Untitled Texas Attorney General Opinion

NERAI. Secretary of State Austin, T,exas Re: The legality of char tesing a corporation whose purpose clause is, *To act as agent for the performance of ary Dear Mr. Shepperd: lawful act.” You request an opinion of this office as to whether or not you are authorised under Section 49 of Article 1302, V.C.S., to approve a charter which has for its purpose: *To act aa agent for the performance of 4ny lawful act.” The creation of corporations and the power t&y shall possess are governed by the Conrtitution and statetea. The Texas Constitution, Section8 1 and 2, Article XII, forbid& the croation of corporations “except by general law” and directs ~Iw kgiaiatura “to enact general laws . , ~ for the creation of private corporationa.” Pursuant to this constitutional mandate the Legislature has provided by statute the purposes for which corporations may be created in this State. One such purpose is expressed in Section 49 of Article 1302, V.C.S., as follows: ‘“For any one or more of the following purposes: To accumulate and lend money, purchase, sell and deal in notes, bonds and securities, but without banking and discounting privileges; to act as trustee under any lawful express trust committed to them by contract and as agent for the perform- ance of any lawful act.” This purpose as now expressed in the stat- ute had its origin in C.S.S.B. No. 83, Acts 36th Leg., R,S. 1919, ch. 83, pa 134. Section 1 of this act provides as follows: ‘“That corpo- rations may be created for any or all of the following purposes, to- wit: To accumulate and lend money, purchase, sell and deal in notes, bonds, and securities, but without banking and discounting privileges. To act a8 Trustee under any lawful express trust com- mitted to them by contract and as ag.ent for the performance ofy lawful act. But no corporation organized hereunder shall act aa a- gent or trustee in the consolidation of or for the purpose of com- bining the asaeta, buSin666, or mean6 of any other persons, firms. corporations or associations, nor shall such corporation as agent or trustee carry on the bueiness ot another *” Section 2 of this act commit@ the rupervision of cor- porations incorporated under the 8ct to the Commissioner of Insur- Hon. John Ben Shepperd, Page 2 (V-1075) ante and Banking, the official who at that time had supervision of both insurance and banking, thus Indicating the legislative intent as to the business characteristics of the corporations authorised to be created under the act. The 1925 codification re-enactad this corporate purpose in the language as it now appears in Arttcle 1302, Section 49, V.C.S,, which is as follows: “This subdivision aball embrace corporations created for any or all of the following purposes: To accumulate and lend money, purchase, sell and deal in notes, bonds, and securities, but without banking and discounting privileges; and to act as trustee under any lawful express trust committed to them by contract and as agent for the performance of any lawful act, No such corporation &ail act as agent or trustee in the consolidation of or for the purpose of combining tire as- sets, business or means of any other persons, firms, associations or corporations, nor shall such corpora- tion as agent OP trustee carry on the business of anoth- er. No such corporation shall be authorieed to engage in or carry on any such business unless it shall have an actual paid in capital of not less than ten thousand dollars.” The only difference nbted in the two acts is that the purpose clause as expressed in the 1919 original act separates the purposes into two sentences, and the 1925 codification cxpre8res the purpose ia one sentence and uses a semicolon instead ad a pes%od after the phrase ““but without banking and discounting privileges* and before ““to act as trustee under any lawful express trust committed to them.” This difference, however, is without significance, for we think the scope and purpose of the act in defining the cbaracten of corpora- tions to be organized thereunder to be the same. The supervision and control of such corporations is by the 1925 codification com- mitted to the Banking Commissioner0 insurance and banking super- vision having been in the meantime separatsd. Tbe same corporate purpose is again repeated in Ssa.riWo,?!kQ&&ts 4@h&rg., 1927. ch. 275,‘~. ,414, with certain added purposes not important here, Sec- tion 1 of this act reads as follows: “A private