NEY GENERAL EXAS

Honorable Jesse James Treasurer Treasury Depazhnent Austin, Texas Opinion No. C-590 Re: Whether Article 10.04 of the Texas Insurance Code exempts Fraternal Benefit Societies from the statutes of this State which require that property subject to escheat be reported to the Treasury Department and DearNr. James:
. . related questions. Youhave requested anopinion of this ofiiue w the follonlng questions:

“1. Whether Article 10.04 of the Texar Insurance Code exempts Friternal Benefit Societies from the statutes of this State which require that property subject to esoheat be reported to this office?

“2. Whether Article 12.12 of the Texas Insurance Code exempts Burial Associations and Local Mutual Aid Associations from the statutes of this State which require that property subject to escheat be reported to this office? “3 Whether Article 13.09 of the Texas Insurance Code exempts Statewide Local Hutual Assessment Companies from the statutes of this State which require that property subject to escheat be reported to this office?

“4. In the event that any.6rall of such organlzatlons are not exempt, should their reports of property subject to eecheat be filed pursuant to Article 272a, Vermont8Civil Statutes or Article 4.0 , Texas Insurance Code?”

-2043-Honorable Jesse James, Page 2 (C-:590) Articles 10.04, 12.12 and 13.09 provide a8 fOllOW6:

.“Art. 10.04 Exemptions

“Except a8 herein provided, such societies flraternal Benefit Societies/ shall be governed .ijythis chapter and ahall bz exempt from all provisions of the Insurance laws of this State, not only in governmental relations with the State, bu%for every other purpose. Nolaw ,hereafter enacted shall apply to them, unless they be expressly denlejnated therein. Acts 1951, 52nd Leg.9 Ch,. 491.

“Art. 12.12. Corporate Existence. /&la1 Associations andheal mtual Aid Assoc’Tatlong

“Anyaesoclatlon organized under the provisions hereof or which has accepted the provlalons hereof shall for the purpose of operation be andbecome a~body corporate with authority to sue andbe sued In Its own‘nameand to exercise the,other power~s andfunctions specifically herein granted, but not otherwise. Except as herein provided, such a8aoclatlon ehall~ be governed by tNs chapter andChapter 14 of this code and shall be exempted from all~other provialons of the Insurance laws of this State. No law hereafter enacted rhall apply to themunless they be expreesly designated therein. Acts 1951, 52nd,,Leg., Ch. 491.”
“Art. 13.09. Exception8 andExemptions

“This .chapter shall in nowayaffect or apply to companies operating as local mutual aids, as fraternal benefit societies, reciprocal exchangea, or to Soreign alraesament companies operating under anyother law In this State, or anyother form of insurance other than those corporations carrying on in this State In the statewide business of mutually protecting or Insuring the lives of their members by assessments madeupon their members. Except as expressly provided in thle chapter andIn Chapter 14 **of** this code, noinsurance law of this State shall to any cbrporation operatlng under this chapter, Aaseasment CompanleZrj7,and

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no law hereafter enacted shall apply to th& unless they be expressly designated therein. Acts 1951, 52nd Leg., Ch. 491.” It Is well established that other chapters of the

is applicable by Its terms to all Life Insurance Companlea, It Is not applicable to the above groups Canoethey are
tual Ben. Association

benefit so&e~les, ,burlal asboclatlo&, lo&l mutual aid assoclatlons andmutual asressgent companies are not required to re ort property rubjeet to esoheat pursuant to Article 4. & Texas Insuranoe Code, uhioh Is applicable to life Insurance companies. Theremaining question is whether they are required to report property subject to escheat pursuant to Artlole 3272a, Vernon’s Civil Statutes. In our opinion this Is anall-$ncluslve general law of the state, Intended by the Legislature to be of universal application, even though such Article does not expressly designate the organizations above named. It will be noted that the provisions of each of the statutes quoted EtbOQeare basically the same. First, they declare that the respective chapters shall govern the particular type of organization andthat, except as provided In such chapters, noother Insurance law shall apply to them. Then, each of these Artlales declares: “Noother law hereafter enacted shall aflply,to themunless they’be elcpressly designated therein. In our opinion, the last, as well as the first, provision relates to Insurance rather than to general laws.

