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        OFFICE   OF THE ATTORNEY    GENERAL   OF TEXAS
                           AUSTIN




Honorable 0. P. Lookhart
Beard   d Iasumnor Coamieeioners
Awltill, TBxae.



                          Ret 8eetloa
Konoreblr      0. P. Lockhart,   Page 8



      EdOn Of Section l? Of Senate ijill        135,    Acts
      of the 46th Legislature. . . ."
               Seotion 17, Senate Bill    135, &Lots Forty-sixth
Legislature,      p. 405, provides8
              wPapnnts on Certifioates      Already in Foroo.
      Ii tbs payments of the members of any aosooia-
      tion ooming within the eoope of this Act, on
      oertifioates     issued and in foroe when this Act
      takes effect,      or tba reinsuranoe or renewal6 of
      such csrtifloatea,       shall prove insufficient     to
      pay matured death end dieability        olaime in the
      maximumamount 8tatsd in auoh@.liaiis           or oer-
      titloetes,    and to provide for tlw oreation and
      maintenan0pe of the funds requi&?ed by itb law6,
      such aseooiation      may with the approval of the
      Eoard of Ineuranae Gommiesioners and after prop-
      er, heari!@ before said 5oa1'$ provide for meeting
      suah deflaian0y      by additional,  in0reaeed     oi
      extra rates of payment, or by reduction in the
      saulmum benefits      stated in such ptilioies    or oer-
      tifioatse    then in force, or by both euch~ Inoreaesd
      payments and reduced na%imumbemfite,            or t.ho
      members may be given the option of agreeing to
      reduoed maximwa benefita,       or of making horeared
      payments."
               Seation. S of said enactment gives      the followi~
definitions      of certain terms used therein:
            " 'Xembsr' aball inolude policyholders   or
      any persons irpured by an aesoaiation,     by what-
      soe~er~meena the inauranoe may be effeotlve.
            W~Certifioats' shall include any insurance
      policy or aontraot of ineuranoe, oertifioate   of
      membership or other dooumokat through whioh ia-
      aurenoe is lffeotod or evidenaod.
            v*hsso0iation'    shall refer to and inolude
      all types 'of organizations,     oorpor~tions, Pinas,
      asaooiati0ns,    or groups eubjeot   to the provisiona
      o? th&s &et,"
         Its-is observed that Motion 17 is oaptioaed vj&-
ment on CWtifi6tat6# Already in For0e.v The SeOtion then
Honorable   0. P. Lockhart,       Page 3



 stipulates   how an association    may aot to meet oertain oon-
tingencies    arising from ite operations.         Thuely: “If the
payments of the members . . . prove insufficient             to pay
matured d,eath and dlsabillty      olsime in the maxlmum amount
 e&ted    in such policies   or certificates*’     then the assooia-
tion, with the approval of the Ineuranoe Board,~may “provide
for meeting arch detiaienoy      by additional,      inorcased.    or
extra rats8 of (premiumj payment, or by reduotion in the
maximumbenefits      etated in suoh polioies       or oertifioates
then in foroe, or by both such gnoreaeed payments end re-
auoed maximum beNtits,       or the members may be given tno
    ti     r agreeing t.a reduoed maximumbenefits,         or of aak-
f& zogeesed       payment6.“(Undersoorfn$      ourz)
            Seotion   13 of’the     same Aot provides:
            “It is the ~riamra DUSDOBB  of this riot to
      seoure to the membera of the assooiations    and
      their benefiolaries   the full and prompt payment
      of all ~olaime aooording to tta maximumbenew
      provided in their certifioates.   . . .” (Under-
      aoor4~; OUPS)
          The pSOViSiOn8  of Sections 13 and 17 of the Bat
8eem to constitute  an anomaly.   ‘Ihe language of each rootion
soems in aireot varlanoe with that o? the other.     This, how-
ever, oan be explained.
           Seotion 36 of the Aot, the emergency olause, states
that thevpresent laws governing life,    health and accident
asaesament insurance,   . . . do not  adequately proteot the
members from loss through unwholesome, unsound or fraudulent
practioes”  therefore, an emerrjenoy and an imperative pub110
neaesaity was deolared to exist.
            The Legislature       apparently
                                       realized that nat all
insuranoe   companieswere finano:ally  able to give “full ana
prompt payment of al.1 olaims according to the maximumbene-
fit provided In their oertifloates.‘~
           The Legislature,    therefoxe, reasoned that there
must be come provision    inoorporated  in the Aot whoherebythoee
oertaln finanoially   unsound associations   or companies could
go back into the past and make any neoeesary ohanges with
regard to its old members and oertifioate      holders. They must
be allowed to put their houses in order.
Honorable     O.P. Lookhart,           Page 4


