Court Opinion

ID: 4137697
Source: CourtListenerOpinion
Date Created: 2017-02-18 02:27:50.288511+00
Date Added: 2024-06-11T14:36:48.034723
License: Public Domain

NERAI.

Secretary    of State
Austin,   T,exas                           Re:    The legality  of char tesing a
                                                  corporation   whose purpose
                                                  clause is, *To act as agent
                                                  for the performance     of ary
Dear   Mr.   Shepperd:                            lawful act.”

              You request an opinion of this office as to whether     or
not you are authorised     under Section 49 of Article  1302, V.C.S.,   to
approve   a charter   which has for its purpose:    *To act aa agent for
the performance     of 4ny lawful act.”

               The creation   of corporations      and the power t&y shall
possess    are governed    by the Conrtitution     and statetea.    The Texas
Constitution,   Section8   1 and 2, Article    XII, forbid& the croation      of
corporations     “except  by general   law” and directs      ~Iw kgiaiatura
“to enact general     laws . , ~ for the creation     of private  corporationa.”

                Pursuant      to this constitutional      mandate the Legislature
has provided      by statute the purposes         for which corporations          may
be created     in this State.      One such purpose is expressed            in Section
49 of Article     1302, V.C.S., as follows:          ‘“For any one or more of
the following     purposes:       To accumulate      and lend money, purchase,
sell and deal in notes, bonds and securities,               but without banking and
discounting     privileges;     to act as trustee      under any lawful express
trust   committed      to them by contract        and as agent for the perform-
ance of any lawful act.”           This purpose as now expressed            in the stat-
 ute had its origin      in C.S.S.B.    No. 83, Acts 36th Leg., R,S. 1919, ch.
83, pa 134. Section         1 of this act provides      as follows:     ‘“That corpo-
rations    may be created        for any or all of the following        purposes,      to-
wit:    To accumulate       and lend money, purchase,           sell and deal in
notes, bonds, and securities,           but without banking and discounting
privileges.      To act a8 Trustee        under   any lawful express       trust    com-
mitted to them by contract           and as ag.ent for the performance             ofy
lawful act.     But no corporation         organized    hereunder     shall act aa a-
gent or trustee in the consolidation            of or for   the  purpose of com-
bining the asaeta,        buSin666,    or mean6 of any other persons,            firms.
corporations      or associations,       nor shall such corporation          as agent
or trustee    carry on the bueiness          ot another *”

               Section 2 of this act commit@ the rupervision                 of cor-
porations    incorporated  under the 8ct to the Commissioner                   of Insur-
Hon.    John Ben Shepperd,       Page    2 (V-1075)

ante and Banking, the official       who at that time had supervision          of
both insurance   and banking, thus Indicating       the legislative    intent
as to the business   characteristics     of the corporations      authorised
to be created   under the act.     The 1925 codification     re-enactad       this
corporate   purpose in the language as it now appears           in Arttcle     1302,
Section 49, V.C.S,, which is as follows:

                “This subdivision       aball embrace      corporations
        created    for any or all of the following        purposes:       To
        accumulate     and lend money, purchase,           sell and deal
        in notes, bonds, and securities,           but without banking
        and discounting     privileges;     and to act as trustee        under
        any lawful express       trust   committed     to them by contract
        and as agent for the performance            of any lawful act, No
        such corporation      &ail act as agent or trustee           in the
        consolidation    of or for the purpose of combining              tire as-
        sets, business    or means of any other persons,              firms,
        associations    or corporations,        nor shall such corpora-
        tion as agent OP trustee carry on the business               of anoth-
        er.   No such corporation         shall be authorieed     to engage
        in or carry on any such business           unless it shall have
        an actual paid in capital of not less than ten thousand
        dollars.”

The only difference     nbted in the two acts is that the purpose clause
as expressed     in the 1919 original    act separates      the purposes     into
two sentences,     and the 1925 codification     cxpre8res       the purpose ia
one sentence and uses a semicolon          instead ad a pes%od after the
phrase ““but without    banking and discounting        privileges*    and before
““to act as trustee under any lawful express          trust   committed     to them.”
This difference,    however,    is without significance,       for we think the
scope and purpose of the act in defining         the cbaracten      of corpora-
tions to be organized     thereunder    to be the same.        The supervision
and control   of such corporations      is by the 1925 codification        com-
mitted to the Banking Commissioner0           insurance      and banking super-
vision having been in the meantime          separatsd.      Tbe same corporate
purpose is again repeated       in Ssa.riWo,?!kQ&&ts        4@h&rg.,      1927. ch.
275,‘~. ,414, with certain added purposes         not important      here,    Sec-
tion 1 of this act reads as follows:

