Tam ATTWENSY GENERAL OF TEXAS

Honorable Jesse James State Treasurer of Texas December 20, 1963

Capitol Statlon Austin,Texas 78711 OpinionNo. C-200
Re: Questions relating to the effect ofArticle 4.08, Texas Insurance Code
DearMr. James: You have requested the opinion of this office 'regarding Senate Bill 337,Acts 58th.Legislature,Regular Session 1963, chapter 333, page 865, which has been codified as Article 4.08 of the Texas Insurance Code. The questions which you ask are as follows: "1
. Do the provisions of Section 13, Art. 4.08~Texas Insurance Code, referred to above, exempt life insurance companieswhich do business in Texas from the filing of reports requiredby Article 3272a, R.C.S. for the period between January 6, 1962 and August 23, 1963?

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**.** If your answer to questionNo. 1 is affirmative, will the provisions of said Art. 4.08 Insurance Code, nullify the reports that have been made ,tothis officeby life insurance companiesbetween January 6, 1962landAugust 23, 1963,under the provisions of Article 3272a, R.C.S., even though Art. 4.08 Texas Insurance Code was not effective until August 23, 1963? "3. Do the provisions of said **Art.** 4.08 Texas Insurance Code, exempt life Insurance companies from filing future reportsunder the provision of **Article** 3272a, on all property contemplatedby Article 3272a, or only on such property

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that is defined in Section 3, **Art.** 4.08 Texas Insurance Code? "4
. Under the provisionsof Art. 4.08, I'exasInsurance Code,are all insurance companies, includingTexas Chartered companies, required to report onunclaimed funds as defined~in Section 3, only if, according to the records of the company, the last known address of the person entitled to such funds is within this State? “5. Do the provisions ofArt. 4.08 Texas'Insurance Code cover 'unclaimedfunds' as defined therein and~held by life insurance'companies,on which there is no gecord of an address?" Under the provisions of Section 1 of Article 3272a, Vernon's Civil Statutes, every person holding property subject to escheatupon the effectivedate of such Article tiasrequired to file a report thereofwithin sixty (60)days after the effectFve date, and after filing such initial report, Is required to file a report on an annual basis on'orbefore May 1st of each year. Article 3272abecame effective on November 7, 1961, consequently, the datesupon which~ **reports** have been due under such Articleare January 6, 1962, and May 1, 1.963. Section'13 ofArticle 4.08, Texas Insurance Code, reads as follows:..

"No other Statute of this State relating to escheat or unclaimed fundsnow In force shall apply to life.insurance companies,nor shall any such Statute.hereafterenacted so apply unlessspecifitallymade applicableby Its terms; provided that. Article 3272a, House Bill No. 5, **Acts** 'ofthe 57th Legislature, First CalledSession, shall be in force as to personalproperty subject to escheat reported or required to be reportedby January 6, 1962, under the terms of said Actand the provislons of Section 8 hereof shall be aoplicable in such cases." Article 4.08 was passedby the House of Representatives on a non-recordvote and, as a consequence,did not'become effectiveuntil 90 days after the adjournment of the Legislature onMay 24, 1963; i.e.,August 23, 1963. Therefore Section 13 of Article 4.08 was not in effect onMay 1, 1963, when annual reports were due to be filed under Article 3272a. In fact, Article 4.08 had not evenbeen enactedby the Legislature on May 1, 1963, final passage in the House,having

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occurred on May 8, 1963. Therefore, all persons, including' life insurance companies,holding'propertysubject to escheat were obligated to report such property to the State Treasurer of Texas under the provisions of Article 3272a on orbefore May 1, 1963, and, upon complianceby the State with the provisions of Article 3272arelating to processing of such reports and entry of judgmentthereon,would be obligated to tender such property to the custody of the State Treasurer of Texas. The primary questionwhich we must answer Is whether Section 13 of Article 4.08 effectively released life insurance companies from the obligationswhich exi.sted under Article 3272a onMay 1 1963 and thereafterup untll.the date Article 4.08 bkame effective. The plain language of Section 13, ofArticle 4.08 purports to have the effect of so relieving life insurance companies; however, this provision is, in our opinion.within the prohibition of Article III, Section 55 of the Texas Constitution,which provides as follows:

"The Legislature shall have no power to release or extinguish, or to authorize the,releaslng or extinguishing, in whole or in part, the lndebtedness, liability or obligation' of any corporation or individual, to this State or to any county 'or defined subdivision thereof, or othermunicipal corporation therein, except delinquent taxes which havebeen due for a period of at least ten years."
In so concluding,we relyuponstate v. Pioneer Oil pgi$G&A, 292 S.W. 869 (Tex.Comm.App.1927) as announcing

law to be applied in this case. In that case a' taxing statute had been passedby the legislature, the terms of which required that "thefirst report and payment required under this act shallbe made on or before May 25, 1923". This act became effective on April 1, 1923. Thereafter, the Legislature, in Called Session, enacted a statute covering the same subjectmatter and persons and therein repealed the prior statute. The second statutebecame effective June 1, 1923. The Attorney Generalbrought suit to recover taxes alleged to have accrued for themonths of April and May 1923 under the terms of the first statute. The Commission of Appealsheld that the tax which fell due under the first statute could not be relinquished or extinguishedby the

