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 Purchase Agreements are witbin the 

provisions of Art. !Wb. V.C.S., requiring 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 presently engaged in the sale of debentures, which debentures 

are either sold outright for cash or under a Dsbenture Installment 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 purchaser thereof may designate certain items of funeral merchandise 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 AdvaaceOf-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 Furchase Agreement which may have some bearing 011 this matkr~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 completing the iastallmeat paynieate.” 

These facts as debiled in your request involve three separate organisatione. 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 merchandise, 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 r mcluding 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 business 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 purchaser may, and presumably does, fill out what is called “Advance-OfNeed 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 fnetructiona 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 concerns 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