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 ofArt. 1111-d. Chapter Bleven, A, Vernon'sPenal Code. Dear Mr. Clyde:

Your request f".or our opl~nlonon the above captioned matter has been received by thinsDepartment. We quote from your letter as follows:

"It is thedesire of this office to obtain an opinion from your office on the construction ofArticle 1111-D, Chapter A, of the Penal Code of the State ofTexas, ss towhether or not thls ArtZCle applies to the following state of facts:

'Aconcern, situated here I.nFort Worth, known as "BlueBonnet Discount Stamp Company", sells their stamps to merchants throughout the State of Texas, who, in turn, give the stamps t0 customers. When the CUStotS0rCOmpl8t8S a book which isgiven by the Blue Bonnet Discount Stamp Company to place Stamps therein, the customer, In turn, can present the book or books of stamps to the Blue Bonnet Company; and they, Lnturn, will give merchandise to redeem the book orbooks presented by the customer. This company does not sell~merchandise, but is engaged only in the bUS~naSS of redeeEpjngth8 stamps heretOfOr8 mentioned.'
'Thequestion 1~s:Whether ornot the eonduct 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, fromwh?ch we quote:Hon. Alfred M. Clyde, page 2 v-76

'I1

. The Blue Bonnet Stamp Company keeps at its location inFort Worth, the merchandise with which to redeeem the stamps, and also has other redemption stations in other cities in Texas. The onlyway this Company puts outmerchandise isby redeeming stamps that haV8 been given away by the merchants.

"2* The holder of these stamps cannot receive merchandise from themerchant 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’

. Themerchandise runs from one 'bookvalue', and up. Any person may appear inperson at the redemption stations and select and receive at that time, any RPtiCle that the Company has,provided they have a sufficient number of books. Deliveries ofmerchandise are also made by this Company by mail. Under 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 ofbooks containSJlgstamps to the Company. The Company,,in turn, will mail this particular item to the individual, which closes the transaction, unless the item isdamaged in,,shlpplng. If so, the Company will make itgood.
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, association or copartnership, either foreign Or domestic,to operate, maintain, open or establish any store ormercantile 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 shallI.

Hon. Alfred M. Clyde, page 3 v-76

be construed to apply to every person, agent, receiver, trustee,~firm, corporation, copartnership or association, either domestic or foreign, which is controlled or held with others by majority stock ownership orultimately controlled or directed by onemanagement or association of ultimate management.

"Sec. 7. The term 'store'as used in this Act shell be construed tomean and include any store or stores orany mercantile establishment or establishments not specifically exempted wlthin this Act which are owned, operated, maintained, or controlled by the same person, agent, receiver, trustee, firm, corporation; copartnership orassociation, either domestic or foreign,,in which goods, wares, ormerchandise of any kind are sold, at retail orwholesale.

"Sec. 8. Any person who, either for himself or as the agent of any person, receiver trustee, firm, corporation, copartnership orassociation, shall operate ormaintain 

### anystore or stores ormercantile establishment ormercantile establishments as defined in this Act without having displayed in a conspicuous place in such store ormercantile establishment the license fee receipt for the current year as required in this Act shall be guilty of a misdemeanor 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, itwill be necessary forus todetermine whether ornot the Bluebonnet Discount Stamp Company isa "store" or "mercantile establishment", as defined in Sec. 7 of theAct quoted above.

In the case ofHurt, etal, vs. Cooper, etal, decided by our Supreme Court onDecember 1, (2d) 1937, reported in 110 S.W. 896, 130 Tex. 433, Judge Hickman, Commissioner, in speaking of "store" said:

"The statute having defined theword, we are not concerned with itsusual,meaning. Under that definition, amercantile establishment, atwhich goods, wares, ormerchandise of any kind, except those exempted, are sold is a store and isHon. Alfred W. Clyde, page 4 v-76

taxable as such, end this even though itmay also~be a distributing point

. . , :convepsely, amercantile establishment atwhich no sales are made 1snot a store, and therefore not taxable. The test iswhether sales ofgoods, wares& or merchandise are made at the place

. . ~ . In Continental Paper Bag Company, et al, vs. Bosworth, Corn.App., Sec. B, 276 S.W. 170, Justice Short said:

"InAmerican usage, theword 'store' when employed to designate a place of business, isa broad one. It signifies not merely a warehouse, or storeroom, but may include in itsmeaning a business establishment where personalty is kept and sold, and incidentally gotten in salable condition." I

InVeasey Drug Company, et al, vs. Bruza$ etal, 37 Pacific Reporter, 26, 294, the Court said:

