Untitled Texas Attorney General Opinion

December L:, lY70
Honorable Martin Dies, Jr. Opinion No. M- 754
Secretary of State
Capitol Building Re: Should the Secretary of
Austin, Texas State administratively re-
instate, under Article 12.17,
Title 122A, Tax-Gen.,,V.C.S.,
a trust company formed under
Article 1302, subsection 49..
‘or’Article 1303(b), V.C.S.,
without proof that the
corporation has complied
with Article 1513a, V.C.S.,
and especially whether the
corporation is authorized to
have and doeshave a fully
paid-in capital of not less
Dear Mr. Dies: than $5OO,OOOiOO?
Your recent request presents the following question for
determination by this office:
"Should the Secretary of State administra-
tively reinstate, under Article 12.17, Taxation-
General, Vernon's Annotated Texas Statutes, a
trust company formed under Article 1302, sub-
division 49, or Article 1303(b), Vernon's Anno-
tated Texas Statutes, without proof that the
corporation has complied with Article 1513a,
Vernon's Annotated Texas Statutes, and especially
whether the corporation is authorized to have and ',
does have a fully paid-in oapital of not less
than $500,000.00.~
This question of whether the Secretary of State should
require proof of compliance with Article 1513a,l Title 32,
Corporations, before reinstating the charter of a corporation
1. All Articles cited are as codified in Vernon's Civil Statutes.
-3676-
.
Hon. Martin Dies, Jr., page 2 (M-754)
formed under either Article 1302(49), or Article 1303(b), of
this Title 32, (the latter two articles repealed by Acts 1961,
57th Leg., p. 458, ch. 229, Sec. 1, Eff. Aug. 28,.1961),
actually presents two questions for determination in this opinion.
The first question concerns the Secretary of State's wright or duty
to require that a corporation seeking reinstatement under
Article 12.17, Title 122A, Taxation-General, comply with all laws
then pertaining to it before allowing reinstatemant~of its charter.
Assuming that such a duty on the part of the Secretary of State
exists, the second question is whether the provisions of Article
1513a, apply to corporations chartered under either Article 1302(49)
or Article 1303(b), and which corporations seek reinstatement of
their charters granted under the authority of either of these
Articles.
Article 12.17 provides for administrative and judicial re-
instatements of charters forfeited either administratively by the
Secretary of State or judicially by court order. We are concerned
here with only the right to administrative reinstatement provided
for corporations with charters administratively forfeited by the
Secretary of State. Article 12.17 provides in part:
"(3) . . . (b). Any corporation, domestic
or foreign, whose charter or certificate has been
forfeited without judicial ascertainment by the
Secretary of State may revive said charter.or cer-
tificate, by first filing all delinquent franchise
tax reports as required by law and by filing all
franchise taxes; penalties, and interest due by
said corporation at the time of the request. . . .
Upon such request, and upon the determination that
all delinquent tfranchise tax,reports have been
filed and all franchise taxes, penalties, and
interest due by said corporation at the time of
the request for reinstatement have been paid, the
Secretary of State shall administratively set
aside the forfeiture. . ."
This statutory provision does not speak of any requirement
that a corporation to be reinstated must comply with any other
laws relating to its existence or operation. However, it can
easily be seen that if such corporation is not required to comply
with all laws pertaining to its existence and operation under its
charter before it is reinstated, the Secretary of State would be
put in the unreasonable and untenable position of reinstating
corporations that cannot exist or operate under their char& as
-3677-
Hon. Martin Dies, J., page 3 IM-754)
reinstated. For example, this problem would arise whenever a
corporation did not have a registered agentsas required by the
Texas Business Corporation Act, or failed to meet some other
provision of the corporation laws, but did meet the requirements
of Article 12.17 by paying all delinquent franchise taxes,
penalties, and interest due. It is implicit in any procedure to
create or reinstate a corporate charter that the corporate laws
dealing with suoh a corporation be complied~with prior to its
creation or reinstatement on the records of the Secretary of State.
