THE ATTOKNEY GENERAL
OF TEXAS
Honorable Coke R. Stevenson, Jr. Opinion No. M-159
Administrator
Texas Liquor Control Board i Re: Interpretation of Section
Austin, Texas 18 of Article 1 of the Texas
Liquor Control Act (Article
666-18 of Vernon's
Penal Code) as it relates
to a corporation's rights
to hold a permit, and
Dear Mr. Stevenson : related questions.
your letter requesting an opinion of this office reads,
in part, as follows:
"Our questions involve an interpretation of the
provisions of Section 18 of Article 1 of the Texas
Liquor Control Act (Article 666-18 of Vernon's
Penal Code).
"Prior to the amendment to the said Section 18
by the 60th Legislature, a corporation, though
otherwise unqualified to hold a permit, could obtain
and hold a permit if it was '...doing business in
this State under charter or permit prior to August
24, 1935.'
"After the effective date of the amendment to
the said Section 18 by the 60th Legislature, a
corporation, though otherwise unqualified to
hold a permit, may obtain and hold a permit if
it was '...engaged in the legal alcoholic beverage
business in this State under charter or permit
prior to August 24, 1935.'
"Our first question is as follows:
If a corporation, though otherwise
unqualified to hold a permit, did, in
fact, obtain and hold a permit because
it was 'doing business in this State
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Honorable Coke R. Stevenson, Jr., Page 2 (M-159)
under charter or permit prior to
August 24, 1935,' prior to the effec-
tive date of the amendment to Section
18 of Article I of the Texas Liquor
Control Act (Article 666-18 of Vernon's
Texas Penal Code) by the 60th Legis-
lature, is such corporation entitled
to obtain and hold a permit after the
effective date of the amendment to
the said Section 18 by the 60th Leg-
islature, even though such corporation
0 . . was not, in fact, 'engaged in
the legal alcoholic beverage business
in this State under charter or permit
prior to August 24, 19351'
"Our second question is as follows:
Where Corporation-l, which is otherwise
not qualified to hold a permit, does,
in fact, hold a permit because it was
'engaged in the legal alcoholic bev-
erage business in this State under
charter or permit prior to August 24,
1935,' and where all of the capital
stock of CorporatE-1 is acquired
by Corporation-2, which is not quali-
fied to obtain and hold a permit either
directly or as a result of an exemption,
is Corporation-l, thereafter, entitled
to obtain and hold a permit under the
terms of Section 18 of Article I of
the Texas Liquor Control Act (Article
666-18 of Vernon's Texas Penal Code)?
If not all, but more than 49 percent
of the corporate stock of Corporation-l
is acquired by Corporation-2, under the
same conditions as outlined above,
would Corporation-l be entitled to
obtain and hold a permit?
n. e .
"Our third question is as follows:
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Honorable Coke R. Stevenson, Page 3 (M-159)
Where a corporation was engaged in the
legal alcoholic beverage business in
Texas from January 1, 1935, to January
1, 1940, at which time such corporation
became inactive but continued to pay
its franchise taxes and preserve its
good standing in Texas, may such
corporation be reactivated in January
of 1968, with either all or more than
49 percent of its capital stock being
owned by unqualified persons or cor-
porations, and be entitled to obtain
and hold a permit under the terms of
Section 18 of Article I of the Texas
Liquor Control Act (Article 666-18 of
Vernon's Texas Penal Code)?"
Prior to the questioned amendment, Section 18 of Article
I of the Texas Liquor Control Act (Article 666-18 of Vernon's
Texas Penal Code) Acts 1935, 44th Leg., 2nd C.S., Ch. 467, p.
1795, at page 1814 provided as follows:
"NO person who has not been a citizen of Texas
for a period of three (3) years immediately pro-
ceeding ,the filing of his application therefor shall
be eligible to receive a permit under this Act.
