Anderson-Clayton Bros. Funeral Homes, Inc. Crespo & Sons, Inc. Laurel Land Funeral Home, Inc. Laurel Land Funeral Home of Fort Worth, Inc. Restland Funeral Home, Inc. And Singing Hills Funeral Home, Inc. v. Texas Department of Banking and Catherine A. Ghiglieri, in Her Official Capacity as the Banking Commissioner of Texas

• Court: Court of Appeals of Texas
• Decided: May 15, 1996
• Docket: 03-95-00221-CV
• Status: Published

Opinion

CV5-221

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-95-00221-CV

Anderson-Clayton Bros. Funeral Homes, Inc.; Crespo & Sons, Inc.; Laurel Land Funeral Home, Inc.; Laurel Land Funeral Home of Fort Worth, Inc.; Restland Funeral Home, Inc.; and Singing Hills Funeral Home, Inc., Appellants

v.

Texas Department of Banking and Catherine A. Ghiglieri, in her official capacity as the Banking Commissioner of Texas, Appellees

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 201ST JUDICIAL DISTRICT

NO. 94-09305, HONORABLE JOHN K. DIETZ, JUDGE PRESIDING

PER CURIAM

Anderson-Clayton Bros. Funeral Homes, Inc.; Crespo & Sons, Inc.; Laurel Land Funeral Home, Inc.; Laurel Land Funeral Home of Fort Worth, Inc.; Restland Funeral Home, Inc.; and Singing Hills Funeral Home, Inc., (the "funeral homes") bring one point of error in their appeal from the trial-court order that dismissed their declaratory judgment action for lack of jurisdiction because the court found that no justiciable issue existed. Because we hold that a justiciable issue exists, we will reverse the trial-court order and remand the cause for further proceedings.

The Controversy

The funeral homes sell prepaid funeral plans under permits issued by appellees (the "Department"). They must place a certain percentage of the prepaid funds in trust accounts until the funeral services are actually provided. Tex. Rev. Civ. Stat. Ann. art. 548b, § 5(a)(2) (West Supp. 1996) ("Art. 548b"). The funds placed in the trust accounts earn interest, accrue income, and otherwise increase in value. The accumulated profits ("excess earnings") are the property of the funeral homes and may be withdrawn from the trust accounts under certain circumstances. Art. 548b, § 5(a)(4)(D).

The amount of the trust-account money that may be invested in stocks and bonds is regulated:

At no time may more than 70 percent of the prepaid funeral benefits trust funds related to a single permit holder be invested in:

(1) bonds, evidences of indebtedness, obligations, notes and participation described by Subsection (d)(5) of this section; or

(2) common or preferred stock described by Subsection (d)(7) or (8) of this section.

Art. 548b § 5A(e). The interpretation of this section of the statute is the heart of this controversy.

The funeral homes contend that the proper interpretation of the investment limit is that not more than 70% of the fund may be invested in either subsection one (bonds) or subsection two (stocks). That is, if 60% of the trust account is invested in bonds, then 40% may be invested in stocks. They contend that the Department's interpretation of the limit is that not more than 70% of the fund may be invested in the combination of subsections one and two. That is, if 60% of the trust fund is invested in bonds, then not more than 10% may be invested in stocks. The funeral homes assert that the Department's construction of the statute harms them because it has an adverse impact on the trust-fund earnings. The Department responds that no justiciable issue exists because it has neither interpreted the statute nor taken any action adverse to the funeral homes.

The Department has never interpreted this section of the statute in a formal rule published in the Texas Administrative Code. See Tex. Gov't Code Ann. §§ 2001.021-2001.038 (West 1996). The funeral homes pleaded that they learned of the Department's interpretation in "conversations and correspondence" and assert the "conversations and correspondence" are sufficient to create a justiciable issue. ⁽¹⁾ We need not decide whether the funeral homes are correct because other indicia of an actual controversy exist. We express no opinion on the competing interpretations of the statute in question.

Justiciable Issue

The Uniform Declaratory Judgments Act provides that a person whose rights, status, or other legal relations are affected by a statute may have any question of construction or validity arising under the statute determined and obtain a declaration of rights, status or other legal relations. Tex. Civ. Prac. & Rem. Code Ann. § 37.004(a)(West 1986). The statute is remedial and to be liberally construed. Id. § 37.002(b); Hawkins v. Texas Oil & Gas Corp., 724 S.W.2d 878, 891 (Tex. App.--Waco 1987, writ ref'd n.r.e.). A declaratory judgment is appropriate only if a real controversy exists as to the rights and status of the parties and the declaration will resolve the controversy. Bonham State Bank v. Beadle, 907 S.W.2d 465, 467 (Tex. 1995); Texas Ass'n of Business v. Texas Air Control Bd., 852 S.W.2d 440, 446 (Tex. 1993); Southwest Airlines Co. v. Texas High-Speed Rail Auth., 863 S.W.2d 123, 125 (Tex. App.--Austin 1993, writ denied). The dispute may not be hypothetical or concern an abstract question of law that the judgment will not actually determine; if so, the court would be giving an improper advisory opinion. See Southwest Airlines, 863 S.W.2d at 125.