In view of the above holding we must now determine the scope
of Article 1513a, in so far as its prOViSiOnS may apply to corpora-
tions having charters originally granted under either Article
1302(49), or Article 1303(b). If the provisions of Article 1513a
apply to such corporations seeking reinstatement, then the Secre-
tary of State must require compliance with them before allowing
reinstatement of the forfeited charter.
An understanding of the subject matter of these three
statutes dealing with trust companies is necessary to this opinioni
these statutes read in their relevant parts:
Article 1302
"The purpoaes for which private corporations
may be formed are:
,I
. . . .
"49. For any one or more of the following purposes:
To accumulate and lend money, purchase, sell and deal
in notes, b.ondsand securities, but.without banking and
discounting privileges; to act as trustee under any law-
ful express trust committed to them by contract and as
agent for the performance of any lawful act.”
Artiole 1303(b)
"A private corporation may be formed for any one
or more of the following purposes, without banking or
insurance privileges: to accumulate and loan money;
to sell and deal in notes, bonds and seourities; to act
as Trustee under any lawful express trust committed to
it by contract or will, or under appointment of any court
having jurisdiction of the subject matter, and as agent
Hon. Martin Dies, Jr., page 4 (M- 754)
for the performance of any lawful acts;. . . .'
Article 1513a
"Section 1,. Trust companies may be created, and
any corporation, however created,,may amend its,oharter
in compliance herewith, or a foreign corporation may
obtain a certificate.of authority to do business in
Texas for the following purpose: to act as trustee,
executor, administrator, or guardian when designated
by any 'person, corporation , or court to do so, and as
agent for the performance of any lawful act, includ-
ing the righ:tto receive deposits.made by agencies of
the United States of America,for the authorized account
of any individual, and to act'as attorney-in-fact for
reciprocal or inter-insurance exchange, and to lend and
accumulate money without banking privileges, when
licensed under the provisions of Subtitle II of Title
79, Revised Civil Statutes of Texas, 1925, as amended.
"Section 2. (a) Such corporations shall be subject
to supervision by the Banking Commissioner of Texas and
shall file . . . each year a statement of its condition
showing under oath its assets and liabilities,
;oge;her with a fee of $25 for filing;.. . .
"(b) The Banking Commissioner of Texas shall . . .
cause to be examined each such oorporation annually or
more often if he deems it necessary. . . . If such
corporation has not sold in Texas, and does not offer
for sale or sell in Texas, any of its securities which
have been registered or with respect to which a permit
authorizing their sale has been issued under the Securi-
ties Act, . . . the Banking Commissioner . . . shall
accept the financial statement filed by such corporation
pursuant to the first paragraph of this Section. . . .
"(c) If any such corporation shall fail to comply
with the requirements of the first paragraph of this
Section . . . such failure shall,subject such corporation
to a penalty of not leas than $200 nor more than $1,000,
which shall be collected at the suit of the Attorney
General. . . . A second failure to file such statement,
. . . shall be grounds for forfeiture of the charter of
such corporation at the suit of the Attorney General . . .
lion.Martin Dies, Jr., page 5 (M- 754)
” (d) Refusal. . . of any such corporation
to submit to an examination by the Banking
Commissioner . . . or . . . withholding of in-
formation . . . shall constitute grounds for for-
feiture of the charter of such corporation . . .
"Section 3. Any securities issued.or sold by
such companies shall be issued and sold in compliance
with . . . Securities Act, . . .
"Section 4. Any such company,must have a fully
paid-in capital of not less than $500,000.
"Section 5. Any such company shall not accept
demand or time deposits, except as hereinabove pro-
vided.
"Section 6. The provisions of this Act shall
apply to foreign corporations which have heretofore
been authorized and which may hereafter be authorized
to transact business in this State under a certificate
of authority which authorizes such corporation to,
exercise in this State all or any of the purposes,
powers or authorities referred to in Section 1 hereof. . . .
