Attorney General Opinion WW-0224

TEE ATBXBRNEP GENERAL OF TEXAS Honorable John C. White Commissioner, Texas Opinion No. WW-224. Department of Agriculture Re: Are the funds presently on Capitol Station deposit In a bank in Harlin- Austin, Texas gen, Texas, to the credit of the ‘Federal-State of Texas Inspection Service general operating fund” of such a nature as to properly be qualified as “public money”, or are they in fact private funds and subject to reimbursement under the pro- visions of the cooperative agreement between the U.S; Department of Agriculture, Inspection Association, Inc. and the Texas Department of Dear Commissioner White: Agriculture; and related questions. You have requested an opinion concerning the reim- bursement of funds presently on deposit in a bank in Harlingen, Texas, and the sale of certain office equipment and furniture in storage in a bonded warehouse in Harlingen, under the pro- visions of the cooperative agreement between the U. S. Depart- ment of Agriculture, Inspection Association, Inc. and the Texas Department of Agriculture. In your letter you have submitted the following questions: “1. Are the funds presently on deposit with the First National Rank of Harlingen to the credit of ‘Federal-State of Texas Inspection Service gen- eral operating fund’ of such a nature as to prop- erly be classified as ‘public money’ or are they of such a nature as to properly be classified as private funds and disposed of in accordance with the provisions of the Cooperative Agreement be- tween the U. S. Department of Agriculture, In- spection Association, Inc. and the Texas Depart- ment of Agriculture? “2. In the event that you are of the opinion that any portion of these funds are properly to be Honorable John C. White, page 2 (WW-224) classified as 'public money', then will you please designate such portion. “3 0 Does the Texas Department of Agriculture have the authority to dispose of such office equipment and furniture as is presently in storage at Harlingen, Texas, in accordance with the provisions of the Cooperative Agreement be- tween the U. S. Department of Agriculture, In- spection Association, Inc. and the Texas De- partment of Agriculture? “4. Does the Texas Department of Agriculture have the authority to dispose of such additional equipment as Is presently under its control in accordance with the provisions of the Coopera- tive Agreement between the U. S. Department of Agriculture, Inspection Association, Inc. and the Texas Department of Agriculture?" .We shall answer your questions in the order presented. Your file indicates that there is presently on deposit in the First National Dank of Harllngen, Texas, funds in excess of $100,000. This fund, it appears has accrued as a result of the operation of the various inspection statutes of the State of Texas as they relate to the shipment of fruits, vegetables and citrus fruit, and as a result of the cooperative agreements en- tered into pursuant to these state inspection statutes. The file further indicates that until 1953, the ln- spection service was carried out under the statutes in effect and under the provisions of a series of cooperative agreements entered into by the U. S. Department of Agriculture and the Texas Department of Agriculture. In 1953 the cooperative agree- ment that had beenin effect between the U. S. Department of Agriculture and the Texas Department of Agriculture was termi- nated, and the Texas Department of Agriculture ceased to be a party to any cooperative agreement involving the inspection of fruits and vegetables. The inspection statutes under which this cooperative agreement had been operative read, in part, as follows: (1) Art. 117, V.C.S.: "The Commissioner of Agriculture shall appoint Inspectors to inspect fruits other than citrus and vegetables other than potatoes at the different Honorable John C. White, page 3 (.L%W-224) shipping or loading stations in this State when called upon by the grower, shipper, shipper's agent, or by any financially interested party. When one or more of the above mentioned parties are operating at one or more shipping points and inspection is requested, the Commissioner of Agriculture shall appoint an Inspector to make the requested inspection and the party or parties requesting inspection shall contribute his or their pro rata of the expense of inspection. 11 . . D "Sec. 4. All Certificates of Inspection is- sued by the Commissioner of Agriculture designat- ing the true grade, classification, pack or other standard requirements of such fruits or vegetables under the provisions of this Act, or other form evidencing that official Inspection has been made, shall be issued by the Inspector and delivered to the applicant upon the payment of his contribution of his pro rata share of the cost of inspection. ,, . . . (2) Art. 118a, V.C.S.: "Sec. 1. In order to provide the means whereby producers of certain citrus fruit, and all interested parties, may secure prompt and efficient Inspection and classification of grades of fruit at reasonable cost, and because it is hereby recog- nized that the standardization of the citrus fruit industry by the proper grading and classifications of citrus fruit by prompt and efficient inspection under competent authority is beneficial alike to grower, shipper, carrier, receiver, and consumer, in that it furnishes the grower and the shipper prima facie PvSdence of quality and condition of products, it guarantees the carrier and the receiver of quality of products carried and received by them and assures the ultimate consumer of the quality of the products purchased, this Act ins passed. " . . . "Sec. 12. It is prctrided that this law shall be self financing, and that the Legislature shall make no appropriation for the enforcement thereof; . . . provided that the contribution shall be fixed Honorable John C. White, page 4 (wW-224) as nearly as possible with reference to the cost of maintaining the expenses of inspecting and grading citrus fruits under the provisions and requirements of this Act and the Co-operative Agreement, and the Issuance of certificates with relation thereto; 0 0 0" (3) Art. 118c-1, V.C,S.: "In order to provide a means by which pro- ducers and shippers of tomatoes