COMMITTEE SUBSTITUTE
FOR
Senate Bill No. 407
(By Senators Burdette, Mr. President, Blatnik,
Felton, Sharpe, Wagner and Boley)
____________
[Originating in the Committee on the Judiciary;
reported March 26, 1993.]
A BILL to amend chapter thirty-five of the code of West Virginia,
one thousand nine hundred thirty-one, as amended, by adding
thereto a new article, designated article five-b, relating
to the sale of preneed cemetery company property, goods and
services; definitions; requirements for engaging in business
of cemetery company; fees; compliance agent; exemptions;
deposit in trust account of percentage of proceeds from sale
of property, goods and services required; contents of
preneed cemetery company contracts; composition of trust
account; payment of certain expenses from trust account;
exceptions; disbursement of trust funds; records to be kept;
financial report; breach of contract; liability of trustee;
maintenance of cemetery property; and criminal penalties.
Be it enacted by the Legislature of West Virginia:
That chapter thirty-five of the code of West Virginia, one
thousand nine hundred thirty-one, as amended, be amended by
adding thereto a new article, designated article five-b, to readas follows:
ARTICLE 5B. PRENEED CEMETERY COMPANY PROPERTY, GOODS AND
SERVICES; RELATED CONTRACTS.
§35-5B-1. Definitions.
The following words and phrases as used in this article,
unless a different meaning is clearly indicated by the context,
have the following meanings:
(a) "Burial vault" means a protective container for a casket
which is used to prevent a grave from sinking.
(b) "Cemetery" means and includes all land and appurtenances
including roadways, office buildings, outbuildings and other
structures used or intended to be used for or in connection with
the interment of human remains. The sprinkling of ashes or their
burial in a biodegradable container on church grounds or their
placement in a columarium on church property do not constitute
the creation of a cemetery.
(c) "Cemetery company" or "seller" means any person,
partnership, firm or corporation engaged in the business of
operating a cemetery or selling property, goods or services used
in connection with interring or disposing of the remains or
commemorating the memory of a deceased human being, where
delivery of the property or goods or performance of the service
may be delayed later that one hundred twenty days after receipt
of the initial payment on account of such sale. Such property,
goods or services include, but are not limited to, burial vaults,
mausoleum crypts, lawn crypts, memorials, marker bases and
opening and closing and/or interment services, but do not include
graves or incidental additions such as dates, scrolls or othersupplementary matter representing not more than ten percent of
the total contract price.
(d) "Commissioner" or "tax commissioner" means the secretary
of the West Virginia department of tax and revenue.
(e) "Compliance agent" means a natural person who owns or is
employed by a cemetery company to assure the compliance of the
cemetery company with the provisions of this article.
(f) "Cost requirement" means the total cost to the seller of
the property, goods or services subject to the deposit
requirements of section four of this article required by that
seller's total contracts.
(g) "Delivery" means that the seller has transferred
physical possession of the identified goods, has attached or
installed such goods at the designated interment space or has
actually furnished preneed burial contract services. In the case
of preneed goods which are identified with the name of the buyer
or other contract beneficiary," delivery" may also occur when:
(a) The seller pays for and stores the goods at the cemetery
where they are intended to be used; or (b) the seller has paid
the supplier of such goods and the supplier has caused such
merchandise to be manufactured and stored, has caused title to
such merchandise to be transferred to the buyer or other contract
beneficiary and has agreed to ship such merchandise upon his or
her request.
(h) "General funds" means the sum total of specific trust
funds put together in a single fund.
(i) "Grave" means a below-ground right of interment.
(j) "Interment" means the disposition of human remains byearth burial, entombment or inurnment.
(k) "Lawn crypt" means a burial receptacle, usually
constructed of reinforced concrete, installed underground in
quantity on gravel or tile underlay. Each crypt becomes an
integral part of the given garden area and is considered real
property.
(l) "Marker base" means the visible part of the base or
foundation upon which the memorial, marker or monument rests and
is considered personal property.
(m) "Mausoleum crypt" means a burial receptacle usually
constructed of reinforced concrete and usually constructed or
assembled above the ground and is considered real property.
(n) "Memorials, markers or monuments" means the object used
to identify the deceased including the base and is considered
personal property.
(o) "Opening and closing or interment fee" means any fee
associated with the excavation and filling in of a grave in a
manner which will not disturb or invade adjacent grave sites.
(p) "Preneed" means at any time other than either at the
time of death or while death is imminent.
