HonorableJ. M. Falkner

Commlssloner Departmentof Banking John H. Reagan wllldlng Austin, Texas Opinion No. C- 413

Dear Mr. Falkner: Re: Whether a nonprofit corporationcharging a membership fee a6 a requisiteto par.. ticipate In a subsequent contract for prepaid funeralmere. chanaiae can operate under Article 548b, Sec. 5. YOU ha,ve

requested .m
_ an opinion from this office on

. . the above captloneaquesc:lon. The questionedenterpriseis dewrlbed by **your** letter 88 fOllONS:

“A nonprofit corporation desires to sell to persons certainprepaid funeralmerchandise Including caskets,vaults, etc. In order to exclude certainundesirablepersons from membership in the nonprofit corporation, and also to help defray advertisingand selling costs, a person could apply fop, end if acceptable,would be affordedmembership In the nonprofit corporation, upon the payment of a membership fee to be set by a board of directorsof the corporation. Once a person ha8 been accepted a8 a member, upon payment of the membership fee and acceptable a8 being a deairebleperson for membership,that member would be entitled and eligible to purchase from the corporationat substantiallyless than currentmarket prlce8, a casket,vault,marker and other funeralmerchandiseto be dellv&ed to the member at time of hi8 death or need."

-1945-HonorableJ. M. Falkner,page 2 (C-413)

Your letter further outlines the followingquestions. "1. Under Article 548b, Section 5(l), V.C.S., can a nonprofit corporationofferingprepaid fur]eral

benefit8 charge a membership fee as a requisiteto be eligible and entitledto participate in a kibsequentcontract 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 provisionsof Article 548b, Sectlon 5(l), V;CiS;, and particularlythe last full sentencethereof, should the membership fee be limited to ar '&mount not to exceed the total of funds permitted to be retainedunder this subsection?”
In const.,ruing

a statute,the aim and,objectis to ascertainand enforce the leglalativeintent and not to t=Fa;h5nullify or thwart It. 53 Tex.Jur.26181, Statutes,

. . Section 5(l) of Article 548b, Vernon's Civil Statutes, read8 a8 follows:
Sec. 5.

. . . "(1) The funeralhome (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 collecteaor 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 purchaserof such prepaid funeral benefits as such total amour+is reflected in the contract. No~charges-or assessments,
. . . shall be collecteafrom 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** assessmentwhich Is to be used for the purpose of covering expenses,costs and overheadmust be lncluaed In the total amount of the contract for prepaid funeralmerchandise. Art, 548b, Sec. 5(l), V."C;S;

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HonorableJ. M. Falkner, Page 3 (C-413)

The membershipfee In this case is to be used to defray expenses and cost8 but is not to be lncluaed iti the subsequent contract for prepaid funeralmerchandise. We, thus, conclude In answeringyour first question that the associationin question is prohibitedfrom charging a membership fee as a requisiteto purchase a subsequent contract for prepaid funeral~merchandise unless such fee Is included in the total amount of the contract for prepaid funeralmerchandise.
It become8 apparent,under the facts as presented in your letter, that this conclusionwould nullify the necessity for answeringthe latter two questionsunless 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 originallywritten excludednon-profitorganizationsfrom 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 corporation8to 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 corporationlegally chartered under Article 1396, Sec. 1.01, et seq, Vernonts Civil Statutes (TexasNon-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 associationto retain as its own money, for the purpose of defrayingexpenses, 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 concludedthat 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-HonorableJ. M, Falkner,page 4 (C-413)

SUMMARY ------- 1. Under Sec. 5(L), of Article 548b, Vernon's Civil Statutes,a non-profitcorporation '8 prohibited from charging a membership fee unless such fee is incluaea in the total amount of the contract for prepaid funeralmerchandise.

2. Assuming the membership fee will be included In the total amount of the contract, a non-profitcorporationlegally charteredunder the Texas Non-ProfitCorporation 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-profitcorporation may 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

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