                                                                       .
                                    ..
..                                                                                     :

     ,Honorable Bert Ford     Administrator
      TexasLiquor   Controi   Board    :
      Austin, Tetis _
                ..
                              ~Oplnlon No. O-7039

                                  Rer Whether an Individual     may be an
                                      officer    in more than five car- ~
                                      porations,    each of which owns
                                      a package store permlt,and      re-
                                      lated questions.

     Dear Sir:                               .
                  We have'received       your letter   of.Januarp'g,       l$$,'
     .3$ikhwe    quote as followst-
                 wW..L. Moody, Jr., of Galveston, and cer-                   :
           taln associations      in and outs of Texas are the
           principal    stockholders,    officers    and directors
           In eight Texas corporations         and two out-of-stat0              .._
           corporations     doing business fin Texas.       The Texas        ... ..,
           Liquor ControlBoard,has        just discovered      that it
           has issued eleven permItsto          these corporations,.
           and now application      for, a Package Store Permit
           has been made in the name of another~Texa .cor-
           poratlon.

                    win checking the various applications       and          ,i~
           'in checking the information      Yurnishod this of+
            flce'by    the representativesof      the various cor-
          .porations,     it has now beendlsdosed       that in
             several instances    certain s to&holders,    owri stock
            in.more than five corporations        having Package
            Store Permitsr more than five of the corporations
            in some instances     are represented    by common offi-
          .cers and.direotors.                  -
                                                          -
                           . ..
            7
            _,
#
                         Ponorable         Pert Ford - P&e a


                             .
.                                        “The questions the Board wouldlike           to
                                     &we answered are as follows:
                        -.
                                          “1.  Can one Individual       bo an officer
                                     more than five corporations,       each of which owns
                                     a Package Sotre Permit?
            :
                .’ *                        “2.     Can one Individual  be an offlcor  in
                                     more than      five corporations,  each of which OWIl.9
                                     a Package      Store Permiteven   though such individ-
                                     ual h&no         stock ownership or other monetary in-            :
                                     terest    in   such corporatioii?

                                           .“3.  Can one Individual be a director  in     ’
                                     more ; than five corporations, each ,of which owns           .
        :                            a Package Sotre Permit?
                                          I
                                            “4. Can one Individual be a director   in         ,‘:
                                 .   more than five corporations,   each of which owns
                                     a Package Store Permit, eycn though such wdlvid-~
    :
                                     ua& ‘has no stock Nnershlp or other monetary hi-           I
     . .
                         .’ .
                                     terest In such corporation?                        :   ‘..~
    _

                                          “5. Can one lndlvldua& own stock 3.x.1
                                                                               more
                                     than five corporations,  each of which owns a
                                     Package Store permit?
                    :
                                :
    .                   .                   ~6; .Can one”indivldual  have an interest                       . :
                                     represented either as a stockholder,     director                 . . ..:
                        :            ore officer  In more than five  corporations     if
                                     each. corporation                             i
                                                        has. a Packago Store Perm t?                       :

                                           “7. ‘Can one indivld&.  be an officer,  dir-    ’:>                                  :
            :                        ector, or stoc’kholder in one or more corporations,
                                     each of which owns a’‘Package Store Permit, and a2so~ ‘.
    .                                IndividuQly   own or m an lnter.est in five add%-,                                 -
                                     tional Package Store Permits?                       .
                         .
                                            “8.Could an individual   uho owns five Pack-                   ’            .
                .                    age Store Permits actas   independent executor, or
                                                   .~                        I.            :
                                                                                     1
                                                                                         .                      .           ;
                                           :                                    *.,,’ ‘,                            ,
                                                                      .r :
                                                                                               :
                                                                                 ,.
                                                            .
                                                                                                   .       ‘.
                                                                             .
  .




        ponorablc      pert       Ford - Pace #s
                                           .
                              .
                         .        ‘.

                ““trustee for: an’estate that      owns’an. Interest   In
                  a Yackage Store Permit?,
                        “9.   Could an estate    contlnuously’own   stock
                 In more    than five corpor.ltIons,    each of which owns
                 a Package-Store     Permit?     ,~          a

                       . “10. Could an estate am’s tack in a holding           .
                  corporation  which does not itself owna Package
                  Store Permit but does own stock in five other car-               ’
                 .poratlons,  each of which owx Packngc Store Peznits,
                  and also be the owner of stock in a slxth corpora-
                J tion YhIch, owns a:Package Store ~Pcrmlt?      _
                       ‘“1 de&e      to refer you to Section 17 (2), paie
                  27,.and the definition      of *person’ on page 4 of the _.,
                  printed Act.     .   .: .    ..
                            ‘.
                         “1 ,also want to call your attention   to Gplnlon
                  po. 3004 dated September 1, 1937,‘wrItton      by Vernon
                 ‘Coe, A.ssis,tant Attorney Gonoral.     For your .conven-      .
                  ience 11 attach a copy of said opinion.                      ‘.