                “A private     corporation     may be formed        for any
        owe or more     of the following purposes,  without    bank-
        ing or insurance     prfvileges: To accumulate      and loan
        money, to sell and deal in noter, bonds and securities;
        to act as Trustee   umber any lawful express  trust com-
        mitted to it by cot&act,  and as agent for the pesform-
        ante of any lawful act 0 0 r ‘*

                We find that the Legislature   by S.B. No. 165, Acts                42nd
Leg.,   R.S.   1931, ch. 164, p* 280, dealt further  with corporations                in-
Hon.   John Ben Sheppard,          Pag,e   3 (V-1075)

corporated   under Subdivision  49 of Article 1302, Revised                      Civil Stat-
utes of Texas,   1925 (the same as now appears as Section                        49, Arti-
cle 1302, V.C.S.).   Section 1 thereof reads as follows:

                 “This Act shall embrace          corporations     heretofore
        created    and hereafter     created    having for their purpose
        or purposes      any or all of the powers now authorized               in
        Subdivisions      48, 49 or 50 of Article       1302, Revised       Civ-
        il Statutes of TexG,       1925, and heretofore         or hereafter
        created    having in whole or in part any purpose or pur-
        poses now authorized        in Chapter      275, Senate Bill Num-
        ber 232 of the General        and Special Lara        of the Regular
        Session     of the 40th Legislature.        No such corporation
        shall act as agent or trustee in the consolidation                of or
        for the purpose of combining           the assets,    business      or
        means of other persons,         firms,     associations    or corpo-
        rations,    nor shall such corporation         as age&or       trustee
        carry    on the business     of another.”

This act had for its primary             purpose the further          regulation     of cor-
porations     theretofore       and thereafter      created     having for their pur-
pose or purposes         any and all of the powers now authorized                   in Sub-
division   49 of Article        1302, Revised       Civil Statutes of Texas,           1925,
and other subdivisions           not necessary       to enlarge      upon here.       Section
11 of this act specifically          repealed     Articles     1520 to 1524, inclusive,
of the Revised       Civil Statutes of Texas,          but specifically       retained     the
purposes     of Subdivisions        40, 49 and 50 of Article           1302, Revised       Civ-
il Statutes of Texas,         1925, and enlarged          the regulatory      powers con-
ferred   upon the Banking Commissioner                   in.connection      with such cor-
porations.       This latter provision         of Section 1 of S.B. No. 165 is now
embraced       in Article     1524a. V.C.S.,       under the heading of Corpora-
tions for Loaning Money and Dealing in Bonds and Securities                            with-
out Banking and Discounting             Privileges.         The Legislature       in specif-
ically repealing       Articles     1520-24, inclusive,         of the 1925 codifica-
tion, under the heading Loan and Brokerage                     Companies,       obviously
thought their retention          no longer necessary,          as indeed it was not,
since the regulatory          matters    therein dealt with were now to be cov-
ered by Article        1524a, V.C.S.       It is significant       to note that the Leg-
islature   was careful        in all of these legislative         enactments       to make
clear that such corporations             as agents and trustees          were     not au-
thorized    to carry on the business            of another.

              It is quite evident from an examination          of these various
statutory  provisions    that it was not the intent of the Legislature        to
authorize   the creation    of corporations    ‘“To act as agent for the per-
formance    of any lawful act,” as a separate       and independent     purpose,
This is merely     an additional   and related    power which corporations
authorized   to be created     under these various     statutes might exer-
cise.   The primary     purpose which the Legislature         had in mind in
                                                                                    ..

Hon.   John Ben Shepperd,       Page   4 (V-1075)

the enactment    of these various    statutes was to deal with loan and
investment   corporations     or corporations   to accumulate  and loan
money, to sell and deal in notes, bonds and securities,       but without
banking privileges.      These corporations    might also act as trustee
and as agent for the performance        of any lawful act committed   to
them by contract,     in connection   with such business.

              It is quite clear that what is now Section 49 of Article
1302, V.C.S.,    as originally    erected  and as dealt with in subsequent
legislation  by the various     acts we have pointed out above, did not
have for its purpose originally        or by.any subsequent     traatment
thereof by the Legislature       to set up as a separate     and distinct  pur-
pose the formation      of corporations     ‘“to act as agent for the perform-
ance of any lawful act,” but marely          granted this as au additional   or
incidental  power to the loan and investment          business.

