### THE ATTOKNEY GENERAL

OF TEXAS

Honorable Coke R. Stevenson,Jr. Opinion No. M-159 Administrator Texas Liquor Control Boardi Re: Interpretationof Section Austin, Texas 18 of Article 1 of the Texas Liquor ControlAct (Article 666-18 of Vernon's Penal Code) as it relates to a corporation'srights to hold a permit, and Dear Mr. Stevenson: related questions.

your letter requesting an opinion of this office reads, in part, as follows:

"Ourquestions involve an interpretationof the provisions of Section 18 of Article 1 of the Texas Liquor ControlAct (Article666-18of Vernon's Penal Code).

"Prior to the amendment to the said Section 18 by the 60th Legislature, a corporation, though otherwise unqualified to hold a permit, could obtain and hold a permit if itwas '...doingbusiness in this State under charter or permit prior to August 24, 1935.'

"After the effective date of the amendment to the said Section 18 by the 60th Legislature, a corporation, though otherwise unqualified to hold a permit,may obtain and hold a permit if itwas '

...engagedin the legal alcoholicbeverage business in this State under charter or permit prior to August 24, 1935.'

"Our first question is as follows:

If a corporation, though otherwise unqualified to hold a permit, did, in fact, obtain and hold a permit because it was 'doingbusiness in this State



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under charter or permit prior to August 24, 1935,'prior to the effective date of the amendment to Section 18 of Article I of the Texas Liquor ControlAct (Article666-18 of Vernon's Texas Penal Code) by the 60th Legislature, is such corporationentitled to obtain and hold a permit after the effective date of the amendment to the said Section 18 by the 60th Legislature, even though such corporation 0

. .was not, in fact, 'engagedin the legal alcoholicbeverage business in this State under charter or permit prior to August 24, 19351'

"Our second question is as follows:

Where Corporation-l,which is otherwise not qualified to hold a permit, does, in fact,hold a permit because it was 'engagedin the legal alcoholicbeverage business in this State under charter or permit prior to August 24, 1935,' andwhere all of the capital stock of CorporatE-1 is acquired by Corporation-2,which is not qualified to obtain and hold a permit either directly or as a result of an exemption, is Corporation-l, thereafter,entitled to obtain and hold a permit under the terms of Section 18 of Article I of the Texas Liquor Control Act (Article 666-18 of Vernon's Texas Penal Code)?

If not all,but more than 49percent of the corporate stock of Corporation-l is acquiredby Corporation-2,under the
same conditions as outlined above, would Corporation-lbe entitled to obtain and hold a permit?

n

. e
.
"Our third question is as follows:



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Where a corporationwas engaged in the legal alcoholicbeverage business in Texas from January 1, 1935, to January 1, 1940, at which time such corporation became inactivebut continued to pay its franchise taxes and preserve its good standing in Texas,may such corporationbe reactivated in January of 1968,with either all ormore than 49percent of its capital stock being owned by unqualifiedpersons or corporations, and be entitled to obtain and hold a permit under the terms of Section 18 of Article I of the Texas Liquor Control Act (Article666-18of Vernon's Texas Penal Code)?"

Prior to the questioned amendment, Section 18 of Article I of the Texas Liquor Control Act (Article666-18of Vernon's Texas Penal Code) Acts 1935, 44th Leg., 2nd C.S., Ch. 467, p. 1795, at page 1814 provided as follows:

"NOpersonwho has not been a citizen of Texas for a period of three (3)years immediatelyproceeding ,thefilingof his application therefor shall be eligible to receive a permit under thisAct. No permit shallbe issued to a corporationunless the same be incorporatedunder the laws of the State and unless at least fifty-one (51%)percent of the stock of the corporation is owned at all timesby citizenswho have residedwithin the State for a period of threeyears andwho possess the qualifications required of other applicants for permits;provided, however, that the restrictions contained in the preceding clause shall not apply to domestic corporations,or to foreign corporations thatwere doing business in this State under charter or permit prior to August 24, 1935. Partnerships, firms and associations applying forpermits shall be composedwholly of citizenspossessing the qualifications above enumerated. Any corporation (exceptcarrier)holding a permit under thisAct which ahall violate anyprovisions

