Untitled Texas Attorney General Opinion ( 1958 )

Hon. WilliamA, Harrison OpinionNo. WW-490
State Board of Insurance
10th and Brazes Street6 Re: Applicabilityof Texas Busi-
Austin, Texas ness CorporationAct or other
generalcorporatelaws to
Dear Sir: insurancecompanies
You have asked our opinionas to whetherthe Texas Business
CorporationAct1 is applicableto insurancecompaniescoming within
the purviewof Articles2.18 and 3.69 of the InsuranceCode or whether
Title 32, V.C.S., is applicableor whetherboth are applicable. We
assume that your questionis directedto only those insurancecompanies
that are corporationsand this opinionIs so limited.
Article2.18 of the InsuranceCode provides:
"The laws governingcorporationsin generalshall apply
to and govern insurancecompaniesincorporatedin this State
in so far as the same are not inconsistentwi:h any provi-
sion of this Code. None of the provisionsof this Chapter 2
shall apply to insurancecompaniesorganizedor operating
under the provisionsof Chapter3 or Chapter11 of this Code,
and Chapters10, 12, 13, or 14 of this Code."
Article 3.69 of the InsuranceCode provides:
"The laws governingcorporationsin generalshall apply
to and govern insurancecompaniesorganizedor operatingun-
der this Chapter3 in so far as same are not inconsistent
with the provisionsof this chapter."
By letter supplementingthe opinionrequest,you have fur-
nished us with the factual situationsupon which this request is based.
For clarityand brevity,we have set out at lengththese situations
in subsequentportionsof the opinioncaptioned"application".
Article2.18 in its presentform and Article3.69 were en-
acted in 1955 as part of S.B. 12, Acts 54th Leg., R.S. 1955, ch. 363,
p. 916. Article3.69 is an entirelynew legislation;however,Article
1
For brevity'ssake the Texas BusinessCorporationAct will be abbre-
viated throughoutthis opinionas T.B.C.A.
Eon. WilliamA. garrison,page 2 (WW-490)
2.18 containssubstantially the same languageit did in the 1951 Act
codifyingthe insurancelaws. The only changewas the additionof the
last sentenceto Article2.18. "Words used in the originalAct will
be presumedto be used in the same sense in the amendment." 82 C.J.S.
899, Statutes,para. 384. Accordingly,the corporatelaw contemplated
and referredto by Article2.18 prior to the enactmentof Senate Bill
12 and the BusinessCorporationAct in 1955 must necessarilybe the
generalcorporatelaw as it existedprior to the enactmentof the T.B.
C.A.--i.e.,Title 32, V.C.S. There is nothing in S.B. 12 to indicate
that the language,lllawsgoverningcorporationsin general",as it ap-
pears in Article3.69 was intendedto refer to a body of law differing
from that referredto in the identicallanguageas it appears In Arti-
cle 2.18 as amendedby S.B. 12. Therefore,unless the enactmentof
the BusinessCorporation Act changesor modifiesthe situation,the
body of corporatelaw referredto in Article 3.69 as well as Article
2.18 must be the corporatelaw existingprior to the enactmentof the
BusinessCorporationAct.
The BusinessCorporationAct does, however,modify the appli-
cation of Article2.18 and Article 3.69.
While both the BusinessCorporationAct and S.B. 12 became
effectiveon the same date--i.e.,ninety days from adjournmentby the
Legislature,the legislativehistory is significant.The Business
CorporationAct was finallypassed on March 29, 1955, a day subsequent
to the initialSenatepassageof S.B. 12. The BusinessCorporation
Act was signedby the Governoron April 15th while S.B. I.2was first
passed by the House on Way 4, 1955. Thus, at the time of the passage
of S.B. 12 the Legislatureknew of and had recentlypassed an Act which
was to apply to domesticcorporationsorganizedor to foreigncorpora-
tions being admittedintoTexas after its effectivedate. Presumably,
both statuteswere actuatedby the same legislativepolicy and intent.
They pertainto the same subjectmatter insofaras Articles2.18 and
3.69 are concernedand are thereforein par1 materia. Accordingly,
they shouldbe construedtogether.
