                  THEA~TORNEYGENERAL

                                  OF      TEXAS


   WILL   WILSON
A’CFORNEY    GEXSERAL                   bag    30,   1958




    Hon. $3111~ Stealcley                Opinion No. WY-.440
    Sectietary of State
    Capitol Station                      Re:     Should the Zecretarg’ot     S,tate
    Austin, Texas                                accept arid file Article8    of
                                                 Incorporation   In which the cor-
                                                 porate name includes one of’ the
                                                 words, “discount”,    “redts&unt”,
                                                 “guaranty*, or “surety”,     and
                                                  related questions.
    Dear Mr. Steakley:
              You have requested our opinion answering five questions
    concerning the granting of charters to corporatlons~ under the
    Business CorporatFon Act which conttiin proposed purpose Blauses
    and corporate names contalnfng  certain descriptive  words.  Your
    first  question is as follows:
              “Should the Secretary of State accept and
         file Articles of Incorporation   which include one
         or more of the following  purposes:
               !‘a I/ To endorse      and guarantee protilssorg
         notes, drafts,      bills    of exchange, ‘,warranta, bonds,
         debentures,     arid other    negotl,able and non-negoti-
         able instruments and         evidences of indebtedness;
         and to guarantee the         payment of the principal     and
         interest    thereon e
               “b 6 To Guarantee any contract     or under taking
         between   individuels, or bbtween private corpora:
         tions, OP between indlviauals,     or pirvate corpora-
         tions and the State, and municipal’ corporation8,      6r
         counties,  or between corporations    and individuals.
                 “c . To act as surety or guarantor of the
         fidelity     of any person, ftirm or corporation    ap-
         pointed to or assuming the performance’of         any trust
         artsing out of a contract between individuals         or
         corporations,      or otherwise;  to act as surety 6r
         guar&htor for the performance of any contract;          to
         act as surety or guarantor. of the debts of any c’or-
         poration,     individual,   firm, or partnership;   to act
         as agent for the purpose of any lawful act.
Hon. Zollle     Steaklay,   page 2     (Opinion   No. WW-440)


          “d . To accun.ul.ate, lend and advance money
    or glve credit to any person, firm, or corpora-
    tion, either with or without security,         and on
    such terms as may seem expedient,        and to buy,
    sell,  dlsccxlnt and rediscount    bonds, negotiable
    instruments,    condltlonal   sales contracts,    and
    other evidences of indebtedness .I’
           We will first    discuss    the validity   of the following
proposed   purpose:
           “b . To guarantee any contract or undertak-
    ing between individuals,    or between private cor-
    porat ions, or between Individuals,    or private
    corporations,   and the State, and mnlclpal     corpora-
    tions,   or counties,  or between corporations    and
    Individuals . ”
          The wording of thla clause la Identical     with tht word-
ing of one of the purposes contained in Article      7.01 of the
Insurance Code, which was repealed by Chapter 388,/Section       1,
Acts 55th Leg., 1957, p. I162.     Article   7.01 was part of Sub-
Chapter (A), Fidelity,   Guaranty and Surety Corporations,    and
Article  7.01 was captioned,  “TO Act As Surety”.     Althou& Chapter
7 of the Insurance Code has been repealed, ‘corporations     may still
be incorporated  under the provlslons     of Chapter 8 of the Insur-
ance Code for the purpose of engaglng in this type of bualness.
           Article   2.0IA, Suslness Corporation Act, provides that
cbrporatlons    for profit may be organlzed~under this Act for any
lawful purpose or purposes, but that no corporation         inay’adopt Or
be organiced,     or obtain authority   to transact business 1n’Texs.e
under the Act if any one’ of its plrposesls        to operate insurance
companies of every type and character that o erate under the ln-
surance laws of this State.       (Art. 2.OIB(4) yd)) . Article    9.14A,
Business   CorporationAct, also provldes that the Act shall not
apply to corporations organized for the purpose’.of operating ln-
surance companies of every type or character that operate under
the Insurance laws of Texas.
           Therefore,  since the purpose above set forth is-to permit
the corporation    to Issue contracts of surety or guaranty, such
corporation   would be operating an insurance business;   and under
the provlslons    of Article 2.01B(4) (d) and Article 9.14A, a
charter could not be granted by you under tQe provisions     of the
Business Corporation Act.
           Although    the following    purpose clause:
              "c, To act as surety     or guarantor   of the
Hon. Zollle    Steakleg,   page   3         (ww-440)



