Untitled Texas Attorney General Opinion ( 1946 )

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,Honorable Bert Ford Administrator
TexasLiquor Controi Board :
Austin, Tetis _
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~Oplnlon No. O-7039
Rer Whether an Individual may be an
officer in more than five car- ~
porations, each of which owns
a package store permlt,and re-
lated questions.
Dear Sir: .
We have'received your letter of.Januarp'g, l$$,'
.3$ikhwe quote as followst-
wW..L. Moody, Jr., of Galveston, and cer- :
taln associations in and outs of Texas are the
principal stockholders, officers and directors
In eight Texas corporations and two out-of-stat0 .._
corporations doing business fin Texas. The Texas ... ..,
Liquor ControlBoard,has just discovered that it
has issued eleven permItsto these corporations,.
and now application for, a Package Store Permit
has been made in the name of another~Texa .cor-
poratlon.
win checking the various applications and ,i~
'in checking the information Yurnishod this of+
flce'by the representativesof the various cor-
.porations, it has now beendlsdosed that in
several instances certain s to&holders, owri stock
in.more than five corporations having Package
Store Permitsr more than five of the corporations
in some instances are represented by common offi-
.cers and.direotors. -
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Ponorable Pert Ford - P&e a
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. “The questions the Board wouldlike to
&we answered are as follows:
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“1. Can one Individual bo an officer
more than five corporations, each of which owns
a Package Sotre Permit?
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.’ * “2. Can one Individual be an offlcor in
more than five corporations, each of which OWIl.9
a Package Store Permiteven though such individ-
ual h&no stock ownership or other monetary in- :
terest in such corporatioii?
.“3. Can one Individual be a director in ’
more ; than five corporations, each ,of which owns .
: a Package Sotre Permit?
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“4. Can one Individual be a director in ,‘:
. more than five corporations, each of which owns
a Package Store Permit, eycn though such wdlvid-~
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ua& ‘has no stock Nnershlp or other monetary hi- I
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terest In such corporation? : ‘..~
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“5. Can one lndlvldua& own stock 3.x.1
more
than five corporations, each of which owns a
Package Store permit?
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. . ~6; .Can one”indivldual have an interest . :
represented either as a stockholder, director . . ..:
: ore officer In more than five corporations if
each. corporation i
has. a Packago Store Perm t? :
“7. ‘Can one indivld&. be an officer, dir- ’:> :
: ector, or stoc’kholder in one or more corporations,
each of which owns a’‘Package Store Permit, and a2so~ ‘.
. IndividuQly own or m an lnter.est in five add%-, -
tional Package Store Permits? .
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“8.Could an individual uho owns five Pack- ’ .
. age Store Permits actas independent executor, or
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ponorablc pert Ford - Pace #s
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““trustee for: an’estate that owns’an. Interest In
a Yackage Store Permit?,
“9. Could an estate contlnuously’own stock
In more than five corpor.ltIons, each of which owns
a Package-Store Permit? ,~ a
. “10. Could an estate am’s tack in a holding .
corporation which does not itself owna Package
Store Permit but does own stock in five other car- ’
.poratlons, each of which owx Packngc Store Peznits,
and also be the owner of stock in a slxth corpora-
J tion YhIch, owns a:Package Store ~Pcrmlt? _
‘“1 de&e to refer you to Section 17 (2), paie
27,.and the definition of *person’ on page 4 of the _.,
printed Act. . .: . ..
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“1 ,also want to call your attention to Gplnlon
po. 3004 dated September 1, 1937,‘wrItton by Vernon
‘Coe, A.ssis,tant Attorney Gonoral. For your .conven- .
ience 11 attach a copy of said opinion. ‘.
~*%our v&lued opinion as to. the above questiona’.‘,
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irill beg ~pprocIatod, ‘as a new corporation with
‘,stockholders, officers and:dIrectors In sgyo~of the
original ‘ten ~corpdratlons mentioned above. has made
applic&tIon ‘for a Package ,Store Permit,.”
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As ~jrour questions, are phrased. genorslly,:.vie shall ..
answer ‘thoti accordingly aild assume that there are ne ad+
tlonalfacts other ,than those which you specify.
The provisions of the Texas Liquor Control Act, as
recorded in Vernon’s Ponal Code of’Texas, which give rise .to
your questions are,‘as followsl
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.’ nA&icle ~666-17. (2) ’ It, shall Abe‘unJ.a&l ‘1.i
I for any person, to hold, or have ,an ~Interest in. . ,. :~
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&moi-able Cert Pord - Paso $t
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more than five (5) Package Stores or the busi-
ncss thereof. It shall further be unlawful
for any person to hold or -have an ln~tercst in
more th.an five (5) Pacwge Store Permits.”
