2024 -- S 2737

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LC005049

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2024

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A N   A C T

RELATING TO FINANCIAL INSTITUTIONS -- THE RHODE ISLAND SPECIAL DEPOSITS

ACT

     

     Introduced By: Senators McKenney, Euer, LaMountain, Bissaillon, and F. Lombardi

     Date Introduced: March 08, 2024

     Referred To: Senate Commerce

     It is enacted by the General Assembly as follows:

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     SECTION 1. Title 19 of the General Laws entitled "FINANCIAL INSTITUTIONS" is

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hereby amended by adding thereto the following chapter:

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CHAPTER 35

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THE RHODE ISLAND SPECIAL DEPOSITS ACT

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     19-35-1. Short title.

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     This chapter shall be known and may be cited as the "Uniform Special Deposits Act."

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     19-35-2. Definitions.

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     As used in this chapter, the following words and terms have the following meanings:

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     (1) "Account agreement" means an agreement that:

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     (i) Is in a record between a bank and one or more depositors;

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     (ii) May have one or more beneficiaries as additional parties; and

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     (iii) States the intention of the parties to establish a special deposit governed by this chapter.

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     (2) "Bank" means a person engaged in the business of banking and includes a savings bank,

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savings and loan association, credit union, trust company, other financial institution as defined in

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this title, and other regulated institution as defined in this title. Each branch or separate office of a

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bank is a separate bank for the purpose of this chapter.

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     (3) "Beneficiary" means a person that:

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     (i) Is identified as a beneficiary in an account agreement; or

 

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     (ii) If not identified as a beneficiary in an account agreement, may be entitled to payment

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from a special deposit:

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     (A) Under the account agreement; or

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     (B) On termination of the special deposit.

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     (4) "Contingency" means an event or circumstance stated in an account agreement that is

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not certain to occur but must occur before the bank is obligated to pay a beneficiary.

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     (5) "Creditor process" means attachment, garnishment, levy, notice of lien, sequestration,

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or similar process issued by or on behalf of a creditor or other claimant.

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     (6) "Depositor" means a person that establishes or funds a special deposit.

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     (7) "Good faith" means honesty in fact and observance of reasonable commercial standards

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of fair dealing.

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     (8) "Knowledge" of a fact means:

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     (i) With respect to a beneficiary, actual knowledge of the fact; or

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     (ii) With respect to a bank holding a special deposit:

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     (A) If the bank:

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     (I) Has established a reasonable routine for communicating material information to an

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individual to whom the bank has assigned responsibility for the special deposit; and

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     (II) Maintains reasonable compliance with the routine, actual knowledge of the fact by that

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individual; or

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     (B) If the bank has not established and maintained reasonable compliance with a routine

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described in subsection (8)(ii)(A)(I) of this section or otherwise exercised due diligence, implied

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knowledge of the fact that would have come to the attention of an individual to whom the bank has

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assigned responsibility for the special deposit.

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     (9) "Obligated to pay a beneficiary" or "obligation to pay a beneficiary" means a

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beneficiary is entitled under the account agreement to receive from the bank a payment when:

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     (i) A contingency has occurred; and

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     (ii) The bank has knowledge the contingency has occurred.

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     (10) "Permissible purpose" means a governmental, regulatory, commercial, charitable, or

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testamentary objective of the parties stated in an account agreement. The term includes an objective

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to:

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     (i) Hold funds:

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     (A) In escrow, including for a purchase and sale, lease, buyback, or other transaction;

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     (B) As a security deposit of a tenant;

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     (C) That may be distributed to a person as remuneration, retirement or other benefit, or

 

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compensation under a judgment, consent decree, court order, or other decision of a tribunal; or

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     (D) For distribution to a defined class of persons after identification of the class members

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and their interest in the funds;

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     (ii) Provide assurance with respect to an obligation created by contract, such as earnest

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money to ensure a transaction closes;

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     (iii) Settle an obligation that arises in the operation of a payment system, securities

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settlement system, or other financial market infrastructure;

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     (iv) Provide assurance with respect to an obligation that arises in the operation of a payment

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system, securities settlement system, or other financial market infrastructure; or

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     (v) Hold margin, other cash collateral, or funds that support the orderly functioning of

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financial market infrastructure or the performance of an obligation with respect to the

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infrastructure.

