Court Opinion

ID: 4146188
Source: CourtListenerOpinion
Date Created: 2017-02-18 04:05:22.978325+00
Date Added: 2024-06-11T13:30:13.383197
License: Public Domain

Gerald C. Mann

                                NO. 3043
         Opinion holding that two or more private corpora-
         tions,  organized for purposes other than those
         mentioned in Article   1315 of the Revised Civil
         Statutes,  1925 are not authorized under Article
         1316 of such s 4 atutes to consoSidate their char-
         ters.

                      OFFICE OF THE ATTORNEY
                                           GENERAL

                                         March 27, 1939

    Hon. Claude A. Williams              Opinion No. O-219
    Assistant Secretary of State         Re: Consolidation    of
    Austin, Texas                              corporations
    Dear Sir:
              This department acknowledges receipt  of your letter
    of January 26, 1939, in which you ask the question:
               "May two or more private corporations  organized
         for purposes other than those mentioned in Article
         1315 of the Revised Civil Statutes    1925, consolidate
         their charters under a new corpora 4 e name in accord-
         ante with the provisions   of Article 1316 of such stat-
         ute?"
               We also acknowledge receipt    of a copy of the confer-
    ence opinion of this department, dated November 4, 1938, being
    No. 3026, written by Hon. Richard Brooks, ,Assistant Attorney
    General, and's copy of the opinion of Hon. Edwin D. Guinn,
    Attorney   Franchise Tax Division,    in the office   of the Secre-
    tary of &ate,    dated December 2, 1938.     Copies of both of said
    opinions are attached hereto.      Said opinions,   which relate to
    the question submitted by you and which reach contrary conclu-
    sions, have received the careful consideration       of this depart-
    ment.
Hon. Claude A. Williams,        page 2    (C-219)

           After studying the opinions above referred       to and
all relevant authorities,   it is our opinion that Article      1316
of the Revised Civil Statutes,   1925, does not authorize two or
more corporations,  organized for purposes other than those men-
tioned in Article  1315 of such statutes,    to consolidate    their
charters.   Having reached this conclusion,     we must of necessity
overrule the former opinion of this department, hereinabove re-
ferred to, which reached the opposite     conclusion.
              Articles   1315 and 1316 as they appear in the Revised
Civil    Statutes,    1925, read as fo 1lows:
               “Art. 1315. Renewal of charter. - Corporations
        created for the support of benevolent,          charitable,
        educational     or missionary undertakings,      the support
        of any literary     or scientific   undertaking,     the main-
        tenance of a library,      or the promotion of painting,
        music or other fine arts, whose charter has expired
        by limitation,     may revive such charter with all the
        privileges    and immunities and rights of property,
        real and personal,      exercised  and held by it at the
        date of the expiration       of its said charter,     by filing,
        with the consent of a majority of its stockholders,
        a new charter under the provisions         of this chapter,
        reciting    therein such original    privileges    and immunI-
        ties and rights of property,       and by filing     therewith
        a certified     copy of such original    expired charter.”
              t1Art. 1316. Consolidation.      - Any two or more of
        such corporations    may revive and consolidate    their
        charters under a new corporate name, or under the name
        of either    with all privileges,     immunities and rights
        of proper 4y, real and personal,      enjoyed by each at the
        date of expiration    of their several charters,     by, in
        like manner, filing     a charter, which shall recite the
        facts of consolidation,     accompanied by certified     copies
        of said original   charters;    provided the provisions
        thereof shall not be construed to relieve       any corpora-
        tion from the payment of occupation taxes, now or here-
        after required by law.”
              These articles  were originally  enacted as an amendment
to Article     575, Chapter 3, Title 20, of the Revised Statutes of
Texas of 1879, relating      to the general powers of “every private
corporation”.      By chapter XCv of the General Laws, Eighteenth
l$e$?;lature,    Regular Session, 1883, pe 98 (9 Gammel’s Laws of
       , page 404) a new section,     to be numbered “Section 9” was
added to Article     575 of the Revised Statutes, to read as follows:
                                                           _-.

