Honorable J. M. Falkner 

Commlssloner 

Department of Banking 

John H. Reagan wllldlng 

Austin, Texas 

Opinion No. C- 413 

Dear Mr. Falkner: 

Re: Whether a nonprofit 

corporation charging 

a membership fee a6 

a requisite to par.. 

ticipate In a subsequent contract for 

prepaid funeral mere. 

chanaiae can operate 

under Article 548b, 

Sec. 5. 

YOU ha,ve requested .m _ 

an opinion from this office on . . the above captlonea quesc:lon. 

The questioned enterprise is dewrlbed by your letter 

88 fOllONS: 

“A nonprofit corporation desires to sell to 

persons certain prepaid funeral merchandise 

Including caskets, vaults, etc. In order to 

exclude certain undesirable persons from membership 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 corporation, 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 corporation at substantially less 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 corporation offering prepaid 

fur]eral benefit8 charge a membership fee as a 

requisite to be eligible and entitled to participate in a kibsequent contract for prepaid 

funeral benefits? . . . 

"2. Under Article 548b, Section l-a, V.C.S., 

could a nonprofit corporation operate as in the 

question above? 

"3.~ 'In view of the provisions of Article 548b, 

Sectlon 5(l), V;CiS;, and particularly the last 

full sentence thereof, should the membership fee 

be limited to ar '&mount not to exceed the total of 

funds permitted to be retained under this subsection?” 

In const.,ruing a statute, the aim and,object is to 

ascertain and enforce the leglalative intent 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 collecting 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 'ten percent 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-or assessments, . . . shall 

be collectea from the purchaser other than those 

included in the total amount of.said contract." 

It Is our opinion that the 'legislature intenaed that 

any charge of assessment which Is to be used for the purpose 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 iti the subsequent contract for prepaid funeral merchandise. 

We, thus, conclude In answering your first question 

that the association in question is prohibited from charging a membership fee as a requisite to purchase a subsequent contract for prepaid funeral~merchandise unless 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 conclusion would nullify the necessity for answering the latter two questions unless the 

membership fee is included in the total amount of the contract. 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 organizations from 

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 nonf; roflt corporation8 to 

operate under this Act. Art. 54 b, Sec. la, V.C.S. 

Thus, In answer to your second question, It is our 

opinion that a non-profit corporation legally chartered 

under Article 1396, Sec. 1.01, et seq, Vernonts Civil 

Statutes (Texas Non-Profit Corporation Act) 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 association may 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 prohibited 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 corporation legally chartered under 

the Texas Non-Profit Corporation Act 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 corporation may not retain 

the fee as a separate item to defray expenses, 

costs and overhead. 

Respectfully submitted, 

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-