GERALD C. MANN

d BB

Honorable O.P. Lockhart, Chairman Board of Insurance Commissioners Austin, Texas

Dear Sir: OpinionNo. O-5207 Re: Can the InsuranceDepartment lawfully continue to license the Mutual Benefit Health & AccidentAssociation, Omaha, Nebraska,,

to conduct its businest in Texasunder repealed Chapter 

### 5, Title 

### 78, of the Revised Civil Statutes of Texas of 1925, end a related question.

Your request for an opinion on the abovematters has been received and carefullynoted. We quote from your request as follows:

"Re: Mutual Benefit Health & Accident Association, Omaha,Nebraska,
"TheCompanywas originally incorporatedunder the laws of Nebraska on March 

### 5, 1909 for a period to expire March 

### 5, 1939. On February 12, 

### 1938 its membership adopted charter amendment,which was approved and filed by the Director of Insurance of NebraskaMarch 28, 

### 1938extending its corporate life to March 

### 5, 1989. Enclosed are photostatic copies of its old and new charter and of its bglaws as amended and filed with this Department from time to time.

"Itwas originallyadmitted to Texas and licensed as a mutual assessmenthealth and accident company on March 17, 3920 under theprovisions of Chapter 4~of Title 

### 71,R. C. 3. 1911, which later became Chapter 

### 5 of Title 

### 78,R. C. 3. 1925. Annually thereafter to and including 1942 it was licensed in like manner and under the same statutory provisions to continue its operations in. .

Honorable 0. P. Lockhart, Page 2, (o-5207)

Texas under such Chapter 5, though the latterwas Acts 1929, 41st Leg., as amendedby Acts 1929, sec. 1. Ithas not yet repealedby Section 16 of 1st C. Se,p. 90, Ch. 40, 2nd C. S., p. 99, Ch. 60, been lioensed for 1943.
"Pleasegivb-us your ing points: opinionupon the follow-

"1. Can this Department lawfully continue to license such Company to conduot itsbusiness in Texas under such repealed Chapter 5 of Title 781

“2. Are the present charter and by-laws of such oompany such as necessarily to constitute it a 'mutualassessment insurance company' fundamsntally incompetiblewith the plan of operation of a 'mutualinsurance compan is t of the kind governedby new Chapter 9 of Title 

### 7 (Article

### 48608,sections l-19) as added by,the 1929 Aots above cited,and thus neoessarily debar it from qualifylag to do ~JU;USS in Texasunder seotion 13 of suohArticle

" "

. . . . It is the opinion of this department that the first question askedby you shouldbe answered in the affirmative, which answer makes it unneosssary to answer the seoond ques- ;',o& asked by you. Our masons for suchholding are as fol- : Repealed Ghapter.5,Title 

### 78, of the Revised Civil Statutes of Texas of 1925, under whloh aaid oompany was originally licensed to do business in Texas was composed of Artioles 4701, 

### 4782and 

### 4783.~Article 

### 4782provlded for certain filing fees, Artiole 4783,exceptedaoma oompanies from the provisions of said Chapter ar&d Artiole 

### 4781was aa follows:

"Art. 4781, (4791) Forrign'assessmsntoom-
!I?+ ,--Companies or assooiatlono ollganleed Under e aws of any other State of the United States, carrying on the business of life or oasualty insurance on the asserrrmeat 

### or natural premium plan, having cash assets of a sum notless than onehundred thousanddollars, invested as requiredby the laws of this State regulating other insurance companies, shallbe licensedby the Qommissionerto do business in this State, an8 be subject only toHonorable 0. P. Lockhart, Page 3, (o-5207)

the provisions of this chapter. S&h company or association shall first file with said Commissioner a certified copy of its charter, a written agreement appointing said Commissionerand his successor in office, to be its attorney,upon whom all lawful process in any action orproceeding against it may be served;a certificateunder oath of its president and secretary that it is paying, and for the twelvemonths next precedinghas paid, the maximum amount named in its policies or certificates in full; a statementunder oath of its president and secretary of its business for the year ending on the thirty-firstday of Decemberpreceding; a certified copy of its constitutionand by-laws, and a copy of its policy and application;a certificate from the proper authority in itshome State that said company or association is lawfully entitled to do business therein, and has at least onehundred thousand dollars surplusassets subject to its indebtedness. The Commissioner shall issue a license to any company or association complying with the provisions of this chapter. Every such company or association shall annually thereafter before such license is renewed, file with said Commissioner on orbefore the first day of March, a statementunder oath of its president and secretary, or like officers, of its business for the year endingDecember 

### 31preceding." Said Chapter 5 was repealed in 1929 by S. B. No. 37, page 90 of the General and SpecialLaws of the First Called Session of the 41st Legislature, Section 18 of said Act being in part as follows:

"SEC. 18. Chapters 5, 6, 9, 12, 13, 14, and 15 of Title 78, of the Revised Civil Statutes of 1925, and all other laws orparts of laws in conflict with the provisions of this Act, are hereby repealed;provided that such repeals and the provisions of this Act shallnot apply to or affect any company or association of this Statenow doing business under the laws repealed, and they shall continue to be governedby the regulatoryprovisions of such laws.

