THE ATTOKNEY GENERAL 

OF TEXAS 

Honorable Coke R. Stevenson, Jr. Opinion No. M-159 

Administrator 

Texas Liquor Control Board i Re: Interpretation of Section 

Austin, Texas 18 of Article 1 of the Texas 

Liquor Control Act (Article 

666-18 of Vernon's 

Penal Code) as it relates 

to a corporation's rights 

to hold a permit, and 

Dear Mr. Stevenson : related questions. 

your letter requesting an opinion of this office reads, 

in part, as follows: 

"Our questions involve an interpretation of the 

provisions of Section 18 of Article 1 of the Texas 

Liquor Control Act (Article 666-18 of 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 it was '...doing business 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 

it was ' . ..engaged in the legal alcoholic beverage 

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 'doing business in this State 

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Honorable Coke R. Stevenson, Jr., Page 2 (M-159) 

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 

Control Act (Article 666-18 of Vernon's 

Texas Penal Code) by the 60th Legislature, is such corporation entitled 

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, 'engaged in 

the legal alcoholic beverage 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 

'engaged in the legal alcoholic beverage business in this State under 

charter or permit prior to August 24, 

1935,' and where 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 49 percent 

of the corporate stock of Corporation-l 

is acquired by Corporation-2, under the 

same conditions as outlined above, 

would Corporation-l be entitled to 

obtain and hold a permit? 

n . e . 

"Our third question is as follows: 

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Honorable Coke R. Stevenson, Page 3 (M-159) 

Where a corporation was engaged in the 

legal alcoholic beverage business in 

Texas from January 1, 1935, to January 

1, 1940, at which time such corporation 

became inactive but continued to pay 

its franchise taxes and preserve its 

good standing in Texas, may such 

corporation be reactivated in January 

of 1968, with either all or more than 

49 percent of its capital stock being 

owned by unqualified persons 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 (Article 666-18 of 

Vernon's Texas Penal Code)?" 

Prior to the questioned amendment, Section 18 of Article 

I of the Texas Liquor Control Act (Article 666-18 of Vernon's 

Texas Penal Code) Acts 1935, 44th Leg., 2nd C.S., Ch. 467, p. 

1795, at page 1814 provided as follows: 

"NO person who has not been a citizen of Texas 

for a period of three (3) years immediately proceeding ,the filing of his application therefor shall 

be eligible to receive a permit under this Act. 

No 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 citizens who have resided within 

the State for a period of three years and who 

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 that were doing business 

in this State under charter or permit prior 

to August 24, 1935. Partnerships, firms and 

associations applying for permits shall be 

composed wholly of citizens possessing the 

qualifications above enumerated. Any corporation (except carrier) holding a permit 

under this Act which ahall violate any provisions 

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Honorable Coke R. Stevenson, Jr., Page 4 (M-159) 

hereof, or any rule or regulations promulgated 

hereunder, shall be subject to forfeiture of 

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's permits." 

Section 18 of Article I of the Texas Liquor Control Act 

(Article 666-18 of Vernon's Penal Code), as amended by 

Acts 1967, 60th Leg., Ch. 85 sec. 2 p. 161, provides as follows: 

"No person who has not been a citizen of 

Texas for a period of three (3) years immediately 

preceding the filing of his application therefor 

shall be eligible to receive a permit under 

this Act. 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 citizens who have resided within the 

State for a period of three (3) years and who 

possess the qualifications required of other 

applicants for permits; provided, however, that 

the restrictions contained in the preceding 

clause shall not apply to domestic or foreign 

corporations that were engaged in the legal 

alcoholic beverage business in this State under 

charter or permit prior to August 24, 1935. 

Partnerships, firms, and associations applying 

for permits shall be composed wholly of citizens 

possessing the qualifications above enumerated. 

Any corporation (except carrier) holding a 

permit under this Act which shall violate any 

provisions hereof, or any rule or regulations 

promulgated hereunder, shall be subject to 

forfeiture of its charter and it shall be 

the duty of the Attorney General, when any such 

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Honorable Coke R. Stevenson, Jr., Page 5 (M-159) 

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 citizenship or require 

incorporation in Texas shall not apply to the 

holders of agent's, industrial, medicinal and 

carrier's permits." (emphasis added.) 

The first question presented in the opinion request relates 

to the portion of Section 18 dealing with the provision commonly 

called the "grandfather clause" where the words, "engaged in 

the legal alcoholic beverage business" are substituted for the 

more general phrase, "doing business." 

The intent of the legislature to restrict the class of 

corporation that shall qualify under the "grandfather clause" is 

clear. Therefore, only corporations that shall now qualify 

for a permit under the "grandfather clause" of Section 18 as 

amended is a "domestic or foreign corporation that was engaged 

in the legal alcoholic beverage business in this State under 

charter or permit prior to August 24, 1935." 

A permit issued by the Texas Liquor Control Board under 

the authority granted the Board or Administrator by the legislature is a mere privilege and not a right. The Texas Liquor 

Control Act so provides (Article 666-13, 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 issued by 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 at midnight 

of August 31 next 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." 

(Article 666-15c(2). (emphisis added.). Also, Article 666-11 

provides "The Board or Administrator may refuse to issue a 

permit either on an original application or a renewal application to any applicant" if certain facts are found to be true. 

It is therefore clear that the Board or administrator may, upon 

-74% 
Honorable Coke R. Stevenaon, Page 6 (M-159) 

application for a renewal of a permit, either issue or 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 

"doing business 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 corporation was "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 "grandfather clause" itself,not the 

general requirements concerning ownership of stock,govern 

when a corporation seeks to bring itself within 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 'grandfather clause', the commission 

without requiring further proof that the public 

convenience and necessity will be served, must 

issue a certificate if a carrier applicant or 

its predecessor in interest was in bona fide 

operation as a comnion carrier by motor vehicle 

on June 1, 1935, over the routes or within the 

territory covered by the application, and has 

so operated since that time." 

The "grandfather clause" protects the privilege 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, "grandfather clause".belongs,to~the. 

corporation, as an entity~distinct~ from its, stockholders... As. 

long as the corporation continues in existence, the authority 

conveyed by the "grandfather clause" belongs to the corporation 

regardless of 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 "grandfather clause" need only show that the 

corporation was "engaged in the legal alcoholic beverage industry 

in this state under charter or permit prior to August 24, 1935". 

(emphasis added) e 

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. 

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

A court cannot read into the law words 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 legislature by 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 ownership by Texas citizens can be read into the privilege 

granted to a corporation under the "grandfather clause" 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 the public policy of California prohibiting the holding 

of multiple licenses. We are not presented with this question 

but with a Texas statute which deals only with a local citizenship 

requirement. 

In order to'qualify under the "grandfather clause", a 

corporation need only show that it was "engaged in the legal 

alcoholic beverage business in this State under charter or 

permit prior to August 24, 1935." (emphasis added). 

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 "grandfather clause" of 

Section 18 to only those domestic or foreign corporations that were engaged in the legal alcoholic 

beverage business in Texas under charter or 

permit prior to August 24, 1935, and neither 

continuous operation nor any certain percentage 

of stock ownership by 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 

Prepared by Douglas Chilton 

Assistant Attorney General 

APPROVED: 

OPINION COMMITTEE: 

Hawthorne Phillips, Chairman 

Kerns Taylor, Co-Chairman 

W. V. Geppert 

Jo Betsy Lewallen 

Dyer Moore, Jr. 

Houghton Brownlee 

STAFF LEGAL ASSISTANT 

A. J. Carubbi, Jr. 

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