Hon. William A, Harrison Opinion No. WW-490 State Board of Insurance 10th and Brazes Street6 Re: Applicability of Texas BusiAustin,Texas ness Corporation Act or other generalcorporate

laws to Dear Sir: insurance companies

You have asked our opinionas to whetherthe Texas Business Corporation

Act1 is applicable to insurance

companies

comingwithin the purviewof Articles 2.18 and 3.69 of the Insurance Code or whether Title 32, V.C.S., is applicable or whetherboth are applicable. We
assume that your questionis directed to only those insurance companies that are corporations and this opinion Is so limited.

Article 2.18 of the Insurance Code provides:

"The laws governing corporations

in generalshall apply to and govern insurance companies

incorporated

in this State in so far as the same are not inconsistent wi:h any provision of this Code. None of the provisions of this Chapter 2 shall apply to insurance companies

organized

or operating under the provisions of Chapter 3 or Chapter 11 of this Code, and Chapters10, 12, 13, or 14 of this Code."

Article 3.69 of the Insurance Code provides:

"The laws governing corporations

in generalshall apply to and govern insurance companies

organized

or operating

under this Chapter 3 in so far as same are not inconsistent with the provisions of this chapter."

By letter supplementing the opinionrequest, you have furnished us with the factual situations upon which this request is based. For clarity

and brevity,

we have set out at lengththese situations in subsequent

portions

of the opinioncaptioned"application".

Article 2.18 in its present form and Article3.69 were enacted in 1955 as part of S.B. 12, Acts 54th Leg., R.S. 1955, ch. 363, p. 916. Article 3.69 is an entirely new legislation;

however,

Article

1 For brevity's

sake the Texas Business Corporation

Act will be abbreviated throughout

this opinion

as T.B.C.A.Eon. WilliamA. garrison, page 2 (WW-490)

2.18 containssubstantially the same languageit did in the 1951 Act codifying

the insurance

laws. The only change was the additionof the last sentence

to Article2.18. "Wordsused in the original Act will be presumed

to be used in the same sense in the amendment." 82 C.J.S. 899, Statutes,

para. 384. Accordingly, the corporate

law contemplated and referred

to by Article2.18 prior to the enactment of SenateBill 12 and the Business Corporation

Act in 1955 must necessarily be the generalcorporate

law as it existed

prior to the enactment of the T.B. C.A .--i.e.,

Title 32, V.C.S. There is nothing in S.B. 12 to indicate that the language,

lllaws governing

corporations

in general",

as it appears in Article 3.69 was intended to refer to a body of law differing from that referred

to in the identical language

as it appears In Article 2.18 as amended by S.B. 12. Therefore, unless the enactment of the Business

Corporation

Act changesor modifies the situation,

the body of corporate

law referred

to in Article 3.69 as well as Article 2.18 must be the corporate law existing

prior to the enactment of the Business

Corporation

Act.

The Business

Corporation

Act does, however, modify the application of Article2.18 and Article 3.69.

While both the Business Corporation

Act and S.B. 12 became effective

on the same date--i.e., ninety days from adjournment by the Legislature,

the legislative

history is significant. The Business Corporation

Act was finally

passed on March 29, 1955, a day subsequent to the initialSenate passageof S.B. 12. The Business Corporation Act was signed

by the Governor

on April 15th while S.B. I.2 was first passed by the House on Way 4, 1955. Thus, at the time of the passage of S.B. 12 the Legislature knew of and had recently passedan Act which
was to apply to domestic corporations

organized

or to foreigncorporations being admitted intoTexas after its effective date. Presumably, both statutes

were actuated

by the same legislative policyand intent. They pertainto the same subject matter insofar

as Articles2.18 and 3.69 are concerned

and are thereforein par1 materia. Accordingly, they should

be construed

together.
Admittedly,

there are limitations upon the applicability of the Business

Corporation

Act to insurance

companies

by the terms of the Act itself. Article2.OlB (4) in effectprevents any insurance company from:

(1) Adopting

the Business

Corporation

Act.
(2) Organizing

under the Business Corporation

Act.
(3) Obtaining

authority

to transact

businessin this State in accordance

with the procedure prescribed

by the T.B.C.A. (This obviously has reference

to foreign corporations.),. --

... . \ ~.~_ -.

i

_ -

Hon. WilliamA. Harrison, page 3 (WW-490)