may secure prompt and efficient inspection, classlficatlon, and grading of tomatoes at reasonable cost, and be- cause the Legislature of the State of Texas recog- nizes that the standardization of tomato shipments through the proper grading and classification of tomatoes, by prompt and efficient inspection under competent authority, will confer benefits upon growers, shippers, carriers, receivers, and consum- ers, in that the certification by competent author- ity will furnish the grower and shipper of such products with prima facie evidence of the quality, quantity, and condition of pack of the product so certified, and because such certification will guarantee to the carri-?r and receiver tb:? quality of products carr!.ed and received by them and will assure the ultimate consumer of the quality of products delrvered to him, this Act is passed. "Sec. 10. It is provided that this law shall be self-financing and that the Legislature shall nake no approprletlon for the enforcement thereof; D . 0 provided that the contribution shali be fixed as nearly as possible wlth reference to the cost of mninta:ning the expenses of inspection and grad5 g tomatoes under the Cooperative Agree- ment; D 0 O1(D As a result of the operation of the Inspection serv- ices under the cooperative agreement, which was terminated, there had accrued a balance of $17,917.60, which remained af- ter the payment of all expenses and outstanding debts. Part III (1) of the Memorandum of Agreement between the FTOdUCtiGn and Marketing Administration, U. S. Department of Agriculture and the Texas Department of Agriculture, which was terminated in 19j39 reads as follows: Honorable John C. White, page 5 (WW-224) "(i) Upon the termination of this agreement any balances remaining in the hands of the Texas Department of Agriculture after all proper charges incurred in the conduct of the work provided for under this agreement have been paid, may be used for the conduct of activities In the State of Texas consistent with the purposes set forth in this agree- ment provided that such disposition shall be mu- tually agreed upon by the cooperating parties and provided further that in the event no agreement can be reached, the balances shall be equally divided between the cooperating parties hereto and that por- tion reverting to the Production and Marketing Ad- ministration shall be covered into the Treasury of the United States as Miscellaneous Receipts." Prom the summer of 1953 until September 15, 1955 your file indicates that all inspection services were carried on by means of a cooperative agreement between the U. S. De- partment of Agriculture and Inspection Association, Inc. a corporation formed to assist the government agencies in i heir inspection service. In 1955 the 54th Legislature amended the above in- spection statutes to allow the establishment of cooperative agreements which could include any Texas firm, corporation or association organized for the purpose of Inspection, in ad&- tion to the U. S. Department of Agriculture as previously allowed. Pursuant to these amendments, a cooperative agree- ment between the Agricultural Marketing Service of the U. S. Department of Agriculture, Inspection Association, Inc., and the Texas Department of Agriculture was entered into on Sep- tember 15, 1955. Part III (p) of this agreement reads as fol- lows I l'(p) There are certain funds now on hand with the Inspection Association, Inc., as well as certain funds, office equipment, furniture, fixtures and other equipment being held by the Texas Department of Agriculture, which existed, accrued and accumu- lated under former cooperative agreements between the United States Department of Agriculture and the State Department of Agriculture, now being held by the State Department of Agriculture or to Its credit In the First National Bank of Harlingen, Texas. These funds, office furniture equipment and other properties so held by Inspection Association, Inc., and by the Texas Department of Agriculture, or placed to its credit shall, after the payment of all legal Honorable John C. White, page 6 (W-224) obligations incurred to date by Inspection Association, Inc., immediately upon the ef- fective date of this agreement, be made available to, and become property subject to use under this agreement, and shall also be subject to the hereinafter provided provision regarding distribution of assets under this agreement In the event of abrogation or terml- nation hereof o )’ Under the provisions of Part III (p), the $17,.917.60 was transferred from the old account to~the operating account which was created by the 1955 three-way agreement. The Termination Clause of this three-way provides : Wpon termination of this agreement, or any extension or renewal thereof, any balances in the inspection fund, together with all furni- ture supplies and equipment, may be used as mu- tualiy agreed for rendering of the service through a successorV cooperating agency or other- wise; provided. however, in case the agreement is not reactivated by mutual consent of the par- ties hereto, within one year of termination of this agreement, any unobligated balance remain- ing after all equipment has been sold and all proper charges incurred in the conduct of the work provided for under this agreement have been paid, shall be withdrawn from the Inspection fund and returned to the applicants for lnspec- tion in proportion to the amount which they have paid for inspections under this agreement during a period of one year prior to the terminatlon of this agreement. Any share which cannot be re- turned within two years from the termination of this contract shall be paid one-half to the Agrl- cultural Marketing Service and the other one- half to the State Department of Agriculfure.” By agreement between all parties the three-way agree- ment entered into September 15, 1955, was e erminated, effective April 12, 1956, and under the provisions of the Termination Clause, the $100,000 balance remaining in the inspection fund becomes subject to the distribution provided for in the Termina- tion Clause e Honorable John C. White, page 7 (WW-224) The language of Articles 117, 118a, and 118c-1, Vernon's Civil Statutes, as set forth above, indicates