                        ~*%our v&lued opinion as to. the above questiona’.‘,
. ..
            .
       * . ~.
                 irill beg ~pprocIatod,     ‘as a new corporation   with
                 ‘,stockholders,   officers    and:dIrectors  In sgyo~of the
                  original   ‘ten ~corpdratlons mentioned above. has made
                  applic&tIon ‘for a Package ,Store Permit,.”
                                                                                    .:.,
                     As ~jrour questions, are phrased. genorslly,:.vie shall           ..
         answer ‘thoti accordingly    aild assume that there are ne ad+
         tlonalfacts     other ,than those which you specify.
                     The provisions   of the Texas Liquor Control Act, as
         recorded in Vernon’s Ponal Code of’Texas,       which give rise .to
         your questions are,‘as followsl
           :
                  .’ nA&icle   ~666-17. (2) ’ It, shall Abe‘unJ.a&l ‘1.i
           I for any person, to hold, or have ,an ~Interest in. . ,. :~
                                             .              .   ‘~
                       :.                            .,
          f’     .:     :      . .. ,.                    ‘.         *       I
                                                                   :

                              .’            ..                         .
                                       \’
                                                                                            172


  &moi-able Cert Pord - Paso $t
  .                             .
                                                                                                      ..




         more than five (5) Package Stores or the busi-
         ncss thereof.   It shall further be unlawful
         for any person to hold or -have an ln~tercst in
         more th.an five (5) Pacwge Store Permits.”
               “Art&&e 666-30.      ‘Persons’ shall mean and
        refer to any natural person or association        of
        natural.porson~s,   trustee,   recelvor,  partnership
        corporation,   organization,     or the manager, agen c ,
        servant,   or employee of any of thorn.”
                Under the foregoing      statutory provisions,     a nat-
 ’Ural person or a corporation          may (1) hold or (2) have an
    m,in           a maximumof five packagc stores or package
     store permits, provided all other requirements of the 11:.
    quor A& are fulfilled.         Although. the term *‘holdoF is not
     defined in. the Mt, it is the person who makes .appllcatlon
     for and receives. the permit,- 11 co~i-poration, being a sopa-
   ‘r,ate entity under the laws of this State, is reoogtized              as
     a person capable of holding, a package store perhit.            Xs’It
     is the corporation     that holds the peruit,      it follows that
    neither the ‘officers      nor the stockholders     of ‘the corpora-
     tion are.the ~Sndividual holders thereof.          The problem here
     then is. the ‘nature’ of.the ~interest.,a stockholder      and- ~offi-
. Cer.,of the corporation        has in the permit held by the car- :._
     poration.                                                           ‘.
 :
                                                                            ,.*
                The issues you present her~e in your. first s5.x
    .qnestions Involve ~princlpally      that. of common corporate        .~
     stockholders,   dir.ectors   and officers   ‘ln~ more than ~flve ,‘~        ..
     cor$oratlons,   each!.of~ which is .the holder. of a package
     store permit, land the ~effec.t thereof- upon ap lying the                 ..                .
     provisions of that part of Article        666-17 (2!, which       ..-
     reads:                                        ..
                                                                      . . .
              “It. shall be unlaw’ful for any person to . .                        :-
        have ‘an interest. in ‘more than five (51 package
        stores . . .,‘Or    4 , . more.than,flve  (5) pack-
        age ~store permits.” .‘=
                                                    .   .                     :-        1

             The holding in a previous opinion of this d&.x&
   ment to which you refer, No. 3006, 1s ,appllcable t, the
                        .
                            .,            .
                   ..

             ‘.,

                                 .




