                                  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 Pur-
                                             chase Agreements are witbin the
                                             provisions of Art. !Wb. V.C.S., re-
                                             quiring 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 pre-
            sently engaged in the sale of debentures, which debentures
            are either sold outright for cash or under a Dsbenture In-
            stallment 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 pur-
            chaser thereof may designate certain items of funeral mer-
            chandise 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 Advaace-
            Of-Need - Enetructions and apparently it is not binding upon
            th4 heirs of the purchaser.  . . The funeral merchandise
            and services listed in lueh memorandum are purchaeable
            from a separate unfnoorporated business concern         *a*
            for profit,organiaed for the purpose of operating a Y 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 Fur-
            chase Agreement which may have some bearing 011this 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
           in full in the event the purcharor dies prior to complet-
           ing the iastallmeat paynieate.”

         These facts as debiled in your request involve three separate organi-
satione.    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 mer-
chandise,     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 rmcluding 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 busi-
           ness 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 pur-
chaser may, and presumably does, fill out what is called “Advance-Of-
Need 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 fnetruc-
tiona 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   con-
                      cerns 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
