Reserve Vault Corp. v. Jones

• Decision Date: 16 April 1962
• Docket Number: No. 5-2625,5-2625
• Parties: RESERVE VAULT CORPORATION et al., Appellants, v. Clint JONES et al., Appellees.
• Court: Arkansas Supreme Court

Page 225

356 S.W.2d 225

234 Ark. 1011

RESERVE VAULT CORPORATION et al., Appellants, v. Clint JONES et al., Appellees.

No. 5-2625.

Supreme Court of Arkansas.

April 16, 1962.

Wayne Foster, Little Rock, for appellants.

J. Frank Holt, Atty. Gen., by Jack L. Lessenberry, Asst. Atty. Gen., Little Rock, for appellees.

HARRIS, Chief Justice.

This litigation involves the validity of Act 78 of 1961, entitled, 'An Act Relating to Prepaid Funeral Expenses; Requiring Registration of Organizations Dealing Therein and Requiring the Establishment of Trusts for the Benefit and Protection of Purchasers of Such Contracts.' The provision particularly under attack is Section 5, which reads as follows:

'SECTION 5. After the effective date of this Act, all funds collected under contracts for prepaid funeral benefits, including funds collected under contracts made before the effective date of this Act, shall be placed in a state or national bank, or building and loan association in this State and so deposited not less than thirty days (30) after collection, to be held in a trust fund in this State for the use, benefit and protection of purchasers of such contracts. Any withdrawals from such trust fund shall be accompanied by a certified copy of the death certificate, together with proper affidavits as may be required by the Securities Division of the State Bank Department, before such funds shall be released in fulfillment of the contract. In no event shall more funds be withdrawn from the trust account than are originally placed into the fund under any one contract, other than through the payment of accrued interest thereon.'

Appellant, Reserve Vault Corporation, is engaged in selling fiberglass grave vaults ¹ to the general public, under a procedure sometimes referred to as 'pre-need' contracts. Appellant Washington is one of the salesmen for the corporation. The company has been selling these vaults under two contracts, herein referred to as contract 'A', and contract 'B'. Prior to the passage of Act 78, approximately one hundred such vaults had been sold at an average price of $195 each. Under an agreement between the corporation and its salesmen, Washington was to receive a commission of 25% of the selling price of each vault sold by him. Practically all of the contracts under which the vaults were sold provided that the selling price would be paid in monthly payments, and the salesmen were to receive the first 25% of monies paid in. Washington, as salesman for appellant company, made the sale of a vault to Mrs. Leaether A. Bailey on November 10, 1960, for a total consideration of $190, of which $5 was paid in cash, and the balance was to be paid in thirty-seven equal monthly installments in the amount of $5 each. This sale was made under contract 'A', pertinent portions of which read as follows:

'The said vault(s) are sold subject to the following conditions which are hereby agreed to by the parties:

'The company agrees to deliver the grave vault or vaults purchased under this contract to any place designated by the purchaser within the State of Arkansas. Purchaser or someone acting for purchaser hereby agrees to notify corporation immediately upon death whereby, the corporation will have a minimum of twenty-four hours notice prior to the delivery of the vault. Purchaser agrees to give a minimum of twenty-four hours notice that a vault is required and of the place and time of delivery. Corporation agrees to effectuate delivery within a twenty-four hour period after notice, however, the corporation shall not be liable for delays in delivery due to acts of God or conditions beyond the control of the corporation. Corporation agrees to maintain a separate account which shall be at least 50% of the amount of this contract. This reserve account shall be a restricted fund to assure performance by the corporation of its contract. Investments of this fund shall be made by the Board of Directors of the corporation.'

On March 18, 1961, the company sold a vault to William and Pauline Dailey for the sum of $200.85, of which $5 was paid in cash, and the balance was to be paid in thirty-nine equal monthly installments of $5 each. This sale was made under contract 'B', termed the 'lay away plan', and pertinent portions read as follows:

'The corporation agrees to deliver grave vault or vaults purchased under this contract to any place designated by the purchaser within the State of Arkansas within a period of ten days subsequent to corporation's receipt of the final installment due under this contract, however, the corporation shall not be liable for delays in delivery due to Acts of God or conditions beyond the control of the corporation.'