Hon. Claude A. Williams,       page 3     (O-219)

             "Section 9. Any private corporation             created
     either by special act of the Legislature,               or under
     the provisions       of the general law, for the support
     of any benevolent,         charitable,     educational   or, mis-
     sionary undertaking          the support of any literary         or
     scientific      undertaking,      the maintenance of a library,
     or the promotion of painting,             music or other fine
     arts, whose charter may expire or may have expired
     by limitation       may revive such charter wlth all the
     privileges      and immunities and rights of property
     real and personal,         exercised and held by it at tAe
     date of the expiration          of its said charter,      by fil-
     ing, with the consent of a majority of its stock-
     holders,     a new charter under the provision           of the
     general law of the State of Texas, reaiting               therein
     such original       privileges     and immunities and rights
     of property,       and by filing      therewith a certified
     copy of such original          forfeited    charters end any
     two or more of such corporations             may revive and
     consolidate      their charters under a new corporate
     name or under the name of either,             with all the priv-
     ileges,    immunities and rights of property             real and
     personal       enjoyed by each at the date of the expira-
     tion of iheir several charters              by in like manner
     filing    a charter, which shall ;eaite           the fact of
     consolidation,       accompanied by certified        oopies of
     said original       charters:     provided this act shall not
     be construed to relieve           any corporation    from the
     payment of occupation taxes now or hereafter                re-
     quired by law."
             It will be noted that the statute as originally           enact-
ed was all in one sentence, the portion of the statute which is
now Article     1315 of the Revised Civil Statutes       1925, being sep-
arated from the portion that is now Article         1316 of such stat-
utes   by only a colon.        It seems to be indisputable      that although
SectIon 9 was made a part of Art. 575, relating          to'all    private
corporations      still   Section 9 was intended to apply only to cer-
tain named kinds of corporations,        and that the phrase "sn@'h COP-
porations"     as usea in the latter part of the act referred          to
corporations     mentioned in the first    part of the act, namely COP-
porations created "for the support of any benevolent,             chari Eable,
educational     or missionary undertaking,    the support of any liter-
ary or scientific       undertaking,  the maintenance of a library,        or
the promotion of painting,        music, or other fine arts."
           It is a general rule of statutory construction   that a
statute   in the absence of some specific  amendment, should be
given "{he meaning which it had at the time of its enactment".
                   ,-.

Hon. Claude A. Williams,     page 4   (O-219)

Manrv v. Robisclg    122 Tex. 213 56 SW (2d) 438 (1932). Unless,
therefore,  there'is    some compei ling reason for the adoption of a
different  construction,    we believe that the phrase "such corpor-
ations" should now be given the same meaning as it had in the
statute as it was originally     enacted.
          Article  575 of the Revised~ Statutes of 1879 was re-
enacted in Article  651 of the Revised Statutes of 1895, there
being no change in the provisions   of Section 9 thereof, except
that the two portions thereof were separated by a semi-colon in-
stead of a colon.
             Article  651.of the Revised Statutes of 1895 was amend-
ed by Senate Bill No, 221 Chapter CLVIII General Laws, 30th
Legislature,     Regular Sess     1907, page sOlI and by House Bill
No. 586, Chapter 115 Genera Laws, 31st Leg slature,       Regular
Session, 1909, page 325, but neither of these laws changed the
provisions    of Section 9 of this article.
             Article  651 of the Revised Statutes of 1895 was split
into three different      articles   by the Legislature   in enacting the
Revised Civil Statutes of 1911.         The first   eight sections of Ar-
title   651. of the Revised Statutes of 1895 were re-enacted as
Article   lib0    a part of chapter 3 of Title 25 of the Revised Civil
Statutes of 1 911.      Section 9 of Article     651 of the Revised Stat-
utes bf 1895 was re-enacted        in two separate parts as Articles
;$kl and 1137 of Chapter 2 of Title 25, Revised Civil Statutes of
         These two articles      of the Revised Civil Statutes of 1911
read*as follows:
             "Art. 1136. Renewal of charter of certain benevo-
     lent     etc.   corporations,    how. - Any private corporation
     crea 4 ed ei t her by special act of the legislature         or under
     the provisions      of the general law for the support of any
     benevolent,     charitable,    educational   or missionary under-
     taldng, the support of any literary          or scientific    under-
     taking, the maintenance of a library,          or the promotion
     of painting,     music or other fine arts whose charter may
     expire or may have expired by limitat3on,           may revive such
     charter, with all the privileges          and immunities and rights
     of property,     real and personal,     exercised   and held by it
     at the date of the expiration         of its said charter,     by
     filing,    with the aonsent of a majority of its stockholders,
     a new charter under the provisions          of the general law of
     the state of Texas, reciting        therein such original      privi-
     leges and immunities and rights of property,            and by filing
     therewith a certified        copy of such original     expired char-
     ter."
Hon. Claude A, Williams,      page 5'   (O-219)

