Honm+KLe Wm. J. Lawson Secretary of State Austin, Texas

Dear Sir: Attention: Hon. Will Mann Richardson
Opinion No. O-3991 Re: May the charter of AvdonxMutual Housing Corporationbe granted under the present statutes? If so, will the filing fee be $10.00 and will it be exempt from the payment of franchise tax?

This will acknowledge receipt of your request for the opinion of this department on the hereinabovementioned question.

In connectiontherewith, you submittedto us the application for the charter, a copy of the by-laws and a letter from the Federal Works Agency inWashington explaining certainprovisions in the certificate of incorporationand in the by-laws.

We quote from your letter as follows:

"It is the contention of the incorporators that this is a benevolent non-profit corporation and shouldpay only the $10.00 filing fee and be exempt from franchise tax.

"This Department has contended that the purpose is too broad for us to determineunder what subdivisionof Article 1302 they are seeking to incorporate. It seemsprobable, however, that Subdivision 44 which allows the corporation to establish,maintain, erect and repair a department house is the closest to the purpose of the corporation. It is the contention of this Department that if such a purpose is used, even though the corporation is not organized for profit, itmust pay the $50.00 filing fee and the annual franchise tax.

"This Departmenthas also objected to Articles 7 and 8 of the charter. Article 7 provides restrictionsnot authorizedby the statuteson the amendment of the charter, and Article 8 provides for a dissolutionby two-thirds of itsmembers, when the Texas Statutes require four-fifths,HonorableWm. J. Lawson, Page 2

"We would appreciateyour examining these instrumentsand givingus an early opinion as to (1) whether this chartermay be granted under the present statutes and (2) whether if such a charter is granted, the filing fee will be $10.00 and the corporation exempt from franchisetax."

Article 1302,Vernon's Annotated Civil Statutes, enumerates the purposes for which a private corporationmay be formed. The proposed charter is required,by Article 1304,Vernon's Annotated Civil Statutes, to state the purpose for which the corporation is formed. It has been held by our Supreme Court, in the case of Johnston vs. Townsend, 103 Texas 122, 124 S. W. 417, that the purpose shouldbe statedwith sufficient clearnessto enable the Secretary of State to determinewhich of the purposes specified inArticle 1302, supra, the applicants seek to incorporateunder.

In the case of Smith vs. Wortham, 106Texas 106, 157 S.W. 740, it is stated that:

"The statutoryrequirementthat the 'purpose'of the corporation shallbe stated in its charterwas intended for the protection of the incorporatorsand stockholders,and the public, in order that they may be advised as to the characterof its corporateactivities, and to enable the State, through itsproper officers, to collect filing fees and franchisetaxes, and to superviseand control the use and to punish the non-use of its franchise." (Underscoringours.)

In the certificateof incorporation,or application for a charter, submittedwith your request letter, it is stated in the first paragraph thereof as follows:

"Thatwe, the subscribers,of the said County of Dallas and State of Texas under the provisions of the Revised Civil Statutes of 1925 as amendedby the Legislature of Texas, Title 32, Chapter 9, Article 1396 there- @ and the regulatoryarticles succeeding saidArticle 1396 and contained in said Chapter 9 together with all amendments thereto, do hereby form and incorporateourselves into a voluntary association for a Benevolent
w-we, more particularly set out inArticle 2 hereafter, and to that end we hereby adopt and subscribe the following:" (Underscoringours.)

Article 1396 of the Revised Civil Statutes of Texas, 1925, Title 32, Chapter 9, reads as follows:

"Any religious society, charitable,benevolent, literary or socialassociation (otherthan colleges, universities, academies or seminaries),and any military,-,

HonorableWm. J. Lawson, Page 3

or fire company,may, by the consent of a majority of itsmembers become a body corporateunder this title, electing directors or trustees, and performing such other things as are directed in the case of other corporations;and when so organized shallhave all the powers and privileges, and be subjectto all the restrictions in this title contained, for the objects named in the charter, and shall have the same power to make by-laws for the regulation of their affairs as other corporations."

Said certificateof incorporation, inArticle 2 there states the purpose and cause as follows:

"Article 2~ Purpose and Powers. The benevolent purpose for which this Corporation is formed is to manage and operate, under appropriateagreements, in the interest of the United States of America and the members of the Corporation as occupantsthereof. Defense Housing ProjectTEX-41091, constructedby the United States, through the Federal Works Admin- :istrator,

in the town of Grand Prairie, County of Dallas, Texas, known as Avion Village, in order to provide housing for families of persons engaged in national defense activitiespursuant to an act of P Congress approved October 14, 1940 (54 Stat. ll25), iasamended, known as the LanhamAct, and similarpro- .jectsin the State of Texas for the housing of other :?ersons,

as may be agreed upon bythe Corporation ;andthe United States; to maintain,protect and safeguard the Project and Project property and secure to the Government the orderlyand regular receipt (ofrentals, installmentpayments and all other charges thereon and revenues therefrom;by becoming the purchaserthereof to enable the Governmentto dispose of said Project and Project property as requiredby Section 4 of saidAct of Congress, upon the termination of the present emergency as declared thereunderby the President of the United States or prior thereto, ,snd thereby assure the continuedusefulness and occupancy of the Project thereafter; to serveas the medium and means by which the residents and occupants of the Project and houses thereon, as members of the Corporation, through corporate owner-ship of the Project and Project property on a non-profitmutual participation plan, obtain the benefits and security of homes and permanent shelter for their families'andconstructive communityplanning under management of their own choosing in keeping with recognized standardsof Safety, health and wholesome living, togetherwith such services, goods, suppliesand facilitiesas are necessary or desirable for the operation of the homes, and in addition !Of,. .

