Untitled Texas Attorney General Opinion

Honorable Robert S. Calvert            Opinion No. M- 449
Comptroller of Public Accounts
State Capitol Building                 Re:    House Bill No. 579,
Austin,  Texas                                Chapter 497, Acts of the
                                              61st Legislature,  page
                                              1606 (Title 122A,
                                             ,Taxation-General,  V.C.S.)
                                              regarding certain coin-
Dear Mr. Calvert:                             operated machines.
      Your opinion request dated July 28, 1969, poses six
questions that have arisen under new Article      13.17,   Title
122A, Taxation-General,   Vernon's Civil Statutes,      which was
enacted by the 61st Legislature   and which becomes effective
September 1, 1969.
      Your first   question Inquires as to whether a business
licensed  under Article    13.17  Is required to file with the
Comptroller and the Consumer Credit Commissioner a copy of
'any personal loans, notes, mortgages and any other monetary
benefits  extended to a person engaged in selling      or$Er;i$g
alcoholic  beverages    for on-premises consumption."
lowing portiozis of the Article'have      relevance to thiS'quek3tion;
to-wit :
           "Section   2.   DEEINITIONS. . . .
                               +++

           “(2)    tfinancial      interest"    includes any
     legal or equitable       interest,      and specifically
     includes the ownership of shares or bonds of
     a corporation.
                               *it*

           ?!&@tioa$???.    * . .
          "(1)   It shall     be unlawful for a nerson
     who has a financial      interest  in a business



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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 ,alco-
     holic beverages for on-premises consumption
     unless otherwise permitted in this Article.
     no bona fide financial   interest   or commitment
     in existence   prior to September 1, 1969, shall
     be deemed a violation   of this Article,    but no,
     such interest   or commitment may be 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)  Any person required to be licensed by
     this Article    may make an extension of credit to
     a lessee or a bailee of a music or skill or
     pleasure coin-operated      machine for business or
     commercial purposes when the following       terms and
     conditions   have been met and the following     duties
     and obligations    satisfactorily   assumed and dis-
     charged D
                             ***

            “(7)   Any person required to be licen~sed by
      this Article   who co-signs,  guarantees,   or becomes
      surety for an extension of credit or loan of any-
     ,thing of value to any person engaged in selling       or
      serving alcoholic   beverages for on-premises consump-
      tion or to any person who he has reason to believe
      is about to be engaged in selling      or serving alcoholic
     beverages for on-premises consumption, shall file
     with the Comptroller and the Consumer Credit Commissioner,
      a copy of all documents related to the transaction.”
      It is our opinion that a person who lends money to be used
in a liquor business or who takes a mortgage on any property
owned by or used in the liquor business has thereby become
financially  Interested  in the liquor business within the spirit
and contemplation   of the Act.


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    .       1




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


       In Nevada Tax Commission v. Hicks,      310 P.2d 852 (Nev.,
sup. 195'2) th           t      t  d th 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 Nevada and commission rules
thereunder.      Section 1Oc of the Gambling Control Act pro-
vided that applications      for gambling licenses    shall include
the names of all persons directly       or indirectly   interested
in the business and the nature of such business.           cofnmission
Rule II 1 which was promulgated under such Gambling Control
Act provided that with regard to the revocation         or suspension
of licenses     the omission of the nsme'of any person financially
participating     in the business from the application      should be
deemed pertinent.
      One of the questions in the case was whether the lending
of money to a hotel corporation     for the purpose of construct-
ing a hotel gave the lender a "financially     participating
interest"   in the hotel corporation.    The court 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 may reason-
        ably be construed to include the investment which
        results when money is lent for the purpose of financing
        an enterprise.       Otherwise such financial   interests
        a8 those represented by the corporate bonds of sn
        incorporated    licensee    would be excluded.    While these
        do not have the potentially       hazardous effect   upon the
        public welfare which direct operational        control would
        have, still    they can be said to be of material con-
        cern to the commission."
      Thus, except for the provisions         of paragra h (6) of
Section 27, all those barred under Section 27(l P rrom having
a financial    interest   in a business 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 a means whereby a person otherwise
prohibited   from making such loans can extend credit to a
lessge or bailee of a coin-operated         machine, even though he be
eng +d in the on-premises alcoholic          business,     provided that
all%    les and regulations      set forth in paragraph (6), including
subparagraphs (a) through (f),         are strictly   followed.