             "Art. 1137.     Renewal and consolidation        of two or
      more such corporations,        etc.,   how. - Any two or more of
      such corporations      may revive and consolidate         their char-
      ters under a new corporate name, or under the name of
      either    with all privileges,        immunities and rights of
      proper c y, real and personal,        enjoyed by each at the date
      of the expiration      of their several charters,         by, in like
      manner filing      a charter, which shall recite          the fact of
      aonsoljdation      accompanied by certified        copies of said
      original    charters;   provided,     the provision    thereof shsll
      not be,construed      to relieve     any corporation    from the pay-
    . ment of occupation taxes, now or hereafter             required by
      law.1'
            The fact that the two provisions   of the statute,  which
 had formerly been one sentence in a single section of the stat-
 utes, were divided so as to form two separate articles     does not
 indicate  that the statutory provisions   should receive a differ-
 ent interpretation  from the meaning which they originally    had,
where there was no substantial    change in their phraseology,   Buck
 Stove & Rans Car va Vickers,   226 U.S. 205, 57 L. Ed. 189, 33m
ct. 41 (1912:.
             In the opinion of this department, dated Novsmb@r 4
1938, the case of Texas Seed & Floral Company ve Chisago Set &
Seed Comoanv, 187 S.W. 747 (Civ.App.,         Amarillo    19.~6)in which
writ of error was refused,      is cited as authori t y for the propo-
 sition that Article     1137 Revised Civil Statutes of 19ll (now :
Article   1316, Revised Cl&       Statute,   1925) has been judicially
construed to authorize commercial corporations           to consolidate
their charters.     It is true that in the opinion in this case
the aourt said that Article       1137 authorized the consolidation
of corporations,    and that under the findings        of the trial    court,
a consolidation    had been established      under the statute.      It does
not appear however, that the point was raised that Article               1137
applied od y to the corporations        formed for the purposes men-
tioned in Article    1136 and this point is not mentioned in the
court's   opinion,   Furthermore, the validity       of the aonsolidation
was entirely    immaterial to the decision of the only question be-
fore the oourt; viz,      the liability     of the new aompany to a ered-
itor of one of the o f d companies.        Even if the consolidation      was
without lawful authority,      still   the new corporation    was liable
to the creditors    of the old corporations.        This point was ex-
pressly passed on by the Commission of Appeals in the case of
c                                                 23 S.W. (2a) 704 (1930)
in'&    opinion by Presiding Judge Harve;: which was approved by
the Supreme Court.      In this opinion Judge Harvey said:
Hon. Claude A. Williams,     page 6   (O-219)

