Justice JEFFERSON delivered the opinion of the Court, in which Chief Justice PHILLIPS, Justice ENOCH, Justice OWEN, Justice O'NEILL, Justice SCHNEIDER, Justice SMITH, and Justice WAINWRIGHT joined.
The primary issue in this case is whether the Electric Cooperative Corporation Act ("ECCA"), particularly as amended in 1997 by House Bill 3203, Act of May 24, 1997, 75th Leg., R.S., ch. 904, § 4, 1997 Tex. Gen. Laws 2847, 2849-50 ("H.B. 3203"), allows a nonprofit electric cooperative to create and own a for-profit subsidiary propane business. See Tex. Util.Code § 161.001-.254. The district court granted summary judgment declaring that HILCO Electric Cooperative, Inc. could create and own HILCO United Services, Inc., which does for-profit business as HILCO Propane. The court of appeals reversed and remanded, holding that the ECCA prohibits electric cooperatives from creating and owning such companies. 43 S.W.3d 677, 678, 681. Although we disagree with the breadth of the court of appeals' holding, we affirm its judgment.
We hold that the HILCO companies failed to establish conclusively that the creation and ownership of a for-profit propane business furthered a proper purpose for a cooperative created under the ECCA. Accordingly, the court of appeals correctly reversed the trial court's summary judgment for the HILCO companies. We also hold, however, that the ECCA entitles an electric cooperative to create and own a for-profit company if necessary, convenient, or appropriate to effectuate the Act's permitted purposes: rural electrification or purposes like those listed in article 1396-2.01(A) of the Non-Profit Act.
The Texas Legislature enacted the ECCA in 1937 to promote rural electrification through the creation of electric cooperatives. State ex rel. S.W. Gas & Elec. Co. v. Upshur Rural Elec. Coop. Corp., 156 Tex. 633, 298 S.W.2d 805, 807 (1957). HILCO Electric was formed under the ECCA to engage in rural electrification and currently provides electricity to rural cooperative members in Hill County, Dallas County, Ellis County, and McLennan County. HILCO Electric also owns onehundred percent of the shares of HILCO Propane, a Texas corporation that sells and delivers propane gas to the general public for a profit.
Midlothian Butane Gas Company, Inc., Rodney R. Jenkins, Lynn B. Gray, Sam Crain, Don Duke, and David R. Heald (collectively, "Midlothian"), and a number of other companies and individuals sued HILCO Electric and HILCO Propane. All of the present plaintiffs are HILCO Electric members,
Midlothian moved for summary judgment. The HILCO companies responded and filed a cross-motion for summary judgment. The district court denied Midlothian's motion for summary judgment and granted the HILCO companies' crossmotion, declaring that "Texas law, including the ECCA and H.B. 3203, permits HILCO Electric Cooperative, Inc. to create and own for-profit corporations, including HILCO United Services, Inc., d/b/a HILCO Propane," and that H.B. 3203 did not violate the one-subject rule of article III, section 35 of the Texas Constitution.
On appeal, the court addressed the question of "whether an electric cooperative company can create and own a `forprofit' company" under the ECCA. 43 S.W.3d at 678. The court held that "electric cooperatives are prohibited from creating and owning for-profit companies." Id. The court of appeals reversed the trial court's judgment and remanded the cause to that court for further proceedings. Id. at 678, 681. Because of the court of appeals' disposition of the statutory construction issue, it did not reach the constitutional question. Id. at 681 n. 3.
We granted HILCO's petition for review to determine whether the ECCA permits an electric cooperative to engage in a forprofit business without regard to the purposes for which the cooperative exercises its powers. 45 Tex. Sup.Ct. J. 306 (January 10, 2002).
The parties' dispute centers on the purposes and powers specified in the ECCA, as amended by H.B. 3203. The HILCO companies assert that, because the amendment expanded the purposes for which electric cooperatives could be organized, such cooperatives may create and own forprofit subsidiaries like HILCO Propane, as long as such ownership furthers "any lawful purpose." Midlothian contends that H.B. 3203 did not expand electric cooperatives' purposes and powers beyond permitting them to use unclaimed funds for certain charitable or nonprofit purposes. Alternatively, Midlothian asserts that, if H.B. 3203 enlarged electric cooperatives' purposes and powers, then the bill unconstitutionally encompassed more than one subject. Tex. Const. art. III, § 35.
