Insurance - Title Insurance Guaranty Fund-Investment -Mortgages-Stock in Trade - Trading Capital. A title insurance company organized under the laws of this Commonwealth may not use as ordinary trading capital the guaranty fund which is required to be created and maintained by St. 1907, c. 576, § 64, providing that every such corporation shall set apart and in- . vest as a trust for the benefit of its policyholders not less than twofifths of its capital to be applied only to the payment of losses and expenses incurred by reason of the guaranty or insurance contracts of the corporation and may not use as stock in trade the mortgages in which such fund is invested. Nov. 21, 1913. Hon. FRANK H. HARDISON, Insurance Commissioner. DEAR SIR: You have requested my opinion upon the question whether a title insurance company organized under the laws of this Commonwealth may trade in the mortgages in which its guaranty fund is invested, for the purpose of obtaining capital to carry on its business. The guaranty fund of a domestic title insurance company is required to be created and maintained under St. 1907, c. 576, § 64, which provides as follows: Every such corporation shall set apart an amount not less than two fifths of its capital, and not less than one hundred thousand dollars in any case, as a guaranty fund, and shall invest it subject to the same limitations as are imposed upon the investment of the capital of domestic insurance companies, and shall issue no policy and make no contract of guaranty or insurance until such amount is so set apart and invested. The principal of such guaranty fund shall be a trust for the protection of policy holders, and shall be applied only to the payment of losses and expenses incurred by reason of the guaranty or insurance contracts of the corporation. Whenever the corporation shall increase its capital, two fifths or a sufficient part of the increase shall be set apart and duly invested and added to the guaranty fund so that such fund shall always be not less in amount than two fifths of the entire capital. If, by reason of losses or other cause, the guaranty fund is less than two fifths of the capital, the company shall make no further contract of guaranty or insurance until the fund is made good. Section 37 of the same chapter, regulating the investment of the capital of domestic insurance companies, provides in paragraph numbered 4 that the capital of such companies may be invested in loans upon improved and unincumbered real property in any State of the United States, provided that no loan on such property shall exceed 60 per cent. of its market value, and that fact shall be properly certified. According to the statement of facts contained in your letter the title insurance company in question has a guaranty fund of the amount required by law, which is invested in mortgages of $6,000 or less, and I infer from your letter and the oral statement accompanying it that the requirements of section 37 have been complied with, so that the investment is lawful in character. In my opinion the company may not properly use its guaranty fund for trading purposes. The language of section 64, above quoted, is clear and unequivocal in the expression of the legislative intent that the fund shall not be used as ordinary trading capital, and that the mortgages in which the fund is invested shall not be used as stock in trade. The statute provides that the company shall "set apart’ a certain fund for-guaranty purposes, thus segregating it from its active funds. It provides that the fund shall be "invested " subject to certain limitations, implying a permanency of investment inconsistent with speculative and active trading. It provides that "the principal of such guaranty fund shall be a trust for the protection of policy holders," and limits the application of the fund to the payment of losses and expenses incurred by reason of the guaranty or insurance contracts of the corporation, and it carefully guards the integrity of the fund. The corporation is, of course, not to be considered as prevented by these provisions from making such changes in the mortgages in which the guaranty fund is invested as the interests of the beneficiaries of that fund may require. It is not only authorized but is required by these provisions to make changes in the investment if it is necessary to do so to prevent impairment of the security afforded by the fund. The essential point is that the statute requires that this fund shall be set apart as a trust fund for purposes of protection, and that it shall be administered in accordance with the character given it by the statute and not as active trading capital. See 1 Op. Atty.-Gen. 41. Very truly yours, JAMES M. SWIFT, Attorney-General. INDEX TO OPINIONS. PAGE Automobiles, negligence of chauffeur in employment of Commonwealth, Railroad corporation, compliance with requirements of law, prelimi- 103 44 84 96 32 Canal company, distribution of tax assessed upon, 80 Cold-storage eggs sold at retail upon order in marked container, 95 73 Commonwealth Pier, cancellation of lease to Old Colony Railroad Com- 11 pany, Constitutional law, confirmation of appointment of administrative or ex- district to voters, . Exercise of police power in fixing hours of labor, Grant to private individuals of right to control area between high Regulation by cities and towns of width and grade of private ways, 15 Sale of fruit, vegetables and nuts at retail by dry measure, 27 Deeds, mortgages and other instruments, minimum charge for recording, Unfit for food, construction of statute prohibiting sale of, Employee of street or elevated railway company, hours of labor, 54 Express matter and freight, street railways as common carriers of; local 44 Fee, for transcript of birth certificate in connection with employment of Minimum charge by register of deeds for recording instruments, tional law, 47 PAGE Fruit, vegetables and nuts, constitutionality of restriction of sale of, at retail, . 27 84 Gas or electric light meters as weighing and measuring devices for hire or . Health, State Board of, approval of regulation of sale of milk as article of Exercise of police power in fixing; constitutional law, Insane hospital, authority of trustees to limit number of patients, Insanity, State Board of, appointment of agent to fill new position; appropriation, Insurance, determination of indebtedness of Massachusetts Employees Guaranty fund of title insurance company as trading capital, Life and disability, separate and distinct policies, benefits conditioned Intoxicating liquors; sixth-class license, breach of conditions of, convic- Judicial district, act creating, submission of, to voters, constitutional law, Lease of Commonwealth Pier to Old Colony Railroad Company; cancellation, 11 License, sixth-class, conviction of unlawful sale of intoxicating liquor by clerk of licensee; forfeiture, 59 To run steam boiler or engine or stationary locomotive, Loan by trust company to single individual, 19 8 Locomotive, stationary, license to run steam boiler or engine of, Massachusetts Employees Insurance Association, determination of indebtedness for outstanding losses, 19 29 Massachusetts Highway Commission, approval of local regulations of traffic, 7 Mollusks, cultivation of, grant of flats between high and low water mark; eminent domain, Negligence of chauffeur in employment of Commonwealth, personal liability of members of boards or commissions for, Pharmacy law, business of pharmacy conducted by dry goods and mercantile corporations by lease of floor space to registered pharmacist, Police power, exercise of, in fixing hours of labor, Railroad corporation, compliance with requirements of law preliminary Reform school, juvenile, solitary confinement of inmate of, PAGE Regulation of sale of milk by boards of health; approval by State Board of Health as an article of food, 96 Of traffic, local, approved by Massachusetts Highway Commission, when, Of width and grade of private ways by cities and towns; constitu- Savings department of a trust company, loan to single individual, fee for transcript of birth certificate, Solitary confinement of inmate of juvenile reform school, Statute, establishing limit of time for holding articles of food in cold storage; perspective in effect, 1 57 54 Prohibiting the sale of eggs unfit for food, construction of, ployees of; police power, Street railways as common carriers of express matter and freight; regulations and restrictions, Supreme Judicial Court, confirmation of appointment of administrative or executive officer by; constitutional law, Taxation of domestic business corporation, distribution of tax of canal company, The Essex Company, distribution of tax assessed upon, Trust company, loan to single individual, Traffic, regulation of, by cities and towns, approval by Massachusetts Trustees of insane hospitals, authority to limit number of patients, Veteran in the service of the Commonwealth, retirement, elective officer, 53 84 Weymouth Back River, "cost and expenses" incidental to construction of bridge over; apportionment, 62 |