Court Opinion

ID: 4142900
Source: CourtListenerOpinion
Date Created: 2017-02-18 03:27:18.408237+00
Date Added: 2024-06-11T09:20:40.617146
License: Public Domain

THEA~~~ORNEY               GENERAL
                        OFTEXAS

Honorable William J. Lawson
Se;;;;rqe;;sState.

Dear Sir:                     Opinion No. O-3463
                              Re: Substitution of purpose
                                   clause of private corpora-
                                   tion by charter amendment.

          We are in receipt of your recent request for
an opinion as to whether a corporation may amend its char-
ter by changing its purpose from that stated by Article
1303b, Vernon's Texas Civil Statutes, to that stated by
Subdivision 47 of Article 1302, R. C. s., 1925, comonlg
known as the real estate urpose clause, in view of the
provisions of Article 131E , R. C. S., 1925.

          You have the following to say concerning the
established practice in your department:

                "So far as we are able to determine, this
      off$ce has-always held that Article 1314 pro-
      hibits the amendment of a purpose clause chang-
      ing it from one subdivision of Article 1302  to
      another, and has allowed only such amendments
      as leave the purpose within the same purpose
      clause, but add or subtract from its powers under
      that purpose clause."

           Article 1303b, Ch. 2, Title 32, Vernon's Texas
Civil Statutes, 1925, reads as follows:

           'A private corporation may be formed for
      any one or more of the following purposes, with-
      out banking or insurance privileges: to accum-
      ulate and loan money, to sell and deal in notes,
      bonds and securities; to act as trustee under
      any lawful express trust committed to it by
      contract, and as agent for the performance of
      any lawful act; to subscribe for, purchase, in-
 Honorable ~~illiam J. Lawson, page 2 O-3463

      vest in, hold, own, assign, pledge and other-
      wise deal in and dispose of shares of capital
      stocks, bonds, morgages, debemes,    notes and
      other securities or obligations, contracts and
      evidences of indebtedness of foreign or domestic
      corporations not competing with each other in
      the same line of business, to borrow money or
      issue debentures for carrying out any or all
      purposes above enumerated.  Provided that the
      power and authority herein cp&rred   shall in
      no way affect any of the crevisions of the antf-
      trust laws of this State.

            The present charter purpose of the corporation
 in question Is in the language of the above quoted statute.

           Subdivision 47 of Article   1302, Ch. 1, Title 32,
      R. C. S. 1925, provides:

             "To erect or repair any building or im-
       provement, and to accumulate and lend money for
       said purposes, and to purchase, sell and sub-
       divide real property in towns, cities and vil-
       1ages;and their suburbs not extending more than
       two miles  beyond their limits and to accumulate
       end lend money for that purpose."

            The proposed amendment in the purpose of the cor-
porate charter is in the exact language of Subdivision 47.

            A private corporation is a creature of the stat-
utes and may amend its charter only as authorized by staute
and in strict comformity thereto. Attorney General's Oninion,
November 21, 1933, to Hon. W. W. Heath, Secretary of State.

            Article 1314 of R. C. S. 1925, reads as follows:

            "Any private corporation organized or in-
       corporated for any purpose mentioned in this
       title, may amend or change its charter or act of
       incorporation by filing, authenticated in the
       same manner as the original charter, such amend-
       ments or changes with the Secretary of State, A
       corporation created by special Act of the Legis-
       lature shall also file with said officer its
Honorable William J. Lawson, page 3 o-3463

      original charter and such amendments thereto or
      changes therin, if any, as have been made by
      special Act of the Legislature; and the same
      shall be recorded by the Secretary of State, fol-
      lowed by the proposed amendments or changes there-
      of. Such amendments or changes shall take ef-
      fect and be in force from the date of any filing
      thereof. The certificate of the Secretary of
      State shall be evidence of such filing. No.amend-
      ment or change violative of the Constitution or
      laws 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." (Underscoring ours)

           In addition to the departmental construction by
the Secretary of State's office, we find a number of opin-
ions of this department construing Article 1314, R C. S.
1925.
           In an opinicn dated June 7, 1924, to honorable
S: L. Staples, Secretary of State, this department referred
to Article 1135, R. S. 1911, (now Article 1314, R. C. 9.
1925) in the following language.
           "The ourpose of thins enactment is seem-
      ingly,to prevent a change in the character and
      the purpose or, in other words, the nature of
      a corporation by an amendment of its charter,
      or to reorganize the corporation into a new
      and a different concern, under the guise of an
      amendment or the addition of a new purpose per-
      mitted under the statute."