           Consequently Seotfon 17 naa placed in Benate
Bill 135 80 that the old members of any assooiation       within
the soope or the Aot oould be proteotsd     also from *loss
through unwholea~me, unsound or fraudulent praatioes~       by
havine: now, *additional,    lnoreaesd, or sxtra rate8 of pay-
ment, or by reduotion in the mexlmumbenefits.        . . or by
both . . ." levied agalnet them so a6 to meet any *doti-
oisnop   whioh m%$ht prevent their aeeooiation     from nttcrin-
lng the ultimate aia or being rinenoially      able to meet
Its valid obligations     in the future by giving "full and
prompt payment or all alaim43,*
             We rind no anomaly between the respective    pro-
vLelons    or the two Deotlone.   The Legislature  derlrrd and
Intended    that all maabare of en aaeooiation,   both @II to
the mrt     am well as the future, 6hould benefit by t& pro-
vitaionn   of senate Bill 126.
              m0tion         16,   astic        I,   (mli      or   Rights)    or tma
Texar Constitution,            providea     that:
            Wo bill   0r attainlor,    ax po8t raoto law,
     ntroaativo     law, or any law -airing      the ob-
     ligation   or oontraots,    aball be madorW
             A retroaotiv6   or :~rotr+iapeative statute is one
whioh reaohos b&ok to impose or attaoh now rlghfe,         h*r dutlea,
now obllgatiolu,     end new liabilities    on paat truusaotioru   or
oonolderetiona.      2 R. 0.. L,; p. 310, Cooley',~,Oonstitutlo~
Limltatlone,     p. 771.
            The oourt          Ln Turbevills             v. %vidy,    (C.C.A.)     272
S. ~34'.559. stated:
            ='A retroaotire   lawi In the aanae or the C&A-
     8tltution     . . . wtioh prohibita  auoh aota, la
     one made that afieota aota or rfghte aaoruing
     bst020     it     oam     into    roroo.        a    rtatute    im   retro-
     aotive which ta?&ee away or l!apalrs rested rlght8
     aoquired under existing   law, or ore&toe a new
     obligation,  iapof~8s a new duty, or edopta a MW
     disability  in reepect to tran&sotions or co&U&d-
     eratlone alreqdy pa8sedrw
           St is a well-aettlod rule of statutory oonrttuo-
tioa that 8tatutee are to be treated as operating prOOpeO-
tirely unlsae the contrary is apparent from the leng~~a     Of
Honorablo   0. P. Lookhart,      Pago 5



