OFFICE OF THE ATTORNEY GENERAL OF TEXAS
AUSTIN
GROVER SELLERS
ATTORNEY GENERAL
Hon. Oeo. H. Sheppard
Comptroller of Publio Aoooullts
Austin, Texas
A
Dear ?dr. Shsppard:
onlnlon Ho.
We hare yxsy qopinlon, which is as
t ollowa :
this department
as to whethe svied under
appllse when
oorporatlon and
and the stook-
rm a partnership, taking
properties of the oorporatl&.
ship hold the
y eaoh held in
the County Tax .,
tor tshloles
tion to the new partnership.
ounty Tax Colleotor authorized to make
hout the payment of the one per oent tax
levied under Artlole 7047(k)?R
In order to clarify your letter we c~uoto from the
letter of the Assessor-Colleotor of Tan-ant County:
Hon. Sea. E. Sheppard, pa,:e 2
*The question has been raised with this office
rezsrding the 1% S&es Tax on the transfer as stated below:
“On September lOth, 1945, four men formed e partner-
ahlp and purohased all the ooi~mon stook of the Mddox Ullk
Products Co. Ino. of Fort Worth, Texss. Now these gentlemen
srs dissolving the oorporstion and sre going to operate
under the name of Crystal Pure Dairies and want to apply
ror new titles on all the alotor vehicles, but they olaim
they 03n nake sn aftldavlt that there 1s no sales tax due
but just 6 ohsnge of operating name, lnasnruoh 6s they did
not buy equipment snd good will but purohesed ‘Common
Stook’ or said oorporatIon.*
From the shore It *rould appear that the Usddox kilk
Produots Company, Ino., of Fort ‘Worth, Texss, w3s a corporation.
We hare-made sn examination of the charter of said oomoeny In
the orfloe of the Seoretary of State of the State of Texas,
and found that said company was duly Incorporated with the
capital all subsoribed, fully ?aId, and all shares were oommon
stook.
d oorporatlcn, a3 to its property, I3 e mere trustee
for Its stockholders. Lenawee County 36vIngs Rank v. City of
Adrian, 33 N. W. 304, 305, 66 Miohigan 273.
“‘Common atook’ la the ordinary stook of the oorpore-
tlon, whbther Issued at its formation or afterwards, whloh
entitles the owner to pro rata dividends without any privlty -
or preferenoe over any-other stockholders or olass aC share:
holders but equally with all other stookholdere, oxoept
preferred stookholders. . . . A stookholder or oommon stook
ha3 the right of attending and voting et meetlnSa of the
oorporatioa, p3rtIoIpatIon in the election oi oltioers, the
formation of by-laws, the partiolpation 1x1the profits and
lossee, and In the final division or the property upon
dissolution. * Storrow v. Texas Consolidated Compress and
:<3nuFacturing Association, 87 3. 612, 31 C. C. A. 139. _
(Appealed from the Cirouit Court of tne iJ. s., Eastern
Distrlot of Texas). (Smyhasls ours)
“Ji ‘stookholder’ Is the owner of hi3 shares absolutely,
and .‘as a right to manage hls property as suits his own
notions.” 3Ird Coal .& Iron Co. v. Hune, 27 .;. 750, 752,
157 Pa. 278, 37 A. St. Zep. 727.
Hon. Oeo. H. Sheppard, ?ege 3
*‘The *stockholders 9 of a business ooruoration are
partners, with rights and liabilities fixed by the
general or special law, which is a part of their oontract.”
In re opinion of Just10 es._ 33 A. 1076. 1082. 66 ?J, a-
629. (Emphasis ours)
“A ‘share ol capital stook* la the right to partake,
aooording to the amount put into the fund, of the surplus
profits, and,
3 N. N. 9 11 116 Wi 344 and other odses therein
oited; Cld v.‘Redmau “j7 P.‘437 439 6 Idaho 568. Xarkle
v. Burgess, 95 N. E. 308, 309, 1’)6 Ihi. 25, oiting’l Cook
on Corporations, Seo. 12. (Emphasis ours)
“A *share of oorporete stock’ signifies an eliquot
pert of the corporation’s property, end I3 but evidence of
the right of the owner thereof to share In prooeeds oi
suoh property.” Warren Y. New Jersey Zinc Co., N. J.
