Hon. James E. Kllday opinion Noo. o-357
Dlrector,Motor Tram- Be; .Observance by Ballroad Commis-
portatlon Divlslon sion of corporate riOt;on in approv-
Railroad Commlsslon of lng or dlsapprovlng transfers of
Texas Special Commodity Permits nuder the
Austin, Texas provlslons of Article glib, Vernon’s
Clvll Statutes.
Dear Sir:
We uote -the r0ii0wing fact situation presented In
your letter oP December 4, 1939:
“J. H. Robinson Truck Lines, Inc., a Texas
corporation, in which J. H. Robinson ,a citizen
of Texas, owns approximately 75% of {he capital
stock, has properly proceed from this Commission
end holds .severel Intrastate Certlf’icates of Pub-
lic Convenience and Necessity authorizing said
corporation to operate over Texas highways as an
IRTRASBXECommonCarr%er by trucki and said cor-
poration so extensively operates and has so ex-
tenslvely operated severel years.
*The 75% stock ownership is based on Mr. Rob-
inson’s ownership of 374 shares out of a total of
'500shares. Ed De Leon vice-president and dlrecr-
tor, owns 125 shares anb 0, H. Johnson, secretary-
trrsurer, owns one share. Hr. Robinson Is presi-
The assets of the corporation are sald to be
aboui $100 000.06. The capital stock llablllty has
been set a$ $50,000&O.
“On November 29, 1939, by au a~pl’lcatlon fil-
ed with this Division, the Commlsslon Is asked to
approve of a sale end transfer into J. H. Robinson,
personally and Sndlvldually, out of the 0. D. Jack-
son of Refuglo r Texas of au IRTRASTATR Special
Commodity Per&l; No.&9 heretofore issued by
this Commission, authcirlzlng said Jackson to tram-
port by truok:
Hon. James E. Kllday, page 2
Texas and from all points In Texas to Befuglon
AND, AS WELL,
*pilfleld ee to and from all points In
Texas.*
You observe that we have recently held, in response
to an Inquiry from your department, that a person may not hold
a CommonCarrier Truak Certlfloate OS Public Convenience and
Neoessity and a Special Commodity Truck Permit at one and the
8aiM time.
You present the following questions for the conslder-
ation of this department:
*(a) Shall this Comml8slon observe or disre-
gard the corporate fiction in this and 8lmilar
cases? (b) Does this Commission have the poten-
tial power to approve of aald trans er and sale?
(c) I8 it dlscretlonery with this Eomml8sion as
to whether It approves or disapproves this trans-
fer and sale?”
We will endeavor to answer your se’eond and third ques-
tions first.
Subdivision (d), Section 6, Article 911b Vernon’s
Civil Statutes confer8 authorlt upon the Railroa h Commission
to Issue certain special commodlt p permits *upon such term8
condltltis and restrl&lons a8 the Railroad Commlaslon may beem
a Into this authority there 1s to be read of necessity,
!gP%ltation contained in Section 6bb of said A&, that “no
appllaatlon for permit to operate a8 a contract carrier shall
be granted by the Commlsslon to any person operating as a eom-
mon carrier and holding a certificate of convenience and neces-
8ity...n
Subdivision (e) of the Act permits the transfer of
such Special Commodity Permits upon approval by the Consnls8lon,
and proVlde8 that the Commission %ay disapprove such proposed
transfer If It be Sound and determined by the Commission
ihit’auch propo8ed . . . transter 18 not in good faith or’ that the
proposed . . . trausieree 1s not capable of continuing the opera-
tion of the equipment proposed to be transferred in such a man-
ner as to render the services demanded In the best Interest of
the public; the Commission In approving or disapproving any ...
transier of any permit may take into consideration all of the
requirements and quallf lcatlons OS a regular applicant.. .*
Hon. James E. Elldw, page 3 ,. :: ( ., in I-: .:~ z._,zz:..
.Your second and thlr,d questions,,: .therefo.re2.~+re,.,an-
,,qered ,as SoIlpws~r: .:.~‘,I’;.;, ~.‘:J’.: i, :” I,,. ..-.’ +:[.:.;,, i.:.
: ...‘rhe.‘aufh~~tp”b~..the +&&&i& io’ ap&& ;jr~ hisi: _
prove the proposed transfer of a S@eeclEQ‘C~hpmoditfr’~er~~lt’irl P1
dep,eqd,upon its findings .,oS,Sact.~ IS, .the, Conjmlsslon finds
that the e.ffect -of ‘Its’ .aDproveI“of .the, tr&n&Ser~propose,d,will
e to &nSer ‘a perndt to &t as :a Spe&I :f&rt&~ty, ~Contraqt:
e arrler upon a person holding a CertSSlcate~‘dS Convenlerice ‘and
HeCeSslt,y, .lt ig&& decline, to approve. the tr.aqsfer. An,approv-
: ~+$.oi such ,,a pnsfer ~pilld constitute’ anatt&pt upon the pert
of the~,Commissldn to arrogate ‘to-,Itself. thei ‘power ‘to : suspeaa
We iWJislons of Se,ctl.y? 6th .?F $iJe; ‘+p i ..: .,,nil’
‘~I:
,.~‘?;,:
;‘,.-:
.‘.‘..~;,!‘~;~;
your flrst que &‘& .ls &&&;i.Ca& &&&f ‘: : ‘2: I!:,
;..Y: ,,
A corporation’ Is lk’most instances to be regarded as
a legal. ,entltp se.perate and:dlstlnct from Its Individual mem-
bers or stockholders. Disregard of the so-called “aorporate
fiction* Is the exception .and not the ruIe. Fact situations
whereb the .coUr~a.h.ave.&r&srded the corporate entity are
classlfik'd as fmOW8; ‘ina no’te appearing In 5 Texas Law Re-
view, at page 77, c CQ~1:”<..I:.y::c.;(Y<,LCi
: ‘,
qirst, where it is used a9,a ,~~“$,c~~~:i”,~.,~ ~.‘.
petrating fraud; second, where “‘a.‘~ rforat~~‘~Is:~-‘~ :.
organized and operated a8 a m.ere.tpg, , or pUs1ne.s~.~,
conduit of anothe,r corporatloa~ 4 ~%hlkjd,;.vherg;the
.^ : .’ ::
corporate fiction is resorted o ‘as’amsan&‘rS
evading an exlstlng legal obligation; fourth, ,.whsre-,,
the corporate fiction 1s employed to achieve or “: ~,:
perpetuate monopoly; fifth, where the corporate
fiction is used to circumvent a statute; sixth,
where the corporate Slotion Is relied upon as a
protection of crime or to justifywrong."
Whether the corporate Slctlon should be disregarded
seems to turn upon the ascertainment of the following facts:
(1) Is the situation factually such that the car or-
ate entity Is but the alter ego of the stockholder; and (2 P
are the facts such that an adherence to the fiction of