OFFICE OF THE ATTORNEY GENERAL OF TEXAS 

AUSTIN 

iionorablc Claude Iabell 

secrekry of state 

Austin, TeIll8 

Attention: Xr. I. L. BmGarl 

0p5n10n 30. o-6561 

Rer Whether the Se0 

ahou3.d approva 

oration ha8 a 

hich wodLd 

1945, requeetln& the opln- 

@nt8 thu above geeetiou, and 

sred under the ioLl.oning factual 

. “uhere the aubaoribl.ng 

putpose kk~? uhlah would not persit it 

buslnaee of the other aorporatlon.* 

ostatio copy of the propo8ed ssvmdnmnt 

blng the above qucpltions, aooonpenlrr your 

ou desire to kcior whether or not aa8# should 

be approved and illed. 

The applicable pubdlvlelon ot Brt. 1302, rterised 

Civil Statutes of ;Texna, 1925, provldea: 
Zen. Claude Iaball, pace 2 

wTt~e purpoaaa for which private oorporationo may be formad am: 

"34. To trenecaot any nanuraoturing or 

m.ininc buainssa, en8 to purohatia end aall 

hoods, warois and merohaendisa usad for auah 

business. 

". . . 

". . . 

*39. To gurohese and sell gooda, weraa 

end marohandiae and agrioultural and farm 

producta." 

The partioular oorporetiona involved in your quaatlona have, in their ahartar, adopted the foregoing purpoea 

oleuae8. Yubdivialon 34 ia adopted by the rubaoriblng Qorporetion, end Subdlvlalon 39 by the corporation voting the 

lnoreaae in atook and tandsrint: the smndment. 

Under the provisiona of Art8. 1313 and 13l& R.C.s., 

1925, the duty ie lmpomd upon tha SaoLMery of State to file 

acd reoord tha oharter and proper authentloetad amandmanta 

thereto when the atookholdera of any oompang ahell turnlah 

aatisraotory eoidonoa to tha Beoratary of State of a oomplianoa with the prorl8lons of Chap. 2, Title 32 (nrtr. 

1303-18, inoluaive) V. A. C. S. 

Art. 1320, SUbdivisiOn 7 of aaid atatutaa provide8 

that any oorporetion aa 8uoh haa the power to enter into any 

obllgetion or oontraot saabntial to the tranaeotion of it8 

authorized buainoae. 

Art. 1321 of aaid atetutaa provldse that oorporatlona 

may borrow aumey o~i the orcdit of the oorporetlon and may axacute bond6 and promleaory notas tharafor, and may pladga the 

property and income of the oorportation. 

Art. 1349, v. A. c. M., insofar a8 metarial, providea 

that no corporation, domastio or foral@i, doing buaineaa in 

this state, ahall employ or um tta stock, maana, assets or 

ottsr property, diraotly or indlraotly, ror any purpose whatever other than to aooompliah the legltlmata buainaas of lta 

creation or thoea purpoaaa otherwise p9rmlttad by law, provided Mat nothing in thie artiola shall be bald to inhibit 

oorporetiona rron oontributinC to eng . . . cloio enterprieaa. . . 
‘706 

lion. Claude ;Lsbell, P4@ 3 

It is generally raoognlzed, and by tha waight of 

euthorlty that in the ebsenoe of a statute or oonatitutional 

~rovialon to the contrary, a corporation may take atook of 

mothtir corporation in payment of, or aa eeourity, ror a 

debt. 16 C. J. ii., Far. a3, p 682; 13 Amer. Jur., Par. 

791, i: 312; 1 iillCebrend*a Terse Cor oration8 Par. 80, 

p 243, a:.d see iimotatione in 701. 3 i! , kamr. kit. dep., 

P 140. 

Neither the proposed amandment with eooompanying 

affidavit nor your letter, diaoloaa any other than a bona 

fide laaue ond aubaorlptlon of atook under the above mntiotad and generally reoo&zed rule. 

The cane of Uolnma and Orlgg8 Mfg. co. v. Holmaa 

and Ware611 Eatal Co., 127 Ic. Y. 252, 27 B. &. 831, 24 Ammsr. 

St. itap. 4l+8, l'urnlahea tha leading authority and aupport of 

the above rule. In that oeae tha prerIdr.at and aaoretery of 

the Eenufeoturlng Company, a oorporatlon, aubaorlbad lndlvldually for the atook ln a nawl.y foreud oorporetlon, aam being 

laaued to a truetee for said offloera. The nclw oorporatlon 

theraaftar purohaaed the entire plent, meahlnary, and ato., 

of tha plaintiff oorporetion for whloh it laaued raid atook 

ea aforesaid, and said tianufeoturing Company ratirad from 

bualneaa. The rule wee reoognlzed in thla oaao that a oorporetlon oannot purohaaa or deal in atooke of other oorporetlona unless expraaalg authorlaed to do 80. Tha l tatute 

under which plaintiff oompeny waa Inoorporatad in the state 

or caw York provided that *It ahell not be lawful for suoh 

company to use any of their fund8 in the puroheac of any 

stock in eny other oorporet1on.n 

The court held that add statute was AOt intended 

to 1Imlt the power8 of th6 oorporetlon bayond its neoaaaary 

powara ln the exaroiaa of lta oorporata franohlse, to-wit: 

selling of property, oolleotlon of debta, . . . taking title 

to all kinds of property, including the atook of another oospariy in ths peymant of a debt, in holding tha tranaaotion not 

ultra vlres. Tha court raeaoned in the following language; 

*The plaintiff haa mold lta rolling-mIl1 

machli:ery, ato., to the defandant. It has 

taken stock in the lettirr oompeny in paymaut 

therafor. Ineamuuh aa this wea done with tha 

oomant OS all or the stookholdara, It being 

the act of a private corporations, not in any 

manner harming tha publio, wa sac no reason 
‘YV 6 

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