HonorableWm. J. Lawson, Page 4

thereto benefits which contributeto their general welfare includinghealth, recreationand education,

as citizens of the community. The Corporation shall have full powers to accomplish the benevolent purpose for which it is organized, and in the exercise thereof shall have each and every power granted to corporationsorganizedunder the laws of the State of Texas, and in addition thereto shall have such privileges as are extended to it by the United States of America or the laws thereof."

From the purposes expressed in the application for the charter, quoted above, it is the opinion of this departmentthat the Avion Mutual Housicg "Corporation' is neither a religious society,a charitable,benevolent, literary or social association,nor 8 military or fire company, within the meaning of those terms as used in Article 1396, supra, authorizing the incorporationof such societies,associationsand companies under Title 32 of the Revised Civil Statutes of Texas, as amended.

In the case of State vs, Texas Mutual Life Ins. Co. of Texas, et al, 51 S. W, (2d) 405 (Reversed in 58 S. W0 (2d) 37, on other grounds) the court, in speaking of the meaning of the word benevolent, used the following language:

"Broadly speaking,the word (benevolent)implies 'merelywishing well to others;beneficence; doing well.' It is a broader term than icharity,'which it includes, and with which it is frequentlyused synonymously. Charity in its legal sense implies givingwithout consideration or expectation of return, Whereas benevolent is applied to any act which is promotedby or has for its object the well being of others," (Underscoringours.)

In the case of Kansas Masonic Home vs. Board of Commissioners of Sedgwick County, 1.06 P. 1082, 81 Kan. 859, itwas held that the words "benevolent"and "charitable"are nearly synonymous in meaning, and s.8 frequentlyused are entirely so, especiallywhen applied to purposes or institutions.

In the case of Kappa GammaRho vs. Marion County, et al, 279 P. 555, the Greek letter society,owning the lot on which its fraternity house was situated,was held not entitled to have its property exempted from taxation, as providedby statute, on the ground that it was not a "benevolent,charitable, litemry or scientific society,"within the meaning of such statute exemptingproperty of such societiesfrom taxation, The court held that "benevolent societies';as that term was used in the statute,meant societiesorganizedwith the domimnt purpose of doing good to others rather than for the convenienceof their own members, and dLd not includea fraternitywhich was merely beneficial to its own membe~cs.Eon. Wm. J. Lawson, Page 5

While it appears from the application for the charter that the applicants seek to incorporateas a benevolent corporation,and refer to the "benevolentpurposes for which this corporation is formed," the purpose clause, in our opinion, does not show that the purposes of said corporation are "benevolent"in the sense that said term is used inTitle 32 of the Revised Civil Statutes of Texas, dealingwith corporations.

From the purpose clause in the application, it is clearly shown that thisobjects of the corporationare primarily for the benefit of its
own members, and not for the benefit or well being of others.

It is true that the purpose clause states that the purpose of the corporation is "in the interest of the United States of America." That feature alone, however, does not constitutea benevolent corporation,

as contemplatedby our incorporationstatutes. Every corporation in Texas, benevolent or otherwise,must have a purpose that is in the interest of the 7Jnited

States of America, the State of Texas, and the general public, under penalty of being void and unauthorizedas against public policy.

In view of the foregoing, therefore, it is the opinion of this department,under the facts stated, that the Avion Mutual Housing "Corporation" can not be incorporatedunder subsection2 of Article 1302, Vernon's Annotated Civil Statutes,which provides that private corporations may be formed for "the support of any benevolent, charitable,educational or missionaryundertaking."

Whether the charterapplied for may be grantedunder the present statutes, depends on whether the purpose, as hereinabove quoted, is stated with surlficient

clearnessto enable the Secretary of State to determine that the purpose contemplated is one provided for by Article 1302, supra, and that the purposes contemplateddo not embrace more than one of the subdivisionsof Article 1302, Johnston vs. Townsend, supra.

From the facts submittedto us in connectionwith your request for our opinion, it is the opinion of this departmentthat the purpose is not so clearly stated in the application for the charter as to clearly show that it is authorizedunder any of the presentTexas incorporation statutes and that therefore the application for said charter shouldbe refused.

In view of our answer to your first question,your other questions no longer exist. Very truly yours, GROVER SELLERS ATTORNEY GENERAL OF TEXAS EP:RS:hep This opinion BY s/ Edgar Pfeil Considered and Edgar Pfeil Approved in Assistant Limited Conference. APPROVED OPINION COMMITTEE BY BWB CHAIRMAN -