Untitled Texas Attorney General Opinion ( 1947 )

c c
R-90
March 7, l-Y’+?
Hon. Alfred M. Clyde
Criminal Dlstrlct Attorney
Tarrant County
Fort Worth, Texas Opinion No. v-76
Re: Construction of Art. 1111-d.
Chapter Bleven, A, Vernon's-
Penal Code.
Dear Mr. Clyde:
Your request f".orour opl~nlon on the above captioned
matter has been received by thinsDepartment. We quote from
your letter as follows:
"It is the desire of this office to ob-
tain an opinion from your office on the con-
struction of Article 1111-D, Chapter A, of the
Penal Code of the State of Texas, ss to whether
or not thls ArtZCle applies to the following
state of facts:
'A concern, situated here I.nFort
Worth, known as "Blue Bonnet Discount
Stamp Company", sells their stamps to
merchants throughout the State of Texas,
who, in turn, give the stamps t0 cus-
tomers. When the CUStotS0r COmpl8t8S a
book which is given by the Blue Bonnet
Discount Stamp Company to place Stamps
therein, the customer, In turn, can pre-
sent the book or books of stamps to the
Blue Bonnet Company; and they, Ln turn,
will give merchandise to redeem the
book or books presented by the customer.
This company does not sell~merchandise,
but is engaged only in the bUS~naSS of
redeeEpjng th8 stamps heretOfOr8 mentioned.'
'The question 1~s: Whether or not the eon-
duct of the business as outlined above, comas
within the purview of this Statute."
On February 26, 1947, we requested that you furnish,
thf+ office with additional facts, which you did by letter dated
March 1, 1947, from wh?ch we quote:
Hon. Alfred M. Clyde, page 2 v-76
'I1
. The Blue Bonnet Stamp Company keeps
at its location in Fort Worth, the merchandise
with which to redeeem the stamps, and also has
other redemption stations in other cities in
Texas. The only way this Company puts out mer-
chandise is by redeeming stamps that haV8 been
given away by the merchants.
"2 * The holder of these stamps cannot re-
ceive merchandise from the merchant who gives
the stamps. They amst present the stamps to
one of the redemption stations.
“3 . The merchandise of the Company is
displayed at the redemption stations, and each
article has a value which is known by the Corn:
pany as 'book value’. The merchandise runs
from one 'book value', and up. Any person may
appear in person at the redemption stations and
select and receive at that time, any RPtiCle
that the Company has , provided they have a suf-
ficient number of books. Deliveries of merchan-
dise are also made by this Company by mail. Un-
der this system, the customer selects the desired
article, orders by number from a pamphlet put out
by the Blue Bonnet Company, and mails the required
number of books containSJlg stamps to the Company.
The Company,, in turn, will mail this particular
item to the individual, which closes the trans-
action, unless the item is damaged in,,shlpplng.
If so, the Company will make it good.
The Texas Chain Store Tax Statute (Chap. 400, page
1589, Acts 1st C.S, 44th Leg.) is codified as Art. lllld, Ver
non's Annotated Penal Code of Texas. The parts of the Act w:th
which we are concerned provide as follows:
"38C. 1. That from and after the passage
of this Act it shall be unlawful for any person,
agent, receiver, trustee, firm, corporation, as-
sociation or copartnership, either foreign Or
domestic, to operate, maintain, open or establish
any store or mercantile establishment in this
State without first having obtained a license SO
to do from the Comptroller of Public Accounts
as hereinafter provided.
338C. 6, The provisions of this Act shall
I.
Hon. Alfred M. Clyde, page 3 v-76
be construed to apply to every person, agent,
receiver, trustee,~ firm, corporation, copartner-
ship or association, either domestic or foreign,
which is controlled or held with others by major-
ity stock ownership or ultimately controlled or
directed by one management or association of
ultimate management.
"Sec. 7. The term 'store' as used in this
Act shell be construed to mean and include any
store or stores or any mercantile establishment
or establishments not specifically exempted wlth-
in this Act which are owned, operated, maintained,
or controlled by the same person, agent, receiver,
trustee, firm, corporation; copartnership or as-
sociation, either domestic or foreign,,in which
goods, wares, or merchandise of any kind are sold,
at retail or wholesale.
"Sec. 8. Any person who, either for him-
self or as the agent of any person, receiver
trustee, firm, corporation, copartnership or as-
sociation, shall operate or maintain any store
or stores or mercantile establishment or mercan-
tile establishments as defined in this Act with-
out having displayed in a conspicuous place in
such store or mercantile establishment the lic-
ense fee receipt for the current year as re-
quired in this Act shall be guilty of a misde-
meanor and upon conviction thereof shall be fined
in any sum not less than Twenty-five Dollars ($25);
nor more than One Hundred Dollars ($lOO), and each
day of such violation shell constitute a separate ~
and distinct offense."
