State ex rel. Londerholm v. Anderson

• Court: Kansas Supreme Court
• Writing for the Court: KAUL; FATZER
• Citation: State ex rel. Londerholm v. Anderson, 408 P.2d 864, 195 Kan. 649 (Kan. 1965)
• Decision Date: 11 December 1965
• Docket Number: No. 44237,44237
• Parties: STATE of Kansas ex rel. Robert C. LONDERHOLM (Substituted for William M. Ferguson), Attorney General, Robert Pennington, Neosho County Attorney, and Frank L. Sullivan, Commissioner of Insurance, Appellant and Cross-Appellee, v. Norman ANDERSON, Individually and d/b/a Ten Named Corporations, et al., Appellees and Cross-Appellants.

Page 864

408 P.2d 864

195 Kan. 649

STATE of Kansas ex rel. Robert C. LONDERHOLM (Substituted for William M. Ferguson), Attorney General, Robert Pennington, Neosho County Attorney, and Frank L. Sullivan Commissioner of Insurance, Appellant and Cross-Appellee, v. Norman ANDERSON, Individually and d/b/a Ten Named Corporations, et al., Appellees and Cross-Appellants.

No. 44237.

Supreme Court of Kansas.

Dec. 11, 1965.

Rehearing Denied Jan. 6, 1966.

Syllabus by the Court

1. When the lawmaking power speaks upon a particular subject, over which it has constitutional power to legislate, public policy is what the statute enacts.

2. In an action brought in the name of the state, the extent of the public interest in the particular percentage of the purchase price of burial lots sold by a cemetery corporation required to be set aside for the permanent maintenance of the cemetery is that fixed by the legislature as expressed in K.S.A. 17-1311 wherein it is provided that not less than ten per cent shall be so set aside.

3. A legislative act remedial in nature is to be liberally construed to effectuate the purpose for which it was enacted.

4. K.S.A. 17-1311 construed and held: When burial lots are sold by a cemetery corporation upon installment contracts, such corporation is required to set aside at least ten per cent of each installment payment for the permanent maintenance of the cemetery at the time such installment payment is made.

5. K.S.A. 17-1311 further construed and held to contemplate only a single purchase price for each burial lot.

6. The enactment of statutes for the prevention of fraud and deceit is within the police power of the state.

7. K.S.A. 16-301 to 16-304, inclusive, do not prohibit the sale of funeral or burial property or merchandise on a pre-need basis but they do regulate the same by requiring that funds received therefor pursuant to agreement wherein delivery of the property or merchandise is not immediately required shall be deposited with a bank or trust company for the purpose of fulfilling such agreement.

8. K.S.A. 16-301 to 16-304, inclusive, considered and held to be reasonable regulations within the scope of the police power of the state, fairly designed to protect the public from evils which otherwise might occur, and further held to be not invalid on any claimed constitutional ground.

9. Contracts for the sale of burial vaults upon a pre-need basis considered and held to be such wherein delivery of the property is not immediately required and therefore within the purview of K.S.A. 16-301 to 16-304, inclusive.

10. The term insurance may be defined generally as any contract whereby one party promises for a consideration to indemnify the other against certain risks.

11. Whether a company is engaged in the insurance business depends on the character of the business it transacts and whether the assumption of a risk is a principal object and purpose of the business.

12. In an action brought in the name of the state wherein it was sought to enjoin defendants from including in their contracts of sale of burial merchandise on a pre-need basis a clause providing for cancellation of indebtedness in case of death of the purchaser, upon the ground such contract constituted insurance which defendants were not authorized to issue or sell, the record is examined and held, the trial court did not err in refusing to grant the requested injunctive relief.

Park McGee, Asst. Atty. Gen., argued the cause, and Robert C. Londerholm, Atty. Gen., Robert E. Hoffman, Asst. Atty. Gen., and Robert Pennington, County Atty., were with him on the brief for appellant and cross-appellee.

George B. Powers, Wichita, argued the cause, and Carl T. Smith, John F. Eberhardt, Stuart R. Carter, Robert C. Foulston, Malcolm Miller, Robert N. Partridge, Robert M. Siefkin, Richard C. Harris, Gerald Sawatzky, Donald L. Cordes, Robert L. Howard, Charles J. Woodin, Mikel L. Stout, Ronald K. Badger, and Benjamin C. Langel, Wichita, and Joe F. Balch, Chanute, were with him on the brief for appellees and cross-appellants.

HARMAN, Commissioner.

This action was initiated to test the propriety of certain practices of defendants in selling cemetery lots and burial equipment on a pre-need basis at various cities in Kansas, and to compel compliance with certain statutes.

