Attorney General Opinion WW-0919

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 l ueh memorandum are purchaeable from a separate unfnoorporated business concern for profit,organiaed for the purpose of operating a Y *a* 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 011 this 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 mcluding caskets, grave vaults, and all other r 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