THE JURISDICTION OF THE CEMETERY BOARD IN A MATTER PERTAINING TO AN AGREEMENT BETWEEN A CITY OF THE THIRD CLASS AND A COMPANY NOT A CORPORATION -- OR THE CONSTRUCTION OF A MAUSOLEUM AND THE SALE OF CRYPTS BY THE COMPANY
A document described as a least agreement, if it is intended as a lease, which provides for the construction of a mausoleum by an unincorporated company in a cemetery owned by a third class city and which provides for the sale of the crypts by the company as a cemetery authority is invalid, because it attempts to authorize the operation of a private cemetery during the period of the lease by individuals who cannot qualify under the law as a cemetery authority. If it is intended as a construction contract, the agreement is invalid because it violates the provisions of RCW 68.24.140. In either event it is invalid because it attempts to create on behalf of the city an endowment care fund which the city is not authorized by law to maintain.
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November 20, 1956
Honorable Hans M. Bielski
Secretary, The Cemetery Board
P.O. Box 218
Aberdeen, Washington Cite as: AGO 55-57 No. 343
By letter previously acknowledged you have requested an opinion as to whether a certain agreement entered into between a city of the third class and a partnership described as a company is legal.
You have submitted with your request a copy of the agreement involved and copies of the correspondence between the city and the Cemetery Board. The document submitted is described as a lease agreement and when condensed to its essential terms and provisions is as follows:
The agreement is between a city of the third class, as lessor, and a copartnership as lessee. For the sake of brevity, we will hereinafter refer to the parties as the city and the company.
The document denominated a lease is for a term of fifteen years, beginning on the 30th day of July, 1956, and ending on July 30, 1971, with the qualification that if the crypts provided for in the agreement are all sold and disposed of at an earlier date, the agreement shall terminate as of the earlier date. As consideration for the agreement, the company is to construct a mausoleum on a certain described portion of the city cemetery, which mausoleum shall contain 100 crypts and 400 niches; the title to the niches shall vest in the city upon the completion of the mausoleum and the city has the exclusive right to sell and keep the proceeds from the sale of the niches. The title to the entire structure shall pass to the city upon the termination of the agreement.
The company, in paragraph 5 of the agreement, is given the [[Orig. Op. Page 2]] exclusive right during the term thereof to sell all crypts in the mausoleum and to receive the proceeds from the sale thereof. The company further has the right to sell said crypts on contract and issue certificates entitling the purchasers to use or occupy such crypts for entombment purposes forever.
Paragraph 6 of the agreement provides for the creation of a trust fund in which shall be deposited the proceeds from the sale of all crypts less the ten percent of such sale price which is to be paid to the city for deposit in an endowment care fund. Such payments constitute a portion of the rental to be paid by the company for the use of the property during the period of the agreement. The consideration then reaching to the city and constituting the payment of rentals by the company consists of the right to the proceeds of the sale of the 400 niches to be constructed; ten percent of the sale price of all crypts sold by the company during the period of the agreement; and the ultimate ownership of the entire structure when the agreement is terminated.
Paragraph 6 further provides that if the proceeds from the sale of crypts during the period of construction are not sufficient to pay for the full cost of construction, the company may supply and deposit in the trust fund such sums as may be necessary to pay such costs. After the improvements have been completed and all the costs thereof fully paid and satisfied, and the amounts due the city, that is, the ten percent of the sale price of the crypts, have been paid, the trust account is to be discontinued and any funds remaining in the trust belong to the company.
Paragraph 8 of the agreement provides, in substance, that if the company fails to perform its contract by constructing the improvements, the company shall return all funds realized from the sale of crypts to the purchasers of such crypts. This section further provides that in the sale of crypts and in its dealings with the general public, the company acts as an independent contractor and that no obligation or responsibility shall be placed upon the city in any manner whatsoever in connection with the sale of crypts or the construction of the improvements. The city further disclaims all liability for any acts of the company in connection with the agreement. If any crypts remain unsold at the date the agreement expires, such crypts shall become the property of the city.
In paragraph 13 of the agreement, the city agrees that all rental payments, to wit, the ten percent of the sales price of the crypts, shall be placed immediately in the cemetery endowment care fund, and the city agrees to provide endowment care for each crypt for which payment to the cemetery endowment care fund has been made [[Orig. Op. Page 3]] in full and to issue an endowment care certificate to the purchaser.
Concerning this agreement you have submitted five questions as follows:
1. Is the document submitted valid either as a lease or as a construction contract?
2. Can a copartnership qualify to operate a cemetery in this state?
3. Can a town or city operate an endowment care cemetery in this state?
4. Does the board have jurisdiction in the situation created by the agreement?
5. If the board lacks jurisdiction, is there any action the board can take to remedy this situation?
The answers to questions 1 to 4 inclusive are in the negative. The answer to question 5 is supplied in the analysis.
