969 S.W.2d 84 | Tex. App. | 1998
OPINION
VitaPro Foods, Inc. (VitaPro) appeals a summary judgment declaring its contracts with the Texas Department of Criminal Justice (TDCJ) invalid. VitaPro brings two points of error, contending that the trial court erred by granting TDCJ’s motion for summary judgment and denying VitaPro’s motion for summary judgment.
This case concerns the authority of the TDCJ to enter into two contracts with Vita-Pro. VitaPro is a Canadian company that manufactures a soy-based meat substitute called VitaPro, which is a textured vegetable protein (TVP).
In January 1994, Yank Barry, VitaPro’s President and CEO, met TDCJ officials at the American Correctional Association Food Show and Service Show in Orlando, Florida. According to Barry, a VitaPro broker followed up on this initial contact during several subsequent meetings with TDCJ officials.
According to Jane Thomas, TDCJ’s Director of Food Service, James Collins, TDCJ’s Executive Director, directed her to purchase VitaPro for testing purposes in mid-1994. Thomas prepared a bid specification and sent it to the General Services Commission (GSC). Through the GSC, TDCJ acquired some VitaPro in July 1994. According to Barry, after the testing period, he met with officials of TDCJ and Texas Correctional Industries (TCI), a TDCJ office that uses inmate labor to make products. At this meeting, the parties discussed the possibility that TCI could repackage and market Vita-Pro. In the succeeding months, TCI officials met with VitaPro representatives in Montreal and developed an “Action Plan” in order to “[fjacilitate the purchase of TVP from Vita-Pro Foods, Inc. for distribution by TCI to Food Service and to other tax supported entities.”
On November 7, 1994, Collins issued a “Decision Memorandum” stating that “[i]t is the intent of the Prison Industries Office, Texas Correctional Industries, to purchase Dehydrated Textured Protein Product (TVP) in bulk quantities, and using inmate labor, repackage and label said product in commercial containers for sale to the TDCJ-ID Food Service Facilities and to the correctional facilities of other states.” At the same time, TDCJ entered into the first of two contracts to purchase VitaPro, without contracting through the GSC. The parties agree that the contracts between TDCJ and VitaPro are embodied in two “Delegated Purchase Orders.”
The first contract provided for a term ending on August 31, 1995, with an option to
TDCJ and VitaPro entered into a second contract in July 1995. This contract had a five-year term and obligated TDCJ to purchase a minimum of thirty-nine metric tons of VitaPro per month. TDCJ retained the right to cancel for cause, which was defined as “serious detriment to the daily operations of TDCJ-ID.” The second contract also noted that VitaPro would provide TCI technical assistance with product packaging and inventory control. The contract provided for an estimated purchase of VitaPro at a cost of over $33 million.
Although the purported contracts do not directly provide for TCI’s role as a distributor of VitaPro, the evidence is undisputed that all VitaPro shipments went first to TCI, and not to TDCJ’s Food Services Division. According to Thomas, Food Services purchased VitaPro from TCI with appropriated money actually spent, as opposed to paper-only transfer of funds between agencies.
Additionally, TCI, with the help of Food Services employees, began to market VitaPro to other government entities. According to Artis B. Mosley, Jr., a TDCJ deputy executive director, TCI purchased VitaPro out of the Industrial Revolving Fund. It was Mosley’s understanding that the Industrial Revolving Fund consists of money from sales. TCI repackaged the VitaPro, then marketed it. The parties agree that TCI completed only five sales to entities other than TDCJ: State of New York, State of Iowa, State of Missouri, Nacogdoches County, and McLen-nan County. These sales totaled $84,719.11:
New York $66,728.21
Iowa $13,005,00
Missouri $ 2,906.25
Nacogdoches County $ 1,806.25
McLennan County $ 273.00
TDCJ and VitaPro encountered many obstacles to TCI’s plan to repackage and ship VitaPro. Many states have laws discouraging the purchase of food handled by inmates. Additionally, TCI could not effectively negotiate for favorable trucking costs. Finally, because of geographical proximity, VitaPro could ship to northern and eastern states more cheaply than could TCI. Therefore, Vi-taPro directly shipped the New York and Iowa orders from Canada. For these sales, TCI essentially received a sales commission without ever touching the product.
Barry conceded that the distributorship agreement may never have been committed to writing. He also conceded that TCI’s required minimum purchase was intended to cover sales to TDCJ.
