Untitled Texas Attorney General Opinion

Han; Walter C. Woodward Opinion No. -0-1788 Chairman of the aboard .Rer Is Article 1302a of the Hon. R.G. Waters “Title Guaranty Law” applicable to Casualty Ins. Commissioner an extension agreement with regard Board of Insurance Com- to a policy which had been issued missioners before the enactment of the said Austin, Texas “Title Guaranty Act”.

Dear Sirs:

Your letter requesting an opinion has been received and considered by this department.

As a necessary preliminary to a correct understanding of the question presented we quote’ as follows from your request: 11 * * *

“The’~Pioneer Abstract and Guarantee Title Company is a corporation organized in’ 1919 under Sec. 57 of Article 1302, Revised Civil Statutes, 1925, and has neverbeen au- thorized to write title insurance under Article 1302a. Prior to the passage of the title act, mortgagee policies were issued containing the following provision:

“I* * * Payment, discharge or satisfaction of the said indebtedness secured by the said instruments, except by foreclosure or the extension of said indebtedness or any part thereof without the consent of the company shall fully terminate, avoid and annul this policy and all liability of the company hereunder. ’

IWe request your opinion on the following questions:

“1. Is the Pioneer Abstract and Guarantee Title Com- pany acting in violation of Article 1302a, Section 3, in offering to extend policy Re:2871, issued prior to the pass- age of the title act to cover refinancing of loan, (a) if period of extension does not exceed the original maturity of the pOliCyj (b) if policy is extended for period extend- ing beyond the original maturity date?

"2. If the Pioneer Abstract and Guarantee Title Com- pany is within its rights.in extending policy to cover re- financing, is company acting in violation of Section 3,

Hon. Walter C.- Woodward Ron. R. G. Waters, page 2 (O-1788)

Article 1302a in charging a fee?

“3. Is it required that fee for such extension be calculated on schedule of premiums promulgated by the Board of Insurance Commissioners now in effect?

“4. Does the Board of Insurance Commissioners have au- thority under Section 24, Article 1302a, to prohibit such practice, and what procedure should be followed?” . The kct under consideration is commonly known as the Texas “Title Guaranty Law”, being Chaptes 40, p. 77, Acts 1929, Forty-first Legislature (R.S.) and codified as Article .1302a in Vernon’s tinotated Revised- Civil Statutes. The Act, after making provision for incorporation under the terms thereof, pro- vides, insofar as applicable here, in Section 3 as follows:

“Corporations so formed as well as foreign Corpora- tions.and those created under Subdivision 57, aticle 1302 of the Revised Statutes of 1925, or under Chapter 18, Title 78, Revised Statutes of 1925, or any other law insofar as the business of either may be a title insurance business! shall ooerate in Texas under the control and supervision and under such uniform rules and regulations as to forms of policies and underwriting contracts and premiums there- for, as may be from time to time prescribed by the Board of Insurance Commissioners of Texas; and no Texas or for- eign corporation whether incorporated under this Act or any other law of the State of Texas shall be permitted to issue any title policy or mortgage certificate or under- writing contract on Texas property other than under this Act and under such rules and regulations. No policy of title insurance or guarantee of any character on Texas titles shall be issued or valid unless written by a corpor- ation complying with all provisions of and authorized or qualified under this Act. ***

“The Board of Insuranck~~Commissioners shall have the right- and it shall be its duty to fix and promulgate the rates to be charged by corporations created or operating hereunder for premiums on policies or certificates and un- derwriting contracts. ***II

The pertinent port& of Section 20 of said Act is as follows:

“If any corporation. domestic or foreign, while hold- ing a-certificate of authority to transact business in this State, shall fail or refuse to comply with any of the provisions or requirements of this Act, the Board of

Hon. Walter C. Woodward Hon. R. G. Waters, page 3 (O-1788)

Insurance Commissioners, upon ascertaining this fact, shall notify such company .by actual notice in writing delivered to an executive officer of such company, of his intention to revoke Its certificate of authority to transact business in this State at the expiration of thirty days af-;er the mailing of such registered letter, or the date upon whi,ch such actual notice is served. If such provisions or require- ments are not fully complied with upon the expiration of said thirty’days, it shall beg then duty of said Board to re- voke the certificate of authority of such com*)any. ***‘I

Further, Section 24 of the Act provides that:

liThe terms and provisions of this kct are cond:tions upon which corporations doin g the business provided fcr herein may continue to exist, and failure to comply with any of them or a violation of any of the terms of this Act shall be proper cause for revocation of the permit and for- feiture of charter of a domestic corporation or the permit of a foreign corporation.tl

The rules and regulations announced by thi.s Act became effective on June 1, 1931.