Admittedly,there are limitationsupon the applicabilityof
the BusinessCorporationAct to insurancecompaniesby the terms of
the Act itself. Article2.OlB (4) in effect preventsany insurance
companyfrom:
(1) Adoptingthe BusinessCorporationAct.
(2) Organizingunder the BusinessCorporationAct.
(3) Obtainingauthorityto transactbusinessin this State
in accordancewith the procedureprescribedby the
T.B.C.A. (This obviouslyhas referenceto foreign
corporations.)
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Hon. WilliamA. Harrison,page 3 (WW-490)
Article 2.Ol.B(4) does not precludeby its terms the appli-
cabilityof the T.B.C.A.to insurancecompaniesin those cases in which
the InsuranceCode is silent,but merely preventsan insurancecompany
from doing one of the three acts mentioned. Since the InsuranceCode
providesmethods for organizationof domesticinsurancecompanies,the
provisionsof the InsuranceCode would controlthe procedurefor organi-
zation of a domesticinsurancecompany;and since under Articles2.18
and 3.69 of the InsuranceCode the general corporatelaw controlsonly
when "not inconsistent" with the InsuranceCode, the provisionsof Ar-
ticles 2.18 and 3.69 precludedomesticinsurancecorporationsfrom or-
ganizingunder the generalcorporatelaw, whetherthat law is found
in the BusinessCorporationAct or in Title 32, V.C.S. In like manner,
foreign insurancecompaniesobtaintheir certificateof authorityto
transactbusinessin this State in accordancewith the proceduresset
out in the InsuranceCode ratherthan the proceduresset out in the
general corporatelaw. Thus, in the absenceof the limitations(2)
and (3) describedabove, a domesticcorporationcouldnot have organ-
ized under the BusinessCorporationAct nor could a foreigncorporation
obtain a certificateof authorityto do businessin this State under
the BusinessCorporationAct. Therefore,these two (2) limitations
are not determinativeof the questionasked. The effect of adopting
the BusinessCorporationAct is that after the adoption,all provisions
of the BusinessCorporationAct apply. (Articleg.lkC (4), T.B.C.A.)
Such a resultwhen appliedto an insurancecompanywould clearlybe
wholly inconsistentwith the regulatoryschemeof the InsuranceCode.
Likewise,this limitationis not determinativeof the question.
Article 9.14A,T.B.C.A.,provides:
"Art. 9.14. To What CorporationsThis Act Applies;
Procedurefor Adoptionof Act by ExistingCorporations.
"A. This Act does not apply to corporationsorgan-
ized for the purposeof operatingbanks, trust companies,
buildingand loan associationsor companies,insurance
companiesof every type or characterthat operateunder
insurancelaws of this State and corporateattorneysin
fact for reciprocalor interinsurance exchanges,rail-
road companies,cemeterycompanies,cooperativesor lim-
ited cooperativeassociations,labor unions,or abstract.
and title insurancecompanieswhose purposesare provided
for and powers are prescribedby Chapter9 of the Insur-
ante Code of this State,nor to corporationsorganized
for the purposeof operatingnonprofitinstitutions, in-
cludingbut not limitedto those devotedto charitable,
benevolent,religious,patriotic,civic, cultural,mis-
sionary,educational,scientific,social,fraternal,
athletic,or aestheticpurposes;provided,however,that
if any of said exceptedcorporationsare hereafterorgan-
ized under specialstatuteswhich containno provisions
‘I
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Hon. William A. Rarrison,page 4 (WW-490)
in regard to some of the mattersprovidedfor in this Act,
or if such specialetatutesspecifically providethat the
general laws for incorporationshall supplementthe pro-
visions of such statutes,then the provisionsof this Act
shall apply to the extentthat they are not inconsistent
with the provisionsof such specialstatutes." (Emphasis
added.)
Observethat the corporations exceptedby the generallanguage
set forth in Articleg.lkA,T.B.C.A.,from the generalapplicability
of the BusinessCorporationAct may, nevertheless,have it supplement
and apply to them under the followingconditions:
(1) When the corporationis "hereafterorganized".
(2) Under a specialstatute.
