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 | |
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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: | |
1 | SECTION 1. Title 19 of the General Laws entitled "FINANCIAL INSTITUTIONS" is |
2 | hereby amended by adding thereto the following chapter: |
3 | CHAPTER 35 |
4 | THE RHODE ISLAND SPECIAL DEPOSITS ACT |
5 | 19-35-1. Short title. |
6 | This chapter shall be known and may be cited as the "Uniform Special Deposits Act." |
7 | 19-35-2. Definitions. |
8 | As used in this chapter, the following words and terms have the following meanings: |
9 | (1) "Account agreement" means an agreement that: |
10 | (i) Is in a record between a bank and one or more depositors; |
11 | (ii) May have one or more beneficiaries as additional parties; and |
12 | (iii) States the intention of the parties to establish a special deposit governed by this chapter. |
13 | (2) "Bank" means a person engaged in the business of banking and includes a savings bank, |
14 | savings and loan association, credit union, trust company, other financial institution as defined in |
15 | this title, and other regulated institution as defined in this title. Each branch or separate office of a |
16 | bank is a separate bank for the purpose of this chapter. |
17 | (3) "Beneficiary" means a person that: |
18 | (i) Is identified as a beneficiary in an account agreement; or |
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1 | (ii) If not identified as a beneficiary in an account agreement, may be entitled to payment |
2 | from a special deposit: |
3 | (A) Under the account agreement; or |
4 | (B) On termination of the special deposit. |
5 | (4) "Contingency" means an event or circumstance stated in an account agreement that is |
6 | not certain to occur but must occur before the bank is obligated to pay a beneficiary. |
7 | (5) "Creditor process" means attachment, garnishment, levy, notice of lien, sequestration, |
8 | or similar process issued by or on behalf of a creditor or other claimant. |
9 | (6) "Depositor" means a person that establishes or funds a special deposit. |
10 | (7) "Good faith" means honesty in fact and observance of reasonable commercial standards |
11 | of fair dealing. |
12 | (8) "Knowledge" of a fact means: |
13 | (i) With respect to a beneficiary, actual knowledge of the fact; or |
14 | (ii) With respect to a bank holding a special deposit: |
15 | (A) If the bank: |
16 | (I) Has established a reasonable routine for communicating material information to an |
17 | individual to whom the bank has assigned responsibility for the special deposit; and |
18 | (II) Maintains reasonable compliance with the routine, actual knowledge of the fact by that |
19 | individual; or |
20 | (B) If the bank has not established and maintained reasonable compliance with a routine |
21 | described in subsection (8)(ii)(A)(I) of this section or otherwise exercised due diligence, implied |
22 | knowledge of the fact that would have come to the attention of an individual to whom the bank has |
23 | assigned responsibility for the special deposit. |
24 | (9) "Obligated to pay a beneficiary" or "obligation to pay a beneficiary" means a |
25 | beneficiary is entitled under the account agreement to receive from the bank a payment when: |
26 | (i) A contingency has occurred; and |
27 | (ii) The bank has knowledge the contingency has occurred. |
28 | (10) "Permissible purpose" means a governmental, regulatory, commercial, charitable, or |
29 | testamentary objective of the parties stated in an account agreement. The term includes an objective |
30 | to: |
31 | (i) Hold funds: |
32 | (A) In escrow, including for a purchase and sale, lease, buyback, or other transaction; |
33 | (B) As a security deposit of a tenant; |
34 | (C) That may be distributed to a person as remuneration, retirement or other benefit, or |
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1 | compensation under a judgment, consent decree, court order, or other decision of a tribunal; or |
2 | (D) For distribution to a defined class of persons after identification of the class members |
3 | and their interest in the funds; |
4 | (ii) Provide assurance with respect to an obligation created by contract, such as earnest |
5 | money to ensure a transaction closes; |
6 | (iii) Settle an obligation that arises in the operation of a payment system, securities |
7 | settlement system, or other financial market infrastructure; |
8 | (iv) Provide assurance with respect to an obligation that arises in the operation of a payment |
9 | system, securities settlement system, or other financial market infrastructure; or |
10 | (v) Hold margin, other cash collateral, or funds that support the orderly functioning of |
11 | financial market infrastructure or the performance of an obligation with respect to the |