Article 2.Ol.B

(4) does not preclude by its terms the applicability

of the T.B.C.A. to insurance companiesin those cases in which the Insurance

Code is silent,

but merely prevents an insurance

company from doing one of the three acts mentioned. Since the Insurance Code provides

methods for organization of domesticinsurance companies,

the provisions

of the Insurance

Code would controlthe procedure for organization of a domesticinsurance company;

and sinceunderArticles2.18 and 3.69 of the Insurance Code the general corporate law controls

only when "not inconsistent" with the Insurance Code, the provisions of Articles 2.18 and 3.69 preclude domesticinsurance

corporations

from organizing

under the generalcorporate law, whetherthat law is found in the Business

Corporation

Act or in Title 32, V.C.S. In like manner, foreign insurance

companies

obtaintheir certificate of authority

to transact

business in this State in accordance with the procedures set out in the Insurance Code ratherthan the procedures set out in the general corporate

law. Thus, in the absenceof the limitations (2) and (3) described

above, a domestic

corporation

couldnot have organized under the Business Corporation

Act nor coulda foreigncorporation obtain a certificate of authority

to do business in this Stateunder the Business

Corporation

Act. Therefore,

these two (2) limitations
are not determinative of the question

asked. The effect of adopting the Business

Corporation

Act is that after the adoption, all provisions of the Business

Corporation

Act apply. (Article g.lkC (4), T.B.C.A.) Such a result

when appliedto an insurance company

would clearly

be wholly inconsistent with the regulatory schemeof the Insurance Code. Likewise,

this limitation

is not determinative of the question.

Article 9.14A,T.B.C.A., provides:

"Art. 9.14. To What Corporations This Act Applies; Procedure

for Adoptionof Act by Existing Corporations.

"A. This Act does not apply to corporationsorganized for the purposeof operating banks, trust companies, building

and loan associations or companies,

insurance companies

of every type or character that operate

under insurance

laws of this Stateand corporate attorneys

in fact for reciprocal or interinsurance

xchanges,

railroad companies,

cemetery

companies,

cooperatives

or limited cooperative

associations,

labor unions,or abstract. and title insurance companies

whose purposes

are provided for and powers are prescribed by Chapter 9 of the Insurante Code of this State,nor to corporations organized for the purposeof operating nonprofitinstitutions,including

but not limitedto those devotedto charitable, benevolent,

religious,

patriotic,

civic, cultural,

missionary,

educational,

scientific,

social,fraternal, athletic,

or aesthetic

purposes;

provided,

however,

that if any of said exceptedcorporations are hereafter

organized under specialstatutes which contain

no provisions‘I li I

.
Hon. WilliamA. Rarrison, page 4 (WW-490)

in regard to some of the matters provided

for in this Act,
or if such specialetatutes specifically

provide

that the general laws for incorporation shall supplement

the provisions of such statutes, then the provisions of this Act shall apply to the extentthat they are not inconsistent with the provisions of such specialstatutes." (Emphasis added.)

Observethat the corporations excepted

by the generallanguage set forth in Articleg.lkA,T.B.C.A., from the general

applicability of the BusinessCorporation Act may, nevertheless, have it supplement and apply to them under the following conditions:
(1) When the corporation is "hereafter

organized".

(2) Under a specialstatute.
(3) Containing

A. No provisions

in regardto somematters provided in the Business

Corporation

Act.

B. Or containing

a specific

provision

that the general laws for incorporations hall supplement

provisionsof such statute. Obviously,

the insurance

companies

referred

to in Articles 2.18 and 3.69 meet the third condition. While the term "special"statute sometimes

refersto acts which regulate the rightsor interests of a particular

or designated

personor which relateto a particular person or thing of a class as distinguished from en act which applies uniformly

throughout

a class (39 Tex.Jur.29, Stats.,Sec. 12), it is also frequently

appliedto statutes such as the Insurance Code that pertain to a limited or subclass

of personsor things or corporations. (Thiswas the sense in which the term, specialstatute, was used in the following

cases: Flowers

v. Pecos River Company, 138 Tex. 18, 156 S.W.2d 260 (lgkl),

and casesthereincited,Townsend v. Terrell,

118 Tex. 463, 16 S.W.2d 1063 (Comm.App. 1929, opinion

adopted),

Cole v. State, 106 Tex. 472, 170 S.W. 1036 (1941)) From the reading of the statute,it can be seen that all of the excepted corporations

are governed by statutes

that are "special"

in the latter sense. Accordingly, the term "special" statute

as used in Article 9.14,T.B.C.A., must be used in the same sense so that insurance companies

organized

after the effective

date of the Business Corporation

Act wouldbe a corporation "hereafter

organized

under special

statutes".

