R-337 

Hon. Paul H. Brown Opinion No. V-163 

Secretary of State 

Austin, Texas Re: The designation of notes receivable as "property" within the meanln of Article 

XII, Section i? , Constitution 

Dear Sir: of Texas. 

You have submitted the following request for 

the opinion of this department. 

"1 . There has ~been submitted to this 

department applications for proposed corporate charters wherein the following situation appears: 

"a . In payment for capital stock subscriptions notes receivable secured by chattel mortgages on automobiles Is shown. 

"b . Current assets of the proposed 

corporations include customers accounts receivable. 

"2 . Do the items shown in 8 and b, 

foregoing, 'or either of them, coiistitu6 

property within the meaning of Article 12, 

Section 6, Constitution of Texas, and, if 

so, what investigation, if any, should the 

Secretary of State make In respect to either E or b_?" 

Article XII, Section 6, of the Constitution of 

Texas is as follows: 

"No corporation shall issue stock or 

bonds except for money paid, labor done or 

property actually received, end 811 fictl- 

,tlous ,lncreaee of stock sr indebtedness 

,shell be void." 

Article 1308, Revised Civil Stetutea of Texss, 

1925, which was enacted pursuant to the abov6 constltu- 
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Hon. Paul R. Brown - Page 2, v-163 

tional provision, is In part as follows: 

"Before the charter of a private corporation created for profit can be filed 

by the Secretary of State, the full amount 

of its authorized crpFta1 stock rust be in 

good faith subscribed by its stockholders 

and fifty per cent thereof paid in mesh, 

or its equivalent in other property or labor done, the product of which shall be 

worth to the company the actual value at 

which it was taken or at which the property was received. The affidavit of 

those who executed the charter shall be 

furnished to the Secretary of State, showing: . . . .' 

"2 . The cash value of any property 

received, giving its description, loostion and from Whom and the price et which 

It was received; . . .n. 

That notes receivable secured by chattel mortgages on automobiles and customers' accounts receivable 

are persona1 property subject to taxation is conclusively 

demonstrated by the Legislature definition thereof contained in Article 7147, Revised Civil Statutes of Texas, 

1925, which is in part as follows: 

"Personal property, for the purposes 

of taxation, shall be construed to include all goods, chattels ard effeots, and 

all moneys, credits, bonds and other evldences of de-d by citizenmthis 

State, whether the aeme be in or out of 

the State; . . ." (EmphaaFs added). 

Article 7149, Revised Civil Statutes of Texas, 

1925, defines the term “credits” as follows: 

"ICredits.'-The term. 'credits.? 

wherever used in this titie, shall bb 

held to mean and Include every claim and 

demand for money or other valueble thing, 

and everv annuity or sum of money receivable at stated ueriods. due or to become 

due, and all cleims end demends secured bx 

deed or mortgage, due or to become due." 

nmphasis added) 
Hon. Paul H. Brown - Page 3, v-163 

In the oaae of OIBesr-Rester Glass Company et 

al, 101 Tex. 43,1, 1.08 S.W. 967, the Supreme Court of 

Texa a, construed the meaning of Article XII, Section 6 

of the Constitution of Texas aa follows: 

“The terms in which this section of 

the Constitution is expressed indicates 

the purpose that the assets of the corporation should be somebfh~substantlal, and 

of such e character that they could be subjected to the payment of claims against the 

corporation a§ wel,l 88 to secure the shareholders in ,their rights in the capital 

stock. . . .‘I, 

In view of the rbove legislative and judicial 

construction, it .1a. the opinion of ,this department that 

notes receivabl,e secured by c.hattel mortgages on sutomobiles and cuatbmel)sV accounts receivsble constitute property within the meaning of Article XII, Section 6, Constitution of Texas. 

Referring to the s,ecwnd pert of your question 

as to what i,nve8tlgation, If anyJ should the Secretary 

of State meke in ,reapect to the above property, it is 

presumed that pour query pdfbrs to the a3certrlnment of 

the “value” of such property. 

Article 1309, Revised Civil Statutes of Texas, 

1925, which mubt be construed in connection with Article 

1308, supti, is as follows: 

“If the Secretary of State is not satisfied, he’8.ary, at the expense of the inocrporators ,‘, requi,re other 36 tisfac tory evidence 

before he ah*11 be required to receive, file 

and record such charter,” 

The foregoing article was c snatrued by 

preme Court of Texas in the case of Beach et 81, 

Kay, State Secretary, 191 S.W. 557, as f0llews: 

“The question whether the stock had 

been subscribed in go@d faith, and whether 

the Suvs. Mc50 psr cent thereof Md been paid ia Gosh, 

or i&3 equivalent, ai?3 questions of fact to 

be deterained by the ~aaretary of state by 

the exercise of a discretion ledged with him 

by law. . . .” 
Hon. Paul B. Brown - Page 4, V-163 

Therefore, Therefore, the nature and extent of any further investig6tlon investig6tlon of the,v@lue the,velue OS 8uah property, if 

such investigation Is deemed neaeasary, f lisi whbilg 

roperty, if 

is8 wholly 

within your dlscretioti, 

Bates receivable aec’urad by ohattel 

mortgagee on automobiles and ouetoaers 1 

acaounts receivable oonatitute property 

which may be received la 

r 

ywat of aapitsl stock subaarlptions u thin the moaning of Article XII, Beotlen 6, OOMtitution of Texas. Investigation may be made 

by the Seoretary of State 80 to the value 

of such property under the provi8iona of 

Artiole 1309, R.C.S., and the aatum and 

extent thereof lies wholly within his discretion. 

I 

Yours very truly 

ATTORNEY GEliBRAL OF TEXAS 

CW/lh 

A t April’ 25, 1947 

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A @EEERAL