Honorable Wm. J. Lawson
Secretary of State
Austin, Texas
Dear Sir: Att'n: Mr. Will Mann Richardson
Opinion No. O-3433
Re: May a corporation formed
under Art. 1434a amend its
charter so as to include in
its purpose clause the fur-
nishing of sewage service on
a non-profit basis? (Nueces
Naval Base Water Supply Cor-
poration)
Your request for our opinion on the herinabove captioned
question has been received by this Department. We quote from
your letter as follows:
"The above named corporation was incorporated
in November of last year as a non-profit company to
supply water to the Naval Training Station near Cor-
pus Christi, The corporation is formed under the
authority of Article 1434a which is a special act
passed by the 43rd Legislature, first called session.
"This corporation now wishes to extend its powers
and also furnish swegage to the Naval Base on a non-
profit basis. The attorneys for the corporation have
pointed out that Subdivision 93 of Article 1302 states
that private corporations may be created for, or after
being created, charters may be amended to include the
supply of water and sewage service to the public. This
subdivision was passed by the 42nd Legislature in 1931.
Hon. Wm. J. Lawson, Page 2
"We request an opinion from your Department as
to whether a corporation fromed under Article 1434a
may amend its charter so as to include in its purpose
clause the furnishing of sewage service on a non-profit
basis."
Article 1434a, Vernon's Annotated Civil Statutes of Texas,
provides as follows:
Sec. 1. That on and after the passage of this
Act three or more persons who are citizens of the
State of Texas may form a corporation for the purpose
of furnishing a water supply to towns, cltles and
private corporations and individuals and may provide
in the charter of such corporation that no dividends
shall ever be paid upon the stock and that all profits
arising from the operation of such business shall be
annually paid out to cities, towns, corporations and
other persons who have during the past year transacted
business with such corporation, in direct proportion
to the amount of business so transacted provided that
no such dividends shall ever be paid while any indebted-
ness of the corporation remains unpaid: and provided
also that the directors of such corporation may allocate
to a sinking fund such amount of the annual profits as
they deem necessary for maintenance, upkeep, operation
and replacements.
"Sec. 2. The said corporation is hereby vested
with power to negotiate and contract with any and all
Federal Government agencies including, without exclus-
tion becuase of enumeration, the Emergency Conservation
Acts, Public Works Acts, Self- Liquidating Acts, Housing
Unit Acts, Colonization Acts, Conservation Acts,
Emergency Relief and Reconstruction Acts, and the Re-
construction Finance Corporation as credited under the
terms of Reconstruction Finance Corporation Act of
January 22nd. 1932, Acts of the 72nd Congress of the
United States of America, First Session, for the ac-
quisition, construction, and/or maintenance of such
project and improvements: to obtain money from such
Federal Goverment agency for the purpose of financing
said acquisition, and encumber the properties so ac-
quired or constructed and the income, fees, rents and
Hon. Wm. J. Lawson, page 3
other charges thereafter accruing to the said corpor-
ation in the operation of said properties; and to
evidence the transation by the issuance of bonds,
notes, or warrants to secure the funds so obtained.
But it is hereby expressly provided that the bonds,
notes, and/or warrants so issued shall not constitute
general obligation or indebtedness of the said cor-
poration, but shall represent solely a charge upon
specifically encumbered properties and the revenue
therefrom, as herin provided.
"Sec. 3 The persons applying for a charter
for such corporation shall make application to the
Secretary of State in the manner how provided by
law for private corporations and in the name desig-
nated for such corporation shall use the words
"Water Supply Corporation." Each holder of stock
in such corporation shall be given a certificate
which shall entitle him to one vote in the conduct
of the affairs of the corporation and each incorpora-
tor shall be a member of the Board of Directors which
shall be a permanent body. Upon the death or re-
signation of a member of the Board of Directors his
stock in such corporation shall be cancelled and a
successor elected by a majority vote of the directors
remaining. The application for charter shall name
all the members of the Board of Directors. The
number of directors may be increased from time to
time by charter amendment but there shall never be
more than twenty one members of said Board.
