THEAA~TORNEY CmNERAL 

OF ?I-ExAs 

Honorable 3. #I. Fallmer 

State Banking Commlssloner 

Opinion Ho. S-188 

Capital latfonal Bank Building Re: Whether a loan of $200 

Austin, Texas to a funeral home, providing an option for a 

paid funeral, Is subJect 

to the provisions of 

Article 548b, V.C.S., requiring a permit from 

Dear Mr. Falkner: Banking Department. 

Your letter of January 27, 1956, requested the opinion 

of this office concerning the following situation whloh we quote 

as described by your letter: 

'The Good.%elghbor Funeral Home, Inc., LaMarque, 

Texas, according to our Information, is a corporat&on duly Incorporated and existing under and by 

virtue of the laws of the State of Texas with Its 

domicile and principal place of business In the City 

of LaMarque, CIalveston,County, Texas, to conduct a 

general funeral directors and undertaking buslneas. 

Seemingly, their charter was obtained in February, 

1955, with a capital stock of $1,050.00. Subsequent to its Incorporation, they proceeded to 

solicit subscriptions for the erection of a funeral 

home by obtaining ersonal loans from Individuals 

In the amounts of ! 200.00 each, bearing 4s Interest 

Vernon's 

Home. 

with no securlt 

V' 

save and except an option whloh 

provided for a l,OOO.OO funeral service .whlch was 

to Include a metal casket, embalming, use of funeral home and chapel, hearse service, register book, 

and acknowledgment oards, and with funeral complete 

with use of the staff of said funeral home." 

Your request concerns the appllcablllty of Article 548b, 

Civil Statutes, to the above operations of the Funeral 

Section 1 of Article 548b provides In part: 

"Any lndlvldual, firm, partnership, corporation, or association (hereinafter called -'organ- 
Hon. J. M. Falkner - Page 2. '(S-186) 

izatlon’) desiring to sell 'prearranged or prepaid funeral services or funeral 'merchandise 

(including caskets, grave vaults,.and all other 

articles of merchandise Incidental to a funeral 

service) In this State under a sales eontract 

providing for prepaid burial or funeral. benefits or merchandise to be delivered at an undetermlned future date de 

of the contracting party f 

endent upon the death 

hereinafter called 

'prepaid funeral benefits') shall obtain a permit from the State Banking Department authorlslng the transaction of this type of business before entering Into any such contract. After thirty 

days from the effective date of this Act, It shall 

be unlawful to sell prepaid funeral benefits unless the seller holds a valid current permit at 

the time the contract Is made." 

In the subscription agreement, the Funeral Home agrees 

to furnish the followinga 

"In the event of the death of the undersigned or any member of his Immediate family, as 

herein named, then the COOD NRIQHROR FUNERAL 

HOME, INC., promises and agrees to provide a One 

Thousand Dollar funeral service, for such deceased 

one, Including metal casket, embalming, use of 

funeral home and chapel, hearse service, register 

book, and aoknowledgement cards, and with funeral 

complete with use of the staff of the COOD NRICRBOR FUNRRALHOME, INC." 

The other party to the agreement agrees to lend Good 

Neighbor Funeral Home, I,nc., the sum of $200.00 for a term of 

ten years. By this subscription agreement the funeral home 

promises to furnish a $l,OOO.OO funeral service in the event 

of death and In return for this the other party to the agreement promises to loan a sum of money to the funeral home. 

Subsequent to signing the subscriptdon agreement, both 

parties sign a note a8 described In a form drawn by the corporation. This form contains the following language: 

"Option One: As security for the payment 

of this note and in the event of the death of the 

payee or any member of his Immediate family, as 

herein named, within ten (10) years from this 

date, then the Good Neighbor Funeral Home, Inc., 

promises and agrees to provide a One Thousand 
, 

-.-- 

;; ,; 

Eon. 3. II. Falkner - page 3. pww I , .?‘,. Lc’3 -. ‘;; ,‘_ ~, (‘5 . ” I ,:, 

Dollar funex-al aervloe, for suoh.deoeased one, 

lnoludlng metal;casket, emballsing,.'us& of funeral 

home aiC3 ahapel,~ he,aqi!e servlee,~re@itreir book, 

and aolmo*ledgmeht oards, and 'ti$th fuiferal oomplate wlth we of *he' staff 6f the Qood Helghbor 

Funeral Home, Inc." 

Opt& Two Is a8 ~followst 

"In the .event the above named One Thousand 

Dollar funersl~ Is not needed during said ten 

(10) year period; And the payee should so eleot, 

then the @oo~d Neighbor Funeral Home, Inc.; agrees 

to furnish to the payee and/or the isembers of the 

family as above named, a Five Hundred Dollar funeral at any-tlae after said ten (10) year period." 

By this agreement-the corporation promises and agrees 

to provide a $l,OOO,OO funeral In case of death If elected b 

the payee, and also~ further promises that It will furnish a 3 500.00 

funeral If It has not furnished the $l,.OOO.OO funeral during the 

ten year period, If the payee should 'so eleot, after the ten years 

elapse. In return for these promises on the part of the funeral 

home, the other party lends the suqof money sought by the funeral home. 

It la clear from the two contracts that the corporation 

Is binding Itself to furnish funeral sefvlces In return for the 

u8e of the other party's money for a term not to exceea ten years. 

Both parties are bound by their pSamlse8 described In the crony 

tract. 

Therefore, It Is the dpinion of this offlce that the 

activities of the funeral home come within the provisions of 

Article 5&8b, and the funeral homes operating in the mapner 

outlined in your letter must obtain permits from Me State 

Banklng Department before entering Into sqoh contracts.. 

SUMMARY 

Individuals, firms, partnerships, 

corporatlons or assoclatlons providing prepaid or prearranged funeral benefits In return for a 
Hon. J. n. Falkner - page 4. (S-188) 

APPROVED: 

loan of money are required by Artlcle 548b, V.C.S., to obtain permits 

from the State Banking Department 

before entering Into such oontraots. 

J. C. Davis, Jr. 

County Affair,8 Division 

J. A. Amls, Jr. 

Reviewer 

Mert Starnes 

Reviewer 

L, W. Gray 

Reviewer 

Davis Want 

First Assistant 

JOHR BEN SHEPPERD 

Attorney Gleneral 

Yours very truly, 

JOHN i&N SHEPPERD 

Attorney Oeneral 

Philip Sanders , 

Assistant ,Attorney Qeneral 

PS:zt