(3) Containing
A. No provisionsin regardto some mattersprovided
in the BusinessCorporationAct.
B. Or containinga specificprovisionthat the gen-
eral laws for incorporations
shall supplementpro-
visionsof such statute.
Obviously,the insurancecompaniesreferredto in Articles
2.18 and 3.69 meet the third condition. While the term "special"stat-
ute sometimesrefersto acts which regulatethe rightsor interests
of a particularor designatedpersonor which relateto a particular
person or thing of a class as distinguishedfrom en act which applies
uniformlythroughouta class (39 Tex.Jur.29, Stats.,Sec. 12), it is
also frequentlyappliedto statutessuch as the InsuranceCode that
pertainto a limitedor subclassof personsor things or corporations.
(This was the sense in which the term, specialstatute,was used in
the followingcases: Flowersv. Pecos River Company,138 Tex. 18, 156
S.W.2d 260 (lgkl),and casesthereincited,Townsendv. Terrell,118
Tex. 463, 16 S.W.2d1063 (Comm.App.1929, opinionadopted),Cole v.
State, 106 Tex. 472, 170 S.W. 1036 (1941)) From the readingof the
statute,it can be seen that all of the exceptedcorporations are gov-
erned by statutesthat are "special"in the lattersense. Accordingly,
the term "special"statuteas used in Article9.14,T.B.C.A.,must be
used in the same sense so that insurancecompaniesorganizedafter the
effectivedate of the BusinessCorporationAct would be a corporation
"hereafterorganizedunder specialstatutes".
It can thereforebe concludedthat insurancecompaniescom-
ing within the purviewof Articles2.18 and 3.69 of the InsuranceCode
and organizedunder the InsuranceCode after the effectivedate of the
Hon. WilliamA. Harrison,page 5 (WW-490)
BusinessCorporationAct also fall within the provisoto the general
exceptionset forth in Article 9.14A, T.B.C.A.;thus, the Business
CorporationAct when not inconsistentwith the applicableportionsof
the InsuranceCode governs such of the insurancecompaniescontemplated
by Articles2.18 and 2.69 as are incorporatedafter the effectivedate
of the BusinessCorporationAct.
Does the BusinessCorporationAct in like manuer apply to'
similarforeigninsurancecompaniesinitiallyadmittedto Texas after
the effectivedate of the BusinessCorporationAct?
Can a foreign insurancecompanyadmittedto do business in
Texas come within the purview of Articles2.18 or 3.69 of the Insurance
Code?
Article21.43 of the InsuranceCode states:
"The provisionsof this code are conditionsupon which
foreigninsurancecorporationsshallbe permittedto do
businesswithin this State, and any such foreigncorpora-
tion engagedin issuingcontractsor policieswithin this
State shallbe held to have assentedtheretoas a condition
precedentto its right to engage in such businesswithin
this State."
This article governsall foreign insurancecompaniesexcept
those exceptedfrom the provisionsof Chapter21 by Article 21.41 of
the InsuranceCode. This articlewas originallyenactedin 1903 as
Article 3096ee (Acts 1903, p. 94). At that time it specified:
"That the provisionsof this act as well as all the
terms and provisionsof chaRters1, 2, and 3 of Title 58
of the Revised Civil Statutesof Texas are conditionsup-
on which foreign insurancecorporationsshallbe permitted
to do businesswithin this State, and any such foreign
corporationengaged in issuingcontractsfor policieswith-
in this State shall be held to have assentedtheretoas a
conditionprecedentto its right to engage in such business
within this State." (Emphasisadded.)
At that time Title 58, Article3046, provided:
"The laws relatingto and governingcorporationsin
generalshall apply to end govern insurancecompaniesin-
corporatedin this state insofaras the same are'not in-
consistentwith any provisionof this code."
