             OFFICE OF THE ATTORNEY GENERAL             OF TEXAS
                              AUSTIN
GROVER  SELLERS
ATTORNEY GENERAL



Hon. Oeo. H. Sheppard
Comptroller of Publio         Aoooullts
 Austin,      Texas
                                                             A
 Dear ?dr. Shsppard:
                               onlnlon    Ho.




                    We hare yxsy                 qopinlon,       which is as
 t ollowa :
                                                              this department
           as to whethe                                     svied under
                                                           appllse when
                                                          oorporatlon    and
                                                             and the stook-
                                              rm a partnership,    taking
                                              properties  of the oorporatl&.
                                                            ship hold the
                                                          y eaoh held in
                                                           the County Tax .,
                                                           tor tshloles
                                   tion   to the new partnership.
                              ounty Tax Colleotor authorized to make
                              hout the payment of the one per oent tax
           levied   under Artlole  7047(k)?R
                  In order to clarify       your letter we c~uoto from the
 letter      of the Assessor-Colleotor       of Tan-ant County:
Hon. Sea.     E. Sheppard,    pa,:e 2


                  *The question has been raised with this office
         rezsrding the 1% S&es Tax on the transfer    as stated          below:
                  “On September lOth, 1945, four men formed e partner-
         ahlp and purohased all the ooi~mon stook of the Mddox Ullk
         Products   Co. Ino.  of Fort Worth, Texss.    Now these gentlemen
         srs dissolving the oorporstion     and sre going to operate
         under the name of Crystal Pure Dairies and want to apply
         ror new titles    on all the alotor vehicles,  but they olaim
         they 03n nake sn aftldavlt    that there 1s no sales tax due
         but just 6 ohsnge of operating name, lnasnruoh 6s they did
         not buy equipment snd good will but purohesed ‘Common
         Stook’ or said oorporatIon.*
              From the shore It *rould appear that the Usddox kilk
Produots Company, Ino., of Fort ‘Worth, Texss, w3s a corporation.
We hare-made sn examination of the charter of said oomoeny In
the orfloe   of the Seoretary of State of the State of Texas,
and found that said company was duly Incorporated    with the
capital  all subsoribed,  fully ?aId, and all shares were oommon
stook.

                 d oorporatlcn,   a3 to its property, I3 e mere trustee
for Its     stockholders.     Lenawee County 36vIngs Rank v. City of
Adrian,     33 N. W. 304, 305, 66 Miohigan 273.
                  “‘Common atook’ la the ordinary         stook of the oorpore-
         tlon, whbther Issued at its formation or afterwards,              whloh
         entitles    the owner to pro rata dividends without any privlty   -
         or preferenoe over any-other stockholders           or olass aC share:
         holders but equally with all other stookholdere,            oxoept
         preferred     stookholders.     . . . A stookholder or oommon stook
         ha3 the right of attending and voting et meetlnSa of the
         oorporatioa,      p3rtIoIpatIon    in the election   oi oltioers,    the
         formation of by-laws,        the partiolpation    1x1the profits    and
         lossee,    and In the final division       or the property    upon
         dissolution.     * Storrow v. Texas Consolidated       Compress and
         :<3nuFacturing Association,        87 3. 612, 31 C. C. A. 139. _
          (Appealed from the Cirouit Court of tne iJ. s., Eastern
         Distrlot     of Texas).     (Smyhasls ours)
                  “Ji ‘stookholder’  Is the owner of hi3 shares absolutely,
         and .‘as a right to manage hls property as suits his own
         notions.”     3Ird Coal .& Iron Co. v. Hune, 27 .;. 750, 752,
         157 Pa. 278, 37 A. St. Zep. 727.
Hon. Oeo. H. Sheppard,          ?ege 3


                *‘The *stockholders 9 of a business ooruoration  are
          partners, with rights and liabilities     fixed by the
          general or special    law, which is a part of their oontract.”
          In re opinion of Just10 es._ 33 A. 1076. 1082. 66 ?J, a-
          629. (Emphasis ours)
                 “A ‘share ol capital stook*      la the right to partake,
          aooording to the amount put into        the fund, of the surplus
          profits,   and,