No permit shall be issued to a corporation unless
the same be incorporated under the laws of the
State and unless at least fifty-one (51%) percent
of the stock of the corporation is owned at
all times by citizens who have resided within
the State for a period of three years and who
possess the qualifications required of other
applicants for permits; provided, however, that
the restrictions contained in the preceding clause
shall not apply to domestic corporations, or to
foreign corporations that were doing business
in this State under charter or permit prior
to August 24, 1935. Partnerships, firms and
associations applying for permits shall be
composed wholly of citizens possessing the
qualifications above enumerated. Any cor-
poration (except carrier) holding a permit
under this Act which ahall violate any provisions
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Honorable Coke R. Stevenson, Jr., Page 4 (M-159)
hereof, or any rule or regulations promulgated
hereunder, shall be subject to forfeiture of
its charter and it shall be the duty of the Attorney
General, when any such violation is called to
his attention, to file a suit for such can-
cellation in a District Court of Travis County.
Such provisions of this section as require
Texas citsenship or require incorporation in
Texas shall not apply to the holders of agent's,
industrial, medicinal and carrier's permits."
Section 18 of Article I of the Texas Liquor Control Act
(Article 666-18 of Vernon's Penal Code), as amended by
Acts 1967, 60th Leg., Ch. 85 sec. 2 p. 161, provides as follows:
"No person who has not been a citizen of
Texas for a period of three (3) years immediately
preceding the filing of his application therefor
shall be eligible to receive a permit under
this Act. No permit except a Brewer's Permit,
and such other licenses and permits as are
necessary to the operation of a Brewer's Permit,
shall be issued to a corporation unless the
same be incorporated under the laws of the
State and unless at least fifty-one (51%) percent
of the stock of the corporation is owned at all
times by citizens who have resided within the
State for a period of three (3) years and who
possess the qualifications required of other
applicants for permits; provided, however, that
the restrictions contained in the preceding
clause shall not apply to domestic or foreign
corporations that were engaged in the legal
alcoholic beverage business in this State under
charter or permit prior to August 24, 1935.
Partnerships, firms, and associations applying
for permits shall be composed wholly of citizens
possessing the qualifications above enumerated.
Any corporation (except carrier) holding a
permit under this Act which shall violate any
provisions hereof, or any rule or regulations
promulgated hereunder, shall be subject to
forfeiture of its charter and it shall be
the duty of the Attorney General, when any such
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Honorable Coke R. Stevenson, Jr., Page 5 (M-159)
violation is called to his attention, to file
a suit for such cancellation in a District Court
of Travis County. Such provisions of this
section as require Texas citizenship or require
incorporation in Texas shall not apply to the
holders of agent's, industrial, medicinal and
carrier's permits." (emphasis added.)
The first question presented in the opinion request relates
to the portion of Section 18 dealing with the provision commonly
called the "grandfather clause" where the words, "engaged in
the legal alcoholic beverage business" are substituted for the
more general phrase, "doing business."
The intent of the legislature to restrict the class of
corporation that shall qualify under the "grandfather clause" is
clear. Therefore, only corporations that shall now qualify
for a permit under the "grandfather clause" of Section 18 as
amended is a "domestic or foreign corporation that was engaged
in the legal alcoholic beverage business in this State under
charter or permit prior to August 24, 1935."
A permit issued by the Texas Liquor Control Board under
the authority granted the Board or Administrator by the legis-
lature is a mere privilege and not a right. The Texas Liquor
Control Act so provides (Article 666-13, V.P.C.), and the courts
of Texas are in full accord. Jones v. Marsh, 148 Tex. 362,
224 S.W.Zd 1 253 S.W.Zd
269 (1952); 108 S.W.2d
300 (Tex. Ci
v. Raspante,
Any permit issued by the Texas Liquor Control Board,
except Wine and Beer Retailer's Permits issued to other than
a railway dining buffet, or club car , shall expire at midnight
of August 31 next following the date of issuance. (Article
666-13, V.P.C.), However, upon filing an application for
renewal of permit, the Board or administrator is authorized,
upon finding that the applicant is qualified under the terms
of the Act, "to issue the ermit sought to be renewed."
(Article 666-15c(2). (emphisis added.). Also, Article 666-11
provides "The Board or Administrator may refuse to issue a
permit either on an original application or a renewal appli-
cation to any applicant" if certain facts are found to be true.
It is therefore clear that the Board or administrator may, upon
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Honorable Coke R. Stevenaon, Page 6 (M-159)
application for a renewal of a permit, either issue or refuse
to issue a permit.