      fidelity   of any person, firm OP corporation
      appointed to OP assuming the performance of any
      trust arIsIng out of a contract between lndivld-
      uals or corporations 3 OP otherwise;     to act as
      surety OP guarantor for the performance of any
      contract;    to act as surety or guaMntor of the
      debts of any coPporatloc,    individual,   firm, or
      partnership;    to act as agent for the purpose of
      any lawful act (I”
does no% use language which Is Identical         with certain of the pur-
poses contained In Article       7'.01 of the Insurance Code discussed
above, nevertheless,      the phraseology    evlddnces the Intent of the
corporation     to conduct Its business for part of the same purposes
which were formeplg authbrized by Atiticle 7.01 of ‘the Insurance
Code. The purpose, “to act as surety or guarantor of the
fidelity    of any pepson, firm, or corporation       appolnted to or’
assuming the performance of any trust arising out.of a Eohtract
between Individuals     or corporations,     or othe~wlse”,~‘l~ almbst
identical    with one of the purposes formerly authb??Lzed uriaer
Article    7001, which was “to act as surety.and guarantbr bf the
f IdeUty of employees, trustees,        executors 9 admlnltitP&t6rti,
guardians OF others appointed to, or ‘essumlng the p&f 0Mance of
any trust,,publ.fc    01”private,   under eppolntment of any court or”
tribunal,    or under contract between private lndfvlduals        OP COP-
poratlons;     0 0 D e -”
          It is clear that although the verbiage of the,fortgolng
purpose Is dlffepent    from the ,verblage of Article    7.019’~neverthe-
less, thb nature of the proposed buslness&s’thereunder         are lden-
tlcal,  namely, to carry on a surety or guaranty busiaess,        which
1s an insurance business,     ar.d therefore, since such purpose falls
within the prohlbltIons    .above described,    you would not be au- -’
thorlzed to grant a charter containing       this purpbse to a corpora-
tldh und’ep the provisions    of the Business Corporation Act for the
reasons above set forth-
            The same reasoning and the same conclujions        are applfca-
ble   to that papt of the purpose clause which reads as follows:
            4,. 0 D 0 tb act as sur&g OP guarantor fop the
      perfbrmance of any contract;     to act as surety or
      guarantoti. of ‘the debts of ‘any corptration,  lfidlvld-
      ual, firm, or pastnershlp;     . D . ti
All of the’foregolng     mrposes are r&stitements in different
Verbikge of purpose clauses foFmePly authorlzea’by      Article 7.01,
Bfid~ilould authoplze the corporatlbn’ to conduct a surety or ”
guaranty business,    which is insurance business (Ar%. 5.13, Insur-
iPnce Code), and therefore    you could not iasue~a charter or an
amendment or certificate     of authority to any corporation   under
Hon. Zollle   Steakleg,   page 4           (W-440)



the Business Corporation     Act to conduct    a business      for   such pur-
pose or purposes.
         The remaining part of the purpose clause is “to act as
agent for the purpose of any lawful act”.        It Is our opinion
that you could not’ issue a charter or approve an amendment
thereto,  or issue a certificate     of authority to any corpora-
tion under the Business Corpbratlon Act which conttis       this single
purpose for the following     reasons:
            (a)   The purpose clause,      standing alone,
     is violative    of Article 2.01A which provldtis
     that corporations      for profit may be organized
     for any lawful purpose, which DurDose shall be
     fills   stat@   In the articles      of Incorporation.
     The purpose’ “to act as agent for the purpose of
     any lawful. act” is too vague and ‘Indefinite,
     since the word5     “for any lawful act” do riot
     specify    the nature of the act which the agent
     Intends to perform.        It Is possible    that the
     acts sought to be performed might, In the opLn-
     Ion of the officers       end directors   of the cor-
     poration,    be lawful acts, butt such acts might
     also be In violation       of the lciws of this State
     if accomplished In a particular         manner.
            (b)    Prior to the enactment of the ‘Busl-,
     ness Corporation Act there were three lawful
     purposes under *Rich a corporation        was permlt-
     ted to act as agent for another.         These were,
     respectively,       ~&ubdlvlslons 49 and 108, Article
     1302, V.C.S., and Article-1303b,        V.C.3~; Sub-
     division    49, Article    1302, is in part as follows:
            I,        .to act as trustee under any
         law&i ixpress trust committed to them
         by contract,      and as agent for the per-
         formance of any lawful act VW
         Article   1303(b), V.C.S.,  uses the identical          language,
but aUds the tiesfriction   that such oorporatlon  will         be “without
banking or Insurance privileges”.
           Sub-division   108, Article   1302, V.C.S.,      provides    as
follows:
            “Corporationa   may be creeted to furnish
     the agent upon whom process may be si)rved, to
     act as agent fop rtielpt     of’comirmnlcatlons  and
     notices,   to establish   and maintain registered
Bon. Zollle   Bteekley,   page 5             (W-440)