Act 78, containing an emergency clause, became effective on February 13, 1961, and on March 23, appellants instituted suit in the Pulaski Chancery Court, seeking a declaratory judgment relative to the validity of Act 78. It was alleged that appellants were about to be adversely affected by the provisions of the Act, and that same was in contravention of both the Constitution of the United States, and the Constitution of the State of Arkansas. As an alternative, appellants prayed that if the Act be held constitutional, the Court enter its judgment finding that Act 78 had no application to the contracts herein involved, as being outside the purview of the Act. On trial, the Court held that Act 78 was a constitutional exercise of the police power of the State of Arkansas to regulate a business susceptible to fraudulent practices. The Court further held:

'3. That said Act does not unconstitutionally impair the contracts of plaintiff corporation with the defendant, Leaether Bailey, or the contract for commissions between plaintiff corporation and its salesman, plaintiff A. J. Washington.

'4. That the contract noted as Exhibit 'A' is within the purview of said Act.

'5. That the contract described as Exhibit 'B' from the testimony and evidence given at the trial is not within the purview of said Act.

'6. That said Act is retroactive to include contracts executed prior to its enactment, but it is not the intent of said Act to require the payment into a trust fund of any collection made on the Leaether Bailey contract prior to the effective date of the Act, but does require the payment into a trust fund of all payments collected on said contract since the effective date of the Act, even though said collections be funds previously relegated by contract to the salesman, A. J. Washington, as a commission.'

Judgment was entered accordingly, and appellants have appealed from that portion holding the Act constitutional, and finding that contract 'A' is covered by the Act. The State has not appealed from that portion of the judgment finding that contract 'B' is not within the purview of said Act. For reversal, appellants rely upon several points, which we proceed to discuss.

It is first asserted that the contract, here involved, is not controlled by the Act, and is beyond its scope and purview. In presenting this point, appellants first argue that the Act purports only to cover situations wherein delivery (of a vault) is dependent upon death, and, say appellants, the Bailey contract does not require the death of anyone as a condition precedent to delivery. We do not concur with this contention. We think this statement would be apt relative to contract 'B', which on its face, only requires full payment of the purchase price before delivery can be demanded, but it is evident from the language of contract 'A', that delivery is dependent upon a death. Again quoting the pertinent portion 'Purchaser or someone acting for purchaser hereby agrees to notify corporation immediately upon death whereby, the corporation will have a minimum of twenty-four hours notice prior to the delivery of the vault. Purchaser agrees to give a minimum of twenty-four hours notice that a vault is required and of the place and time of delivery.'

We do not agree with appellant that a purchaser under this contract would be entitled to obtain a vault as soon as same was paid for. Appellants likewise argue that Act 78 relates only to contracts which are dependent upon the death of a 'contracting party', ² and that the contract in question certainly does not require the death of the contracting party. This same contention was made, and rejected, in the case of Falkner v. Memorial Gardens Association, 298 S.W.2d 934. There, the Court of Civil Appeals of Texas passed upon an Act identical with the Act here in question. Relative to this contention, the Court said:

'Some contracts are doubtless made for the benefit of a third person or persons and are not necessarily dependent on the death of the actual contracting party. However it is clear that they are made in contemplation of the death of the party benefited.'

Of course, a purchaser might have in mind another member of his family when buying the vault, and it must be likewise considered that certainly, in numerous instances, the vault would be purchased for the benefit of the contracting party. Accordingly, if appellants' view were correct, the same exact contract would be sometimes within the purview of the Act, and sometimes without the purview of the Act, depending upon whether the contracting party purchased the vault in contemplation of his own death, or in contemplation of the death of some member of his family. Such an interpretation would leave the matter in total confusion, and would open the door to evasive practices. Actually a purchaser probably would not know for whom the vault was being acquired, the answer to that question depending upon which member of the family first died. At any rate, we find no merit in the contention, and hold that delivery of a vault, under contract 'A', is conditioned upon a demand made pursuant to a death.

Appellants contend that the Act is an unwarranted and unlawful exercise of the police power, stating 'the attempted regulation of the money...