Therefore, it is the opinion of this office that a
corporation not otherwise qualified to obtain a permit that
did, in fact, obtain and hold a permit because it was
"doing business in this state under charter or permit prior to
August 24, 1935" is not, after the effective date of the
amendment to section 18, entitled to obtain a
the corporation was "engaged in the legal alto
business in this State under charter or permit prior to
August 24, 1935."
In answer to the second question presented in the opinion
request the terms of the "grandfather clause" itself,not the
general requirements concerning ownership of stock,govern
when a corporation seeks to bring itself within the "grandfather
clause", as discussed in the case of Elliott Bros. Trucking Co.
v. United States, 59 F.Supp. 328 (D.C., Maryland, 1945). The
Court there observed at page 330:
"Under the 'grandfather clause', the commission
without requiring further proof that the public
convenience and necessity will be served, must
issue a certificate if a carrier applicant or
its predecessor in interest was in bona fide
operation as a comnioncarrier by motor vehicle
on June 1, 1935, over the routes or within the
territory covered by the application, and has
so operated since that time."
The "grandfather clause" protects the privilege of a
corporation to hold a permit and, is not changed or lessened
in any way by a change in the ownership of the stock. The right
to qualify under the,"grandfather clause".belongs,to~the.
corporation,as an entity~distinct~from its,stockholders...As.
long as the corporation continues in existence, the authority
conveyed by the "grandfather clause" belongs to the corporation
regardless of who owns the stock in the corporation.
In answer to the third question presented in the opinion
request, a corporation seeking to bring itself under the exception
granted by the "grandfather clause" need only show that the
corporation was "engaged in the legal alcoholic beverage industry
in this state under charter or permit prior to August 24, 1935".
(emphasis added) e
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.
Honorable Coke R. Stevenson,,Jr., Page 7 (M-159)
A court cannot read into the law words not placed there
by the legislature. Rmoire Gas and Fuel Co. v. State. 121 Tex.
138, 47 S.W.Zd 265 (Iv: . In Goldman v. Torres, 341:S.W.2d
154 (Tex.Sup. 1960), the court stated at page 158 as follows:
”
. this Court cannot, under the guise
. .
of liberal construction, usurp the power of
the legislature by reading into.,theAct a
provision that is not there."
Under the authority cited above, it is the opinion of this
office that neither continuous operation nor any percent of
stock ownership by Texas citizens can be read into the privilege
granted to a corporation under the "grandfather clause" in
Section 18 of Article I of the Texas Liquor Control Aot.
you have directed our attention to the case of Harris v.
Alcoholic Beverage Control Appeals Board, 38 Cal. 305 392
. 1 (1964). This case involved a different situation con-
cerning the public policy of California prohibiting the holding
of multiple licenses. We are not presented with this question
but with a Texas statute which deals only with a local citizenship
requirement.
In order to'qualify under the "grandfather clause", a
corporation need only show that it was "engaged in the legal
alcoholic beverage business in this State under charter or
permit prior to August 24, 1935." (emphasis added).
SUMMARY
Article 666, Section 18 of V.P.C. as amended
by Acts 1967, 60th Leg., Ch. 85 sec. 2, p. 161,
restricts the class of corporations authorized
to qualify under the "grandfather clause" of
Section 18 to only those domestic or foreign cor-
porations that were engaged in the legal alcoholic
beverage business in Texas under charter or
permit prior to August 24, 1935, and neither
continuous operation nor any certain percentage
of stock ownership by Texas citizens cau be
read into the privilege granted to the qualify-
ing corporation.
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Honorable Coke R. Stevenson, Jr., Page 8 (M-159)
8 very truly,
F
Prepared by Douglas Chilton
Assistant Attorney General
APPROVED:
C
A
fGx=-
FORD C. MARTIN
orney General of Texas
OPINION COMMITTEE:
Hawthorne Phillips, Chairman
Kerns Taylor, Co-Chairman
W. V. Geppert
Jo Betsy Lewallen
Dyer Moore, Jr.
Houghton Brownlee
STAFF LEGAL ASSISTANT
A. J. Carubbi, Jr.
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