           In an opinion addressed to Mrs. Jane Y. McCallum,
Secretary of State. dated January 28, 1932, this department
ruled that by virtue of the provisions of Article 1314, R,
C. S. 1925, a corporation having as its charter purpose the
language of Section 37, Article 1302, R, C. S, 1925, could
not by amendment change its purpose to that set out in Sub-
division 38, of Article 1302. Subdivision 37 provides for
the establishment and maintenance of an oil business with
certain other enumerated powers and Subdivision 38 provides
for the establishment and maintenance of B drilling business,
including the drilling of wells for oil or gas.
Honorable Williwn J. kwson,   page 4 O-3463

           We quote in part from the opinion:

           'By no stretch of the imagination, can .I
      conceive that one whose authority is restricted
      to engaging in a drilling business', has author-
      ity either expressly or impliedly to 'contract
      for the lease and purchase of the right to pros-
      pect for, develop and use coal and other miner-
      als, petroleum and gas; or to build and own oil
      tanks necessary to be used in the 'oil business";
      and not necessary in the 'drilling.business', or
      to build-and own cars and-pipes necessary to be
      used in the 'oil business', and not necessary
      in the 'drilling business!.  There being such a
      wide difference in the character of the two busi-
      nesses treated in the two Section, there is
      no danbt in my mind but that the proposed smend-
      ment 'so changes the original purpose of the
      corporation as to prevent the execution thereof.'
      State ex rel. Steubenville Gas and Electric tie.
      v. Taylor (Supreme Court of Ohio) 45 N. E. 513."

           The opinion then discusses the cited case and con-
 tinues:

           "It is also to be noted that unlike the
      amendment proposed by Collins & Plummer Produc-
      ticn Company, the amendment proposed by the
       Ohio Corporation did not deprive it of any of
      the rights and privileges granted to it under
      its original charter, but wted    it with addi-
      tional rights and privileges which it could
      have just as well obtained at the time of the
      granting of its original charter by including
      them therein. The Ohio Court said the amend-
      ment violated that portion of Article 323qa
      set out herein.  It will be readily seen that
      the amendment in the instant case more surely
      and definitely voilates certain of the provi-
      sions contained in Article 1314 than did the
      proposed amendment in the Ohio case, in that
      the amendment would deprive the corporation,
      under its charter as amended, of the authority
      to do each of those things set out in paragraphs
      1 and 2 on page.aree hereof."    (The paragraphs
      referred to point out the charter powers in
      Subdivision 37 which would not be included under
_   .   .

Honorable ~~illian H. Lawson, page 5; O-3463

            Subdivision 78) (Underscoring ours)

             in Conference Opinion No. 2944, dated Larch 17,
1934, to Honorable rf. W, death, Secretary of State, this
department reviewed the history of Article 1314, R. C. S.
1925, and discussed its application.   This opinion appar-
ently approves the holding of the 1932 opinion quoted above
and states that it "relates to the right to make an ab-
solute and complete change in the purpose clause" and
"deals with the question of whether a corporation having
for its purpose clause, one of the subdivisions of the
statute, might completely substitute another and different
subdivision thereof as its purpose clausem the kind and
character of work being entirely dissimilar in the two
instances." It is pointed out in this conference opinion
that Article 573, R. S., 1.8'79,provided that "no amend-
ments or changes shall be cf any force or effect which
are not germain to the,original-purposes or charter of
incorgoraticn, and calculated to carry out and effect the
same.    It was concluded that "prevent the exeoution there-
ras    used in Article 1314, should be construed to mean
substantially the same as "germane to and calculated to
carry out and effect the zame' as used in the original en-
actment.

            Under the practice of your de artment and the
long-standing construction of Article 131fi, R. C. S. 1925,
by this department, we think a mere readinm of the purposes
set out in Article 1303b, and Subdivision i;7, Article 1302,
is sufficient to demonstrate that they are not germane but
provide separate and distinct purposes.  %bdivision 47 of
Article 1392 has for its principal purpczes the purchase,
sale and subdivision of reil property in cities, and the
creation or repair of buildings or improvement. 'I'heac-
cumulation and lending of money in incidental to the prin-
cipal purposes and thereby restricted.  There is a sub-
stantial difference between these purposes and those set
out in Article 1303b.

            It has been pointed out that the corporation has
been in liquidation since 1933, and as a result thereof,
has acquired considerable real estate through foreclosure.
It is further suzgezted that the corporation has net ex-
ercised all the powers authorized by its charter, either
because of the liquidation or because prohibited by the
banking laws of the United States and for these reasons
the amendment would not prevent the further execution0 f'
Honorable William J. Lawson, pase 6 O-3463

the original purpose of this corporation.  In determining
this question however, we think that our examination must
be confined to the original charter purposes of the cor-
poration, as disclosed by applicable stautes and its char-
ter on file in the office of the Secretary of State, and
that the incidental acquisition of real estate in the order-
ly process of liquidation would not affect the corporetion's
original charter purpcses.

           It is our opinion that a corporation having as
its charter pur ose the powers set out in Article   1303b,
Vernon's Texas i!i
                ivil Statutes may not be amendment zub-
stitute therefor Subdivision I;7 of Article 1302, R. C. S.
lq2#, by virtue of the provisions of Article  1314,  R. C. S.
1925 0
                                   Yours very truly
                              ATTORNEY GENERAL OF TEXAS

                              BY       Cecil C. Cammack
                                              Assistant
CCC:LM--pam

APPROVE3 MAY 10, 1941
Glenn R. Lewis
Acting A$torney General of Texas

APPROVED OPINION COMMITTEE
BY BWB, CHAIRMAN