# Untitled Texas Attorney General Opinion

> Texas Attorney General Reports · July 2, 1965

URL: https://www.frixlaw.com/law-library/cases/4135034

## Case

- **Court:** Texas Attorney General Reports
- **Decided:** July 2, 1965
- **Precedential status:** Published
- **Opinion:** Opinion
- **Judges:** Waggoner Carr
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/4135034

## Opinion text

Hon. Coke R. Stevenson, Jr. Opinion No. C-427
Administrator
Texas Liquor Control Hoard Re: Whether the provisions of
Austin, Texas the Texas Liquor Control
Act, which require that a
corporation be Incorporated
under the laws of the State
of Texas in order to be
eligible for a permit or
license are constltutlonal
Dear Mr. Stevenson: and related questions.
In your request for an opinion of this office, you
ask the following questions concerning the following statutes:
"Section 18 of Article I of the Texas
Liquor Control Act (Artlolt 666-18 of V.
A.P.C.) provides in part as follows: I. . .
No permit shall be issued to a corporation
unless the same be incorporated under the
laws of the State and unless at least flfty-
one (51s) percent of the stock of the corpo-
ration Is owned at all times by citizens who
have resided wlth,inthe State for a period
of three years and who possess the qualifi-
cations required of other applicants for
permits; . . .I
"Subdivision (h) of subsection 2 of Sec-
tion 5 of Article II of the Texas Liquor Con-
trol Act (Article 667-5, 2, (h) of V.A.P.C.)
provides In part as follows: @. . . The coun-
ty judge shall refuse to approve the appll-
cation for such license If he has reasonable
grounds to believe and finds any of the follow-
ing to be true: . . . 2. If a Distributor or
Retailer: . . . (h). If a corporation, that
the applicant l,snot incorporated under the
laws of this state; or that at least flfty-
one (51%) percent of the stock of such corpo-
ration 1s not owned at all times by citizens

-2005-
Ron. Coke R. Stevenson, Jr., page 2 (C-427)

who have resided within this state for a
period of three (3) years and who possess
the qualifications required of other appll-
cants for licenses; . . .I
"Question number one. Are these pro-
visions of law which r&$ilre that & corpo-
ration be incorporated under the laws of
the State of Texas In order to be eligible
for a permit or a license constitutional?
"Question number two. Are these pro-
visions of law that i%?iiiIre
that fifty-one
percent of the.stock of the corporation be
owned by persons who have been resident citi-
zens of the State of Texas for a period of
three years Immediately preceedlng the filing
of the application in order for the corpo-
ration to be eligible for i permit or a
license constitutional?
"Subsection (10) of Section 3-a of
Article I of the Texas Liquor Control Act
(Article 666-3a, (10) of V.A.P.C.) provides
that the term '"'applicant"shall mean any
person who submits or files an original or
renewal appllcatlon with the county judge,
or board or administrator for a license or
permit.'
"Subsection (6) of Section 3-a of
Article I of the Texas Liquor Control Act
(Article 666-3a, (6) of V.A.P.C.) provides
that the term "'person" shall mean and refer
to any natural person or association of nat-
ural persons, trustee, receiver, partnership,
corporation, organization, or the manager,
agent, servant, or employee of any of them.'
"Subsection 16 of Section 11 of Article
I of the Texas Liquor Control Act (Article
666-11, (16) of V.A.P.C.) provides In part
as follows: t . . .When the word "applicant"
Is used in (1) to (14) of this section, It
shall also mean and Include each member of
a partnership or association and all officers
and the owner or owners of the majority of
the corporate stock of a corporation, as of
the date of the application, . . .I

-2006-
Hon. Coke R. Stevenson, Jr., page 3 (C-427)