. . ."
The Second Called Session of said 41st Legislature, by 3. B. No. 106, page 99 of the General Laws of said Session, amended said Section 18 of said original act, but no change was made in that part of samehereinabove set forth.Honorable 0. P. Lookhart, Page 4, (o-5207)

Therewould be no question as to the proper construction of this repealing law as contained in said Section 18 thereofbut for the fact that the Legislatureused the words "of this State" in describing the companiesand associations to which such act shouldnot apply, and both domestic and foreign companieshad been licensed to do business under said repealed law.

A question as to the meaning of this savings clause was raised in the case of National Aid Life Associationvs. Murphy, 78 3. W, (2) 223, writ dismissed, end Judge Looney of the Dallas Court of Civil Appeals, on December 1, 1934, construed same as follows:

"Afterdefendanthad been issued a permit to carry on its insurancebusiness in this state,under the provisions of chapter 5, title 78 (article 4781 et seq.), the 41st Legislature repealed chapters 5, 6, 9, 12, 13, 14 end 15 of title 78 (article 4781 et seq.; art. 4860 et seq.; art. 4933 et seq.), effective June 19, 1929 (seeActs 1929, 1st Called Sess., chapter 40, pp* 90-95 (Vernon'sAnn. Civ. St. art. 486Oa-1 et se section of the sot of 1929 4.)). The repealing seeVernon's Ann. Civ. St. art. 4860a--18) contains a saving clause in favor of insur;arg ;;mpanies, then doing business, as follows: Chapters 5, 6, 9, 12, 13, 14, and 15 of Title 76, of the Revised Civil Statutes of 1925, and all other laws or parts of laws in conflictwith the provisions of this Act, are hereby repealed;provided that such repeals end the provisions of this Act shallnot apply to or affect any company or association of this Statenow doing business under the laws repealed, and they shall continue tobe governedby the regulatoryprovisions of such laws. * * *I
"!Phe contention of plaintiff isbased on the idea that the saving clause does not include foreign insurance companies, such as defendant,but applies only to domestic concerns,and that, since the effective date of the repealing act, defendant has conducted its business in Texaswithout authority of law. That this is a correct statement of plaintiff'sposition is revealedby the following excerpts from thewritten argument ofher attorneys on file. They said: 'Itis manifest from the repealing act above quoted that the provisions of the statute excepting from its application only thoseHonorable 0. P. Lockhart, Page 5, (O-5207)

companies or associations of this statewhich were then doing business under the laws repealeddid not apply to foreign insurance companiesand that no foreign company of the description contained in the repealing act could thereafterdo business under the provisions of articles 4781, 4782 and 4783, the act repealed. + * * But appellee contends that, in view of the express and unambiguousprovisions of the statute,withdrawing the right of the appellant company to do business in Texas, no construction of the statutewas necessary end the mere fact that the insurance commissionerwithout authority issued a license or permit to appellant did not have the effect to emend the statute and write an exception therein in favor of appellant and associations in like situation.1

"We cannot accept as correctplaintiff's idea as to themeaning of the statuteunder consideration; on the contrary,believe that all associations end companies,domestic or foreign, legally doing business in the statewhen the statuteswere repealed, were permittedby the saving clause, quoted above, to continue andhave theirpermits renewed.'
The general rule as to the interpretationby the Legislature of laws passed by it is set forth in 39 Texas Jurisprudence,Section 132, pages 248-251, in the following language:
"Doubtlessthe Legislature, in enacting, amending or repealing a statute,may be presumed to have known facts of commonnotoriety in the State, as well as any circumstancesor conditions affecting or relating to the particular enactment. And it may be presumed that the Legislature Qnew*, 'had in mind', or 'Iwasfamiliarwith' the 'lawof the land', that is, the Constitution, the common law, existing statutes and the effect thereof; also pries decisions of the courts,--atleast those of last resort,--pertaining to the subject-matter.
"TheLegislature is presumed to have understood the meaning of language that it employed, and to have known the constructionplaced upon the same or a similar statuteby the appellate courts and by executive or administrativeofficers. And it may be presumed, in a proper ease, that the Legislaturehas acquiesced in the construction of a particular act,Honorable 0. P. Lockhart, Page 6, (o-5207)

or that if it had not been satisfiedwith such constructionit would have changed the verbiage of the law so as to show a contrary intention.

n "

. . . . After the passage of this repealingAct in 1929 containing the saving clause above referred to, the Legislaturehas referred theretoas hereinafter shown.