corporation may be formed for any owe or more of the following purposes, without bank- ing or insurance prfvileges: To accumulate and loan money, to sell and deal in noter, bonds and securities; to act as Trustee umber any lawful express trust com- mitted to it by cot&act, and as agent for the pesform- ante of any lawful act 0 0 r ‘* We find that the Legislature by S.B. No. 165, Acts 42nd Leg., R.S. 1931, ch. 164, p* 280, dealt further with corporations in- Hon. John Ben Sheppard, Pag,e 3 (V-1075) corporated under Subdivision 49 of Article 1302, Revised Civil Stat- utes of Texas, 1925 (the same as now appears as Section 49, Arti- cle 1302, V.C.S.). Section 1 thereof reads as follows: “This Act shall embrace corporations heretofore created and hereafter created having for their purpose or purposes any or all of the powers now authorized in Subdivisions 48, 49 or 50 of Article 1302, Revised Civ- il Statutes of TexG, 1925, and heretofore or hereafter created having in whole or in part any purpose or pur- poses now authorized in Chapter 275, Senate Bill Num- ber 232 of the General and Special Lara of the Regular Session of the 40th Legislature. No such corporation shall act as agent or trustee in the consolidation of or for the purpose of combining the assets, business or means of other persons, firms, associations or corpo- rations, nor shall such corporation as age&or trustee carry on the business of another.” This act had for its primary purpose the further regulation of cor- porations theretofore and thereafter created having for their pur- pose or purposes any and all of the powers now authorized in Sub- division 49 of Article 1302, Revised Civil Statutes of Texas, 1925, and other subdivisions not necessary to enlarge upon here. Section 11 of this act specifically repealed Articles 1520 to 1524, inclusive, of the Revised Civil Statutes of Texas, but specifically retained the purposes of Subdivisions 40, 49 and 50 of Article 1302, Revised Civ- il Statutes of Texas, 1925, and enlarged the regulatory powers con- ferred upon the Banking Commissioner in.connection with such cor- porations. This latter provision of Section 1 of S.B. No. 165 is now embraced in Article 1524a. V.C.S., under the heading of Corpora- tions for Loaning Money and Dealing in Bonds and Securities with- out Banking and Discounting Privileges. The Legislature in specif- ically repealing Articles 1520-24, inclusive, of the 1925 codifica- tion, under the heading Loan and Brokerage Companies, obviously thought their retention no longer necessary, as indeed it was not, since the regulatory matters therein dealt with were now to be cov- ered by Article 1524a, V.C.S. It is significant to note that the Leg- islature was careful in all of these legislative enactments to make clear that such corporations as agents and trustees were not au- thorized to carry on the business of another. It is quite evident from an examination of these various statutory provisions that it was not the intent of the Legislature to authorize the creation of corporations ‘“To act as agent for the per- formance of any lawful act,” as a separate and independent purpose, This is merely an additional and related power which corporations authorized to be created under these various statutes might exer- cise. The primary purpose which the Legislature had in mind in .. Hon. John Ben Shepperd, Page 4 (V-1075) the enactment of these various statutes was to deal with loan and investment corporations or corporations to accumulate and loan money, to sell and deal in notes, bonds and securities, but without banking privileges. These corporations might also act as trustee and as agent for the performance of any lawful act committed to them by contract, in connection with such business. It is quite clear that what is now Section 49 of Article 1302, V.C.S., as originally erected and as dealt with in subsequent legislation by the various acts we have pointed out above, did not have for its purpose originally or by.any subsequent traatment thereof by the Legislature to set up as a separate and distinct pur- pose the formation of corporations ‘“to act as agent for the perform- ance of any lawful act,” but marely granted this as au additional or incidental power to the loan and investment business. If we should attribute to the Legislature an intent to set up a separate and distinct purpose in the use of the language ““To act as agent for the performance of any lawful act,” the effect