Under the facts you outlined, it will be necessary
for us to determine whether or not the Bluebonnet Discount Stamp
Company is a "store" or "mercantile establishment", as defined
in Sec. 7 of the Act quoted above.
In the case of Hurt, et al, vs. Cooper, et al, decided
by our Supreme Court on December 1, 1937, reported in 110 S.W.
(2d) 896, 130 Tex. 433, Judge Hickman, Commissioner, in speaking
of "store" said:
"The statute having defined the word, we
are not concerned with its usual,meaning. Un-
der that definition, a mercantile establishment,
at which goods, wares, or merchandise of any kind,
except those exempted, are sold is a store and is
Hon. Alfred W. Clyde, page 4 v-76
taxable as such, end this even though it may
also~be a distributing point . . , :convepsely,
a mercantile establishment at which no sales are
made 1s not a store, and therefore not taxable.
The test is whether sales of goods, wares& or
merchandise are made at the place . . ~ .
In Continental Paper Bag Company, et al, vs. Bos-
worth, Corn. App., Sec. B, 276 S.W. 170, Justice Short said:
"In American usage, the word 'store'
when employed to designate a place of business,
is a broad one. It signifies not merely a
warehouse, or storeroom, but may include in
its meaning a business establishment where
personalty is kept and sold, and incidentally
gotten in salable condition." I
In Veasey Drug Company, et al, vs. Bruza$ et al, 37
Pacific Reporter, 26, 294, the Court said:
"The claimant presents no authority defln-
lng the specified term 'wholesale mercantile
establishment' es used in our statute, and we
have found none, however, when the separate
words composing that expression are considered
in their usual, ordinary and natural use and
meaning, no difficulty is encountered in arriv-
ing et the meaning of the statutory term. Thus
from all of the definitions the word 'establish-
ment' means an Institution, place, building, or
location. Its meaning, of course, may vary and
does vary with the uee of the word. The word
'mercantile' in Its ordinary acceptance means
pertaining to the business of merchants, and Is
concerned with trade or buying end selling of
merchandise. People vs. Federal Security Com-
pany, 255 111. 561,, 99 N.E. 668, 88, H. H.
Kohlsaat and Company vs. O'Connell, 255 111.
271, 99 N.E. 689. In Carr vs. Riley, 198
&LSS. 70, 84 N.E. 426, 428, 'mercantile' is
defined thus: 'Of or pertaining to merchants or
the traffic carried on by merchants; having to
do with trade or commerce, trading, conxnercial'.
Thus while the word 'establishment' may mean
almost any kind or character of institution,
location, building, or place, yet its meaning
is greatly restricted when used following the
Hon. Alfred M. Clyde, page 5 v-76
word 'mercantile'. And the expression 'mercan-
tile establishment' must mean and refer to an
institution of mercantile business, or place,
building; or location where thg‘mercantile busi-
ness or the buying or selling of merchandise Is
conducted or engaged in. one mercantile bUSin8SS
or establishment may differ from another just
as one merchant may differ from another merchant
as to the character of business engaged in. So
we have retail merchants or retail mercantile
establishments on the one hand, and wholesale
merchants or wholesale mercantile establishments
on th8 other hand.
"A mercantile establishment is a place
Where the buying and selling of articl‘es of mer-
chandise is conducted. Hotchkiss vs. District
of Columbia, 44 App. D,C. 73.
"The'term 'mercantile bUsin8S.9' is defined
to mean 'the buying and selling' of erticl8s of
merchandise as an employment' in Grayham v. Hen-
dricks, 22 L. Ann. 52x*
In your related facts, the subject company redeems
the book or books of stamps in merchandise; consequently, It is
not necessary for us to define goods, wares or merchandise as
set forth in the statute.
We come now to the word "sale! In,37 Tex. Jurls.,
page 69, Under Sec. 2 of the subject "sales' the following defi-
nition is given:
"A 'sale' may be defined as a transfer of
personal property from one p8rSOn to another for
a price in money or for.property of an agr88d money
value. The Uniform Sales Act defines 'a sale of
goods as 'an agreement Whereby the seller tranS-
fers the property in goods to the buyer for a con-
sideration Called the price.' The deflnltlon implies
that there must be not only en 'agreement', but also
a present 'transfer' of property, or 'passage of
title', from seller to buyer, either absolute1 Or
conditionally, (but not necessarily a delivery 7 ,
end the payment of a price, or e promise - given or
implied - to pay."
