Court Opinion

ID: 4133268
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:35:56.713886+00
Date Added: 2024-06-11T14:34:22.144913
License: Public Domain

.-   ‘

                                      September    25,    1973

         The Honorable Ivan WiDiams                            Opinion No.    H-110
         Executive Director
         Texas Amusement     Machine Commission                Re:   The applicability    of regu-
         P. 0. Box 13226 Capitol Station                             latory Article   13.02 to
         Austin,  Texas  78711                                       coin-operated    machines
                                                                     on U.S. military installa-
         Dear Mr.    Williams:                                       tions in Texas

                On behalf of the Texas Amusement       Machine Commission        you have
         requested the opinion of this office about the application of Article       13.02(2).
         V.T.C.S.,    in connection with a controversy     involving the Army and Air
         Force Exchange Service.        Your letter expl .@s:
                                                           \
                                                        1
                             “The Texas Vending Commission         was created
                      by Senate Bill 268, [Acts 1971, 62nd Leg.,        R.S.,
                      p. 1942, ch. 5871 . . . . Section 2 of S.B.        268
                      transfers   to the Texas Vending Commission        [subse-
                      quently renamed the Texas Amusement          Machine
                      Commission,      Acts 1973, 63rd Leg.,     R.S.,   p. 362,
                      ch. 1591 all of the functions previously     exercised   by
                      the State Comptroller     under Chapter 13, [V. T. C. S. 1,
                      Taxation-General,     as amended.

                             “Subsection   2, Article 13.02,  [V. T. C.S.],
                      Taxation-General     provides in part as follows:

                             ‘No owner shal:l agree or contract with a bailee
                             or lessee of a coin-operated    machine to compen-
                             sate said bailee or lessee in excess of fifty per-
                             cent (50%) of the gross receipt of such machine
                             after the above reimbursement     has been made.
                             In addition to all other penalties provided by law,
                             the [Texas Amusement     Machine Commission]

                                                   p.    528
The Honorable    Ivan Williams,                page 2 (H-110)

                     .     . shall revoke any License held under
                                   .
                     Article    13.17 by any person who violates
                     this subsection. ’

                  “This specifi.c statutory provision                        has been
           declared valid by the court [Thompson
           489 S.W. 2d 95 (Tex. 197311.

                  “The Unitt:d States A,rmy                        and Air Force
           Exchange Service has taken the                           posi.ti,on that the
           subject st:atutory p:roti.sfon may                       not be enforced
           by this Commissi,on agaj,nst the                        Army and Air
           Force Exchange Service. ‘(

     You note:

           !I
             . . . the                 Army and Air Force Exchange Service
           purchases                   goods and servi.ces from !non-appropria-
           ted fun.ds’                 and . . . the Army and ASP Force Exchange
           Service is                  a c’LviPian rather than a military operation
           of the Department                   of Defense.    ”

     You then asks:

                     'I1
                     .    Whetherr the provisions     of SubsectLon 2,
           A’rtlcl,e 1 ,3. 02, [‘V. T. C.S. 1, Taxation-General     may
           be enforced by this commission          against a Kcensee-
           owner under thi,s act who contracts with a U.S.
           military post exchange,         U.S. mi.litary ser,uice club
           or some othe:r lessee of coin-operated          mac,hines
           when the lessee is physi.cally l,ocated on lands [over]
           which the State of Texas [has] ceded exclusive           juris-
           dict!on to the UnZ”:ed States,      reserving   only jurisdic-
           tion to execute judicial process there?

                     “2What would be your answer to question No. 1
                               .

           if such lessee was physically   loc:ated on laods not ceded
           or ceded onl,y in part by the State of Texas to the United
           States?

                                                      p.     529
The Honorable         Ivan Williams,         page 3 (H-110)

                          “3.  Would the fact that some lessees    of coin-
                   operated machines which are physically     located on
                   U.S. military installations  contract to purchase goods
                   and services  from ‘appropriated   funds’ while others
                   do so from ‘non-appropriated    funds’ have any effect
                   on your answer? ”

       Your questions are broader than your premise,     since the term
“lessee”  used in your first question applies to persons or entities other
than the Army and Air Force Exchange Service,      but we will answer in
the broader context.   The questions involve two different clauses of the
federal Constitution.