"Sec. 4. Such Water Supply Corporation shall
have the right to purchase, own, hold and lease and
otherwise acquire water wells, springs and other
sources of water supply, to build, operate and main-
tain pipe lines for the transportation of water, to
build and operate plants and equipment necessary for
the distribution of water and to sell water to towns,
cities and other political subdivisions of the State
of Texas, to private corporations and to individuals.
Such corporations shall have the right of eminent
domain to acquire rights-of-way and shall have the
right to use the rights-of way of the public highways
of the State for the laying of pipe lines under sup-
ervision of the State Highway Commission.
Hon. Wm. J. Lawson, page 4
"Sec. 5 Upon the issuance of a charter and
annually thereafter on the First Tuesday in January
the Board of Directors shall elect a President, a
Vice-President, and a Secretary-Treasurer and shall
require of such officers bonds for the faithful
performance of their duties. The salaries of all
the officers of said corporation except that of the
Secretary-Treasurer and of the Manager whose salary
is hereinafter referred to, shall not exceed Five
Thousand ($5,000.00) Dollars per year. The salary
of the Secretary-Treasurer shall be fixed by the
Board of Directors at a sum commensurate with the
duties required of him.
"Sec. 6. The business of the corporation shall
be handled under the direction of the Board of Direc-
tors, by a manager to be elected by a majority vote
of the Board and he shall be employed at a salary
to be fixed by the Board of Directors.
"Sec. 7. The Board of Directors may employ
counsel to represent said corporation and may by agree-
ment with him fix an annual retainer and the fees to
be paid for his services and said Board of Directors
may if they deem it necessary employ additional counsel
from time to time.
"Sec. 8. The Board of Directors shall select as
depository for the funds of said corporation, a National
Bank within the State of Texas and shall require of
said depository such bond as the Board deems necessary
for the protection of said corporation; and such funds
as the Board of Directors may from time to time allocate
to the sinking fund for replacement, amortization of
debts and the payment of interest which shall not be
required to be expended within the year in which the
same is deposited, shall be invested in bonds or other
evidence of indebtedness of the United States of
America or deposited at interest in such National Bank
in a Savings account." (Underscouring ours)
This act was passed by the 43rd Legislature at the 1st
called session in 1933. (Acts 1933, 43rd Legislature, 1st C.S.
~202, Ch. 76.)
Bon. Wm. J. Lawson, page 5
That the furnishing of "a water supply" is the only pur-
pose for which a corporation may be formed under said article,
is apparent from the clear and unambiguous language of the
act.
It appears that the proponents of the proposed amendment
did not question their inability to amend the charter if they
must look exclusively to the powers conferred by Article 1434a.
They base their right to amend, however, on the provisions of
subdivision 93 of Article 1302, Vernon's Annotated Civil
Statutes of Texas, which reads as follows:
*Private corpr>rations may be created for,
or after being created, charters may be amended to
include the supplying of water and sewerage service
to the public."
Said subdivision is a part of the general incorporation
statutes dealing strictly with the purposes for which private
corporations may be organized. Articles 1434a, on the other
hand, is a separate and distinct act, not a part of Title 32
of the Revised Civil Statutes of 1925, dealing with private
corporations and is not a amendment to any article in said
title.
The type of corporation contemplated under the provisions
of Article 1434a is in the nature of a quasi public corporation
with the power of eminent domain and operation on a non-profit
basis. The only powers which such a corporation can exercise
are those conferred by the provisions of the act authorizing
its creation. None of the provisions dealing with the general
incorporation laws of Texas are applicable to a corporation
organized under said article.
YOU are respectfully advised, therefore, that it is the
opinion of this Department, under the facts stated, that cor-
poration formed under Article 1434a for the purpose of supplying
water on a non-profit basis is not authorized to amend its
charter so as to include within its purpose clause the furnish-
ing of sewerage on a non-profit basis.
Very truly yours
ATTORNEY GENERAL OF TEXAS
EP:N By s/Edgar Pheil
APPROVED JUN 15, 1941 Assistant APPRQVED
Opinion
ctittee
s/GlennR. Lewis
ActingAl70PNEYGI%ERAL BY s/BwB