It can therefore

be concluded

that insurance

companies

coming within the purviewof Articles 2.18 and 3.69 of the Insurance Code and organized

under the Insurance Code after the effective date of theHon. William A. Harrison,

page 5 (WW-490)

Business

Corporation

Act also fall within the proviso to the general exceptionset forth in Article 9.14A,T.B.C.A.; thus, the Business Corporation

Act when not inconsistent with the applicable portions

of the Insurance

Code governs such of the insurance companies

contemplated by Articles2.18 and 2.69 as are incorporated after the effective date of the Business

Corporation

Act.

Does the BusinessCorporation Act in like manuer apply to' similar foreign insurance companiesinitially admitted

to Texas after the effective

date of the Business Corporation

Act?

Can a foreign insurance companyadmitted

to do business in Texas come within the purview of Articles 2.18 or 3.69 of the Insurance Code?

Article 21.43 of the Insurance Code states:

"The provisions

of this code are conditions upon which foreign insurance

corporations

shallbe permitted

to do business

within this State, and any such foreigncorporation engaged in issuingcontracts or policies

within this State shall

be held to have assented theretoas a condition precedent

to its right to engage in such business within this State."

This article governsall foreign insurance companies

except those exceptedfrom the provisions of Chapter21 by Article 21.41 of the Insurance

Code. This article was originally

enacted in 1903 as Article 3096ee (Acts 1903, p. 94). At that time it specified:

"That the provisions of this act as well as all the terms and provisions of chaRters

1, 2, and 3 of Title 58 of the Revised Civil Statutesof Texas are conditionsupon which foreign insurance corporations

shallbe permitted to do business

within this State, and any such foreign corporation

engaged in issuingcontracts for policies

within this State shallbe held to have assented theretoas a condition

precedent

to its right to engage in such business within this State." (Emphasis added.)

At that time Title 58, Article 3046, provided:

"The laws relatingto and governing corporations

in general shall apply to end govern insurance companies

incorporated

in this state insofar as the same are'not inconsistent

with any provision of this code."
Thus, the part of the 1903 Act which becameArticle 21.43 of the Insurance

Code made Article 3046, R.C.S. 1895,which becameHon. William A. Harrison,

page 6 (WU-490)

Y Article 2.18 of the Insurance Code, applicable

to foreigninsurance companies

admitted

to do business in Texas as well as to domesticinsurancecompanies. Therefore, Article2.18 would apply to foreign insurancecompanies

admitted

to do businessin Texas exceptthose organized or operating

under Chapters3, 10, 11, 12, 13, or 14 of the Insurance Code. Article3.69 expresses the samebasic legislative intentand effects the same resultas Article 2.18, insofar as Chapter3 insurance companies

are concerned. This IS especially emphasized

by the close identity

of language

of the two articles, both of which are enacted in 1955 as part of S.B. 12. Furthermore, Article 3.69 appliesto "insurancecompanies

organized

or operating

under this Chapter3", By adding in Article3.69 the term "operating", which does not appear in Article 2.18, the Legislature evidenced

and emphasized

its intentthat
a foreigoChapter3 insurancecompany would fall within the purview of Article 3.69 so that the generalcorporate laws would apply and govern when not inconsistent with the Insurance Code.
Having concluded

that foreigninsurance companies

can fall within the purviewof Articles 2.18 and 3.69, it remains then to determine

whetherthe BusinessCorporation Act applies

to foreignas it does to domestic

insurance

corporations.

We recognize

that the proviso to the general exclusorylanguage in Article

g.lkA,T.B.C.A.,

uses the term "hereafter organized"

and that at first blush this would seem to limit the provisoto domesticcorporations. Nevertheless,

there
are other circumstances that dictate

a different

result.
Basically,

it is a question

of whethera foreign insurance corporation

is going to be treated in the same mannerand subject to the same limitations and affordedthe same rightsand powers as a domestic insurance

corporation

similarly

situated. There is nothing in Article 2.18 or Article 3.69 of the Insurance Code nor in S.B. 12 which would evidence

a legislative

intentor justify

a construction

which would result.in

a differentstandard being applied

to foreigncorporations than domestic. Likewise, Article21.43 of the Insurance Code evidences

the legislative

intent that foreign and domestic

corporations should standon the same footingand be governed by the same laws. Article 1532,

V.C.S.,and Article 8.02,T.B.C.A., likewise

providethat foreigncorporations which obtaina certificate of authority

pursuant to either

Article 1529,V.C.S., or Chapter8, T.B.C.A., shall stand
on the same footing and shall have the same rights and responsibilities
as a domestic

corporation. (Fundamentally, of course,

the powers of
a foreigncorporation are further limited by their charter

provisions and by the law of the jurisdiction in which they are incorporated. 17 Fletcher