         Article   1,     5 8,   Clause    17 of the Constitution    of the United States
reads,     in part:

                          “The Congress     shall have power. . . to
                   exercise   exclusive  Legislation    in all Cases what-
                   soever . . . over all Places purchased by the
                   Consent of the Legislature      of the State in which the
                   Same shall be, for the Erection of Forts,        Magazines,
                   Arsenals,    Dock-Yards,    and other needful Buildings
                   . . . . I,

         Article     6,   cl,. 2, the     so-called    Supremacy    Clause,   provides:

                          “This Constitution, and the Laws of the
                   United States which sha,Ll be made in Pursuance
                   thereof: and all Treaties  made, or which shall be
                   made, under the Authority of the United States,
                   shall be the supreme Law of the Land; and the
                   Judges in every State shal.1 be bound thereby, any
                   Thing in the Consti,tution or Laws of any State to
                   the Contrary notwithstanding.   ”
                                                     \

      Our system is one of dual sovereignty.     Though the federal government
may acquire land within a State by purchase or condemnati.on without the con-
sent of the State, in the absence of such consent,  the United States does not
become an exclusive    sovereign as authorized by A,rticle 1, $ 8, cl. 17, and its

                                                p.    5,30
The Honorable     Ivan Williams,    page 4 (H-110)

possession    is regarded as that of an ordinary proprietor.           Any ‘!consent”
given by a State may be conditioned upon its retention of jurisdiction             over
the land consistent    with the federa. use, but when consent has been given,
if a portion of the State’s jurisdiction     is not expressly     retained (or to the
extent that it is not retained),    the jurisdiction    of the federal government
becomes    “exclusive”    if the federal government       assents to the transfer of
the jurisdiction.    If the State’s legislative    jurisdiction  is not retained,
subsequent laws of the State have no force in a federal enclave.              However,
state laws applicable at the time of transfer         remain in effect,   until abrogated,
to assure that no area is left without a developed system for private rights.
Paul v. United States, 371 U.S. 245 (1963).    See Adams v. Calvert,       396
S.W.2d 948 (Tex. 1965).

        In ceded areas where only the jurisdiction    to execute judicial process
has been reserved,      the applicability of Article 13.02,  Taxation General,
‘V. T. C. S., to private persons depends upon whether the basic provisions
 of that law were in force at the time the land was ceded, and whether it
has been abrogated by federal law.        We are aware of no federal legislation
 or policy which abrogates     such laws as they might apply to private persons
 in such circumstances.

       However,   U.S. Military Post Exchanges       and U.S. Military Service
Clubs operated by the Army and Air Force Exchange are not purely private
personages.     The Exchange Service evolved from the original “sutler”
system of provisioning    armi.es.  Its establishment   has never rested on
statutory law, but, rather,    on General Orders of the War Department and,
now, Regulations    issued by authority of the Secretary    of Defense.  See 8
JAG L. Rev. 19, Scolnick and Packer,        Evolution of the Army and Air Force
Exchange Service (1966).

        Post Exchanges    and Service Clubs are instrumentalities    of the federal
government,     though some might classify them as “civilian”     rather than
“military,   ” and thou.gh they are operated exclusively   with “non-appropriated”
funds.    Standard Oil Co. v. JohnsoriL 316 U.S. 481 (1942).      Compare Paul v.
United States,    su.pra.    And see United States v. State Tax Commi.ssion     of Miss-
is sippi. ,       U.S. --.-9     37 L.jEd Ld 1 (1973).

                                        p.   531
The Honorable   Ivan Williams,   page 5 (H-110)

       Paul v. United States was decided January 14, 1963.        It involved
the right of the State of California  to enforce minimum wholesale price
regulations  with respect to milk sold at three U.S. military installations
in California and used for three different purposes;    for strictly military
consumption,    for resale at federal commissaries,    and for consumption
or resale at various military    clubs and post exchanges.    Milk for the
first two uses was paid for with appropriated    funds while that to be used
or resold at the clubs and exchanges was not.

