### THEA~~~ORNEY GENERAL
OFTEXAS

Honorable William J.Lawson Se;;;;rqe;;sState.

Dear Sir: Opinion No. O-3463 Re: Substitution ofpurpose clause ofprivate corporation by charter amendment.

We are inreceipt ofyour recent request for
an opinion as towhether acorporation may amend its charter by changing its purpose from that stated byArticle 1303b, Vernon's Texas Civil Statutes, to that stated by Subdivision 47 of Article 1302, R. C. s., 1925, comonlg known as the real estate urpose clause, inview of the provisions of Article 131E,R. C. S., 1925.

You have the following to say concerning the established practice inyour department:

"So far aswe are able todetermine, this off$ce has-always held that Article 1314 prohibits the amendment of apurpose clause changing it from one subdivision of Article 1302 to another, andhas allowed only such amendments
as leave the purpose within the same purpose clause, but add or subtract from itspowers under thatpurpose clause."

Article 1303b, Ch. 2,Title 32,Vernon's Texas Civil Statutes, 1925, reads as follows:

'Aprivate corporation may be formed for any one ormore of the following purposes, without banking or insurance privileges: to accumulate and loan money, to sell and deal innotes, bonds and securities; to act as trustee under any lawful express trust committed to itby contract, and as agent for theperformance of any lawful act; to subscribe for, purchase, in-Honorable ~~illiamJ. Lawson, page 2 O-3463

vest in,hold, own, assign, pledge and otherwise deal in anddispose of shares of capital stocks, bonds, morgages, debemes, notes and other securities or obligations, contracts and evidences of indebtedness of foreign or domestic corporations not competing with each other in the same line ofbusiness, toborrow money or issue debentures for carrying out any or all purposes above enumerated. Provided that the power and authority herein cp&rred shall in
no way affect any of the crevisions ofthe antftrust laws of this State.

The present charter purpose of the corporation in question Is in the language of the above quoted statute.

Subdivision 47 of Article 1302, Ch. 1, Title 32, R. C. S. 1925, provides:

"To erect or repair anybuilding or improvement, and to accumulate and lend money for said purposes, and topurchase, sell and subdivide real property in towns, cities andvil1ages;and their suburbs not extending more than
two miles beyond their limits and to accumulate end lendmoney for that purpose."

The proposed amendment in the purpose of the corporate charter is in the exact language of Subdivision 47.

A private corporation is a creature of the statutes andmay amend its charter only as authorized by staute and in strict comformity thereto. Attorney General's Oninion, November 21, 1933, toHon. W. W. Heath, Secretary of State.

Article 1314 ofR. C. S. 1925, reads as follows:
"Any private corporation organized or incorporated for anypurpose mentioned in this title, may amend or change its charter or act of incorporation by filing, authenticated in the
samemanner as the original charter, such amendments or changes with the Secretary of State, A corporation created by special Act of the Legislature shall also file with said officer itsHonorable William J. Lawson, page 3

### o-3463

original charter and such amendments thereto or changes therin, if any, ashave been made by special Act of the Legislature; and the same shall berecorded by the Secretary of State, followed by the proposed amendments or changes thereof. Such amendments or changes shall take effect andbe 

### in force from the date of any filing thereof. The certificate of the Secretary of State shallbe evidence of such filing. No.amendment or change violative of the Constitution or laws of this State or anyprovision of this title
orwhich so changes the original purpose of such corporation as toprevent the execution thereof, shall be of any force or effect." (Underscoring ours)

In addition to thedepartmental construction by the Secretary of State's office, we find anumber of opinions of this department construing Article 1314, R C. S. 1925.

In an opinicn dated June 7, 1924, tohonorable S: L. Staples, Secretary of State, this department referred to Article 1135, R. S. 1911, (nowArticle 1314, R. C. 9. 1925) in the following language.

"The ourpose of thinsenactment is seemingly,to prevent achange in the character and thepurpose or, inother words, the nature of
a corporation by an amendment of its charter,
or toreorganize the corporation into anew and adifferent concern, under theguise of an amendment or the addition of anew purpose permitted under the statute."

In an opinion addressed toMrs. 