           3 N. N. 9 11 116 Wi     344 and other odses therein
          oited; Cld v.‘Redmau “j7 P.‘437    439 6 Idaho 568. Xarkle
          v. Burgess, 95 N. E. 308, 309, 1’)6 Ihi. 25, oiting’l Cook
          on Corporations, Seo. 12. (Emphasis ours)
                “A *share of oorporete stock’ signifies  an eliquot
          pert of the corporation’s   property, end I3 but evidence      of
          the right of the owner thereof to share In prooeeds oi
          suoh property.”   Warren Y. New Jersey Zinc Co., N. J.
          Ch. 173 A. 128, 132, 16 N. J. Eq. 315.
                “A *share’ of the stook of a oorporetion   In the title
          of the shareholder to his    roportion  of the oorporate
          p~;~r~~;“Dlm&d’     v. Yyok:f’f , 7 A. 672, 674, 49 N. J. I.. 48.

            Dissolution   of a Texas oorporation    1s effected  under
;;;;ter   8 or Title 32 or the Revised Oivil     Statutes   of Texas,
         The artiolss   so far 6s governing the matter under oonsidera-
tlon’are   as roilows:
               “Artiole     1387. 1205, 680, 604     How dissolved
               aA oorporation     is dissolved:
               “.   .   .

                 “4. ‘#hen, without e stookholders’   meeting, all the
          stockholders    of the corporation  oonsent In writing to a
          dissolution,    the same shell be certified    to as above and
          filed with the Seoretary of State.       ‘%hen any suoh certifl-
          oate Is filed with the Searetary of State, he shell. issue
          a oertirioats    8hat suoh oonsent has been filed and that
          the corporation    is dISSOlVsd; and said officer    shall so
          note on the ledger in his oflioe.
               “.   . .”
               5-t.   1385.   1206-7   Liquidation   by arrlaers
             *Upon the dissolution    of a oorporatlon,     unless a
    reoeiver   la appointed t?y 801~6 oourt of oompetent jurisdlo-
    tion, the president and direotors       or raanagers of the
    afialrn   of the corporation    at the time of its dissolution
    s&all be trusteoa of the oreditors        and stookholders    of
    such aarporation,     with oowar to settle    the errairs,    oolleot
    the outstandlnsj debts,and divide tno moseys and other
    property among the etookboldsrsafter paying the debts due
    and owing   by ouch oorporation    at the time of its diseolu-
    tion, as far as auah money end propsrty will enablb them
    after paging all just and reasonable expenses; and for
    this purpoee they may in the nsrne or 8Uoh oorporation,
    sell,   c~nv3y and transfer ali reai and asrsonal propezty
    beLongin& to nuch ootrgany, oollcot       all debts, oomproxiae
    oontrovcrnies,     maintain or defahd judiolai     brocesdinas,
    aad exeroine full pawer Und authority of mid ooapany
    ovar suoh assets an3 property.        Sttld trustsee shall be        )
    severally    rasponoible   to the oreditors   ard stookholdara
    of auoh oorporatlon      to the extent of its property and
    errects   thal; shali ham 8~6 Into their hands.” (tiphasla
    added )
               *wt.   1389. 1236,   682, 606   %teasion    or existence
              *The exlstenoa of every o orgtiim  mey be oontfnued
     tor three years after its diesolutlon‘ftic.  %hatbV&r oauae,
     ror the purgoose of enabling those ohergsd wlthth3   duty,
     to settle   UP its as'falre. . . .” !Zf@Lsaisadded)
            The arohlves of the offiae   of the Seorstary of
Stats or the State or Texas dlsoloae   that the Maddox Ellk i-o-
duots Compeny, Ino., was dissolved   by virtue end under the
artloloa above quoted e.acc set out.

              *A ‘partnernhlp’   is a relation  or statUs between
     two cr Sore conpbtsnt Esrties,      uhltlnd labor or propi:rtg,
     or both, in lawful enterpri83.      . . . In abeenoe of statute
     regulatlnq    general partnership,   OOZLTLO~-lurrules qvern
     oases invol.vLni?; partosrehip ~qucsthxm.~~ :llison    v. .:ar.nbell,
     2’18 3. ‘i. j23, 117 Ter. 277. Rehearing denied (lS2Y) 1 3.::.
     (2d; 866, 117 %r. 27’7.
Hon. ho.   H. Sheppard, page 5


           Article   1436-1, V. A. P. C., being the Motor
Vehicle “Certificate   of Title Aot,” so far as affeoting the
matter under oonsideration,    reads as follows~
            “Section 1. This Act shall be referred     to, aited,
     and known as the lCertiflcate    of Title Aot,‘.    . .
     The following   terms, as herein defined,   shall control
     in the enforoement and oonstruotion     of this Act.    As
     amended Acts 1941, 47th Leg., p. 343, oh. 187, 81.
             It. . .