of this would be to virtually nullify and render useless all the other subdivisions of the statute specifying the particular purpose for which corporations might be created, for there is nothing inherent- ly unlawful in any of the numerous purposes for which the Legisla- ture has said corporations may bo formed. In 10 Texas Jurispru- dence 622, Corpor&tions, Section 31, it is said: “The proposed charter ia requbred to state the purpose for which the corporation is fosmed. The main purpose of this requirement is, first, to protect the public against too great a delegation and aDy USUF- ption of power, and, second, to afford the means where- by right to a claimed power, or rightful use of an ad- mitted power, may be tested. Thie should be done with sufficient clearness to enable the Secretary of State to see that the purpose specified is one provided for by the statute, and it must therefore deLiare with certainty the scope of the business or undertaking to be rohnston v. Townsend, 103 Tex, 122, 125, 124 119101. The Supreme Court said in the case of Smith v, Worth- am, 106 Tex. 106, 157 S-W, 740 (1913): - “‘The sCtutory requirommbt that the “purpose’ of the corporation rhaU k stated in its charter was in- tended for the p&ec&vn of the incorporators and rtock- holders, and the public, in order that they may be ad- vised as to the character of its corporate activities, and to amble ths tit&e, through its proper officers, to col- Hon. John Ben Shepperd, Page 5 (V-1075) lect proper filing fees and franchise taxes, and to super- vise and control the use and to punish the nonuse of its franchise . 0, ” You refer in your request to the case of James N, Tardy Co. v. Tarver, 120 Tex. 591, 39 S.W.2d 848 (1931). Judge Speer took note of this case in Opinion O-3250 and in that opinion said: “We are not unmindful of James N, Tardy Co. v. Tarver, 39 S. W. (2d) 848, wherein the Supreme Court held that a corporation possessing sufficiently broad charter powers, was entitled under tha laws of this State to be licensed as an agent for a company writing fire, marine and casualty insurance. In that case the extent of the corporate powers of the applicant corpo- ration was not decided by the court -- it was not an is- sue in the case -- for, says the opinion, ‘respondent concedes that relator James N. Tardy Company’s char- ter is broad enough to authorize it to act as an insur- ance agent.’ While Article 1520 of the Revised Civil Statutes then in force with respect to loan and broker- age companies contained the identical language as the present Article 1524a of Vernon’s Codification, forbid- ding such corporations to carry on the business of an- other, as above stated, the court did not pass upon the charter power of the applicant, so that, whether James N. Tardy Company was a loan and brokerage company or not, has nothing to do with the point actually decided by the court. The respondent may have conceded too much in the defense of that case, but whether he did or not, the conceded issue was not determined by the court.” Conceding, as we think we may, that the Secretary of State should have refused the charter in the Tardy case, it was nev- ertheless issued and the State never thereafter took affirmative ac- tion by quo warrant0 to cancel it. The Supreme Court did not, there- fore, find it necessary in the Tardy case to pass upon this collater- al issue and did net do so. As stated by Judge Speer: ““The respond- ent may have conceded too much in the defense of that case, but whether he did ortnet. the conceded issue was not determined by the court. ” You are therefore respectfully advised that it is the opinion of this office that you are not authorized to grant a charter which has for its sole purpose ‘“To act as agent in the performance of any lawful act,” aad should refuse to grant a charter for this pur- pose alone, . ‘\ -_ Hon. John Ben Shepperd, Page 6 (V-1075) SUMMARY The Secretary of State is not authorized to issue a charter under the authority of Section 49 of Article 1302, V.C.S., or any other statute, which has for its sole purpose “To act as agent in the performance of any lawful act.” This is merely an added 01 incidental power which the corporations authorized to be char- tered under that section may exercise, and is not a Sep- arate and distinct purpose within itself. Yaws very truly, PRICE DANIEL Attorney General APPROVED: W. V. Geppert Assistant Taxation Division Joe R. Greenhifh First Assistant* LPL/mwb