The Private Contract of the Texas Joint-Stock Company

Legal Underpinning of the Texas Joint Stock Company

First, the Texas Joint Stock Company (TJSC) is a separate legal entity or person apart from the individual person. Federal Statute states in Title 1 U.S. C. Section 1 that:

In determining the meaning of an Act of Congress, unless the context indicates otherwise, the words ‘person’ and ‘whoever’ includes…joint stock companies, as well as individuals.

In addition, the TJSC is unincorporated and is a common-law entity upheld as a separate legal entity or person by Court decisions, which includes the U. S. Supreme Court in Burk-Waggoner Oil Assn. v. Hopkins, 269 U.S. 110. And, is a legal, separate entity or person as upheld by the Texas Courts in Flint-Texas Oil-Drilling Trust v. Bridges, 23 S.W. 2d 875.

Additionally, the State of Texas recognized the TJSC as a separate entity or person in Vernon’s Texas Civil Statues, Title 105, Chapter 2. Unincorporated Joint Stock Companies, Arts. 6133 thru 6138. (Acts 1907, p. 240)

The U.S. Bankruptcy Code has always recognized the Joint Stock Company as a separate legal entity or person apart from an individual person in Bankruptcy cases. See Title 11 U.S.C. Section (1) (8).

Texas Joint Stock Company is Based on Private Contract

In the U.S. Constitution, private contracts are protected under Article I, Section 10, which states in part that “Section 10. No state shall…pass any…Law impairing the Obligation of Contracts…” This provision is secured by Article VI, ¶ 2, of the U.S. Constitution which states that “This Constitution…shall be the Supreme Law of the Land; and the Judges in every State shall be bound thereby, anything in the Constitution or Laws of any State to the Contrary (or in spite of) notwithstanding.”

In addition, “That the clause of the Fourteenth Amendment which forbids a state to deprive any person of life, liberty or property without due process of law includes freedom to contract is so well settled as to be no longer open to question. West Coast Hotel Co. v. Parish, 300 U.S. 379. Freedom of contract was the general rule; the only exceptions to liberty of contract are:

  1. Statutes fixing rates and charges exacted by businesses impressed with a public interest;
  2. Statutes relating to contracts for the performance of public work;
  3. Statutes prescribing the character, methods, and time for payment of wages; and
  4. Statutes fixing hours of labor.

West Coast Hotel Co. v. Parish, supra.

The Texas Fraudulent Transfer Act could only refer to the four (4) exceptions above.

The Right to Contract is stated as an absolute rule in the private context or domain as stated in Hale v. Henkel, 201 U.S. 43 where the Supreme Court stated that, “The individual may stand upon his constitution rights as a citizen. He is entitled to carry on his private business in his own way. His power to contract is unlimited…His rights are such as existed by the law of the land long antecedent to the organization of the state, and can only be taken from him by due process of law, and in accordance with the Constitution.

The Hale v. Henkel, supra, case has been used as supporting legal precedent in at least 1,600 federal and state court decisions upholding these principles. There could not be any state statute impairing the obligation of a private contract because only a change in the Constitution could affect private contracts. Hale v. Henkel, supra. There has been no change in any Constitution that affects a private contract to date.

Under the Texas Constitution, Article 1, Section 16, Bill of Rights, it declares in part that, “There shall be no…law impairing the obligation of contracts…shall be made.”

This Bill of Rights provision is further enforced by the Texas Constitution, Article 1, Section 19, which states that, “Due Course of Law – No citizen of this State shall be deprived of life, liberty, property, privileges or immunities, or in any manner disfranchised, except by the due course of the law of the land.”

Again, there would have to be an amendment of the Texas Constitution to provide a Due Course of Law to impair the obligation of contract which does not exist.

Also, the Bill of Rights in the Texas Constitution makes Article 1, Section 16, inviolate by stating that, “Sec. 29. ‘Bill of Rights’ Inviolate – To guard against transgressions of the high powers herein delegated, we declare that everything in this ‘Bill of Rights’ is excepted out of the general powers of government, and shall forever remain inviolate, and all laws contrary thereto, or to the following provisions, shall be void.” This means that the Texas Fraudulent Transfer Act violates the “Bill of Rights” of the Texas Constitution and shall be void.

Any application of the Fraudulent Transfer Act to the private contract of a Texas Joint-Stock Company is automatically unconstitutional making that application null and void. The Fraudulent Transfer Act was originally designed and adopted for gift transfers and certain types of public contract transfers. We have to realize that the State Legislature was fully aware or should have been fully aware of the U.S. and State Constitutional provisions dealing with private contracts and the absolute protection thereof.

The Right to Private Contract is equated and has equal status with other protected liberties of the Due Process Clause of the 5th and 14th Amendments of the U.S. Constitution such as the Right to Marry, the Right to Establish a Home, the Right to Bring Up Children, the Right of Freedom of Association and the Right to Worship the God of your Dictates, etc., along with the Right to Contract. Meyer v. Nebraska, 262 U.S. 1446; Board of Regents v. Roth, 408 U.S. 564.

Before a debtor has received a final judgment from a court, this does limit his or her liberty to private contract with their property or assets. The Fraudulent Transfer Act only allows the creditor to return to the Court that issued the judgment and file a Motion to Return Assets to Debtor concerning certain transfers, but the private contracts of a Texas Joint-Stock Company could not be involved.