            "The fact that none of the corporations      involved
     in the transaction    are shown to have had legal author-
     ity to effect    a consolidation   or merger is unimportant.
     For, if a consolidation      or merger was agreed upon and
     actually put into operation,      the lack of legislative
     authority in that respect cannot be set up by the de-
     fendant company as a defense against liability        to the
     creditors   of the corporations."
           Furthermore it should be pointed out that the decision
of the Court of Civil Appeals in Texas Seed & Floral Co. v. Chi-
cazo Set & Seed Comuany. suura is a decision by an intermediate
court and not by the court of iast resort.    Under the statutes
then in effect the refusal of a writ of error by the Supreme
Court merely indicated   that the court was of the opinion that a
correct  judgment had been entered, and did not indicate   that the
Supreme Court concurred in all that was said in the oninion.
Pickrell  v. Butler   116 Tex. 567, 296 S.W. 1062 (1927jj Davis v.
Lanier   94 Tex. 455 61 S.W. 385 (1901); Asoley V. Hawkins, 99
Tex. 380, 89 S.W. 9$2 (1905).
            For the reasons stated, we do not believe that the
opinion in the case of J!exas Seed &Floral        CompanV v. Chicago Set
& Seed Comaanv            can be considered as a judicial      construc-
tion that ArtiEl??&       applies to commercial corporations      as well
as corporations   formed for the purposes mentloned in Article
1136. There being no judicial        construction  of the statute on
this point, there is no reason for applying the well recognized
rule, sustained by cases cited in the former opinion of this de-
partment    that the re-enactment of a statute is deemed an adop-
tion of ihe judicial    construction    thereof.
             Articles  1136 and 1137 of the Revised Civil Statutes
of 1911 were substantially      re-enacted  as A rticles    1315 and 1316
of the Revised Civil Statutes,       1925, which have been quoted above.
Since said date, however, two new articles        have been added to the
statutes,    which new articles    have been inserted by the legisla-
ture between ,Articles 1315 and 1316.       The first    of these new arti-
cles was added by House Bill No. 122,       Cha ter 179, Acts, 45th
Legislature,    Regular Session 1937, page 3E8, which reads as fol-
lows:
            "Section 1. That Article   1315 of the Revised Civil
     Statutes of Texas, of 1925 be and the same hereby is
     amended by adding thereto a, title   1315 (a) to read as
     followst
           "'Article 1315 (a).  Subject     to a finding by the
     Secretary of State as hereinafter      provided,  any private
                    ,--                                -_

Hon. Claude A. Willlams,      page 7    (O-219)

     corporation    organized or incorporated        for any purpose
     or purposes    authorized under this Title,         at any time
     within ten (10) years prior to the expiration             of its
     charter,    or any extension thereof        ,may extend such char-
     ter,and the corporate existence         o h such corporation      for
     an additional    period of not to exceed fifty          (50)’ ye.ars
     from the expiration     d.ate of the original       charter,   or any
     extension thereof,     with all the privileges,         powers, im-
     munities, right of succession by its corporate name,
     and rights of property,      real end personal,       exercised
     and held by it at such expiration          date, to the same in-
     tents and purposes as upon original           incorporation.      The
     manner of extending any such charter shall be by a reso-
     lution in writing,     adopted at any annual or speaial
     meeting of stockholders      called for that purpose by stock-
     holders holding a majority of the shares of capital               stock
     of such corporation     then outstanding,        such resolution     to
     specify the period of, time for which the charter is ex-
     tended, and a copy of such resolution,            duly certiffed     by
     the secretary     of the corporation,      under the corporate
     seal, shall be filed and recorded in the office              of the
     Secretary of State.        Upon the adoption of such re’solu-
     tion and the filing      of a certified      copy thereof wfth the
     Secretary of State, together with payment of the filing
     fee herein prescribed,      the charter and corporate exist-
     ence of such corporation      may be extended for the addi-
     tional period of time recited        in such resolution.         The
     filing   fee to be paid for any such extension of a char-
     ter shall be such fee as said corporation would be re-
     quired under the Statutes of Texas to pay fn the event
     it was then applying for a new charter instead of ex-
     tending its then existfng       charter.
           “‘Such extensions;    however, may be made only In In-
     stances where the Secretary of State shall have found,
     after proper investigation,     that such corporation fs
     solvent and its capital unimpaired.’
           “See. 2. The fact that there is now no General Law
     providing for the extension of corporate charters,        and
     the fact that securities   of Texas corporatfons      are being
     discrlmlnated  against because investors      have questioned
     the validity  of .any such seourities. where the maturity
     date thereof was subsequent to ,the expiration       date of the
     charter of the corporation   ‘issuing such seeurlties,     and
     the fact that this operates as a, ,handLcap ‘to the fair
     and proper financing   of T,exas corporations    create an emer-
     gency and an imperative public necessity       that the Consti-
     tutional Rule, requering bills     to be read on three several
     days, be suspended,~ and that said ,Rule is hereby suspended,
Hon. Claude A. Williams,   page 8    (O-219)