that the inspection services, as provided for by the provisions of these respective statutes, are to be financed by the contribu- tions of those seeking the inspection service, and that the acts shall be self-financing. The language of the statutes also indicates that the contributions shall be fixed as nearly as possible with reference to the cost of maintaining the ex- pense of inspecting and grading. The amendments to Articles 117p 118a, and 118c-1, Vernon's Civil Statutes, which were enacted by the 54th Legis- lature, made several minor changes in these inspection statutes. The only significant change, however, was in the provision which established the power of the Texas Department of Agriculture to enter Into cooperative agreements with any Texas firm, corpora- tion or association organized for the purpose of assisting In the inspection provided for by the respective statutes. The amendments in no way modify the provisions of the prior stat- utes which established the method of financing and the extent of contributions. We believe that the provisions of Articles 117, 118a and 118c-1, Vernon's Civil Statutes, have at all times lndl- cated a clear intent on, the part of the Legislature that the people of Texas should be provided with the means by which the fruit and vegetables which they produce, and desire to have shipped, may be promptly and efficiently inspected and classi- fied. It also seems clear that the Legislature has indicated that the cost of this inspection shall in no way be borne by the State of Texas, bdt, to the contrary, should be financed by the individuals who receive the benefit of the inspection. The above quoted provisions indicate that each user of the service is to contribute his pro rata share of the expense and that his contribution shall be fixed as nearly as possible with reference to the cost of maintaining the inspection and grading service. As further indication of this intent the 54th Legis- lature, in amending Articles 118a and il8c-1, Vernon's Civil Statutes, has added the following phrase to Section 12 of Arti- cle 118a and to Section 10 of Articlt: i18c-1. 'I* e 0 but shall in no c&se exceed the actual i cost of the service-for inspection and grading services performedLrendereu in a regular packing house. 0 o 01' For these reasonsp it is our opinion that it was clearly the intent of the Legislature that the inspection serv- ice provided for by these statutes should be self-supporting Honorable John C. White, page 8 (~~-224) and operated on a non-profit basis. It therefore follows, we believe that regardless of whether the funds collected be classlfjed as public or private, the Legislature Intended that any surplus funds remaining after the performance of the in- spection service should be returnable to the individual contrib- utors. It is our further opinion that though $17,917.60 of the balance on hand accrued as a result of the operation of the inspection service under a former agreement, these funds are subject to distribution under the provisions of the 1955 agree- ment. These funds were used in accordance .with the provisions of Part III (i) of the last U. S. Department of Agriculture- Texas Department of Agriculture agreemen.t and were properly transferred to the inspection fund in the 1955 agreement in ac- cordance with Part III (p) of the later agreement. For these reasons, it follows that our answer to your first question is that all of the funds on deposit with the First National Dank in Harlingen, Texas, to the credit of "Fed- eral-state of Texas Inspection Service general operating fundnp are subject to disbursement fn accordance with the provlsions of the 1955 cooperative agreement entered into between the U.S. Department of Agriculture, Inspect'lon Association, Inc. and the Texas Department of Agriculture. As a result of our ans wer to your first question, it becomes unnecessary to answer your second question. It is also our opinion that what has been said in connection with our holding as to the funds on deposit in the bank at Harlingen will apply with equal force in answering your third question and that the Texas Department of Agriculture has the authority to dispose of all office equipment and furni- ture which is presently in storage at Harlingen, Texas, provided that this furniture was purchased out of the proceeds of the contributions paid by the users Ok p the inspection service under the present three-way agreement or under prior agreements be- tween the U. S. Department of Agriculture and the Texas Depart- ment of Agriculture. Subject to the latter condition, your third question is answered in the afffrmative. Likewise, it Is our opinion that the Texas Department of Agriculture has the author'lty to dispose of any additional . equipment which might have been purchased out of the proceeds of the contributions of the users under the 1955 three-way agreement, or prior agreements, and which is presently under its control. Subject to the latter conditicnp your fourth question must be answered in the affirmative. Honorable John C. White, page 9 (W-W-224) SUMMARY The funds presently on deposit with the First National Bank in Harlingen, Texas, to the credit of "Federal-State of Texas Inspection Service gen- eral operating fund" may be disposed of In accord- ance with the provisions of the three-way agreement entered into between the Agricultural Marketing Service of the U, S. Department of Agriculture, In- spection Association, Inc. and the Texas Department of Agriculture. All furniture presently In storage at Harlingen, Texas, and all other equipment which is presently under the control of the Texas Depart- ment of Agriculture, which was purchased under the provisions of the above three-way agreement or under the provisions of any previous agreement, is also subject to disposal under the provisions of the three-way agreement entered into as between the U.S. Department of Agriculture, Inspection Association, Inc. and the Texas Department of Agriculture. APPROVED: OPINION COMMITTEE H. Grady Chandler, Chairman W. V. Geppert Wallace Finfrock B. H. Timrains, Jr. REVIEWED FOR THE ATTORNEY GENERAL BY Geo, P, Blackburn WCR:jl:wb Very truly yours, WILL WILSON Attorney General of Texas Assistant