"Subsection (11) of Section 11 of Arti-
cle I of the Texas Liquor Control Act (Arti-
cle 666-11, (11) of V.A.P.C.) provides in
part as follows: ‘The Board or Administrator
may refuse to,lssue a permit . . . to any
applicant . . . if It has reasonable grounds
to believe and finds any of the following to
be true: . . . (11). That the applicant Is
not a citizen of the United States or has
not been a citizen of Texas for a period of
three (3) years Immediately preceding the
filing of his application, . . .I
"Section 18 of Article I of the Texas
Liquor Control Act (Article 666-18 of V.A.
P.C.) provides In part a8 follows: 'No per-
son who has not been a citizen of Texas for
a period of three (3) years immediately pre-
ceding the filing of his application there-
for shall be eligible to receive a germit
under this Act. . .I

"Subdivision (e) of subsection 2 of
Section 5 of Article II of the Texas Liquor
Control Act (Article 667-5, 2 (e) of V.P.P.
C.) provldes~In part as follows: I.'. .The
County Judge shall refuse to approve the
application for such license If he has
reasonable ground8 to.believe and finds any
of the following to be true: . . . 2. If a
Distributor or Retailer: . . . (e). That the
applicant Is not a citizen of the United
States or has not been a citizen of.Tcxas
for a period of three (3) years Immediately
preceding the filing of an application, . .
.t
"gstion number three. Are these pro-
visions of law that require that the officers
of a corporation be resident citizens of the
State of Texas for three years immediately
preceding the filing of the application In
order for the corporation to be eligible to
receive a pennit or a license constitutional?
'lQuestlonnumber four. Are these pro-
visions of law that require that a natural

-2007-
Hon. Coke R. Stevenson, Jr., Page 4 (C-427)

person, or a partnership composed of nat-
ural persons, or an association of natural
persons, be resident citizens of Texas for
three years immediately preceding the filing
of the application in order to be eligible
to receive a permit or license constitution-
al?
"Subsection (28) of Section 12 of Artl-
cle I of the Texas Liquor Control Act (Arti-
cle 666-12, (28) of V.A.P.C.) provides as
follows: 1. . .Where the word "permittee" is
used in this section it shall also mean and
include each member of a partnership or as-
sociation and each officer and the owner or
owners of the majority of the corporate stock
of a corporation, . . .I
"Subsection (23) of Section 12 of Artl-
cle I of the Texas Liquor Control Act (Arti-
cle 666-12, (23) of V.A.P.C.) provides In
part as follows: 'The Board or Administrator
may cancel . . . any permit . . . if It is
found that any of the following is true:
. . . (23). That the permittee is not a
citizen of the United States or has not been
a citizen of Texas for a period of three (3)
years Immediately preceding the filing of
his application; . . .I

"Question number 5. Is this provision
of law that gives th Texas Liquor Control
Board the authority To cancel a permit ls-
sued to a natural person, or partnership, or
association, on the ground that the persons
to whom the permit was issued were not resi-
dent citizens of the State of Texas for a
period of three years immediately preceding
the filing of the application for the permit
constitutional?
"Question number 6. Is this provision
of law that gives the Texas Liquor Control
Board the authority to cancel a permit is-
sued to a corporation on the ground that the
officers of thencorporation were not resident
citizens of~the State of Texas for a period
of three years immediately preceding the
filing of the application for the permit con-
stitutional?
-2008-
Hon. Coke R. Stevenson, Jr., page 5 (C-427)

