Honorable Robert S. Calvert Opinion No. M-449

Comptroller of Public Accounts State Capitol Building Re: HouseBill No. 579, Austin, Texas Chapter 497, Acts of the 61st Legislature, page 1606 (Title 122A, ,Taxation-General, V.C.S.) regarding certain coinDear Mr. Calvert: operated machines. Your opinion request dated July 28, 1969, poses six questions that have arisen under newArticle 13.17, Title 122A, Taxation-General, Vernon's Civil Statutes, which was enacted bythe 61st Legislature andwhich becomes effective September 1, 1969. Your first question Inquires as to whether abusiness licensed under Article 13.17 Is required to file with the Comptroller andthe ConsumerCredit Commissioner a copy of 'any personal loans, notes, mortgages andany other monetary benefits extended to aperson engaged in selling alcoholic beverages for on-premises consumption." or$Er;i$g lowing portiozis of the Article'have relevance to thiS'quek3tion; to-wit : "Section 2. DEEINITIONS.

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“(2) tfinancial interest" includes any legal or equitable interest, andspecifically includes the ownership of shares or bonds of a corporation. *it* ?!&@tioa$???. *

. . "(1) It shall be unlawful for anerson whohas a financial interest in abusiness

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Hon. Robert S. Calvert, page 2 (M-449)

required to be licensed by this Article to knowingly have a financial interest in a business engaged in selling or serving ,alcoholic beverages for on-premises consumption unless otherwise permitted in this Article. nobona fide financial interest or commitment in existence prior to September 1, 1969, shall be deemeda violation of this Article, but no, such interest or commitmentmaybe renewed or altered after September 1, 1969, without the written approval of the Comptroller, provided that this prohibition shall not apply if the business engaged in selling or serving alcoholic beverages be a corporation whose securities are registered under the laws of the United States or the State of Texas. (Emphasis added.) *++

“(6) Anyperson required to be licensed by this Article maymakeanextension of credit to a lessee or abailee of amusic or skill or pleasure coin-operated machine for business or commercial purposes whenthe following terms and conditions have been met andthe following duties andobligations satisfactorily assumedanddischargedD ***

“(7) Anyperson required to be licen~sed by this Article whoco-signs, guarantees, or becomes surety for anextension of credit or loan of any- ,thing of value to anyperson engaged in selling or serving alcoholic beverages for on-premises consumption or to anyperson whohe has reason to believe is about to be engaged in selling or serving alcoholic beverages for on-premises consumption, shall file with the Comptroller andthe ConsumerCredit Commissioner, a copy of all documents related to the transaction.” It is our opinion that aperson wholends moneyto be used in a liquor business or whotakes amortgage onanyproperty ownedby or used in the liquor business has thereby become financially Interested in the liquor business within the spirit andcontemplation of the Act.

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Hon. Robert S. Calvert, page 3 (M-449)

In NevadaTax Commission v. Hicks, 310P.2d 852 (Nev., sup. 195'2) th t t dth terms "directly or indirectly'int~r%d E?~h~"&sin&s't and "financially participating in the business" as contained in the Gambling Control Act of the State of Nevadaandcommission rules thereunder. Section 1Ocof the Gambling Control Act provided that applications for gambling licenses shall include the namesof all persons directly or indirectly interested in the business andthe nature of such business. cofnmission Rule II 1which waspromulgated under such Gambling Control Act provided that with regard to the revocation or suspension of licenses the omission of the nsme'of anyperson financially participating in the business from the application should be deemedpertinent. Oneof the questions in the case waswhether the lending of moneyto ahotel corporation for the purpose of constructing ahotel gave the lender a "financially participating interest" in the hotel corporation. Thecourt disposed of that specific question thusly:

"It is our view that the language lfinanclally participating interest' should not be as narrowly defined as respondents would have it but mayreasonably be construed to include the investment which results whenmoneyis lent for the purpose of financing anenterprise. Otherwise such financial interests a8those represented by the corporate bonds of sn incorporated licensee would be excluded. While these donot have the potentially hazardous effect upon the public welfare which direct operational control would have, still they can be said to be of material concern to the commission." Thus, except for the provisions of paragra h Section 27, all those barred under Section 27(lP (6) of rromhaving afinancial interest in abusiness where alcoholic beverages are sold or served for on-premises cFsumption are prohibited from making loans to or accepting mortgages from such an alcoholic beverage business. However, it is our opinion that paragraph (6) provides ameanswhereby aperson otherwise prohibited from making such loans can extend credit to a lessge or bailee of a coin-operated machine, even though he be all% eng +d in the on-premises alcoholic business, provided that les andregulations set forth in paragraph (6), including subparagraphs (a) through (f), are strictly followed.