    offices   for corporetfons   and other organizations,
    domestic or. forelgh, and for lndlvlduals,     and for
    the performance of any lawful act In connection
    therewith;   provided,   however, no such corporation
    shall as agent carry on the business of 8nOther.”
In addition to the p~ovlso con%alned,ln sub-division           108 that
“no such~corporatlon    shell,   as, agent; carry on the business of
bnother”,  all corporations     whose purpose clauses~ contain the
purposes mentioned ln sub-division        49, Article   1302, and Article
1303(b), were.subJect    to the provisions      of Sectfon 1, Article
152tie, V,C,S,,   which provides that “nor shall such corporation
as agent or trustee ‘carry on t’he business of another,” which re-
striction   1s stfll  applicable    to corporatfons    operating under such
purpose clauses 0 (Art 9 g,lgB, Business        Corporation Act) .        ~,_

            It has been the unfform departmental   construction    of the
office   of the Secretary of State over a long period-of      pears,
following    the opfnlons of various’ Attorneys General, that a
charter could not be granted ‘nor a permft Issued to a foreign ‘~’
corporation    whose purpose clause oontalned the words, “to act as
agent ‘for the performanoe of any’lawful     act”, standing alone; but
that the entire purpose clauses above se% forth under eub-clivl-
slons 49 and 108, Article    1302$ and Article 1303(b),    V.C.‘S,, must
be set forth In the charter or amendment thereto,       or permit in
the case of a foreign corporation,
          In addltlon the Legfs’la%ures of Texas, over a’ long period
of years prior to the en&c%men%of the Business Corporation Act,
have no% seen fit to enlarge uEjon the purpose clauses ‘above se%
forth which perml%%ed a corporation    to act as agent, but have
continued the restrfctlve  provisIons   or words of ~lmltatlon se%
forth therein,
          1%~1s the opinion of this office that a single purposb
to “act as agent for the purpose of any lawful act” 1s no% a law-
ful purpose which may be contained fn any eher%er OP certificate
of authorfty  for the reason that 1% is too indefinite  and is not
fully stated so as to apprise the Secretary of State OP the &ub-
llc at large as to %he performance of whet lawful act or acts the
proposed corporatfon  contemplates D
          The proposed    purpose   clause   whfch reads es follows:
          “d.   To accumula%e, lend and advance money
    or give credit to any person, firm, or corpora-
    tion, either w~lth or without security,     and en
    such.terms as may seem expedfent,    and to buy,
    sell,  discount and rediscount   bonds, negotiable
    instruments,   conditional sales contracts,    and
    other evidences of lnd,sb%edness *”
Hon. Zollle    Steakleg,   page 6            (wu-440)