                                 -   2226   -
Hon. Robert   S. Calvert,   page 4 (M- 449)


       Section 27(l) provides an exception if the one engaged
In the sale of alcoholic     beverages for on-premises consump-
tion 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     rovisions  of said para-
graph (6) and its subparagraphs (a P through (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 make a.loan to anyone save an
excepted corporation     engaged in the on-premises alcoholic
beverage business except under paragraph (6),         and loans to
an excepted corporation     under Section 27(l) can be made if
the corporation    is a lessee or bailee of a machine on1
under the terms of the provisions       of said paragraph (6 7 .
      We think that paragraph (7) above-quoted   is self-
explanatory.   It provides that a person licensed by the Act
can co-sign,  guarantee or become surety for the extension
of credit to a person engaged in the liquor business so long
as a copy of all documents related to the transaction     are
filed with the Comptroller and the Consumer Credit Commis-
sioner.
      Your second question inquires as to whether a business
licensed   under Article   13.17  will be required to file a copy
of any personal loans, notes, mortgages and any other monetary
benefit   extended to a person who is 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 no prohibitions       against a coin-operated
business becoming interested      in another business where alco-
holic beverages are not sold for on-premises consumption.
However, under the provisions      of said paragraph (6) which
extends credit to any lessee or bailee of a coin-operated
machine (whether such lessee or bailee is in the liquor busl-
ness or not) must follow all of the rules and regulations
set forth in said paragraph (6) and subparagraphs(a)         through
(f),  both inclusive,    of said paragraph (6).     Since the
Legislature    has provided the means, methods and conditions
under which a licensed business may make a loan to a lessee
or bailee of a coin-operated      machine, such loans cannot other-
wise be made. Where a statute prescribes         a method under which
an Act can be accomplished,      no other method can e implied
and all other methods are excluded.        Creager v. RIda&o County


                                -2227-
Hon. Robert   S. Calvert,        page 5 (M-449)


Water Improvement District    No. 4, 283 S.W. 151 (Tex.Comm.
3   . 1926). Vit pi1      Ware, 280 S.W.2d 378 (Tex.Clv.App.
lpSp55 erro; refo n.rv;! .); 53 Tex.Jur.2d 205, Statutes,
Sec.'llll.
     Your third    question       reads as follows:
          "Can a person own and operate his own coin
     machine in his business where alcoholic beverages
     are sold and consumed on the premises under Sec-
     tion 27(l), under this act?"
       In Attorney General's Opinion M-437 recently       issued,
this office    held that a person who owned and operated his
own coin-operated      machine in his own place of business was
engaged in a business which is required to be licensed          under
this Act.     Therefore,    under the plain provisions   of Section
27(l) of the Act, one who is engaged in the business of
selling   alcoholic    beverages for on-premises consumption is
absolutely    barred from owning and operating a coin-operated
machine in his liquzr business.        Exceptions to this rule
are granted in the         randfather clause" which is contained
in said Section 27(1 7 and which is self-explanatory.          Section
27(l) also grants an exemption to corporations         whose securi-
ties are registered      under the laws of the United States or
Texas.    Paragraph (2) of Section 27 also grants an exemption
In that one who has a financial       interest  in a business required
to be licensed      can also have an interest   in real property on
which there is located a business engaged in selling          or serv-
ing alcoholic     beverages for on-premises consumption.
     Your fourth      question     is as follows:
            "Section 26 requires that a written contract
     be filed with the Comptroller as to all agreements
     with licensee   and business where a coin-operated
     machine is placed.    Would a copy of a blanket con-
     tract suffice   or would the licensee  be required to
     file a copy of each contract    signed and sworn to by
     both parties?"
     The applicable      portions     of Section      26 are as follows:

           "Section     26.      ~MJT~;RIZRD CONTRACTS
                                                     PROHIBITED;
                                        a
          "(1)      No person      licensed under this Article
     may place     or operate      a music or skill or pleasure

