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 

Dear Nr. James : . . related questions. 

You have requested an opinion 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 .6r all of such 

organlzatlons are not exempt, should their reports 

of property subject to eecheat be filed pursuant 

to Article 272a, Vermont8 Civil Statutes or 

Article 4.0 , Texas Insurance Code?” 

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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 

.ijy this 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. No law ,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 and heal mtual Aid Assoc’Tatlong 

“Any aesoclatlon organized under the provisions 

hereof or which has accepted the provlalons hereof 

shall for the purpose of operation be and become 

a~ body corporate with authority to sue and be sued 

In Its own ‘name and to exercise the, other power~s 

and functions specifically herein granted, but not 

otherwise. Except as herein provided, such a8aoclatlon 

ehall~ be governed by tNs chapter and Chapter 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 them unless 

they be expreesly designated therein. Acts 1951, 

52nd ,,Leg., Ch. 491.” 

“Art. 13.09. Exception8 and Exemptions 

“This .chapter shall in no way affect or apply 

to companies operating as local mutual aids, as 

fraternal benefit societies, reciprocal exchangea, 

or to Soreign alraesament companies operating under 

any other law In this State, or any other 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 made upon their members. Except 

as expressly provided in thle chapter and In 

Chapter 14 of this code, no insurance law of this 

State shall to any cbrporation operatlng under 

this chapter, Aaseasment CompanleZrj7, and 

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Honorable Jesse James. Page 3 (C- 590) 

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 Canoe they are 

tual Ben. Association 

benefit so&e~les, ,burlal asboclatlo&, lo&l mutual 

aid assoclatlons and mutual 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. 

The remaining 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 

an all-$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 EtbOQe are basically the same. First, they 

declare that the respective chapters shall govern the 

particular type of organization and that, except as provided 

In such chapters, no other Insurance law shall apply to 

them. Then, each of these Artlales declares: “No other 

law hereafter enacted shall aflply,to them unless 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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Honorable Jesse James, Page 4 (CL590 ) 

Our~concluslon is that the Legislature did not Intend 

to attempt to bind all future legislatures, In the enactment of general laws, to name each of these types of organlzatlons In order to bind or benefit them by such general laws. 

The Intent to relate general laws to all persons and corporations, Including these organisations, is evidenced by 

many laws 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 any particular class of Insurance organization. Not 

all of the rights and powers of any insurance organization 

are contained In the Texas Insuranoe Code. Neither are 

all of their duties and responslbllltles. 

In MoIoco~ Unde 

and Life Cosipanx, 2 

%he Court h d this 

(the predeoissor o 

Chaans v. Amerloan Camalty 

26 m 313 (T 

‘about klcle 

Cl A 1952 1 

%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 suah general or speolrl laws pertainIn& 

to lnsuranoe expressly designate they are to 

so apply.” (Emphhslr added) 

On the 

relates to 

Raseell Q. 

Fex. 353, 184 S . W . 26 917 

the same provision 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 any of 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. The Haccabees, Tex.Com.App., 241 

S.W. 101.” 

Consider, for Instance, whether a subsequently enacted 

statute regulating the rights and relatlonsNp8 of a bank 

and Its depositor must speolfloally deolare that It also 

applies to fraternal benefit societies., burlal~assoclatlons, 

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Honorable Jesse James, Page 5 (C- 590) 

mutual aid assooiatlons and looal mutual dssessment companiea 

in order to bind (or benefit) them. Likewise, we might 

ask whether a statute amending the law of deeds or negotiable 

instruments must refer ‘to. theee or anitationa in order to 

govern their transactions, or whet f er amendments to 

procedures establlahed for the condemnation of property 

for public purpoeea must epecify theare organizations 

in order tom eatabllsh valid condemhatlon procedures with 

respect to their property. We could mention other statutes 

whloh would affect interest rates, lltitations of actions, 

public health, and an endless variety of eubjects of general 

law. 

Our point is well llluatrated.by expressions from 

subsequent leglelatures in the provlrlon for the lnvestment of surplus funds by these very o,rganizatione. Article 

10.17 of the Insurance Code authorizes fraternal benefit 

societies, and Article 14.26 authorizes mutual aseesgment 

companiee,to invest surplus f’unde in the name securities 

a8 are authorized for life ineuranae companlep. From 

time to time new statutes are enacted and existing statutes 

are amended to make certain securities lawful lnveetaents of insurance oompanies. Hone of the statute8 

apeciallg designate or in any manner refer 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 and autho$zed investments for . . . Insurance 

companies. . . . Fraternal benefit eocletles, local 

mutual aid societies and mutual asaesament companies 

are not mentioned. Article 842a, enacted in 1933,declares 

securities issued by Federal 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 any restrictions on 

d-;T-;ztments contained in any laws of this 

. * . all insurance companies, Insurance 

associationa and other persona carrying’on an 

insurance business. . . may legally invest . . . 

in. . . obligatSons ieaued by a housing 

authority. . . . ” 

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Honorable Jesse James, Page 6 (C- 590) 

Similar provisions are found in Section 9 of Article 

1187a V.C.S. enacted in 1933. Without further elaboration 

we will say that there are some twenty similar statutes 

which we have found with respect to securities issued 

by Federal and State agencies and various types of 

municipal corporations, water dlstr1cts and the like. 