Thomas testified that Collins ordered her to serve VitaPro every day to inmates. Eventually, Food Services was serving Vita-Pro twenty-six times a month. TDCJ presented considerable summary judgment proof that the frequent serving of VitaPro demoralized both inmates and staff. The inmates complained of adverse health effects, primarily rampant flatulence. Far fewer inmates and staff ate meals when VitaPro was served.
On February 20, 1996, TDCJ stopped accepting, phased out the consumption of, and filed suit against VitaPro. In its suit, TDCJ requested the court to declare that
(1) No contract was ever formed between TDCJ or the State of Texas, and Vita-Pro;
(2) Neither the Purchase Order nor any of its predecessors confer any obligation upon TDCJ or the State of Texas to take or to pay for any amount of Vita-Pro product;
(3) TDCJ has paid in full for all the Vita-Pro product shipped and received through the month of January 1996;
(4) TDCJ has rightfully rejected the February 1996 shipment of VitaPro and has performed all legal duties to Vita-Pro with respect to the rejected goods;
(5) TDCJ is now and at all times relevant was without authority to expend the funds used to pay VitaPro for the goods shipped.
VitaPro counterclaimed, seeking a declaration that the contract was valid, that it was due breach-of-eontraet damages, and that TDCJ had not properly canceled the contract for cause.
On July 12, 1996, TDCJ filed a motion for summary judgment, seeking an order declaring that
(a) Other than by Purchase Order No. 696-4-5847-X [the original order placed by GSC], no contract was ever formed between TDCJ or the State of Texas, and Defendant;
(b) Other than Purchase Order No. 696-4-5847-X, which has been fully performed by both parties, no Purchase Order issued by Plaintiff to Defendant confers any obligation upon TDCJ or the State of Texas to take or to pay for any amount of VitaPro product;
(c) TDCJ is now and at all times relevant was without authority to expend the funds used to pay VitaPro for the goods shipped under [the last two contracts].
VitaPro filed a counter-motion for summary judgment on July 19, 1996. VitaPro sought summary judgment against TDCJ on TDCJ’s claims that the contracts were invalid or canceled for cause. VitaPro also sought a declaration that all the contracts were valid, and that VitaPro was entitled to breach-of-eontraet damages.
On August 9, 1996, the trial court entered an order denying VitaPro’s motion for summary judgment and declaring that the disputed contracts were not valid, that TDCJ had no obligation to VitaPro, and that TDCJ was without authority to pay VitaPro for the goods shipped under the second and third contracts.
Summary judgment is appropriate if the summary judgment evidence “on file at the time of the hearing, or filed thereafter and before judgment with permission of the court, show that, except as to the amount of damages, there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law on the issues expressly set out in the motion or in an answer or any other response.”
No one has authority to make a contract binding on the State, except where he is authorized to do so by the Constitution or a pre-existing statute.
The GSC is generally responsible for all state purchases.
VitaPro argues that the statutes establishing the prison industries program authorize the VitaPro purchases.
The Government Code provides for the purchase of materials for the prison industries program:
To provide articles and products to an agency of the state or a political subdivision of the state, the institutional division may purchase equipment, raw materials, and supplies in the manner provided by law.11
(Emphasis added.) This statute permits TDCJ to obtain materials for products for political subdivisions of the State of Texas. Except for the three sales to other states, all of the repackaged VitaPro was sold to counties, which are subdivisions of the state, and to TDCJ for prisoner consumption. One of the purposes of the prison industries programs is to “provide adequate, regular, and suitable employment for the vocational training and rehabilitation of inmates, consistent with proper penal purposes.”
The State also contends that the sales to other states violated Section 1761 of the criminal laws of the United States Code, which prohibited transporting goods manufactured by convicts or prisoners into interstate commerce.
The present litigation does not attempt to void the out-of-state sales, or any of the sales made through the Texas prison
But a salient factor that must be considered in Section 497.025 is that these purchases must be made “in the manner provided by law.” To hold that this statute permits direct purchases would be to beg the question. Thus, we must look to the specific authorization provisions to determine what manner is provided by law.
VitaPro urges that the general purchasing commission does not have authority over goods and services for resale, citing Section 2155.141(1) of the Texas Government Code.
VitaPro also contends that TDCJ was authorized to purchase VitaPro pursuant to Section 496.051(b):
The [TDCJ] board may authorize the executive director to adopt policies allowing the institutional division to purchase directly or at public auction livestock, agricultural commodities, agricultural or industrial equipment, supplies, and raw materials for agricultural or industrial production, breeding, consumption, or resale, if the division determines that the purchase is economically feasible and advantageous to the division. The State Purchasing and General Services Act ... does not apply to purchases made under this subsection. The institutional division shall notify the General Services Commission as soon as practicable of a purchase made under this subsection and the purchase price.17
(Emphasis added.) This statute does not directly authorize any TDCJ purchases. Instead, it authorizes the TDCJ to formulate policies permitting direct purchases that do not go through the GSC.
