1-1 By: Turner of Harris, Greenberg H.B. No. 1661 1-2 (Senate Sponsor - Ellis) 1-3 (In the Senate - Received from the House May 4, 1995; 1-4 May 5, 1995, read first time and referred to Committee on 1-5 Jurisprudence; May 16, 1995, reported favorably by the following 1-6 vote: Yeas 7, Nays 0; May 16, 1995, sent to printer.) 1-7 A BILL TO BE ENTITLED 1-8 AN ACT 1-9 relating to the adoption of the Texas Uniform Unincorporated 1-10 Nonprofit Association Act. 1-11 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-12 SECTION 1. SHORT TITLE. This Act may be cited as the Texas 1-13 Uniform Unincorporated Nonprofit Association Act. 1-14 SECTION 2. DEFINITIONS. In this Act: 1-15 (1) "Member" means a person who, under the rules or 1-16 practices of a nonprofit association, may participate in the 1-17 selection of persons authorized to manage the affairs of the 1-18 nonprofit association or in the development of policy of the 1-19 nonprofit association. 1-20 (2) "Nonprofit association" means an unincorporated 1-21 organization, other than one created by a trust, consisting of 1-22 three or more members joined by mutual consent for a common, 1-23 nonprofit purpose. However, joint tenancy, tenancy in common, or 1-24 tenancy by the entireties does not by itself establish a nonprofit 1-25 association, even if the co-owners share use of the property for a 1-26 nonprofit purpose. 1-27 (3) "Person" means an individual, corporation, 1-28 business trust, estate, trust, partnership, limited liability 1-29 company, association, joint venture, government, governmental 1-30 subdivision, agency, or instrumentality, or any other legal or 1-31 commercial entity. 1-32 (4) "State" means a state of the United States, the 1-33 District of Columbia, the Commonwealth of Puerto Rico, or any 1-34 territory or insular possession subject to the jurisdiction of the 1-35 United States. 1-36 SECTION 3. SUPPLEMENTARY GENERAL PRINCIPLES OF LAW AND 1-37 EQUITY. Principles of law and equity supplement this Act unless 1-38 displaced by a particular provision of it. 1-39 SECTION 4. TERRITORIAL APPLICATION. Real and personal 1-40 property in this state may be acquired, held, encumbered, and 1-41 transferred by a nonprofit association, whether or not the 1-42 nonprofit association or a member has any other relationship to 1-43 this state. 1-44 SECTION 5. REAL AND PERSONAL PROPERTY; NONPROFIT ASSOCIATION 1-45 AS BENEFICIARY. (a) A nonprofit association in its name may 1-46 acquire, hold, encumber, or transfer an estate or interest in real 1-47 or personal property. 1-48 (b) A nonprofit association may be a beneficiary of a trust, 1-49 contract, or will. 1-50 SECTION 6. STATEMENT OF AUTHORITY AS TO REAL PROPERTY. 1-51 (a) A nonprofit association may execute and record a statement of 1-52 authority to transfer an estate or interest in real property in the 1-53 name of the nonprofit association. 1-54 (b) An estate or interest in real property in the name of a 1-55 nonprofit association may be transferred by a person so authorized 1-56 in a statement of authority recorded in the county clerk's office 1-57 in the county in which a transfer of the property would be 1-58 recorded. 1-59 (c) A statement of authority must set forth: 1-60 (1) the name of the nonprofit association; 1-61 (2) the address in this state, including the street 1-62 address, if any, of the nonprofit association, or, if the nonprofit 1-63 association does not have an address in this state, its address out 1-64 of state; and 1-65 (3) the name or title of a person authorized to 1-66 transfer an estate or interest in real property held in the name of 1-67 the nonprofit association. 1-68 (d) A statement of authority must be executed in the same 2-1 manner as a deed by a person who is not the person authorized to 2-2 transfer the estate or interest. 2-3 (e) The county clerk may collect a fee for recording a 2-4 statement of authority in the amount authorized for recording a 2-5 transfer of real property. 2-6 (f) An amendment, including a cancellation, of a statement 2-7 of authority must meet the requirements for execution and recording 2-8 of an original statement. Unless canceled earlier, a recorded 2-9 statement of authority or its most recent amendment is canceled by 2-10 operation of law on the fifth anniversary of the date of the most 2-11 recent recording. 2-12 (g) If the record title to real property is in the name of a 2-13 nonprofit association and the statement of authority is recorded in 2-14 the county clerk's office of the county in which a transfer of real 2-15 property would be recorded, the authority of the person named in a 2-16 statement of authority is conclusive in favor of a person who gives 2-17 value without notice that the person lacks authority. 