..

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Our~concluslon is that the Legislature did not Intend to attempt to bind all future legislatures, In the enactmentof general laws, to nameeach of these types of organlzatlons In order to bind or benefit themby such general laws. TheIntent to relate general laws to all persons and corporations, Including these organisations, is evidenced by manylaws enacted after the-above quoted statutes were passed. While insuranoe laws are‘tddifled, It does not follow that general laws are lrrelevaxit or inapplicable to anyparticular class of Insurance organization. Not all of the rights andpowers of any insurance organization are contained In the Texas Insuranoe Code. Neither are all of their duties andresponslbllltles. In MoIoco~

Unde and Life Cosipanx, 2 %heCourt hdthis (the predeoissor o Chaans v. Amerloan Camalty 26 m 313 (T

‘about klcle Cl A 19521

%9fQ*V?i:S. e 13.Og’**quoted** abovi) **:**

n This provision prevsnts other general or s~e&l insuranoe law from applying to mutual~companles, auoh a8 the one in question, unless suahgeneral or speolrl laws pertainIn& to lnsuranoe expressly designate they are to so apply.” (Emphhslr added) Onthe relates to Raseell Q. Fex. 353, **184** SW26917

. . the sameprovision as It Court of Texa6, In

Co., 143 4) observed:

“The provisions of the foregoing se&Ion do not exempt mutual companliss from the law of responde’at superior, or from anyof the principles of general law. ..me provisIon rqferrlng to ‘lnsuranoe law”‘do not have the effect to place the subjeot companies beyond the pale of the general law of agency. Calhoun et al. Q. TheHaccabees, Tex.Com.App., 241 S.W. 101.” Consider, for Instance, whether a subsequently enacted statute regulating the rights andrelatlonsNp8 of a bank andIts depositor must speolfloally deolare that It also applies to fraternal benefit societies., burlal~assoclatlons,

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mutual aid assooiatlons and looal mutual dssessment companiea in order to bind (or benefit) them. Likewise, wemight ask whether a statute amendingthe law of deeds or negotiable instruments must refer ‘to.theee or anitationa in order to govern their transactions, or whetfer amendmentsto procedures establlahed for the condemnation of property for public purpoeea must epecify theareorganizations in order tom

eatabllsh valid condemhatlon procedures with respect to their property. Wecould mention other statutes whloh would affect interest rates, lltitations of actions, public health, andan endless variety of eubjects of general law. Ourpoint is well llluatrated.by expressions from subsequent leglelatures in the provlrlon for the lnvestmentof surplus funds by these very o,rganizatione. Article 10.17 of the Insurance Codeauthorizes fraternal benefit societies, andArticle 14.26 authorizes mutual aseesgment companiee,to invest surplus f ’unde in the namesecurities a8are authorized for life ineuranae companlep. From time to time newstatutes are enacted and existing statutes are amendedto makecertain securities lawful lnveetaents of insurance oompanies. Hone of the statute8 apeciallg designate or in any mannerrefer to fraternal benefit societies, local mutual aid associations or mutual aaaeeament companies. For instance, Section 7(b) of Article 6795b-1, enacted in 1949, declares that all bonda issued under thle law “are hereby declared to be legal andautho$zed investments for

. . . Insurance companies.

. . . Fraternal benefit eocletles, local mutual aid societies andmutual asaesament companies are not mentioned. Article 842a, enacted in 1933,declares securities issued byFederal agencies to be lawful inveetments of “all insurance companies of every kind and character.” Article 1269k-1, enacted in 1939, reads in part aa follows:

%o:twithetanding anyrestrictions on d-;T-;ztments contained in any laws of this

. *

. all insurance companies, Insurance associationa andother persona carrying’on an insurance business.

. . maylegally invest

. . . in.

. . obligatSons ieaued by a housing authority.

. . .”