"The claimant presents no authority deflnlng the specified term 'wholesalemercantile 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 inarriving et the meaning of the statutory term. Thus from all of the definitions theword 'establishment' means an Institution, place, building, or location. Itsmeaning, of course, may vary and does vary with theuee of the word. Theword 'mercantile' in Its ordinary acceptance means pertaining to the business ofmerchants, and Is concerned with trade or buying end selling of merchandise. People vs. Federal Security Company, 255 111. 561,, 99N.E. 668, 88, H. H. Kohlsaat and Company vs. O'Connell, 255 111. 271, 99N. E. 689. InCarr vs. Riley, 198 &LSS. 70, 84N. E. 426, 428, 'mercantile' is defined thus: 'Ofor pertaining tomerchants 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, orplace, yet its meaning isgreatly restricted when used following theHon. Alfred M. Clyde, page 5 v-76

word 'mercantile'. And the expression 'mercantile establishment' must mean and refer to an institution ofmercantile business, orplace, building; or location where thg‘mercantile business or the buying or selling ofmerchandise Is conducted or engaged in. onemercantile bUSin8SS or establishment may differ from another just as one merchant may differ from another merchant as to the character ofbusiness engaged in. So we have retail merchants or retail mercantile establishments on the one hand, and wholesale merchants orwholesale mercantile establishments on th8 other hand.

"Amercantile establishment isa place Where the buying and selling of articl‘esofmerchandise is conducted. Hotchkiss vs.District of Columbia, 44 App.D,C. 73.

"The'term 'mercantilebUsin8S.9'isdefined tomean 'thebuying and selling' of erticl8s of merchandise as an employment' inGrayham v.Hendricks, 22 L. Ann. 52x*

Inyour related facts, the subject company redeems thebook or books of stamps inmerchandise; consequently, It is not necessary forus to define goods, wares ormerchandise 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 definition isgiven:

"A 'sale'may be defined as a transfer of personal property from one p8rSOn to another for aprice inmoney or for.property of an agr88d money value. The Uniform Sales Act defines 'asale of goods as 'anagreement Whereby the seller tranSfers the property ingoods to the buyer for a consideration Called the price.' The deflnltlon implies that there must be not only en 'agreement', but also apresent 'transfer' of property, or 'passage of title', from seller to buyer, either absolute1 Or conditionally, (butnot necessarily a delivery7, end the payment of aprice, or epromise -given or implied -topay."

InJohnson 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

"TheCourt defined a sale as follows: 'Inlaw, a sale 1s the agreed transfer ofproperty 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 mentioned may not be inmoney, but may be any article ofvalue.' We think this definition is correct.'
InL.B. Woods and Company vs. Half, Weiss Company, 44 Texas, 633, the Court said:

!'Asale imports and necessarily carries with ita chnge of ownership, (Pars. Mere. Law, 46) 1,

. . . DWhatever rule be adopted, itmay be sometimes difficult to apply it,but we cannot doubt that the true principle is this: every sale transfers the property, and that isnot a sale which does not transfer the property in the thing sold; but this property cannot pass, and therefore the thing isnot soldunless, first, it is completed and wholly finished, soas‘to be in fact and in reality the thing purporting to be sold; and In the second place, itmust be 

### SO distinguished and discriminated from all other things that it is certain, or canbe made certain, 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 isnot 

### a sale, although itmay be a valid contract for a Suture sale of certain articles when they shall be completed, orwhen separated from others."

InGay vs. Hardeman, 31Tex. 245, the Court said:
"What constitutes an actual sale of personal property?' It Is an agreement between the seller and the buyer upon the consideration or price, either in cash orupon a stipulated credit, end adelivery of the property. When sodelivered, 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 ofmankind. But it ispretended that at the time of the sale a lienwas 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 effectuate a sale of personal property. And when thisHon. 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 hemight choose tomake of it."
With reference to thedefinition of "retail" and "wholesale", Holmes, Circuit Judge, inWhite Motor Company vs. Littleton, et al, C. C.A., 5th Circuit, decided December 12, 1941, 

### 124Fed. (2d) 92, in speaking of the Fair Labor Standards Act, said:
"Theword 'retail' isnot defined by the Act. Given its common and ordinary acceptation when used in sales parlance, itmeans a sale in small quantity or direct to the consumer, asdistinguished from theword 'wholesale', meaning a sale in large quantity to onewho intends to resell. The character of the sale isnot altered by theuse towhich the consumer may put the purchased commodity. These sales were preponderantly retail although the products sold

### wereused subsequently for commercial purposes."
InVeazey Drug Company, etal, vs. Brunza, et al, supra, the following.was said:

"The term 'wholesale' or the selling in orby unbroken parcels isdistinguished from 'retail' ordividing into smaller quantities and selling direct to consumers" inGorsuth v, Butterfield, 2Wis. 237, and also inKentucky Consumers Oil Company vs. Commonwealth, 192Ky. 