(q) "Preneed cemetery company contract" means a contract for
the sale of real and personal property, goods or services used in
connection with interring or disposing of the remains or
commemorating the memory of a deceased human being, where
delivery of the property or performance of the service may be
delayed for more than one hundred twenty days after the receipt
of initial payment on account of such sale. Such property or
services include, but are not limited to, burial vaults,mausoleum crypts, garden crypts, lawn crypts, memorials and
marker bases, but do not include graves or incidental additions
such as dates, scrolls or other supplementary matter representing
not more than ten percent of the total contract price.
(r) "Seller's trust account" means the total specific funds
deposited from all of a specific seller's contracts, plus income
on such funds allotted to that seller.
(s) "Specific trust funds" means funds identified to a
certain contract for personal property or services.
(t) "Trustee" means any natural person, partnership or
corporation, including any bank, trust company, broker-dealer,
foreign state charter trust, savings and loan association or
credit union which receives money pursuant to any agreement or
contract made pursuant to the provisions of this article.
§35-5B-2. Information filing; fees, compliance agent.
On or after the first day of July, one thousand nine hundred
ninety-three, no person, partnership, firm or corporation may
engage in the business of operating a cemetery company in this
state without having first paid an annual registration fee
established by the tax commissioner in an amount not to exceed
four hundred dollars, and filing with the tax commissioner
certain information which shall include the name and addresses of
all officers, owners and directors of the cemetery company and
the name of the designated compliance agent. The cemetery
company shall notify the tax commissioner of any changes in the
information required to be filed within ninety days of the date
on which the change occurs. A new filing shall also be required
if there is a change in the ownership of the cemetery company orif there is a change in the name of the compliance agent
designated by the cemetery company. The cemetery company shall
pay an additional fee as established by the commissioner in
connection with the reporting of such changes, not to exceed one
hundred dollars. There is hereby created in the state treasury
a special account to be known as the "cemetery company account"
into which all fees collected under this article shall be
deposited. Funds in this account may be expended upon authority
of the secretary of tax and revenue in connection with the
administration of this article.
§35-5B-3. Exemptions.
The provisions of this article do not apply to:
(a) Sales of property, goods and services subject to the
provisions of article fourteen, chapter forty-seven of this code;
(b) Sales of services by perpetual care cemeteries subject
to the provisions of article five-a of this chapter;
(c) Sales of property, goods and services by cemeteries
owned and operated by a county, municipal corporation, by a
church or by a nonstock corporation not operated for profit if
the cemetery: (1) Does not compensate any officer or director
except for reimbursement of reasonable expenses incurred in the
performance of official duties; (2) does not sell or construct or
directly or indirectly contract for the sale or construction of
vaults or lawn, garden or mausoleum crypts; and (3) uses proceeds
from the sale of all graves and entombment rights for the sole
purpose of defraying the direct expenses of maintaining the
cemetery;
(d) Sales of property, goods and services by communitycemeteries not operated for profit if the cemetery: (1) Does not
compensate any officer, owner or director except for
reimbursement of reasonable expenses incurred in the performance
of official duties; and (2) uses the proceeds from the sale of
the graves for the sole purpose of defraying the direct expenses
of maintaining its facilities; and
(e) Sales of property goods and services by family
cemeteries wherein lots or spaces are not offered for public
sale.
§35-5B-4. Deposit in preneed trust required upon sale of
property, goods or services not to be delivered within one
hundred twenty days.
(a) Each cemetery company shall deposit into an interest
bearing trust fund forty percent of the receipts from the sale of
property, goods or services purchased pursuant to a preneed
burial contract including sales of opening and closing or
interment services, when the delivery thereof will be delayed
more than one hundred twenty days from the initial payment on
said contract. However, should the proceeds from the sale be
financed through a lending institution, it shall be considered a
cash sale. For this purpose, the cemetery company shall
establish a special trust fund in a bank, savings and loan or
other federally insured financial institution. The trust shall
bear the legend "Preneed Trust Account". Deposits are required
to be made by the cemetery company within thirty days after the
close of the month in which said receipts are paid to it.
(b) If payment is made on an installment or deferred payment
basis, the seller shall have the option of depositing into thetrust fund forty percent of the amount of the principal
initially, or alternatively, depositing forty percent of the
principal of each payment within thirty days after the close of
the month in which said receipts are paid to it.
§35-5B-5. Requirements for preneed cemetery company contracts.