     and that this   Act take effect   and be in force   from
     and after its   passage, and it   Is so enacted."
           Article 1315 (b) was added by Senate Bill      No. 21, Chap-
ter 14, Acts, 45th Legislature,  1st Called Session,      1937, page
1773, which reads as follows:
           Wection 1. That Article  1315' (a) of the Civil
     Statutes of Texas be and the same is hereby amended by
     adding thereto Article 1315 (b) to read as follows:
           ” ‘Article   1315 (b);  The provisions   of ,Article 1315(a)
     shall extend to and include all private corporations         in-
     corporated under the general laws of Texas.        The period
     of ten (10) years prior to the expiration       of the charter
     or any extension thereof referred      to In Article   1315(a)
     shall include the period of time during which such corpora-
     tion may have continued its existence       under the provisions
     of Article     1389 of the Revised Civil Statutes of 1925.8
            %ec. 2. The fact that it is not clear whether the
     provisions   of Article  1315 (a) of the Civil Statutes of
     Texas passed in 1937 include all private corporations
     incorporated   under the general laws of Texas, or whether
     the period of ten (10) years prior to the expiration         of
     the oharter or any extension thereof referred       to in Article
     1315 (a) includes the period of time during which such
     corporation   may have continued its existence under the
     provisions   of Article  1389 of the Revised Civil Statutes
     of Texas, and the fact that securities      of Texas corpora-
     tions are being discriminated      against because investors
     have questioned the validity     of any such securities     where
     the maturity date thereof was subsequent to the expiration
     date of the charter of the corporation      issuing such securi-
     ties,   and the fact that this operates as a handicap to the
     fair and proper financing    of Texas corporations     create an
     emergency and an imperative public necessity       that the Con-
     stitutional   Rule requiring  bills   to be read on three sev-
     eral days be suspended, and that said Rule be suspended
     and that ihis Act take effect      and be in force from and
     after its passage and it is so enacted."
           It will be noted that Article 1315 is not supplanted by
Articles  1315 (a) and 1315 (b), but that Articles    1315 (a) and
1315 (b)! are merely added to the statutes and inserted between
Articles  1315 and 1316.   The question is presented,   therefore,
whether this addition and insertion    constitutes an implied amend-
ment of Article   1316, in the absence of any express reference      to
Article  1316 in the amending Acts.    This is an entirely   different
question from the question decided by the Austin Court of Civil
Hon. Claude A. Williams,       page 9    (O-219)

