                                                 R-337




Hon. Paul H. Brown     Opinion No. V-163
Secretary of State
Austin, Texas          Re:   The designation of notes re-
                             ceivable as "property" with-
                             in the meanln of Article
                             XII, Section i?, Constitution
Dear Sir:                    of Texas.

          You have submitted the following request for
the opinion of this department.
          "1 . There has ~been submitted to this
     department applications for proposed cor-
     porate charters wherein the following sit-
     uation appears:
          "a . In payment for capital stock sub-
     scriptions notes receivable secured by chat-
     tel mortgages on automobiles Is shown.
          "b . Current assets of the proposed
     corporations include customers accounts re-
     ceivable.
          "2 . Do the items shown in 8 and b,
     foregoing, 'or either of them, coiistitu6
     property within the meaning of Article    12,
     Section 6, Constitution of Texas, and, if
     so, what investigation, if any, should the
     Secretary of State make In respect to ei-
     ther E or b_?"
          Article XII, Section 6,   of   the Constitution of
Texas is as follows:
          "No corporation shall issue stock or
    bonds except for money paid, labor done or
    property actually received, end 811 fictl-
   ,tlous ,lncreaeeof stock sr indebtedness
    ,shell be void."
          Article 1308, Revised Civil Stetutea of Texss,
1925, which was enacted pursuant to the abov6 constltu-
                                                            .   -




Hon. Paul R. Brown - Page 2, v-163


tional provision, is In part as follows:
          "Before the charter of a private cor-
     poration created for profit can be filed
     by the Secretary of State, the full amount
     of its authorized crpFta1 stock rust be in
     good faith subscribed by its stockholders
     and fifty per cent thereof paid in mesh,
     or its equivalent in other property or la-
     bor done, the product of which shall be
     worth to the company the actual value at
     which it was taken or at which the pro-
     perty was received. The affidavit of
     those who executed the charter shall be
     furnished to the Secretary of State, show-
     ing: . . .     .'
          "2 . The cash value of any property
     received, giving its description, loos-
     tion and from Whom and the price et which
     It was received; . . .n.
          That notes receivable secured by chattel mort-
gages on automobiles and customers' accounts receivable
are persona1 property subject to taxation is conclusively
demonstrated by the Legislature definition thereof con-
tained in Article 7147, Revised Civil Statutes of Texas,
1925, which is in part as follows:
          "Personal property, for the purposes
     of taxation, shall be construed to in-
     clude all goods, chattels ard effeots, and
     all moneys, credits, bonds and other evl-
     dences of de-d       by citizenmthis
     State, whether the aeme be in or out of
     the State; . . ." (EmphaaFs added).
          Article 7149, Revised Civil Statutes of Texas,
1925, defines the term “credits” as follows:
          "ICredits.'-The term. 'credits.?
     wherever used in this titie, shall bb
     held to mean and Include every claim and
     demand for money or other valueble thing,
     and everv annuity or sum of money receiv-
     able at stated ueriods. due or to become
     due, and all cleims end demends secured bx
     deed or mortgage, due or to become due."
     nmphasis added)
Hon. Paul H. Brown - Page 3, v-163


          In the oaae of OIBesr-Rester Glass Company et
al, 101 Tex. 43,1, 1.08 S.W. 967, the Supreme Court of
Texaa, construed the meaning of Article XII, Section   6
of the Constitution of Texas aa follows:
          “The terms in which this section of
     the Constitution is expressed indicates
     the purpose that the assets of the corpora-
     tion should be somebfh~substantlal, and
     of such e character that they could be sub-
     jected to the payment of claims against the
     corporation a§ wel,l88 to secure the share-
     holders in ,theirrights in the capital
     stock. . . .‘I,
          In view of the rbove legislative and judicial
construction, it .1a.the opinion of ,thisdepartment that
notes receivabl,esecured by c.hattelmortgages on sutomo-
biles and cuatbmel)sVaccounts receivsble constitute pro-
perty within the meaning of Article XII, Section 6, Con-
stitution of Texas.
          Referring to the s,ecwndpert of your question
as to what i,nve8tlgation,If anyJ should the Secretary
of State meke in ,reapectto the above property, it is
presumed that pour query pdfbrs to the a3certrlnment of
the “value” of such property.
          Article 1309, Revised Civil Statutes of Texas,
1925, which mubt be construed in connection with Article
1308, supti, is as follows:

          “If the Secretary of State is not satis-
     fied, he’8.ary,
                   at the expense of the inocr-
     porators,‘,
               requi,reother 36tisfactory evidence
     before he ah*11 be required to receive, file
     and record such charter,”
          The foregoing article was c snatrued by the Su-
preme Court of Texas in the case of Beach et 81, vs. Mc-
Kay, State Secretary, 191 S.W. 557, as f0llews:
          “The question whether the stock had
     been subscribed in go@d faith, and whether
     50 psr cent thereof Md been paid ia Gosh,
     or i&3 equivalent, ai?3questions of fact to
     be deterained by the ~aaretary of state by
     the exercise of a discretion ledged with him
     by law. . . .”
Hon.    Paul B. Brown - Page 4, V-163


          Therefore, the nature and extent of any fur-
ther investig6tlon of the,v@lue
                      the,velue OS 8uah property,
                                          roperty, if
                                        lisi
such investigation Is deemed neaeasary, f is8 whbilg
                                              wholly
within your dlscretioti,


            Bates receivable aec’uradby ohattel
       mortgagee on automobiles and ouetoaers 1
       acaounts receivable oonatitute property
       which may be received la    ywat of aapi-
       tsl stock subaarlptions u rthin the moan-
       ing of Article XII, Beotlen 6, OOMtitu-
       tion of Texas. Investigation may be made
       by the Seoretary of State 80 to the value
       of such property under the provi8iona of
       Artiole 1309, R.C.S., and the aatum and
       extent thereof lies wholly within his dis-
       cretion.
                                                           I
                               Yours very truly
                           ATTORNEY GEliBRALOF     TEXAS




CW/lh
                           A        t April’ 25,   1947
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