Ch. 173 A. 128, 132, 16 N. J. Eq. 315.
“A *share’ of the stook of a oorporetion In the title
of the shareholder to his roportion of the oorporate
p~;~r~~;“Dlm&d’ v. Yyok:f’f , 7 A. 672, 674, 49 N. J. I.. 48.
Dissolution of a Texas oorporation 1s effected under
;;;;ter 8 or Title 32 or the Revised Oivil Statutes of Texas,
The artiolss so far 6s governing the matter under oonsidera-
tlon’are as roilows:
“Artiole 1387. 1205, 680, 604 How dissolved
aA oorporation is dissolved:
“. . .
“4. ‘#hen, without e stookholders’ meeting, all the
stockholders of the corporation oonsent In writing to a
dissolution, the same shell be certified to as above and
filed with the Seoretary of State. ‘%hen any suoh certifl-
oate Is filed with the Searetary of State, he shell. issue
a oertirioats 8hat suoh oonsent has been filed and that
the corporation is dISSOlVsd; and said officer shall so
note on the ledger in his oflioe.
“. . .”
5-t. 1385. 1206-7 Liquidation by arrlaers
*Upon the dissolution of a oorporatlon, unless a
reoeiver la appointed t?y 801~6 oourt of oompetent jurisdlo-
tion, the president and direotors or raanagers of the
afialrn of the corporation at the time of its dissolution
s&all be trusteoa of the oreditors and stookholders of
such aarporation, with oowar to settle the errairs, oolleot
the outstandlnsj debts,and divide tno moseys and other
property among the etookboldsrsafter paying the debts due
and owing by ouch oorporation at the time of its diseolu-
tion, as far as auah money end propsrty will enablb them
after paging all just and reasonable expenses; and for
this purpoee they may in the nsrne or 8Uoh oorporation,
sell, c~nv3y and transfer ali reai and asrsonal propezty
beLongin& to nuch ootrgany, oollcot all debts, oomproxiae
oontrovcrnies, maintain or defahd judiolai brocesdinas,
aad exeroine full pawer Und authority of mid ooapany
ovar suoh assets an3 property. Sttld trustsee shall be )
severally rasponoible to the oreditors ard stookholdara
of auoh oorporatlon to the extent of its property and
errects thal; shali ham 8~6 Into their hands.” (tiphasla
added )
*wt. 1389. 1236, 682, 606 %teasion or existence
*The exlstenoa of every o orgtiim mey be oontfnued
tor three years after its diesolutlon‘ftic. %hatbV&r oauae,
ror the purgoose of enabling those ohergsd wlthth3 duty,
to settle UP its as'falre. . . .” !Zf@Lsaisadded)
The arohlves of the offiae of the Seorstary of
Stats or the State or Texas dlsoloae that the Maddox Ellk i-o-
duots Compeny, Ino., was dissolved by virtue end under the
artloloa above quoted e.acc set out.
*A ‘partnernhlp’ is a relation or statUs between
two cr Sore conpbtsnt Esrties, uhltlnd labor or propi:rtg,
or both, in lawful enterpri83. . . . In abeenoe of statute
regulatlnq general partnership, OOZLTLO~-lurrules qvern
oases invol.vLni?; partosrehip ~qucsthxm.~~ :llison v. .:ar.nbell,
2’18 3. ‘i. j23, 117 Ter. 277. Rehearing denied (lS2Y) 1 3.::.
(2d; 866, 117 %r. 27’7.
