrtOd d%rrWInt
8harOr or thee oommon8tOOk to be useda8 4 bar18 in deter-
8lnlng the uount oi dividend8 to be paid in ldmntlo81 pol-
101.8, then 8UOh an 8otlon would be in tlolatlon 0r Art101e
509, Vemon’r Annotated Clvll Statutar, and Artiole 578,
Vernon'8 Annotated Penal Coda, Bovevw, ior the purporsr
Or thi8 O@liOn, We mU8t 888-e th8t the Oollouy Win 18@41-
l~oOndUOtlt8bu8llu88 and th8t088hpO~O$aOldar Of the
88ma ola88 ~111 bo treated llko over othar polla~ol&c
ln hi8 01888, and that th oimpeny w I11 not rerort to any
. dl8OririlutiOn Vh&8WVbF. fb 9088ibilitr wt th8 OOOL-
PenJ oould di8orimiMtr bdsveen it8 polio~holder8 dOe8 not
$Iltifl Y8 in OOIU3iUdirrg tht the OOHI~ Vi11 d0 80.
ktlOb84753 and 5036, Vernon'8 Annotated Civil
st8tUt88, prorido r0r the arlaU.l4tlon0r 8Ur9xU8 rw dlvl-
dond pur908e8 and forbid the p@Pwnt of dividend8 out of
rU& Otbr thur 8t~91U8 prOrit8 a8 dOriM ia 8ad ltiOi88.
Ta~;al tlng elaure or Oertliloate, above quoted, must,
r 0 oonstrued 88. permlttlzigthe paymat or dlvi-
dendr onl; out 0r ruob i8uru.xrurplu888. lstlole 4729, Ver-
non@8 Annotatad Cl+11 St8tuter 4180 fOrbid8 tha pa 0r
dividend8 OthW m fFGW 8UF9iU8 pOfit8 and iOr r id8 @l8FUr-
toeddlVldOd8 to goll@yhhalderrla 0x0088 Oi the amount of
the lx p enw0r loalng in the promlum and pFOVid88 rurthw
th8t in Oal* 0r papent 0r dividend8 in 0X0.88 or the 8moUnt
Or th0 8XpOIi88 bAdit& ~88WO8 8wi bt3 8d U9 t0 OOIW
the deilolw&o~ ln net premlumthereby areated.
In flew 0r the foregoing, it 18 our opinion th8t
the putlolpatlng a$awbe or oerti.floete,quoted above, doe8
not ViObtr UIJ prO~i8iCUk Or the b8UI?8ILOO hV8 Or thi8
(Itate. Theretore, hwlng awered your rir8t quertlon @I
tlWetOfOre rtated, it 18 JlOtMO888M~ t0 di8OU88 tkW 9OVW8
0r the Board 0r xn8~ranao commi88iowr8 vlth rrteronee to
Bonorablr 0. P. Lookhart, page 9
the r1thdmwa1 0r TOW &p~OYlhl 0r 8UOh roru &Ad other
uttoro rohtlng thweto a8 mentioned b yOUr lnpuiry.
Tour8 very truly
aTTaRaKPOBIrnAL OF TKXAS
By M&L
Ardell Y1111ABE8
A88i8tmt