“Art&&e 666-30. ‘Persons’ shall mean and
refer to any natural person or association of
natural.porson~s, trustee, recelvor, partnership
corporation, organization, or the manager, agen c ,
servant, or employee of any of thorn.”
Under the foregoing statutory provisions, a nat-
’Ural person or a corporation may (1) hold or (2) have an
m,in a maximumof five packagc stores or package
store permits, provided all other requirements of the 11:.
quor A& are fulfilled. Although. the term *‘holdoF is not
defined in. the Mt, it is the person who makes .appllcatlon
for and receives. the permit,- 11 co~i-poration, being a sopa-
‘r,ate entity under the laws of this State, is reoogtized as
a person capable of holding, a package store perhit. Xs’It
is the corporation that holds the peruit, it follows that
neither the ‘officers nor the stockholders of ‘the corpora-
tion are.the ~Sndividual holders thereof. The problem here
then is. the ‘nature’ of.the ~interest.,a stockholder and- ~offi-
. Cer.,of the corporation has in the permit held by the car- :._
poration. ‘.
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The issues you present her~e in your. first s5.x
.qnestions Involve ~princlpally that. of common corporate .~
stockholders, dir.ectors and officers ‘ln~ more than ~flve ,‘~ ..
cor$oratlons, each!.of~ which is .the holder. of a package
store permit, land the ~effec.t thereof- upon ap lying the .. .
provisions of that part of Article 666-17 (2!, which ..-
reads: ..
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“It. shall be unlaw’ful for any person to . . :-
have ‘an interest. in ‘more than five (51 package
stores . . .,‘Or 4 , . more.than,flve (5) pack-
age ~store permits.” .‘=
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The holding in a previous opinion of this d&.x&
ment to which you refer, No. 3006, 1s ,appllcable t, the
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. ponorahle. Bert Ford - Paae $5
. circumstances here. It.was ~thcre held that ownership by one
gerson of stock In three corporations did not violate the ,pro-
visions of Art. 666-17(2), supra, even though the three cor-
porations together owned more than five package store permits.
The reasoning in that opinion’ was based upon a no11 defined
line of Texas authorities holding that a stockholder ln’a
corporation dms. not own an interest in the~assets of a going
corporation:and consequently the stockholder does not own an
Interest in the package store tho business thorcof, or the
package store permit hold by Che corporation. lO.Tcx. Jur. .
781, Se& 3; Prcsnall vs. Stockyards National Dank 15l S.W.
873, 8763 Automobile Mortgage Company vs. Ayub, 26b S.Li. 134.
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This dopartment has previously constrkd “intcrestn
as used in Article 666-17(2) according .to’ its legal rather
.than to its popular usage and as beini: synonymous with legnl
title or equitable title, or both, pursuant to the. interpre- ,
tation placed upon the term by Texas Courts and those of
’ other jurisdiction.’ XcAlllster vs . zdip~e ,oii Company, 98
S.W. (2d) 171; :lO Tex. Jur. 780, 781; Automobile Kortgage Co.
vs. Ayub, 266 S.W. ,134, U. S. vs. Delaware & Hudson Company,
21.3U.S. 366; ~Byerly et al vs. Camey, 161 S. W. (2d) 1105.
Although officers and directors gonerally manage corporate
affairs, it is our position that a director or officer of fhe
corporation occupys the same position as the Sockholdors .,
vith.respect~ to their ninteres.tn in the corporation under
this statute.. An officer’s position with.respect to the
corporation is brieflp’.statcd:in 19 C.J.S., Corporations, Sect-
ion~741 as followsr
%‘he officers of’a private corporation have
no franchise in their.offlces; they are mere17 ..
representatives. or agents of the corporation.e
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Consequently, applying the holdlngbf the opinion
.cited above and our construction of the word. “interest?, we
arrive at the conclusion that a stockholder, :officor ,or direr 1
tor of a corporation, regardless of his stock ‘ownership, may.
belong to more than five corporations each corporation ~hold-
lne a package store permit. Wc therefore answer your f lrst
81x questions In the af firnative.
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It is our further opinion that 8s adirector, officer
or stockholder tn one or more corporations, each corporation ..~ i
holdinf: a nackarre store normit. has no leEa interest in the I
going corg&a.ti&, then he may’lndividualiy’and personally
.hold the statutory m~xlmumof five package store permits. We
therefore answer your question nu?ber 7 in the affirmative.