A preneed cemetery company contract shall:
(a) Be written in clear understandable language and printed
in easy-to-read type, size and style;
(b) Identify the seller, the contract buyer and the person
for whom the contract is bought if other than the contract buyer;
(c) Contain a complete description of the property, goods or
services bought;
(d) Clearly disclose whether the price of the property goods
or services bought is guaranteed;
(e) Provide that if the particular property, goods and
services specified in the contract are unavailable at the time of
delivery, the seller shall be required to furnish property, goods
and services similar in size and style and at least equal in
quality of material and workmanship and that the representative
of the deceased has the right to reasonably choose the property,
goods or services to be substituted; and
(f) Be executed in duplicate and a signed copy given to the
buyer.
§35-5B-6. Identification of funds.
Any funds deposited in the trust account as required by
section four of this article, shall be identified in the records
of the seller by the contract number and by the name of the
buyer. The trustee may commingle the deposits in any preneedtrust account for the purposes of the management thereof and the
investment of funds therein.
§35-5B-7. Corpus of trust account and income to remain in
preneed trust account; exception.
The corpus of the trust account shall remain intact until
the property or goods are delivered or services performed as
specified in the contract: Provided, That the net income from
the preneed trust account may be used to pay any appropriate
trustee and auditor fees, commissions and costs. The net income
from the preneed trust account, after payment of any appropriate
trustee and auditor fees, commissions and costs, shall remain in
the account and be reinvested and compounded. Any trustee fees,
commissions and costs in excess of income shall be paid by the
cemetery company and not from the trust. However, the trustee
shall, as of the close of the cemetery company's fiscal year,
upon the written assurance to the trustee by a certified public
accountant employed by the seller, return to the seller any
income in the seller's account which, when added to the corpus of
the trust account is in excess of the current cost requirements
for all undelivered property, goods or services included in the
seller's preneed cemetery company contracts including all
outstanding preneed cemetery company contracts entered into prior
to the first day of July, one thousand nine hundred ninety-three.
The seller's cost requirements shall be based upon wholesale cost
and certified in its records by a sworn affidavit by the
compliance agent and shall be determined by the seller as of the
close of the cemetery company's fiscal year.
§35-5B-8. Disbursement of trust funds upon performance of
contract.
(a) Upon performance of the preneed cemetery company
contract, the seller shall certify to the trustee by affidavit
the amount of specific funds in the trust, identified to the
contract performed, which the trustee shall pay to the seller.
The seller may in its records itemize the property, goods or
services and the consideration paid or to be paid therefore,
which the trustee shall pay to the seller. The seller may in its
records itemize the property, goods or services and the
consideration paid or to be paid therefore, to which the deposit
requirements of this article apply. In such case the seller may,
upon certification of the amount of specific trust funds
identified in its records to such items, request disbursement of
that portion of the specific funds deposited pursuant to the
contract, which the trustee shall pay to the seller.
(b) If the preneed contract provides for two or more
persons, the seller may, at its option, designate in its records
the consideration paid for each individual in the preneed
cemetery company contract. In such case, upon performance of
that portion of the contract identified to a particular
individual, the seller may request, by certification in the
manner described above, the disbursement of trust funds
applicable to that portion of the contract, which the trustee
shall pay to the seller.
(c) Any cemetery company that sells space in an
unconstructed mausoleum must commence construction within seven
years from the date of the first sale or when eighty percent of
the spaces in the original mausoleum plan are sold, whicheveroccurs first.
§35-3B-9. Seller required to keep records.
Each seller of a preneed cemetery company contract shall
record and keep detailed accounts of all contracts and
transactions regarding preneed cemetery company contracts and the
records shall be subject to examination by the tax commissioner.
§35-5B-10. Financial report and written assurance required.
(a) The cemetery company shall report the following
information to the tax commissioner within four months following
the cemetery company's fiscal year:
(1) The total amount of principal in the preneed trust
account;
(2) The securities in which the preneed trust account is
invested;
(3) The income received from the trust and the source of
that income during the preceding fiscal year;
(4) An affidavit executed by the compliance agent that all
provisions of this article applicable to the seller relating to
preneed trust accounts have been complied with;
(5) The total receipts required to be deposited in the
preneed trust account;
(6) All expenditures from the preneed trust account; and
(7) If the trustee is other than a bank, savings and loan,
or other federally insured financial institution, a fidelity bond
is required, and the trustee must have proof that the required
fidelity bond has been secured and that it is in effect.
(b) The cemetery company shall employ an independent
certified public accountant who is to audit the account andprovide assurance that forty percent of the cash receipts from
the sale of preneed property, goods or services will not be
delivered or performed within one hundred twenty days after
receipt of the initial payment on account has been deposited in
the account within thirty days after the close of the month in
which the payment was received.