              If we should attribute    to the Legislature     an intent to set
up a separate    and distinct  purpose in the use of the language        ““To
act as agent for the performance        of any lawful act,” the effect of
this would be to virtually    nullify and render     useless all the other
subdivisions    of the statute specifying    the particular   purpose for
which corporations     might be created,      for there is nothing inherent-
ly unlawful in any of the numerous        purposes    for which the Legisla-
ture has said corporations      may bo formed.       In 10 Texas Jurispru-
dence 622, Corpor&tions,      Section 31, it is said:

                “The proposed       charter   ia requbred to state the
        purpose     for which the corporation         is fosmed.      The
        main purpose of this requirement            is, first, to protect
        the public against      too great a delegation       and aDy USUF-
        ption    of power, and, second, to afford the means where-
        by right to a claimed        power, or rightful     use of an ad-
        mitted power, may be tested.            Thie should be done with
        sufficient    clearness    to enable the Secretary        of State to
        see that the purpose specified          is one provided      for by
        the statute, and it must therefore          deLiare with certainty
        the scope of the business         or undertaking      to be
        rohnston     v. Townsend,      103 Tex, 122, 125, 124
        119101.

                  The Supreme Court said in the case         of Smith   v, Worth-
am,    106 Tex. 106, 157 S-W, 740 (1913):
-
                “‘The sCtutory    requirommbt      that the “purpose’ of
        the corporation      rhaU k     stated in its charter      was in-
        tended for the p&ec&vn          of the incorporators      and rtock-
        holders,    and the public,    in order that they may be ad-
        vised as to the character        of its corporate   activities,    and
        to amble     ths tit&e, through its proper officers,         to col-
Hon. John Ben Shepperd,         Page   5 (V-1075)

       lect proper filing fees and franchise  taxes, and to super-
       vise and control  the use and to punish the nonuse of its
       franchise  . 0, ”

              You refer in your request to the case of James N, Tardy
Co. v. Tarver,   120 Tex. 591, 39 S.W.2d 848 (1931).   Judge Speer
took note of this case in Opinion O-3250 and in that opinion said:

                “We are not unmindful of James N, Tardy Co. v.
       Tarver,    39 S. W. (2d) 848, wherein         the Supreme Court
       held that a corporation       possessing     sufficiently     broad
       charter    powers,    was entitled   under tha laws of this
       State to be licensed      as an agent for a company writing
       fire, marine and casualty        insurance.       In that case the
       extent of the corporate       powers    of the applicant      corpo-
       ration was not decided by the court            -- it was not an is-
       sue in the case -- for, says the opinion,             ‘respondent
       concedes     that relator   James N. Tardy Company’s               char-
       ter is broad enough to authorize          it to act as an insur-
       ance agent.’     While Article     1520 of the Revised         Civil
       Statutes   then in force with respect        to loan and broker-
       age companies      contained    the identical      language as the
       present Article      1524a of Vernon’s       Codification,     forbid-
       ding such corporations        to carry    on the business       of an-
       other, as above stated, the court did not pass upon the
       charter    power of the applicant,      so that, whether        James
       N. Tardy Company was a loan and brokerage                   company
       or not, has nothing to do with the point actually              decided
       by the court.     The respondent       may have conceded          too
       much in the defense       of that case, but whether he did or
       not, the conceded      issue was not determined           by the court.”

              Conceding,    as we think we may, that the Secretary         of
State should have refused      the charter    in the Tardy case, it was nev-
ertheless  issued and the State never thereafter         took affirmative     ac-
tion by quo warrant0     to cancel it. The Supreme Court did not, there-
fore, find it necessary    in the Tardy case to pass upon this collater-
al issue and did net do so. As stated by Judge Speer:             ““The respond-
ent may have conceded       too much in the defense      of that case, but
whether he did ortnet. the conceded        issue was not determined       by
the court. ”

             You are therefore   respectfully    advised   that it is the
opinion of this office that you are not authorized      to grant a charter
which has for its sole purpose ‘“To act as agent in the performance
of any lawful act,” aad should refuse     to grant a charter    for this pur-
pose alone,
                                                                             . ‘\
                                                                                    -_

Hon. John Ben Shepperd,    Page   6 (V-1075)

                             SUMMARY

             The Secretary    of State is not authorized    to issue
      a charter  under the authority    of Section 49 of Article
      1302, V.C.S.,   or any other statute,     which has for its
      sole purpose “To act as agent in the performance           of
      any lawful act.”   This is merely     an added 01 incidental
      power which the corporations       authorized   to be char-
      tered under that section may exercise,        and is not a Sep-
      arate and distinct   purpose within itself.

                                                  Yaws       very   truly,

                                                   PRICE      DANIEL
                                                  Attorney     General

APPROVED:

W. V. Geppert                                            Assistant
Taxation Division

Joe R. Greenhifh
First Assistant*

LPL/mwb