                                     -2228..
Hon. Robert     S. Calvert,    page 6 (M-449)

      coin-operated    machine In an establishment
     where alcoholic     beverages are sold or served
      for on-premises consumption except by written
     contract.      The contract must include all pro-
      visions of the agreement between the parties
     and a statement sworn to by both parties that
     _there are no other  . understandings   or agreements
      between tne parties.
              "(2)    The licensee    shall
                                                of the contract
                                                terms previously
      filed    with the Comptroller.
                    furnish a copy to the manager of the
      establiu(bkent   where the machine Is placed; and
                      retain   a copy at his principal     place
      of bu:&;ss.
              “(3)    The manager of the establishment  shall
     retain     his   copy of the contract on his premises."
      With the words "unless on terms previously      filed with
the Comptroller,!'     as contained in paragraph (2)(a),   the
Legislature   apparently undertook to provide an exception
to the rule that a copy of each contract must be filed with
the Comptroller.      These words are ambiguous, and they must,
if possible,   be construed in such a fashion as will ascribe
a reasonable and fair meaning within the legislative        intent,
as ascertained     from a view of the statute as a whole.      53
Tex.Jur.2d 180-189,      Statutes,  Sets. 125-126.
       In assigning   some efficacy    to the exemption provision
and at the same time staying within the manifest spirit' of
the policing    provisions    of the Act, we are of the opinion
that a fully executed copy of each and every contract must
be filed with the Comptroller.         However, applicable     terms of
the contract may be incorporated        and made a part of the con-
tract by express reference       to another contract or other
instrument which sets forth certain contractual            terms and
provisions    and which is definitely     identified     in the present
contract and which has been previously         filed with the Comp-
troller,    Such a contract so incorporating         certain terms by
reference   must also affirm that all parties have read such
terms and provisions       and understand them. Thus, a copy of
a "blanket contract"      will suffice   only to the extent above-
outlined.
      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 and operated.
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 Hon. Robert       S. Calvert,    page 7 (M-449)


       We are 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 many references    to the Article,   samples of
 which are as follows:
                 "Section   8.    LICENSEREQUIRRU;PRNALTY;
                                  EXCEPTIONS.
                  "(1)   No person 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, a music coin-operated    machine
           or a skill or pleasure coin-operated       machine
           without a license     issued under this Article.
                                    ***

                 "Section   11.   DISPLAY; PENAL!lTY,
                  "(1)     A person licensed   to do business under
           this Article       shall prominently display his current
           license     certificate   at his place of business at
           all times.
                                    *+*

                 "Section   15.   TYPES OF LICENSES.
                  "(1)   A person who wishes to engage in certain
           business dealing with music coin-operated    machines
           or skill    or pleasure coin-operated machines shall
           apply for a general business license,    or an import
           license,    or both.
                  "(2)   A general business licensee   may engage
            in business to manufacture, own, buy, sell,      rent,
            lease, trade, repair,   maintain, service,   transport
            or exhibit within the state, and store music and
,'          skill  or pleasure coin-operated   machines.
                  "(3)  An import licensee   may engage in busirless     i
           to import, transport,     own, buy, repair, sell,   and
           deliver,    music and skill or pleasure coin-operated
           machines, for sale and delivery     within this.State."
            The provisions  of Section 12 dealing with the application
     for   a license are also relevant in that the application   must
Hon. Robert   S. Calvert,   page 8 (M-449)



