State v. Dyer

• Decision Date: 26 March 1947
• Docket Number: No. A-1122.,A-1122.
• Parties: STATE v. DYER.
• Court: Texas Supreme Court

Page 813

200 S.W.2d 813

STATE v. DYER.

No. A-1122.

Supreme Court of Texas.

March 26, 1947.

Rehearing Denied April 23, 1947.

Error to Court of Civil Appeals of First Supreme Judicial District.

Action by Arch MacDonald against Texas Loan and Guaranty Company, a Texas corporation, wherein the State of Texas intervened to recover from defendant and from Frank G. Dyer, receiver thereof, delinquent franchise taxes. Judgment for the state for part of its demand was affirmed by Court of Civil Appeals, 197 S.W.2d 855, and the state brings error.

Judgments of the district court and the court of civil appeals reversed and cause remanded to district court with instructions.

Grover Sellers, former Atty. Gen., of Sulphur Springs, Price Daniel, Atty. Gen., W. V. Geppert, and C. K. Richards, Asst. Attys. Gen., for petitioner.

Vinson, Elkins, Weems & Francis and Frank G. Dyer, all of Houston, for respondent.

SMEDLEY, Justice.

On December 1, 1915, Arch MacDonald filed suit for debt against Texas Loan and Guaranty Company, a Texas corporation, in the district court of Harris County, and prayed for the immediate appointment of a receiver, alleging that the corporation was insolvent. The court on the same day entered an order appointing a receiver. The question here presented is whether that order dissolved the corporation.

This action was brought by the State of Texas as an intervention in the receivership suit, which is still pending, for recovery of judgment against the corporation and its receiver, Frank G. Dyer, for the sum of $9,519.56, alleged to be due the State by the corporation as franchise taxes and penalties for the years 1915 to 1945, inclusive, under the provisions of Chapter 3 of Title 122 of the Revised Civil Statutes of 1925, Vernon's Ann.Civ.St. art. 7084 et seq. After trial on an agreed statement of facts the district court rendered judgment in favor of the State against the receiver for the sum of $312.50, the franchise tax and penalty for the year 1915, and denied recovery of taxes for the subsequent years, having concluded that the order of December 1, 1915, appointing the receiver adjudged the corporation insolvent and had the effect of dissolving it according to the provision of subdivision 7 of Article 1387 of the Revised Civil Statutes of 1925 that a corporation is dissolved "whenever * * * upon proper judicial ascertainment [it] is found to be insolvent". The Court of Civil Appeals, affirming the trial court's judgment, also held that the order appointing the receiver dissolved the corporation. 197 S.W.2d 855.

The stipulation shows the following facts: Texas Loan and Guaranty Company, chartered under the laws of Texas in 1908, failed to make reports and to pay franchise taxes from the year 1915 to the year 1945, inclusive. On account of the failure of the corporation to pay its franchise tax for the year 1915, the Secretary of State, on July 2, 1915, forfeited its right to do business in the State, by giving notice and making entry of forfeiture on the record in his office as provided by Articles 7091 and 7092 of the Revised Civil Statutes.

Arch MacDonald, a creditor of the corporation, was the sole plaintiff, and the corporation was the sole defendant in the suit filed on December 1, 1915, for debt and the appointment of a receiver, being the suit in which this action is an intervention. MacDonald's petition alleges the debt and its nonpayment, that the corporation is insolvent, and that the immediate appointment of a receiver is necessary in order to preserve and conserve its assets. The prayer is for the appointment of a receiver and for judgment for the debt. There is no allegation that the plaintiff owns 25 per cent of the indebtedness of the corporation. There is no prayer for dissolution of the corporation. The order appointing the receiver, entered on the day the suit was filed, recites that after consideration of the application, the answer of the defendant thereto, which consented to the appointment, and the evidence adduced in support thereof, it is ordered that the application be granted, that E. L. M. Beavens be appointed receiver, and that upon making bond in the sum of $5,000 he shall take possession of the properties and assets of the defendant corporation and administer its affairs under the orders of the court. The order makes no reference to a dissolution of the corporation.

Beavens qualified and acted as receiver until his death, when L. B. Moody was appointed and qualified as receiver on January 27, 1931. Moody administered the property and affairs of the corporation until he died, and respondent Frank G. Dyer was appointed on July 5, 1945, to succeed him.

The total amount of the unpaid franchise taxes and penalties for the years 1915 to 1945, inclusive, is $9,519.56. It is agreed that Texas Loan and Guaranty Company was in fact insolvent on December 1, 1915, and has been in receivership by order of the district court of Harris County since that date, that the receiver has denied liability for any of the taxes herein sued for, and that the Attorney General has never filed suit against Texas Loan and Guaranty Company for the forfeiture of its charter, as provided by Article 7095.