We proceed to your question number 8 relative to un
5ndividual who owns five, package store permits and at tho same
-‘time acting as lndepondent executor or trustee for an estate
that owns ‘an interest in a Package Store Permit. A permit or
license -granted uuder the terms of the Toxas Liquor Control
Act,.ls a personal privilege and does not constitute. propor~fy,
nor does It descend.by the 1~s of testate successionbut
ceases upon the death of the licensee or permittee. However,.
the. Texas Liquor Control Eoard may prescribe regulations where-’
by a new license may be applied for and Issued wit&but payment
of, additional fee as to unexpired periods of affected ‘licenses
upon the death of the holder of said license to the end that
the value of the,unexplred portion of the license shall not.
be lost to the sudcessors :ln interest of any business: Involved
and that. the conduct of said business may he eontinuod without
~&ntdrruption. SOQ Art. 666-13, V.A.P.C. Said Article- further
proviUes nthat any successor in Interest must ~.meetall reqtire-
~ments.of law applicable to.the holder of a permit or license
.under the termsof this act, except that the executor, ad+-
lstrator, trustee or receiver acting under any judicial ~pro-
ceedlnes shall not be required to be domiciled in the county
in which’ the business Is, louated.”
Due to the .fact that the. quoted wording In the &ova
stat&creates an exception a’s to executors, it would seem to
‘imply an assumption t?at an executor is a”succcssor in interest?-
‘to the deceased’s estate. however, whether an individual who
already holds s maximumof five package store permits can le-
gally act as indepondent executor or trusteo for sn ettate * .
having a package store permit will depend upon his &? crest
as’axecutor in said estate according to our prior definition of
the term$ntcrost under Article 66~17(2); namely, a legal
interest synonymous wlthlegal or equitable t$tle~. .,
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ponorable Bert Fort - Page 97
Proceeding then we find by Article 3314: V.A;C. S.,
th$t tihen a person dies, leaviny: ~a lawful will, ali of his
estate devised or bcqucathod by said will vost ln~cdiatolp
~jn thn devisees or leR:atees; that upon the issuance of lot-
tcrs~ testamentary or of administration, the executor shall
have the right of possession of the estate and shall hold
said estate in trust to be disposed of in accordance with.
law. We find further by Artlclo 3’+27, V.A.C. S., the ex-
ecutor has broad discretion in m3naglng the business of
the deceased for the welfare of the estate. Under these ’
statuteo, an independent executor is entitled to possession
.of the entire estate. r’oal ns well as norsonal. (horroll .
vs. Iianlett, 24 S. W: (2d) 531; Caufleid vs. New&n,. 265 ~*
s. w. 1052). The independent executor or representative
has nothing more than a temporary right to possession of the
proparty of the estate. Tine nature of .his possessionls
declared to be In trust, to be disposed of pursuant to law. ..
horrell VS. Uamlett, 24 S. W.. (2d) 531; 13 Tex.’ Jur. 7 2;
Bra-.in vs. Canal Bankand Trust Company C.C.A., La., 1l 1~ .
Fed.“2d 832. It is therefore ‘our, opin i on that an lndepdn-
dent executor or trustee, assuming that he has rccoived no
legacy or devise in the business of selling liquor by the ’
terms of the will, does not have a legal interest in the
assets of the estate to be distributed, as we have horeto-
fore defined the term lntercst under Article 666-1X2).
Consequently; we enswer your eighth question in the .&fir-.
mative .
., As .we ‘&ve already determined~ tho nature of the ‘-
$nteres$ as set out in Article 666-17(2) eland,found that a
stockholder does not have such an Interest in a corporation,
it is.our further opinion that an estate would occupy the
same.position as an individual in that respect and owner-
ship by the estate of stock in five or more corporations, mch
holding a package store permlt, IS’ likewise not a violation
of Article 666-17(2) supra. Ne ,therefore answer your ninth
and tenth questions In the -affirmative.
Ve are’ not unmindful of tho strong and growing ’
line of. legal authorities preventing the use of the fiction
of corporate.ldenity for Illegal purposes. The courts till
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Bonorable Eart Ford - Pase #a :
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look 3cyond the.&pbrite..forin to the’ purposa of it as well
as to the officers ~assoclated.t;lth that purpose In order to
eetemine If the corporate fiction is relied upon. to circum-
Vent the provisions of a statute. Here houever, as you
have presented no facts which would lea d us TV such a con-
elusion this opinion must rest solely ubon.those facts set
out In your letter..
We trust our findings bo,roln will be of assistance
to you. : ‘.
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0 Very truly yours
ATTOIUiEY C&ERAL dF !CEC&~
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Jack IL Aper’ ; ..
Assistant *. ‘. ‘~
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This opinion
. considered and ``’
. approved in
Limited
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