Is a combination of the purpose clauses set forth in subdivi-
sion 49, Article     1302, V.C.S.,   and Article  1303(b), V.C.S.,   and
is an enumeration of some of the powers granted to trust com-
panies underArticle      1513, V.C.S.    It also contains some of the
purposes enumerated in Article 342-301 of the Banking Code, which
authorlzes    the incorporation    of banks and trust companies,
although the verbiage used In the proposed purpose clause is
not Identical    with any of the purpose clauses above enumerated.
                     ose clause could be subdivided into two distinct
                     to accumulate, lend and advance money or give
credit to any person, firm, or corporation,        either with or wtth-
out security,    and on such terms as may seem expedient,      . .
and (2)    “to buy, sell,    discount and rediscount    bonds, negotlible
lnatruments, condltlonal      sales contracts,   and other evidences of
indebtedness.”
            Analgsl.ng the first    purpose, lt may be reduced to the
purpose of acoumlating       and                             or without
security,    sLnce the words
synonymous w’lth the words
is given as a loan or an advance
Fmmaterial because the ordinary business practice              followed by
both banks as well as lndlviduals        and corporations        engaged in the
business of lending money to the public is for the lender to
exercise discretion     as to the requirement of security,            provided
that such loans are not made Ln vlolatlon            of the statutory       re-
strictions    governing the lending institution.           The use of the
term “and on such terms as may seem expedient” agaln involves a
questton of discretion      on the part of the lender, but would not
authorize the corporation       to lend’or advance the money in vlola-
tion of the constitutional       and statutory    provisions      governing
the amount of interest      and other charges to be exacted from the
borrower.     Standing alone, this Furpose clause would not consti-
tute a legal purpose, althou h it is almost identical                with the
provislons    of sub-divlslons    &8 and 49, Article        1302, V.C.S.,      and
one of the purposes contained in Article           1303(b), V.C.S.,        since
the words “without banking and discounting            privileges”     ~would have
to be added to the’purpose       clause before-you      would be authorlied
to issue a charter,     approve an amendment, or’grant           a certificate
of authority to a foreign corporation          to engage in business ln
Texas ‘for such purpose.       The addltion    of the,qualifglng       phrase,
“without banking and discounting        privileges”,      will be discussed
lnthe     answer to your second question.
           ‘The purpose clause authorlelng   the corporation   “to~buy,
sell,   discount and r’ediscbunt bonds, negotiable    instruments,,F;on-
ditional     sales contracts and other evidences of indebtedness,
would be lnvalld as to the words “discount and rediscount”         since
such language Fs almost’ldentlcal      with the language in cub-dlvlL’
sion 49, Article     1302, which authorizes  a corporation   to “purchase,
I




    Xon.    Zollle   Steakley,   page 7           (ww-440)


    sell,    and deal In notes, b$$s or securltles,        but Without banking
    and discount1                       and therefore,   uiiless such quallfy-
    hg words w&r?a~dr~il’,ues, as stated
                                     ’    above, this clause would not con-
    stltu;4! ‘a lawful Frpose.       Since the words, “disbount and redis-
    w;,“;,     a;e ln direct contradlctLon   to the necessarg,,quallPyFng
                  without banking and discounting    pPlvlLeges    such words
    tiould,‘of     necessity, authorize the performance of a &ohlblted
    act. ,.
                Dlsooi.antlng”ls   one of the finCtlons      ef the.banklng’
    ‘business 0 This is manifest from the~wor%Liig of SMtion 16, ”
     ArtZcle XVI, Constftution        of Texas,‘whlch    autharizes     “the incor-
     pvoation of corporate bodies wlth bankingand discounting                 prl-
     vlleges”.     The word “discaunt”,      has been held to be Included
     in the term, “banking”.        ‘Kallskl v. Gossett, Bankina Coti ‘9sfoner,
     IO9 S.W. 2% 340, 344 (Civ. App. 1937           errdr,ref,i)B    Att orneg Gen-
     eral’s.Oplnlon     No. O-5646, dated Oethber X3$ 1943: arjd’Nb.
     O-4912’, dated Octbber 17; 1942, H&-ice, any purpose clause.
     which: atithoritied a corporation      tci conduct a business of dtti-
     counting or redlscountltig       negotF&ble instrument& or commerclial
     p&per would .constltute      authoi”ltg for the corporation       to do B
     banking buslnesa and would.fall         within the prohibltLon       of Arti-
     cle 2 .OlB( 4) (a) 0 Therefore,      you would be without” authority        t0
     grant a charter OP amendment thereto,          or certificate     of author-
     ity to a forsign corporation         for such purpose.       It may be iioted
     that the phrasing of the proposed purpose clause (d) p su r
     b&ars a strlklng     slmlla~lty     to hhe provisions     of Artlc #&301
                                                                           e
     (a) and (e) ) V,C,S,       (Banking Code of 1943) 0
                 The last   of the proposed   pupposes~ls,   as follows~
                  nao To endorse and guarantee pPomiseo~y
           notes, draft&, bills      of exchange, warPants, bonas,
           debentures,    and other negotiable    and nbn-,nqgotleble
           LnZ3tfutient.a tin%’evidences of indebtednes~ti; arid to
           ~~t;;;ef:   the payment ‘of the pplnci~l     and, int?rest
                     0
               It will be noted %K&$,the propos6d purpose clause tWi%ti’
     conta?ns the wbrda, “tb guaPantBe”.        Article 5.13 of the ‘Insiipanbe
    -Code $a applfcable     to any insuranc,eLoti@p&lay OF other organlzatibn
     writlang any fidelity,    surety, or gW&rafitp bonds on risks or op&-            ',
     atlons In Texas, with ceP%aln exbeptFons’,not applicable        here, and
     vests the regulatory     power over such oPgahiea%lons In the 'Board
     bf Insuraiwe Commlsslonem3, The regulatory         powers etimera%ed
     are. gMerall$   conc&rtied with ratings and pblic$‘formti a Again
     ref&Plng %b the p~ovlsihw        of fotier Article 7.01, one of the ‘.
     pUrposes named therein Was to’ guaMn%tie .any contract       or under-
     taking between individuals      and bbtW&en~‘prlvate corporations,    and
     between lndlvlduals     and private coppopatlons.     The purport .of the
Hon. Zollle   Steakley,   page 8   ’       (wu-440)