### 437,233 S.W. 

### 892,and inGreat Atlantic & Pacific Tea Company vs. Cream ofWheat Co., (C.C.A.) 227 F. 

### 46.

"Awholesale dealer is onewhose business is the selling ofgoods ingross to retail dealers, and not by the small quantity or parcel to consumers thereof." State vs. Lowenhaught, 79 Tenn. (11Lea) 

### 13;.Webb v. State, 79 Tenn. (11 Lea) 

### 662.

In Sperry &Hutchinson Co. vs. Mechanics' Clothing co., 

### 135Fed. Rep. 

### 833,the Court said:

"Upon consideration of the allegations of the bill as to the nature of the trading stamps, it isapparent 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 inrelation to these stamps is that itwill redeem them if procured from authorized merchants; and that the collector acqui.redonly such rights as are expressly orby fair implication promised him by the company. 

### “Atrading stamp isnot ordinary property. it is sui generis. Itrepresents a somewhat complicated transaction, and, from Itsnature, I think there are necessary limitations upon the modes inwhich itmay be transferred

. . . By contract between the complainant and the merchant, the title to the stamp does not vest in the merchant who issues itbut remains inthe company until It has been issued in regular course to a customer of themerchant. The customer is expraesly offered only the right to redeem the stamp, and impliedlg the right to transfer it for redemption. A stamp isnot merely a token of the company's obligation to redeem it, and of the right of the holder to redemption, but it isalso a token or an instrument of another transaction inwhich the trading stamp company has an interest, and from which itderives its entire profit and its recompense for its outlay in establishing the buainess e o o . . . .

"The trading stamp, when issued, represents a closed transaction between the merchant and the company, aswell 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 isnecessarily a consumable article -an article designed for a singleuse inan advertiseing scheme.

. O

. . "THe trading stamp isan artificial creation. The company, having created Itand having created a value for it,may dispose of It on such terms as it sees fit. Itmay in the first instance restrict theeright to issue it for advertising 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 exchangeable for goods. But, it Isasked, why, if the right of a customer to transfer it is conceded, may he not transfer it inany mode he pleases, and give Itas an advertisement if he sees fit?.

Hon. Alfred M. Clyde,

A sensible answer

. - 

### page9 v-76

to this question, I think, is thereby appropriates to him-

_ . trl1s : Because ne 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 hisbenefit, a redeemable stamp; the merchant is to acquire, as his benefit, a trade advantage resulting from issuing the stamps at his shop; the trading stamp company's benefit is themoney paid to itbymerchants for the priv%lege of issuing the stamps *

. . . . .o a "Whilea transfer of ordinary property by the ownerupon any terms usually deprives other persons ofno rights, this Is not always the case with the trading stamp. While itmay be transferred Inany way which confines Its use within the purpose for which itwas issued, it may not be transferred in such a way as **to** destroy itsvalue as an instrument of special trade advantage or advertising company, or advertlsing, or as todeprive the company which created the value of the stamp, andwhich has assumed the obligatFon to redeem it, of its right to compensatlo? for expenditures and for redeeming the stamp.
InSperry &Hutchinson Co, vs, Fenster, et al,District Court, Eastern District, New York, decided January 

### 16,1915, 219, **Fed.** Rep. 

### 755,the Court said:

"Theright to redeem the stamps is a property rLght transferable by possession while the license touse them for advertising purposes isnot 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:

"Aconsideration may be defined tobe something which fsgiven in exchange, something which ismutual, or something which is the lnducement to the contract. Itmust 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:

"Avaluable consideration may be either a benefit to the promisor or adetriment to the promissee, - or stated inanother way, itmay consist of some right, interest, profit, or benefit accrui~ngto one party, or some forebearante, 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,eivedby, one or the other of the parties.

In the light of the decisions and laws set forth above, and inasmuch as a transfer ofmerchandise 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" atwhich goods, wares ormerchandise of any kind are sold, at retail orwholesale, and is, therefore, subject to the provisions ofArticle lllld, Penal Code of Texas.
SUMMARY

A trading stamp company which redeems trading stamps, with merchandise It keeps in stock for that purpose, isa "store" or "mercantile establishment" within themeaning of Article lllld, Vernon's Penal Code, and is subject to the provisions of that Article. Very truly yours,
ATTORNEY GENERAL OF TEXAS

JAA:rt:mj

### :Wc By s/J.A. Amis, Jr. J.A. Amis, Jr. Assistant

APPROVED MAR. 

### 7,1947 s/PriceDaniel ATTORNEY GENERAL
APPROVED OPINION COMMITTEE BY BWB CHAIRMAN -5