Court Opinion

ID: 4135048
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:57:47.823059+00
Date Added: 2024-06-11T14:34:24.802896
License: Public Domain

Honorable J. M. Falkner          Opinion No. C- 413
Commlssloner
Department of Banking
John H. Reagan wllldlng
Austin, Texas                    Re: Whether a nonprofit
                                     corporationcharging
                                     a membership fee a6
                                     a requisite to par..
                                     ticipate In a sub-
                                     sequent contract for
                                     prepaid funeral mere.
                                     chanaiae can operate
                                     under Article 548b,
Dear Mr. Falkner:                    Sec. 5.
     YOU ha,verequested
             .m         an
                        .. opinion from this office on
                  _ quesc:lon.
the above captlonea
      The questioned enterprise is dewrlbed by your letter
88 fOllONS:
       “A nonprofit corporationdesires to sell to
    persons certain prepaid funeral merchandise
    Including caskets, vaults, etc. In order to
    exclude certain undesirablepersons from member-
    ship 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 corpora-
    tion, 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 corporationat substantiallyless 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 corporationoffering prepaid
    fur]eralbenefit8 charge a membership fee as a
    requisite to be eligible and entitled to par-
    ticipate in a kibsequent contract for prepaid
    funeral benefits? . . .
       "2. Under Article 548b, Section l-a, V.C.S.,
    could a nonprofit corporationoperate as in the
    question above?
       "3.~ 'Inview of the provisions of Article 548b,
    Sectlon 5(l), V;CiS;, and particularlythe last
    full sentence thereof, should the membership fee
    be limited to ar '&mountnot to exceed the total of
    funds permitted to be retained under this sub-
    section?”
     In const.,ruing
                   a statute, the aim and,object is to
ascertain and enforce the leglalativeintent 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 collect-
    ing 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 'tenpercent 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-orassessments, . . . shall
    be collectea from the purchaser other than those
    included in the total amount of.said contract."
     It Is our opinion that the 'legislatureintenaed that
any charge of assessment which Is to be used for the pur-
pose 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 itithe subse-
      quent contract for prepaid funeral merchandise.
           We, thus, conclude In answering your first question
      that the associationin question is prohibited from charg-
      ing a membership fee as a requisite to purchase a subse-
      quent contract for prepaid funeral~merchandiseunless 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 conclusionwould nullify the neces-
      sity for answering the latter two questions unless the
      membership fee is included in the total amount of the con-
      tract. 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 organizationsfrom
      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 non- roflt corporation8to
      operate under this Act. Art. 54f;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 (Texas Non-Profit CorporationAct) 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 associationmay 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 pro-
     hibited 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 corporationlegally charteredunder
    the Texas Non-Profit CorporationAct 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 corporationmay 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

                              -1948-