"Section 7. The General Laws for incorporation
and governing of corporationsand the provisions of
Article 1513, Revised Civil Statutes of Texas, 1925,
and the provisions of the Texas Business Corporation
Act shall supplement the provisions of this Act and
shall apply to such trust companies to the extent that
they are not inconsistent herewith; provided, the pro-
visions of Article 2.01A permitting a corporation to
have more than one purpose shall not apply. The power
and authority herein conferred shall in no way affect
any of the provisions of the antitrust laws of this State."
The above quoted statutes all,authoriae the oreation of
corporations having trust powers, characterized as "trust companies'
by the courts and in Section 7, of Article 1513a. Carney\v. Sam
Houston Underwriters, 272 S.W.Zd 942 (Civ.App. 1954, error ref.
n.r.e.); Stewart v. Ramsey, Secretary of State, 148 Tex. 249,'
223 S.W.Zd 782 (1949).
Hon. Martin Dies, Jr., page 6 IM-754)
Articles 1302(49), and 1303(b), were enacted in 1919 and
1927, respectively, and were repealed as of August 20, 1961.
Article 1513a, was enacted in 1957 and is still in effect. After
the repeal of Articles 1302(49), and 1303(b), a trust company
could be created only under the authority of Article 1513a. Al-
though all three statutes authorized the creation of "trust
companies", only Article 1513a sets out a comprehensive statutory
scheme for the regulation of such corporations.
Article 1513a, providing for the creation and the regulation
of trust companies and requiring the compliance with specific
conditions therein provided by such trust companies, effected a
change in the conditions and requirements necessary for all trust
companies, including those theretofore created under prior
statutes authorizing corporations with trust powers. This statute
is not the first enactment whereby prior corporations have been
subjected to subsequent requirements necessary forits continued
existence as a corporation having the same powersgranted to it'
by the statute under which it was originally created. Jefferson
County Title Guaranty Co. v. Tarver, 119 Tex. 410, 29 S.W.?d 316
(Comm.App. adopted 1930).
In that case a title guaranty company incorporated in 1927
under Article 13021571, Title 32, Corporations, ,was subjected to
a later act requiring an increase in the capital stock subscribed
of $50,000.00. The court quoted the following statutes and pro-
visions of our State Constitution:
Article XII, Section 1, Texas Const.:
"No private corporation shall be created
except by general laws."
Article XII, Section 2, Texas Const.:
"General laws shall be enacted providing for
the creation 'of private corporations, and ~shall
therein provide fully for the adequate protection
of the public and the individual stockholders."
Article 1318:
"All charters or amendments to charters under
the provisions of this chapter, shall be subject to
the power of the Legislature to alter, reform, or
amend the same."
-,
3f,R
J ,.,
Bon. Martin Dies, Jr., page 7 (M-754)
2
Under the above constitutional and statutory provisions,
the court held that the company, having been incorporated under
the Constitution and general laws of Texas expressly reserving
in the Legislature the right~to alter, reform, or amend the
corporation laws and charters, is subject to the Act of 1929
requiring the capital stock of $100,000.00 as a condition precedent
to doing business in this state , and that such statutory require-
ment does not impair any contract evidenced by the charter granted
by the State to the company, The Court further held that a
corporation such as the one in question had no vested right in the
privilege of doing a title guaranty business as a corporation, and
therefore suffered no loss of any vested right to property in a
change in the statute law prescribing a larger capital stock as
a condition precedent to continuing business in this State.
This construction'of Article 1513a is not inconsistent with
the prior Acts providing that corporations could be created having
trust pwers because the subsequent Act, Article 1513a, does not
invalidate the charters theretofore granted but merely provides I
certain standards such as the amount of capital necessary,
compliance with the Securities Act and compliance with the regu-
lations providing for annual reports submitted to the Banking
C&anissioner of Texas and his examination thereof.
Further support is given to the above construction of
Article 1513a because of the language of Section 6 of that statute.
