STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 6656

August 20, 1990

FUNERAL DIRECTORS AND EMBALMERS:

Prepaid Funeral Contract Funding Act--application of escrow provisions to sale of goods delivered to warehouse prior to buyer's death

The escrow provisions of the Prepaid Funeral Contract Funding Act do not apply to a contract for the sale exclusively of funeral goods where the seller delivers and surrenders control over the goods to a bona fide, third party warehouse which then issues a warehouse receipt to the buyer.

Honorable Joseph F. Young, Sr.

State Representative

The Capitol

Lansing, Michigan

Honorable Joseph F. Young, Jr.

State Representative

The Capitol

Lansing, Michigan

You have requested my opinion whether the escrow provisions of the Prepaid Funeral Contract Funding Act, 1986 PA 255, MCL 328.211 et seq; MSA 14.525(21) et seq, apply to certain sales of funeral goods.

As background to your question, you state that certain sellers of funeral goods and services have adopted a marketing strategy known as "warehousing," in which the seller arranges for the storage of merchandise (chiefly caskets and a type of burial container called a catafalque) and then gives the buyer a warehouse receipt. In light of this practice, you ask:

The Prepaid Funeral Contract Funding Act requires that, with certain limited exceptions, "[a]ll funds received in connection with a prepaid funeral contract" must be placed in escrow for the benefit of the person for whom the funeral goods or services have been purchased. MCL 328.222(1); MSA 14.525(32)(1). The term "prepaid funeral contract," as used in the Act, is defined as follows:

MCL 328.215(3); MSA 14.525(25)(3). The Act also calls for refunding the escrowed funds if the contract is cancelled, and provides other protections to purchasers of funeral goods or services. See, MCL 328.223; MSA 14.525(33).

The Prepaid Funeral Contract Funding Act explicitly recognizes that sellers of funeral goods and services may provide funeral goods before the death of the intended user. See, e.g., MCL 338.225(1); MSA 14.525(35)(1). More importantly, the definition of "prepaid funeral contract" set forth in MCL 328.215(3); MSA 14.525(25)(3), extends to contracts for the sale of funeral goods only when "physical delivery and retention ... would occur after death."

Your question is explicitly limited to contracts for the sale "exclusively of funeral goods." I understand this to mean a contract which provides only for the sale of funeral goods and delivery prior to the buyer's death and which does not require the funeral provider to perform any services other than to arrange for the delivery of those goods to a warehouse. If the contract does provide for funeral services or for the delivery of any goods after the death of the buyer, it would plainly fall within the definition of "prepaid funeral contract," and would be covered by the Act. Thus, the sole question posed by your request is whether the practice of warehousing such goods constitutes "physical delivery" of those goods to the buyer prior to the buyer's death, thus removing such a transaction from the definition of a "prepaid funeral contract" subject to regulation under the Act.

It has long been settled in Michigan that delivery to a warehouseman, together with an order directed to the warehouseman to deliver the goods to the buyer, is "in the eye of the law, a delivery to [the buyer], regardless of whether he actually received the goods." Harris v Pellenz, 146 Mich 529, 531; 109 NW 1044 (1906). Accord: Schneider v C H Little Co, 184 Mich 315, 321; 151 NW 587 (1915). The critical element in such delivery is the parties' respective abilities to control the funeral goods. Assuming that the "warehousing" practice described in your letter involves delivery of funeral goods to a disinterested third party warehouse, and not merely to a warehouse or storage area owned or controlled by the seller of the goods, it would appear that the seller has in fact relinquished control of the goods to the warehouse upon delivery. The warehouse receipt gives the buyer the right to receive the funeral goods, placing them under his control. It follows that, upon delivery of the goods to a bona fide, third party warehouseman, together with the issuance of a warehouse receipt which provides the buyer with the control of the goods, control has passed to the buyer. Assuming that these events occur prior to the death of the buyer, there has been a "physical delivery" of those goods to the buyer within the meaning of MCL 328.215(3); MSA 14.525(25)(3).

It is noted, however, that while such transactions are, consequently, excluded from the escrow provisions of the Prepaid Funeral Contract Funding Act, they nevertheless continue to be subject to regulation. As is recognized by the Act itself, the federal regulations set forth in 16 CFR, Part 453, proscribe a number of unfair or deceptive acts or practices in connection with the sale of funeral goods and services. See, MCL 338.225(1); MSA 14.525(35)(1).

It is my opinion, therefore, that the escrow provisions of the Prepaid Funeral Contract Funding Act do not apply to a contract for the sale exclusively of funeral goods where the seller delivers and surrenders control over the goods to a bona fide, third party warehouse which then issues a warehouse receipt to the buyer.

Frank J. Kelley

Attorney General