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Section 27(l) provides anexception if the one engaged (M- 449)

In the sale of alcoholic beverages for on-premises consumption is a corporation whose securities are registered under the laws of the United States or this State. However, for reasons below given in answer to your second question, we are also of the opinion that if the licensee extends credit to a corporation of the type described in the exception, the licensee must also follow all graph (6) andits subparagraphs (aP rovisions of said parathrough (f) before it can extend credit for business or commercial purposes to a lessee or bailee of a coin-operated machine. In brief, a licensee under the Act cannot makea.loan to anyone save an excepted corporation engaged in the on-premises alcoholic beverage business except under paragraph (6), andloans to an excepted corporation under Section 27(l) can be madeif the corporation is a lessee or bailee of amachine on1 under the terms of the provisions of said paragraph (67. Wethink that paragraph (7) above-quoted is selfexplanatory. It provides that aperson licensed by the Act can co-sign, guarantee or become surety for the extension of credit to aperson engaged in the liquor business so long as a copy of all documents related to the transaction are filed with the Comptroller andthe ConsumerCredit Commissioner. Your second question inquires as to whether abusiness licensed under Article 13.17 will be required to file a copy of anypersonal loans, notes, mortgages andany other monetary benefit extended to aperson whois not engaged in selling or serving alcoholic beverages for on-premises consumption. Rxcept~for the provisions of paragraph (6) of Section 27 of the Act, there are noprohibitions against a coin-operated business becoming interested in another business where alcoholic beverages are not sold for on-premises consumption. However, under the provisions of said paragraph (6) which extends credit to anylessee or bailee of a coin-operated machine (whether such lessee or bailee is in the liquor buslness or not) must follow all of the rules andregulations set forth in said paragraph (6) andsubparagraphs(a) through (f), both inclusive, of said paragraph (6). Since the Legislature has provided the means, methods andconditions under which a licensed business maymakea loan to alessee or bailee of a coin-operated machine, such loans cannot otherwise be made. Wherea statute prescribes amethod under which anAct can be accomplished, no other method canRe implied andall other methods are excluded. Creager v. Ida&o County

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Water Improvement District No. 4, 283 S.W. 151 (Tex.Comm. 3

. 1926). Vit pi1 lpSp55erro; refo n.rv;! Ware, 280 S.W.2d 378 (Tex.Clv.App. Sec.'llll. .); 53 Tex.Jur.2d 205, Statutes,

Your third question reads as follows: "Canaperson ownandoperate his owncoin machine in his business where alcoholic beverages are sold andconsumed onthe premises under Section 27(l), under this act?" In Attorney General's Opinion M-437recently issued, this office held that aperson whoownedandoperated his owncoin-operated machine in his ownplace of business was engaged in abusiness which is required to be licensed under this Act. Therefore, under the plain provisions of Section 27(l) of the Act, onewhois engaged in the business of selling alcoholic beverages for on-premises consumption is absolutely barred from owning andoperating a coin-operated machine in his liquzr business. Exceptions to this rule are granted in the 7randfather clause" which is contained in said Section 27(1 andwhich is self-explanatory. Section 27(l) also grants anexemption to corporations whose securities are registered under the laws of the United States or Texas. Paragraph (2) of Section 27also grants anexemption In that onewhohas a financial interest in abusiness required to be licensed can also have an interest in real property on which there is located abusiness engaged in selling or serving alcoholic beverages for on-premises consumption. Your fourth question is as follows: "Section 26 requires that awritten contract be filed with the Comptroller as to all agreements with licensee andbusiness where a coin-operated machine is placed. Woulda copy of ablanket contract suffice or would the licensee be required to file a copy of each contract signed andsworn to by both parties?" Theapplicable portions of Section 26 are as follows: "Section 26. ~MJT~;RIZRD CONTRACTS PROHIBITED; a "(1) Noperson licensed under this Article mayplace or operate amusic or skill or pleasure

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coin-operated machine In anestablishment where alcoholic beverages are sold or served for on-premises consumption except bywritten contract. Thecontract must include all provisions of the agreement between the parties anda statement sworn to by both parties that there are no other understandings or agreements