proposed purpose clause is to generally   guarantee the payment
of written evidences of indebtedness,   both negotiable and non-
negotiable.   That the wrltten evidences of Indebtedness named
in the purpose clause are contracts is so well settled as to
obviate the neceasltg  of citation  of authorltlea.
           In Southern Surety Co.’ v. AustlQ      17 S.W. 2% 774
(COUUU. App. ‘1929) it was held th t in gu&anty insurance the
guarantor agrees co indemnify theainsured for any loss of money
sustained due to the failure      of the principal   to act.   If, on
the other hand, it is contended that the obntract to”be issued
by the proposed corporation     is one of suretyship,    that is, to
guarantee the payment of the Indebtedness to the holder of the.
written evidence of ‘indebtedness upon the default of the maker,
nevertheless   it la a contract    of insurance since the holder of
the written evidence ‘of indebtedness would rely upon the obll-
gatlon of the corporation    under its contract     to guarantee the
payment of the indebtedness upon the default of the maker.
         In National Auto Service Corn: v. State, 55 S.W. 2%
209, 211 (Clv. App. 1932; error dl    ) th Court of Civil
Appeals stated the general rule ass~oliows~
           ‘Whether or not a contract 1s one of lnsur-
    ante is to be determlned by Its purpose, effect,
    contents,   and import, and not necessarily by the
    terminology used, and even though it contalns de-
    clarations   to the contrary.”
It is self-evident that’ a corporation   organized for the foregoing
purpose would have the authority    to and could issue contracts   of
suretyship and guaranty In furtherance    of such purpose.

         It Is therefore  our opinion that the proposed pureose
clause would authorize the corporation    to issue contracts  of
surety and guaranty, which’ Is an insurancebusiness,     and there-
fore you would be withat   authority   to issue any charter or
amendment thereto,  or cei-tlflcate  of authority to any corpora-
tion under the provisions  of the Business Corporation Act to con-
duct a business for such purpose.
          Your second question     Is as follows:
           ‘Is the Secretary of State authorized to
    ac’ceptand   file a domebtlc corporate charter,
    or an application    for 8~certificate     of author-
    ltg of a foreign    corporation,    contain purpose
    clause in terms-of subdivisions        48, 49, and 50
    of Article 1302, and Article       1303b, if the pur-
    poses clauses do not contain the words of llml-
Bon. Zollle         Steakley,   page 9           (W-440)


