Untitled Texas Attorney General Opinion ( 1985 )

The Attorney General of Texas
JIM MAlTOX April 9, 1985
Attorney General
Supreme Court Building Arthur G. Ransen, Ph.D. Opinion No. JM-305
P. 0. Box 1254S Chancellor
A”lll”. TX. 7871 I- 2545 Texas A 6 H Universj.tp System Re: Whether the sale of “gin
512l4752591
College Station. Tems 77843 trash” by a gin is exempt under
Telex 91018711357
Telecopier 51214750286 section 141.002(c)(4) of the
Agriculture Code
714 Jackson. Suite 799 Dear Dr. Eansen:
Dallas, TX. 75202-4508
214n42a944
You ask us the following two questions:
4s2, AlbermAve..suite 160 Can a cotton gin be considered s representative
El Paso. TX. 7S9C52793 or agent of the farmer In disposal of the cotton
915/5353.(84 plant by-product ‘gin trash’ under the circum-
stances outlined and thus be exempt from the
1091 Texas. Suile 700 economic provisions of the statute under section
Hou,,~“. TX. 77902-3111 141.002(~:11:4)? Does it make any difference if the
713/223-5886 gin is a cooperative of farmers?
We conclude that the answer to your first question will depend upon
905 Broadway. Suits 312
Lubbock. TX. 794013479 the facts in each :.ustance. If title to the produce passes from the
Sm-747.5235 farmer to the ginner, the subsection (c)(4) exemption from the code’s
registration, 1abe:lKng and inspection requirements for commercial
agricultural feed, does not follov the produce in a subsequent sale.
4309 N. Tenlh. Suite B
McAllen. TX. 78541-1885
If. on the other hand, title does not paw. the subsection (c)(4)
512mS2.4547 exemption remains operable. We answer your second question in the
affirmative.
200 Main Phza. Suite 400
Chapter 141 of the Agriculture Code governs the registration,
!3m Antonio. TX. 782052797
51212254191
labeling. and Inspection of commercial agricultural feed. Section
141.002(c) restricts the definition of “commercial feed” for purposes
of this chapter:
An Equal Opportunity/
Affirmalive Acllon Employer The foAlowing sre not conunarcial feeds subject
to this chapter:
(1) unground hay;
co uhole grain or whole seed not containing
torrins or chemical adulterants;
(3) unadulterated cottonseed, peanut, or rice
hulls:
p. 1385
Arthur G. Nansen - Page 2 (~i+f-:)()5)
(4) a feed product produced and sold by a
farmer; -
(5) an individual mineral substance not mixed
with another inaterial; or
(6) a material furnished by a purchaser for
use in s customer-formula feed that was
produced by the purchaser or acquired by
the purchaser from a source other than the
person whose! services are engaged in the
milling. m:.r:iag , or processing of a
customer-formula feed. (Emphasis added).
Under the following subm:tssion of facts, you essentially wish to
know under what circumstances .the sale of “gin trash” can be held to
be the sale of “a feed product produced and sold by a farmer.”
Fanners produce the cotton plant, harvest it
and deliver the harrested mixture to a cotton gin
which, for a charge or fee, performs a processing
service. The cotton mixture is divided into three
basic fractions dur%rlg the ginning process: lint,
cottonseed, and gin trash.
The lint, which 1s formed into bales, is care-
fully identified such that each farmer is paid
exactly according to the amount generated from his
cotton and the grade quality of same. The ginner
may either buy the cotton bales directly from the
farmer on behalf 01: a third party, act as broker
for the farmer, or merely transfer the bales to a
warehouse for storage pending later sale. The
ginner charges a f’!e for the transport to ware-
house. Upon warehousing, the farmer is issued
negotiable receipts :for his cotton.
While the quantity of cottonseed generated from
a particular lot 0:: cotton is recorded, the seed
from one lot are co,-mingled in bulk with that of
other lots and marketed as such by the gin. The
proceeds from sale of seed extracted from a
particular l.ot of cotton are prorated directly
back to the gin service charges made to a farmer.
Specific records of the quantity of gin trash
from s particular lot of cotton are not main-
tained. While the farmer has the option of
receiving the gin trash from his lot of cotton,
the impracticality c#f handling the gin trash most
frequently results in its disposal by the gin.
Any proceeds are applied against gin operating
p. 1386
Arthur G. Hansen - Page 3 (311-305)
costs and assist In keeping ginner service costs
down to a minimum level. In many cases the cotton
gin is a cooperative of farmers who jointly sell
the gin trash to lower their costs of production.
Gin trash is Irimarlly being sold to cattle
feedlot operations to be used in finished rations
for animals owned by their clientele.
Gin trash is a low density nutrient which is
not utilized as a ~?rimsry source of protein or fat
in an animal ratica as are most feed ingredients,
but more for its ",ulk' or fiber content. In this
respect gin trash is similar to unadulterated
cottonseed hulls, peanut hulls and rice hulls,
which are currently exempted from the act under
section 141.002(c) (,4).
