Case Information
*1 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 o P 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 IRTRASBXE Common Carr%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 '500 shares. Ed De Leon vice-president and dlrecr- tor, owns 125 shares an b 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, by au a~pl’lcatlon fil- the Commlsslon Is asked to ed with this Division, 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 e 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 Common Carrier 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? I8 it dlscretlonery with this E omml8sion as (c) 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 Article 911b Vernon’s upon the Railroa h Commission Civil Statutes to Issue certain special confer8 authorlt t commodl 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 ner as to render the services demanded In the best Interest of in such a man- 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.. .* *3 ,. :: ( ., in I-: .:~ z._,zz:..
Hon. James E. Elldw, page 3 .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 P 1 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: 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~ ~%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 justify wrong." 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 <he sep- arate existence of the corporation would under the particular circumstances, sanction a fraud or First National Rank In Canyon vs. Gamble ? pp.), 132 S.W.(2d) 100, opinion adopted by the Supreme Court.
It 1s therefore clear that this department cannot ad- vise the Commfsslon that it should observe or disregard the
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Ho+ Jams E. Kllday, pige 4
corporate Sletlon ln the situation prerrented, for whether the fiction 8hotfLd be dieregarded depend8 upon the de- corporate, termtnatlon of what are esrentl8lly questions of fact for the Commlrsioa to resolve, towltt
1. mther the tramfer to Roblnaon 18 In reality and Intended to vest real tit18 to the permit, ac- fiCtitiOU8
~:‘: ++8Lly, la the corporatlonj or, 2. Uhether the oontrol over the oorporatloa byBob- lnson a8 majority 8tookholder 18 such that In fact the aorport atlon 18 but the alter ego of Robinson, aud whether the cor- porate fiction 18 being U8ed in an attempt to clrcument the provision8 of the law above quoted.
Yours very truly ATTORNEY GENERAL OF TEXAS By /8/ B. W. Falrchlld R. W. Falr&lld, Aaslstant AkPROVED DPC 18,
jr/ Gerald C. itana
ATTOREEY GXERAL OF TEXAS
APPROVED: OP&ilI~ONC~!ST”
BY: D
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