## GENERAL ESA~WRNEY

OF TEXAS AUSTIN, TEXAS 78711

The Honorable Jimmy Morris Criminal District Attorney Navarro County Corsicana, Texas 75110

Deat Mr. Morris: Opinion No. H- 332 Re: Whether town is entitled

to recover city sales tax from tb.eComptroller where its incorporation has been judicially determined tobe void. You ask whether atown the incorporation ofwhich has been declared null and void in afinal district court judgment is entitled to receive the city sales taxes collected onits behalf by the Comptroller. In 1972 the town ofAngus was purportedly incorporated pursuant to Articles 1133 and 1134, V. T. C.S. The town thereupon elected to adopt the local sales anduse tax permitted byArticle 1066c, V. T.C.S..But on July 23, 1973, the district court ofNavarro County set aside the attempted incorporation ofAngus and declared it illegal, void, and of no effect. There has been noappeal from that decision. During the second quarter of 1973 and for some time thereafter, city sales taxes had been collected by the Comptroller onbehalf ofAngus. You ask whether the town of Angus is entitled to receive the sales taxes collected for it during 1973 by the Comptroller despite thejudicial declaration that its incorporation was void. In resolving questions similar to the one you present, the courts have drawn a distinction between de facto municipal corporations and tho,se’that are void ab initio. A de facto municipal corporation is created when a community has made a good-faith attempt to organize inthe method prescribed by existing law andhas at least colorably complied with that law. Hunt v. Atkinson, 12S.W. 2d 142 (Tex. Comm, App. 1929), vacated on other grounds, 17 S.W. 2d 780 (Tex. Comm. App. 1929). With respect to its obligations, a de facto corporation is for all intents and purposes, the same as a dejure corporation: its acts and contracts are as binding onit

p. 1536The Honorable Jimmy Morris, page 2 (H-332)

as are those ofa dejure corporation. Shapleigh v. San Angelo, 167 U.S. 646 (1897). A de facto corporation may levy and collect taxes to. fhe same extent as a dejure corporation. See generally, 39 Tex. Jur. 2d. Municipal Corporations, Sec. 57. p.407. Onthe other hand, where there is no authority for its dejure existence, amunicipality is void ab initio. The.legal effect ofa judicial determination that an attempted incorporation was void is described inthe following passage from Hunt v. Atkinson, supra:

A corporation, for the existence ofwhich dejure there is nolaw, cannot be ade facto corporation, andits existence may be attacked directly or collaterally, or even ignored since itis in law nothing. Itaffords norights andpresents nodefenses at any time, or as toany person. 12S.W. 2dat 145. Thus when an attempted incorporation is declared void, the municipality purportedly created is treated by the law as if it never existed, and its acts and contracts have noeffect whatsoever. The attempted incorporation ofthe town ofAngus has been set aside and declared illegal, void and%fno effect. Inits judgment the district court stated that there is not now nor has there ever been a legally incorporated town ofAngus, and it ousted all city officials from the offices they purportedly held with no right to assert any powers or exercise any functions afthose offices. The incorporation ofAngus having been declared void, the town never had the authority to levy and collect the city sales tax, and those who paid it are entitled to a refund oftheir money. Article 20.10, Taxation-General, V.T. C.S. Since ithas neither de jure nor de facto status, the town of Angus and those purporting to represent it are certainly not entitled to receive any city sales taxes from the Comptroller.

p0 1537The Honorable Jimmy Morris, page 3 (H-332)

SUMMARY A town the incorporation of which has been .declared null and void in afinal court order is not entitled to receive the city sales taxes collected onits behalf by the Comptroller. Very truly yours, A 

# v Attorney General of Texas APP OVED: R

DAVID M. KENDALL, Chairman Opinion Committee

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