Hon. ho. H. Sheppard, page 5
Article 1436-1, V. A. P. C., being the Motor
Vehicle “Certificate of Title Aot,” so far as affeoting the
matter under oonsideration, reads as follows~
“Section 1. This Act shall be referred to, aited,
and known as the lCertiflcate of Title Aot,‘. . .
The following terms, as herein defined, shall control
in the enforoement and oonstruotion of this Act. As
amended Acts 1941, 47th Leg., p. 343, oh. 187, 81.
It. . .
*Sea. 24. The term *Certlfloate of Title’ means a
written instrument which may be issued solely by and
under the authority of the Department.
n. . .
“Sea. 27. Before selling or disposing of any motor
vehiale required,to be registered or llaensed in this
State on any highway or public plaoe within this State,
exoept with dealer's metal or oardboard license number
thereto attaohed as now provided by law, the owner shall
make applioation to the designated agent in the county
of his domioile upon form to be presorlbed by the Depart-
ment for a aertifiaate of title for such motor vehiole.
“. . .
*Sea. 35. Whenever the ownership of a motor rehiole
registered or lioensed within this State is transferred
by operation of law, as upon lx&eritanoe, devise or bequest,
bankruptcy, reoeivership, Judloial sale, or any other
involuntary dlvesture of ownership, the Department shall
issue a new eertifloate of title upon being provided with
aertifled oopy of the probate prooeedings, if any (if no
administration is neoessary, then upon affidavit showing
euoh raot and all of the heirs at law end speoiffoation
by the heirs as to in whose name the oertifioate shall
issue), or order or bill of sale from the ofriaer -?.aking
the juaiolah sale, exospt however, that where foreclosure
is had under the terms of a lien, the affidavit of the
person, firm, assooiation, or corporation or authorized
agent, of the faot of repossession end divestiture of title
in aaoordanoe with the terms of the lien, shall be suffi-
cient to authorlxe the issuanae of a new aertificate of title
in the name of the purohaser at such sale, and exoept
Hon. Geo. H. Sheppard, page 6
further that in the oase of the foreolosure of any
Constitutional or Statutory lien, the affidavit of
the holdar of suoh lien, or if a oorporation, its
agent of the Saot of the oreation of sush lien and
the d~restlture of titlr by reason thereor in aooordanoe
with law, shall be suffioient to authorize the issuanoe
or a new oertlfloate of title in the nsme of the pur-
ohsser.
“. . .
V!leo. 38. The Department shall refuse issuanoe of
a oertlfioate of title, or having issued a oertifioate
of title, suspend or revoke the same, upon any of the
r0uowing grounds:
"* . .
*(o) That the registration of the vehlole stands
suspended or revoked.
*(a) That the required fee has not been paid.
“Sea. 57. Saoh applloant
for a oertifioate of title
or re-issuame thereof
shall pay to the designated agent
ths sum of Fifty (50) Oents, of whIoh Twenty-five (25)
Cents shall be retained by the designated agent, from
whloh he shall be entitled to suffioient money to pay
expenses neoeesary to effioiently perform the duties set
forth herein; and the remaining Twenty-five (25) Cents
shall be forwarded to the Department for deposit to the
State Highway Fund, together with the appliaation for
oertifloate of title, within twenty-four (24) hours
after same has been reaeired by said designated agent,
. As amended Aota 1941, 47th Leg., p. 343, oh. 187,
i6; Aots 1943, 48th Leg., pb 404, ah. 272, 0 1.
Hon. Geo. H. She_apard, gage 7
Y3eo. 63. . . .
"(0) The Owner of a motor vehiole registered in this
State shall not after January 1, 1942, operatebor permit
the operation of any suoh motor vehiole upon any highways
without first obtaining a oertifioate of title thcrefor
from the Department, nor shall any person operate any suoh
motor vehicle upon the publio highways knowing or having
reason to believe that the owner has failed to obtain a
oertifioate of title bherefor."
