Untitled Texas Attorney General Opinion

OFFICE OF'IHE A’ITORNEY GENERALOF- AU0TIN

xonorable 0. P. Lockhart, Chalmmn Board of Inauranoe Comnlissloners Auemn, Texas

Dear Slrr opinion 80. o-4065 Ret IS the plan of the Reserve Loan Life IXWUW.lOe COUipq end the American Liberty Oil Company as desoribed lawful?

YOUZ' letter reQU88tiJQ dillOpinion of this d8partXl8nt on th8 &bove mtated qu8StiOn reads as fOllOWb; "'pheR86erVe LO038 L.ife IlMlUl'aBO8Compaay Of Dal&m, Texas, Se organlsed pursuant to Chapter 3, Title 78, Revised 01~11 Statute8 of Texan, vith $250,000 capital, and the Ammriaan Liberty Oil Oom- pany, as it8 ndane indloates, Is presumably lnoor- porated for the purpose of producing, refining, and marketing orude 011 and Its products, iaoludlng re- tail distribution. Mr. Clint MurcUsonandLlr. Toddle Lee Wynne are Stookholders and director8 In the life $neuranoe company, and are the principal stockholders In the 011 company.

“A plan haa been Submitted to us for approval in a policy fom and +pplioatlon form vhersby life polioies are bff8rQd to the publia generally by the Insurance company for whlah the first year premiwns are agreed to b8 paid, and actually paid in advanoe, jointly by the Bmployer of the asetied and by the oil company in oertaln agr88d proportions, and these facts are reflected in the face of the polioiea themselves.

*We understand the 011 oom@any has set up a fund of $50,00O'to b8 Used for this purpose and charged to adV8rtAdIkg of the 011 oompany, vhose name, of course, appears in the faoe of the polioy as having donated . its share of th8 first year premiums. Obviously the plan Is designed also to increase the business of the

. Roiorable 0. P. Lookbart, Chalmaan, Page 2

bUminC8 compeny, and thus this 8Oh8mS rebounds to the benefit of the ocunmon 8tOCkhOldr88 In th8 two oompani8S at both ends of the line.

“The authorities cited in "Insurance,". 24 Tex. .JlW., Sections 137, and 231, and In Couch on Inaurano8. ~Sectlona 107, 350, 605, and 606 seem to indicate that 8inC8, 80 far aa Ye h8V8 been able t0 dlaoover, Ye have no statute forbidding the practice mentioned a- bOV8, it I8 not illegal tie88 by r88aon Of the com- munity of ownership, interest, and control aa between the two oompanIe8 which might be 8 form of rebating, dIacrlml~tlon, or Other practioe forbidden by the atatUt88 hereafter m8ntIOn8d. Or OOntram t0 public polloy generally.

'We respectfully Invite your attention to the provisions of Art10183 568, 569 and 578 of the Penal COdS, end Artlolea 5053, 5056 end 5064 ,of th8 R8VI88d Civil Statutes, vhioh may have aon8 bearing upon the questions here propounded.

%8 reapectiully ask your OpkIOn 88'tO vhether the plan above outlined Is lavful and should be ap- proved by ua in polIolea end applioation forms), or vhether the scheme contravenes the provlalons of en$ oonatitution or statutory provialon or la oontrery t0 publPo pOli.ay OtherWIse In View Of~the COmBunIty Of Oi?n8rahlp, iPt8F88t, and OOntrOl (LB betVe8n the tV0 COlIlp.Sn188."

btiOl8 . 53, Vernon18 Annotated Civil Statutea, among other thlnga, prov50de8 in 8ff8Ot that no inducement t0 in8UranO8 ahalL b8 m&d8 U~~l88a ap8oified in th8 poliay or OOntreCt Of In- 8Ul"IXLO8. Apparently this requIr8ment ha8 been complied with by inaertbng into the tiSUIWlC8 pO11C3.88 Ol? COntr8cta the fOllOWIll p8regr8pht '

'This policy Is Iaaued in cOn8Id8ratIOn of the eppllcat1on therefor, a copy of which Ia attaahed hereto and made 8 part hereof, end of the p8gment in advane of the first premium of $ C8dpt ~Of #FhlCh is h8IWby 8Ck330v18dg8d~iOkh&%

Bonorable 0. P. Lo&hart, (W&man, Peg8 3

maintain this DO~IOP In for08 for the D8riOd termI- mating on the - kayof , i9 and' it Vi11 b8 Conm8d in for08 UpOn %h8 &8r pay- ment of $ on said date and bn the day OS every - thereafter until thmicy anni- versary nearest tie date on which the Insured at- tains the age of years or until the prior death of the iDaui%i%ie said first prcuuiumonly to be paid jointly bj, employer of the insured) end oor.poratlon)." h&V8 w808Z'8fully oonSId8red the St8t&ll8ntiOll8d in your letter and are of the opieion that the proposed plan of the Reserve Loan Life Inaumnae Campeny and the Ameriaan Liberty Oil Company does pot contravene any of these statutes. It la stated In Wuohla Cyalopedla of InauHnae Law, Vol. 3, pOg8 1962, thatc "Paynent of Insurance premIuma la not neceaaar- Ily the personal act of the 111aured, oonsequently, end as ageneral rule, anyonemaypeythe premIuma or 8aaeiraaientaon 911 Insurance polloy or benefit aor- tISIaat8, vlth the result that, if rooepted‘ the p8y- ment Is as valid as IS made by the Lnatand hizaaelf, and t&Is vhether the payment was voluntary, or pw- auant to request of,:or 8 contraat with, the person or persona responsible for such payment, this being 8sp8cl8llg true In the case of request or express contraot, provided, of aourae, that there are no ele- ments of vagering aufflclimt to avoid the aontraot of Insurance, or auoh payments are not prohibited by 8 statute, and are not made after the polloy he8 C8888d to b8 a valid and enforceabla OOntr8Ct. l + l m

