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.)
,.                                                         -
                --       ~.~_     -.
      ...   .        \
i _




                     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
li
 I



     .

         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
