Honorable J. M. Falkner Opinion No. C- 413
Commlssloner
Department of Banking
John H. Reagan wllldlng
Austin, Texas Re: Whether a nonprofit
corporationcharging
a membership fee a6
a requisite to par..
ticipate In a sub-
sequent contract for
prepaid funeral mere.
chanaiae can operate
under Article 548b,
Dear Mr. Falkner: Sec. 5.
YOU ha,verequested
.m an
.. opinion from this office on
_ quesc:lon.
the above captlonea
The questioned enterprise is dewrlbed by your letter
88 fOllONS:
“A nonprofit corporationdesires to sell to
persons certain prepaid funeral merchandise
Including caskets, vaults, etc. In order to
exclude certain undesirablepersons from member-
ship in the nonprofit corporation,and also
to help defray advertising and selling costs, a
person could apply fop, end if acceptable,would
be afforded membership In the nonprofit corpora-
tion, upon the payment of a membership fee to
be set by a board of directors of the corporation.
Once a person ha8 been accepted a8 a member,
upon payment of the membership fee and acceptable
a8 being a deaireble person for membership, that
member would be entitled and eligible to purchase
from the corporationat substantiallyless than
current market prlce8, a casket, vault, marker
and other funeral merchandise to be dellv&ed
to the member at time of hi8 death or need."
-1945-
Honorable J. M. Falkner, page 2 (C-413)
Your letter further outlines the following questions.
"1. Under Article 548b, Section 5(l), V.C.S.,
can a nonprofit corporationoffering prepaid
fur]eralbenefit8 charge a membership fee as a
requisite to be eligible and entitled to par-
ticipate in a kibsequent contract for prepaid
funeral benefits? . . .
"2. Under Article 548b, Section l-a, V.C.S.,
could a nonprofit corporationoperate as in the
question above?
"3.~ 'Inview of the provisions of Article 548b,
Sectlon 5(l), V;CiS;, and particularlythe last
full sentence thereof, should the membership fee
be limited to ar '&mountnot to exceed the total of
funds permitted to be retained under this sub-
section?”
In const.,ruing
a statute, the aim and,object is to
ascertain and enforce the leglalativeintent and not to
t=Fa;h5nullify or thwart It. 53 Tex.Jur.26 181, Statutes,
. .
Section 5(l) of Article 548b, Vernon's Civil Statutes,
read8 a8 follows:
Sec. 5. . . .
"(1) The funeral home (or other entity collect-
ing said funds) may retain a8 its own money, for the
purpose of covering its selling expenses, servicing
cost8, and general overhead, an amount not to exceed
one-half of all.funds so collectea or paid until it
has received for its use,and benefit an amount not
to exceed 'tenpercent of the total amount agreed
to be paid by the purchaser of such prepaid funeral
benefits as such total amour+is reflected in the
contract. No~charges-orassessments, . . . shall
be collectea from the purchaser other than those
included in the total amount of.said contract."
It Is our opinion that the 'legislatureintenaed that
any charge of assessment which Is to be used for the pur-
pose of covering expenses, costs and overhead must be
lncluaed In the total amount of the contract for prepaid
funeral merchandise. Art, 548b, Sec. 5(l), V."C;S;
-1946-
.7-
Honorable J. M. Falkner, Page 3 (C-413)
The membership fee In this case is to be used to defray
expenses and cost8 but is not to be lncluaed itithe subse-
quent contract for prepaid funeral merchandise.
We, thus, conclude In answering your first question
that the associationin question is prohibited from charg-
ing a membership fee as a requisite to purchase a subse-
quent contract for prepaid funeral~merchandiseunless such
fee Is included in the total amount of the contract for
prepaid funeral merchandise.
It become8 apparent, under the facts as presented in
your letter, that this conclusionwould nullify the neces-
sity for answering the latter two questions unless the
membership fee is included in the total amount of the con-
tract. Thus we have decided to assume, for the purpose of
answering these questions, that the membership fee will
be included in the total amount of the contract.
Sec. la of Article 548b, Vernon's Civil Statutes, as
originally written excluded non-profit organizationsfrom
the coverage of the Act. This was repealed by Acts 58th
m3., 1963, Chapter 496, page 1304 and the present section
was added in lieu thereof. The ,legislature, by this change,
obviously intended to allow non- roflt corporation8to
operate under this Act. Art. 54f;b, Sec. la, V.C.S.
Thus, In answer to your second question, It is our
opinion that a non-profit corporationlegally chartered
under Article 1396, Sec. 1.01, et seq, Vernonts Civil
Statutes (Texas Non-Profit CorporationAct) can operate
under Article 548b, Sec. la, Vernon's Civil Statutes.
In answer to your third question, we refer you to
Sec. 5(l) of Article 548b, Vernonls Civil Statutes, which
allows the association to retain as its own money, for the
purpose of defraying expenses, costs and overhead, an amount
not to exceed one-half of all funds until it has received
ten percent of the total amount of the contract. We have
concluded that so long as the membership fee is includea
in the total amount of the contract, there is no limit
on its size. However, It must be incluaed in the contract
and upon such compliance, the associationmay then retain
one-half as paid not to exceed the ten percent as permitted
by the Statute. Art. 548b, Sec. 5(l), V.C;S.
Thus, it is our opinion that under Sec. 5(l) of Article
548b, there is no limit on the size of the membership fee
but the fee as a separate Item cannot be retained es it
must be Included in the total amount of the contract.
-1947-
Honorable J. M, Falkner, page 4 (C-413)
SUMMARY
-------
1. Under Sec. 5(L),of Article 548b, Vernon's
Civil Statutes, a non-profit corporation'8 pro-
hibited from charging a membership fee unless
such fee is incluaea in the total amount of the
contract for prepaid funeral merchandise.
2. Assuming the membership fee will be
included In the total amount of the contract,
a non-profit corporationlegally charteredunder
the Texas Non-Profit CorporationAct can charge
a membership fee under Sec. la of Article 548b.
3. Assuming the membership fee will be
Included in the total amount of the contract,
under Sec. 5(l) of Article 548b, Vernon's Civil
Statutes, there is no limit on the size of the
fee, but the non-profit corporationmay not retain
the fee as a separate item to defray expenses,
costs and overhead.
Respectfullysubmitted,
WAGGONER CARR
Attorney General of Texas
CFVznh
APPROVED:
OPINION COMMITTEE
W. V. Geppert, Chairman
plRG;ms
Gordon Houser
Harold Kennedy
APPROVEDFORTHEAATTORNEYGENERAL
BY: Stanton Stone
-1948-