"Guestion number 7. Is this provlcion
of lawAfiat gives th Texas Liquor Control
Bard the authority Eo cancel a permit ls-
sued to a corporation on the ground that the
owner or owners of the majority of the corpo-
rate stock of such corporation were not resl-
dent citizens of the State of Texas for a
period of three years immediately preceding
the filing of the application for such ncr-
mit constitutional?"
It was stated in your request that these questions
arose as a result of the decision in Miskell v. Termplan In-
corporated of Houston, 381 S.W.2d 129 (Tex.Civ.App. 1go4
error ref.), whemthat provision of the Texas Rcgulatiry
Loan Act requiring that 51% of the stockholders in domestic
finance corporations be Texas residents was struck down as
being In vlolatlon of the Due Process and Equal Protection
Clauses of the State and Federal Constitutions. It may be
stated at the outset that we do not adopt that-case ascon-
trolling herein due to the language on page 133 of the opln-
ion:
11 . . The discrimination cases in the
liquor'f~ieldare of little help as they are
treated In a class to themselves. This is
especially so since the adoption of the 21st
amendment to the Federal Constitution."
With regard tomQuestion No. 1, It was held In Rail-
way Express Agency v. Virginia, 282 U.S. 441)(1931) that?
state constitutlonal provj which require:;a foreign nubllc
service corporation to become incorporated uncicr the laws of
the state as a condition of obtaining authori~tyto carry on
intrastate business therein does not violate the Fourteenth
Amendment to the Federal Constitution. In an annotation to
that case in 72 A.L.R. 105, it was stated:
. .The present annotation is limited
to the-question of whether or not a state may
require a foreign corporation, as a condition
upon its right to do business within the state,
to become domesticated or incorporated under
its laws.
"The real question raised by the subject
of this annotation is the power of a state to
exclude foreign corporations; for the require-
ment of domestication or local incorooration
-2009-
Hon. Coke R. Stevenson, Jr., page 6 (C-427)

is in effect the exclusion of the corporation
so long as it retains Its foreign status.
Hence, the recognized power to exclude foreign
corporations would seem to imply power to re-
quire domestication or Incorporation in the
state. . . .'
It Is stated in 16A C.J.S. 212, Sec. 471:
"Since a corporation is not a citizen
within the meaning either of the Constitu-
tion as originally adopted or of the Four-
teenth Amendment, as discussed supra f3456
it follows that a state may prohibit a
foreign corporation from doing business with-
in Its boundaries, or may grant such prlvl-
lege on such conditions as it deems best,
without violating such constitutional pro-
visions or similar provisions in a state
constitution, . . .v
Finally, In Waters-Pierce Oil Co. v. Texas, 177 U.S.
28. the United States Supreme Court in affirming the Austin
Court of Civil Appeals decision (error ref.), held that the
right of a foreign corporation to engage in business within
a state other than that of its creation depends solely upon
the will of such other state, except with respect to business
of a Federal nature.
Based on this authority we answer Question No. 1 in
the affirmative.
It appears that the ultimate issue in all of the
above questions is whether the statutory discrimination in
each case is reasonably related to the overall ob.iectiveof
the act in which It is-found; or,Swhether the legislative
classification is, In fact, arbitrary. San Antonio Retail
Grocers, Inc. v. Lafferty, 156 Tex. 574, 2~7 -957).
'I?le
overall f the Ll<luorControl Act-is stated in
Section 2 ofp%?%~eo666, Vernon's Penal Code:
"This entire Act shall be deemed an
exercise of the police power of the State
for the protection of,the welfare, health,
peace, temperance, and safety of the people
of the State, and all its provisions shall
be liberally construed for the accompllsh-
ment of that purpose."

-2OlO-
Ron. Coke R. Stevenson, Jr., page 7 (C-427)

In DeGrazler v. Stephens, 191 Tex. 194, 105 S.W. 992
(1907). the court upheld a statutory requirement that an acpli-
cant for a retail liquor license be-a citizen of the State-and
a resident of the county wherein the license Is issued. The
Court said that the requirement did not contravene the Prlvi-
leges and Immunities, Equal Protection, and/or Due Process
Clauses, but was calculated to aid In regulating the liquor
traffic by rendering the licensee subject to process where suit
is brought on his bond and by facilitating the determination of
his other qualifications to exercise his license.

