Untitled Texas Attorney General Opinion ( 1960 )

THE L%~OKNEY GENEML
OF?t%XAS
AUSTIN m.lgxAn
WI& WILSON
A-RN- G!,CN~-X.. January 27, 1960
The Honorable Zollie Steakley Opinion No. WW-789
Secretary of State
State Capitol Re: Authority of the Secretary
Austin, Texas of State to accept 2nd file the
application for Certificate of
Authority of Panhandle Tele-
phone Co-Operative, Inc., a
foreign corporation, which pro-
poses to furnish rural tele-
phone service and related
Dear Mr. Steakley: questions.
You have requested our opinion on three questions. The first
concerns the authority of your office to accept and file an app:.icatlon
for a Certificate of Authority submitted by Panhandle Telephane Co-
Operative. Inc., a non-profit corporation chartered in Oklahoma pur-
suant to the provisions of 18 Okla. Stat. 43.81 et seq.. The pmrpose for
which the company proposes to transact business in Texas is “to furnish
telephone service in rural areas to the widest practicable number of
users ofsuch service; provided there shall be no duplication of service
where reasonable and adequate telephone service is available,” Should
we conclude that your office has no authority to file such application,
you then inquire as to whether or not the corporation can lawfully en-
gage in business in Texas without a Certificate of Authority. Your
third question is whether or not the corporation will be required to file
a return and pay the franchise taxes required under Chapter 12 of Title
12ZA (H.B. 11, Acts 56th Legislature, Third Called Session 1959) regard-
less of whether or not it may be required to obtain Certificats of Authority.
Article 1528~ V.C.S.T. (Acts 1950, 51st Legislature, First Called
Session, page 33, chapter 4) authorizes the incorporation of “co-operative,
non-profit corporations. . .for the purpose of furnishing telephone ser-
vice in rural areas to the widest practical number of users of such ser-
vice; provided there shall be no duplication in service where reasonable,
adequate telephone service is available.” Consequently, the business
of furnishing rural telephone service, being a lawful purpose for which
corporations could be organized prior to the passage of either the Busi-
ness Corporation Act or the Non-Profit Corporation Act, is u lawful
purpose today unless either of these Acts prohibit the formation of such
companies. The Business Corporation Act, Art. 2.01, Sec. A, provides
that corporations “for the purpose of operating non-profit institutions”
may not adopt or be organized under the Act. Moreover, Sull-paragraph
(4)(g) of Section B of Article 2.01 provides that co-operative:; or limited
c .
The Hon. Zollie Steakley, page 2 (WW-789)
co-operative associations may not be organized under the Act or obtain
authority to transact business in this State under same.
An even more pointed prohibition is found in Paragralzh B, Arti-
cle 2.01 of the Non-Profit Corporation Act (Acts 1959, 56th Legislature,
Chapter 162) which provides that “this Act shall not apply to imy corpor-
ation nor may any corporation be organized under this Act or obtain
authority to conduct its affairs in this state under this Act. ,(F.if
any one or more of its purposes for the conduct of lts affairs in this
state is to organize telephone co-operative corporations.” In the face
of this specific laneuaee we conclude that your office has no outhorihr
to accepi and file tge application in question under the Non-Profit Cdr-
poration Act. However, any doubts as to whether or not Art. 1528~ was
repealed by the passage of the Non-Profit Corporation Act ars removed
by Article 10.05, Paragraph B of the Act which provides:
“Except as provided in Article 10.06 of this Acf:,
any limitations, obligations, liabilities and powers ap’-
plicable to a particular kind of corporation, for which
special provision is made by the laws of this state, s1.all
continue to be applicable to any such corporation and
this Act is not intended to repeal and doss not repeal
the statutory provisions providing for these special
limitations, obligations, liabilities and powers .‘*
If. then, the Panhandle Telephone Co-Operative, Inc. cannot obtain
a Certificate of Authority to transact business in this state by virtue of
either the Business Corporation Act or the Texas Non-Profit Act, the ques-
tion arises as to whether or not there is any authority under which your
office might issue such a certificate. Prmto the passage al: the Texas
Business Corporation Act and the Non-Profit Corporation Act. Chapter 19,
of Title 32 (Art. 1529-V.C5.) of the laws of the State of Texas provided
the method and manner in which foreign corporations could qualify to do
business in Texas. Article 1529 thereof eliminates foreign non-profit
corporations from the purview of Chapter 19 by providing thz.t “any corpor-
ation for pecuniary profit,. . .shall file with the Secretary of State a duIy
certlffied copy of its Articles of Incorporatlou; and thereupon such official
shall issue to such corporation a permit to transact business in this State
. . **’ Consequently, prior to the passage of the Texas Business Corpor-
ation Act and the Non-Profit Corporation Act, there were no provisions
whereby a foreign corporation not for pecuniary profit could obtain a per-
mit to do business in this state-e City of San Antonio v. Salvation Arm
127 S.W. 860) and such corporations could carry on their acf&
state without obtaining such a permit. Vol. 1 Prentice Hall Corporation
Law Guide, page 3300. This, of course, is no longer true ior, foreign
non-profit corporations covered by the Non-Broflt Corporation Act. For
those which are not it remains the law, primarily by virtue of the principle
of comity.