The State contends that VitaPro is not an agricultural commodity under Article 496.051(b). VitaPro is texturized soybean with an assortment of other items added into the mix, such as spices, wheat, flour, carrots, green beans, onions, yeast, com syrup, canola oil, corn starch, conditioners, and anti-caking agents.
The State also argues that the phrase for agricultural or industrial production, breeding, consumption, or resale uses the adjectives agricultural and industrial to modify the four nouns coming after those adjectives. The doctrine of the last antecedent is sometimes applied to making an interpretation in this situation. This doctrine is as follows:
[R]elative and qualifying words, phrases, and clauses are to be applied to the words or phrase immediately preceding, and are not to be construed as extending to or including others more remote; nor are they ordinarily to be construed as extending to the following words. This rule is, however, merely an aid to construction to be applied only where there exist uncertainties and ambiguities in the statute, and when other and more important rules of construction fail; and the clear intent of the legislature takes precedence as a cannon of construction.
Applying the doctrine of the last antecedent, agricultural or industrial modifies only
The State emphasizes that the legislative history should be examined to determine the legislative intent. Section 311.023 of the Texas Government Code
On the other hand, the Texas Supreme Court has stated that unless the statute is ambiguous, we must follow the clear language of the statute.
Courts must take statutes as they find them. More than that, they should be willing to take them as they find them. They should search out carefully the in-tendment of a statute, giving full effect to all of its terms. But they must find its intent in its language and not elsewhere .... They are not responsible for omissions in legislation. They are responsible for a true and fair interpretation of the written law. It must be an interpretation which expresses only the will of the makers of the law, not forced nor strained, but simply such as the words of the law in their plain sense fairly sanction and will clearly sustain.
Benjamin Disraeli said, “With words we govern men.” The laws are written for the benefit of the people of the State of Texas, and any citizen reading the law should be able to rely on the language of the statute-. We should not go behind the statute to ascertain some legislative intent that was in no way expressed in the language. Legislative intent necessarily requires that the legislators who vote on the passage of such a law understand and intend the language as written. There is some ambiguity
The State has offered considerable legislative history for Section 496.051, some of which suggests that there was discussion in the committee and bill analysis that the legislation was to give the TDCJ the leeway to make advantageous purchases in situations where it was impractical to obtain GSC approval. Earlier versions of the bill limited its application to purchases made at auctions. We recognize that legislative history is one of the factors to be considered according to Section 311.023 of the Government Code.
The State argues that the new statutory authorization is designed only to take effect when it is impractical to requisition through the GSC. It is further pointed out that the first purchase of YitaPro utilized the GSC procedures. The rest of the purchases were made after several months of discussion with VitaPro, and the record does not reflect that the TDCJ could not have purchased the Yita-Pro through the GSC.
However, there is no language in the statute (Section 496.051(b)) that requires purchases by the TDCJ be made pursuant to that statute only when such purchases cannot be made under the GSC. For us to construe such a requirement into the provision would be usurping the authority of the Legislature and in effect be writing the legislation. If the Legislature so intended, then it can insert that language into the statute. Section 496.051 was written after Section 2155.061, which provides for purchases through the GSC. While it is true that this later provision did not amend the specific Act under which the GSC requirements are set up, it should be construed to be an exception, and because it is the latest of the two statutes passed, it should prevail.
On November 9, 1987, TDCJ formulated a direct purchase policy. The policy was designed “[t]o establish procedures for implementing direct purchases and purchases at public auction for certain agricultural and industrial commodities and materials.” It provided that
In certain instances, it is advantageous for the Texas Department of Corrections (TDC) to make purchases that do not fit the pattern or rules of the State Purchasing and General Services Commission. Examples of these include livestock at auction, used equipment, surplus equipment from correctional facilities in other states, and raw materials for resale items when requested by the customer. The 70th Legislature provided TDC exemption from State Purchasing and General Services Commission rules and review in those instances when the department deems such action is economically feasible and advantageous to the Texas Department of Corrections.28
The initial “decision memorandum” authorizing the purchase of VitaPro relied upon TDCJ’s purchasing authority under Tex.Rev. Crv. Stat. Ann. art. 6203c-12, a predecessor statute to Section 496.051. The agency’s policy memorandum also set up a procedure whereby the divisions of the department could make direct purchases. Subsequent purchase orders and payment vouchers also referenced Article 6203c-12. Therefore, Section 496.051 was TDCJ’s statutory justification for the VitaPro purchases. VitaPro notes that “[construction of a statute by the administrative agency charged with its enforcement is entitled to serious consideration, so long as the construction is reasonable and does not contradict the plain language of the statute.”
