Iionoreble M. 0. Flowers Secretary of State **Austin,** Texas
Dear Sir: Attentionr Mr. Will Mann Richardson Opinion No. O-2544-A Re: Reconsiderationof opinion **No,** o-2544
Your request for reoonsiderationof the above numbered opinion of this department has been received. 'fhe brief submitted in oonneotion therewithhas also been reoeived and carefully considered.

We quote from opinion No. O-2544, as followsr "Section 6 of Artiole 12 of the Texas Constitution reads:
"TNo corporationshall issue stook or bonds except formoney paid, labor done or property aotually received. and all fictitious; **increase** of steak or indebtedness shall be void.'
"'No think the correct test for the determinationof whether or not property is of suoh characteras to be capable of being accepted by a corporation in payment of capital stookwas set forth by Judge Phillips of the Supreme Courtin the case of WasherVB: %nyer, 211 S. W. 965, 4 A. L. R. 1520. Ihe question involved in such case whether or not a note was propertywithin the purview of the above quoted oonstitutionalprovision. The court said!"'Cndeniably,in the broad 8ense a note is property **in** the hands of the payee. So, in a literal 8en88, is everythingpropertywhich is capable of ownership. All forms of choses in action are property in the earna sense--theright to recover a debt, the right to reoover damages for breach of a contract,unsatisfied judgments. and other similarkinds of aotionabledemands. But the framers of the Constitutionnever intended that property of that nature should constitutetheHonorableM. 0. Flowers, Page 2 **O-2544-A**

oapital of a corporation. The term "property" was used in this section of the Constitution in no auoh sense. Itmeans property readily capable of being applied to the debts of the oorporation. As a rule, it should be property .ofthe kind adapted as to the oharteruses of the corporationand whioh itmay legally acquire. There are some classes of propertywh9ch are **SO** staple in characterand so easily convertible intomoney as to be **in** actual ~ommeroe the ready equivalent of money, and it is possible that a corporation in its formative periodwould be authorizedto receive suoh property **in** payment for stock though not, in a &riot sense, adapted to its purpose*. The different forms of valuable property and the different purposes for whioh corporationsmay be created,make it impossible to lay down other than general rules upon the subject. "'The integrityof a oorporationand the interests of the publia demand,however, that the assets of a corporatfon consist of somethingmore than its stockholders'debts, Its oapital oannot be thus constituted,and therefore it cannot aooept a stock subsariber'snote **in** payment for his stock. There is authority opposed to this holding, as there is authoritywhioh supports it, But it seems to us no authority is needed to establish it.' "Viewing the contract involved in the light of the foregoingwell establishedprinciples of law, we do not believe it constitutespropertywithin the purview of the Constitutionand consequentlythe charter amendment does not warrant your approval." The courtshave held that the.Board of directors of a corporation have no authority to oontract for personal serviaee and impose **an** obligation thereby upon the corporationto oontinuebeyond their term of office. See the ease of **Denton Milling**  tipany vso Blewett, 264 S. W, 236,writ of error denied 276 S. VI.1114, 114 Tex. 582, and also the case of Cliffordvs. Firemen'sMut. BenefitAss’n of City of New York, 249 N. Y. S. 713, 2S2 App. Div. 260, affirmed 182 N. D. 175, 259 x'. YL. **547.** The proposed contract is speculativeand unoertain **in many**  **re** spects, to wit:

1. It is highly speculativeand unoertain as to whether or notHonorable M. 0. Flowers. Pege, 3 0-2544-A

therewill ever be eny prooeeds from the contract,and what amount, if my. 2. It is speculative 8s to whether or not the newly elected board of direotors eaohyear will approve and reenter the contraotO

3, It is speoulativeas to whether or not the presidentwill be removed from office.

4. The oontinued solvency of the insurance oompany is speaulative,
We think said contract is so highly speculativea8 to impose an impossibleburdenupon the Seoretary of State to determinewhat value, if any, said contracthas, thus rendering the same incapableof being consideredas property within the purview of Section 6 of Article 12 of our State Constitution.

We hereby approve opinion No. O-2644 of this departmer& It is our opinion that the charteramendment does not warrant your approval.
Yours very truly
ATTORNEY GKNEAL OF TEXAS

By s/V&n.

J, Fanning Assistant
WJFrGO:wc
APPROVED SEP. 24, 1940 s/Gerald C. Mann ATTORNEY GENERAL OF TEXAS
Approved Opinion Committee By BWB Chairman

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