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?”
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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 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. ..
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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 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,
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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 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. . . .”
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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 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
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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, 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.
:
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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 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.
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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 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
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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
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