X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Business, Banking and Contracts No. 01-0336, 7/3/2003. Click here for the full text of this decision FACTS: The primary issue in this case is whether the Electric Cooperative Corporation Act, particularly as amended in 1997 by 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. Texas Utility 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. HOLDING: The court affirms the court of appeals’ judgment reversing the trial court’s judgment and remands for further proceedings. The court rejects the HILCO companies’ contention that Non-Profit Act �2.01(A)’s reference to “any lawful purpose” establishes the Legislature’s intent to expand infinitely the purposes for which electric cooperatives can be organized. Instead, the court applies the rule of ejusdem generis, which provides that when words of a general nature are used in connection with the designation of particular objects or classes of persons or things, the meaning of the general words will be restricted to the particular designation. Carr v. Rogers, 383 S.W.2d 383 (Tex. 1964). Thus, the court holds that the phrase “any lawful purpose,” in the context of the ECCA’s reference to �2.01(A), is limited to purposes similar in kind or class to the 21 identified categories. The court concludes 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. The court disagrees, however, with the respondent’s contention and the court of appeals’ interpretation that the limitation on electric cooperatives’ purposes necessarily precludes them from engaging in any for-profit economic endeavor. 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. Texas Utility Code �161.121(10). They may “acquire, own, hold, maintain, exchange or use property or an interest in property, [as] necessary, convenient, or useful.” �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. OPINION: Jefferson J.; Phillips, C.J., Enoch, Owen, O’Neill, Schneider, Smith and Wainwright, JJ., join. CONCURRENCE: Hecht, J. “Two amici express concern that the court of appeals’ opinion could be read to hold that nonprofit corporations cannot own for-profit corporations. Notwithstanding any language in the court of appeals’ opinion, nonprofit corporations are statutorily permitted to own for-profit corporations. Implicit in the Court’s remand of this case to the trial court is the assumption that HILCO Electric would be authorized to own and operate a for-profit subsidiary if it can show that doing so is ‘necessary, convenient, or appropriate’ under ECCA. The amici’s concerns thus do not survive this Court’s opinion.

Want to continue reading?
Become a Free ALM Digital Reader.

Benefits of a Digital Membership:

  • Free access to 3 articles* every 30 days
  • Access to the entire ALM network of websites
  • Unlimited access to the ALM suite of newsletters
  • Build custom alerts on any search topic of your choosing
  • Search by a wide range of topics

*May exclude premium content
Already have an account?

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.