Sexton v. Mount Olivet Cemetery Ass'n

• Decision Date: 24 September 1986
• Docket Number: No. 14579,14579
• Citation: 720 S.W.2d 129
• Parties: James L. SEXTON, Banking Commissioner of Texas, Appellant, v. MOUNT OLIVET CEMETERY ASSOCIATION, Appellee.
• Court: Texas Court of Appeals

Page 129

720 S.W.2d 129

James L. SEXTON, Banking Commissioner of Texas, Appellant, v. MOUNT OLIVET CEMETERY ASSOCIATION, Appellee.

No. 14579.

Court of Appeals of Texas,

Austin.

Sept. 24, 1986.

Rehearing Denied Nov. 12, 1986.

Jim Mattox, Atty. Gen., Edna I. Ramon, Asst. Atty. Gen., Austin, for appellant.

Robert J. Hearon, Jr., Graves, Dougherty, Hearon & Moody, Austin, for appellee.

Before POWERS, BRADY and CARROLL, JJ.

POWERS, Justice.

James L. Sexton, the Banking Commissioner of Texas, appeals from a final judgment rendered by the district court in a suit brought by Mount Olivet Cemetery Association, wherein the Association obtained declaratory and injunctive relief after a

non-jury trial. We will reform the judgment of the district court and affirm it as reformed.

THE CONTROVERSY

The Banking Department of Texas is a component of the Finance Commission of Texas and the Commissioner is charged to enforce, through the Department, the provisions of Tex.Rev.Civ.Stat.Ann. art. 548b (1973 & Supp.1986). See generally, id. at arts. 342-207; 342-101--115; 342-201--211. Article 548b vests in the Department a regulatory power over the business of selling prepaid funeral services and merchandise, a business in which the Association is engaged under a permit issued by the Department. The Association conducts its business according to a plan which was approved by the Department in 1981 after an adjudicative hearing before the Commissioner. No party sued for judicial review of the order and the present case does not involve the issue of whether an agency order may be changed after its affirmance on judicial review.

The controlling issue on appeal is whether the Department has the power to reopen the 1981 administrative proceedings in order to reconsider its previous approval of the Association's plan--some three years after it had become effective--to determine whether such approval should be modified or rescinded altogether, in light of new evidence, in light of consequences not anticipated in 1981, and, perhaps, in light of changes in administrative policy under a new Commissioner. ¹ There is no contention that the Association is conducting its business in violation of any common-law duty, any statute, or any rule or regulation of any administrative authority; and, the parties have stipulated that the Association is conducting its business in accordance with the officially approved plan.

The district court concluded that the 1981 order approving the plan was a final order binding on the Department, and one that may not be modified or rescinded absent a showing by the Department that a material change of circumstances has occurred since 1981; provided, however, any such change may not include issues that might have been raised in the 1981 proceedings but were not. Accordingly, the district court enjoined any administrative proceedings directed at reconsideration of the 1981 order, save on the condition specified. From this judgment the Commissioner appeals raising various assignments of error, all of which depend ultimately on the single issue of whether the Department had jurisdiction to reopen the earlier administrative proceedings to reconsider the previous approval of

the Association's plan, and perhaps to modify or rescind the Department's approval. ²

THE REGULATORY STATUTE

The Legislature enacted art. 548b for the primary purpose of protecting purchasers who had contracted and paid in advance (ordinarily by installment payments, according to the evidence) for funeral services and merchandise to be supplied by sellers at the death of individuals specified in the contracts. 1955 Tex.Gen.Laws, ch. 512, at 1292; Falkner v. Memorial Gardens Ass'n, 298 S.W.2d 934 (Tex.Civ.App.1957, writ ref'd n.r.e.). The basic statutory method chosen to secure such protection was to withdraw from sellers their otherwise absolute control over sums paid to them by purchasers. There are, however, other familiar aspects of regulation set out in art. 548b: the statute prohibits the sale of prepaid funeral services and merchandise except that it be done under an annual permit issued by the Department to the seller (§§ 1, 3, 9); any contract for such services and merchandise is unenforceable by the seller if the contract was made in violation of the statute; however, the purchaser may in such instances recover from the seller all sums paid under the contract (§ 1); and, the provisions of the statute are enforceable by criminal sanctions and by quo warranto proceedings (§ 9).