Cyclopedia

of Corporations,

para. 8317,p. 80, et seq.) These statutes

relateto the same subject matter and are in pari materia and should

therefore

be construed

together. 82 C.J.S. 801, Stats., para. 366. Construing these statutes

in that manner,

a legislative intent is manifest

that a forelm insurance corporation

coming within the purview

of Articles 2.18 or 3.69 of the Insurance Code is limitedHon. WilliamA. Harrison, page 7 (WW-490)

by the same body of laws as would a domesticinsurance corporation similarly

situated. Although a foreign corporation does not obtain its certificate

of authority

under Title 32, V.C.S.,or under the Business Corporation

Act so that it would fall squarely within the purviewof Article 8.02, T.B.C.A., or Article 1532,V.C.S.,there is at least one case which would effectthe same result in the absence of any statute. In the opinionof Lytlev. Custead, 23 S.W. 45 (Tex.Civ.App. 1893), the Court stated:

"Then there

was no law regulating foreign

corporations in Texas at the time the accountwas nade, and, such being the case, the SierraBlancaMining and Smelting Company

being regularly

incorporated

under the laws of a sister state, the comityexisting between sovereign

states would place the corporation

on an equal footingwith those of this state." ~Emphasissupplied.)
Thus, as to such a foreigo corporation admitted

to Texas after the effective

date of the Business Corporation

Act, the Business

CorporationAct would supplement the Insurance

Code provisions;

and as to such a forei@ corporation admittedto Texas p&~r to the effective date of the Business Corporation

Act, the generalcorporate laws found in Title 32, V.C.S., and elsewhere

would supplement

the Insurance

Code.

Thus far,we have not commented on the applicability of the BusinessCorporation Act to domestic insurance companies

incorporated prior to and for-i@ insurance companies

admitted

prior to the effective date of the Business Corporation

Act. As to these companies we conclude

that the Business

Corporation

Act presently

cannotand does not supplement

the Insurance

Code; accordingly, as to these companies at present,

the general

corporation

statutessuch as those set out in Title 32, V.C.S.,applyand supplement the Insurance

Code. As previouslypointedout on page 2 of this opinion, Articles

2.18 and 3.69 of the Insurance

Code refer to the corporate law as found in Title 32, V.C.S., except insofar as the BusinessCorporation Act modifies

that effect. Generally, Articleg.lkA, T.B.C.A.,excludes from application of the Business

Corporation

Act insurance

companies

subject

to the provision above discussed.This proviso cannotapply to domesticinsurance corporations

organized

p&or to the Business Corporation

Act or to foreign insurance companies

admittedto do businessiti Texas prior to the Business

ConorationAct, for the provisoonly appliesto corporations "hereafter organized". Furthermore, Article9.15A,

T.B.C.A., expresslystates: '.

. . e&sting coroorations shall continue

to be governed

by the laws heretofore applicable

thereto."

Because

of the expressprohibition of Article2.OlB (k)(d) insurance

companies

cannotadopt the Texas Business Corporation

Act. Thus, 'it

does not now apply to domesticand foreigninsurance companies which were operating in Texas on the effective date of the Business Corporation

Act.Eon. WilliamA. Earrison, page 8 (WW-490)

"APPLICATIONS"

In your supplementary letteryou point out that the Insurance Code is silentas to problems presented

in the following

fact situations:

I. (1) A domestic life insurance

company

organized

under Chapter 3 of the Texas Insurance Code in 1940 whichwishes to change its name and desiresto file an application with the StateBoard of Insurance

to reservea particular name for a short

periodof time is not authorized

to utilize the procedure set out.

In Article2.06A (Z), T.B.C.A., for the reason that the BusinessCorporation Act does not apply at present to such corporation so as to supplement the provisions of the Insurance

Code. (2) A domesticstock life insurance company organized

under Chapter 3 of the Texas Insurance Code in 1958 which wishes to change its name and desires to avail itself

of the procedures set out in Article 2.06 of the T.B.C.A. may do so in order to reserve the proposed

name.

II. (1) The XYZ fire insurance company,

a Chapter6 fire and marine companyorganized in 1951, may voluntari~lydi~sol_v_e without obtaining

unanimousconsentof its stockholders by following

the pro-- cedure set out in Title 33, V.C.S.,and particularly that set out in Article 1387, V.C.S. The Business Corporation

Act does not now apply to such a company. (2) A generalcasualty company

organized

under the provisions

of Chapter 8 of the Insurance Code in 1957 may voluntarily dissolve

without the unanimous consent

of its stockholders in accordance

with the procedure set out in Chapter

6 of the Business Corporation

Act.