Artiole 7047k, Uotor vehicle retail sales tax, reads
as f0ii0w3:
Qeotion 1. (a) There is hereby levied a tax upon
every retail sale of every motor vehiale sold in this
State, such tax to be equal to one (1) per cent of the
total oonaidera?ion paid or to be paid to the seller by
the buyer, ;vhloh oonsideration shall 'inolude the amount
paid or to be paid for said motor vehiole and all aaces-
sorles attaohed thereto at t&e tine of the sale, whether
such consideration be in the nature of oash, credit, or
exchange of other property, or a combination of these.
In the event the oonsideration received by the seller
inoludea any tax imposed by the Federal Government, then
suoh Federal tax shall be deduoted from suoh aonsideration
for th@ purpose of oomputing the amount,of tax levied by
this Artiole upon suah retail sale. ,,
". . .
"Sec. 3. (a) The term 'sale' or *sales* as herein
used shall lnolude instalment and oredlt sales, and the
exohange of property, as well as the sale thereof for
money, every olosed transaotion oonatituting a sale.
The transaotion whereby the possession of property is
transferred but the seller retains title as seourity for
the payment of the price shall be deemed a sale.
e(b) The tern 'retail sale' or 'retail sales' as
herein used snail include all sales of motor venicles
exoept those ;vnereby the purchaser eoquireo a ,motor
vehiale for the exclusive purpose of resale and not for
use.
“. . .
Hon. Gee. H. Sheppard, page 8
*Sea. 5. The taxes levied in this Artiole shall be
oolleoted by the Assessor and Colleotor or Taxes or the
oounty in whloh any suoh motor vahiole is first registered
or first transrerred art&r suoh a sale; the Tax Colleotor
shall refuse to aooept ror registration or ror transfer
any motor vehlole until the tax thereon is paid.
". . ."
Inths trensaotions bearing upon-the question or
liability for tha one (1%) per osnt motor vehioles sales tax
or the Maddox Milk Produstr CO., Ino., in vlw or the deoislons
and statutes hereinbefore eat out and quoted, wa sonolude that
there we8 no sale by said oompany, a oorporation, to the Crystal
Pure Dairies, a partnarshlp. The oorporatlon was owned by Its
stookholdars. It held the property belonging to it es a more
trustee ror its atookholdsrs. (See oltation ante). The stook-
holders formed a partnership.: The oorporatlon was dissolved
by oonsent or all the stookholdera. The officers and dlreotors
beoame trustaeii~or the stookholders - who were the sams persons. _
The trustees have the statutoryrright to settle the affairs of
the dissolved oorporation. (Art. 1388). The oorporatlon belonged
to its stookholders who are now partners, who now own the same
propartp that they owned when tha oorporation existed. The
owners es partners Only adopted a dlrferent method other than
oorporate to oarry on their business, which they had a legal
right to do. The trenster.was by operation or law.
Art. 1436-1, V. A. P. a.). The trustees, formerly or%kv3kd
dlreotors of said dlssolted oorporatlon, aotihg In bha oapaoity
or reoeirema In sottllng the aftairs of the oorporatlon, whloh
was dissolved, (Sec. 35, Art. 1436-1, V. A. P. C., and AZ%. 1388,
R. c. S.) and there was no vaalaa or wretail sala" as oontemplatad
within Art. 7047k.
It is the opinion of this Department that no liability
ror the one (l$) per osnt "Rotor Vshiole Retail Sales Tax- in
the transaotion was inourrod, and the tax is not due and payable.
It is our further opinion that the Crystal Pure Dalrlos may
obtain oertitioates Or title for any motor vehiola or vehioles
eoquired in said transaotion, as prasoribed in Sea. 35 of Art.
1436-l. V. -4. T. C., and that the provisions of Sec. 5, or
Artiole 7047k do not apply to the transaotion under consideration.
Hon. Geo. H. Sheppard, page 9
;Be are herewith returning your files es requested.
Yours very truly
-
Jos. VI Frnka
Aseista~t *
JVF:AMM
EtmIG3uREs