Court Opinion

ID: 4131162
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:12:40.389558+00
Date Added: 2024-06-11T14:33:22.155577
License: Public Domain

The Attorney            General              of Texas

JIM MAlTOX                                          April   9,   1985
Attorney General

Supreme Court Building         Arthur G. Ransen, Ph.D.                               Opinion     No. JM-305
P. 0. Box 1254S                Chancellor
A”lll”. TX. 7871 I- 2545       Texas A 6 H Universj.tp System                        Re: Whether the sale of “gin
512l4752591
                               College Station. Tems     77843                       trash” by a gin is exempt under
Telex 91018711357
Telecopier 51214750286                                                               section     141.002(c)(4) of the
                                                                                     Agriculture    Code
714 Jackson. Suite 799         Dear Dr. Eansen:
Dallas, TX. 75202-4508
214n42a944
                                    You ask us the following         two questions:

4s2, AlbermAve..suite 160                    Can a cotton gin be             considered    s representative
El Paso. TX. 7S9C52793                    or agent of the farmer               In disposal    of the cotton
915/5353.(84                              plant by-product      ‘gin           trash’ under the circum-
                                          stances   outlined    and           thus be exempt from the
1091 Texas. Suile 700                     economic provisions      of          the statute    under section
Hou,,~“. TX. 77902-3111                   141.002(~:11:4)?   Does it          make any difference      if the
713/223-5886                              gin is a cooperative      of         farmers?

                               We conclude that the answer to your first        question will depend upon
905 Broadway. Suits 312
Lubbock. TX. 794013479         the facts in each :.ustance.   If title    to the produce passes from the
Sm-747.5235                    farmer to the ginner, the subsection     (c)(4)   exemption from the code’s
                               registration,   1abe:lKng and inspection      requirements   for   commercial
                               agricultural  feed, does not follov    the produce in a subsequent sale.
 4309 N. Tenlh. Suite B
 McAllen. TX. 78541-1885
                               If.   on the other hand, title    does not paw.       the subsection   (c)(4)
 512mS2.4547                   exemption remains operable.    We answer your second question         in the
                               affirmative.
 200 Main Phza. Suite 400
                                     Chapter 141 of the Agriculture     Code governs the registration,
 !3m Antonio. TX. 782052797
 51212254191
                               labeling.   and Inspection   of commercial agricultural     feed.  Section
                               141.002(c)   restricts the definition of “commercial    feed” for purposes
                               of this chapter:
 An Equal Opportunity/
 Affirmalive Acllon Employer                 The foAlowing        sre    not     conunarcial     feeds   subject
                                          to this chapter:

                                              (1)    unground hay;

                                              co    uhole grain or whole seed not                    containing
                                                    torrins or chemical adulterants;

                                              (3)    unadulterated           cottonseed,       peanut,   or   rice
                                                     hulls:

                                                                        p.    1385
Arthur G. Nansen - Page 2 (~i+f-:)()5)

              (4)    a feed    product   produced     and   sold   by   a
                     farmer;       -

               (5)   an individual  mineral     substance    not mixed
                     with another inaterial;    or

               (6)   a material    furnished     by a purchaser     for
                     use in s customer-formula          feed that was
                     produced by the purchaser or acquired by
                     the purchaser from a source other than the
                     person whose! services       are engaged in the
                     milling.    m:.r:iag ,   or   processing    of    a
                     customer-formula      feed.   (Emphasis added).

     Under the following  subm:tssion of facts,  you essentially wish to
know under what circumstances   .the sale of “gin trash” can be held to
be the sale of “a feed product produced and sold by a farmer.”

               Fanners produce the cotton plant,       harvest    it
           and deliver   the harrested mixture to a cotton gin
           which, for a charge or fee, performs a processing
           service.    The cotton mixture is divided into three
           basic fractions    dur%rlg the ginning process:    lint,
           cottonseed,   and gin trash.