In Texas Liquor Control Board v. Continental Distlll-
lng Sales Company, 203 S W 2d 268 pci A 1947
ref.). Article bb6. Sectio: 1%. Ver%nlsvPezi Code: Ei?lt-
tacked as violative of the Due"Process~and Equal Protection
Clauses. This section provides that it shall be unlawful for
any one holding a non-resident seller's permit to hold or have
any interest in any permit authorizing the importation of liq-
uor Into the State for resale. In upholding the constitution-
ality of the statute, the Court states:
(1. . .The right of the'state to dis-
criminate under the 21st Amendment of the
Federal Constitution carries with it~all
power necessary to carry out'its will. It
matters not whether the discrimination is
reasonable or unreasonable, If there is dis-
crimination between wholesalers or Importers
as to cause any to cease doing business in
the State, such Is only that which is neces-
sary to effectuate the State's regulation of
the liquor traffic In the interest of public
welfare. The discrimination, if present,
which we think does not exist, such Is only
Incidental to the main purpose of the Act,
i.e., maintaining various levels of the liq-
uor industry within this State.. The policy
of the State, as reflected in the statute,
art. 666, Penal Code, is clearly appropriate
for effectually eliminating the .evlls Incident
to the combination of affiliated companies in
such business. . . The State, under the 21st
.Amendment, has the express power reserved to
it to regulate as it sees fit with regard to
commerce In Intoxicating liquors, and such
right carries with It all power necessarily
incidental to effectuating the main purpose

-2011-
Ron. Coke R. Stevenson, Jr., page 8 (c-427)

of the Aot. State Board of Equalization of
California v. Youn 'a Market Co
_- 3, 57 S.Ct. 77, 7%, 79, 81 L.i' 8'?'&&ey
v. Joseph Trlner Corp., 304 U.S. 2,
01, 58 S.
Ct. 952, 82 L.Ed. 1424; IndianapolisBrewing
Co. v. Liquor Control Commission, 305 U.S.
391, 59 S.Ct. 254, 83 L.Ed. 243; Zlffrln,
Inc. v. Reeves, 08 U.S. 132, 60 S.Ct. 163,
167, 84 L.FA. 128 ; Clark Dlstllllng Co. v.
Western Maryland R.R. Co., 224 U.S. 311, 37
S.Ct. 180; Missouri Kansas & Texas R. Co.
of Texas v. May, 194 U.S. 267, 24 S.Ct. 638,
48 L.FA. 971."

The federal decisions have also upheld the State
police power under the 21st Amendment as not being in contra-
vention of the Due Process, Equal Protection or Commerce Clauses.
The United States Supreme Court stated in Ziff'rlnv. Reeves, 308
U.S. 132 (wig):
"The Twenty-First Amendment sanctions
the right of a Stat@ to legislate concerning
intoxicatingliquors brought from without,
unfettered by the Commerce Clause. Without
doubt a State may absolutely prohibit the
manufacture of Intoxicants, their transpor-
tation, sale, or possession, i,rrespectlveof
when or where produced or obtained, or the
use to which they are to be gut. Further,
she may adopt measures reasonably.approprlate
to effectuate these inhibitions and exercise
full police authority In respect of them.
Clark Distilling Co. v. Western Maryland Ry.
co., 242 U.S. 311, 320; Crane v. Campbell,
245 U.S. 304, 307. Seaboard Air Line Ry. v.
North Carolina, 245 U.S. 298, 304; Samuels
v. McCurdy, 267 U.S. 188, 197-198.
"Having power absolutely to prohibit
manufacture, sale, transportation,or pos-
session of Intoxicants,was it permissible
for Kentucky to permit these things only
under definitely prescribed conditions?
Former opinions here make an affirmative
answer Imperative. The greater power ln-
eludes the less. Seaboard Air Line Ry. v.
North Carolina, supra. The State may pro-
tect her people against evil Incident to