       The Supreme Court held that, as to milk paid for with appropriated
funds (and without regard to “jurisdiction”   questions),    the federal policy
set by 10 U.S.C.   § 2301, et seq.,  and the Armed Services       Procurement
Regulations  promulgated   pursuant thereto,   required competitive     bidding.
Milk purchased for military consumption      and for resale at federal com-
missaries   was purchased with appropriated     funds.    The Supreme Court
held, therefore,  that the Regulations  promulgated    pursuant to the statutes
were to be given the force of law and took precedence       over any contrary
state laws.

        But milk purchased for consumption    or resale at the various military
clubs and post exchanges was purchased with non-appropriated        funds.   The
Court, through Justice Douglas,     observed that “[t]here  is no. . . conflicting
federal policy concerning purchases     and sales from non-appropriated    funds”
and concluded that California’s   current price controls over milk were appli-
cable.to such sales,   provided the basic State law authorizing   such control
had been in effect since the times of the various acquisitions    of ceded areas.

      In other words, exchanges   and clubs using non-appropriated   funds
were to be considered  subject to the State law to the same extent as private
persons in the same circumstances    would be subject to it.

       Subsequent to the decision in Paul v. United States, new regulations
applicable  to the Army and Air Force Exchange Service have been promul-
gated, stating that the A & A F E S is immune from direct State taxation and
from State regulatory   laws, such as licensing and price control, statutes,
whose application wou1.d result in interference   with the performance      by the
A & A F E S of its assigned    Federal functions.  (32 C. F. R.,  5 554.6).    And

                                     p.   532
The Honorable      Ivan Williams,   page 6 (H-110)

see 32 C. F. R.,    § 554.9,  purporting to require full competition in procure-
ment “consistent     with the immunity of exchanges from State regulations    and
control, ”

        The above A & A F E S Regulations   have no statutory basis other than
that contained in 10 USC 3012 (g) conferring upon the Secretary    of the Army
power to “prescribe   regulations to carry out his functions, powers and
duties.   . . .”

       In Paul v. United States,   the Supreme Court specifically     noted that the
provisions   of 10 USC 2301 et seq.,   relating to Defense Department procure-
ment and which authorized the adoption of Regulations        making State price
controls inapplicable,   were themselves     applicable only to purchases    made
with appropriated   funds: it found no existing federal policy of immunity for
the Exchange Service against the enforcement        of State price controls where
only non-appropriated    funds were concerned.       We have found no later-
enacted federal statutes applicable to the Army and Air Force Exchange
Service which would change that policy.

        Congress authorized immunization     from State price controls for
purchases    made under the authority of the Department     of Defense only as
respects   purchases   made with appropriated   funds.  The express appl,ication
of those statutes only to payments made from appropriated        funds impliedly
excludes from their policy operation those payments made from non-appro-
priated funds.    The Secretary  of the Army was without the power or autho-
rity to extend that immunization    policy beyond the limits set by Congress,
and we think the above A & A F E S Regulations      attempting to do so are
nullities in that respect.   See Hirshberg  v. Cooke, 336 U.S. 210 (1949).

       In Penn Dairies v. Mil,k Control Commission,      318 U.S. 261 (1943) the
Supreme Court, after considering      another “milk” price control case under
statutory and administrative   provisions   antecedent to (but different from)
those concerned in Paul v. United States, said (at p, 621):

                      1,. . . [T]hose burdens [state taxation and regu-
             lation],     save as Congress  may act to remove them, are
             to be regarded as the normal incidents of the operation

                                        p.   533
.   0

        The Honorable    Ivan Williams,   page 7 (H-11Q)

                     within the same territory   of a dual system of
                     government,   and.   . . no immunity of the national
                     government from such burdens is to be implied
                     from the Constitution.   . . .

                            “Even in the case of agencies created or
                     appointed to do the government’s    work we have
                     been slow to infer an immunity which Congress
                     has not granted and which Congressional    policy
                     does not require. ”

        Also see Polar Ices Cream & Creamery        Co. v. Andrews,    375 U.S. 361
        (1964).   Compare United States v. Georgia Public Service Commission,
        371 U.S. 285 (1963), and Public Utilities   Commission   of the State of
        California v. United States,  355 U.S. 534 (1958).