the statute.  330 Ine. 00. v. Ray, 50 Tax. 511, at p. 6191
1 Couch on Insuranoe, p. SOS, Cooley’s Constltutionel Limni-
tat10ns, p. 772.
           The language or Seotion 19, Senate Bill 135, plaln-
ly reveala the legislative   intent that the provisions     ot said
section should operate retroepeotirely.    Asr *oertitioatse    iesued
and in foroe when thio Aot tekea efteat” shall ba eubjeot to
%norsasod, or extra ratoe of peyment, or by reduotion in the
maximum benefits   stated in such poliolee  or oertlrioates    then
in foroe.”  (Undeieoorilrgours)
           Mr Justloe  Phillips  in the ease of Cox v., poblson,
105 Tex.. (Se,, at page 487, said:
            “Had the authors of thir provision        (of the Texas
     Constitution)    intended it to have a prospeotite
     operatlon and efioot      they oould, and it fr fair
     to assume that thoy wouI&,~ have used terms whoso
     undoubted common use and meaning would. have ma&a
     that Intention plaln,~ instead of a term whoa6 ‘usual
     rrignifiaanoa ‘ie not proepeative,,      and to whioh wa
     mast attaoh a use it does not ordinarily          have and
     Impart a meaning it doe8 not oommonly bear, in ordir
     to give the provision      a’prospootire    interpretation.*
     (Parenthetfoal    insertion’ our(l)
           The statement by Mr. yustioe Phlllipa    18 applioable
to our situation.,   ltmre apgwma a olear legislatire    intention
that the provisions    of Seetlon II should operate retroepeotlvely.
          In the oaso of Gemtring P. Sovereign Camp, W.O.W.,
278 6. Ww.310, Chief ~Uatiee yly oi’the Court Or civil Appeals,
states that:
            “.   lall lawa retroactive
                     ‘?                   in their           na-
     ture do aoh oomo under the -~oonstitutlonal.           cow
     devnnationl”
         ’ Theichier Juetioe then prooeeded to quote with
apparent approval the following  sxtraot from Oooley*a Oonsti-
tutional  Li.mitationst
            *,@Where a rtatute     is   expressly   rstroaoti76,
     and the objeot and sireet 0r It ia to oorreot an
     i~oo~nt   mlstdro, remedy a mlrohhief exeout~e the
     Intention or the parties,  +d promote 3ustioe~
     then* both a8 a matter ,Or Hsht &d of publie
Honorable    0. P. Lookhart,        Page 6



     poliap tm00ting  the pea00 and mirar9 or the
     oommunity, the law should be ~)~staineQ.'"
             We shall a&so quote raw Oooley*s                  Treatise    on
Oonlltitlltional  LlaIit&iOM,  pp. 179~7%;
           “. . . %brO i# n0 doubt of the right of
     the legislature  ta pane nbatutes uhioh naoh
     baok to and ahange or moaiif the ;r?eot  or prior




            Mr, CooLey then prooeeds to enumerate   oertala ox-
oeptional   aitustlone   where retmspeotlro etatutes hare been
held valid.     They rolla:
           *A retn,epeatira         statute ouring defeat6
     in legal prooao8iage          where they are in their
     nature irregularitiae          only, and do not extend
     to   tatt0rrr   or   jurlrdlction,      18   not   void   OD   bon-
     stitutional     gr0und8, ~nluss expresoly rorblddon.
     02 this alas8 are the etatube       to oure irrsgu-
     leritles    in the arrsaunent at property for t-a-
     tlon end the lory of taxes thereon        Irregular-
     Itles in the organization     or eleot 1ona of aor-
     porationsi     lrregulerftiee  ia the vote8 or other
     a&ion by mlraioipal oorporation#,      or the like,
     where .a statutory power hae i&lea       or due QM
     raguler exeoution through the oarelesansre         of
     oifioere,     or other aausesi Irregular procreb-
     ings in oourt, sto.
             The  rule epplloable   to aaaes of this do-
     60ription    ie rubatantially   tha r0ii0dng: xr
     the thing wanting @r wh%oh railed to be don*,
     and whioh oonstitutae      the defeat in the prooFed-
     lnga, is aomothi~ the neoer8lty for which the
     legislature    might hare dinppsneed with by prior
     statute,    then it is not beyond the power of th0
Honorable   0. P. Lockhert,     Page 7