The Ginners Association maintains that cotton
gins act on beha,lf of the farmer, offering a
service which is an extension of the harvesting
process. It is further maintained that a farmer
relinquishes ownership only when the disposition
of lint, seed and gin trash is completed. The gin
management actsf#>:c the grower in delivering gin
trash. to the point of its disposal, whether that
disposal be I to channels of the feed trade. in
distribution across farmland, to s landfill.~ or
otherwise. This disposal service is provided as
part and parcel of' the ginning service and in many
cases may provide a. return to the farmers in lower
fees or charges.
The guiding principle of statutory construction is to ascertain
legislative intent. Jessem
-- Associates, Inc. v. Bullock, 531 S.W.2d
593 (Tex. 1975). From reading chapter 141 as a whole, It is clear
that the legislature intendocl to set up a comprehensive scheme for the
registration, labeling, ar.d. inspection of commercial agricultural
feed. Section 141.002 sets forth certain specific exceptions to such
requirements. The subsection (c)(4) exemption applies only to "a feed
product produced and sold by a farmer." (Emphasis added). It is
clear that the exemption:, intended to reach a farmer only when he
sells his product; he is then removed from the ambit of the rezra-
tion. labeling, and inspection requirements. Once ownership of the
giu trash passes from thf! farmer, however, the subsection (c) (4)
exemption ceases to operet~r. It is unclear in your letter whether,
and if so when. such title passes. The determination of your first
question will finally deperdi on the facts involved in each instance.
If title passes from the farmer to the ginner. then clearly the
subsection (c)(b) exemptlot. does not extend to the ginner when there
is a subsequent sale by the ginner. The ginner would perforce be
required to comply with th'c provisions of chapter 141. On the other
p. 1387
Arthur G. Eansen - Page 4 (m-305)
hand, if the ginner acts as a broker pursuant to some form of agency
contract or accepts the cotton unde!: some form of consignment
agreement, the subsection (c)(4) exemption may still be operable.
You inform us that in many instar,ces, a gin is operated as a
cooperative of farmers. Therefore, you further ask whether the
subsection (c)(4) exemption would extend to gin trash processed at a
gin so operated. In section 51.004 of the Agriculture Code, a
farmers’ cooperative society is empowered to “act as an egent for its
members in selling the members’ agricul.tural products. . . ."
(Emphasis added). Agric. Code 151.004(a)(3). In such an instance,
courts will look to the intention of the parties to the contract at
issue and examine the contract as a wholr rather than rely on the mere
form of the contract. In Texas Certified Cottonseed Brieders’ Ass’n
v. Aldridge. 61 S.W.2d 79 (Tex. 1933). ,the Texas Supreme Court held
that a marketing contract by which a cotton producer delivered
cottonseed for resale to a co-bperstive marketing &sociation did not
effect an absolute sale, even though the agreement specifically
provided that the association “buys” snd the producer “sells and
agrees to deliver” the produce. The cour't declared:
The members of the association. in order to
promote their welfare, delivere,d their seed to the
association. They constitutejd the association
their agent with broad and ~rxclusive powers to
handle end sell their commodity. This was
necessary to accomplish the very purposes for
which it wss created. It being the clear
intention of the members to create a true
co-operative marketing association, under the
powers enumerated by law and by the contracts, to
perform certain services exclusivelv for Its
members, and to hold in the face of this intention
that the delivery of the seei; to the association
was an absolute sale would destroy it as a
co-operative marketing asso&%. The members
have conferred on this association, as their
selling agent, such title to the cottonseed with
plenary powers to handle and dzlspose of same. but
the a&&.ation handles the proceeds thereoi for
the benefit of itself and its%mbers. (Emphesis
added).
-Id. at 83.
In another context, this office has previously determined that
farm products held by a farm co-operative remain in the hands of the
producer for purposes of article VIII. section 19 of the Texas
Constitution which exempts from aii valorem taxation "(flarm
products . . . in the hands of the producer. . . ." Attorney General
Opinions R-938 (1977); M-632 (1970); O-5404 (1943). The opinions
concluded that farm products held by a co-operative remained in the
p. 1388
Arthur C. Ransen - Pago 5 (JM-305)
hands of the producer becauec! the producers, in effect, constituted
the co-operative as their agent. No absolute title to such products
passed from the farmers to ocher parties. Analogously, ue conclude
that “gin trash” held by a gin operated as a farmers’ co-operative may
still receive the benefit of the subsection (c)(4) exemption because
title to such product remeinn with the farmer with the co-operative
acting merely as the producere’ agent.
“Gin trash” In the control of a cotton ginner
falls within thlz ambit of the section
141.002(c)(4) Agriculture Code exemption from
registration. labeling, and inspection require-
ments for commerci;%:l agricultural feed only If
title to such feed product has not passed from the
farmer to another party. “Gin trash” in the
control of a cotton &inner which is operated as a
farmers’ co-operative does fall within the examp-
tion provisions.
-
JIM M ANT T 0 X
Attorney General of Texas
TOMGREEN
First Assistant Attorney Gene,cal
. .
DAVID R. RICEARDS
Executive Assistant Attorney General
RICX GILPIN
Chairman, Opinion Conunittee
Prepared by Jim Moellinger
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Rick Cilpin. Chairman
Jon Bible
Colin Carl
Susan Garrison
Tony Guillory
Jim Moellinger
Jennifer Riggs
Nancy Sutton