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### (C- 590)

Similar provisions are found in Section 9of Article 1187a V.C.S. enacted in 1933. Without further elaboration wewill say that there are sometwenty similar statutes which wehave found with respect to securities issued by Federal andState agencies andvarious types of municipal corporations, water dlstr1cts andthe like. If the clause under consideration were to be construed to render subsequently enacted general laws inapplicable to fraternal benefit societies andthe like, then none of the organizations in question could appropriate to themselves the benefits and rights of the subsequently enacted general laws. Such a result, webelieve, would defeat the legislative Intent. All of these statutes deal with the samesubject (lawful Investments) as that covered byArticles 10.17 and 14.26 mentioned above. In determining the meaning of the "no law hereafter enacted" clause in Articles 10.04, 12.12 and 13.09, all of these statutes should be considered In pari materia. Winterman v. McDonald, 129Tex. 275, 102S.W.Pd 167; 53Tex.Jur. 2d 2110, "Statutes" Sec. 186. Thecase of State v. ThePraetorians, 143Tex. 565, 186S.W.2d 973 (1945) does not control the question Presented here and is clearly distinguishable from that question. A careful reading of that case reveals that the Court did not In anvwaymodlfv what It hadoreviousls declared one year earlier in Hasseil v. Cossnonwealth -

, quotedabove.oriana "Taxation," 516, Statutes, Sets s under the subhead, Footnote 36in support of the following proposition:

"Aspecial or local act on the subject of taxation is not repealed by ageneral tax law unless the intent to repeal is clearly apparent." TheSupremeCourt had before it there a special law (Art. 4858a, V.C.S.) exempting fraternal benefit societies from every form of taxation except taxes on real estate andoffice equipment whenused for other than lodge purposes. Thecourt characterized the UnemploymentCompensation Act, Including its tax lmpoaition, as a 'general law" and its tax as in the nature of an "excise tax". It then held

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Honorable Jesse James, Page 7 (C- 590>

that such general law did not ope,rate to amendor repeal the special act expressly exempting fraternal benefit societies from exciee taxes. Thequestion here presented is.materlally different. There is no:special act on the subject of eacheat for the insurance organisations under consideration. No special **or** general law purports to grant themexemption from escheat; Therefore, there is no law oalling for a construction as to whether it wasrepealed by the general law governing escheats in Texas* Article 3272a, V.C.S of Texas. Chapters 10, 12, and13 of the Insurance Code are completely silent on all matters to whlah the esaheat law pertains. Theonly lawpassed bythe Legislature governing the eubjeot of esaheat insofar as these organizations are ooncerned Is the general law. It thus appears that the Legislature Intended the general law to apply to them. TheCourt in ThePraetoriana aase, supra, was dealing with tso different statutes involving the. subject of taxation. It found that the special law wasnot repealed by the general law teaause of the special law’s aoncludlng prchision:, Nolaw hereafter enaoted shall apply to them’u&ss they be expressly designated therein.” This sentence wasthus construed inits proper bontext to meanno other law dealing with the samesubjeat of taxes as applied to the organizations concerned. It is Important, therefore, to discern that the SupremeCourt wasneither holding nor implying that,the above quoted p~oviaion in the special insurance act exempts thoaeorganisations from the general laws of the state thereafter enaoted, but merely referred to such provision as being applicable to the particular subject matter before the Court. Opinion No. O-4668 (1942) issued by this office is not to be confused with the questions presented by your letter. In that opinion weheld that since Article 577, Vernon’s Annotated Penal Code did not specifically designate fraternal benefit socletles, it did not apply to themor to their officers. As that opinion carefully points out, this penal statute wasa part of a comprer henaive bill providing for the incorporation andregulation of life, health andacaident lnsurancs companies. It was cle+$y an insursnoe lair in its application.

:

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It IS clear that subsequently enaated insurance laws must specifically refer to fraternal benefit societies ;;dt;;; other organizations namedabove In order to apply