2-18 SECTION 7. LIABILITY IN TORT AND CONTRACT. (a) A nonprofit 2-19 association is a legal entity separate from its members for the 2-20 purposes of determining and enforcing rights, duties, and 2-21 liabilities in contract and tort. 2-22 (b) A person is not liable for a breach of a nonprofit 2-23 association's contract merely because the person is a member, is 2-24 authorized to participate in the management of the affairs of the 2-25 nonprofit association, or is a person considered to be a member by 2-26 the nonprofit association. 2-27 (c) A person is not liable for a tortious act or omission 2-28 for which a nonprofit association is liable merely because the 2-29 person is a member, is authorized to participate in the management 2-30 of the affairs of the nonprofit association, or is a person 2-31 considered as a member by the nonprofit association. 2-32 (d) A tortious act or omission of a member or other person 2-33 for which a nonprofit association is liable is not imputed to a 2-34 person merely because the person is a member of the nonprofit 2-35 association, is authorized to participate in the management of the 2-36 affairs of the nonprofit association, or is a person considered as 2-37 a member by the nonprofit association. 2-38 (e) A member of, or a person considered to be a member by, a 2-39 nonprofit association may assert a claim against the nonprofit 2-40 association. A nonprofit association may assert a claim against a 2-41 member or a person considered to be a member by the nonprofit 2-42 association. 2-43 SECTION 8. CAPACITY TO ASSERT AND DEFEND; STANDING. (a) A 2-44 nonprofit association, in its name, may institute, defend, 2-45 intervene, or participate in a judicial, administrative, or other 2-46 governmental proceeding or in an arbitration, mediation, or any 2-47 other form of alternative dispute resolution. 2-48 (b) A nonprofit association may assert a claim in its name 2-49 on behalf of its members if one or more members of the nonprofit 2-50 association have standing to assert a claim in their own right, the 2-51 interests the nonprofit association seeks to protect are germane to 2-52 its purposes, and neither the claim asserted nor the relief 2-53 requested requires the participation of a member. 2-54 SECTION 9. EFFECT OF JUDGMENT OR ORDER. A judgment or order 2-55 against a nonprofit association is not by itself a judgment or 2-56 order against a member or a person considered by the nonprofit 2-57 association to be a member. 2-58 SECTION 10. DISPOSITION OF PERSONAL PROPERTY OF INACTIVE 2-59 NONPROFIT ASSOCIATION. (a) If a nonprofit association has been 2-60 inactive for three years or longer, or a shorter period as 2-61 specified in a document of the nonprofit association, a person in 2-62 possession or control of personal property of the nonprofit 2-63 association may transfer the custody of the property: 2-64 (1) if a document of a nonprofit association specifies 2-65 a person to whom transfer is to be made under these circumstances, 2-66 to that person; or 2-67 (2) if no person is so specified, to a nonprofit 2-68 association or nonprofit corporation pursuing broadly similar 2-69 purposes, or to a government or governmental subdivision, agency, 2-70 or instrumentality. 3-1 (b) Notwithstanding the above, if a nonprofit association is 3-2 classified under the Internal Revenue Code of 1986 as a 501(c)(3) 3-3 organization or is or holds itself out to be established or 3-4 operating for a charitable, religious, or educational purpose, as 3-5 defined in Section 501(c)(3) of the Internal Revenue Code of 1986, 3-6 then any distribution must be to another nonprofit association or 3-7 nonprofit corporation with similar charitable, religious, or 3-8 educational purposes. 3-9 SECTION 11. BOOKS AND RECORDS. (a) A nonprofit association 3-10 shall keep correct and complete books and records of account for at 3-11 least three years after the end of each fiscal year and shall make 3-12 them available to the members of the association for inspection and 3-13 copying upon request. 3-14 (b) The attorney general may inspect, examine, and make 3-15 copies of the books, records, and other documents the attorney 3-16 general deems necessary and investigate the association to 3-17 determine if a violation of any law of this state has occurred. 3-18 SECTION 12. APPOINTMENT OF AGENT TO RECEIVE SERVICE OF 3-19 PROCESS. (a) A nonprofit association may file in the office of 3-20 the secretary of state a statement appointing an agent authorized 3-21 to receive service of process. 