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hereof, or any rule or regulationspromulgated hereunder, shall be subject to forfeitureof its charter and it shall be the duty of the Attorney General,when any such violation is called to his attention, to file a suit for such cancellation in a District Court of Travis County. Such provisions of this section as require Texas citsenship or require incorporation in Texas shall not apply to the holders of agent's, industrial,medicinal and carrier'spermits."

Section 18 of Article I of the Texas Liquor ControlAct (Article666-18 of Vernon's Penal Code), as amendedby Acts 1967, 60th Leg., Ch. 85 sec. 2 p. 161,provides as follows:

"Noperson who has not been a citizen of Texas for a period of three (3)years immediately preceding the filingof his application therefor shall be eligible to receive a permit under thisAct. No permit except a Brewer's Permit, and such other licenses and permits as are necessary to the operation of a Brewer's Permit, shall be issued to a corporation unless the
same be incorporated under the laws of the State and unless at least fifty-one (51%)percent of the stock of the corporation is owned at all times by citizenswho have residedwithin the State for a period of three (3)years andwho possess the qualifications required of other applicants forpermits; provided, however, that the restrictions contained in the preceding clause shall not apply to domestic or foreign corporationsthat were engaged in the legal alcoholicbeverage business in this State under charter or permit prior to August 24, 1935. Partnerships, firms, and associations applying for permits shall be composedwholly **of** citizens possessing the qualifications above enumerated. Any corporation (exceptcarrier)holding a permit under this Act which shall violate any provisionshereof, or any rule or regulations promulgatedhereunder, shall be subject to forfeitureof its charter and it shall be the duty of the Attorney General,when any such

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violation is called to his attention, to file
a suit for such cancellation in a District Court of Travis County. Suchprovisions of this section as require Texas citizenshipor require incorporationin Texas shall not apply to the holders of agent's, industrial,medicinal and carrier'spermits." (emphasisadded.)

The firstquestion presented in the opinion request relates to theportion of Section 18 dealingwith the provision commonly called the "grandfatherclause"where thewords, "engaged in the legal alcoholicbeverage business" are substituted for the more general phrase, "doingbusiness."

The intent of the legislature to restrict the class of corporation that shall qualify under the "grandfatherclause" is clear. Therefore, only corporations that shall now qualify for a permit under the "grandfatherclause" of Section 18 as amended is a "domesticor foreign corporation thatwas engaged in the legal alcoholicbeveragebusiness in this State under charter or permit prior to August 24, 1935."

A permit issuedby the Texas Liquor Control Board under the authority granted the Board or Administratorby the legislature is a mere privilege and not a right. The Texas Liquor Control Act so provides (Article666-13,V.P.C.), and the courts of Texas are in full accord. Jones v. Marsh, 148 Tex. 362, 224 S.W.Zd 1 253 S.W.Zd 269 (1952); 108 S.W.2d 300 (Tex.Ci
v. Raspante,
Any permit issuedby the Texas Liquor Control Board, except Wine and Beer Retailer's Permits issued to other than
a railway dining buffet, or club car, shall expire atmidnight of August 31next following the date of issuance. (Article 666-13,V.P.C.), However, upon filing an application for renewal of permit, the Board or administrator is authorized, upon finding that the applicant is qualified under the terms of the Act, "to issue the ermit sought to be renewed." (Article666-15c(2). (emphisisadded.). Also, Article 666-11 provides "The Board or Administrator may refuse to issue **a** permit either on an original applicationor a renewal application to any applicant" if certain facts are found to **be** true. It is therefore clear that the Board or administratormay, upon

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application for a renewal of a permit, either issueor refuse to issue a permit.
Therefore, it is the opinion of this office that a corporation not otherwise qualified to obtain a permit that did, in fact, obtain and hold a permit because it was "doingbusiness in this state under charter or permit prior to August 24, 1935" is not, after the effective date of the amendment to section 18, entitled to obtain a the corporationwas "engaged in the legal alto business in this State under charter or permit prior to August 24, 1935."