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     (11) "Person" means an individual, estate, business or nonprofit entity, government or

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governmental subdivision, agency, or instrumentality, or other legal entity. The term includes a

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protected series, however denominated, of an entity if the protected series is established under law

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that limits, or limits if conditions specified under law are satisfied, the ability of a creditor of the

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entity or of any other protected series of the entity to satisfy a claim from assets of the protected

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series.

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     (12) "Record" means information:

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     (i) Inscribed on a tangible medium; or

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     (ii) Stored in an electronic or other medium and retrievable in perceivable form.

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     (13) "Special deposit" means a deposit that satisfies §19-35-5.

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     (14) "State" means a state of the United States, the District of Columbia, Puerto Rico, the

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United States Virgin Islands, or any other territory or possession subject to the jurisdiction of the

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United States. The term includes an agency or instrumentality of the state.

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     19-35-3. Scope, choice of law, and forum.

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     (a) This chapter applies to a special deposit under an account agreement that states the

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intention of the parties to establish a special deposit governed by this chapter, regardless of whether

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a party to the account agreement or a transaction related to the special deposit, or the special deposit

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itself, has a reasonable relation to this state.

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     (b) The parties to an account agreement may choose a forum in this state for settling a

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dispute arising out of the special deposit, regardless of whether a party to the account agreement or

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a transaction related to the special deposit, or the special deposit itself, has a reasonable relation to

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this state.

 

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     (c) This chapter does not affect:

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     (1) A right or obligation relating to a deposit other than a special deposit under this chapter;

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or

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     (2) The voidability of a deposit or transfer that is fraudulent or voidable under other law.

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     19-35-4. Variation by agreement or amendment.

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     (a) The effect of §§ 19-35-2 through 19-35-6, §§ 19-35-8 through 19-35-11, and § 19-35-

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14 may not be varied by agreement, except as provided in those sections. Subject to subsection (b)

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of this section, the effect of §§ 19-35-7, 19-35-12, and 19-35-13 may be varied by agreement.

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     (b) A provision in an account agreement or other record that substantially excuses liability

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or substantially limits remedies for failure to perform an obligation under this chapter is not

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sufficient to vary the effect of a provision of this chapter.

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     (c) If a beneficiary is a party to an account agreement, the bank and the depositor may

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amend the agreement without the consent of the beneficiary only if the agreement expressly permits

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the amendment.

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     (d) If a beneficiary is not a party to an account agreement and the bank and the depositor

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know the beneficiary has knowledge of the agreement's terms, the bank and the depositor may

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amend the agreement without the consent of the beneficiary only if the amendment does not

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adversely and materially affect a payment right of the beneficiary.

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     (e) If a beneficiary is not a party to an account agreement and the bank and the depositor

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do not know whether the beneficiary has knowledge of the agreement's terms, the bank and the

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depositor may amend the agreement without the consent of the beneficiary only if the amendment

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is made in good faith.

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     19-35-5. Requirements for special deposit.

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     A deposit is a special deposit if it is:

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     (1) A deposit of funds in a bank under an account agreement;

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     (2) For the benefit of at least two (2) beneficiaries, one or more of which may be a

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depositor;

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     (3) Denominated in a medium of exchange that is currently authorized or adopted by a

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domestic or foreign government;

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     (4) For a permissible purpose stated in the account agreement; and

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     (5) Subject to a contingency.

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     19-35-6. Permissible purpose.

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     (a) A special deposit shall serve at least one permissible purpose stated in the account

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agreement from the time the special deposit is created in the account agreement until termination

 

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of the special deposit.