               The lint,    which 1s formed into bales,      is care-
           fully   identified     such that each farmer is paid
           exactly according to the amount generated from his
           cotton and the grade quality of same. The ginner
           may either buy the cotton bales directly          from the
           farmer on behalf 01: a third party, act as broker
           for the farmer, or merely transfer         the bales to a
           warehouse for       storage    pending later   sale.   The
           ginner charges a f’!e for the transport           to ware-
           house.     Upon warehousing,        the farmer is issued
           negotiable    receipts    :for his cotton.

               While the quantity of cottonseed       generated from
            a particular      lot 0:: cotton is recorded,    the seed
            from one lot are co,-mingled in bulk with that of
            other lots and marketed as such by the gin.            The
            proceeds     from sale     of   seed extracted     from a
            particular     l.ot of cotton     are prorated   directly
            back to the gin service charges made to a farmer.

                Specific    records of the quantity of gin trash
            from s particular        lot of cotton    are not main-
            tained.      While the farmer has the option           of
            receiving    the gin trash from his lot of cotton,
            the impracticality      c#f handling the gin trash most
            frequently     results   in its disposal     by the gin.
            Any proceeds       are applied    against  gin operating

                                               p.   1386
Arthur G. Hansen - Page 3 (311-305)

            costs and assist   In keeping ginner service   costs
            down to a minimum level.    In many cases the cotton
            gin is a cooperative   of farmers who jointly    sell
            the gin trash to lower their costs of production.

                 Gin trash is Irimarlly   being sold to cattle
             feedlot  operations to be used in finished rations
             for animals owned by their clientele.

                 Gin trash is a low density nutrient          which is
             not utilized    as a ~?rimsry source of protein or fat
             in an animal ratica as are most feed ingredients,
             but more for its ",ulk'       or fiber content.   In this
             respect    gin trash     is similar    to unadulterated
             cottonseed    hulls,   peanut hulls     and rice   hulls,
             which are currently        exempted from the act under
             section   141.002(c) (,4).

                 The Ginners Association       maintains   that cotton
             gins act on beha,lf of the farmer,             offering   a
             service    which is an extension        of the harvesting
             process.      It is further maintained that a farmer
             relinquishes      ownership only when the disposition
             of lint,    seed and gin trash is completed.        The gin
             management actsf#>:c      the grower in delivering      gin
             trash. to the point of its disposal,         whether that
             disposal     be I to channels of the feed trade.         in
             distribution      across  farmland,    to s landfill.~   or
             otherwise.      This disposal    service   is provided   as
             part and parcel of' the ginning service and in many
             cases may provide a. return to the farmers in lower
             fees or charges.

       The guiding principle             of statutory     construction      is to ascertain
legislative      intent.       Jessem
                               --          Associates,    Inc.   v.    Bullock,     531 S.W.2d
593 (Tex. 1975).           From     reading     chapter   141   as   a  whole,    It   is clear
that the legislature          intendocl to set up a comprehensive scheme for the
registration,        labeling,        ar.d. inspection     of commercial          agricultural
feed.     Section 141.002 sets forth certain specific                    exceptions      to such
requirements.        The subsection         (c)(4)   exemption applies only to "a feed
product produced and sold by a farmer."                        (Emphasis added).           It is
clear that the exemption:,                 intended to reach a farmer only when he
sells his product;         he is then removed from the ambit of the rezra-
tion.    labeling,      and inspection          requirements.       Once ownership of the
giu trash passes           from thf! farmer, however,              the subsection          (c) (4)
exemption ceases to operet~r.                 It is unclear in your letter              whether,
and if so when. such title                passes.      The determination        of your first
question will finally             deperdi on the facts involved           in each instance.
If title      passes     from the farmer to the ginner.                   then     clearly     the
subsection      (c)(b)    exemptlot. does not extend to the ginner when there
is a subsequent          sale by the ginner.             The ginner would perforce              be
required to comply with th'c provisions                  of chapter 141.          On the other

                                          p.   1387
Arthur G. Eansen - Page 4 (m-305)

hand, if the ginner acts as a broker pursuant to some form of agency
contract   or accepts    the cotton    unde!: some form of    consignment
agreement, the subsection   (c)(4)  exemption may still be operable.