Norman Anderson, a Texas resident, owns all the stock in Sacred Gardens, Incorporated, a Texas corporation, and substantially all the stock in nine Kansas corporations, all being defendants herein, and appellees and cross-appellants. He or the Texas corporation purchases land near a city and then sells a part of it to the particular Kansas corporation and a cemetery is laid out. Then pursuant to contract with the local corporation, trained sales personnel of the Texas corporation canvas the community selling cemetery lots on a preneed basis. Approximately ninety per cent of these sales are on an installment plan basis with payments extending for as much as seventy-two months and approximately ninety per cent also include the sale of a burial vault and memorial marker. More detailed mention of the practices used will be made in discussing the points involved in this appeal, which for clarity will be classified under the separate headings of A. Lots; B. Burial vaults and markers; and C. Insurance. The parties will be referred to simply as plaintiff and defendants.

A. Lots.

Three separate but closely related points are involved here upon appeal and cross-appeal.

1. The installment contracts provided that the defendant cemeteries would deposit into an endowment trust fund a sum equal to twenty per cent of the contract price for lots for permanent maintenance of the cemeteries. The defendants established such a fund but their practice was to pay in the twenty per cent only after the full amount of the contract price had been paid. The initial action was designed to compel defendants to pay in the full twenty per cent upon execution of the contract. The trial court held that defendants' obligation as to the required percentage to be paid into a permanent maintenance fund insofar as state regulation required it is fulfilled by their compliance with our statute pertinent to cemetery corporations (K.S.A. 17-1311) which provides:

'That such corporation shall fix and set aside, within the state of Kansas, a percentage of the purchase price of each burial lot sold by it, not less than ten percent (10%) thereof, for the permanent maintenance of the said cemetery, which sum so as aforesaid set aside shall be by said corporation invested in first mortgages upon Kansas real estate, or in bonds issued by any municipality of the state of Kansas, or in obligations of the United States government, except railroad-aid bonds, and the proceeds of the said permanent maintenance fund shall be used exclusively for the maintenance of said cemetery: Provided, however, No part of the principal of said fund shall ever be used for any purpose except for such investment * * *.'

Plaintiff's challenge to this ruling is based upon the theory that a charitable trust is involved which the state has an interest in upholding. It is true that as to certain charities of a character so public as to interest the whole community the attorney general of the state has duties to uphold and enforce (see Troutman v. DeBoissiere, etc., 66 Kan. 1, 71 P. 286). So also the public is interested in the maintenance of cemeteries including those operated for profit as are defendants. We believe, insofar as applicable to the point at issue, the extent of that interest is that expressed by the legislature in the statute, K.S.A. 17-1311. When the legislature has clearly spoken defining the policy of the state in a given area there is no place for judicial definition. In Reser v. Southern Kansas Mutual Ins. Co., 150 Kan. 58, 91 P.2d 25, this court quoted from United States v. Trans-Missouri Freight Association, 166 U.S. 290, 340, 17 S.Ct. 540, 41 L.Ed. 1007, as follows:

"* * * when the lawmaking power speaks upon a particular subject, over which it has constitutional power to legislate, public policy in such a case is what the statute enacts." (p. 64, 91 P.2d p. 29.)

We hold the trial court correctly ruled that ten per cent was the proper percentage figure to be enforced in this action. It must be emphasized the result reached is in no wise to be construed as affecting private contractual rights and obligations of the parties to the particular contracts or that they would not be enforced in an appropriate proceeding.

2. The trial court ruled that defendants were required to pay ten per cent of each installment payment into the statutory permanent maintenance fund at the time each of said installments was received. By way of cross-appeal defendants challenge this ruling, claiming that K.S.A. 17-1311 does not require any payments to be made into the permanent maintenance fund until the full purchase price of the lots is paid and the sale completed. They point to the contract provisions that a deed to the lots is not to be delivered until after full payment, ergo, there is no sale until full payment is made, and no maintenance payment is required until the lots are sold. The statute, originally enacted in 1901 (Laws 1901, ch. 102, § 5), expressed the public concern in maintaining in a seemly manner places set apart as burial grounds and in preventing the maintenance of privately developed public cemeteries from becoming public charges. Being of a remedial nature it is to be liberally construed to effectuate the purpose for which it was enacted (Van Doren v. Etchen, 112 Kan. 380, 383, 211 P. 144). We think the narrow construction of the statute urged by defendants would tend to defeat that purpose. It must be remembered defendants operate as a business venture, for profit, and there are many possibilities whereby money received from the sale of lots might be diverted without adequate provision for...