_ . between tne parties. "(2) Thelicensee shall

filed with the Comptroller. of the contract terms previously

u(bkent where the machine Is placed; and furnish a copy to the manager of the establi

of bu:&;ss. retain a copy at his principal place

“(3) Themanager of the establishment shall retain his copy of the contract onhis premises." With the words "unless on terms previously filed with the Comptroller,!' as contained in paragraph (2)(a), the Legislature apparently undertook to provide anexception to the rule that a copy of each contract mustbe filed with the Comptroller. These words are ambiguous, andthey must, if possible, be construed in such a fashion as will ascribe a reasonable andfair meaningwithin the legislative intent, as ascertained from a view of the statute as awhole. 53 Tex.Jur.2d 180-189, Statutes, Sets. 125-126. In assigning someefficacy to the exemption provision andat the sametime staying within the manifest spirit' of the policing provisions of the Act, weare of the opinion that a fully executed copy of each andevery contract must be filed with the Comptroller. However, applicable terms of the contract maybe incorporated andmadeapart of the contract by express reference to another contract or other instrument which sets forth certain contractual terms and provisions andwhich is definitely identified in the present contract andwhich has been previously filed with the Comptroller, Sucha contract so incorporating certain terms by reference must also affirm that all parties have read such terms andprovisions andunderstand them. Thus, a copy of a "blanket contract" will suffice only to the extent aboveoutlined. Your fifth question inquires as to whether the Act requires that a license be procured at each place of business where a coin-operated machine Is placed andoperated.

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Weare of the opinion that the Act requires a license on the distinctive business of dealing in coin-operated. music, skill or pleasure machines. This conclusion i's, manifest from manyreferences to the Article, samples of which are as follows:

"Section 8. LICENSE REQUIRRU;

PRNALTY; EXCEPTIONS. "(1) Noperson shall engage in business to manufacture, own, buy, sell, or rent, leaso, trade, lend, or furnish to another, or repair, maintain, service, transport within the state, store, or import, amusic coin-operated machine or a skill or pleasure coin-operated machine without a license issued under this Article. *** "Section 11. DISPLAY;PENAL!lTY, "(1) Aperson licensed to dobusiness under this Article shall prominently display his current license certificate at his place of business at all times. *+* "Section 15. TYPESOFLICENSES. "(1) Aperson whowishes to engage in certain business dealing with music coin-operated machines or skill or pleasure coin-operated machines shall apply for ageneral business license, or an import license, or both. "(2) Ageneral business licensee mayengage in business to manufacture, own, buy, sell, rent, lease, trade, repair, maintain, service, transport or exhibit within the state, andstore music and ,' skill or pleasure coin-operated machines.

"(3) Animport licensee mayengage in busirless i to import, transport, own, buy, repair, sell, and deliver, music andskill or pleasure coin-operated machines, for sale anddelivery within this.State." Theprovisions of Section 12dealing with the application for a license are also relevant in that the application mustHon. Robert S. Calvert, page 8 (M-449)

showthe nature of'the business entity to be licensed snd must showthe location of each coin-operated machine which is owned, possessed or controlled by the licensee. It is further relevant that while Article 13.02 of Chapter 13, Title 122A, Taxation-General, V.C.S., distinctly provides for atax of $15.00 per year on each coin-operated machine, Article 13.17 deals with the licensing of abusiness which deals in such machines. The only difficulty in interpretation with regard to this question is found in the provisions of Sections 9and 16 of Article 13.~17. Section g(2) provides that a license shall be effective for a single place of business. Section 16(l) provides that anannual license fee of $300.00 shall be paid for each "type andplace of business licensed under this Article." InMcCauley v. Hobbs Trailers, 357 S.W.2d 494, (Tex. Civ.App. 1962 Article 6165a: r)cl”‘ sit) the court construed Section 2 of

., which defines a loan broker as “a person, firm,. or corporation

. . . whopursues the business of lending money,
. . . andtaking for security for the payment of such loans

. . . anassignment of wages.
. . ." Thecourt held that the term "business" connoted a distinctive business, i.e., au occupation or employment habitually engaged in for the purpose of profit or improvement. Therequirement of a license to engage ir,a particular business or occupation whether it is called a license tax, an occupation tax, aprivilege tax or an excise tax, is not atax anproperty. 53 C.J.S. 457-458, Licenses, Sec. 3; Producers Oil Companyv. Stevens, 99S.W. 157 (Tex.Civ.App. 907, error ref.). Rather, such abusiness licensing requirement exacts atax or fee for the rivllege of carrying on abusiness or occupation. 53 C.J.S. t46-447, Licenses, Sec. 1; 36 Tex.Jur.2d 618, Licenses, Sec. 28. Statutes imposing licenses andbusiness taxes are to be construed liberally in favor of the citizen and strictly against the government. andever-v doubt as to construction mustbe &solved & favor oflthe one against whomthe enactment is sought to be applied. Ii. E. Butt Grocery Companyv. Shepherd, 137 S.W.2d 823 (Tex.Civ.App. 1940, error ref.); 53CJ S