The Secretary of State's entry of forfeiture, under Articles 7091 and 7092, of the right of the corporation to do business did not forfeit its charter, and notwithstanding that action of the Secretary of State the corporation continued thereafter to be liable for the payment of the annual franchise tax, even though it did not thereafter conduct its authorized business. Ross Amigos Oil Co. v. State, 134 Tex. 626, 138 S.W.2d 798; Federal Crude Oil Co. v. State, Tex.Civ.App., 169 S.W.2d 283, application for writ of error refused. It follows that the corporation is liable for the franchise taxes for which the State sues in this intervention unless the order of December 1, 1915, appointing the receiver terminated the existence of the corporation.

That order seems to come within the strict letter of subdivision 7 of Article 1387, which is that a corporation is dissolved whenever "upon proper judicial ascertainment" it is "found to be insolvent". While the order contains no express finding of insolvency, it grants the application for the appointment of a receiver, which alleges as the sole ground for the appointment the insolvency of the corporation; and thus there is implied a finding or ascertainment by the court of the corporation's insolvency. But was it the intention of the legislature in the enactment of the statute that such an order in such a case should of itself dissolve a corporation?

In Edwards v. Morton, 92 Tex. 152, 153, 154, 46 S.W. 792, 793, where the strict letter of a statute was not followed, the court said: "The intention of the legislature in enacting a law is the law itself, and must be enforced when ascertained, although it may not be consistent with the strict letter of the statute. Courts will not follow the letter of a statute when it leads away from the true intent and purpose of the legislature, and to conclusions inconsistent with the general purpose of the act." A too literal construction of a statute, which would prevent the enforcement of it according to its true intent, should be avoided, Bowman v. Puckett, 144 Tex. 125, 128, 188 S.W.2d 571. In ascertaining the true intention of the legislature in the enactment of subdivision 7 of Article 1387, and the general purpose of the statute of which it is a part, we take into consideration the existing condition of the law at the time of the enactment of the statute and the general rules then established and applicable to its subject matter. McBride v. Clayton, 140 Tex. 71, 76, 77, 166 S.W.2d 125.

We refer briefly to some of the general rules as to dissolution of corporations. Since a corporation is a creature of the state by which it is chartered, the right to dissolve the corporation without its consent belongs exclusively to the state. State v. Robinson, Tex.Civ.App., 42 S.W. 2d 457, 458, application for writ of error refused; Lillard v. Longergan, 10 Cir., 72 F.2d 865, 870 (certiorari denied 293 U.S. 615, 55 S.Ct. 147, 79 L.Ed. 704); 13 Am. Jur. pp. 1159, 1160, Sec. 1288. Whether the franchise of a corporation is to be forfeited depends upon the will of the body that created it. The forfeiture or the dissolution of the corporation cannot be claimed in a collateral proceeding merely because a ground of forfeiture may exist, and ordinarily the forfeiture or dissolution must be declared in a judicial proceeding instituted for that purpose. Galveston H. & S. A. R. Co. v. State, 81 Tex. 572, 595, 17 S.W. 67; Murphy v. Luttrell, 56 Tex.Civ.App. 149, 120 S.W. 905, 909; Moseby v. Burrow, 52 Tex. 396; 13 Am.Jur. p. 1187, Sec. 1335; 19 C.J.S. Corporations Sec. 1649, p. 1420. Such suit, in the absence of an express statute to the contrary, can be instituted only by the State. Thompson on Corporations (3d Ed.) Vol. 8, p. 652, Sec. 6475; Fletcher's Cyclopedia Corporations (Perm. Ed.) Vol. 16, p. 798, Sec. 8077; Note 47 A.L.R. pp. 1288, 1305; 19 C.J.S. Corporations Sec. 1698, p. 1464; 13 Am.Jur. p. 1182, Sec. 1328. One state has no power to dissolve a corporation created by the laws of another state. East Line & Red River R. Co. v. State, 75 Tex. 434, 451, 12 S.W. 690; Thompson on Corporations (3d Ed.) Vol. 8, pp. 647, 648, Sec. 6466.

In suits brought for the purpose of dissolving a corporation, courts will proceed with caution and will declare a forfeiture of the charter or a dissolution of the corporation only in a clear case. Commonwealth v. United Warehouse Co., 293 Ky. 502, 169 S.W.2d 300; Arcola Sugar Mills Co. v. Burnham, 5 Cir., 67 F.2d 981 (certiorari denied 292 U.S. 630, 54 S.Ct. 640, 78 L.Ed. 1484); Fletcher's Cyclopedia Corporations (Perm. Ed.) Vol. 16, p. 753, Sec. 8035; Thompson on Corporations (3d Ed.) Vol. 8 pp. 656, 657, Sec. 6478; 19 C.J.S. Corporations, § 1651, pp. 1424, 1425.

It is uniformly held that a...