III. (1) A foreignstock life insurance company

which if it had a certificate of authority

would be operating

under the provisions of Chapter 3 of the Insurance Code and which desires to register its name as provided by Article2.07, T.B.C.A., may do 80 by following the procedure6

in Articles 2.06 and 2.07 of the Business Corporation Act. (2) A foreigngeneralcasualty company

which if it had a certificateof authority would be subjectto Chapter 8 and Chapter2 of the Insurance

Code and which desiresto regis its @me as provided by Article 2.07 of the Business Corporation

Act may do so by following the procedures

set out in Articles 2.06 and 2.07 of the BusinessCorporation

Act.

IV. (1) A foreignstock life insurance company

having a certificate

of authority

snd.operating

under the provisions of Chapter 3 of the Insurance Code which desiresto changeits cove and to utilize the procedure established

by Article2.06,

T.B.C.A.,and which was first admitted to do business in Texas in 1953 and has been continuously

operating

In this State since that time may not follow the procedures

set out in the Business Corporation

Act. The Business Corporation

Act does not now apply to such a corporation. (2) AEon. WilliamA. Harrison, page 9 (UW-490)

foreign fire and marine insurance companyoperating

under the provisions of Chapter 6 which was first admitted to do businessin Texas in 1948 and which has been continuously doing businesssince that date In Texas cannot utilize

the proceduresset out in the Bus,iness Corporation

Act inchanging its name. The Business Corporation

Act does not now apply to such corporations.

It goes without sayingthat the functions performed

by the Secretary

of State under the generalcorporate laws--the

Business

Corporation

Act or the provisions of Title 32, V.C.S.,--would, as to lnsurance corporations, be performed

by the Department

of Insurance.

The tenor of your next questionis whetheran insurancecompany must adopt the Texas Business Corporation

Act before it is applicable to the company. As we have previously stated,

an insurance

company cannotadopt the Texas Business Corporation

Act. The Business Corporation

Act does, however, apply to certaininsurance companies by virtue of the proviso to the general exceptions

set out In Article 9.1&A, T.B.C.A. Therefore, we answeryour secondquestionin the negative.
Questions 3, 4, and 5 will not be answeredsince they are predicated

upon our answering questions

1 and 2 in a different manner.
Since title insurance companies

are subject

to a special

Act (Acts 55th Leg.,R.S. 1957, p. 753, ch. 311) with respect to the Texas Business

Corporation

Act, we are excluding them from the scope of this opinion. We are not passing upon the applicability of anythingstated in this opinion

to title insurance companies.

We have not been askedwhether the statutesset out Fn Title 32 will continue

to apply after five years from the effective date of the Business

Corporation

Act to foreip and domesticInsurance companies within the purviewof Articles 2.18 and 3.69 of the Insurance Code which
were incorporated

under Texas laws or admitted to Texas prior to the effective

date of the Business Corporation

Act. The question 16 most difficult

to resolveand the law is very unsettled and confusing. This is perhaps

not a proper subjectfor an opinion since the Legislature 'isyet to meet and the question couldbe resolved

by the enactment

of additional

legislation

which would become effective prior to September 6, 1960 (fiveyears from the effective date of T.B.C.A.). Accordingly, you are advised

that this opinion

does not pass on that question.Eon. WilliamA. Harrison, page 10 (HW-490)

The Texas Business Corporation

Act Is the law "governing

corporations

in general" referred

to in Articles2.18 and 3.69 insofar as domesticInsurance corporations organized

after and forelgu insurancecorporations

admitted

to Texas after the effective

date of the Busiuess Corporation Act provided

that such insurancecorporations came within the purviewof Articles 2.18 and 3.69 of the Insurance Code. This resultsalthough

the insurance

corporation has not "adopted"

the Busiuess

Corporation Act. As to all other insurancecorporations falllug

withiu the purviewof Articles 2.18 and 3.69, the BusinessCorporation Act does not now apply and the "laws goveruFng

corporati;;;;s

in general"

are those found in Title 32, V.C.S.,and elsewhere other than in the BusinessCorporation Act.
Very truly yours,

WILL WILSON Attorney

General

of Texas 

# By /dbd ’ d+N

WallaceP. Finfrock Assistant

hTF:lm

APPROVED:

OPINIONCOMMITTEE:

Gee. P. Blackburn, Chairman

Lawrence

Jones Henry G. Braswell J. Milton Richardson

REVIEWEDFOR TBE ATTORNEY GENERAL BY: W. V. Geppert