. . . 495, Licenses, 6ec. 13. Based o&an interpretation of the spirit and intent of the statute as gathered from its four corners, weare of the opinion that this Licensing Act is aimed at the distinctive business of dealing in coin-operated machines andthat a license must be procured for each place

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HCQ.Robert S. Calvert, page 9 (M-449)

where that distinctive and identifiable business, a6such, is carried on. Thus, each person in the business Is required to have at least one license before he can engage in business at all. Thefirst license is effective as to a single place a of business, so that if aperson has any other establishment in which hemaintains an contemplated by Section 5 of the business activities, as (1) of Article 13.17, such as a warehouse, repair shop, store, etc., he is required to have a license for each such establishment or "place of business.” Goldstein v. State Revenue Commission, 178 S.E. 164 (Ga.Sup. 1935); 53 C.J.S. 551, Licenses, Sec. 24. Take for example, aperson whois in the basic, overall business of owning coin machines audplacing them'on various locations for oper;.---*’ ation. If that person hadan office andwarehouse InDallas andanother office endwarehouse in Houston, hewould need a license for his Dallas location andmother license for his Houston location. If the sameperson hadanofflce, or repair shop, end a,warehouse in separate locations in each of the twocities, hewould need a total of six licenses. However,. he would not necessarily need a separate license for each place wherehe places amachine onlocation. Asingle machine onlocation is apart of his business, but the Act. does not clearly require a license for apart or portion of his business. It merely requires a license for each f of the overall, Identifiable business or occupation w was Intended to be subject to being licensed:. Wedonot consider your sixth question because It is conditioned onsn affirmative answer to question No. 5.

SUMMARY UnderArticle 13.17 of Title 122A, TexationGeneral, Vernon's Civil Statutes, HouseBill No. 579, Chapter 497, Acts of the 61st Legislature, page 1606, a licensed business otherwise prohibited from having a financial interestin abusiness where alcoholic beverages are sold for on-premises consumption maynevertheless make extensions of credit to lessees andbailees of coin-operated machines provided that hemust strictly comply with the provisions of paragraph (6) of Section 27of the Article. Loans to corporations of the type in which the licensee Is not prohibited from having a financial interest must also be madeunder said paragraph (6) if such

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AW:dc corporation is a lessee or ballee of such machines. Extensions of credit by a licensed business to a lessee or bailee of a coinoperated machine whois not engaged in abusiness where alcoholic beverages are sold for on-premises consumption must also strictly comply with the provisions of said Section 27(6). Aperson cannot ownandoperate his owncoin-operated machines in his ownplace of business where alcoholic beverages are sold for on-premises consumption unless he comesw&thin* oxceptlons granted in the "grandfather clause'" of Section 27(l) of the Act, or unless he is the type of corporation which is excepted under Section 27(l), or unless he comes within the exception provided for the ownership of interest in real estate as set forth In Section 27(2). UnderSection 26 of the Article, afully executed copy of each written contract mustbe filed with the Comptroller, provided however that terms and provisions of the contract maybe Incorporated and madeapart thereof by reference to another contract or written instrument containing such terms, provided that such referred-to instrument must have theretofore been filed with the Comptroller andmustbe definitely identified In the present contract, and the contract must affirm that all parties have read such referred-to terms andunderstand them. It 1s~ 'I' required that a license be procured for the distinctive business which is required to be licensed, and hemust have a separate license for each place such as sn office, warehouse, repair shop, store, etc., where that distinctive business is carried on; however, a licensee'uhder the Act is not necesserily required to procure a separate license for each location where one of his machines is placed on location, unless that licensee carries onhis distinctive business also at such location.

ey General of Texas

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Prepared by Alfred Walker Assistant Attorney General APPROVED: OPINIONCOMMITTEE Kerns Taylor, Chairman George Kelton, Vice-Chairman Roger Tyler Houghton Brumlee, Jr. JohnBanks TomBullington W.V. Geppert Staff Legal Assistant Hawthorne Phisips Executive Assistant

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