With reference to the payment of premiums on Insureno poliolea, the general rule as Stated in Corpus Awls, Vol. 32, p. 1197, la 8a follovar

Honorable 0. P.,Lookbart, Ch&lramn, Page 4

"Premiums may be paid by insured or benefl- Oi8~, or by someone for him, even though the on8 so pay&g has no insurable Interest.'

App8r8ntly, under tbn general XWleS 8bOV8 mentioned, ' the payment of Insuranoe premiums aan be made by anyone vhere such payments are not prohibited by statute. Ue have failed to find any Texas Statute prohibiting auah payments.

In the 0888 of Thayer et al vs. Vathem et al, 44 S. W. 906, it is atat6dt

"Bec8ua8 the parties oolnpoaing both ocanpaniea are the same is no bar to their dealing with e8Oh other. All the law requires in ouch cases is that the timnaaatlon shall be free from fraud and exe- outed in good faith.'

This Ma 8 suit brought for the oon#truotion of a trust agreement, and to requlrq one of the trustees, to aoaept atook of the nebv company, and frenafer the franohlaea ehd property of the DaU.aa Rapid-Transit R8fiVay Coaqany to the nev aorp~ration oc- ganized by virtue of said trust agreeawnt.

In Fletcherta Cyolopeti Corporations Vol. 2, p. 1857, it i8 Stated8

llhenever 8 oorporatlon has psver to BaLs a oontract,It can aa&e It vlth anether oorporatlon aa veil 88 en Indlvldual. or partnership. Hovever, it has been held that oontraota between two oorp- orations, In order to bind either of them, atuat be vlthln the povera of both.

"If the right to oontraat exists, it is inma- terial if the same offiaers and. stockholders oontrol both contracting corporatlone; if there is no b8d faith.!'

Bovever, as v8 understand e question before us, v8 do not have % 8 oorporations contreating vith each the pPopO8ition of two aepa other vlth the same offioera and atookholdera. Apparently there

Honorable 0. P. Lockhart, Ch8irmanl Page 5

la no contraot whatsoever between the American Liberty Oil Com- pany and the Reserve Loan Life Inauranoe Comp8ny. The 011 aom- -jr Sl8l'8lJr 8gX'88S t0 p8y and .~ $oea pay a part of the pr8mIum on 811 polIcI8s of a certam aLaa*.

The question la raised vhether the Amerlaan Liberty Oil Company ha8 the leg81 pover and authority t0 perfolln the 8bOVe m8ntiOn8d act8 as adV8rtiSing for aald oompany. It 18 stated in Fl8tCh8r'S Cyclopedia on Corporations, Vol. 2, page 178'7r "A corporatlori may adopt any proper means of advertising its bualneaa or Its enterprise, lrnd make necessary contracts with the publishera of newspapers or others for auoh purpose."

It la further stated in the same volume on page 17881 '538 moat dlffioult of alI. questions relating to implied pqvera la whether, in a partlaular case, 8 corporetlon m8y rid 8 person or 8 firm or 8nother company when Its purpose Jn so doing la to lnoreaae its ovn busln888. ThIa queatlon'often arises in connection with donations by a oorporatlon to aid an enterprLa8, the auaceaa of vh5oh Vi= incre888 the business of the donating oorpor8tlon, In connea~ tlon with the power of the corporation to become a guarantor or 8 surety to help a person, Slnn or another corporation, where the efSeot'v111 be to en- able the corporation tc make a sale or obtain a steady customer or to Oth8IWiSe help its buainesa; and In various other phases. It moat frequently a+ rises in connection with the buaI.neaa of brewing c~anles, land companies, street oar oompanI8a and the 15.k8. All that can be said la that the olrcum- stances of the particular aaae largely control the question; that some oourts +re more liberal then others In allowing corporations to do acts which a level-headed business man, 8s an individual, would do to help his business; that the undoubted tandenay; Of th8 courts la in the direction of upholding such aota. .* + I .u

HOnOr8bl8 0. P. Loakhsrt, Chelnnan, Page 6

It is our opinion that the above mentioned plan Is not prohibited by law end that the Department of Inaura.noe may legally 8pprOV8 application and policy.fonna containing the above QUOtWd par8@'8ph.

Trusting that the foregoing fully enavers your Inquiry, we are Yours very.truly

A~alatsnt AWtej