Section 5 of art. 548b establishes a basic obligatory scheme for the safeguarding of funds paid to a seller by purchasers:

1. The seller may retain as much as one half of sums paid under a contract until the seller has retained an amount not to exceed 10% of the contract price, such retention being for the purpose of allowing the seller to recoup his selling expenses, servicing costs, and general overhead.

2. The remainder of any sums paid by the purchaser must be deposited, within 30 days of receipt, to the seller's trust account in a savings and loan association, a bank, or a trust company, the seller being required to account on an individual-contract basis for all sums received and deposited.

3. On the death of the contract beneficiary, the balance of the purchaser's account "shall be released in fulfillment of the contract," the seller being required to supply any difference between the total sum paid in by the purchaser and the balance in his account.

4. The seller may, at any time, withdraw from the accrued interest or "income" earned on the principal sums so much as may be necessary to pay reasonable and necessary charges imposed by the depository institution, including trustees' fees, and "any taxes caused or created by reason of" the account.

5. The seller may, after performing a particular contract or after it has been cancelled by the purchaser, withdraw a proportional part of "any enhanced value, accrued interest, or accrued income of said contract...."

This basic scheme, established in § 5, may be avoided by a seller in only two circumstances. These are specified in § 1a of art. 548b. First, compliance with § 5 is excused when the seller's contracts are based upon a plan whereby the sums necessary to pay for the stipulated funeral services and merchandise will be supplied in the form of insurance proceeds payable under "a contract of insurance with an insurance company licensed in Texas," an evident reference to burial insurance. Second, compliance with § 5 is excused if the seller's contracts are based upon a plan whereby the necessary sums will be supplied from a

fund, investment, security, or contract ... approved by the Department as safeguarding the right and interests of the The second, non-insurance alternative allowed by § 1a is in issue in the present case.

[purchasers] to substantially the same or greater degree as is provided with respect to funds regulated by Section 5....

Because the controlling issue in the present appeal depends thereon, we shall set out the specific powers expressly delegated to the Department in art. 548b in order that it might administer the regulatory scheme, as it is directed to do in § 2:

1. the power to require that a seller supply evidence that the pertinent insurance premiums have been paid, where he has elected the insurance alternative allowed by § 1a, and the power to cancel his permit for failing to supply such evidence (§ 1a);

2. the power to approve any plan submitted by a seller who proposes to employ the non-insurance alternative allowed by § 1a, as the Association elected to do in the present case (§ 1a);

3. the power to promulgate "reasonable rules and regulations concerning the keeping and inspection of records, the filing of contracts and reports, and all other matters incidental to the orderly administration of" art. 548b, as well as the power to approve any forms used for sales contracts involving prepaid funeral benefits (§ 2);

4. the power to issue the requisite permits and to collect nominal fees therefor (§ 3);

5. the power to cancel permits or deny their renewal where the holder has failed to comply with any requirement of art. 548b or any rule or regulation, after notice and hearing if they are requested (§ 4);

6. the power to authorize withdrawals of funds payable to purchasers who have cancelled their contracts and supplied the sellers with an affidavit in a form prescribed by the Department (§ 5);

7. the power to require annual reports of permit holders and to prescribe the form thereof (§ 7);

8. the power to establish record-keeping requirements for sellers, to examine such records annually or more frequently when deemed necessary by the Department, and to assess and collect fees for such examinations (§ 8); and,

9. the power to have the Attorney General initiate criminal and quo warranto proceedings for violations of art. 548b (§ 9).

THE 1981 ADMINISTRATIVE PROCEEDING

The Association, having determined to solicit sales under the non-insurance alternative allowed by § 1a, applied to the Department in 1981 for approval of its intended plan of operation, accounting, withdrawals, and distribution, contending that its proposed plan safeguarded buyers in substantially the same or greater degree as the protection furnished by § 5 of art. 548b. The proposed plan varied from § 5 in several respects. At issue in the present case is this basic difference: under its proposed plan, the Association would be entitled to withdraw periodically, and before cancellation or performance, all interest accruing on sums deposited by the Association in its bank trust account; whereas, under the basic scheme established in § 5, the Association would be permitted to withdraw from accrued interest only the amounts necessary to pay taxes and trustees' fees, as well as a proportional part of such interest on performance or cancellation of a particular contract. After an adjudicative...