Hon. Coke R. Stevenson, Jr. Opinion No. C-427
Administrator
Texas Liquor Control Hoard Re: Whether the provisions of
Austin, Texas the Texas Liquor Control
Act, which require that a
corporation be Incorporated
under the laws of the State
of Texas in order to be
eligible for a permit or
license are constltutlonal
Dear Mr. Stevenson: and related questions.
In your request for an opinion of this office, you
ask the following questions concerning the following statutes:
"Section 18 of Article I of the Texas
Liquor Control Act (Artlolt 666-18 of V.
A.P.C.) provides in part as follows: I. . .
No permit shall be issued to a corporation
unless the same be incorporated under the
laws of the State and unless at least flfty-
one (51s) percent of the stock of the corpo-
ration Is owned at all times by citizens who
have resided wlth,inthe State for a period
of three years and who possess the qualifi-
cations required of other applicants for
permits; . . .I
"Subdivision (h) of subsection 2 of Sec-
tion 5 of Article II of the Texas Liquor Con-
trol Act (Article 667-5, 2, (h) of V.A.P.C.)
provides In part as follows: @. . . The coun-
ty judge shall refuse to approve the appll-
cation for such license If he has reasonable
grounds to believe and finds any of the follow-
ing to be true: . . . 2. If a Distributor or
Retailer: . . . (h). If a corporation, that
the applicant l,snot incorporated under the
laws of this state; or that at least flfty-
one (51%) percent of the stock of such corpo-
ration 1s not owned at all times by citizens
-2005-
Ron. Coke R. Stevenson, Jr., page 2 (C-427)
who have resided within this state for a
period of three (3) years and who possess
the qualifications required of other appll-
cants for licenses; . . .I
"Question number one. Are these pro-
visions of law which r&$ilre that & corpo-
ration be incorporated under the laws of
the State of Texas In order to be eligible
for a permit or a license constitutional?
"Question number two. Are these pro-
visions of law that i%?iiiIre
that fifty-one
percent of the.stock of the corporation be
owned by persons who have been resident citi-
zens of the State of Texas for a period of
three years Immediately preceedlng the filing
of the application in order for the corpo-
ration to be eligible for i permit or a
license constitutional?
"Subsection (10) of Section 3-a of
Article I of the Texas Liquor Control Act
(Article 666-3a, (10) of V.A.P.C.) provides
that the term '"'applicant"shall mean any
person who submits or files an original or
renewal appllcatlon with the county judge,
or board or administrator for a license or
permit.'
"Subsection (6) of Section 3-a of
Article I of the Texas Liquor Control Act
(Article 666-3a, (6) of V.A.P.C.) provides
that the term "'person" shall mean and refer
to any natural person or association of nat-
ural persons, trustee, receiver, partnership,
corporation, organization, or the manager,
agent, servant, or employee of any of them.'
"Subsection 16 of Section 11 of Article
I of the Texas Liquor Control Act (Article
666-11, (16) of V.A.P.C.) provides In part
as follows: t . . .When the word "applicant"
Is used in (1) to (14) of this section, It
shall also mean and Include each member of
a partnership or association and all officers
and the owner or owners of the majority of
the corporate stock of a corporation, as of
the date of the application, . . .I
-2006-
Hon. Coke R. Stevenson, Jr., page 3 (C-427)
"Subsection (11) of Section 11 of Arti-
cle I of the Texas Liquor Control Act (Arti-
cle 666-11, (11) of V.A.P.C.) provides in
part as follows: ‘The Board or Administrator
may refuse to,lssue a permit . . . to any
applicant . . . if It has reasonable grounds
to believe and finds any of the following to
be true: . . . (11). That the applicant Is
not a citizen of the United States or has
not been a citizen of Texas for a period of
three (3) years Immediately preceding the
filing of his application, . . .I
"Section 18 of Article I of the Texas
Liquor Control Act (Article 666-18 of V.A.
P.C.) provides In part a8 follows: 'No per-
son who has not been a citizen of Texas for
a period of three (3) years immediately pre-
ceding the filing of his application there-
for shall be eligible to receive a germit
under this Act. . .I
"Subdivision (e) of subsection 2 of
Section 5 of Article II of the Texas Liquor
Control Act (Article 667-5, 2 (e) of V.P.P.
C.) provldes~In part as follows: I.'. .The
County Judge shall refuse to approve the
application for such license If he has
reasonable ground8 to.believe and finds any
of the following to be true: . . . 2. If a
Distributor or Retailer: . . . (e). That the
applicant Is not a citizen of the United
States or has not been a citizen of.Tcxas
for a period of three (3) years Immediately
preceding the filing of an application, . .
.t
"gstion number three. Are these pro-
visions of law that require that the officers
of a corporation be resident citizens of the
State of Texas for three years immediately
preceding the filing of the application In
order for the corporation to be eligible to
receive a pennit or a license constitutional?
'lQuestlonnumber four. Are these pro-
visions of law that require that a natural
-2007-
Hon. Coke R. Stevenson, Jr., Page 4 (C-427)
person, or a partnership composed of nat-
ural persons, or an association of natural
persons, be resident citizens of Texas for
three years immediately preceding the filing
of the application in order to be eligible
to receive a permit or license constitution-
al?