The statute authorizing the TDCJ board to adopt policies allowing for such purchases and the policy adopted allow this exception to the State purchasing and General Service Commission rules “when the department deems such action is economically feasible and advantageous to the Texas Department of Corrections.”
It is not the duty of the person contracting with the TDCJ to decide whether the purchase is economically feasible and advantageous to the Texas Department of Corrections. To require such action would place a difficult, and perhaps impossible, burden on any party attempting to contract under this provision. Under both the statute and policy, the TDCJ is best suited to determine or deem whether a purchase is economically feasible and advantageous. There is no summary judgment proof that the TDCJ did not deem these purchases to be economically feasible and advantageous. Furthermore, if the TDCJ represented to the seller that the purchases were economically feasible and advantageous, then the seller had a right to rely upon those representations.
VitaPro argues that its product is a raw material. Raw material can be defined as “crude or processed material that can be converted by manufacture, processing, or combination into a new and useftd product. Wheat [the finished product of the farmer] is raw material for the flour mill.”
However, if the product fits in another category under the statute, a mistake in the terminology describing the product would not void the contract. The formulated policy itself authorized agricultural commodities. Por an ultimate determination of whether these contracts for the purchase of Vitapro were legal under the statute, we must look to the authorization to purchase agricultural commodities.
TDCJ argues that VitaPro cannot be an agricultural commodity because it is already a finished product ready for consumption. It contends that VitaPro is a highly manufactured, complex food product that has come a long way from the farm. The Texas Agricultural Code in Section 41.002
The original-identity test avoids the generalities of most definitions of this term by giving it a factual focus for definitive classification. The principle of the original-identity test to distinguish between an agricultural commodity and a manufactured product had its origin in the interpretation of the Interstate Commerce Act. Nevertheless, this seems an appropriate test in the present case. In Hartranft v. Wiegmann,
[mjanufaeture implies a change, but every change is not manufacture, and yet every change in an article is the result of treatment, labor, and manipulation. But something more is necessary.... There must be transformation; a new and different article must emerge, having a distinctive name, character, or use.
We recognize that different courts have made different interpretations under this test. The State points to the cases of Interstate Commerce Commission v. Schaetzel
At the time this summary judgment was entered, Rule 166a of the Rules of Civil Procedure had not been amended, and the burden was on the State to show as a matter of law that VitaPro did not fit in any of the categories allowing a direct purchase. The State faded to exclude as a matter of law that VitaPro was an agricultural commodity. The fact that VitaPro was used for consumption and resale was not disputed. Therefore, we reverse and remand this case for trial.
. TexR. Civ. P. 166a(c).
. Nixon v. Mr. Property Management, 690 S.W.2d 546, 548-49 (Tex.1985).
. State v. Ragland Clinic-Hosp., 138 Tex. 393, 159 S.W.2d 105, 106 (1942).
. Tex. Const, art. Ill, § 44.
. Ragland, 159 S.W.2d at 107; City of Bonham v. Southwest Sanitation, Inc., 871 S.W.2d 765, 767 (Tex.App.—Texarkana 1994, writ denied).
. Id.
. Tex Gov’t Code Ann. § 2155.061(a) (Vernon 1998).
. This section became effective on September 1, 1995. It was preceded by Tex.Rev.Civ. Stat. Ann. art. 601b, § 3.01(a) (repealed 1995), which provided that the GSC "shall purchase, lease, rent, or otherwise acquire all supplies, materials, services, and equipment for all state agencies, including spot purchases and purchases that do not require a competitive bid, except for [certain irrelevant exceptions]." Article 601b, § 3.01(a) would apply to VitaPro purchases before September 1, 1995, and § 2155.061(a) of the Government Code would apply to VitaPro purchases on or after September 1, 1995. The differences between the sections have no apparent effect on the outcome of the case. Therefore, for ease of discussion, we will reference only the section still in effect.
. Tex. Gov’t Code Ann. §§ 497.001 et seq. (Vernon Supp.1998).