            *Sea. 24. The term *Certlfloate            of Title’ means a
     written instrument which may be issued            solely by and
     under the authority of the Department.
             n. . .

            “Sea. 27. Before selling      or disposing of any motor
     vehiale required,to    be registered     or llaensed in this
     State on any highway or public plaoe within this State,
     exoept with dealer's    metal or oardboard license number
     thereto attaohed as now provided by law, the owner shall
     make applioation    to the designated agent in the county
     of his domioile upon form to be presorlbed by the Depart-
     ment for a aertifiaate    of title    for such motor vehiole.
             “. . .
             *Sea. 35. Whenever the ownership of a motor rehiole
     registered     or lioensed within this State is transferred
     by operation of law, as upon lx&eritanoe,             devise or bequest,
     bankruptcy, reoeivership,          Judloial sale, or any other
     involuntary dlvesture         of ownership, the Department shall
     issue a new eertifloate         of title   upon being provided with
     aertifled     oopy of the probate prooeedings,          if any (if no
     administration       is neoessary,    then upon affidavit      showing
     euoh raot and all of the heirs at law end speoiffoation
     by the heirs as to in whose name the oertifioate               shall
     issue),    or  order   or bill   of  sale  from  the  ofriaer   -?.aking
     the juaiolah      sale, exospt however, that where foreclosure
     is had under the terms of a lien,            the affidavit    of the
     person, firm, assooiation,          or corporation    or authorized
     agent, of the faot of repossession           end divestiture    of title
     in aaoordanoe with the terms of the lien, shall be suffi-
     cient to authorlxe the issuanae of a new aertificate                 of title
     in the name of the purohaser at such sale, and exoept
Hon. Geo. H. Sheppard,            page 6


     further that in the oase of the foreolosure          of any
     Constitutional   or Statutory     lien,  the affidavit    of
     the holdar of suoh lien, or if a oorporation,          its
     agent of the Saot of the oreation          of sush lien and
     the d~restlture    of titlr   by reason thereor in aooordanoe
     with law, shall be suffioient        to authorize the issuanoe
     or a new oertlfloate     of title    in the nsme of the pur-
     ohsser.
            “.     . .
            V!leo. 38. The Department shall refuse issuanoe of
     a oertlfioate     of title,  or having issued a oertifioate
     of title,     suspend or revoke the same, upon any of the
     r0uowing     grounds:
            "*     .   .

          *(o) That the registration                of the vehlole   stands
     suspended or revoked.
            *(a)       That the required        fee has not been paid.


            “Sea.          57. Saoh applloant
                                       for a oertifioate     of title
     or   re-issuame           thereof
                               shall pay to the designated agent
     ths sum of Fifty (50) Oents, of whIoh Twenty-five         (25)
     Cents shall be retained    by the designated agent, from
     whloh he shall be entitled     to suffioient   money to pay
     expenses neoeesary to effioiently      perform   the duties set
     forth herein; and the remaining Twenty-five         (25) Cents
     shall be forwarded to the Department for deposit to the
     State Highway Fund, together with the appliaation         for
     oertifloate   of title, within twenty-four      (24) hours
     after   same has been reaeired   by said designated agent,
           . As amended Aota 1941, 47th Leg., p. 343, oh. 187,
     i6; Aots 1943, 48th Leg., pb 404, ah. 272, 0 1.
Hon. Geo. H. She_apard, gage 7


                Y3eo. 63. . . .
              "(0) The Owner of a motor vehiole registered     in this
       State shall not after January 1, 1942, operatebor permit
       the operation of any suoh motor vehiole upon any highways
       without first   obtaining a oertifioate  of title   thcrefor
       from the Department, nor shall any person operate any suoh
       motor vehicle upon the publio highways knowing or having
       reason to believe that the owner has failed      to obtain a
       oertifioate   of title  bherefor."
                Artiole       7047k, Uotor vehicle   retail   sales   tax,   reads
as   f0ii0w3:

             Qeotion   1. (a) There is hereby levied a tax upon
       every retail   sale of every motor vehiale sold in this
       State, such tax to be equal to one (1) per cent of the
       total oonaidera?ion   paid or to be paid to the seller     by
       the buyer, ;vhloh oonsideration    shall 'inolude the amount
       paid or to be paid for said motor vehiole and all aaces-
       sorles attaohed thereto at t&e tine of the sale, whether
       such consideration   be in the nature of oash, credit,     or
       exchange of other property,     or a combination of these.
       In the event the oonsideration     received by the seller
       inoludea any tax imposed by the Federal Government, then
       suoh Federal tax shall be deduoted from suoh aonsideration
       for th@ purpose of oomputing the amount,of tax levied by
       this Artiole   upon suah retail   sale.        ,,
                ".   . .
             "Sec. 3. (a) The term 'sale'    or *sales* as herein
       used shall lnolude instalment and oredlt sales,        and the
       exohange of property,    as well as the sale thereof for
       money, every olosed transaotion     oonatituting   a sale.
       The transaotion whereby the possession      of property is
       transferred   but the seller  retains title    as seourity for
       the payment of the price shall be deemed a sale.
             e(b) The tern 'retail  sale' or 'retail sales' as
       herein used snail include all sales of motor venicles
       exoept those ;vnereby the purchaser eoquireo a ,motor
       vehiale for the exclusive   purpose of resale and not for
        use.

                “.   .    .
Hon. Gee. H. Sheppard,       page 8


             *Sea. 5. The taxes levied in this Artiole  shall be
      oolleoted   by the Assessor and Colleotor  or Taxes or the
      oounty in whloh any suoh motor vahiole is first    registered
      or first   transrerred  art&r suoh a sale; the Tax Colleotor
      shall refuse to aooept ror registration    or ror transfer
      any motor vehlole until the tax thereon is paid.
             ".   . ."
             Inths    trensaotions    bearing upon-the question or
liability    for tha one (1%) per osnt motor vehioles            sales tax
or the Maddox Milk Produstr CO., Ino., in vlw or the deoislons
and statutes    hereinbefore     eat out and quoted, wa sonolude that
there we8 no sale by said oompany, a oorporation,               to the Crystal
Pure Dairies,     a partnarshlp.      The oorporatlon     was owned by Its
stookholdars.      It held the property belonging to it es a more
trustee ror its atookholdsrs.           (See oltation    ante).    The stook-
holders formed a partnership.:         The oorporatlon      was dissolved
by oonsent or all the stookholdera.           The officers      and dlreotors
beoame trustaeii~or       the stookholders    - who were the sams persons.           _
The trustees have the statutoryrright           to settle     the affairs   of
the dissolved     oorporation.      (Art. 1388).     The oorporatlon      belonged
to its stookholders      who are now partners, who now own the same
propartp that they owned when tha oorporation             existed.     The
owners es partners Only adopted a dlrferent             method other than
oorporate to oarry on their business, which they had a legal
right to do.     The trenster.was      by operation or law.
Art. 1436-1,    V. A. P. a.).      The trustees,     formerly    or%kv3kd
dlreotors    of said dlssolted     oorporatlon,     aotihg In bha oapaoity
or reoeirema In sottllng        the aftairs   of the oorporatlon,       whloh
was dissolved,     (Sec. 35, Art. 1436-1, V. A. P. C., and AZ%. 1388,
R. c. S.) and there was no vaalaa or wretail sala" as oontemplatad
within Art. 7047k.
           It is the opinion of this Department that no liability
ror the one (l$) per osnt "Rotor Vshiole Retail Sales Tax- in
the transaotion    was inourrod,  and the tax is not due and payable.
It is our further opinion that the Crystal Pure Dalrlos may
obtain oertitioates    Or title  for any motor vehiola or vehioles
eoquired in said transaotion,     as prasoribed in Sea. 35 of Art.
1436-l. V. -4. T. C., and that the provisions     of Sec. 5, or
Artiole  7047k do not apply to the transaotion     under consideration.
Hon. Geo. H. Sheppard, page 9


             ;Be are herewith   returning   your files   es requested.
                                       Yours very truly
                                                     -



                                                Jos.    VI Frnka
                                                       Aseista~t   *

JVF:AMM

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