       legislature   to dispense with it by subsequent
       statute.    md if the irregularity  conslets  in
       doing some act, or in the mode or menuer of do-
      ing come eot, which the legislature   might here
       made immaterial by prior law, it is equally oom-
       peter& to make the 6eme tieterlel    by e eubsa-
       quent law." (pp. 774-776)
         ' 'Ihe situation    oonfrontlng   ua doee not fall with-
In any of the wed       eroeptlona to the general rule.     More-
over,  the Texas Constitution      forbid8 retroactive  lawa s
nomin* .
           Seotion 17, Senete 3111 133, by its eqwe88 $erm8,
seeke to direct a new obligation      upon the old msrbbrrr of
derh4a   lneuranos~ae8oaiatlonr.      Upon them* it lerl.8   new
and dnerpected lie8ilitie8;      It impoeer new &ties,    end at-
tacher new di8abilltie8i     end all relative  to pa8t t+nn8ae-
than8 and oonoidoraticn8.      The provinion 18 intenllrd to at-
toot rd;ghtswhioh aoorued betOr it became operative.
            The paer whioh it saokr to bs8tor upon the
:f~iatio"     is quite bsyond the 800~6 or leg&l legi8la-
        ~e'grenteb    power in it8 prctririon8 eavor8 rtroag-
ly 0) the power tc arsato new contraate between the l8eo o ia -
tion end its old manb8r8and that without the latter'8
oonemt.     The Legirlature  cannot give it* sanction to
aote whioh will impair existing    contraote.
              The orfieial    rim    of thi8  department plainly
show the latent evil in the provirlone          of Seotlon 17, Sen-
ate Bill 135; Unoonsoionablo and unsorupuloue operator8
were quick to recognize and subsequently utilize             Its po8-
aibilitiet3.      People,who,    beoa98s of tlmeir age, could bv
oleeeeb as "bed risks" received notice8 that henceforth
their premium pepente         would be doubled, trebled,      or better,
or that the benerite provided lo-their          oertlfioatee    or pal-
iolee w&to        be cut to a relatively     nominal figure or both
increased premium peymente end out beuafite.              Thue theee
"bed rlekeW were VMzen-ofi*           the eesooiationel     membership
list.     To those puople who could not meet the new, dra8tio.
and even prohlbitiva       demende, end, ee a coneequenee, loet
their inaurenoe, the effect was cataetrophic            beosuaes;W,
as a whole, were of a olase not readily           insurable.        -
stential     equities were adversely effected.
Honorable 0. P. Lockhart,         Page 8




           Such practloealere   not of neoessity    ooniined to
thoee people alone.     Others Pelt the effects.     heny found
that the ineuranoe item in their budget was no longer eu?-
rioient,   Their calculation8   made at the time they firat
became members were upset.     The praotioel   result was wide
epreed lapsing or Insurance contraate.
           Thle seetion tir Senate Bill 135 cannot be deemed
to be in furtherance   or oqulty and good morals or to pm-
mote Justioe,  remedy a mieohiei,  nor a8 one sxeoutlng the
Intention of the pertiee.
           The good motive of the ~giDlatur4  in enacting
thin hw is not to be qub8tiOn.d.    The honest aOt8 Of th8
legitimate  ineuranoe OperatOSD 88ektng to abide the law ti
oortainly  not to be que8tione6.
          hTeverthe~888, Section 17, Senate Bill ~8;00m88
within the con8tftutionel  oondemnatioh 0r 8eoti4n 16,Atti8le
I, at the Peran Bill ot Bighto, a8 being s'retroaotive    law
and one impairing the obligation  of contracts,.
             Seotlon SO, iuWcl8         I,   hxaa   Constitution,     (Bill
0r Right*)    providesr
             Qcoguerd   again8t     tran8gre88ton0         or the




          Aoaordlnglp you are eaviaea that Section 17, of
sonat  Ml1 136 or the Acts or the Borty-sixth   Legislature,
is void end of no roroe or errsot.
                                              Yours very truly
                                  ‘*l    ATTORNBEYGENERAL OF        TEXAS


                                                          Wm. J. Fanning
                                                                              -   .   I.-




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