Thus, the part of the 1903 Act which becameArticle 21.43
of the InsuranceCode made Article 3046, R.C.S. 1895, which became
Hon. WilliamA. Harrison,page 6 (WU-490)
Article 2.18 of the InsuranceCode, applicableto foreigninsurance
companiesadmittedto do business in Texas as well as to domesticin-
surancecompanies. Therefore,Article2.18 would apply to foreignin-
surancecompaniesadmittedto do businessin Texas exceptthose organ-
ized or operatingunder Chapters3, 10, 11, 12, 13, or 14 of the Insurance
Code. Article3.69 expressesthe samebasic legislativeintentand ef-
fects the same result as Article 2.18, insofaras Chapter3 insurance
companiesare concerned. This IS especiallyemphasizedby the close
identityof languageof the two articles,both of which are enacted
in 1955 as part of S.B. 12. Furthermore, Article3.69 appliesto "in-
surancecompaniesorganizedor operatingunder this Chapter3", By
Y adding in Article3.69 the term "operating", which does not appear in
Article 2.18, the Legislatureevidencedand emphasizedits intentthat
a foreigoChapter3 insurancecompanywould fall within the purview
of Article3.69 so that the generalcorporatelaws would apply and gov-
ern when not inconsistentwith the InsuranceCode.
Having concludedthat foreigninsurancecompaniescan fall
within the purviewof Articles 2.18 and 3.69, it remainsthen to de-
terminewhetherthe Business CorporationAct appliesto foreignas it
does to domesticinsurancecorporations.We recognizethat the pro-
viso to the generalexclusorylanguagein Articleg.lkA,T.B.C.A.,uses
the term "hereafterorganized"and that at first blush this would seem
to limit the provisoto domesticcorporations.Nevertheless, there
are other circumstancesthat dictatea differentresult.
Basically,it is a questionof whethera foreigninsurance
corporationis goingto be treated in the same mannerand subjectto
the same limitationsand affordedthe same rightsand powers as a do-
mestic insurancecorporationsimilarlysituated. There is nothing in
Article 2.18 or Article 3.69 of the InsuranceCode nor in S.B. 12 which
would evidencea legislativeintentor justifya construction which
would result.ina differentstandardbeing appliedto foreigncorpora-
tions than domestic. Likewise,Article21.43 of the InsuranceCode
evidencesthe legislativeintent that foreignand domesticcorporations
should standon the same footingand be governedby the same laws.
Article 1532,V.C.S.,and Article 8.02,T.B.C.A.,likewiseprovidethat
foreigncorporations which obtaina certificateof authoritypursuant
to eitherArticle1529, V.C.S., or Chapter8, T.B.C.A.,shall stand
on the same footingand shall have the same rightsand responsibilities
as a domesticcorporation. (Fundamentally, of course,the powers of
a foreigncorporationare furtherlimitedby their charterprovisions
and by the law of the jurisdictionin which they are incorporated.
17 FletcherCyclopediaof Corporations, para. 8317, p. 80, et seq.)
These statutesrelateto the same subjectmatter and are in pari mate-
ria and shouldthereforebe construedtogether. 82 C.J.S. 801, Stats.,
para. 366. Construingthese statutesin that manner,a legislative
intent is manifestthat a forelm insurancecorporationcomingwithin
the purviewof Articles2.18 or 3.69 of the InsuranceCode is limited
Hon. William A. Harrison,page 7 (WW-490)
by the same body of laws as would a domesticinsurancecorporation
similarlysituated. Althougha foreign corporationdoes not obtain its
certificateof authorityunder Title 32, V.C.S.,or under the Business
CorporationAct so that it would fall squarelywithinthe purviewof
Article 8.02, T.B.C.A.,or Article 1532, V.C.S.,there is at least one
case which would effectthe same result in the absenceof any statute.
In the opinionof Lytlev. Custead,23 S.W. 45 (Tex.Civ.App. 1893),
the Court stated:
"Then therewas no law regulatingforeigncorporations
in Texas at the time the accountwas nade, and, such being
the case, the SierraBlancaMining and SmeltingCompanybe-
ing regularlyincorporated under the laws of a sister state,
the comityexistingbetween sovereignstateswould place the
corporationon an equal footingwith those of this state."
~Emphasissupplied.)
Thus, as to such a foreigo corporationadmittedto Texas after
the effectivedate of the BusinessCorporationAct, the BusinessCorpo-
ration Act would supplementthe InsuranceCode provisions;and as to
such a forei@ corporationadmittedto Texas p&~r to the effective
date of the BusinessCorporationAct, the generalcorporatelaws found
in Title 32, V.C.S.,and elsewherewould supplementthe InsuranceCode.