### Jane Y. McCallum, Secretary of State. dated January 28, 1932, this department ruled thatby virtue of theprovisions ofArticle 1314, R, C. S. 1925, a corporation having as its charter purpose the language of Section 37,Article 1302, R, C. S, 1925, could not by amendment change itspurpose to that set out in Subdivision 38, ofArticle 1302. Subdivision 37provides for the establishment andmaintenance of an oilbusiness with certain other enumerated powers and Subdivision 38provides for the establishment andmaintenance of Bdrilling business, including the drilling ofwells for oil or gas.Honorable Williwn J. kwson, page 4 O-3463

We quote inpart from the opinion:

'By no stretch of the imagination, can .I conceive that one whose authority is restricted to engaging in a drilling business', has authority either expressly or impliedly to 'contract for the lease and purchase of the right toprospect for, develop anduse coal and other minerals,petroleum and gas; or tobuild and own oil tanks necessary tobe used in the 'oilbusiness"; andnot necessary in the 'drilling.business', or tobuild-and own cars and-pipes necessary tobe used in the 'oilbusiness', andnot necessary in the 'drilling business!. There being such a wide difference in the character of the two businesses treated in the two Section, there is
no danbt inmymind but that theproposed smendment 'sochanges the original purpose of the corporation as toprevent the execution thereof.' State ex rel. Steubenville Gas and Electric tie.

v. Taylor (Supreme Court of Ohio) 45 N. E. 513."

The opinion then discusses the cited case and continues:

"It is also tobe noted that unlike the amendment proposed by Collins & Plummer Producticn Company, the amendment proposed by the Ohio Corporation didnot deprive it of any of the rights andprivileges granted to itunder its original charter, but wted itwith additional rights andprivileges which it could have just aswell obtained at the time of the granting of its original charter by including them therein. The Ohio Court said the amendment violated that portion ofArticle 323qa set outherein. Itwill be readily seen that the amendment in the instant case more surely and definitely voilates certain of theprovisions contained inArticle 1314 than did the proposed amendment in the Ohio case, in that the amendment would deprive the corporation, under its charter as amended, of the authority to do each of those things set out inparagraphs 1 and 2on page.aree hereof." (Theparagraphs referred topoint out the charter powers in Subdivision 37which would not be included under_ . .

Honorable ~~illianH. Lawson, page 5;O-3463

Subdivision 78) (Underscoring ours)

in Conference Opinion No. 2944, dated Larch 17, 1934, toHonorable rf.W,death, Secretary of State, this department reviewed thehistory ofArticle 1314, R. C. S. 1925, and discussed its application. This opinion apparently approves theholding of the 1932 opinion quoted above and states that it "relates to the right tomake an absolute and complete change in thepurpose clause" and "deals with the question ofwhether a corporation having for itspurpose clause, one of the subdivisions of the statute, might completely substitute another anddifferent subdivision thereof as itspurpose clausem thekind and character ofwork being entirely dissimilar in the two instances." It ispointed out in this conference opinion that Article 573, R. S., 1.8'79, provided that "no amendments or changes shall be cf any force or effect which
are not germain to the,original-purposes or charter of incorgoraticn, and calculated to carry out and effect the
same. It was concluded that "prevent the exeoution thereras used inArticle 1314, should be construed tomean substantially the same as "germane to and calculated to carry out and effect the zame' asused in the original enactment.

Under thepractice of your de artment and the long-standing construction ofArticle 131fi ,R. C. S. 1925, by this department, we think amere readinm of thepurposes set out inArticle 1303b, andSubdivision i; 7,Article 1302, is sufficient to demonstrate that they arenot germane but provide separate anddistinct purposes. %bdivision 47 of Article 1392 has for itsprincipal purpczes thepurchase, sale and subdivision of reilproperty in cities, and the creation or repair ofbuildings or improvement. 'I'heaccumulation and lending of money in incidental to the principal purposes and thereby restricted. There is a substantial difference between these purposes and those set out inArticle 1303b.

It has been pointed out that the corporation has been in liquidation since 1933, and as aresult thereof, has acquired considerable real estate through foreclosure. It is further suzgezted that the corporation has net exercised all thepowers authorized by its charter, either because of the liquidation orbecause prohibited by the banking laws of theUnited States and for these reasons the amendment would not prevent the further execution0 f'Honorable William J. Lawson, pase 6 O-3463

the original purpose of this corporation. this question however, In determining
we think that our examination must be confined to the original charter purposes of the corporation, asdisclosed by applicable stautes and its charter on file in the office of the Secretary of State, and that the incidental acquisition of real estate in the orderlyprocess of liquidation would not affect the corporetion's original charter purpcses.

It is our opinion that a corporation having as its charter pur ose Vernon's Texas i!i thepowers set out in Article 1303b, ivil Statutes stitute therefor Subdivision I;may not be amendment zub7 ofArticle 1302, R. C. S. lq2#, by virtue of theprovisions of Article 1314, R. C. S. 19250

Yours very truly ATTORNEY GENERAL OFTEXAS

CCC:LM--pam BY Cecil C. Cammack Assistant

APPROVE3 MAY 10, 

### 1941 Glenn R. Lewis Acting A$torney General ofTexas

APPROVED OPINION COMMITTEE BY BWB, CHAIRMAN