12 | infrastructure. |
13 | (11) "Person" means an individual, estate, business or nonprofit entity, government or |
14 | governmental subdivision, agency, or instrumentality, or other legal entity. The term includes a |
15 | protected series, however denominated, of an entity if the protected series is established under law |
16 | that limits, or limits if conditions specified under law are satisfied, the ability of a creditor of the |
17 | entity or of any other protected series of the entity to satisfy a claim from assets of the protected |
18 | series. |
19 | (12) "Record" means information: |
20 | (i) Inscribed on a tangible medium; or |
21 | (ii) Stored in an electronic or other medium and retrievable in perceivable form. |
22 | (13) "Special deposit" means a deposit that satisfies §19-35-5. |
23 | (14) "State" means a state of the United States, the District of Columbia, Puerto Rico, the |
24 | United States Virgin Islands, or any other territory or possession subject to the jurisdiction of the |
25 | United States. The term includes an agency or instrumentality of the state. |
26 | 19-35-3. Scope, choice of law, and forum. |
27 | (a) This chapter applies to a special deposit under an account agreement that states the |
28 | intention of the parties to establish a special deposit governed by this chapter, regardless of whether |
29 | a party to the account agreement or a transaction related to the special deposit, or the special deposit |
30 | itself, has a reasonable relation to this state. |
31 | (b) The parties to an account agreement may choose a forum in this state for settling a |
32 | dispute arising out of the special deposit, regardless of whether a party to the account agreement or |
33 | a transaction related to the special deposit, or the special deposit itself, has a reasonable relation to |
34 | this state. |
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1 | (c) This chapter does not affect: |
2 | (1) A right or obligation relating to a deposit other than a special deposit under this chapter; |
3 | or |
4 | (2) The voidability of a deposit or transfer that is fraudulent or voidable under other law. |
5 | 19-35-4. Variation by agreement or amendment. |
6 | (a) The effect of §§ 19-35-2 through 19-35-6, §§ 19-35-8 through 19-35-11, and § 19-35- |
7 | 14 may not be varied by agreement, except as provided in those sections. Subject to subsection (b) |
8 | of this section, the effect of §§ 19-35-7, 19-35-12, and 19-35-13 may be varied by agreement. |
9 | (b) A provision in an account agreement or other record that substantially excuses liability |
10 | or substantially limits remedies for failure to perform an obligation under this chapter is not |
11 | sufficient to vary the effect of a provision of this chapter. |
12 | (c) If a beneficiary is a party to an account agreement, the bank and the depositor may |
13 | amend the agreement without the consent of the beneficiary only if the agreement expressly permits |
14 | the amendment. |
15 | (d) If a beneficiary is not a party to an account agreement and the bank and the depositor |
16 | know the beneficiary has knowledge of the agreement's terms, the bank and the depositor may |
17 | amend the agreement without the consent of the beneficiary only if the amendment does not |
18 | adversely and materially affect a payment right of the beneficiary. |
19 | (e) If a beneficiary is not a party to an account agreement and the bank and the depositor |
20 | do not know whether the beneficiary has knowledge of the agreement's terms, the bank and the |
21 | depositor may amend the agreement without the consent of the beneficiary only if the amendment |
22 | is made in good faith. |
23 | 19-35-5. Requirements for special deposit. |
24 | A deposit is a special deposit if it is: |
25 | (1) A deposit of funds in a bank under an account agreement; |
26 | (2) For the benefit of at least two (2) beneficiaries, one or more of which may be a |
27 | depositor; |
28 | (3) Denominated in a medium of exchange that is currently authorized or adopted by a |
29 | domestic or foreign government; |
30 | (4) For a permissible purpose stated in the account agreement; and |
31 | (5) Subject to a contingency. |
32 | 19-35-6. Permissible purpose. |
33 | (a) A special deposit shall serve at least one permissible purpose stated in the account |
34 | agreement from the time the special deposit is created in the account agreement until termination |
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1 | of the special deposit. |
2 | (b) If, before termination of the special deposit, the bank or a court determines the special |
3 | deposit no longer satisfies subsection (a) of this section, §§ 19-35-8 through 19-35-11 cease to |
4 | apply to any funds deposited in the special deposit after the special deposit ceases to satisfy |
5 | subsection (a) of this section. |
