ESA~WRNEY GENERAL
OF TEXAS
AUSTIN, TEXAS 78711
The Honorable Jimmy Morris Opinion No. H- 332
Criminal District Attorney
Navarro County Re: Whether town is entitled
Corsicana, Texas 75110 to recover city sales tax
from tb.e Comptroller where
its incorporation has been
judicially determined to be
Deat Mr. Morris: void.
You ask whether a town the incorporation of which has been declared
null and void in a final district court judgment is entitled to receive the
city sales taxes collected on its behalf by the Comptroller.
In 1972 the town of Angus was purportedly incorporated pursuant to
Articles 1133 and 1134, V. T. C.S. The town thereupon elected to adopt
the local sales and use tax permitted by Article 1066c, V. T. C. S. .But on
July 23, 1973, the district court of Navarro County set aside the attempted
incorporation of Angus and declared it illegal, void, and of no effect.
There has been no appeal from that decision. During the second quarter
of 1973 and for some time thereafter, city sales taxes had been collected
by the Comptroller on behalf of Angus. You ask whether the town of
Angus is entitled to receive the sales taxes collected for it during 1973
by the Comptroller despite the judicial declaration that its incorporation
was void.
In resolving questions similar to the one you present, the courts have
drawn a distinction between de facto municipal corporations and tho,se’that
are void ab initio. A de facto municipal corporation is created when a
community has made a good-faith attempt to organize in the method pre-
scribed by existing law and has at least colorably complied with that law.
Hunt v. Atkinson, 12 S. W. 2d 142 (Tex. Comm, App. 1929), vacated on other
grounds, 17 S. W. 2d 780 (Tex. Comm. App. 1929). With respect to its
obligations, a de facto corporation is for all intents and purposes, the
same as a de jure corporation: its acts and contracts are as binding on it
p. 1536
The Honorable Jimmy Morris, page 2 (H-332)
as are those of a de jure corporation. Shapleigh v. San Angelo,
167 U.S. 646 (1897). A de facto corporation may levy and collect
taxes to. fhe same extent as a de jure corporation. See generally,
39 Tex. Jur. 2d. Municipal Corporations, Sec. 57. p.407.
On the other hand, where there is no authority for its de jure
existence, a municipality is void ab initio. The.legal effect of a
judicial determination that an attempted incorporation was void is
described in the following passage from Hunt v. Atkinson, supra:
A corporation, for the existence of which de jure
there is no law, cannot be a de facto corporation,
and its existence may be attacked directly or col-
laterally, or even ignored since it is in law nothing.
It affords no rights and presents no defenses at any
time, or as to any person. 12 S. W. 2d at 145.
Thus when an attempted incorporation is declared void, the municipality
purportedly created is treated by the law as if it never existed, and
its acts and contracts have no effect whatsoever.
The attempted incorporation of the town of Angus has been set
aside and declared illegal, void and %f no effect. In its judgment the
district court stated that there is not now nor has there ever been a
legally incorporated town of Angus, and it ousted all city officials
from the offices they purportedly held with no right to assert any
powers or exercise any functions af those offices. The incorporation
of Angus having been declared void, the town never had the authority
to levy and collect the city sales tax, and those who paid it are entitled
to a refund of their money. Article 20.10, Taxation-General, V. T. C. S.
Since it has neither de jure nor de facto status, the town of Angus and
those purporting to represent it are certainly not entitled to receive
any city sales taxes from the Comptroller.
p0 1537
The Honorable Jimmy Morris, page 3 (H-332)
SUMMARY
A town the incorporation of which has been .declared
null and void in a final court order is not entitled to
receive the city sales taxes collected on its behalf by
the Comptroller.
Very truly yours,
A
v Attorney General of Texas
APP OVED:
R
DAVID M. KENDALL, Chairman
Opinion Committee
po 1538