-2012-
Hon. Coke R. Stevenson, Jr., page 9 (C-427)

intoxicants, Mugler v. Kansas, 123 U.S. 623;
Kidd v. Pearson, 128 U.S. 1; and may exercise
large discretion as to mean8 employed."
To provide that an applicant for a liquor permit or
license be a Texas resident for three years preceding his ap-
plication is a reasonable requisite to facilitate the liquor
authorities in determining the qualifications of a permittee
or licensee. Some of these qualifications are that the a?-
plicant has not been convicted of a felony within the two
years preceding his application, that the applicant Is of
good moral character, that his reputation for being a peace-
able, law-abiding citizen in the community wherein he resides
is good, that the applicant Is not in the habit of using al-
coholic beverages to excess, and others. There can be no
doubt that these qualifications are germane to the overall
purpose of the Liquor Control Act for the.protectlon of the
welfare of the people; and likewise It does not appear unrea-
sonable to require that an applicant be a Texas resident for
three years as a necessary means in determining these quall-
fications. Nor, should the overall purpose of the Liquor
Control Act and welfare of the people be impaired where the
licensee or permittee is a corporation. The officers and
majority of the stockholders must necessarily meet the same
standards as an individual, as they are, in effect, the li-
censees and permittees.
In light of the foregoing authorities and language,
therefore, we answer Questions No'a.2, 3 and iiin the affir-
mative:
Questions No~'s.5, 6 and 7 deal with the same re-
quisites as 4, 3 and,2, respectively; the only difference
being that the latter are concerned with qualifications for
an original application for a permit or license an5 the for-
mer relate to grounds for tiancellationwhere a'licenne or
permit has already been granted. For the same reasons, then,
we answer Questions NoIs. 5, 6 and 7 in the affirmative.
SUMMARY
The provisions of law which require
that a corporation be incorporated under
the laws of the State of Texas In order
to be eligible for a permit or a license
are constitutional.

-2013-
.

Hon. Coke R. Stevenson, Jr., page 10 (C-427)

The provisions of law that require
that fifty-one percent of the stock of
the corporation be owned by persons who
have been resident citizens of the State
of Texas for a period of three years im-
mediately preceding the filing of the
application in order for the corporation
to be eligible for a permit or a license
are constitutional.
The provisions of law that require
that the officers of a corporation be re-
sident citizens of the State of Texas for
three years Immediately preceding the fil-
ing of the application in order for the
corporation to be eligible to receive a
permit or a license are constitutional.
The provisions of law that require
that a natural person, or a partnership
composed of natural persons, or an asso-
ciation of natural persons, be re'sident
cltlzens of Texas for three years Immed-
iately preceding the filing of the appli-
cation in order to be eligible to receive
a permit or license are constltutlonal.
The provision of law thatgives the
Texas Liquor Control Board the authority
to cancel a permit Issued to a natural
person, or partnership, or association,
on the ground that the persons to whom
the permit was issued were not resident
citizens of the State of Texa.sfor a
period of three years Immediately preced-
ing the filing of the application for the
permit is constitutional.
The provision of law that gives the
Texas Liquor Control Board the authority
to cancel a permit Issued to a corporation
on the ground that the officers of the
corporation were not resident citizens of
the State of Texas for a period of three
years Immediately preceding the filing of
the application for the permit Is constl-
tutlonal.

-2014-
Ron. Coke R. Stevenson, Jr., page 11 (C-427)

The provision of law that gives the
Texas Liquor Control Board the authority
to cancel a permit issued to a corporation
on the ground that the owner or owners of
the majority of the corporate stock of such
corporation were not resldent citizens of
the State of Texas for a period of three
years immediately preceding the filing of
the application for such permit is consti-
tutional.
Yours very truly,
WAGGONER CARR
Attorney General of Texas

BSC/lh/br
APPROVED:
OPINION COMMI'JX'EE
W. V. Geppert, Chainnan.
Robert Norris
Milton Richardson
Grady Chandler
Roy Johnson
APPROVED FOR THE A!lTORNEYGENERAL
BY: Stanton Stone

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/4135034. Public record. Not legal advice.