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     (b) If, before termination of the special deposit, the bank or a court determines the special

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deposit no longer satisfies subsection (a) of this section, §§ 19-35-8 through 19-35-11 cease to

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apply to any funds deposited in the special deposit after the special deposit ceases to satisfy

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subsection (a) of this section.

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     (c) If, before termination of a special deposit, the bank determines the special deposit no

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longer satisfies subsection (a) of this section, the bank may take action it believes is necessary under

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the circumstances, including terminating the special deposit.

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     19-35-7. Payment to beneficiary by bank.

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     (a) Unless the account agreement provides otherwise, the bank is obligated to pay a

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beneficiary if there are sufficient actually and finally collected funds in the balance of the special

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deposit.

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     (b) Except as provided in subsection (c) of this section, the obligation to pay the beneficiary

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is excused if the funds available in the special deposit are insufficient to cover such payment.

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     (c) Unless the account agreement provides otherwise, if the funds available in the special

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deposit are insufficient to cover an obligation to pay a beneficiary, a beneficiary may elect to be

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paid the funds that are available or, if there is more than one beneficiary, a pro rata share of the

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funds available. Payment to the beneficiary making the election under this subsection discharges

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the bank's obligation to pay a beneficiary and does not constitute an accord and satisfaction with

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respect to another person obligated to the beneficiary.

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     (d) Unless the account agreement provides otherwise, the obligation of the bank obligated

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to pay a beneficiary is immediately due and payable.

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     (e) The bank may discharge its obligation under this section by:

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     (1) Crediting another transaction account of the beneficiary; or

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     (2) Taking other action that:

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     (i) Is permitted under the account agreement for the bank to obtain a discharge; or

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     (ii) Otherwise would constitute a discharge under law.

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     (f) If the bank obligated to pay a beneficiary has incurred an obligation to discharge the

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obligation of another person, the obligation of the other person is discharged if action by the bank

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under subsection (e) of this section would constitute a discharge of the obligation of the other person

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under law that determines whether an obligation is satisfied.

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     19-35-8. Property interest of depositor or beneficiary.

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     (a) Neither a depositor nor a beneficiary has a property interest in a special deposit.

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     (b) Any property interest with respect to a special deposit is only in the right to receive

 

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payment if the bank is obligated to pay a beneficiary and not in the special deposit itself. Any

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property interest under this subsection is determined by this chapter.

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     19-35-9. When creditor process is enforceable against bank.

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     (a) Subject to subsection (b) of this section, creditor process with respect to a special

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deposit is not enforceable against the bank holding the special deposit.

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     (b) Creditor process is enforceable against the bank holding a special deposit with respect

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to an amount the bank is obligated to pay a beneficiary or a depositor if the process:

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     (1) Is served on the bank;

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     (2) Provides sufficient information to permit the bank to identify the depositor or the

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beneficiary from the bank's books and records; and

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     (3) Gives the bank a reasonable opportunity to act on the process.

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     (c) Creditor process served on a bank before it is enforceable against the bank under

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subsection (b) of this section does not create a right of the creditor against the bank or a duty of the

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bank to the creditor. Rhode Island general laws shall determine whether creditor process creates a

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lien enforceable against the beneficiary on a contingent interest of a beneficiary, including a

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depositor as a beneficiary, even if not enforceable against the bank.

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     19-35-10. Injunction or similar relief.

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     A court may enjoin, or grant similar relief that would have the effect of enjoining, a bank

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from paying a depositor or beneficiary only if payment would constitute a material fraud or

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facilitate a material fraud with respect to a special deposit.

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     19-35-11. Recoupment or set off.

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     (a) Except as provided in subsections (b) or (c) of this section, a bank may not exercise a

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right of recoupment or set off against a special deposit.