Thus far, we have not commentedon the applicabilityof the
BusinessCorporation Act to domestic insurancecompaniesincorporated
prior to and for-i@ insurancecompaniesadmittedprior to the effec-
tive date of the BusinessCorporationAct. As to these companieswe
concludethat the BusinessCorporationAct presentlycannotand does
not supplementthe InsuranceCode; accordingly,as to these companies
at present,the generalcorporationstatutessuch as those set out in
Title 32, V.C.S.,applyand supplementthe InsuranceCode. As pre-
viously pointedout on page 2 of this opinion,Articles2.18 and 3.69
of the InsuranceCode refer to the corporatelaw as found in Title 32,
V.C.S., except insofaras the BusinessCorporationAct modifiesthat
effect. Generally,Articleg.lkA, T.B.C.A.,excludesfrom application
of the BusinessCorporationAct insurancecompaniessubjectto the pro-
vision above discussed. This proviso cannotapply to domesticinsur-
ance corporationsorganizedp&or to the BusinessCorporationAct or
to foreign insurancecompaniesadmittedto do businessitiTexas prior
to the BusinessConoration Act, for the provisoonly appliesto cor-
porations"hereafterorganized". Furthermore,Article9.15A,T.B.C.A.,
expresslystates: '. . . e&sting coroorationsshall continueto be
governedby the laws heretoforeapplicablethereto."
Becauseof the expressprohibitionof Article2.OlB (k)(d)
insurancecompaniescannotadopt the Texas BusinessCorporationAct.
Thus, 'itdoes not now apply to domesticand foreigninsurancecompanies
which were operatingin Texas on the effectivedate of the Business
CorporationAct.
Eon. William A. Earrison,page 8 (WW-490)
"APPLICATIONS"
In your supplementaryletter you point out that the Insurance
Code is silent as to problemspresentedin the followingfact situations:
I. (1) A domesticlife insurancecompanyorganizedunder
Chapter 3 of the Texas InsuranceCode in 1940 which wishes to change
its name and desiresto file an applicationwith the State Board of
Insuranceto reservea particularname for a shortperiodof time is
not authorizedto utilizethe procedureset out.In Article2.06A (Z),
T.B.C.A.,for the reason that the BusinessCorporation Act does not
apply at presentto such corporationso as to supplement the provisions
of the InsuranceCode. (2) A domesticstocklife insurancecompany
organizedunder Chapter3 of the Texas InsuranceCode in 1958 which
wishes to change its name and desiresto avail itselfof the procedures
set out in Article 2.06 of the T.B.C.A.may do so in order to reserve
the proposedname.
II. (1) The XYZ fire insurancecompany,a Chapter6 fire
and marine companyorganizedin 1951, may voluntari~lydi~sol_v_e
without
obtainingunanimousconsentof its stockholders by followingthe pro--
cedure set out in Title 33, V.C.S.,and particularlythat set out in
Article 1387, V.C.S. The BusinessCorporationAct does not now apply
to such a company. (2) A generalcasualtycompanyorganizedunder
the provisionsof Chapter8 of the InsuranceCode in 1957 may volun-
tarily dissolvewithoutthe unanimousconsentof its stockholdersin
accordancewith the procedureset out in Chapter6 of the Business
CorporationAct.
III. (1) A foreignstock life insurancecompanywhich if
it had a certificateof authoritywould be operatingunder the provi-
sions of Chapter3 of the InsuranceCode and which desiresto register
its name as providedby Article2.07, T.B.C.A.,may do 80 by following
the procedure6in Articles2.06 and 2.07 of the BusinessCorporation
Act. (2) A foreigngeneralcasualtycompanywhich if it had a cer-
tificateof authoritywould be subjectto Chapter8 and Chapter2 of
the InsuranceCode and which desiresto regis its @me as provided
by Article 2.07 of the BusinessCorporationAct may do so by following
the proceduresset out in Articles2.06 and 2.07 of the BusinessCor-
porationAct.