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Legislature. The following quotations from the opinion,at the pages'indicated;are appropriate to our holding. Page 871: "If the statute firstmentioned competently levied a,tax, that tax became due; and liability~ thereformatured, on May 25, 1923, in respectto the 'firstreport and payment'. This ismade plainby the terms of the act fixing that date for 'report and payment,' default. and providing~penalties,etc., for

There is in the opinion of the Court of Civil Appeals a statement or implicationto the effect that the claims 'wereInchoatebecause the reports had not been made; but, in our opinion, no such effect canbe given the taxpayers'delinquency, for that wouldmean the citizenwho obeyed'the law would be disfavorably circumstancedas compared with the citizenwho disobeyed.

. . ." Page 872: 11 .Thegeneral rule 'thatwhen a'right-depends solelyupon a statutewhlch'is repealed the right ceases to exist,'must be takenwith it6 own limitation. In the present case the right is not inchoate, for nothing remained to be done to mature the tax; and it does not 'dependsolely' upon a 'statutewhich is repealed,' for, having oncebecome a liability, its irrevocablenature finds source in the constitutionalprovision." Page 874: "Accordingly,we hold,~therebecame due and matured onMay 25, 1923, a tax liabilitymeasured by the gallonage involved In all intrastate sales (excludingsuch, If any, as may havebeen made for purposes other than Immediateor ultimate 'consumption'), and this liability the Legislaturedid not (becauseit could not) release or extinguishby the repeal which took effect June 1, 1923." The rule Is tersely statedby the Supreme Court of Texas at page 742 in State,v. City of Austin, 160 Tex. 348, 331 S.rl.2d

737 (1960):

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"After the occurrence of eventswhich under the law then existing give rise to an obligation on the part of an individual or corporation to'the state, the Legislature has no power to release or diminish that obligationwithout consideration.

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We therefore hold that Section 13 of **~Artidle** 4.08,'Texas Insurance Code, is unconstitutional in so far as It purports to extinguish the effect of Article 3272aupon life insurance companiesprior to August 23, 1963. Your first question Is answered in the negative and you are advised that Section 13 oP Article 4.08, Texas Insurance Code, does no::exempt' life insurance companieswhich do business in Texas from filing reports required by Article~3272a. Vernon's Civil Statutes for the period between January 6, 1962 and August 23,, 1963. Since we have answered your first question ih the negative, it becomes unnecessary to answer your second question. The plain and unequivocal language of the first phrase of Sectlon~

13 of ,Articl,e

4.'08evinces the intent of the Legislature to exempt life Insurance companies from a,ll other statutes relating tomescheat or unclaimed funds. Due to the consitutionalprohibition,whichwe discussed in regard to your first question, this exemption is effective from and after the effective date of Article 4.08.~ This exemption is without regard to the definition of unclaimed funds contained in Section 3 of Article 4.08 and such definitionhisnot a' limitationupon the exemption. Therefore, in answer to your third question,you are advised that Section 13 of Article4.08 exempt life insurance companies from filing future reports under Article 3272a ,onall property, regardless of Its nature. The scope of Article 4.08 is set forth in Section 2 thereof in the following language:

"Sec. 2. Scope. - This Article shall apply to unclaimed funds, as defined in Section 3 hereof any life insurance companydoing business in thisof state where the last known address according to the records o person entitled to such funds (Emphasisadded)

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We answer your fourth questionby stating.that: unclaimed funds as defined in Section 3 of Article 4.08 are required to. be reportedunder Article 4.08 'onlyif the last known address, according to the records of the company, of the person entitled to suchunclaimed funds is within the State ofTexas. Therebeing no provision for reportingunclaimed funds under Article 4.08 where the address of the person entitled to such funds is unknown and the scope of Article 4.08being specificallylimitedby Section 2, you are advised, in answer to your fifth question, that such funds are not coveredby Article 4.08.

SUMMARY Thatportion of Section 13 of Article 4.08, Texas Insurance Code,~

which attempts to exempt life Insurance companies from the operation ofArticle 3272a,Vernon's Civil Statutes, for the period between January 6, 1962 and the effectivedate ofArticle 4.08 on August 23, 1963 isunconstltuMona1 under Article III, Section 55 of the Texas Constitution;Article 4.08 exempts all life insurance companies from filing all reports requiredunder Article 3272a from and after the effectivedate of Article 4.08; Article 4.08 required only the reporting of unclaimed funds where the last,knownaddress of the person entitled to such funds la within the State of Texasand where there Is no record of an address, such funds need not be reported. Very truly yours. WAGGONER CARR Attorney General

Assistant Attorney WOS:ml

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APPROVED: OPINION COMMITTEE W. V. Geppert, Chairman James Strock John Ree'ves J. C. Davis J. S. Bracewell APPROVEDFOR THE ATTORNEY GENERAL By: H. Grady Chandler

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