, In 1936, the 44th Legislature, in its Third Called Session and by House Bill No. 37, page 2040 of the General and SpecialLaws of such session,which was an omnibus tax measure, amended Article 7064 of the Revised Civil Statutes of Texas of 1925, which saidArticle 7064provided for the filing of reports and payment of taxesby every kind of insurancebusiness except life and other than fraternalbenefit associations, and in said amendmentmade the followingprovisions, quoting from page 2075:

11

. . .however, foreign assessment life and casualty companiesadmitted to do business in Texas, under Chapter 5, Title 78, Revised Statutes 1925, shall also pay taxes under and in accordancewith the provisions of this Article."
The 45th Legislature, at its Regular Session in 1927 and by House Bill No. 441,page 525 of the General and SpecialLaws of said session,attempted to clarify the law in regard to payment of taxesby certain insurance companies. The caption of said act was in part as follows:

11

. . .and furtherproviding for the taxing of foreign assessment life and casualty companies admitted to do business in Texasunder Chapter 5, Title 7$!,

Revised Civil Statutes of Texas of 1925;

. . . . In the body of said act, page 527 and in amending Article 7064, the followingprovisionwas made:

II 0

. .however, foreign assessment life and casualty companies admitted to do business in Texas, under Chapter 5, Title 78, Revised Civil Statutes of Texas of 1925, shall alsopay a tax of three and twenty-fivehundredths (3*25)per cent of their gross premium receipts from Texas businzss, as such receipts are herein defined.

. . a. .

Honorable 0. P. Lockhart, Page 

### 7, (o-5207)

In 

### 1939,the 

### 46thLegislature,during its Regular Session,passed S, B. No. 

### 313,page 

### 424 of the General Laws of said session,which provided for the payment foreign assessment life and casualty companies, and Section 1 of said act being as follows: of taxesby the caption

'AnAct providing for tsxing the premium celpts of foreign assessment life and - -..... _ recasualty companiesnow aamlttea to a0 business in Texas,under ChapterV, Title 

### 78,Revised Civil Statutes of Texas, 1925, as amended by SenateBill No. 

### 37, Chapter 40, Acts of 

### 1929,First Called Session, Forty-firstLegislature, as amendedby Senate Bill No. 

### 106, Chapter 

### 60,Acts of 1929, Second Called Session,Forty-first Legislature, in the event any such company shouldhereafter reorganize,amend its charter or otherwise change its plan of operation so that It shallnot be subject to the provisions of said ChapterV, Title 78, Revised Civil Statutes of Texas, as amended, snd'declaringan emergency.
"BE IT ENAC~TED

BY TILE

LEGISLATURE OF THE STATE OF TEXAS:
"SECTION1. That if any foreign assessment life or casualty companynow licensed to do business in this State under the provisions of Chapter V, Title 78,Revised Civil Statutes of Texas, 1925, as amendedby SenateBill Ho. 37, Chapter 40, Acts of 1929, First Called Session,Forty-firstLegislature, as amendedby SenateBill No. 106, Chapter 60, Act of 1929, Second Called Session,Forty-first Legislature, shallhereafter reorganize, amend its chapter or otherwise change its plan of operation so that it shallno longer be subject to the provisions of said Chapter and the other laws then applicable to such companies, it shall thereafter, as to all policies written before such change,be governed and taxed as providedby the particular laws under which it operated and was taxed at the time of such change,but as to all policies thereafter written it shallbe governed and taxed under the lawa to which it has thenbecome subjectby such change."
The 46th Legislature,at its said Regular Session, also passed Rouse Bill No. 556, page 638 of the General LawsHonorable 0. P. Lockhart, Page 

### 8, (o-5207)

of said session,which was an act to further amend Article 

### 7064and in which the followingprovisionwas made:

II l . .however, foreign assessment casualty companiesadmitted to,dobusiness in Texasunder Chapter 

### 5 Title 

### 78,Revised Civil Statutes of Texas of i925, shall also pa a tax of three and twenty-fivehundredths (3.25 7 per cent of their gross premium receipts from Texasbusiness, as such receipts are herein defined.

