E ORNEY GENE
OF TEXAS
WILL WrLsa~
A-rrORNEY GENERAL
Augurt 25.1960
Hon. J. hi. Falkner, Commissioner Opinion No. WW -919
Departmant of Ranhing
Austin, Texas Rc: Whether corporations ieeufng
certain Debenture hetallmeat Pur-
chase Agreements are witbin the
provisions of Art. !Wb. V.C.S., re-
quiring corporation8 desiring to sell
prepaid funeral eervicee or funeral
merchandise to obtain a permit from
Dear Mr. Falhner: the Banking Department.
You have requested our opinion on the applicability of Article 548b,
V.C.S., to certain organiaatione engaged in the activities described as
f ollowe:
‘A non-profit corporation orgadedd under the laws
of Texas for the purpose of operating a cemetery is pre-
sently engaged in the sale of debentures, which debentures
are either sold outright for cash or under a Dsbenture In-
stallment Purchaee:Agreement where the purchaser paye
the purchase price in a seriee of inetallmente. . . The
debentures mature in twenty years from date of issuance
or upon death of the purchaser if that occurs first.
“At the tims of the sale of such a debenture, the pur-
chaser thereof may designate certain items of funeral mer-
chandise and services which he desires the members of his
family to purchase upon hi8 death with the funds obtained
from the payment to them of the proceeds of the debenture.
This designation is made on a memorandum styled Advaace-
Of-Need - Enetructions and apparently it is not binding upon
th4 heirs of the purchaser. . . The funeral merchandise
and services listed in lueh memorandum are purchaeable
from a separate unfnoorporated business concern *a*
for profit,organiaed for the purpose of operating a Y uneral
home, and managed by the same person or person8 who
manage the buefaeee utivitl*e ef the noa-prdit coepoeatiaa. l ~,
1.
. . .
“Anotbr feature of thfe Dobonture Inetallment Fur-
chase Agreement which may have some bearing 011this mat-
kr~tbrtthepurchreerthareof~y obtainlifeineuranca
“’
--.. I
” ‘3,.
Hon. J. M. Falkner, page 2 (ww-919)
from an affiliated life insurance company whereby ae
Debenture Installment Purchase Agreement will be paid
in full in the event the purcharor dies prior to complet-
ing the iastallmeat paynieate.”
These facts as debiled in your request involve three separate organi-
satione. The first is a non-profit corporation engaged in sale of installment
debentures; the second. an unincorporated business concern operating a
funeral home; and the third, a Texas life insurance company. The non-profit
cemetery corporation, selling the debentures, is specifically exempt from
Article 548b by Section la thereof. The insurance involved is simply credit
life insurance and as such, both it and the issuing company are regulated
by pertinent provisions of the Insurance Code, not by Article 54gb. This is
emphasis& by Section 10a d tba latter. The holy remaiaiag queetioa is
the applicability of Article Hgb to the unincorporated funeral home.
This statute regulates the sale of prepaid funeral services of mer-
chandise, Section 1 provides in part as follows:
“Any individual, firm, partnership, corportiion or
association (hereinafter called ‘organization’) desiring to
sell prearran ed or prepaid funeral services or funeral
merchandise rmcluding caskets, grave vaults, and all other
articles of merchandise incidental to a funeral service)
in this State under a sales contract providing for prepaid
burial or funeral benefiti or merchandise to be delivered
at .an undetermined future date dependent upon the death
of the contracting party (hereinafter called ‘prepaid funeral
benefits’) shall obtain a permit from the State Banking
Department authorizing the traniaction of this type of busi-
ness before entering into any such contract. . ,”
The narrow question then is whether under the facta presented. ihe
unincorporated funeral home is entering into sales coatracte providing for
prepaid funeral services or merchandise deliverable at the death d the
contracting party. The answer is no.
An analysis of the contractual arraagemente shows a coatract with
the non-profit corporation for the purchase of debeaturee and a contract
with an insurance company for the purchase of credit life insurance. The
purchaser has entered into no contract with the funbral home. The pur-
chaser may, and presumably does, fill out what is called “Advance-Of-
Need Instructions” under the letterhead of the funeral home. This is a
designation of those items of funeral services and merchandise which the
purchaser wants utiliaed at his funeral. As you peinted orrt, these fnetruc-
tiona ars not binding onbanyone. The heirs may utilfee the proceeds of
the debenture to purchase the designated items from the funeral home or
they may not. No consideration flows to the funeral bome~ unloee aad until
the heirs elect to purchase certain fteme therofrom after the death of the
.- . .
Hon. J. M. Falkner. page 3 (WW-919)
purchaser. Even at that time, the consideration may or may not arise
from the debentures. The payee of the debentures is in all cases either
the debentureholder or his estate, not the funeral home.
SUMMARY
The business operations described in the
opinion request do not bring the business con-
cerns involved under the provisions of Article
548b. V.C.S.
Respectfully submitted,
WILL WILSON
Attorney General of Texas
RAw:lmc
APPROVED:
OPINION ~COMMITTEE:
W. V. Geppert, Chairman
J. C. Davis
C. K. Richards
Robert H. Walls
REVIEWEDFORTHEATTORNEYGENERAL
BY: Leonard Passmore