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 $l,OOO.OO funeral service in the event of death and In return for this the other party to the agree- ment promises to loan a sum of money to the funeral home. Subsequent to signing the subscriptdon agreement, both parties sign a note a8 described In a form drawn by the corpora- tion. This form contains the following language: "Option One: As security for the payment of this note and in the event of the death of the payee or any member of his Immediate family, as herein named, within ten (10) years from this date, then the Good Neighbor Funeral Home, Inc., promises and agrees to provide a One Thousand , ;;,; -.-- Eon. 3. II. Falkner - page 3. pww I , .?‘,.Lc’3-. ‘;; ,‘_~,(‘5 . ” I ,:, Dollar funex-alaervloe, for suoh.deoeasedone, lnoludlng metal;casket,emballsing,.'us& of funeral home aiC3ahapel,~he,aqi!e servlee,~re@itreir book, and aolmo*ledgmehtoards, and 'ti$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 PS:zt