Court Opinion

ID: 4145502
Source: CourtListenerOpinion
Date Created: 2017-02-18 03:57:32.872847+00
Date Added: 2024-06-11T14:49:37.927265
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FITHEA~TORNEY                GENERAL
                              OF    YXCXAS
Gerald C . Mann

                                                     June 12,    1939

    Hon. Tom L. Beauchamp            Opinion No. O-911
    Secretary of State               Re:   Authorization  of the Secretary
    Austin, Texas                    of State to allow a foreign corpora-
                                     tion to file a certificate   of amend-
    Attention of Mr. Claude          ment changing the purpose clause in
     A. Williams                     the com?any’s permit to do business
                                     in Texas.
    Dear Sir:
                  1Je acknowledge receipt    of your request    for   an opinion
    on the following      three questions:
                    “3. Is this department authorized to allow a
             foreign corporation  to change its purpose clause?
                   “2.   If this department is authorized to allow
             a foreign corporatfon   to change its purpose clause,
             what filing   fee should this department charge?
                   "3. Is the instrument hereto attached suffi-
             cient to effectuate  such a change in a foreign cor-
             poration’s  purpose clause under its permit?”
               The first   paragraph of your letter    states that you en-
    close the certificate    of amendment of “General Syndicate,      Inc.“,
    a foreign corporation,    and that it is in reality     an application
    for a change of purpose insofar as the company’s permit to do
    business in Texas is concerned.       You also state, and it is on
    that basis that this opinion is written,       that the corporation      is
    authorized under its Delaware charter to conduct such business,
    but that it has heretofore     applied for and secured a permit to do
    business under a different     purpose clause.    We assume that all of
    the necessary prerequisites     and conditions   were met by General
    Syndicate,  Inc. before it obtained its present permit:+     to do busi-
    ness in Texas.
               The issuance of permits to foreign corporations  is goV-
    erned by Article   1529 Revised Civil Statutes of Texas.   Article
    1532 provides that after obtaining   such permit, foreign corpora-
    tions shall have and enjoy all the rights and privileges   confer-
    red by the laws of this state on domestic corporations.
                  Because the situation here presented seems to be one of
     first    impression  we consider it necessary,  as a basis for the
Hon. Tom L. Beauchamp, June 12, 1939s        Page 2    (O-911)

opinion to be rendered by this department, to discuss rather
fully the statutes and decisions      covering the rights of a foreign
c’orpor&tion to do business under its permit, and amendments to
charters of corporations   generally.

             ilrtlcle  1314 of the Revised Civil Statutes      relates to
the amendment of charters by private corporations          and provides
among other things that “no amendmentsor change violative             of the
constitution      or law of this state or any provision     of this title
or which so changes the original        purpose of such corporation      as
to prevent the execution thereof shall be of any force or effect.”
By the enactment of thi’s provision,       the Legislature   has expressly
prohibited     a private corporation    organized under the laws of the
state of Texas from amending its charter so as to change the pur-
pose clause under which the corporation         was organized.     It has
long been settled in this and other statesthat          an amendment to a
corporation’s      charter must n?.ot amount to an entire change of the
objects of the corporation.         In I Thompson on Corporations,      para-
graph 316, the following       language appears:
          IIOO..The charter i.s the constitution    of a corpora-
    tion.   It is an instrument emanating from the sovereign
    power in the nature of authority or a grant to certain
    named persons to act as a body corporate and empowering
    them to exercise  corporate functions    for certain speci-
    fied purposes.1t
          Again, at paragraph 397 of the same volume,            in refer-
ring to amendments made by new charters the following            language
appears:
            “To be sure such substituted   charter must be ger-
      mane, necessary to the objects    and purposes for which
      the corporation  was organized,   and must not violate any
      of ;he prfncip&s   governing the doctrine of amendment.
      00.    Citing Snooks vse Georgia Implement Company, 9
S.E. 1104.
           Generally speaking s alterations     in corporate  charters
which affect    a material change in the nature and purpose of the
corporate venture for the prosecution       or conduction of which it
was created are considered      fundamental and material amendments
and are not allowed.      Perkins vs. Coffin,   84 Corm. 275, 79 A.
1070, I Thompson on Corporations,      para- 400. Further citations
and authorities    in this connection include the .following:
           State vs. Taylor, 44 N.E. 513; Youngblood VS.
      Georgia Implement Co., 10 S.E. 1104; Mercantile
      Statement Company vs. Kneal, 53 N.W. 632; I Thompson on
      Corporations, Para 326, 332, 396.
Hon. Tom L. Beauchamp, June 12, 1939, Page 3             (O-911)