 Appeals in the case of          ernational   &Great Northern Railway
 Comoan~ V. Sk+&        181 S%     504;   The statute involved in the
 Bland base, su&,        amended Articles    1970 1971 1973 and~l974 of
 Chapter 13, Title 37, and Article         2061 oh Chapter 19, Title 37
 of the Revised Civil Statutes of 1911, by setting forth the fo$m
 in which said articles       should read thereafter.      Article   2061, as
 amended, contained the phrase, "as provided for in the foregoing
 erticlas".     The question before the court was whether this phrase
 should be construed as referring        to Articles    1970; 1971, 1973 and
 1974, contained in the amending act          and preceding Article     2061
 in that Act, or to Articles        2058, 2659 and 2060, which were con-
 tained in the same chapter of the Revised Civil,Statutes             with
 Article    2061.    The court held that Article     2061    as amended
'should be considered as placed in the Revised Cfvil Statute:              in
 its proper place, and, that the phrase, "as provided for in the
 foregoing    articles"   should be construed as referring        to ~Artlcles
 2058 -2059 and 2060       which numerically    immediately preceded Arti-
 cle 30 6 1 In the Revised Civil Statutes,        and not as referring     to
 the other Articles      set forth in the same amending statute.          In
 reaching this conclusion,       the court was guided by what it con-
 sidered to be the intention        of the Legislature.
             We find nothing in the Acts passed in 1937, and mentioned
 above, which indicate      any intention      of the Legislature     to change
the meaning of Article        1316.    Articles   1315 (a) and 1315' (b) appar-
ently were inserted by the Legislature            between Article     1315 and
,Article 1316 solely for the purposes of convenience in arrange-
ment. Articles      1315 (a) and 1315' (b) relate to the extension
of the corporate existence          of certain corporations     prior to the
expiration    date of the original. charter,         or any extension thereof.
The Secretary of State is authorized to grant extensions only ,if
he finds, after proper investigation,            that the corporation     is
 solvent and its capital unimpaired.            This requirement indicates       an
intention    to extend the corporate life of corporations             only where
,ccrtain conditions     are met. However if Articles           1315 (a) and
1315' (b) were construed to amend Art&e              1316 by implication     so
as to allow commercial corporations            to "revive and consolidate
their charters",     then commercial corporations         could revive and
consolidate    their charters without makingany proof of solvency
or the soundness of their capital,           because no such proof Is re-
quired by Article      1316.    We do not think it Is reasonable to say
that the Legislature       intended to require careful supervision           of
the extension of the corporate lives of single corporations,                 but
that by the same act it intended by lmpllcation              to change the law
so as to allow revival       and consolidation       of expired commercial
corporations    practically     without condition      or regulation.
            It is well settled that express statutory   authority            is
required   to permit corporations to consolidate  their charters,
                                                                                r-,   .

Hon. Claude A. Williams,      page 10    (O-219)

and that consent of the st;te to consolidation       will not be im-
plied.   See G. C. & S. F.    Y. Co. v. Newell
342; 8 Thompson on Corporations,     Section 6030.
reasons for allowing the revival     and consolidation    of the char-
ters of corporations   formed for benevolent and charitable        pur-
poses, even without strict    supervision,   which would not apply to
the revival and consolidation    of commercial corporations.        Aside
from questions relating   to the protection     of the creditors    and
stockholders  of such corporations,     the state has declared its
policy against consolidations    for various purposes, prohibited
by the laws relating   to trusts and monopolies.       See Title 126 of
the Revised Civil Statutes,    1925, and particularly     Articles   7426
and 7427.
          Furthermore if Article       1316 were construed to apply to
commercial corporations    a serious question would be raised as to
the right of corporations     to consolidate   which were formed with
different purpose clauses,     since Article    1316 expressly provides
that the consolidating    corporations    shall have “all privileges
immunities and rights of property,       real and personal,   enjoyed by
each at the date of the expiration       of their several charters”.
            The Legislature       has passed a number of statutes allow-
ing consolidation     of particular       kinds of companies.     See the
following   Articles    of the Revised Civil Statutes,        1925, relating
to consolidation     of certain kinds of car orations:           building and
loan associations,      ,Articles 871 881 a-5 f: (passed in 1935);
fraternal   benefit    societies,     Article 4840; telegraph and tele-
phone companies, Articles         1420, 1421 1424 and 1425. and electric
cooperative   corporations,       Article   15$8 b section 23 (passed In
1937). We do not believe that the Legislature              would have passed
these acts allowing consolidations           of particular   kinds of corpor-
ations if it had intended by Article 1316 to confer blanket au-
thority   on all corporations       to consolidate    their charters.
            For the reasons above stated, it is our opinion that
Article 1316 of the Revised Civil Statutes,    1925, does not au-
thorize two or more private corporations    organized for purposes
other than those mentioned in~.Artl.cle 1315 of such statutes,  to
consolidate   their charters, and you are so advised.
                                        Yours very truly
                                        ATTORNEY  GENERALOF TEXAS
                                        By /s/ James P. Hart
JPH:MKrwb                               James P. Hart, Assistant
This opinlon has been considered        in conference,   approved,   and or-
dered recorded.
                                       /s/ W. F. Moore
                                      W. F. Moore
                              FIRST ASSISTANTATTORNEY  GENERAL