1
The Hon. Zollie Steakley, page 3 (WW-789)
As stated in Attorney General Optnion V-746 by Hon. :Price
Daniel, “it is a well settled rule of law that under the doctrine of comity
and in the absence of any prohibitory law or rule of public policy, foreign
corporations are entitled to enter a state and make any contrcmor
transact any business therein falllng within the scope of their lawful
corporate powers which are permitted to domestic corporaticns of like
kind and character. In accordance with this rule, if the laws of a state
prohibit the formation of domestic corporations of a specific character,
or for certain purposes, its policy is controlling; and a foreis;n corpora-
tion of that character or created for such purposes would not be allowed
to enter the state and transact business therein. However, an intention
to exclude foreign corporations from the state is not to be deduced from
circumstances that the laws of the state have made no provisions for
domestic corporations of like character. And in the absence of expressed
constitutional or statutory inhibition, foreign corporations may enter a
state and engage in business therein under the rule of comity notwlth-
standing they are organized in accordance with methods which.do not ob-
tain in such state.” Opinion V-746 dealt with a situation~ln which a
tbreign corporation organized for pecuniary profit, but without capital
stock; desired to obtain a certificate to do.&slness in Texas. Article
1530 of the then applicable statutes required that before such a Certifi-
cate of Authority be issued the corporation must show to the satisfac-
tion of the Secretary of State that at least $100,000 in cash o,f its author-
ized capital stock had been paid in or that fifty per c~ent(50%) of its auth-
orized capital stock had been subscribed. In accordance with the quoted
language above, Opinion V-746 concluded that the foreign coz,poration
could obtain a certlficats of authority to do business fn Texas despite
its lnabllity to meet the requirements of Article 1530. In the instant sit-
uation, we find no constitutional or statutory prohibition against corporations
.of the typs in question. Rather, there exists a special act, Article 1528c,
which authorizes the formation of domestic corporations of ihe identical
type. Although making no specific provision for the obtaining of a certifi-
cate of authority by foreign corporations of this typo, Article 1528~ assumes
that foreign corporations will transact business in this state under its
authority. For example, Section ba-( 1) provides “the words ‘telephone
co-operative’ shall not be used In the corporate name of corporations
organized under the laws of this state, or authorized to do business herein,
other than those organized pursuant to provisions of this AC,:.” Section 23,
sub-paragraph (b) provides that “a corporation may hot otherwise sell. . .
a substantial portion of its property unless such sale. . .is a,uthorised by
an affirmative vote of not less than two-thirds (2/3) of all the members
of the corporation; provided however. . .the Board of Directors may. . .
sell, lease or otherwise dispose of all or a substantial portion of its
property to another corporatton or a foreign corporation
in this state pursuant to this act..;“mIIar language may
Section 25.
- .
The Hon. Zollie Steakley, page 4 (WW-789)
On the basis of the foregoing, in answer to your questions 1 and
2, we hold that the Secretary of State has no authority to~accept and file
the application of the Panhandle Telephone Co-Operative, Inc. for a
Certificate of Authority to engage in business in this state for the above
stated purpose. We also hold that the corporation may lawfully engage
in business in Texas without a certificate of authority.
In answer to your third question. it is the opinion of this office
that the corporation must file a return and pay the franchise tiutes re-
quired under the provisions of Chapter 12 of Title 122a. H.B. 11, Acts
56th Legislature, Third Called Session, 1959, if it does business in this
state. Article 12.01(l) provides that “except as herein provided, every
domestic and foreign corporation heretofore or hereafter chartered or
authorized to do business in Texas or doing business in Texas, shall, on
or before May 1st of each year, pay in advance to the Secretal of State
a franchise tax for the year following which shall be based on whichever
of the following shall yield the greatest tax. . .” Obviously, the legisla-
ture contemplated that there would be situations in which a corporation
may not have been chartered under the laws of this state, or have secured
a permit to do business under the laws of this state, but yet might be
doing business here for purposes of paying a franchise tax.
SUMMARY
The Secretary of State has no authority to
accept and file the application of the Pan-
handle Telephone Co-Operative, Inc., for a
Certificate of Authority to engage in business
in’lhis state for the stated purpose. The cor-
poration may lawfully engage in the business
which it proposes in Texas without a certlfi-
cate of authority, but must file a return and
pay the franchise taxes required.
Very truly yours.
WILL WILSON
Attorney Genaral of Texas
BY
RVL:lmc
The Hon. Zollie Steakley. page 5 (WW-789)
APPROVED:
OPINION COMMITTEE:
W. V. Geppert. Chairman
John B. Webster
Jay Howell
Bob Walls
L. P. Lollar
REVIEWED FOR THE ATTORNEY GENERAL
BY: Leonard Passmore.