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'sPenal Code. 

Dear Mr. Clyde: 

Your request f".or our opl~nlon on the above captioned 

matter has been received by thins Department. We quote from 

your letter as follows: 

"It is the desire of this office to obtain an opinion from your office on the construction 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.n Fort 

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 customers. 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 present 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 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, 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 merchandise is by redeeming stamps that haV8 been 

given away by the merchants. 

"2 * The holder of these stamps cannot receive 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 sufficient number of books. Deliveries of merchandise 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 of books containSJlg stamps to the Company. 

The Company,, in turn, will mail this particular 

item to the individual, which closes the transaction, 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, association 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, copartnership or association, either domestic or foreign, 

which is controlled or held with others by majority 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 wlthin this Act which are owned, operated, maintained, 

or controlled by the same person, agent, receiver, 

trustee, firm, corporation; copartnership or association, 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 himself or as the agent of any person, receiver 

trustee, firm, corporation, copartnership or association, shall operate or maintain any store 

or stores or mercantile establishment or mercantile establishments as defined in this Act without having displayed in a conspicuous place in 

such store or mercantile 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, 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, 

(2d) 

1937, reported in 110 S.W. 

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. Under 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. Bosworth, 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 deflnlng 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 arriving et the meaning of the statutory term. Thus 

from all of the definitions the word 'establishment' 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 Company, 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 'mercantile establishment' must mean and refer to an 

institution of mercantile business, or place, 

building; or location where thg‘mercantile business 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 merchandise 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. Hendricks, 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 definition 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 tranSfers the property in goods to the buyer for a consideration 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 property 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 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: 

!'A sale 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 cannot 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 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 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 personal 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 effectuate 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 distinguished from the word 'wholesale', meaning a 

sale in large quantity to one who intends to resell. The character of the sale is not altered 

by the use to which the consumer may put the purchased commodity. These sales were preponderantly 

retail although the products sold were used subsequently 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 dealers, 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 relation 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 complicated 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 merchant 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 expraesly offered only the right to redeem the stamp, 

and impliedlg the right to transfer it for redemption. A stamp is not merely a token of the company'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 buainess 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 advertiseing scheme. . O . . 

"THe trading stamp is an artificial creation. 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 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 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, 

A sensible answer . - 

page 9 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 his benefit, 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 the money paid to it by merchants 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 destroy its value as an instrument of special trade 

advantage or advertising company, or advertlsing, 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 redeeming 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 lnducement 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 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,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 "mercantile 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 

JAA:rt:mj :Wc 

By s/J. A. Amis, Jr. 

J. A. Amis, Jr. 

Assistant 

APPROVED MAR. 7, 1947 

s/Price Daniel 

ATTORNEY GENERAL 

APPROVED OPINION COMMITTEE BY -5 BWB CHAIRMAN