Untitled Texas Attorney General Opinion ( 1950 )

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