           Article 1529 of the Revised Civil Statutes provides
for the issuance of a permit to a foreign corporation  for the
purpose of doing business in the state of Texas and the last
sentence of such article  reads as follows:.
             “If such corporation is created’for more than
        one purpose the permit may be limited to one or more
        purposes eI
           Article 15'37 of the Revised Civil Statutes provides
that each foreign corporation    shall immediately file with the
Secretary of State a certified    copy of any amendment or supple-
ment to its original    articles of Incorporation.
           The following  quotations are from Vol. 8 of Thompson
on Corporations   and are found in the paragraphs indicated:
              IIts powers (speaking of a foreign corporation)
        in another state will be measured by its charter and
        it will not be allowed to exercise   therein any powers
        not conferred upon it, either expressly or implledly,
        by its charter or the laws of the state of its lncor-
        poration.t’  (para D 6582)
              “The principal    of comity permits a foreign cor-
        poration to exercise     only those powers with-      the
        state &&h a domestic cornoration           of the same m
        is aermitted to exer      s     der the constitution.     th
        1 s: and the nolicv%%%            state and such a corporz-
        t%    may not exercise    powers and privileges     which are
        denied to domestic corporations        of like character.     It
        is an expression of p.rincipal that a foreign coroora-
        &ion will not be allowed to t r wet          &&.ness within
        the state on more favorable       conditions   than orescribed
        bv law for domestic c rooratiory. though it is given
        the authority to do s&h acts by the laws of the state
        of its incorporation.l~      (para. 6583) (emphasis ours)
              “A state is not required to recognize   as valid a
        corporation    formed by its own citizens  in another
        state to evade its own laws or the laws of other states.”
        :P68a’~d6~~~krc~tais~~)Carroll vs. East St. Louis, 57 Ill.
                               .
          In Vol. 8 of Thompson on Corporations    at page 830, para.
6607, the case of St. Louis Metal & Construction    Company vs. Beil-
harz, 88 S.W. 512, as cited in support of the principal       of law there-
in announced.  In that  case the Texas Court  of  Civil    Appeals stated
that a change in the name of a foreign  corporation     after it has
Hon. Tom L. Beauchamp, June 12, 1939,         Page 4    (o-911)

obtained a permit to do business in Texas would not sffect             the
validity  of the permit granted or the right of the corporation
to do business in the state of Texas -as    so lo
nsme did not involve a change in corporate charter or in the
character of the business of the cornoration          or the management
thereof.   In this connection it has long been settled that the
business of a corporation       is confined to the objects for which
it was chartered and the same r-zle applies to foreign corpora-
tions permitted to do business in the state of Texas.              a state
may exclude altogether     foreign corporations,      except in the case
of corporations     engaged in interstate    commerce, or if it admits
foreign corporations     to do business within the state it may im-
pose whatever conditions      it sees fit,    A foreign    corporation    has
no existence    beyond the bounds of the state creating          it and it
exercises  no functions    outside of that state except uy consent
of the jurisdiction     in which it seeks to do busine,ss.
           In the case of Western Public Service Company vs. Me-
harg, Secretary of State, 286 S.W. 141, the Commission of Appeals
of Texas, in construing  Article 1.529, said:
             “In view of the comprehensive nature of the
      first declarations       expressed in Article      1529, it
      appears to us that the conclitding sentence is per-
      missive in favor of the corporation            go lo&a as the
      puraoses nw            its charter do not i&4&
        or which franchises      are not Era&able to dome-
      poraorations    and does not j&lude        a cglpBlDation of
      Puruos      not ‘De mitted    to domestic    co oorati u
      So lonisas the Charter purposes are within t&s*
      legitimate    range, the farefgn corporation         is entitled
      to get that for which it asks.           If in such a case
      the corporation     desires to restrict       its business in
      Texas to less than all of its charter purposes, it
      must declare the 13mitatlon,         else the Secretary of
      State 8shall i.ssuen a permit in harmony with the ob-
      jects named in the charter and evidenced by the cer-
      tified    copy thereof.     Such, we think is the meaning
      of Article 1529 as also, of Artfcle 1532, wherein
      it is said thai ssuch corporations.          0D0shall have and
      enjoy all the ri’hts       and privileges     conferred by the
      laws of this sta,! ‘e D on domestic corporations.          And
      since Article 1302, R.SO 1925, subd. 88, contains au-
      thority for a domestic corporation           to have ‘two or
      more’ of such purposes as are named in relator’s              ap-
      plication,    it resu.1t.s that the Secretary of State
      misinterpreted     the law in respect to issuance        of per-
      mits for more than one purpose.”            (emphasis ours)
Hon. Tom. D. Beauchamp, June l2,          1939,   Page 5    (O-911)