IV. (1) A foreignstock life insurancecompanyhaving a
certificateof authoritysnd.operatingunder the provisionsof Chapter
3 of the InsuranceCode which desiresto changeits cove and
to utilizethe procedureestablishedby Article2.06,T.B.C.A.,and
which was first admittedto do businessin Texas in 1953 and has been
continuouslyoperatingIn this State since that time may not follow
the proceduresset out in the BusinessCorporation Act. The Business
CorporationAct does not now apply to such a corporation.(2) A
Eon. WilliamA. Harrison,page 9 (UW-490)
foreign fire and marine insurancecompanyoperatingunder the provisions
of Chapter6 which was first admittedto do businessin Texas in 1948
and which has been continuouslydoing businesssince that date In Texas
cannot utilizethe proceduresset out in the Bus,inessCorporationAct
inchanging its name. The BusinessCorporationAct does not now apply
to such corporations.
It goes without sayingthat the functionsperformedby the
Secretaryof State under the generalcorporatelaws--theBusinessCor-
porationAct or the provisionsof Title 32, V.C.S.,--would,as to ln-
surance corporations, be performedby the Departmentof Insurance.
The tenor of your next questionis whetheran insurancecom-
pany must adopt the Texas BusinessCorporationAct before it is appli-
cable to the company. As we have previouslystated,an insurancecom-
pany cannotadopt the Texas BusinessCorporationAct. The Business
CorporationAct does, however,apply to certaininsurancecompanies
by virtue of the proviso to the generalexceptionsset out In Article
9.1&A, T.B.C.A. Therefore,we answer your secondquestionin the nega-
tive.
Questions3, 4, and 5 will not be answeredsince they are
predicatedupon our answeringquestions1 and 2 in a differentmanner.
Since title insurancecompaniesare subjectto a specialAct
(Acts 55th Leg., R.S. 1957, p. 753, ch. 311) with respectto the Texas
BusinessCorporationAct, we are excludingthem from the scope of this
opinion. We are not passing upon the applicabilityof anythingstated
in this opinionto title insurancecompanies.
We have not been asked whetherthe statutesset out Fn Title
32 will continueto apply after five years from the effectivedate of
the BusinessCorporationAct to foreip and domesticInsurancecompanies
within the purviewof Articles2.18 and 3.69 of the InsuranceCode which
were incorporated under Texas laws or admittedto Texas prior to the
effectivedate of the BusinessCorporationAct. The question16 most
difficultto resolveand the law is very unsettledand confusing. This
is perhapsnot a proper subjectfor an opinionsince the Legislature
'is yet to meet and the questioncould be resolvedby the enactmentof
additionallegislationwhich would become effectiveprior to September
6, 1960 (fiveyears from the effectivedate of T.B.C.A.). Accordingly,
you are advisedthat this opiniondoes not pass on that question.
Eon. William A. Harrison,page 10 (HW-490)
The Texas BusinessCorporationAct Is the
law "governingcorporationsin general"
referredto in Articles2.18 and 3.69 in-
sofar as domesticInsurancecorporations
organizedafter and forelguinsurancecor-
porationsadmittedto Texas after the ef-
fectivedate of the BusiuessCorporation
Act providedthat such insurancecorpora-
tions came within the purviewof Articles
2.18 and 3.69 of the InsuranceCode. This
resultsalthoughthe insurancecorporation
has not "adopted"the BusiuessCorporation
Act. As to all other insurancecorpora-
tions falllugwithiu the purviewof Arti-
cles 2.18 and 3.69, the BusinessCorpora-
tion Act does not now apply and the "laws
goveruFngcorporati;;;;sin general"are
those found in Title 32, V.C.S.,and else-
where other than in the BusinessCorpora-
tion Act.
Very truly yours,
WILL WILSON
AttorneyGeneralof Texas
By/dbd’d+N
WallaceP. Finfrock
Assistant
hTF:lm
APPROVED:
OPINIONCOMMITTEE:
Gee. P. Blackburn,Chairman
LawrenceJones
Henry G. Braswell
J. Milton Richardson
REVIEWEDFOR TBE ATTORNEYGENERAL
BY:
W. V. Geppert