A litigant does not have to incur actual damage or injury; possible losses have justified the rendition of a declaratory judgment. Bonham, 907 S.W.2d at 465; Ainsworth v. Oil City Brass Works, 271 S.W.2d 754, 760-61 (Tex. Civ. App.--Beaumont 1954, no writ). In Bonham, 907 S.W.2d 465, the Bonham State Bank brought a declaratory judgment action requesting the offset of two final judgments. Bonham held a judgment against Beadle for $1,650,000; Beadle, possibly a "judgment-proof" party, held a judgment against Bonham for $75,000. The court had to determine whether a justiciable controversy existed. Bonham at 469. It discussed the concern that Bonham would have to disclose the judgment against it in financial statements and an outstanding judgment could adversely affect its credit rating or interfere with its ability to transact business. Further, the bank should not have to wait until the other party, who might be judgment-proof, took action to execute on its judgment to obtain relief in the form of an offset. Nor should the bank, in order to protect its credit, be forced to pay money to someone who owed it a greater amount but who might not pay that debt. Id. None of the possible outcomes had happened at the time that the court granted Bonham declaratory relief.

The Department claims that no actual controversy exists because it has taken no adverse action against the funeral homes. It is undisputed that the Department has not yet revoked any licenses to sell prepaid funeral plans. The Department contends that the funeral homes should invest their funds according to their interpretation of the statute and then challenge the Department's alleged interpretation only if the Department actually revokes their licenses. The funeral homes respond that they have complied with the Department's interpretation in order to avoid losing their permits.

The Department may issue an order to cancel, suspend, or refuse to renew a permit to sell prepaid funeral plans if the Department finds "by examination or other credible evidence" that a funeral home has violated the Act. Art. 548b, § 4. The second amended petition for declaratory judgment, the live pleading, refers to an October 31, 1993 "Report of Examination" by the Banking Department that explicitly found one of the trust accounts failed to comply with the "70% limitation" for the categories of stocks and bonds as outlined in section 5A of article 548b. This appears to be the type of report that forms the predicate for an action to suspend or revoke a license under section 4.

The examination report expressly finding failure to comply with the investment limitation indicates that the funeral homes are correct that they and the Department have differing interpretations of that section. Therefore, a declaration of the meaning of the statutory section at issue would not be hypothetical or abstract; if resolved in favor of the funeral homes, they could invest according to their interpretation of the statute without triggering further reports of non-compliance which in turn could initiate a license revocation proceeding.

Alternative Ground for Dismissal

We must uphold the judgment on any legal theory that was before the district court, even if it gave an incorrect reason in its judgment dismissing the plaintiffs' cause of action. Guaranty County Mut. Ins. Co. v. Reyna, 709 S.W.2d 647, 648 (Tex. 1986); Lopez v. Public Util. Com'n of Texas, 816 S.W.2d 776, 781 (Tex. App.--Austin 1991, no writ). The Department complained that the funeral homes failed to exhaust their administrative remedies because they did not perfect an appeal from the Commissions's order of June 3, 1994. This order resulted from a hearing on the funeral homes' application to withdraw excess earnings from the trust accounts. Art. 548b, § 5(a)(4)(D). The order allowed the funeral homes to withdraw money from their accounts. There is no provision for judicial review of an order that gives the applicant its requested relief by granting permission to withdraw money from the trust accounts. The only provisions for judicial review concern an order denying permission to withdraw money, which is reviewable by trial de novo in district court. Art. 548b, § 5(a)(4)(d)(v). Therefore, even if the order of June 3, 1994, had clearly declared the Department's interpretation of the rule, ⁽²⁾ that order does not provide a vehicle for judicial review that would invoke the doctrine of exhaustion of administrative remedies.

We sustain the funeral homes' sole point of error, reverse the trial-court judgment and remand the cause for further proceedings.

Before Chief Justice Carroll, Justices Jones and B. A. Smith

Reversed and Remanded

Filed: May 15, 1996

Do Not Publish

1.   The conversations and correspondence are not as formal as the "policy statements" issued by the Department of Human Services that the court considered to be rules under the Administrative Procedure Act. Texas Dep't of Health v. Texas Health Enter., Inc., 871 S.W.2d 498, 501 n.2 (Tex. App.--Dallas 1993, writ denied) (citing Texas Dep't of Human Servs. v. Christian Care Ctrs., 826 S.W.2d 715, 717 (Tex. App.--Austin 1992, writ denied)).

2.   The Department relies on a table attached to the order as indicating the interpretation of the rule. The table simply summarizes dollar amounts in various investments, with a notation to the effect that the amounts complied with the 70% limitation.

actual controversy exists because it has taken no adverse action against the funeral homes. It is undisputed that the Department has not yet revoked any licenses to sell prepaid funeral plans. The Department contends that the funeral homes should invest their funds according to their interpretation of the statute and then challenge the Department's alleged interpretation only if the Department actually revokes their licenses. The funeral homes respond that they have complied with the Department's interpretation in order to avoid losing their permits.

The Department may issue an order to cancel, suspend, or refuse to renew a permit to sell prepaid funeral plans if the Department finds "by examination or other credible evidence" that a funeral home has violated the Act. Art. 548b, § 4. The second amended