Section 6 provides that all foreign corporations'authorized to
transact business in thexate of Texas under a certificate ~of
,authority which authorizes such corporations to exercise in this
State all or any of the powers or purposes referred to in Section
1 of Article 1513a must comply with the provisions of that Act.
If domestic corporations having trust powers set out in
Section 1 of Article 1513a,did not have to comply with the provisions
of that Act then a classification based on the nature of the corpora-
tion as domestic or foreign would result. It is the settled law of
the land that a foreign corporation , once admitted to do business
in a state, is untitled to equal treatment under the laws of that
2. Article 1318 has been replaced by Article 9.12, Business
Corporation Act, which contains similar provisions.
-3682-
Bon. Martin Dies, Jr., p.age8 (H- 754)
state. Whyy, Inc. v. Borough of Glaaboro, 393 U.S. 117 (1968),
21 L. Ed. 242, 89 S. Ct. 286.
The rule is stated in 17 Fletcher'sCyclopedia of The Law of
Private Corporations, 58396, on page 292 :
”
. . . separate classification of foreign and
domestic corporations,,for 'purpose of regulation, --
where the foreign corporation ha8 been admitted to
the state, is unconstitutional as an unreasonable
and arbitrary ola8sification \jhich conetitutee a
. '. denial of the equal protection of the laws; . . .'
(emphaeis added).
Where a corporation has not been admitted to the state,
special condition8 or standard8 may be imposed that do not apply
to like domestic corporations. Also where ground8 for distinction
between foreign and domestic corporations exist, the'above rule
does not apply.
Here, in view of the fact that domestic oorporations
authorized to have trust power8 under Articles 1302(49) and
1303(b) are not subject to any regulations if Article 1513a does
not apply to them, the regulatory provisions of that Act, which
clearly apply to fore+- corporation8 previously admitted to the
state under a certifi'eateof'authority authorixing them to have
like trust powers, would constitute a denial of equal protection
of the ,lawa to such foreign corporatione. Ground8 for a distinction
between foreign and domestic corporations are not evident under such
oircumstanoes.
It is a well-settled rule of law that a rtatute will be
construed in a manner that will uphold the constitutionality of its
provisions: 53 Tex.Jur.Zd 225, Statutes, 5158. By holding that
Article 1513a applies alike to all domestic and foreign corporations
authori8ed to have the trust powers defined in Section 1 of that
Act-, the constitutionality of said statute is preserve'd.
For the above reasons , it is our view that Article 1513a
applies not only to corporations created under the authority of
that Act, but also to all trust companies whether foreign or
domestic, that may wish to employ the trust pwers defined in
Section 1 of Article 1513a.
The Secretary of State, therefore, is authorized to require
proof of compliance with the laws governing trust companies, inciud-
-3683-
Hon. Martin Dies, Jr., page 9 (M-754)
ing the provisions of Article 1513a, before allowing reinstatement
of such corporations under Article 12.17 allowing reinstatement of
charters forfeited for failure to pay franChiS& taxes.
SUMMARY
The Secretary of State is not require,dto
reinstate a corporation whose charter, once rein-
stated, would not comply with the corporate laws
governing said corporation. Article 1513a, V.C.S.,
applies not only to corporations created under the
authority of that Act, but also to all trust
companies whether foreign or domestic, that may
wish to employ the trust pavers defined in Section 1
of Article 1513a. The Secretary of State, therefore,
is authorized to require proof of compliance with the
laws governing trust companies, including the pro-
visions of Article 1513a~before allowing reinstatement
of such corporations under Article 12.17, V.C.S., allow-
ing reinstatement of charters forfeited for failure to
pay franchise taxes.
Hon. Martin Dies, Jr., page 10 (M- 754)
Prepared by Wardlw Lane
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Kerns Taylor, Chairman
W. E. Allen, Co-Chairman
S. J. Aronson
John Banks
John Reeves
Rogeq Tyler
MEADE F. GRIFFIN
Staff Legal Assistant
ALFREDWALKER
Executive Assistant
NOLA WRITE
?%rSt &38iStSl¶t
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