It is altogether fitting that the Legislature should intend for the respective chapters dealing with these forms of Insurance to be the exclusive repositories of ’the insurance law applicable to them. But it would not be reasonable or logiaal to assumethat the Legislature intended suah organizations to be immuneto the general laws. The escheat statute, in Section 1of Article 3272a, Vernon’s Civil Statutes, Is expressly madeapplicable to all persons, corporations, andother entitles, which would encompass the Insurance assoclatlons or companies with which weare concerned. Its coverage as to personal property is likewise broadly described so as to comprehend the type of property Interest involved in such ’ entitles which would be subject to escheat. Nospecial escheat law exempting suah Insurance aompanles or assoclatlons exists in this state, andno law exists purporting law&his state to exem t such aoncerns from the operation of the general Underwell settled canons of construction, exemptlona are not favored and will be strictly construed in favor of the state andagainst the person or entity claiming the exemption. Sinae Article 3272a has auniform application upon all persons andentities having in.thsir~posseaslon property aubjeot. to escheat (see Sectional), it must be characterized as a general law. 50Am;Jur. p. 17, Sea. 6 “Statutes”; 82 C.J.S. 277, Sec. 163 and cases there cited. Purthermore, the ooverage of personal property is likewise broadly described in the statute andwould cover the property interests of membersof the organizations here Involved. Thepurpose of such anescheat statute is to provide for the right of the state to such property interests where,there is noone’ in etistence able to makeclaim thereto. Escheat Is an incident or attribute of sovereignty, based upon the principle of ultimate ownership by the state of all property within Its jurlsdlctlon. 22Tex.Jur.2d 616 Escheat, Sect. 1; 30AC.J.S. 915, Escheat, Sect. 1.

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Honorable Jesse James, Page 9 (C- 590)

TheConstitution of Coahulla andTexas, 1827; The Constitution of

’ TheRepublic of Texas, 1836; andall subsequent aonstitutions, cxaept those of the reconstruatlon period, have declared that eecheats shall accrue to the state. Article 3272 andArticle 3272a of Vernon’s Civil Statutes were enacted In furtherance of ’ the power which Is expressed in our Constitution andwhich ie inherent Snthe sovereignty of the state. Artlales 10.04, 12.12 and 13.09 of the Teas Insurance Codepertain to fraternal benefit societies andother special types o!’ insurance assoolat%ons which are but areatures of the sovereign with such tights and parers as are bestowed by the Legislature. Certainly, these provisions were not intended to be so construed as to disparage OFimpair the rights of the state under the provlslons ol’ our Constitution and statutes relatdng to escheat. It is well aettled that a aourt will never adopt a construation that will makea statute abauld or ridiculous OP one that will lead to absurd conclusions or consequenaes, if the language of ’ the enactment is susceptible of any other meaning. 53 Tex.Jur.2d~ 243., Statutes, Section 165. Toconstrue the Insurance statutes here involved as requiring the legislature to namesuch organlzatlona,in each general law thereafter passed in order that such law shall. apply to themis anunreasonable construction tliat would lead to absuti consequences, as hereinabove illuetrated. Construing the sentence In Articles 10.04, 12.12 and 13.09 of

’ the Ineurance’Code, “no.law hereinafter enacted shall apply to them, unless they be expressly designated therein,” in context with the other related provisions in the articles andother statutes, wethink the intent of the Legislature wasto refer only to laws dealing with the subject OSinsurance enacted thereafter andnot to refer to all general law8 on all other subjects, such as escheat. It is our opinion that the exemptions contained in Articles 10.04, 12.12 and 13.09 are limited to the subject of insurance anddonot negate #e subsequently enacted general lawsrelating to escheats contained in Article 3272a. Therefore, you are her.eby advised that lraternal benefit societies, burial assoa$ations, local mutual aid associations andmutual assessment companies are not

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Honorable Jesse James, Page 10 (C-590 )

exempt from the provisions of Article 32’72aand they are required to report to the State Treasurer of Texas all personal property whiah Is in the aondition apeelfied in said Article. SUNMARY-----wFraternal benefit societies, burial arrsoclations, mutual aid aasoaiationr and local mutual assessment companies are exempt from the operation of general Insurance laws, unless otherwise expredsly provided. However, such societies and associations are not exempt from the general laws of the State of Texas governing escheat and are required to report abandoned property pursuant to the provisions of ’ Article 3272a, Vernon’s Civil Statutes of Texas. Very truly yours, WAQQONNR CARR Attorney General of Texas



### BsAaslstant Attorney General RRR:nr APPROVED: OPINIONCOMMITTEE Ketis B. Taylor, Chairman QortJonCaas Bill Allen Qeorge Gray Brandon Blckett APPROVED

FORTIIEATTORNJZY

0-L BY:T. B. Wright

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