6 | (c) If, before termination of a special deposit, the bank determines the special deposit no |
7 | longer satisfies subsection (a) of this section, the bank may take action it believes is necessary under |
8 | the circumstances, including terminating the special deposit. |
9 | 19-35-7. Payment to beneficiary by bank. |
10 | (a) Unless the account agreement provides otherwise, the bank is obligated to pay a |
11 | beneficiary if there are sufficient actually and finally collected funds in the balance of the special |
12 | deposit. |
13 | (b) Except as provided in subsection (c) of this section, the obligation to pay the beneficiary |
14 | is excused if the funds available in the special deposit are insufficient to cover such payment. |
15 | (c) Unless the account agreement provides otherwise, if the funds available in the special |
16 | deposit are insufficient to cover an obligation to pay a beneficiary, a beneficiary may elect to be |
17 | paid the funds that are available or, if there is more than one beneficiary, a pro rata share of the |
18 | funds available. Payment to the beneficiary making the election under this subsection discharges |
19 | the bank's obligation to pay a beneficiary and does not constitute an accord and satisfaction with |
20 | respect to another person obligated to the beneficiary. |
21 | (d) Unless the account agreement provides otherwise, the obligation of the bank obligated |
22 | to pay a beneficiary is immediately due and payable. |
23 | (e) The bank may discharge its obligation under this section by: |
24 | (1) Crediting another transaction account of the beneficiary; or |
25 | (2) Taking other action that: |
26 | (i) Is permitted under the account agreement for the bank to obtain a discharge; or |
27 | (ii) Otherwise would constitute a discharge under law. |
28 | (f) If the bank obligated to pay a beneficiary has incurred an obligation to discharge the |
29 | obligation of another person, the obligation of the other person is discharged if action by the bank |
30 | under subsection (e) of this section would constitute a discharge of the obligation of the other person |
31 | under law that determines whether an obligation is satisfied. |
32 | 19-35-8. Property interest of depositor or beneficiary. |
33 | (a) Neither a depositor nor a beneficiary has a property interest in a special deposit. |
34 | (b) Any property interest with respect to a special deposit is only in the right to receive |
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1 | payment if the bank is obligated to pay a beneficiary and not in the special deposit itself. Any |
2 | property interest under this subsection is determined by this chapter. |
3 | 19-35-9. When creditor process is enforceable against bank. |
4 | (a) Subject to subsection (b) of this section, creditor process with respect to a special |
5 | deposit is not enforceable against the bank holding the special deposit. |
6 | (b) Creditor process is enforceable against the bank holding a special deposit with respect |
7 | to an amount the bank is obligated to pay a beneficiary or a depositor if the process: |
8 | (1) Is served on the bank; |
9 | (2) Provides sufficient information to permit the bank to identify the depositor or the |
10 | beneficiary from the bank's books and records; and |
11 | (3) Gives the bank a reasonable opportunity to act on the process. |
12 | (c) Creditor process served on a bank before it is enforceable against the bank under |
13 | subsection (b) of this section does not create a right of the creditor against the bank or a duty of the |
14 | bank to the creditor. Rhode Island general laws shall determine whether creditor process creates a |
15 | lien enforceable against the beneficiary on a contingent interest of a beneficiary, including a |
16 | depositor as a beneficiary, even if not enforceable against the bank. |
17 | 19-35-10. Injunction or similar relief. |
18 | A court may enjoin, or grant similar relief that would have the effect of enjoining, a bank |
19 | from paying a depositor or beneficiary only if payment would constitute a material fraud or |
20 | facilitate a material fraud with respect to a special deposit. |
21 | 19-35-11. Recoupment or set off. |
22 | (a) Except as provided in subsections (b) or (c) of this section, a bank may not exercise a |
23 | right of recoupment or set off against a special deposit. |
24 | (b) An account agreement may authorize the bank to debit the special deposit: |
25 | (1) When the bank becomes obligated to pay a beneficiary, in an amount that does not |
26 | exceed the amount necessary to discharge the obligation; |
27 | (2) For a fee assessed by the bank that relates to an overdraft in the special deposit account; |
28 | (3) For costs incurred by the bank that relate directly to the special deposit; or |