               We conclude that the more recent A & A F E S Regulations            attempting
        to extend the immunity from State regulations         are ineffective  to give immu-
        nity to non-appropriated    fund activities  and that contracts     made by the Army
        and Air Force Exchange Service with such funds are subject to the provisions
        of Article  13.02 (2); Taxation General,      V. T. C. S., in the same manner as
        contracts  of a private individual or corporation.        As to ceded areas,    immu-
        nity will depend upon the cession agreement,         the statute’s u      existence
        prior thereto,   and federal abrogations    thereof.

               Adams v. Calvert,     396 S.W.2d 948 (Tex. 1965). involved the right of
        the State to tax the interests   of a private individual in coin-operated  machines
        located at Fort Hood.     The taxes were levied under Article      13.02. The
        Supreme Court said:

                            “It thus appears that at the time the Fort Hood
                     lands were acquired by the United States there were
                     both federal and state limitations       on the authority of
                     the Governor    of Texas to reserve jurisdiction       to the
                     State over the lands.       By the federal law the Governor
                     could reserve    a:l,l juri.sdiction over the lands consistent
                     with the federaxses,         but no more,   and by Artic1.e 5427

                                                  p. 534
.

    The Honorable    Ivan Williams,    page 8 (H-110)

                 the Governor was required to reserve only juris-
                 diction to execute state judicial process anywhere
                 on the lands.    There is no sound reason for saying
                 that the authority conferred on the Governor by
                 Art. 5247 to cede exclusive    jurisdiction  does not
                 include authority to cede a lesser jurisdiction.      We
                 hold, therefore,   that in the area between the maxi-
                 mum permitted by federal law and the minimum
                 required by Article    5247, the extent of juris~diction
                 reserved   to the State over lands acquired by the
                 United States with the consent given in Article     5242
                 is, in the absence of other limitations,    a matter for
                 negotiation by the Governor and is settled and con-
                ,cluded by his deed of cession.    . . . ” (396 S. W. 2d
                 at 950).

            Your first question assumes      that as to the lands involved the State
    has”ceded      exclusive   jurisdiction to the United States,    reserving   only
    jurisdiction    to execute judicial process there. ‘I Our answer to your first
    question,    therefore,   is that, absent a reservation    of jurisdiction   over
    matters not in conflict with federal jurisdiction,       the State has no power
    and the price control aspects of Subsection 2, Article          13.02,   Taxation-
    General,     V. T. C. S., may not be enforced on such a post.

           Your second question asks whether our answer would be different
    if the lessee was physically   located on lands not ceded or ceded only in
    part by the State of Texas to the United States.    If the lands were not
    ceded at all, our answer would be that the State would have the same rights
    as to the lessee as it would have to any other lessee.      If they were ceded in
    part only, the jurisdiction  of the State would have to depend upon the cession
    agreement    in each case; thus, we cannot give an unequivocal answer.

           The answer to your third question would be that as to machines or
    services  purchased with appropriated    funds, the State price control regu-
    lations would conflict with the Federal. Procurement    Act and the Federal
    statute would prevail,.  As, to those purchased with “non-appropriated    funds, ”
    the answer cou1.d differ depending upon whether the machines were located

                                           p.   535
    .I            .

.        .   ,.

                      The Honorable   Ivan Williams,      page 9 (H-110)

                      on or off ceded property and, if on ceded property,      the terms   of the
                      cession agreement   would c,ontrol.

                                                          SUMMARY

                                          Jurisdiction    of the Texas Amusement      Machine
                                   Commission      over coin-operated    machines located
                                   upon Federal     bases wil11 depend upon the following
                                   principles:    (1) If acquired with appropriated     funds,
                                   state regulation is totally ineffective;    (2) Lf acquired
                                   with non-appropriated       funds and located on ceded land,
                                   the extent of the State’s jurisdiction     will depend upon
                                   the terms of the cession agreement        and the State :law
                                   in existence at the time of cession; and (3) If located
                                   on :land which has not been ceded to the United States
                                   and acquired with non-appropriated        funds, the juris-
                                   diction of the Commission       will be complete,

                                                                c86HN   L. HILL
                                                                 Attorney General   of Texas

                      APPRC&‘ED:
                            Q
                             ‘j

                      LARRY   \F. YOR      First    As &ant

                      u~-_~~~
                      DAVID M. KE:NDALL,
                      Opinion Commj,tt.ee
                                                   Chairman,

                                                               po 536