     tatlon of these statutes:    “without banking
     and discounting  privileges 9p and ‘not .compet-
     $.ng wFth each other” in the same line of bus-,
      Lnes s ? fl
         Her6 the basfc’questlofi     is wheth’er restrictive provf-
sions br words~~of lfmftatl6n    qualZfylng .~r&wwl putiposes fbr
which a coPpor&%lon could be formed:‘iinddeP ‘the’ laws of T-exa’s’
prior to the enactment’of    the Business Corporation Act, are still                        ~“’
in full force arid effect 0
           As above sttited, Section 2.Cl.A~oS,%he Business Coi+$ora-
tion Act provfdez thet coPporatlons           organ’ised for profit may be,’
brganfzed for any lawful mppose or plrposss which’Bnis%:.b6’ filly
stated fn the articles       oS.ticorporti%lon.       It ,14 a m&%Ebr:OS corn-
mbn and general knlbbwleiig’e~,of ‘whiqh the:, &Wt& .bft:Texae would
take judlclal     notice,  th&% under’~ the &orpWatlon, 1aPz bhich’ eX-
isted’ ilplor tb ‘the enactment of the’ BusInbes ~Corpor%$loh Act, no
corporatfdn    SBP profit    Wuld be formed excep%. SOP a~ Bp&iSii:
purpoa6 named fn the s%atiitee gOV~erni.ng.%be’incorpdra%lon dS‘ ‘~‘_~       ,
corporatlohs    fop ,proSit, .and then the pippoSb for which”che, cdr-
porPatl6n was S@@J@ was conffned solely to the :~rpo6b’~named in
the statute 0 In o%hep.,Word6p although thePe ‘were over I10 ‘drf;,
Ser’eri% statutory    papposea SOP which”cotip;Wat,lo~        oould. be fdPmed,
1% has long be&n se%t%ed law ln Telhas. that a chartee cold shots
be’ granted to a~~eorporPr&fon Wifoh.:c,on%cr$n@ .rPrps.thanone .of the                                ,,
statutory    purposes 0                     ‘.gf~,TbX. 4040, 67 S.Y. 484
(1902) 0
            One’of ~%helegfslis;%lve ilB$dn%s”‘Plin,,.%he‘bna6%m&& of ‘%h&
Business Corpora%fcm AC% ~wa(I’     %b ‘pe@fnit P i%~poP&%.tf6iiSOP ppbSi%
to be Sbrti&d fblp done OF more PaWul~ .pnv~p$sir, aubjeet: to’ the ‘ex-
tieptfoh8 pPovJfded fn Article' 2’iOlA B. :p”a6tOP    .%@“%hib  ‘Aclt %her6 "
beret many lnbs%anbee whei-e, a. s%&a%oP fcifpos'ti ,wab~epa6tXul b$ ttie
Le&lsl&u~e eontafnfng & g.eheral, sta iTemesbt;~ ” %h*t a &iv&%e coPpoP-
a%ion,,could be SoPme% “‘for any sne o~~:-mo~eoc %,h?‘PolS6~iiig @P- ..‘,
pose8 p ,wlth an enume~atfoaa.the~~~S~~~h~d:,‘%h;e,p~opos68co~po~!e-:.,,‘-               ,:’
tion could adop% %he au%horlzed p%rpPse ,tlausje~in’ fts,‘&n%fr6%p,                   :
or” ffmi% Fts purposes to one”op ,mbPe oS’~%tiieentire rii@bsr~‘ofP’@.UG ‘,                      ‘,
poses &iatkeJPleecI%@3Pt3faa. Many of the: a,%a$U%bm,,       jxnrpoM5‘eli?iusee ~’ ,:,.‘I
were pref”aced by words’~of lfmftatfon        OP pes%Tfctivs,‘~PbvfsYons
upon the authopity of’the       corpoPa%fofi :$o perfokm the, business            ./ : ‘~~
                                                                                         ‘.,
au%bc@lzed under the $u~pose~~Mlthin a &elP%iifia      ~sfihere ,‘6f .iadtlvltg,
so thaat’the eorpoP&fon     e6uld ~6% ,do :bu&lnetib S&Q whieh.eorpWa-
t%oiM had been’ fortied ‘uh%eP o%her purposes Pablch w&Fe regulated                    ~,.:,.~:
                                                                                             ,I
by specific    State agenofes,’                                                                 !
                                                                                               ‘,
            A %yplc?il example of such 8.’purpose clause is to be                ‘,
found In the provfsfona’,of’ APtfcige 1303(b) p V,C,S.,          whfch is as
follows;    the restrictive   p~ovLslowe or worda,,oS lfmF%atfon being                     ,’ ‘,
emphasfeed E
                                                                                                  ‘.
             Steakley,     page 10           (wi-440)



             private     corporation  may be Parmed for
                                                 poses, wlth-
                                                   to acousuz-
                                                 1 in notes,
    bbnds and securities;     to act as Trustee under’eny
    lawful express trust committed to” tt by contract
    or will,    or under appointment of any court having
    jurisdiction     of the sub’ject inetter; end es’ agent
    fork the performance of any lawful act; to sub-
    scribe for, purchase, invest in, hold, own, assign,
    pledge and otherwise deal in and dispose of shares
    of cepltal    stocks, bonds, mortgages; debentures,
    notes eiid other securities      or obligations,      con-
    tracts and evidences of IndebtMness            o;ltfyeign
    or domestic cotiporatlons      not COmDetinR            each
    other In the same line of buslnBag* to borrow
    money or issue debentures fop carr&g             out any
    or all purposes above enumerated. . . . .”
Other restrictive     rovisitina or words of llmltetion are emphasized
ln.sub-divisions    48 49, and 50, Article 1302, V.C.S.Subdlvle.lon
48, Article    1302, 1; es follows:
         ‘To accurmlate      end lend money ylthout       bsnk-
    lng or discountinn                .‘I
                            DriVileRe~S