29 | (4) To reverse an earlier credit posted by the bank to the balance of the special deposit |
30 | account, if the reversal occurs under an event or circumstance warranted under Rhode Island |
31 | general laws governing mistake and restitution. |
32 | (c) The bank holding a special deposit may exercise a right of recoupment or set off against |
33 | an obligation to pay a beneficiary, even if the bank funds payment from the special deposit. |
34 | 19-35-12. Duties and liability of bank. |
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1 | (a) A bank does not have a fiduciary duty to any person with respect to a special deposit. |
2 | (b) When the bank holding a special deposit becomes obligated to pay a beneficiary, a |
3 | debtor-creditor relationship arises between the bank and beneficiary. |
4 | (c) The bank holding a special deposit has a duty to a beneficiary to comply with the |
5 | account agreement as set forth in this chapter. |
6 | (d) If the bank holding a special deposit does not comply with the account agreement as |
7 | set forth in this chapter, the bank is liable to a depositor or beneficiary only for damages proximately |
8 | caused by the noncompliance. Except as provided by Rhode Island general laws, the bank is not |
9 | liable for consequential, special, or punitive damages. |
10 | (e) The bank holding a special deposit may rely on records presented in compliance with |
11 | the account agreement to determine whether the bank is obligated to pay a beneficiary. |
12 | (f) If the account agreement requires payment on presentation of a record, the bank shall |
13 | determine within a reasonable time whether the record is sufficient to require payment. If the |
14 | agreement requires action by the bank on presentation of a record, the bank is not liable for relying |
15 | in good faith on the genuineness of the record if the record appears on its face to be genuine. |
16 | (g) Unless the account agreement provides otherwise, the bank is not required to determine |
17 | whether a permissible purpose stated in the agreement continues to exist. |
18 | 19-35-13. Term and termination. |
19 | (a) Unless otherwise provided in the account agreement, a special deposit terminates five |
20 | (5) years after the date the special deposit was first funded. |
21 | (b) Unless otherwise provided in the account agreement, if the bank cannot identify or |
22 | locate a beneficiary entitled to payment when the special deposit is terminated, and a balance |
23 | remains in the special deposit, the bank shall pay the balance to the depositor or depositors as a |
24 | beneficiary or beneficiaries. |
25 | (c) A bank that pays the remaining balance as provided under subsection (b) of this section |
26 | has no further obligation with respect to the special deposit. |
27 | 19-35-14. Principles of law and equity. |
28 | The Rhode Island general laws regarding consumer protection, banking deposits, escheat |
29 | and abandoned or unclaimed property, equity, contracts, principal and agent, estoppel, fraud, |
30 | misrepresentation, duress, coercion, mistake, and bankruptcy, supplement this chapter except to the |
31 | extent that any statute is inconsistent with this chapter. |
32 | 19-35-15. Uniformity of application and construction. |
33 | In applying and construing this uniform act, a court shall consider the promotion of |
34 | uniformity of the law among jurisdictions that enact it. |
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1 | 19-35-16. Transitional provision. |
2 | This chapter applies to: |
3 | (1) A special deposit made under an account agreement executed on or after the effective |
4 | date of this chapter; and |
5 | (2) A deposit made under an agreement executed before the effective date of this chapter, |
6 | if: |
7 | (i) All parties entitled to amend the agreement agree to make the deposit a special deposit |
8 | governed by this chapter; and |
9 | (ii) The special deposit referenced in the amended agreement satisfies § 19-35-5. |
10 | 19-35-17. Severability clause. |
11 | If a provision of this chapter or its application to a person or circumstance is held invalid, |
12 | the invalidity does not affect any other provision or application of this chapter that can be given |
13 | effect without the invalid provision. |
14 | SECTION 2. This act shall take effect upon passage. |
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LC005049 | |
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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 | |
*** | |
1 | This act would establish the Rhode Island Special Deposits Act to be governed by an |
2 | account agreement between the bank and the depositor or its beneficiary. |
3 | This act would take effect upon passage. |
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LC005049 | |
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