If the clause under consideration were to be construed 

to render subsequently enacted general laws inapplicable 

to fraternal benefit societies and the 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, we believe, would 

defeat the legislative Intent. All of these statutes 

deal with the same subject (lawful Investments) as 

that covered by Articles 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, 129 Tex. 275, 102 S.W.Pd 167; 53 Tex.Jur. 

2d 2110, "Statutes" Sec. 186. 

The case of State v. The Praetorians, 143 Tex. 565, 

186 S.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 anv way modlfv what It had oreviousls 

declared one year earlier in Hasseil v. Cossnonwealth - 

, quotedabove.oriana 

"Taxation," 

516, Statutes, Sets s under 

the subhead, Footnote 36 in support of the 

following proposition: 

"A special or local act on the subject of 

taxation is not repealed by a general tax 

law unless the intent to repeal is clearly 

apparent." 

The Supreme Court 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 

and office equipment when used for other than lodge purposes. 

The court characterized the Unemployment Compensation 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 amend or repeal 

the special act expressly exempting fraternal benefit 

societies from exciee taxes. 

The question 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 them exemption 

from escheat; Therefore, there is no law oalling for a 

construction as to whether it was repealed by the general 

law governing escheats in Texas* Article 3272a, V.C.S 

of Texas. Chapters 10, 12, and 13 of the Insurance Code 

are completely silent on all matters to whlah the esaheat 

law pertains. The only law passed by the 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. 

The Court in The Praetoriana aase, supra, was 

dealing with tso different statutes involving the. 

subject of taxation. It found that the special law 

was not repealed by the general law teaause of the 

special law’s aoncludlng prchision:, No law 

hereafter enaoted shall apply to them’u&ss they be 

expressly designated therein.” This sentence was thus 

construed inits proper bontext to mean no other law 

dealing with the same subjeat of taxes as applied to 

the organizations concerned. It is Important, therefore, to discern that the Supreme Court was neither 

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 we held that since Article 

577, Vernon’s Annotated Penal Code did not specifically 

designate fraternal benefit socletles, it did not apply 

to them or to their officers. As that opinion carefully 

points out, this penal statute was a part of a comprer 

henaive bill providing for the incorporation and regulation of life, health and acaident lnsurancs companies. 

It was cle+$y an insursnoe lair in its application. 

: 

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Honorable Jesse James, Page 8 (C-590 ) 

It IS clear that subsequently enaated insurance laws 

must specifically refer to fraternal benefit societies 

;;dt;;; other organizations named above 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 assume that the Legislature intended suah organizations to be immune to the 

general laws. 

The escheat statute, in Section 1 of Article 3272a, 

Vernon’s Civil Statutes, Is expressly made applicable to 

all persons, corporations, and other entitles, which would 

encompass the Insurance assoclatlons or companies with 

which we are 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. No special 

escheat law exempting suah Insurance aompanles or assoclatlons exists in this state, and no law exists purporting 

law&his state 

to exem t such aoncerns from the operation of the general 

Under well settled canons of construction, exemptlona are not favored and will be strictly 

construed in favor of the state and against the person 

or entity claiming the exemption. 

Sinae Article 3272a has a uniform application upon 

all persons and entities having in.thsir~posseaslon 

property aubjeot. to escheat (see Sectional), it must 

be characterized as a general law. 50 Am;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 

and would cover the property interests of members of 

the organizations here Involved. The purpose of such 

an escheat statute is to provide for the right of the 

state to such property interests where,there is no one’ 

in etistence able to make claim 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. 22 Tex.Jur.2d 616 

Escheat, Sect. 1; 30A C.J.S. 915, Escheat, Sect. 1. 

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, . . 

Honorable Jesse James, Page 9 (C- 590) 

The Constitution of Coahulla and Texas, 1827; The 

Constitution of’ The Republic of Texas, 1836; and all 

subsequent aonstitutions, cxaept those of the reconstruatlon period, have declared that eecheats shall accrue 

to the state. Article 3272 and Article 3272a of Vernon’s 

Civil Statutes were enacted In furtherance of’ the power 

which Is expressed in our Constitution and which ie 

inherent Snthe sovereignty of the state. 

Artlales 10.04, 12.12 and 13.09 of the Teas 

Insurance Code pertain to fraternal benefit societies 

and other 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 OF impair 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 make a 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. 

To construe the Insurance statutes here involved as requiring the legislature to name such organlzatlona,in each 

general law thereafter passed in order that such law 

shall. apply to them is an unreasonable 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 and other statutes, we think 

the intent of the Legislature was to refer only to laws 

dealing with the subject OS insurance enacted thereafter 

and not 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 and do not 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 and mutual assessment companies are not 

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r ~ . 

Honorable Jesse James, Page 10 (C-590 ) 

exempt from the provisions of Article 32’72a and 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 

Bs 

Aaslstant Attorney General 

RRR:nr 

APPROVED: 

OPINION COMMITTEE 

Ketis B. Taylor, Chairman 

QortJon Caas 

Bill Allen 

Qeorge Gray 

Brandon Blckett 

APPROVED FOR TIIE ATTORNJZY 0-L 

BY: T. B. Wright 

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