3-22 (b) A statement appointing an agent must set forth: 3-23 (1) the name of the nonprofit association; 3-24 (2) the federal tax identification number of the 3-25 nonprofit association, if applicable; 3-26 (3) the address in this state, including the street 3-27 address, if any, of the nonprofit association, or, if the nonprofit 3-28 association does not have an address in this state, its address out 3-29 of state; and 3-30 (4) the name of the person in this state authorized to 3-31 receive service of process and the person's address, including the 3-32 street address, in this state. 3-33 (c) A statement appointing an agent must be signed by a 3-34 person authorized to manage the affairs of the nonprofit 3-35 association. The statement must also be signed by the person 3-36 appointed agent, who thereby accepts the appointment. The 3-37 appointed agent may resign by filing a resignation in the office of 3-38 the secretary of state and giving notice to the nonprofit 3-39 association. 3-40 (d) The secretary of state may collect a fee for filing a 3-41 statement appointing an agent to receive service of process, an 3-42 amendment, a cancellation, or a resignation in the amount charged 3-43 for filing similar documents. 3-44 (e) An amendment to a statement appointing an agent to 3-45 receive service of process must meet the requirements for execution 3-46 of an original statement. 3-47 (f) A statement appointing an agent may be canceled by 3-48 filing with the secretary of state a written notice of cancellation 3-49 executed by a person authorized to manage the affairs of the 3-50 nonprofit association. A notice of cancellation must contain the 3-51 name of the nonprofit association; the federal tax identification 3-52 number of the nonprofit association, if applicable; the date of 3-53 filing of its statement appointing the agent; and a current street 3-54 address of the nonprofit association in this state, and outside 3-55 this state, if applicable. 3-56 (g) The secretary of state may promulgate forms and adopt 3-57 procedural rules on filing documents under this section. 3-58 SECTION 13. CLAIM NOT ABATED BY CHANGE. A claim for relief 3-59 against a nonprofit association does not abate merely because of a 3-60 change in its members or persons authorized to manage the affairs 3-61 of the nonprofit association. 3-62 SECTION 14. SUMMONS AND COMPLAINT; SERVICE ON WHOM. In an 3-63 action or proceeding against a nonprofit association, a summons and 3-64 complaint must be served on an agent authorized by appointment to 3-65 receive service of process, an officer, a managing or general 3-66 agent, or a person authorized to participate in the management of 3-67 its affairs, in accordance with the Civil Practice and Remedies 3-68 Code. Within 10 days of a request by the attorney general to an 3-69 officer or board member of a nonprofit association or to the 3-70 nonprofit association, the nonprofit association shall provide to 4-1 the attorney general the names, current addresses, and telephone 4-2 numbers of: 4-3 (1) agents authorized to receive service of process on 4-4 behalf of the nonprofit association; and 4-5 (2) the officers, managing or general agents, and 4-6 other persons authorized to participate in the management of the 4-7 affairs of the nonprofit association. 4-8 SECTION 15. UNIFORMITY OF APPLICATION AND CONSTRUCTION. 4-9 This Act shall be applied and construed to effectuate its general 4-10 purpose to make uniform the law with respect to the subject of this 4-11 Act among states enacting it. 4-12 SECTION 16. TRANSITION CONCERNING REAL AND PERSONAL 4-13 PROPERTY. If, before the effective date of this Act, an estate or 4-14 interest in real or personal property was by the terms of the 4-15 transfer purportedly transferred to a nonprofit association, but 4-16 under the law the estate or interest was vested in a fiduciary such 4-17 as officers of the nonprofit association to hold the estate or 4-18 interest for members of the nonprofit association, on or after the 4-19 effective date of this Act the fiduciary may transfer the estate or 4-20 interest to the nonprofit association in its name, or the nonprofit 4-21 association, by appropriate proceedings, may require that the 4-22 estate or interest be transferred to it in its name. 4-23 SECTION 17. SAVING CLAUSE. This Act does not affect an 4-24 action or proceeding commenced or a right accrued before this Act 4-25 takes effect. 4-26 SECTION 18. EFFECT ON OTHER LAW. This Act replaces existing 4-27 law with respect to matters covered by this Act but does not affect 4-28 other law covering unincorporated nonprofit associations. 4-29 SECTION 19. EFFECTIVE DATE. This Act takes effect September 4-30 1, 1995. 4-31 SECTION 20. EMERGENCY. The importance of this legislation 4-32 and the crowded condition of the calendars in both houses create an 4-33 emergency and an imperative public necessity that the 4-34 constitutional rule requiring bills to be read on three several 4-35 days in each house be suspended, and this rule is hereby suspended. 4-36 * * * * *