THE ATTORNEY GENERAL
OP TEXAS
Gerald C. Mann AUSTIN 11.TEXAS
xxx
ATTORNEY almurcRAl.
Hon. Tom L. Beauchamp
Secretary of State
Austin, Texas
Dear Sir: Opinion No. O-1028
Re: Is proposed charter of "Tax-
payers Association of Nacog-
doches County" an educational
undertaking within the pur-
view of subdivision,2 of
Art. 1302, Revised Civil
Statutes of Texas, 1925?
This will acknowledge receipt of your letter of June 23,
1939, with which you submit the proposed charter of the Tsx-
payers Association of Nacogdoches County, Texas, with a
request that we advise you whether or not the purpose therein
expressed warrants the issuance of a charter under subdivision
2 of Article 1302, Revised Civil Statutes of Texas, 1925.
The purpose clause of such proposed corporation is:
"The purpose for which this corporation is formed
is to educate the members of this Association and
the public on questions of Taxation, and to use its
influence to obtain the economical expenditure of
public money, the equitable application of the taxing
power and a fair distribution of all benefits of
government."
We have carefully considered such application for
charter and especially the purpose clause as hereinabove
quoted, and necessarily reached the conclusion that such pur-
pose clause does not affirmativaly reflect an educational
purpose within the purview of the,statute.
A departmental construction of long standing has for-
bidden the issuance of charcers.;similarto the one in ques-
tion. See opinion by Judge George B. Christian, Reports of
the Attorney General, 1924-1926, page 222, citing with approval
an opinion rendered during the administration of Chief Jus-
tice Cureton on March 26, 1919. See, also, opinions by
Assistant Attorney General Neal Powers, dated June 10, 1932
and August 20, 1932, and opinion no. O-102& by Hon. Morris
Hodges.
The rule as to the statement of the purpose clause of
a corporation is laid down in 10 Tex. Jur., p. 622, s 31,
as follows:
"The proposed charter is required to state the purpose
for which the corporation is formed. The main purpose
of this requirement-is, first, to protect the,public
against too great a delegation and any usurpation of
power, and, second,,to afford the means whereby right
to a claimed power, or rightful use of an admitted
power, may be tested., This should be done with suffi-
cient clearness to enable the Secretarv of State to see
that the purpose specified is one provided for by the
statute, and it must therefore define with certainty the
.scope of the business of undertaking to be pursued."
We quote from thenopinion of Judge Christian, supra, as
follows:: ,~
"The test that must necessarily be applied to any enter-
prise~to determine whether it is primarily educational,in its
nature should exclude ~the educational results thatare purely
ticidental.
'. The paramount urpose of power of the enter-
prise must alone determine ehe nature of its undertaking. The
powers and functions ,of all enterprises are the outgrowth of
educational developments, and the common experience of men will
determine .the application of such powers and functions to any
given enterprise. The development of the enterprises known
to the world has resulted in the grouping of related functions
which have been drawn to specific enterprises, and each of
such enterprises is distinguished one from~,theother by the
primary function within each group drawn to it. Such enter-
prises may embrace common functions that are subsidiary and
incidental to the exercise of~that paramount function. This
is common knowledge, and even the courts of our land would
take judicial notice of the fact. It may be safely assumed
that a legislative body, whose personnel is composed of men
drawn from all the walks of life, in enacting legislation
authorizing the incorporation of busines~senterprises is cog-
nizant of the common experience of mankind that paramount
functions are peculiar to certain enterprises. It follows,
we think, that the Legislature has classified corporations under
our laws according to the principal function exercise%by the
enterprise from ~which it has its inception.
i
Hon. Tom La Beauchamp, Page 3- O-1028
"That our Legislature intended that corporations
created for education should have their powers defined within
a group of powers which was the outgrowth of the developments
of strictly educational enterprises, is exemplified by the
fact that subdivision 2 of chapter 9, Revised Civil Statutes,
1925, dealing with educational corporations, defines the
powers of the faculty of educational institutions and grants
to the trustees of such institutions the authority to provide
for teachers and agents. In short, the Legislature has under-
taken to authorize the creation of educational institutions
under subdivision 2 of Article 1302, Revised Civil Statutes,
1925, and to define the rights and duties of corporations so
organized in enactments that relate to colleges, academies,
universities and other corporations organized for the purpose
of promoting education. A ain in Article 7094, Revised
Civil Statutes, 1925, the fegislature has exempted from the
payment of a franchise tax corporations organized for 'strict-
ly educational purposes'. It is pertinent to our inquiry
to determine whether all car orations organized under sub-
division 2 of Article 1203, i;
evised Civil Statutes, 1925,
for educational purposes are exempt from the payment of a
franchise tax or whether the exemption is determined by the
powers exercised by the corporation."