       You inform us that in many instar,ces,              a gin is operated as a
cooperative     of farmers.         Therefore,    you    further   ask whether the
subsection    (c)(4)    exemption would extend to gin trash processed               at a
gin so operated.           In section     51.004    of the Agriculture         Code, a
farmers’ cooperative        society   is empowered to “act as an egent for its
members in        selling      the    members’ agricul.tural        products.     . . ."
(Emphasis added).         Agric.    Code 151.004(a)(3).        In such an instance,
courts will     look to the intention         of the parties     to the contract       at
issue and examine the contract as a wholr rather than rely on the mere
form of the contract.           In Texas Certified      Cottonseed Brieders’ Ass’n
v. Aldridge.      61 S.W.2d 79 (Tex. 1933). ,the Texas Supreme Court held
that a marketing          contract    by which a cotton          producer     delivered
cottonseed    for resale to a co-bperstive          marketing &sociation        did not
effect    an absolute        sale,   even though the agreement specifically
provided    that the association          “buys” snd the producer         “sells      and
agrees to deliver”       the produce.     The cour't declared:

                    The members of the association.                 in order to
                promote their welfare,          delivere,d their seed to the
                association.         They constitutejd         the association
                their    agent with broad and ~rxclusive powers to
                handle      end sell        their     commodity.        This     was
                necessary      to accomplish         the very purposes           for
                which     it    wss     created.       It    being     the    clear
                intention       of    the    members to         create      a true
                co-operative        marketing      association,        under     the
                powers enumerated by law and by the contracts,                     to
                perform      certain      services      exclusivelv       for    Its
                members, and to hold in the face of this intention
                that the delivery         of the seei; to the association
                was an absolute            sale    would destroy         it   as a
                co-operative       marketing asso&%.                 The members
                have conferred          on this       association,       as their
                selling     agent,    such title      to the cottonseed        with
                plenary powers to handle and dzlspose of same. but
                the a&&.ation           handles the proceeds thereoi for
                the benefit       of itself     and its%mbers.           (Emphesis
                added).

-Id.   at 83.

      In another context,      this office   has previously     determined that
farm products held by a farm co-operative         remain in the hands of the
producer     for purposes    of article    VIII.   section   19 of the Texas
Constitution     which    exempts    from   aii valorem      taxation    "(flarm
products . . . in the hands of the producer.          . . ."   Attorney General
Opinions R-938 (1977);       M-632 (1970);     O-5404 (1943).      The opinions
concluded that farm products held by a co-operative             remained in the

                                              p.   1388
Arthur   C. Ransen       - Pago 5 (JM-305)

hands of the producer becauec! the producers,    in effect,    constituted
the co-operative  as their agent.  No absolute    title  to such products
passed from the farmers to ocher parties.      Analogously,   ue conclude
that “gin trash” held by a gin operated as a farmers’ co-operative       may
still  receive the benefit of the subsection   (c)(4)   exemption because
title  to such product remeinn with the farmer with the co-operative
acting merely as the producere’ agent.

                “Gin trash” In the control         of a cotton ginner
            falls      within    thlz    ambit      of   the   section
            141.002(c)(4)      Agriculture      Code exemption     from
            registration.     labeling,      and inspection   require-
            ments for commerci;%:l agricultural          feed only If
            title   to such feed product has not passed from the
            farmer to another         party.     “Gin trash”   in the
            control of a cotton &inner which is operated as a
            farmers’ co-operative       does fall within the examp-
            tion provisions.

                                                  -
                                                      JIM     M ANT T 0 X
                                                      Attorney General of Texas

TOMGREEN
First Assistant          Attorney   Gene,cal
                     .                                     .
DAVID R. RICEARDS
Executive Assistant Attorney            General

RICX GILPIN
Chairman, Opinion Conunittee

 Prepared by Jim Moellinger
 Assistant Attorney General

 APPROVED:
 OPINION COMMITTEE

 Rick Cilpin.   Chairman
 Jon Bible
 Colin Carl
 Susan Garrison
 Tony Guillory
 Jim Moellinger
 Jennifer Riggs
 Nancy Sutton