The powers of electric cooperatives are solely "derived from, and therefore measured by, the Act which created them." Upshur Rural Elec. Coop. Corp., 298
Section 3 of the 1937 ECCA, entitled "Purpose," provided that electric cooperatives could be organized "for the purpose of engaging in rural electrification." Act of March 30, 1937, 45th Leg., R.S., ch. 86, § 3, 1937 Tex. Gen. Laws 161, 162. Section 4 granted electric cooperatives certain powers, including the right to purchase and own "any and all real and personal property," and "all powers as may be necessary, convenient, or appropriate to effectuate the purpose for which the corporation is organized." Id. § 4, 1937 Tex. Gen. Laws at 637. In 1957, the Legislature amended slightly the "Purpose" provision but still authorized ECCA cooperatives "to engage in rural electrification." Act of May 8, 1957, 55th Leg., R.S., ch. 290, § 3, 1957 Tex. Gen. Laws 692, 692.
These statutes were published as article 1528b of the Texas Revised Civil Statutes. They were repealed in 1997 when the Legislature promulgated the Texas Utilities Code. Act of May 8, 1997, 75th Leg., ch. 166, § 9, 1997 Tex. Gen. Laws 713, 1018. The statute codifying the Utilities Code does not contain an express statement of the purposes for which an electric cooperative may be organized, but, generally, codification intends no substantive change. Id. § 1, 1997 Tex. Gen. Laws at 715. Consequently, under the statute codifying the Texas Utilities Code, rural electrification remained the only purpose for which an electric cooperative could be organized.
House Bill 3203
The same Legislature that repealed article 1528b of Texas Revised Civil Statutes passed H.B. 3203, entitled "AN ACT relating to the disposition of unclaimed funds by nonprofit cooperative corporations." Act of May 24, 1997, 75th Leg., R.S., ch. 904, § 4, 1997 Tex. Gen. Laws 2847, 2849-50.
With respect to electric cooperative corporations, H.B. 3203 amended the "powers" provision of the ECCA to give them the power:
H.B. 3203, § 4 (emphasis in original to indicate additions)(now codified at Tex. Util.Code § 161.121(10)).
Tex.Rev.Civ. Stat. Ann. art. 1396-2.01(A) (footnote omitted).
The HILCO companies argue that because H.B. 3203, section 4 refers to article 1396-2.01(A) of the Non-Profit Act, and that statute provides that corporations organized under the Non-Profit Act may be organized for "any lawful purpose," then electric cooperatives may also be organized for any lawful purpose, notwithstanding the more restrictive enumeration of purposes at the heart of section 2.01(A). To decide this issue, we must examine H.B. 3203 more closely.
Although stated in terms of powers, H.B. 3203, section 4 extends electric cooperatives' permissible purposes to those "described in Section A, Article 2.01, Texas Non-Profit Act." The purposes "described in Section A" include a general classification—"any lawful purpose"—followed by a list of twenty-one specific, permitted purposes: "charitable, benevolent, religious, eleemosynary, patriotic, civic, missionary, educational, scientific, social, fraternal, athletic, aesthetic, agricultural and horticultural; and the conduct of professional, commercial, industrial, or trade associations; and animal husbandry," as well as "organiz[ing] laborers, working men, or wage earners to protect themselves in their various pursuits." Tex.Rev.Civ. Stat. Ann. art. 1396-2.01(A). This list of permissible purposes comports with H.B. 3203's express intent to promote rural educational opportunities and rural economic development.
This interpretation is consistent with the language of H.B. 3203. We find no indication that the Legislature intended to expand the purposes for which a corporation may be organized under the ECCA from "rural electrication" to "any lawful purpose" that fertile minds can fathom. H.B. 3203 amended the ECCA's powers provision to allow an electric cooperative to use its powers to effectuate those purposes described in section 2.01(A) of the Non-Profit Act. The expansion of electric cooperatives' permissible purposes beyond rural electrification, the listed purposes, and purposes of the same nature as those listed must be achieved through the legislative process and not indirectly by a strained interpretation of the statute's words. We conclude that under the ECCA, as modified by H.B. 3203, electric cooperatives may be formed for rural electrification purposes and may exercise their powers to effectuate that purpose, the purposes specifically described in the Texas Non-Profit Act, article 1396-2.01(A), and purposes of the same kind or class as those described therein.
We disagree, however, with Midlothian's contention and the court of appeals' interpretation that the limitation on electric cooperatives' purposes necessarily precludes them from engaging in any forprofit economic endeavor. 43 S.W.3d at 681. The court of appeals' inquiry did not distinguish between an ECCA corporation's purposes and the scope of its powers to accomplish those purposes. The ECCA grants electric cooperatives all the powers that are necessary, convenient, or appropriate to accomplish the cooperative's purposes, whether benefitting members or nonmembers, or whether accomplished directly or through affiliates. Tex. Util. Code § 161.121(10). They may "acquire, own, hold, maintain, exchange or use property or an interest in property, [as] necessary, convenient, or useful." Id. § 161.121(3). There is nothing in the ECCA that, per se, precludes ownership of an interest in a for-profit enterprise, provided that such activity is necessary, convenient, or appropriate to the cooperative's authorized purposes.