"In an opinion rendered by Hon. C. M. Cureton, Attorney
General, on the 26th of March, 1919, the Sec,retaryof State
was advised that a'corporation chartered as an educational
undertaking isby force of the law a strictly educational
institution and that its purpose and only purpose by reason
of the law is strictly an educational one. The question for
~determinationwas whether a business college incorporated as
an educational undertaking under Section 2 of Article
1302 is exempt from the payment of a franchise tax under
Article 7094. After discussing the authorities bearing on
the question of the exemption of educational enterprises from
taxation, Mr. C. i;J.
Taylor, Assistant Attorney General, who
wrote the opinion says:
"The above reasoning leads us to the conclusion that
the word 'strictly' used in the clause for strictly
educational purposes embodied in the statute exempting
certain corporations from the franchise tax, has no
signification or meaning, because a corporation chartered
as an educational undertaking can lawfully engage in
no other pursuit. It is bound by the purpqse clause of
its charter, which is limited by the statute under which
it is incorporated. In other words, a corporation
chartered as an educational undertaking is by force of
Hon. Tom. L. Beauchamp, Page 4, O-1028
the law a strictly educational institution, anc5its
purpose and only purpose is by reason of the law a
strictly educational one. So, to our minds, the
Legislature has added nothing to the meaning of this
clause by inserting therein the word 'strictly'.
"In view of the foregoing, the conclusion seems in-
evitable that an educational undertakin,gas contemplated
by subdivision 2 of Article 1302, Bevised Civil Statutes,
1925, means a corporation having for its primary purpose
the :;ivingof inst-uction in some recognized field of
knowledge, and that corporations may not be created under
this subdivision of our statute wher-eit is apparent
that the instruction to be given and th@ educational
benefits to be derived therefrom are incidental to the
exercise of the primary functions of the corporation'.
The Legislature intended that corporations created under
this subdivision of the statute should engage in something
more than the incidental education which is necessarily
derived from,business enterprises whose primary purpose
is to advertise the merits of.a particular business under-
taking:"
Looking to the proposed charter which furnishes the basis
of your inquiry, it is no doubt true'that the undertaking
therein contemplated would tend to educate, to some extent,
at least, all those who might come in contact with au-..organiza-
tions. %t, as hereinabove pointed out, the educational purpose
-f a proposed corporation must be the primary one and not merely
ap incidental purpose that but naturally results from an en-
'deavor. The purpose must be for such an educational undertaking
as is understood to be educational in the ordinary affairs of
men. A mere incidental purpose or a limited result,is insuf-
ficient. See % re Day liePeysters Estate, 104 NO. n. 714,
State vs. nusiness Men's Athletic Club, 163 S. W. 901.
We must necessarily conclude, an? you are so advised, that
the purpose clause, above set out, is not for an educational un-
dertaking within the purview of subdivision 2, Article 1302,
Revised Civil Statutes of Texas,_1925. I~iefind no statutory
authority for the granting of such a charter as is made the basis
of your inquiry.
Ue return herewith, the proposed charter of the Taxpayers
Association of hacogdoches County, Texas.
-HonimTom. L. Beauchamp, Page 5, O-1028
Trusting that this satisfactorily disposes of your in-
wiry, we are
Very truly yours
ATTORNEY GENERAL OF TEXAS
BY Lloyd Armstrong
Assistant
LA:omb/Pm
ENCL.
APPROVED JULY 22, 1939
s/ W. F. Moore
FIRST ASSISTANT
ATTORNEY GENERAL
APPROVED OPINION COMMITTEE
By T.D.R., Chairman