                                     .,       . .
                                                                                           I4d

    _




.       ponorahle. Bert Ford - Paae $5


    . circumstances here.        It.was ~thcre held that ownership by one
       gerson of stock In three corporations             did not violate         the ,pro-
       visions of Art. 666-17(2),        supra, even though the three cor-
       porations together owned more than five package store permits.
       The reasoning in that opinion’ was based upon a no11 defined
       line of Texas authorities       holding that a stockholder              ln’a
       corporation dms. not own an interest          in the~assets of a going
       corporation:and    consequently     the stockholder           does not own an
       Interest in the package store          tho   business thorcof,          or the
       package store permit hold by Che corporation.                  lO.Tcx. Jur.          .
       781, Se& 3; Prcsnall vs. Stockyards National Dank 15l S.W.
       873, 8763 Automobile Mortgage Company vs. Ayub, 26b S.Li. 134.
                                                                                      :.-
                    This dopartment has previously           constrkd       “intcrestn
       as used in Article    666-17(2) according .to’ its legal rather
      .than to its popular usage and as beini: synonymous with legnl
       title or equitable    title,    or both, pursuant to the. interpre-                    ,
       tation placed upon the term by Texas Courts and those of
     ’ other jurisdiction.’     XcAlllster      vs . zdip~e     ,oii    Company, 98
       S.W. (2d) 171; :lO Tex. Jur. 780, 781; Automobile Kortgage Co.
       vs. Ayub, 266 S.W. ,134, U. S. vs. Delaware & Hudson Company,
       21.3U.S. 366; ~Byerly et al vs. Camey, 161 S. W. (2d) 1105.
       Although officers    and directors       gonerally     manage corporate
       affairs,   it is our position      that a director        or officer       of fhe
       corporation occupys the same position             as the Sockholdors           .,
       vith.respect~ to their ninteres.tn in the corporation                 under
       this statute..     An officer’s     position      with.respect       to the
       corporation is brieflp’.statcd:in          19 C.J.S.,     Corporations,        Sect-
       ion~741 as followsr

                     %‘he officers    of’a private corporation       have
               no franchise in their.offlces;        they are mere17               ..
               representatives.    or agents of the corporation.e
                                           ,
                     Consequently, applying the holdlngbf           the opinion
        .cited above and our construction        of the word. “interest?,     we
         arrive at the conclusion       that a stockholder,   :officor   ,or direr  1
         tor of a corporation,      regardless   of his stock ‘ownership, may.
         belong to more than five corporations           each corporation ~hold-
         lne a package store permit.         Wc therefore   answer your f lrst
         81x questions In the af firnative.
                                                                               ‘.
                              :                  .
 pan
 o.ale r b                                                            ,’


             It is our further opinion that 8s adirector,         officer
  or stockholder   tn one or more corporations,     each corporation                                               ..~ i
  holdinf: a nackarre store normit. has no leEa interest       in the                                                  I
  going corg&a.ti&,    then he may’lndividualiy’and     personally
 .hold the statutory m~xlmumof five package store permits.            We
  therefore answer your question nu?ber 7 in the affirmative.

                We proceed to your question number 8 relative        to un
    5ndividual who owns five, package store permits and at tho         same
-‘time acting as lndepondent executor or trustee for an estate
    that owns ‘an interest    in a Package Store Permit.     A permit or
    license -granted uuder the terms of the Toxas Liquor Control
    Act,.ls   a personal privilege    and does not constitute. propor~fy,
    nor does It descend.by the 1~s of testate        successionbut
    ceases upon the death of the licensee      or permittee.     However,.
    the. Texas Liquor Control Eoard may prescribe      regulations    where-’
    by a new license may be applied for and Issued wit&but payment
    of, additional    fee as to unexpired periods of affected ‘licenses
    upon the death of the holder of said license       to the end that
    the value of the,unexplred      portion of the license    shall not.
    be lost to the sudcessors :ln interest     of any business: Involved
    and that. the conduct of said business     may he eontinuod    without
    ~&ntdrruption. SOQ Art. 666-13, V.A.P.C.       Said Article- further
    proviUes nthat any successor in Interest      must ~.meetall reqtire-
  ~ments.of law applicable      to.the holder of a permit or license
   .under the termsof     this act, except that the executor,       ad+-
    lstrator,   trustee or receiver acting under any judicial        ~pro-
    ceedlnes shall not be required to be domiciled in the county
    in which’ the business Is, louated.”
              Due to the .fact that the. quoted wording In the &ova
   stat&creates      an exception a’s to executors,   it would seem to
‘imply an assumption t?at an executor is a”succcssor        in interest?-
  ‘to the deceased’s   estate.   however, whether an individual who
   already holds s maximumof five package store permits can le-
   gally act as indepondent executor or trusteo for sn ettate                                                      * .
 having a package store permit will depend upon his &? crest
   as’axecutor in said estate according to our prior definition        of
   the term$ntcrost    under Article  66~17(2);    namely, a legal
   interest synonymous wlthlegal     or equitable t$tle~.       .,
                                                        .-
                              ,..,   ‘~.   ;          ,,.   .:.   *
                                                                               .   ~’
     ..   ..~_.        .‘.,                                                i