. . ."

In the Omnibus Tax Law $asaedby the 47th Leglslature,at its Regular Session in 19 1, page 

### 269 of the General and SpecialLavs of said session, saidArticle 

### 7064was again amended, and In said amendment the following languagewas used, quoting from page 

### 334 of said SessionLavs:

.however, foreign assessment casualty companiei admitted to do business In Texasunder Chapter 

### 5, Title 

### 78,Revised Civil Statutes of Texas of 1925, shall alsopay a tsx of four and five hundredths (4.05)per cent of their gross premium receipts from Texasbusiness, as such receipts are herein defined.

. . ."
Another rule of construction of statuteswhich we think is entitled to considerableweight herein is that pertaining to executive or departmental construction. Your statement shows that the Board of InsuranceCommissioners has consistently construed said repealed Chapter 

### 5, and particularly the savings clause thereof, to permit the continued licensing of this company to do business in Texas and this has been done over a period of fourteen years. The general rule relative to departmental construction is laid down in 

### 39 Tex. Jur., sec. 

### 126,pp. 235-238, as follows:



### 'V&26. Executive or Departmental Constructlon.-- The courtswill ordinarilyadopt and uphold a constructionplaced upon a statuteby an executive officer or department chargedwith its administration, if the statute is ambiguous or uncertain, and the construction so given it is reasonable. In other words, the judiciarywill adhere to an executive or departmental construction of an ambiguous statute unless it is clearly erroneous or unsound, or unless it will result in serioushardship or injustice, although it might otherwisehave been inclined to place a different constructionupon the act.Honorable 0. P. Lockhart, Page Y, (o-5207)

"Therule above stated is particularlyapplicable to an administrativeconstruction of long standing,where valuable interests or rightshave been acquired or contractshave been made, or where a law thathas been uniformly construedby those chargedwith its enforcementhas been reenacted without a change of language. Ithas been varlously applied to constructions,opinions or rulings of the Governor, the Attorney General, the Comptroller, the Secretary of State, the Treasurer, the Land Commissioner, the CompensationClaim Board, and the State Department of Education.

. . .v This rule is followedby the court in the case of Houston & North Texas Motor Freight Lines, Inc., et al. v. Johnson et al., 159 5. W. (2) 905, in dealingwith the constructiongiven to an Act by the Railroad Commission,which saidholding is as follows:

'TheRailroad Commissionhas, it appears, since 1931, been authorizing sales ofportions of certificateswhere the certificate is severed 'horizontally',and is not divided ~lengthwlse'. In administering its duties under Section 5, Art. Yllb, the Commission isbound to construe the meaning thereof. The Legislature,which has amended the Act, ofwhich Art. Yllb forms a part, several times since 1931, has never seen fit to in any way indicate that the Commissionhas not given the true interpretationto Sec. 5, Art. 911b. And it is well settled that the constructiongiven to an act by one whose duty it is to administer it is entitled to great weight. Cumin am v. CunP ningham, 120 Tex. 491, 40 S, W. 2d 4 , 75 A. L. R. 1305; Harris Countyv. Crooker, 112 Tex. 450, 248 s. w. 652. And such construction shouldbe adhered to unless clearly erroneous. Western Public Service Co. v. Meharg, 292 s. w. 168." 116 Tex. 193, 288 5. W. 141,

Said Chapter 5, Title 78, though repealed in 1929, has been referred to by the Legislature as stillbeing in effeet insofar as companies affectedby said saving clause are concerned, said references to said law by the Legislature having been after the opinion construing samewas written by Judge Looney in December, 1934. This fact alone should be sufficient to authorize you to continue to license this company to do business in Texasunder said repealed law, but,.

Honorable 0. P. Lockhart, Page 10, (O-5207)

in addition thereto, Judge Looney has held likewise and your departmenthas continuously so construed said law since 1929. Therefore, it is our opinion that you have authority to continue to license this company to do business In Texas as heretofore.

Trusting that this satisfactorilyansversyour lnquiry,we are Very truly yours
ATTORNEYGENERAL OF TEXAS

JWB:mp:eac By /s/ Jas. W. Bassett Jas. W. Bassett Assistant

APPROVEDMAY 

### 4, 1945
/s/ Gerald C. Mann
ATTORNEY GENERAL OF TEXAS APPROVED OPINION COMMITTEE

BY G.C.B. Cm-