In Johnson vs. State, Tex. Ct. Crim. AQQ., 55 5. W.
968, decided February 21, 1900, Brooks, Judge said:
Bon. Alfred M. Clyde, page 6 v-76
"The Court defined a sale as follows:
'In law, a sale 1s the agreed transfer of prop-
erty having aome other value to another for a
valuable consideration. A sale may be shown by
facts and circumstances, as well as by direct
proof. The valuable consideration above men-
tioned may not be in money, but may be any article
of value.' We think this definition is correct.'
In L. B. Woods and Company vs. Half, Weiss Company,
44 Texas, 633, the Court said:
!'Asale imports and necessarily carries with
it a chnge of ownership, (Pars. Mere. Law, 46)
1,
. . . D Whatever rule be adopted, it may
be sometimes difficult to apply it, but we can-
not doubt that the true principle is this: every
sale transfers the property, and that is not a
sale which does not transfer the property in the
thing sold; but this property cannot pass, and
therefore the thing is not sold unless, first, it
is completed and wholly finished, so as‘ to be
in fact and in reality the thing purporting to
be sold; and In the second place, it must be SO
distinguished and discriminated from all other
things that it is certain, or can be made cer-
tain, what is the specific thing the property in
which is changed by the sale. If the transaction
be deficient in either of these points, it is not
a sale, although it may be a valid contract for
a Suture sale of certain articles when they shall
be completed, or when separated from others."
In Gay vs. Hardeman, 31 Tex. 245, the Court said:
"What constitutes an actual sale of per-
sonal property?' It Is an agreement between the
seller and the buyer upon the consideration or
price, either in cash or upon a stipulated credit,
end a delivery of the property. When so delivered,
the sale Is consummated and the right of property
becomes absolute in the buyer, and the seller has
no longer any more control over it than the rest
of mankind. But it is pretended that at the time
of the sale a lien was reserved or retained by
the seller. This was impossible by the common law
in regard to personal property, because an actual
or constructive delivery was necessary to effectu-
ate a sale of personal property. And when this
Hon. Alfred M. Clyde, page 7 v-76
delivery took place the right of property was
absolute in the buyer, and subject to any future
alienations he might choose to make of it."
With reference to the definition of "retail" and
"wholesale", Holmes, Circuit Judge, in White Motor Company vs.
Littleton, et al, C. C. A., 5th Circuit, decided December 12,
1941, 124 Fed. (2d) 92, in speaking of the Fair Labor Standards
Act, said:
"The word 'retail' is not defined by the
Act. Given its common and ordinary acceptation
when used in sales parlance, it means a sale in
small quantity or direct to the consumer, as dis-
tinguished from the word 'wholesale', meaning a
sale in large quantity to one who intends to re-
sell. The character of the sale is not altered
by the use to which the consumer may put the pur-
chased commodity. These sales were preponderantly
retail although the products sold were used sub-
sequently for commercial purposes."
In Veazey Drug Company, et al, vs. Brunza, et al,
supra, the following.was said:
"The term 'wholesale' or the selling in
or by unbroken parcels is distinguished from
'retail' or dividing into smaller quantities
and selling direct to consumers" in Gorsuth v,
Butterfield, 2 Wis. 237, and also in Kentucky
Consumers Oil Company vs. Commonwealth, 192 Ky.
437, 233 S.W. 892, and in Great Atlantic &
Pacific Tea Company vs. Cream of Wheat Co.,
(C.C.A.) 227 F. 46.
"A wholesale dealer is one whose business
is the selling of goods in gross to retail deal-
ers, and not by the small quantity or parcel to
consumers thereof." State vs. Lowenhaught, 79
Tenn. (11 Lea) 13;. Webb v. State, 79 Tenn. (11
Lea) 662.
In Sperry & Hutchinson Co. vs. Mechanics' Clothing
co., 135 Fed. Rep. 833, the Court said:
"Upon consideration of the allegations
of the bill as to the nature of the trading
stamps, it is apparent that the only purpose
for which they are issued to collectors is for
redemption; that the only promise made by the
.. ..
Hon. Alfred N. Clyde, page 8 V-76
Sperry & Hutchinson Company to the public in re-
lation to these stamps is that it will redeem
them if procured from authorized merchants; and
that the collector acqui.red only such rights as
are expressly or by fair implication promised
him by the company.