                  .’                                                                             ,: <..
                        *..-:        .         :
                                               ,,,’                                             ___ :
                  3:                                                                    :                     .c
                                                                                                          :
                                                                               ,
                                                                                            .
                                                                                  J-43
    .    .
.




    ponorable    Bert Fort - Page 97


                 Proceeding then we find by Article           3314: V.A;C. S.,
     th$t tihen a person dies, leaviny: ~a lawful will,         ali of his
     estate devised or bcqucathod by said will vost ln~cdiatolp
    ~jn thn devisees or leR:atees; that upon the issuance of lot-
     tcrs~ testamentary or of administration,          the executor shall
    have the right of possession        of the estate and shall hold
     said estate in trust to be disposed of in accordance with.
    law. We find further by Artlclo           3’+27, V.A.C. S., the ex-
     ecutor has broad discretion       in m3naglng the business of
     the deceased for the welfare of the estate.             Under these      ’
     statuteo, an independent executor is entitled            to possession
    .of the entire estate.     r’oal ns well as norsonal.        (horroll      .
     vs. Iianlett, 24 S. W: (2d) 531; Caufleid vs. New&n,. 265              ~*
     s. w. 1052).     The independent executor or representative
    has nothing more than a temporary right to possession              of the
     proparty of the estate.       Tine nature of .his possessionls
     declared to be In trust,      to be disposed of pursuant to law.               ..
    horrell VS. Uamlett, 24 S. W.. (2d) 531; 13 Tex.’ Jur. 7 2;
    Bra-.in vs. Canal Bankand Trust Company C.C.A., La., 1l 1~ .
     Fed.“2d 832. It is therefore        ‘our, opin i on that an lndepdn-
     dent executor or trustee,      assuming that he has rccoived no
     legacy or devise in the business of selling           liquor by the             ’
     terms of the will,     does not have a legal interest         in the
     assets of the estate to be distributed,           as we have horeto-
     fore defined the term lntercst        under Article     666-1X2).
     Consequently; we enswer your eighth question in the .&fir-.
     mative .
        .,       As .we ‘&ve already determined~ tho nature of the               ‘-
     $nteres$ as set out in Article        666-17(2) eland,found that a
      stockholder does not have such an Interest          in a corporation,
      it is.our further opinion that an estate would occupy the
      same.position as an individual       in that respect     and owner-
      ship by the estate of stock in five or more corporations,            mch
      holding a package store permlt, IS’ likewise not a violation
      of Article 666-17(2) supra.       Ne ,therefore answer your ninth
      and tenth questions In the -affirmative.
                   Ve are’ not unmindful of tho strong and growing                  ’
        line of. legal authorities   preventing  the use of the fiction
        of corporate.ldenity    for Illegal  purposes.  The courts till
                                                         ?#
         .                                    * '.                            ,
                                         ..    .           .        ,.
                                                                          i
*   .   .
              .                        .
                                                                                          :.
                                                                                                      :176,
            Bonorable   Eart   Ford    -   Pase #a                                                     :
                        ..
                                                      i
            look 3cyond the.&pbrite..forin       to the’ purposa of it as well
            as to the officers   ~assoclated.t;lth   that purpose In order to
            eetemine If the corporate fiction        is relied upon. to circum-
            Vent the provisions   of a statute.      Here houever, as you
            have presented no facts which would lea d us TV such a con-
            elusion this opinion must rest solely ubon.those facts set
            out In your letter..
                        We trust      our findings   bo,roln will       be of assistance
            to you.            :      ‘.
                                             .
                                                                                                           _’
                                       0                     Very truly      yours
                                                          ATTOIUiEY C&ERAL dF !CEC&~
                                                                                                ~..         .
                                                                                               ..

                                                            Jack IL Aper’ ;                                 ..
                                                            Assistant     *.         ‘.           ‘~
                                                                     . .




                                                                         This opinion
                                                                 .     considered and             ~~’
                                                             .           approved in
                                                                            Limited
                                                                     ’ I Conferences