Accordingly, we affirm the court of appeals' judgment reversing the trial court's judgment and remand this case for further proceedings consistent with this opinion. In light of our disposition of the first issue, we do not reach the respondents' argument that H.B. 3203 violates the Texas Constitution's one-subject rule.
Justice HECHT filed a concurring opinion.
Justice HECHT, concurring in the judgment.
While I agree that this case must be remanded to the trial court, I write to set out my understanding of the reasons for doing so, which I think are the same as the Court's.
Since it was first enacted in 1937, the Texas Electric Cooperative Corporation Act has enumerated certain powers of electric cooperative corporations and then added a catchall provision, which the parties have referred to as subsection 18, that a cooperative may—to use the current statutory language that has remained essentially unchanged over the years—
perform any other acts for the cooperative or its members or for another electric cooperative or its members, and exercise any other power, that may be necessary, convenient, or appropriate to accomplish the purpose for which the cooperative is organized....
The operative phrase—"necessary, convenient, or appropriate"—is a broad one. The word "necessary" may mean "indispensable"
If reference be had to its use, in the common affairs of the world, or in approved authors, we find that ["necessary"] frequently imports no more than that one thing is convenient, or useful, or essential to another. To employ the means necessary to an end, is generally understood as employing any means calculated to produce the end, and not as being confined to those single means, without which the end would be entirely unattainable.
Black's Law Dictionary defines "necessary and proper" as "appropriate and well
The ECCA was amended in 1997 by House Bill 3203 to add to the end of the catchall provision this clause:
including other or additional purposes benefiting members and nonmembers, whether directly or through affiliates, described in Section A, Article 2.01, Texas Non-Profit Corporation Act (Article 1396-2.01, Vernon's Texas Civil Statutes).
Except as provided by this clause, the Texas Non-Profit Corporation Act does not apply to electric cooperatives.
About the time HB 3203 passed, petitioner HILCO Electric Cooperative, Inc., an electric cooperative corporation organized and operating under the ECCA, formed a for-profit corporation, HILCO United Services, Inc., doing business as HILCO Propane, as a wholly-owned subsidiary to market propane. Within weeks, six of HILCO Electric's members,
In this Court, petitioner HILCO and the respondents all agree that the principal issue is whether "electric cooperativecorporations such as HILCO Electric Cooperative, Inc., have the legal authority to create and own for-profit subsidiary corporations such as HILCO United Services, Inc." As before, however, they argue only the effect of HB 3203. Respondents contend that "[i]t has not been disputed by Petitioners that there was no authority for this type of activity prior to 1997." Petitioners respond that "[t]he most that can be said with respect to prior statutory authority for HILCO's actions is that the parties' cross-motions for summary judgment focused only on HB 3203." The Court correctly concludes that we should not adjudicate the broader issue when the parties have limited their arguments to HB 3203. The most we should decide is whether HB 3203, by itself, authorizes electric cooperatives to own for-profit subsidiaries.
It rather clearly does not. The other amendments contained in HB 3203 all relate to "the disposition of unclaimed funds by nonprofit cooperative corporations", the title of the bill. That fact alone does not preclude the bill's amendment of subsection 18 from being broader, although respondents argue that if the amendment is broader than the title of the bill, the state violates the one-subject rule of article III, section 35 of the Texas Constitution.
This is what I think the Court means by its ejusdem generis argument. Although the Court actually says, "we hold that the phrase `any lawful purpose' ... is limited to purposes similar in kind or class to the twenty-one identified categories" in section 2.01,
HILCO also argues that its expansive view of HB 3203 is supported by the provision that the bill added to the Property Code. Part of that provision, section 74.3013(g), states that nonprofit cooperative corporations
may engage in other business and commercial activities, in their own behalf or through such subsidiaries and affiliates as deemed necessary, in order to provide and promote educational opportunities and to stimulate rural economic development.
HILCO argues that operating a propane business will stimulate rural economic development. Presumably, HILCO would make the same argument for virtually any economic endeavor it chose to pursue. That reading of section 74.3013(g), like HILCO's reading of the amendment to subsection 18, would eviscerate virtually all of the limitations of the ECCA as well as other statutes governing other types of nonprofit cooperatives. By "stimulat[ing] rural economic development" the Legislature could not reasonably have meant engaging in any and every economic enterprise.
We have received briefs from eight amici curiae. One, an electric cooperative,
For these reasons, I join in the Court's judgment.
A person is eligible to become a member of an electric cooperative if the person has a dwelling, structure, apparatus, or point of delivery at which the person does not receive central station service from another source and that is located in an area in which the cooperative is authorized to provide electric energy, and the person:
(1) uses or agrees to use electric energy or the facilities, supplies, equipment, or services furnished by the cooperative at the dwelling, structure, apparatus, or point of delivery; or
Tex. Util.Code § 161.065(a).