"Subsection (28) of Section 12 of Artl-
cle I of the Texas Liquor Control Act (Arti-
cle 666-12, (28) of V.A.P.C.) provides as
follows: 1. . .Where the word "permittee" is
used in this section it shall also mean and
include each member of a partnership or as-
sociation and each officer and the owner or
owners of the majority of the corporate stock
of a corporation, . . .I
"Subsection (23) of Section 12 of Artl-
cle I of the Texas Liquor Control Act (Arti-
cle 666-12, (23) of V.A.P.C.) provides In
part as follows: 'The Board or Administrator
may cancel . . . any permit . . . if It is
found that any of the following is true:
. . . (23). That the permittee is not a
citizen of the United States or has not been
a citizen of Texas for a period of three (3)
years Immediately preceding the filing of
his application; . . .I
"Question number 5. Is this provision
of law that gives th Texas Liquor Control
Board the authority To cancel a permit ls-
sued to a natural person, or partnership, or
association, on the ground that the persons
to whom the permit was issued were not resi-
dent citizens of the State of Texas for a
period of three years immediately preceding
the filing of the application for the permit
constitutional?
"Question number 6. Is this provision
of law that gives the Texas Liquor Control
Board the authority to cancel a permit is-
sued to a corporation on the ground that the
officers of thencorporation were not resident
citizens of~the State of Texas for a period
of three years immediately preceding the
filing of the application for the permit con-
stitutional?
-2008-
Hon. Coke R. Stevenson, Jr., page 5 (C-427)
"Guestion number 7. Is this provlcion
of lawAfiat gives th Texas Liquor Control
Bard the authority Eo cancel a permit ls-
sued to a corporation on the ground that the
owner or owners of the majority of the corpo-
rate stock of such corporation were not resl-
dent citizens of the State of Texas for a
period of three years immediately preceding
the filing of the application for such ncr-
mit constitutional?"
It was stated in your request that these questions
arose as a result of the decision in Miskell v. Termplan In-
corporated of Houston, 381 S.W.2d 129 (Tex.Civ.App. 1go4
error ref.), whemthat provision of the Texas Rcgulatiry
Loan Act requiring that 51% of the stockholders in domestic
finance corporations be Texas residents was struck down as
being In vlolatlon of the Due Process and Equal Protection
Clauses of the State and Federal Constitutions. It may be
stated at the outset that we do not adopt that-case ascon-
trolling herein due to the language on page 133 of the opln-
ion:
11 . . The discrimination cases in the
liquor'f~ieldare of little help as they are
treated In a class to themselves. This is
especially so since the adoption of the 21st
amendment to the Federal Constitution."
With regard tomQuestion No. 1, It was held In Rail-
way Express Agency v. Virginia, 282 U.S. 441)(1931) that?
state constitutlonal provj which require:;a foreign nubllc
service corporation to become incorporated uncicr the laws of
the state as a condition of obtaining authori~tyto carry on
intrastate business therein does not violate the Fourteenth
Amendment to the Federal Constitution. In an annotation to
that case in 72 A.L.R. 105, it was stated:
. .The present annotation is limited
to the-question of whether or not a state may
require a foreign corporation, as a condition
upon its right to do business within the state,
to become domesticated or incorporated under
its laws.
"The real question raised by the subject
of this annotation is the power of a state to
exclude foreign corporations; for the require-
ment of domestication or local incorooration
-2009-
Hon. Coke R. Stevenson, Jr., page 6 (C-427)
is in effect the exclusion of the corporation
so long as it retains Its foreign status.
Hence, the recognized power to exclude foreign
corporations would seem to imply power to re-
quire domestication or Incorporation in the
state. . . .'
It Is stated in 16A C.J.S. 212, Sec. 471:
"Since a corporation is not a citizen
within the meaning either of the Constitu-
tion as originally adopted or of the Four-
teenth Amendment, as discussed supra f3456
it follows that a state may prohibit a
foreign corporation from doing business with-
in Its boundaries, or may grant such prlvl-
lege on such conditions as it deems best,
without violating such constitutional pro-
visions or similar provisions in a state
constitution, . . .v
Finally, In Waters-Pierce Oil Co. v. Texas, 177 U.S.
28. the United States Supreme Court in affirming the Austin
Court of Civil Appeals decision (error ref.), held that the
right of a foreign corporation to engage in business within
a state other than that of its creation depends solely upon
the will of such other state, except with respect to business
of a Federal nature.
Based on this authority we answer Question No. 1 in
the affirmative.
It appears that the ultimate issue in all of the
above questions is whether the statutory discrimination in
each case is reasonably related to the overall ob.iectiveof
the act in which It is-found; or,Swhether the legislative
classification is, In fact, arbitrary. San Antonio Retail
Grocers, Inc. v. Lafferty, 156 Tex. 574, 2~7 -957).
'I?le
overall f the LlUntitled Texas Attorney General Opinion
Combined Opinion