In answer to the second question presented in the opinion request the terms of the "grandfatherclause" itself,not the general requirements concerning ownership of stock,govern when a corporation seeks to bring itselfwithin the "grandfather clause", as discussed in the case of Elliott Bros. Trucking Co.
v. United States, 59 F.Supp. 328 (D.C.,Maryland, 1945). The Court there observed at page 330:

"Under the 'grandfatherclause', the commission without requiring furtherproof that the public convenience and necessitywill be served,must issue a certificate if a carrier applicant or its predecessor in interestwas in bona fide operation as a comnion carrier by motor vehicle
on June 1, 1935, over the routes or within the territory coveredby the application, and has
so operated since that time."

The "grandfatherclause"protects theprivilege of a corporation to hold a permit and, is not changed or lessened in any way by a change in the ownership of the stock. The right to qualify under the,"grandfatherclause".belongs,to~the. corporation,

as an entity~distinct~ from its,stockholders... As. long as the corporation continues in existence, the authority conveyedby the "grandfatherclause" belongs to the corporation regardlessof who owns the stock in the corporation.

In answer to the third question presented in the opinion request, a corporation seeking to bring itself under the exception granted by the "grandfatherclause" need only show that the corporationwas "engaged in the legal alcoholicbeverage industry in this state under charter or permit prior to August 24, 1935". (emphasisadded)e

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Honorable Coke R. Stevenson,, Jr., Page 7 (M-159)

A court cannot read into the lawwords not placed there by the legislature. Rmoire Gas and Fuel Co. v. State. 121 Tex. 138, 47 S.W.Zd 265 (Iv:

. In Goldman v. Torres, 341: S.W.2d 154 (Tex.Sup.1960), the court stated at page 158 as follows:

”

. . . this Court cannot, under the guise of liberal construction,usurp the power of the legislatureby reading into.,the Act a provision that is not there."

Under the authority cited above, it is the opinion of this office that neither continuous operation nor any percent of stock ownershipby Texas citizens can be read into the privilege granted to a corporation under the "grandfatherclause" in Section 18 of Article I of the Texas Liquor Control Aot.

you have directed our attention to the case of Harris v. Alcoholic Beverage Control Appeals Board, 38 Cal. 305 392

. 1 (1964)

. This case involved a different situation concerning thepublic policy of California prohibiting the holding of multiple licenses. We are not presentedwith this question but with a Texas statutewhich deals only with a local citizenship requirement.

In order to'qualify under the "grandfatherclause", a corporationneed only show that it was "engaged in the legal alcoholicbeverage business in this State under charter or permit prior to August 24, 1935." (emphasisadded).

SUMMARY
Article 666, Section 18 of V.P.C. as amended by Acts 1967, 60th Leg., Ch. 85 sec. 2, p. 161, restricts the class of corporations authorized to qualify under the "grandfatherclause" of Section 18 to only those domestic or foreign corporations thatwere engaged in the legal alcoholic beverage business in Texas under charter or permit prior to August 24, 1935, and neither continuous operation nor any certainpercentage of stock ownershipby Texas citizens cau be read into the privilege granted to the qualifying corporation.

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Honorable Coke R. Stevenson,Jr., Page 8 (M-159)

8 very truly, 

# F

fGx=- C FORD C. MARTIN **A** orney General of Texas
Preparedby Douglas Chilton AssistantAttorney General

APPROVED:

OPINION COMMITTEE: Hawthorne Phillips, Chairman Kerns Taylor, Co-Chairman W. V. Geppert Jo Betsy Lewallen DyerMoore, Jr. Houghton Brownlee

STAFF LEGAL ASSISTANT A. J. Carubbi, Jr.

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