Attorney General Opinion WW-0397

Mr. William A. Harrison Opinion No. WW-397 Commissioner of Insurance International Life Bldg. Re: Whether a corporation which Austin, Texas does not meet the requirements of Article 1513a, V.C.S., may continue to act as an attorney- in-fact for a ~reciprocal or inter-insurance exchange under the provisions of Chapter 19, Dear Mr. Harrison: Texas Insurance Code.~ You have requested our opinion in answer to five ques- tions concerning the licensing of corporations to act as agent for a reciprocal or inter-insurance exchange. Your first ques- tion is as follows: "Immediately prior 'to the enactment of Arti- cle 1513a, V.C.S. was the Board of Insurance Corn- missioners authorized by law to license a corpora- tion organised under the laws of this State to act as an attorney-in-fact for the subscribers at a reciprocal or inter-insurance exchange?" 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 corporation or the issuance of a permit to a foreign corporation for the purpose .of acting as an attorney-in-fact for the .sub- scribers of a reciprocal or inter-insurance exchange. It has been a well established rule of law in Texas that, prior to the enactment of the Texas Business Corporation Act, which became effective in 1955, no domestic corpora~tion in Texas could be created, and no foreign corporation could obtain a permit for a purpose not authorized by statute. Prior to the enactment of Article 1513a there was no statutory provision authorizing a corporation to be formed for the 'purpose of acting as agent or attorney-in-fact for a reciprocal or inter-insurance exchange. Bowever, sub-division 49, 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 thereafter various domestic corporations were 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 department has held, commencing with an opinion by Honorable William M&raw dated September 22, 1938, addressed to Wr. George Van Fleet, Actuary for the Roard of Insurance Commis- sioners, and in subsequent opinions b being Opinion No. o-3250, dated May 1 c Honorable Gerald C. &nn, , 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'arvin Rail, Fire Insurance Commissioner, that corporations so formed could not act as agents for various types of insurers,,including reciprocal or inter-insurance ex- changes, for tho reason, among others, that such corporations E Fbject to,the provisions of Section 1, Article 1524a, which provides that corporations having 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 Corporation Act (Article 9.PjB) and, in addition, Article 2,01B(4)(d) of the Business Corporation Act provides that no corporation may 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-fact for reciprocal or inter-insurance exchanges. I' Chapter 388 Acts 55th Leg. R.S. 1957, (codified as Article 1513a, Vernon's &vi1 ktatutes P' p%fded that trust companies may be created, and any corporation how- ever created may amend its charter or a foreign corporation may obtain a certificate of authority to do business in Texas for the following purpose, II. . . to act as attorney-in-fact for a reciprocal or inter-insurance exchange." 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 corporation could be created nor a permitbe issued to a foreign corporation for the purpose of acting as agent or attorney-in-fact for a reciprocal or inter-insurance exchange, the Board of Insurance Commissioners was without power or au- thority to issue a license to such corporations for the purpose of acting in that capacity, and the answer to your first ques- tion is therefore %o". * Emphases throughout are supplied. Mr. William A. Harrison, page 3 (WW-397) Your second question is as follows: "Immediately prior to the enactment of Arti- cle 1513a, V.C.S. was the Board of Insurance Commissioners authorized by law to license a re- ciprocal or inter-insurance exchange and its attorney-in-fact if the attorney-in-fact was a foreign corporation?" It is also a well settled rule of law in Texas that a foreign corporation is restricted to the purposes and powers which may be exercised lawfully by corporations chartered under the laws of Texas, and the rule of comity would not permit a foreign corporation to obtain a permit to do business in Texas for a purpose not authorized or exercise powers which.could not be lawfully exercised under the laws of Texas, even though the purpose for which such corporation was formed and the powers 'sought to be exercised thereunder were lawful in the State where the foreign corporation was 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 .was not authorizedtunder ;,the laws of Texas to issue'a. permitto a foreigncorporation ~to act.as agent or attorney-in-fact for a'reciprocal or inter- insurance exchange prior'to the enactment of Article 1513a, V.C.S., the Board of Insurance Commissioners was without au- 'thority to issue a license to such corporation to 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 con inue E to license such reciprocal or inter-insurance exchange with a corporate attorney-in-fact if the corporate at- torney-in-fact does not meet the requirements of Article 1513a?" '%ay a reciprocal or inter-insurance exchange now be admitted and licensed to do business in this State when its attorney-in-fact is a foreign car-' poration which does not meet the requirements of 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 corporation or grant a permit purpose of acting as agent or to a foreign corporation for the attorney-in-fact for a reciprocal or mter-insurance excnange, any license heretofore granted by you or your predecessor Boards of Insurance Commissioners to such corporation was without legal authority. However, where a domestic corporation has amended its charter, or a foreign cor- poration has received a certificate of authority under the pro- visions of Section 2, Article 1513a, from the Secretary of State which authorizes such corporation to act as attorney-in-fact for a reciprocal or inter-insurance exchange, you would have the legal authority to issue a license to such corporation to act as attorney-in-fact for a reciprocal or inter-insurance exchange, provided such attorney-in-fact for the reciprocal or inter- insurance exchange has fully complied with the provisions of the Insurance Code, and particularly the provisions of Chapter 19 thereof. If such domestic or foreign corporation does not meet the requirements of 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 corporation or issue a certificate of 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 predicated upon an affirma- tive answer to either questions 1 or 2, and since both of these questions have 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 corporation could be chartered, and no foreign corporation could receive a permit to act as agent or attorney-in-fact for reciprocal or inter- insurance exchanges, The Commissioner of Insurance may legally issue a license to act as attorney-in- fact for a reciprocal or inter-insurance exchange to any domestic or foreign corporation which 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,ral of 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