1. It makes no difference whether the agreement submitted is construed as a lease or as a construction contract. It is our opinion that it is invalid. The reasons for this conclusion will be found in our discussion of questions 2 and 3.
2. A mausoleum is a cemetery as defined in RCW 68.04.040, (§ 4, chapter 297, Laws of 1943). Under the terms of the agreement the company has the exclusive right to sell all of the crypts contained in the mausoleum provided the sales can be effected during the period covered by the agreement, and the company can issue a certificate to the purchaser of such a crypt which entitles the purchaser to entombment therein forever. Under the terms of the agreement the city has no right of entry or possession to any portion of the mausoleum except that devoted to the columbarium. Thus it appears that during the period of the agreement the company will actually be operating a private cemetery. RCW 68.20.010 provides:
"It is unlawful to engage in or transact any business of a cemetery within this state except by means of a corporation duly organized for that purpose."
[[Orig. Op. Page 4]]
Since the company is admittedly not a corporation it cannot qualify as a cemetery authority. Consequently it cannot either sell or authorize entombment in the crypts which it sells. On the other hand the company cannot act as the agent of the city in the sale of the crypts for the reason that under the terms of the agreement it is operating as an individual contractor for a profit. If the company attempted to act as the agent of the city, it would be receiving a commission or a bonus as represented by the profit realized in the sale of the crypts.
RCW 68.24.140 provides in substance that it shall be unlawful for a cemetery authority to pay or offer to pay to any person, directly or indirectly, a commission, bonus, rebate, or other thing of value for the sale of a plot or services.
3. We believe the agreement is invalid in another respect, to wit: That it attempts to create in the city, to be operated by the city, an endowment care fund. While the statutes authorize cities to own and operate public cemeteries and to sell lots and burial space therein, there is no provision whereby the city can operate an endowment care fund.
RCW 68.12.040 (1955 Supp.) (§ 1, chapter 378, Laws of 1955) provides in substance that any city may acquire, hold, or improve land for cemetery purposes, may sell lots therein, and may provide by ordinance that a specified percentage of the proceeds from such sales be set aside and invested, the income from such investment to be used in the care of the lots and the general improvement and embellishment of the cemetery.
RCW 68.12.050 (1955 Supp.) (§ 3, chapter 378, Laws of 1955) provides that the monies received in the manner provided in RCW 68.12.040 shall be deposited with the city treasurer and shall be kept apart in a fund known as the "cemetery improvement fund."
It is significant that while the laws pertaining to city cemeteries provide for an improvement fund, they make no provision for the establishment of an endowment care fund. Therefore, if the city attempted to qualify as an endowment care cemetery, it would have to meet the requirements of RCW 68.40.010 (1955 Supp.) which provides in substance that an endowment care cemetery is one which deposits in its endowment care fund not less than the following amount for plots sold:
[[Orig. Op. Page 5]]
Ten percent of the gross sales price, with a minimum of ten dollars for each adult grave; five dollars for each niche; and thirty dollars for each crypt. In addition thereto, where the endowment care cemetery is created after the effective date of chapter 290, Laws of 1953, it would have to deposit in its endowment care fund the additional sum of $25,000 before disposing of any plots or making any sale thereof. This requirement is so different from the requirements of the improvement fund, which the city cemetery is authorized to establish, that we believe it is clear that the legislature did not intend that city cemeteries should, or could qualify to operate an endowment care cemetery.
4. What we have heretofore said makes it clear that the situation created by the agreement in question did not give the board jurisdiction in the matter.
RCW 68.05.280 (1953 Supp.) expressly exempts a city cemetery from the supervision and administration of the board, and since the company cannot qualify as a cemetery authority its activities would likewise not be within the jurisdiction of the board.
5. Since the board lacks jurisdiction, the only remaining question is, what action can the board take to remedy the situation created by the agreement?
In our opinion the only action the board can take is to refer the matter to the prosecuting attorney of the county in which the agreement is being performed and carried out.
In conclusion, it is our opinion that the agreement is invalid for the following reasons:
If it is intended as a lease, it is invalid because it attempts to authorize the operation of a private cemetery during the period of the lease by individuals who cannot qualify under the law as a cemetery authority.
If it is intended as a construction contract, it is invalid because it violates the provisions of RCW 68.24.140.
In either event, it is invalid because it attempts to create [[Orig. Op. Page 6]] on behalf of the city an endowment care fund which the city is not authorized by law to maintain.
We trust the foregoing will be of assistance.
Very truly yours,
ROY C. FOX
Assistant Attorney General