          Sub-division     49, Article    1302,   IS aa follows:
           “For eny one Or more of the following pur-
              To &ccunulate end lend money, purchase


    committed to them by contract         atid as agent for
    the performance of any lawful         @ct.”
          Sub-division     50, Article    1302,   Is as follows:
          .“To subscribe for, pui~hese, Invest ifi,
    hold, own, assign; pledge 6ind titherwise deal in
    and dispose of shares.of     capital stock, bonds,
    mortgages d debentui%s , notes and other securltles,
    obl’igatibns,    contracts and eWldencds of ‘inaebted-
    ness of foreign Or domestlc corpoi%tlons      not
    comti6ting with each Other In the 8(u~e linnf       busi-
    tiesis’; prollded the @wetis and hu?horltg’ herein con-
    me&~ shall in no way effisct any provision        of the
    antl-trust     laws of this State.”

           Sub-division   108, Article  1302, quoted above,        contains
similar   restrictive   provisions  or words of limitation.
Hon. Zollle     Steekley,    page 11            (WV-440)



             Aswas stated in enswer to your first             question,    the
 Legislature     of Texas over a period of many gears prior to the
 enactment of the Business Corporation Act has used words of
 limitation     or restrlctlve~provlslons        In connection with the
 statutory     enactments of lawful purposes for which e corporation
 could be formed under the laws of Texas.              Manifestly,     by provld-
 lng such restrictive        provlslons    or words of limitation       It was
 the ‘leglslatlve     Intent to limit the’ purposes for vhLch’e cor-
 poratlon might legally        do business wlttiln this State so that
 lt.,could    not transact’ builnebs which was properly being trans-
 ac’ted by other corporations         which were uiider.‘.strlct    regulatory
 end ~aupervlsory Ilmltetlona         imposed by law, end which were ad-
 minlatered by State- offlcers         or agencies.     Typical examples of
 such words of limltatlon         or restriction    were applicable      to cbr-
,poratlons     formed for eny of,the purposes contained in sub-dlvi-
 slons 48; 49, end 50, Article          1302, V.C.S., Article       1303(b),
 V.C.S;,    end under the present Busln6ss         Corporetlon Act Article
 15138, V.C.S.,      all of which car oretlons..ware        end ares I Art.
 9.15B, Bualness Corporation Act P sub’ject to the limitations                 end
 restrictions      imposed by Article      15,2&r; V;C.S., under the super-
 vision of the State Banking Commlsslonerp Formerly all title
 insurance companies incorporated           under former Article 13028,
 V.C.S.,    now Chapter’ 9, Texas Inarence         Code, were Incorporated         by
 the Secretary of State, but were under the supervision                 of the
 Board of Insurance Commlssloners.             Banks end trust companies
 which were created under the provisions            of’ the Texas Benking Code
 of 1943 are under the supervision            of the Banking Commissioner of
 Texas a Hence, any purposes contained In the general corporation
 laws which contain words of limitation            or restrictive-provisions
 such as, “without banking and discounting             prlvlleges”,     although
 permitting the corporation          to perform certain business transactions
 which were common to banks end trust oompenles, nevertheIes,s did
 not permit such corporations          to engage in eny phase of banking OP
 discounting     features which forms en integral          part. of the banking
 business,     thereby carrying on a banklng business without any
 supervlslon.
            Thls office
                      has held (Attorney    Cenerel’s   Oplnian No.
WW-77, dated April  1, 1957), that the statutory      &zrpose clauses
authorized under the provisions   of Article   ljO2’end sub-divisions
therebf,  Article 1303b


