Court Opinion

ID: 4134871
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:55:47.070634+00
Date Added: 2024-06-11T14:26:05.786823
License: Public Domain

NEY       GENERAL
                                   EXAS

Honorable Jesse James           Opinion No. C-590
Treasurer
Treasury Depazhnent             Re:    Whether Article    10.04
Austin, Texas                          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?”

                                  -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
     .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

                                     -2844-
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 organiza-
tions 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.                                           ..

                                  -2845-                                    .
Honorable       Jesse   James, Page 4 (CL590 )

      Our~concluslon is that the Legislature     did not Intend
to attempt to bind all future legislatures,      In the enact-
ment of general laws, to name each of these types of organlza-
tlons In order to bind or benefit them by such general laws.
The Intent to relate general laws to all persons and corp-
orations,  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               Chaans v. Amerloan Camalty
and Life Cosipanx, 2              26 m     313 (T    Cl A     1952 1
%he Court h d this               ‘about klcle     %9fQ*V?i:S.
(the predeoissor  o               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                                the same provision   as It
relates to                                  Court of Texa6, In
Raseell Q.                                           Co., 143
Fex. 353, 184 S . W. 26 917               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,

                                   -2a46-
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 tomeatabllsh    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 lnvest-
ment 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 lnveet-
aents 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 inveet-
ments 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.    . . .”

                                  -2847-
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 Pre-
sented 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
                                516, Statutes,   Sets s     under
the subhead, "Taxation,"      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

                               -2848-
.

    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, there-
    fore, 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 regula-
    tion of life,  health and acaident lnsurancs companies.
    It was cle+$y   an insursnoe  lair in its application.
                 :

                                  -2 849-l..
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 Legisla-
ture 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 compre-
hend the type of property Interest      involved in such         ’
entitles   which would be subject to escheat.      No special
escheat law exempting suah Insurance aompanles or assocla-
tlons exists in this state, and no law exists purporting
to exem t such aoncerns from the operation of the general
law&his         state   Under well settled    canons of construc-
tion, 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.

                              -2850-
,   .    .

        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 reconstrua-
        tlon 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 re-
        quiring 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 illue-
        trated.    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

                                       -285’1-
                                                                          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
                       -----w-
         Fraternal benefit   societies,    burial arrsocla-
     tions, mutual aid aasoaiationr       and local mutual
     assessment companies are exempt from the opera-
     tion 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

                              -2852-