             In the case which confronts you at this time, there
 has been no attempt by the corporation-to            amend its Deiaware
 charter, nor has there been any attempt by the corporation                 to
 apply for a permit to do business in Texas for two purposes
which are inconsistent       under the laws of this state.         The cor-
 poration having secured a permit to do business in Texas for
 one purpose as expressed in 4rticle         1302,   now desires to amend
 its permit by substituting       another purpose for the original             pur-
 pose under which the permit was issued.            Under the laws of Dela-
ware the corporation      is permitted to include more than one pur-
 pose in its charter      but when it applied for a permit to do busi-
 ness in Texas,    the &ecretary of State very properly limited the
 issuance of the permit to one purpose.            To allow a foreign cor-
 poration which has thus secured a permit to do business in Texas
 for a specific    purpose to later amend the purpose expressed in
 the permit and conduct an entirely         different    type of business-
 even though such business is one which a corporation             is author-
 ized to conduct in the state of Texas, would be virtually                 annul-
 ling the effect     of the regulation     accomplished by the issuance
 of permits to foreign corporations.           To so hold would open the
,fiela for Texas residents      to form foreign corporations         under the
 laws of other states,      authorized by their charter’ to do business
 for numerous purposes, and to change the purpose clause in their
 permit to do business in Texas as many times as they might desire.
 No persons dealing with such a corporation            in Texas ~would ever
 know how long they would conduct the business for which they were
 issued a permit.      The situation    is somewhat analagous, though it
 is not parallel,     to the case of a domestic corporation          amending
 its charter so as to change the purpose clause for which it was
 incorporated.     It is a well-settled      rule that the charter of a
 corporation    is its constitution     and it constitutes      a contract be-
 tween the corporation      and its stockholders,       between the corpora-
 tion and the state, between the state and the stockholders,                   be-
 tween the stockholders      themselves and between the state and third
 persons dealing with the corporations           on the faith of the granted
 power.    It is equally true that the grant of a permit to do busi-
 ness in Texas with a foreign corporation           is in the nature of a
 contract * The corporation       contracts    with the state of Texas not
 to exceed the powers in the permit and of a necessity              collateral
 contracts   arise as above mentioned,
            Insofar as the state  of Texas and its citizens   are con-
cerned, the permit of a foreign corporation     occupies substantially
the same position   as the charter of a domestic corporation.     The
laws do not permit a domestic corporation     to amend its charter to
the extent of substituting    a new purpose olause and thereby form-
ing a new corporation.     To hold that a foreign corporation   may
change the purpose clause in its permit would be to grant to such
corporation   far greater powers than those permitted a corporation
organized under the laws of Texas.
                                                                 -.     c

Hon.   Tom L. Beauchamp, June 12, 1939,   Page 6    (O-911)

           In answer to your first    question,    it is the opinion
of this department that a foreign     corporation    which has a per-
mit to do business in Texas for a purpose permitted under the
laws of the state of Texas is thereafter       limited to the busi-
ness therein specified,    and it cannot amend the permit so is-
sued so as to change the purpose for which it was originally
granted.   Obviously,   it is not necessary to consider your sec-
ond ana third questions.
                                    Yours very truly
                                    4TTORNEYGENERAL
                                                  OF TEXAS
                                   By /s/ Ross Carlton
                                   Ross Carlton, Assistant
                        .
APPROVErI:
/s'/ Gerald C. Mann
ATTORNEY   GENERAL
                 OFTEXKS
APPROVED:OPIN;~NU~O$MITTEE
BY:
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