### 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 onthe applicability ofArticle 548b, V.C.S., to certain organiaatione engaged in

### theactivities 

### describedas followe:

‘A non-profit corporation orgadedd under the laws

of Texas for the purpose of operating a cemetery is presently engaged in the sale ofdebentures, which debentures are either sold outright for cash or under a Dsbenture Installment Purchaee:Agreement where thepurchaser paye the purchase price in a seriee ofinetallmente.

. . The debentures mature in twentyyears **from** date ofissuance or upon**death** ofthepurchaser if that occurs first.

“At the tims ofthe sale of such 

### adebenture, thepurchaser thereof may designate certain items offuneral merchandise and services which he desires the members ofhis family to purchase upon hi8 deathwith thefunds obtained from the payment to them ofthe proceeds of the debenture. This designation is made ona memorandum **styled** AdvaaceOf-Need - Enetructions and apparently it is notbinding upon th4 heirs ofthe purchaser.

. . The funeral **merchandise** 

### andservices listed in 

### l ueh memorandum 

### are purchaeable from a separate unfnoorporated business concern for profit,organiaed for the **purpose** of **operating** aY *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 ofthfe Dobonture Inetallment Furchase 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 infull in theevent the purcharor dies prior tocompleting the iastallmeat paynieate.” These facts as debiled in **your** request involve three separate organisatione. The first is a non-profit **corporation engaged** insale of installment debentures; the second. anunincorporated business concern **operating** a funeral home; andthe 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 andthe issuing company are regulated by pertinent provisions ofthe 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 ofprepaid funeral **services** of merchandise, Section 1provides inpart 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, andall 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.anundetermined future date dependent uponthe death ofthe contracting party (hereinafter called ‘prepaid funeral benefits’) shall obtain a permit from the State Banking Department authorizing the traniaction ofthis 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 ofthe contractual arraagemente shows a coatract with the non-profit corporation for thepurchase of debeaturee and a contract with an insurance company **for** the purchase ofcredit life insurance. The purchaser has entered into no contract with the funbral home. The purchaser may, andpresumably does, fill outwhat is called “Advance-OfNeed Instructions” under the letterhead ofthefuneral home. This is a designation **of** those items of funeral services and merchandise which the purchaser wants utiliaed athis funeral. **As** youpeinted **orrt,**these fnetructiona ars notbinding onbanyone. The heirs may utilfee theproceeds 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