Corporation Act were lawful purposes~ Andystill              remain lawful~ pur-
hoses for which a corporation  may be organized              under the Act,
vith certeln exceptions  noted therein,
           In enacting the Business    Corporatlon Act the Legislature
manlfestlg   did’ not intend to ‘remove the restrlctlve    provlsrons or
words of llmltatlon    whleh qualifiedthe     lawful purposes granted
Hon. Zollle    Steakley,     pegs 12              (lfu-440)


by it (Art. p.l5B),    but Intended only that such purposes es
brlglnally    enacted still COIMtitUted lewful pzrpos@ under which
8 corporation    oould be ahertetied for one or more lawful purposes
which, under the prior law, wee prohibited.
            It is our opinion that you world not be euthorleed        to.
grant e charter or amendment thereto to~‘~e domestic cOrporetlon,
or an eppllcetion    for 8 certlflcete    oft euthority  tb e Torelgn
cbrpotietlon which cohtelned purposs clause& aubstentially         the
same es sub-divisions      48, 49, end 50; ArtlOle 1302; or Article’
1303b, or any other simller purpos&‘cleusea         which were eutholiized
izs lawful-purposes    prior to the enactment of the Bublness Corpe-
etlon Act, unless such pui?pose clauses contelned’ quaXlfying pro-
Visions or words of llmltetlon       which were originally   e part
thereof.
            Your third     question    Is es follovs:
           “Should the Secreterj    of State accept and
    file Artlcleb   of Incorporetlon    Including dls-
    counting or redlsaountlng     purposes if words of
    llmltetlon   lre added, to-wit:     ‘wlthaut benklng
    or dlacountlng   privilegea?   I”
         This quest(ion~~has been discussed end apawered in the
answers to your first   and second queitlons.
            Your fourth     question    is es followsr
          “Should the Secretary of State ecc&pt end
    file Article& of Incorporation    which include
    surety or. guerenty purporer If words oi’llmlta-
    tion are added thereto,   to-wit:   ‘lnbofer  es may
    be’~permltted by law end nothlng cbnt8lnbd herein
    shell be construed to grant this corporation     ln-
    surence powers?’ ’
          Since we have held In emwer to yoim first     queatlon thiit
a purpose to dc a surety or guaranty business would constitute       a
purpbse tb don en lnsu+nc& business,  yo!~ would“not be atithorlesd
to grant e charter or at~emendiUnt ‘theMto bra 6i ‘certificate   6f
auth6rlty for e foreign aorpotietion tb do buslne’ss In Teties-ilnder
the pri%lsl~ns  of the Bublnebs Corporation Act, end therefore      it
is lmmaterlel whether the qualifying   or restrictive    phrase should
be added to such purpose.
            Your fifth     question    1s es follows:
            “Should the Seoretery   of State eccept and ,
     file   Articlea of Incorporation   in which the
Hon. Zollie   Steakley,   page 13         (Wu-440)


    corporate name includes one of the words, ‘&is-
    count ’, !~redlscount I, ‘guerenty’ , or ‘surety’?”
         Article  2.05A62) of the Business     Corporation      Act refers
to the “Corporete Name es follows:
          “It shell not contain any word or phrase
    which lndlcetes  or implies that It Is organized
    for any purpose other then the one or more of
    the purposes contained in its articles  of ln-
    corporation.  ”
          Since we have held that you are Ytthbut authority to
grant e cherter or en amendment thereto,    or a certificate   off
authority  to’ a foreign corporation to-do a discounting,    redls-
bountlng, guaranty or surety business,    the use of such words lh
the corporat6 name would be in violetion    of Section 2.05A(2) of
the Business Corporation Act.


          The Secretary of State is without authority.
    to issue e charter or grant a certificate    of au-
    thority  to a foreign corporation   for the purpose
    of doing business es e fidelity,    surety, or guer--
    anty business,   which is the business of lnsurence,
    or for the purpose of doing a beriklng business.
          Words of llmltetl~n   or restrlctlve     provlslons
    contained In lawful stetutory      purpose cleuaes of
    private corporations    for profit   in effect   prior to
    the enectment of the Business Corporation Act ere
    &till in full foroe end effect as to any lawful
    Furpose for which e corporation      mey-be formed un-
    der the provisions   of Article    2.OlA, Business
    Corporation Act.
           A corporetlon mey not use In Its corporete
    tieme ,eny word or phrehe which is not descriptive
    of one of the purposes   for which the corporation
    is formed.
CKR:wb:wc                       Very truly   yours,
APPROVED :                   WILL WILSON
Opinion Committee            Attorney General of Texas
Geo. P. B>ackburn, Chekrmen
Mary K. Well                 By s/C.K. Rlcherbs
Milton Richardson                  C.K. Rlcherds
Fred Werkenthln                    Assistant
Reviewed for the Attorney General
By: W. V. Geppert