. Tex Gov’t Code Ann. § 497.006 ("Prison Industries Office” is the statutoiy name for TCI).
. Tex Gov’t Code Ann. § 497.025.
. Tex. Gov’t Code Ann. § 497.022(1).
. Article 9007, § 1(a) provides:
The Texas Department of Corrections is hereby authorized to contract with other states, the federal government, foreign governments, or an agency of any of them for the manufacturing and selling of items produced by prison industries for the above mentioned governments.
Tex.Rev.Civ. Stat. Ann. art. 9007, § 1(a) (emphasis added) (Act of Feb. 28, 1979, 66th Leg., R.S., ch. 9, § 1, 1979 Tex. Gen. Laws 17, repealed by Act of May 28, 1997, 75th Leg., R.S., ch. 1409, § 9, 1997 Tex. Gen. Laws 5284).
. 18 U.S.C.A. § 1761 (West Supp.1998).
. Mayfield v. Troutman, 613 S.W.2d 339, 344 (Tex.Civ.App.—Tyler 1981, writ ref’d n.r.e.).
. Tex. Gov’t Code Ann. § 2155.141(1) (Vernon 1998).
. When the VitaPro purchases were made, Section 496.051(b) had a slightly different wording. The subsection was amended in 1995. Tex Gov’t Code Ann. § 496.051(b), Amended by Act of May 25, 1995, 74th Leg., R.S., ch. 321, § 1.025(b), 1995 Tex. Gen. & Spec. Laws 2774, 2780, repealed by Act of May 28, 1997, 75th Leg., R.S., ch. 1409, § 9, 1997 Tex. Gen. Laws 5284. The change in wording had no effect on the statute's meaning.
. 82 CJ.S. Statutes § 334 (1953) (footnotes omitted).
. Tex. Gov't Code Ann. § 311.023 (Vernon1988).
. Tex. Gov’t Code Ann. § 312.005 (Vernon 1988).
. Republicbank Dallas v. Interkal, Inc., 691 S.W.2d 605, 607 (Tex.1985).
. Id. (quoting Simmons v. Arnim, 110 Tex. 309, 220 S.W. 66, 70 (1920)); accord Seay v. Hall, 677 S.W.2d 19, 25 (Tex.1984).
. The ambiguity rather is on what modifies what in the lengthy opening sentence. In its brief, VitaPro suggests four different possible constructions of that sentence.
Option # 1: • livestock,
• agricultural commodities,
• agricultural or industrial equipment,
• supplies, and
• raw materials for agricultural or industrial,
• production,
• breeding,
• consumption, or
• resale
Option # 2: • livestock,
• agricultural commodities,
• agricultural or industrial equipment,
• supplies, and
• raw materials
for
• agricultural or industrial production,
• breeding,
• consumption, or
• resale
Option # 3: • livestock,
• agricultural commodities,
• agricultural or industrial equipment,
• supplies, and
• production,
• breeding,
• consumption, or
• resale
Option # 4: • livestock,
• agricultural commodities,
• agricultural or industrial equipment,
• supplies, and
• raw materials for
• agricultural or industrial production
• breeding,
• consumption, or
• resale
. Smith v. Brooks, 825 S.W.2d 208, 211 (Tex.App.—Texarkana 1992, no writ).
. Tex Gov’t Code Ann. § 311.023.
. Thiel v. Harris County Democratie Executive Committee, 534 S.W.2d 891, 894 (Tex.1976).
. See Tex. Gov’t Code Ann. § 311.002 (Vernon 1988).
. Texas Department of Corrections, Board Policy No. BP-14.66 (November 9, 1987).
. Tarrant Appraisal Dist. v. Moore, 845 S.W.2d 820, 824 (Tex.1993).
. Texas Department of Corrections, Board Policy No. BP-14.66 (November 9, 1987).
. Webster’s Ninth New Collegiate Dictionary 978 (1985).
. Tex Health & Safety Code Ann. § 431.002 (Vernon 1992 & Supp.1998).
. 21 U.S.C.A. § 321(r) (West 1972).
. Tex Agric. code Ann. § 41.002 (Vernon 1995).
. Tex Agric. Code Ann. § 104.002 (Vernon 1995).
. 121 U.S. 609, 7 S.Ct. 1240, 30 L.Ed. 1012 (1887).
. 351 U.S. 49, 76 S.Ct. 574, 100 L.Ed. 917 (1956).
. 339 F.Supp. 1345 (E.D.Wis.1972).
. 148 F.Supp. 399 (S.D.Tex.1956).