“A trading stamp is not ordinary property.
it is sui generis. It represents a somewhat com-
plicated transaction, and, from Its nature, I
think there are necessary limitations upon the
modes in which it may be transferred . . . By
contract between the complainant and the merchant,
the title to the stamp does not vest in the mer-
chant who issues it but remains in the company
until It has been issued in regular course to a
customer of the merchant. The customer is expraes-
ly offered only the right to redeem the stamp,
and impliedlg the right to transfer it for redemp-
tion. A stamp is not merely a token of the com-
pany's obligation to redeem it, and of the right
of the holder to redemption, but it is also a token
or an instrument of another transaction in which
the trading stamp company has an interest, and
from which it derives its entire profit and its
recompense for its outlay in establishing the buai-
ness e o o . . . .
"The trading stamp, when issued, represents
a closed transaction between the merchant and the
company, as well as an outstanding obligation to
redeem the stamp. As a token or voucher of the
sale and use. of so nmch advertising, the trading
stamp is necessarily a consumable article - an
article designed for a single use in an advertise-
ing scheme. . O . .
"THe trading stamp is an artificial crea-
tion. The company, having created It and having
created a value for it, may dispose of It on
such terms as it sees fit. It may in the first
instance restrict thee right to issue it for ad-
vertising purposes to such persons as it my
select, and to such persons as are villing to pay
for it. The public is entitled to receive it
upon the terms offered, namely, that it 1s ex-
changeable for goods. But, it Is asked, why, if
the right of a customer to transfer it is conceded,
may he not transfer it in any mode he pleases,
and give It as an advertisement if he sees fit?
.
Hon. Alfred M. Clyde, page 9 v-76
A sensible
. - answer to this question, I think, is
trl1s : Because ne thereby appropriates
_ .to him-
self the tradlng stamp company's legitimate share
of the transaction. In the trading stamp scheme
or plan, as explained In the books, there are
designed to be three parties - the customer, the
merchant, and the trading stamp company. The
customer Is to acquire, at his benefit, a redeema-
ble stamp; the merchant is to acquire, as his
benefit, a trade advantage resulting from issuing
the stamps at his shop; the trading stamp com-
pany's benefit is the money paid to it by mer-
chants for the priv%lege of issuing the stamps
* . . . . .o a
"While a transfer of ordinary property by
the owner upon any terms usually deprives other
persons of no rights, this Is not always the
case with the trading stamp. While it may be
transferred In any way which confines Its use
within the purpose for which it was issued, it
may not be transferred in such a way as to de-
stroy its value as an instrument of special trade
advantage or advertising company, or adver-
tlsing, or as to deprive the company which
created the value of the stamp, and which has
assumed the obligatFon to redeem it, of its right
to compensatlo? for expenditures and for redeem-
ing the stamp.
In Sperry & Hutchinson Co, vs, Fenster, et al, District
Court, Eastern District, New York, decided January 16, 1915, 219,
Fed. Rep. 755, the Court said:
"The right to redeem the stamps is a
property rLght transferable by possession while
the license to use them for advertising purposes
is not transferable without compensation'to the
person qrantlng that right, viz: the plaintiff
herein.
In 10 Tex. Juris. p0 111, Sec. 64, consideration is
defined as follows:
"A consideration may be defined to be
something which fs given in exchange, something
which is mutual, or something which is the ln-
ducement to the contract. It must be a thing
which is lawful and competent in value. It is
that which Induces the promise or the price' paid
for the promiser's undertaking."
Hon. Alfred M.~Clyde, page 10 v-76
In 10 Tex. Jurls., page 122, Sec. 71, appears the
following:
"A valuable consideration may be either
a benefit to the promisor or a detriment to the
promissee, - or stated in another way, it may
consist of some right, interest, profit, or
benefit accrui~ng to one party, or some forebear-
ante, loss or responsibility given, suffered or
undertaken by the other. Again, to constitute
a consideration, either some benefit must flow to,
or some injury must b$ rec,eived by, one or the
other of the parties.
In the light of the decisions and laws set forth
above, and inasmuch as a transfer of merchandise for a valuable
consideration (the.right to redeem the stamps for merchandise)
occurs, it is our opinion that the trading stamp company you
named comes within the definition of "store" or 'mercantile
establishment" at which goods, wares or merchandise of any kind
are sold, at retail or wholesale, and is, therefore, subject to
the provisions of Article lllld, Penal Code of Texas.
SUMMARY
A trading stamp company which redeems
trading stamps, with merchandise It keeps in
stock for that purpose, is a "store" or "mer-
cantile establishment" within the meaning of
Article lllld, Vernon's Penal Code, and is
subject to the provisions of that Article.
Very truly yours,
ATTORNEY GENERAL OF TEXAS
By s/J. A. Amis, Jr.
J. A. Amis, Jr.
Assistant
JAA:rt:mj :Wc
APPROVED MAR. 7, 1947
s/Price Daniel
ATTORNEY GENERAL
APPROVED OPINION COMMITTEE BY-5
BWB CHAIRMAN