§35-5B-11. Inclusion of property, goods and services to be
delivered within one hundred twenty days.
Nothing in this article prohibits the sale within the
contract of preneed property, goods or services to be delivered
within one hundred twenty days after the receipt of the initial
payment on account of such sale. Contracts may specify
separately the total consideration paid or to be paid for preneed
property, goods or services not to be delivered or provided
within one hundred twenty days after receipt of initial payment.
If a contract does not so specify the seller shall deposit forty
percent of the total consideration for the entire contract.
§35-5B-12. Breach of contract by seller; trust to be single
purpose trust.
(a) If, after a written request, the seller fails to perform
its contractual duties, the purchaser, executor or administrator
of the estate, or heirs, or assigns or duly authorized
representative of the purchaser shall be entitled to maintain a
proper legal or equitable action in any court of competent
jurisdiction. No other purchaser need be made a party to or
receive notice of any proceeding brought pursuant to this section
relating to the performance of any other contract.
(b) The trust shall be a single purpose trust, and the trustfunds are not available to any creditors as assets of the seller,
nor may the seller encumber the trust funds.
§35-5B-13. Trustee may rely on certifications and affidavits.
The trustee may rely upon all certifications and affidavits
which have been made pursuant to the provisions of this article
and is not liable to any person for such reasonable reliance.
§35-5B-14. Transfer of trust funds to another trustee.
The seller may, upon notification in writing to the trustee,
and upon such other terms and conditions as the agreement between
them may specify, transfer its account funds to another trustee
qualified under the provisions of this article. The trustee may,
upon notification in writing to the seller, and upon such other
terms and conditions as the agreement between them may specify,
transfer the trust funds to another trustee qualified under the
provisions of this article.
§35-5B-15. Use of trustee's name in advertisements.
No person subject to the provisions of this article may use
the name of the trustee in any advertisement or other public
solicitation without written permission of the trustee.
§35-5B-16. Cemetery property maintained by cemetery company.
With respect to cemetery property maintained by a cemetery
company, the cemetery company is responsible for the performance
of:
(a) The care and maintenance of the cemetery property it
owns; and
(b) The opening and closing of all graves, crypts or niches
for human remains in any cemetery property it owns.
§35-5B-17. Waiver of article void.
Any provision of any contract which purports to waive any
provision of this article is void.
§35-5B-18. Violation a misdemeanor.
Any person who violates any of the provisions of this
article is guilty of a misdemeanor, and, upon conviction thereof,
shall be fined not less than one hundred nor more than one
thousand dollars for each occurrence, or incarcerated in the
county or regional jail for a term not to exceed one year, or
both fined and incarcerated. Any person who violates any of the
provisions of this article shall for a second offense be guilty
of a felony and, upon conviction thereof, shall be fined not less
than five hundred nor more than three thousand dollars, or
incarcerated in the penitentiary not less than one nor more than
three years, or, in the discretion of the court, be incarcerated
in the county jail for a term not to exceed one year
__________
(NOTE: The proposed legislation would require that all
cemetery companies selling property, goods or services to be used
in connection with the interring or disposing of the remains of
a deceased human being, where delivery of the property or
performance of the service is to be delayed for longer than one
hundred twenty days after receipt of the initial payment on the
account for such sale, place an amount of money equal to forty
percent of the receipts from the sale (or each such installment)
into a "preneed trust account" until such time as disbursements
may be made from the account. Funds would be disbursed from the
trust fund account upon the performance of the preneed cemetery
company contract. At such time, the trustee of the preneed trust
account would pay to the cemetery company who sold the preneed
property, goods and services an amount equal to that portion of
the preneed trust fund deposited by virtue of the sale of the
preneed cemetery company contract performed.
The proposed legislation would also require that cemetery
companies report certain information to the Secretary of the West
Virginia Department of Tax and Revenue and keep detailed records
of all contracts and transactions regarding preneed cemetery
company contracts. These records would be subject, upon request,
to inspection and examination by the tax commissioner. Theproposed legislation would also require that cemetery companies
make certain additional financial reports to the tax commissioner
upon request.
The proposed legislation would set up minimum requirements
for preneed cemetery company contracts. These requirements are
designed to protect purchasers of preneed property, goods and
services.
Finally, the proposed legislation would make cemetery
property maintenance including the opening and closing of graves,
the responsibility of the cemetery company in order to protect
and indemnify the rights of the lot owners.)