We also consider the ~follow~ing constitutional and stat- utory provisions germane to a proper consideration of your ques- tion. Art.‘l2, Sec. 1. “No private corporations shsll be created except by general laws.”

,Art. 12, section 2. “General laws shall be enacted pro- viding forthe creation of private corporations, and shall therein provide fully for the ad.equate protection of the public, and of the individual stockholders.”

As necessary to his opinion, we also quote Article 1318, R.C.S., 1925: “1111 charters or amendments to charters under the pro- visions of this chapter, shall be subject to the power of the Legislature to alter, reform or amend the same.”

The rule of law applicable to the situation now con- fronting us,. in our opinion, is correctly stated in 17 R.C.L. 476, 477, section 5 as follows: n . . ..Following -the general principle that a license is not a-contract, it is clear that it does not in itself cre- ate zany vested right, or permanent right, and that free latitude is reserved by’the Legislature to impose new or

Hon. Walter C. Woodward Hon. R. G. Waters, page 4 (O-1788)

additional burdens on the licensee, OCRto alter the li- cerise, or to revoke and annul it. And this is the general rule . . ..regardless of whether the term for which the li- cense was given has expired. .~. .I’ To the same effect, see also Daniel v. Tyrrell & Garth Investment Company, 127 Tex. 213, 93 SW 2nd 372, Jefferson County Title Guaranty Co. v. Tar ver , 119 Tex. 410 29 SW 2nd 316, Shaw v. Lone Star Bldg. & Loan Association 123 Tex. 373 71 SW 2nd 863, Lloyds of Texas v. Bobbitt (6.C.A.) 40 SW &d 897.

The Supreme Court of Texas speaking in the case of Daniel v. Tyrrell & Garth Investment Company, supra, which in- volved the construction of .Article 1302a (supra) said:

“Every corporate charter issued by this State is issued with the power reserved in the state to ‘alter, reform or amend I it. Citing Article 1318, supra,~and commenting that the power reserved in the state to ‘alter, reform or amend’ charters cannot be contracted away by the corporation.”

Continuing with its decision, the court said:

“It is contended by (the plaintiff) that the rules and regulations promulgated by the board, by authority of a law which became effective after the contract between it and the title company was entered into, cannot be applied so as to affect such previous contract. We overrule this contention. The police power of the state to regulate the business of title insurance, as to forms of contracts and rates, cannot be contracted away by the title company.ll Citing Shaw v. Lone Star Bldg. & Loan Association, 123 Tex, 373, 71 SW 2nd 863. (Parenthetical insertion ours).

An extension of an interest bearing agreement is a valid contract. .See 1 Williston on Contracts, Section 122 (Revised Edi- tion). Also, the case of Benson v. Phipps, 87 Texas 578, by Gaines, C. J.

Here, you are respectfully advised that under the au- thorities cited above, it is our’opinion, that all private corpor- ations, chartered by this State, assuming to write title insurance must comply with the provisions of Article 1302a, V.A.C.S. In entering into all title insurance contracts, a corporation must take cognizance of, and act according to, all those rules and regulations which are, and may be, prescribed by the Board of In- surance Commissioners pursuant to that authority vested in them by the terms of the Act. Such compliance is in the nature of a condition precedent to the validity of any title insurance agree- ment which said corporation might enter into. This is applicable

Hon. Walter C. wooaward Hon. R. G. Waters. oage 5 (O-1788)

to all contracts, pertaining to title insurance, bearing a date subsequent to that date which marked the effectiveness of the “Title Guaranty Act”. The mere fact that a contract. is an extension agreement will not afford grounds for any pos- sible exemption from the plain and unambiguous provisions of that Act.

We believe that the answers to your Nos. 1, 2 and 3 questions are apparent from the foregoing and require no fur- ther elucidation. In reply to your fourth question, we direct your attention to sections 20 and 24 of Article 1302a, which, for your convenience, are set out herein,

Trusting that the foregoing satisfactorily answers your questions, we remain

Yours very truly

4TTORNEYGENERALOF TEXAS

By /s/ Wm. J. Fanning Wm. J. Fanning, Assistant

By /s/ Grundy Wiiliams Grundy Williams

GW:AW:wb

APPROVEDFEB 2, 1940 /s/ Gerald C. Mann ATTORNEYGEZURAL OF TEXAS

APPROVED: ;zNIO$$OM$TEE BY: 9