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     (b) An account agreement may authorize the bank to debit the special deposit:

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     (1) When the bank becomes obligated to pay a beneficiary, in an amount that does not

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exceed the amount necessary to discharge the obligation;

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     (2) For a fee assessed by the bank that relates to an overdraft in the special deposit account;

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     (3) For costs incurred by the bank that relate directly to the special deposit; or

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     (4) To reverse an earlier credit posted by the bank to the balance of the special deposit

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account, if the reversal occurs under an event or circumstance warranted under Rhode Island

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general laws governing mistake and restitution.

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     (c) The bank holding a special deposit may exercise a right of recoupment or set off against

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an obligation to pay a beneficiary, even if the bank funds payment from the special deposit.

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     19-35-12. Duties and liability of bank.

 

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     (a) A bank does not have a fiduciary duty to any person with respect to a special deposit.

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     (b) When the bank holding a special deposit becomes obligated to pay a beneficiary, a

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debtor-creditor relationship arises between the bank and beneficiary.

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     (c) The bank holding a special deposit has a duty to a beneficiary to comply with the

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account agreement as set forth in this chapter.

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     (d) If the bank holding a special deposit does not comply with the account agreement as

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set forth in this chapter, the bank is liable to a depositor or beneficiary only for damages proximately

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caused by the noncompliance. Except as provided by Rhode Island general laws, the bank is not

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liable for consequential, special, or punitive damages.

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     (e) The bank holding a special deposit may rely on records presented in compliance with

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the account agreement to determine whether the bank is obligated to pay a beneficiary.

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     (f) If the account agreement requires payment on presentation of a record, the bank shall

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determine within a reasonable time whether the record is sufficient to require payment. If the

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agreement requires action by the bank on presentation of a record, the bank is not liable for relying

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in good faith on the genuineness of the record if the record appears on its face to be genuine.

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     (g) Unless the account agreement provides otherwise, the bank is not required to determine

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whether a permissible purpose stated in the agreement continues to exist.

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     19-35-13. Term and termination.

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     (a) Unless otherwise provided in the account agreement, a special deposit terminates five

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(5) years after the date the special deposit was first funded.

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     (b) Unless otherwise provided in the account agreement, if the bank cannot identify or

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locate a beneficiary entitled to payment when the special deposit is terminated, and a balance

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remains in the special deposit, the bank shall pay the balance to the depositor or depositors as a

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beneficiary or beneficiaries.

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     (c) A bank that pays the remaining balance as provided under subsection (b) of this section

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has no further obligation with respect to the special deposit.

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     19-35-14. Principles of law and equity.

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     The Rhode Island general laws regarding consumer protection, banking deposits, escheat

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and abandoned or unclaimed property, equity, contracts, principal and agent, estoppel, fraud,

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misrepresentation, duress, coercion, mistake, and bankruptcy, supplement this chapter except to the

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extent that any statute is inconsistent with this chapter.

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     19-35-15. Uniformity of application and construction.

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     In applying and construing this uniform act, a court shall consider the promotion of

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uniformity of the law among jurisdictions that enact it.

 

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     19-35-16. Transitional provision.

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     This chapter applies to:

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     (1) A special deposit made under an account agreement executed on or after the effective

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date of this chapter; and

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     (2) A deposit made under an agreement executed before the effective date of this chapter,

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if:

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     (i) All parties entitled to amend the agreement agree to make the deposit a special deposit

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governed by this chapter; and

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     (ii) The special deposit referenced in the amended agreement satisfies § 19-35-5.

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     19-35-17. Severability clause.

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     If a provision of this chapter or its application to a person or circumstance is held invalid,

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the invalidity does not affect any other provision or application of this chapter that can be given

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effect without the invalid provision.

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     SECTION 2. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO FINANCIAL INSTITUTIONS -- THE RHODE ISLAND SPECIAL DEPOSITS

ACT

***

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     This act would establish the Rhode Island Special Deposits Act to be governed by an

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account agreement between the bank and the depositor or its beneficiary.

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     This act would take effect upon passage.

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