show the nature of'the business entity to be licensed         snd
must show the 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 a tax of $15.00 per year on each coin-operated       machine,
Article 13.17 deals with the licensing      of a business which
deals in such machines.
      The only difficulty    in interpretation    with regard to
this  question is found in the provisions       of Sections 9 and
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 an annual license        fee of $300.00 shall
be paid for each "type and place of business licensed         under
this Article."
       In McCauley v. Hobbs Trailers,      357 S.W.2d 494, (Tex.
Civ.App. 1962            it) the court construed Section 2 of
Article   6165a: r)cl”‘s ., which defines a loan broker as “a
person, firm,. or corporation       . . . who pursues the business
of lending money, . . . and taking for security        for the
payment of such loans . . . an assignment of wages. . . ."
The court held that the term "business"        connoted a distinc-
tive business,   i.e.,     au occupation or employment habitually
engaged in for the purpose of profit        or improvement.
       The requirement of a license      to engage ir,a particular
business or occupation whether it is called a license             tax,
an occupation tax, a privilege        tax or an excise tax, is
not a tax an property.        53 C.J.S. 457-458,    Licenses,   Sec. 3;
Producers Oil Company v. Stevens, 99 S.W. 157 (Tex.Civ.App.
  907, error ref.).      Rather, such a business licensing
requirement exacts a tax or fee for the rivllege             of carrying
on a business or occupation.         53 C.J.S. t 46-447,   Licenses,
Sec. 1; 36 Tex.Jur.2d 618, Licenses,         Sec. 28.    Statutes
imposing licenses      and business taxes are to be construed
liberally    in favor of the citizen     and strictly    against the
government. and ever-v doubt as to construction          must be
&solved     & favor oflthe one against whom the enactment is
sought to be applied.       Ii. E. Butt Grocery Company v. Shepherd,
137 S.W.2d 823 (Tex.Civ.App.        1940, error ref.);    53 C. J . S .
495, Licenses,     6ec. 13.    Based o&an interpretation       of the
spirit    and intent of the statute as gathered from its four
corners, we are of the opinion that this Licensing Act is
aimed at the distinctive       business of dealing in coin-operated
machines and that 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,   a6 such,
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.     The first   license    is effective    as to a single place a
of business,     so that if a person has any other establishment
in which he maintains an of the business activities,                 as
contemplated by Section 5 (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,
a person who is in the basic,         overall business of owning
coin machines aud placing them'on various locations               for oper;.---*’
ation.    If that person had an office          and warehouse In Dallas
and another office      end warehouse in Houston, he would need
a license    for his Dallas location        and mother license for his
Houston location.       If the same person had an offlce,           or repair
shop, end a,warehouse in separate locations in each of the
two cities,     he would need a total of six licenses.            However,.
he would not necessarily         need a separate license      for each
place where he places a machine on location.               A single
machine on location       is a part of his business,        but the Act.
does not clearly      require a license for a part or portion of
his business.      It merely requires a license         for each
of the overall,      Identifiable    business or occupation wf
was Intended to be subject to being licensed:.
      We do not consider your sixth question because It is
conditioned  on sn affirmative answer to question No. 5.

                              SUMMARY
        Under Article   13.17 of Title 122A, Texation-
        General, Vernon's Civil Statutes,      House Bill
        No. 579, Chapter 497, Acts of the 61st Legis-
        lature,   page 1606, a licensed business other-
        wise prohibited    from having a financial    interest-
        in a business where alcoholic     beverages are sold
        for on-premises consumption may nevertheless         make
        extensions   of credit to lessees and bailees       of
        coin-operated   machines provided that he must
        strictly   comply with the provisions    of paragraph
        (6) of Section 27 of the Article.       Loans to
        corporations   of the type in which the licensee
        Is not prohibited     from having a financial    interest
        must also be made under said paragraph (6) if such


                                  -2232-
Hon. Robert   S. Calvert,   page 10 (M-449)


     corporation    is a lessee or ballee of such
     machines.     Extensions of credit by a licensed
     business to a lessee or bailee of a coin-
     operated machine who is not engaged in a business
     where alcoholic     beverages are sold for on-premises
     consumption must also strictly        comply with the
     provisions    of said Section 27(6).       A person cannot
     own and operate his own coin-operated          machines in
     his own place of business where alcoholic          beverages
     are sold for on-premises consumption unless he
     comes w&thin* oxceptlons granted in the "grand-
     father 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).
     Under Section 26 of the Article,        a fully executed
     copy of each written contract must be filed with
     the Comptroller,      provided however that terms and
     provisions    of the contract may be Incorporated        and
     made a part thereof by reference        to another contract
     or written instrument containing        such terms, provided
     that such referred-to       instrument must have thereto-
     fore been filed with the Comptroller and must be
     definitely    identified    In the present contract,     and
     the contract must affirm that all parties have read
     such referred-to      terms and understand them.       It 1s~ 'I'
     required that a license be procured for the distinc-
     tive business which is required to be licensed,           and
     he must 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   on his dis-
     tinctive   business also at such location.




                                           ey General of Texas
AW:dc



                                - 2233 -
,Hon. Robert   S. Calvert,   page 11 (M- w9)


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




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