Court Opinion

ID: 4131901
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:20:47.885702+00
Date Added: 2024-06-11T14:33:32.125332
License: Public Domain

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                    The Attorney               General of Texas
                                       April    4,   1980

                 Honorable Sam Kelley                        Opinio? No. MW-160
                 Office of Consumer Credit
                  Commissioner                               Re: Whether a lender may charge
                 P. 0. Box 2107                              interest of eighteen per cent per
                 Austin, Texas 78768                         annum on a loan made to a
                                                             professional      corporation  or
                                                             professional association.

                 Dear Mr. Kelley:

                        You ask whether a lender may charge an interest rate of eighteen per
                 cent per annum on a loan made to a professional corporation         or to a
                 professional association.

                        Professional corporations are organized under article 1528e, V.T.C.S.,
                 the Professional     Corporation   Act, while professional   associations are
                 organized under article 1528f, V.T.C.S., the Professional Association Act.
                 Unless the legislature provides otherwise, a maximum rate of interest
                 greater than ten (10%) per cent per annum shall be deemed to be usurious.
                 See
                 -    Tex. Const. art. XVI, 5 11; V.T.C.S. art. 5069-L02.

                      The legislature has established a corporate usury exception in the
                 Texas Miscellaneous Corporation Laws Act, which in subsection B of article
                 1302-1.03, V.T.C.S., provides:

                            B. This Act shall govern all foreign and domestic
                            corporations    including but without being limited to
                            those corporations heretofore or hereafter organized
                            or granted a permit to do business under any Statute
                            of    the    State,    including     the Texas   Business
                            Corporation       Act,     or    the    Texas  Non-Profit
                            Corporation     Act, except to the extent that any
                            provisions of this Act are expressly made inapplicable
                            by any provision of the Texas Business Corporation
                            Act, the Texas Non-Profit Corporation Act, or any
                            specinl Statute of this State pertaining to a particular
                            type of corporation.

                 (Emphasis added).     The corporate       usury exception   is found   in article
                 1302-2.09, V.T.C.S., which provides:

                                               P-    514
Honorable Sam Kelley    -   Page Two     (NW-160)

               Notwithstanding    any other provision of law, corporations,
           domestic or foreign, may agree to and stipulate for any rate of
           interest as such corporation may determute, not to exceed one and
           one-half percent (1-l/2%) per month, on any bond, note, deht,
            contract or other obligation of such corporation under which the
           original principal amount is Five Thousand Dollars ($5,000) or more,
            or on any series of advances of money pursuant thereof if the
            aggregate of sums advanced or originally proposed to be advanced
            shall exceed Five Thousand Dollars ($5,000), or on’any extension or
            renewal thereof, and in such instances, the claim or defense of
            usury by such corporation, its successors, guarantors, assigns or
            anyone on its behalf is prohibited; however, nothing contained
            herein shall prevent any charitable or religious corporation from
            asserting the claim or interposing the defense of usury in any
            action or proceeding.

(Emphasis added).

       The only restriction contained in article 1302-2.09, V.T.C.S., does not prevent a
charitable or religious corporation from asserting a usury defense if it is charged the
higher rate. Professional corporations organized pursuant to article 1528e, V.T.C.S., and
professional associations organized pursuant to article 1528f, V.T.C.S., do not come within
the exception provided for charitable or religious corporations.    The statute contains no
provision concerning the rate of interest that may be charged by lenders to professional
corporations and associations. Both the Professional Corporation Act and the Professional
Association Act provide that the Texas Business Corporation Act shall be applicable to the
respective professional entities. See V.T.C.S. arts. 1528e, 5 5; 1528f, § 25. No provision in
either statute exempts such pr?&sional        entities from the provisions of the Texas
Miscellaneous Corporation Laws Act.

       The Professional Corporation Act specifically authorizes a professional ccrporation
to borrow money at such rates of interest as its board of directors may permit. V.T.C.S.
art. 1528e, § 7(e).     Although the Professional Association Act contains no identical
provision, a similar provision is to be found in article 2.028(g) of the Texas Business
Corporation Act, which is applicable to professional associations pursuant tu section 25 of
article 1528f, V.T.C.S.

        The purpose of the Professional Corporation Act and of the Professional Association
Act is to permit persons duly licensed to practice a profession to obtain corporate status
in order to claim certain benefits, including those available pursuant to the federal income
tax statutes. s     Hamilton, Professional Corporation Acts, 24 SW. L.J. 94 (1970), and Hall,
Professional Incorporation    in Texas, 48 Tex. L. Hev. 84 (1969). Although the Texas
statutes distinguish between professional corporations and professional associations, both
entities are considered to be corporations for most practical purposes. As originally
enacted, the Professional Association Act provided that “the statutory and common law of
partnerships shall apply to associations formed under this Act.” Acts 1969, 6kt Leg., ch.

                                         P.   5 I. 5
Honorable Sam Kelley    -      Page Three    (MW-1 GO)

840, S 24, at 2518. In 1971, this provision was amended to provide:      “The Texas Business
Corporation Act shall be applicable to professional associations.”        V.T.C.S. art. 1528f,
S 25.

       We believe that the legislature intended to confer full corporate status upon
professional corporations and professional associations, except where such status has been
specifically  reserved or limited.      Therefore, we believe that the corporate usury
exceptions contained in article 1302-2.09, V.T.C.S., applies ,to professional corporations
established under article 1528e, V.T.C.S., and to professional associations established
under article 1528f, V.T.C.S. Such corporations and associations may agree to an interest
rate not to exceed one and one-half (l-l/2%1 per cent per month upon corporate
obligations when the original principal amount is five thousand ($5,000) dollars or more.

                                           SUMMARY

           The corporate    usury exception contained in article 1302-2.09,
           V.T.C.S., is applicable to professional corporations  established
           under article 1528e, V.T.C.S., and to professional associations
           established under article 1528f, V.T.C.S.

                                            &X%$&f&

                                                 MARK     WHITE
                                                 Attorney General of Texas

JOHN W. FAINTER, JR.
First Assistant Attorney General

TED L. HARTLEY
Executive Assistant Attorney     General

Prepared by Tom Pollan
Assistant Attorney General

APPROVED:
OPINION COMMITTEE

C. Robert Heath, Chairman
Susan Garrison
Rick Gilpin
Tom Pollan

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