            THEAA~TORNEY     CmNERAL
                    OF ?I-ExAs




Honorable 3. #I.Fallmer             Opinion Ho. S-188
State Banking Commlssloner
Capital latfonal Bank Building      Re: Whether a loan of $200
Austin, Texas                           to a funeral home, pro-
                                        viding an option for a
                                        paid funeral, Is subJect
                                        to the provisions of
                                        Article 548b, V.C.S., re-
                                        quiring 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 corpora-
         t&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. Subse-
         quent 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
         with no securlt     save and except an option whloh
         provided for a V' l,OOO.OO funeral service .whlchwas
         to Include a metal casket, embalming, use of funer-
         al 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,
Vernon's Civil Statutes, to the above operations of the Funeral
Home.
         Section 1 of Article 548b provides In part:
             "Any lndlvldual, firm, partnership, corpor-
         ation, or association (hereinafter called -'organ-
Hon. J. M. Falkner - Page 2. '(S-186)


         izatlon’) desiring to sell 'prearrangedor pre-
         paid 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.bene-
         fits or merchandise to be delivered at an un-
         determlned future date de endent upon the death
         of the contracting party fhereinafter called
         'prepaid funeral benefits') shall obtain a per-
         mit from the State Banking Department authorls-
         lng the transaction of this type of business be-
         fore entering Into any such contract. After thirty
         days from the effective date of this Act, It shall
         be unlawful to sell prepaid funeral benefits un-
         less 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 under-
         signed 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 NRICR-
         BOR 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 agree-
ment 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 corpora-
tion. 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
                                  ,
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       Eon. 3. II.   Falkner   - page 3.   pww
                                             I ,     .?‘,.Lc’3-. ‘;; ,‘_~,(‘5 . ”   I ,:,


                 Dollar funex-alaervloe, for suoh.deoeasedone,
                 lnoludlng metal;casket,emballsing,.'us&
                                                       of funeral
                 home aiC3ahapel,~he,aqi!e
                                         servlee,~re@itreir
                                                          book,
                 and aolmo*ledgmehtoards, and 'ti$th
                                                   fuiferaloom-
                 plate wlth we of *he'staff 6f the Qood Helghbor
                 Funeral Home, Inc."
                 Opt&      Two Is a8 ~followst
                     "In the .eventthe above named One Thousand
                 Dollar funersl~Is not needed during said ten
                 (10) year period; And the payee should so eleot,
                 then the @oo~dNeighbor Funeral Home, Inc.; agrees
                 to furnish to the payee and/or the isembersof the
                 family as above named, a Five Hundred Dollar funer-
                 al 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 3500.00
       funeral If It has not furnished the $l,.OOO.OOfuneral 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 fun-
       eral 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 pro-
                               viding prepaid or prearranged fu-
                               neral benefits In return for a
Hon. J. n. Falkner - page 4.   (S-188)


               loan of money are required by Artl-
               cle 548b, V.C.S., to obtain permits
               from the State Banking Department
               before entering Into such oontraots.

                                         Yours very truly,

APPROVED:                                JOHN i&N SHEPPERD
                                         Attorney Oeneral

J. C. Davis, Jr.
County Affair,8Division
                                         Philip Sanders      ,
J. A. Amls, Jr.                          Assistant ,Attorney Qeneral
Reviewer
Mert Starnes
Reviewer
L, W. Gray
Reviewer
Davis Want
First Assistant
JOHR BEN SHEPPERD
Attorney Gleneral


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