Senate Bill 5801 — Special Deposits Act (Washington, 2024 Regular Session)

Summary

Senate Bill 5801 of the State of Washington, 68th Legislature, 2024 Regular Session, by Senators Dozier, Pedersen, Hunt and Mullet and another senator, by request of the Uniform Law Commission. It was prefiled 12/05/23, read first time 01/08/24 and referred to the Committee on Business, Financial Services, Gaming & Trade. The bill is an act relating to the uniform special deposits act, adding a new chapter to Title RCW and providing an effective date. It provides that the act may be cited as the uniform special deposits act, defines terms including account agreement, bank, beneficiary and special deposit, and states that it takes effect July 1, 2024.

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Full text

     Z-0416.2

                               SENATE BILL 5801


     State of Washington       68th Legislature       2024 Regular Session

     By Senators Dozier, Pedersen, Hunt, Mullet, and J. Wilson; by request
     of Uniform Law Commission

     Prefiled 12/05/23. Read first time 01/08/24. Referred to Committee
     on Business, Financial Services, Gaming & Trade.




1        AN ACT Relating to the uniform special deposits act; adding a new
2    chapter to Title 32 RCW; and providing an effective date.


3    BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:


 4       NEW SECTION.   Sec. 1.   SHORT TITLE. This act may be known and
 5   cited as the uniform special deposits act.


 6       NEW SECTION.    Sec. 2.    DEFINITIONS. The definitions in this
 7   section apply throughout this chapter unless the context clearly
 8   requires otherwise.
 9       (1) "Account agreement" means an agreement that:
10       (a) Is in a record between a bank and one or more depositors;
11       (b) May have one or more beneficiaries as additional parties; and
12       (c) States the intention of the parties to establish a special
13   deposit governed by this chapter.
14       (2) "Bank" means a person engaged in the business of banking and
15   includes a savings bank, savings and loan association, credit union,
16   trust company, and banks as defined in RCW 30A.38.005. Each branch or
17   separate office of a bank is a separate bank for the purpose of this
18   chapter.
19       (3) "Beneficiary" means a person that:
20       (a) Is identified as a beneficiary in an account agreement; or
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 1       (b) If not identified as a beneficiary in an account agreement,
 2   may be entitled to payment from a special deposit:
 3       (i) Under the account agreement; or
 4       (ii) On termination of the special deposit.
 5       (4) "Contingency" means an event or circumstance stated in an
 6   account agreement that is not certain to occur but must occur before
 7   the bank is obligated to pay a beneficiary.
 8       (5) "Creditor process" means attachment, garnishment, levy,
 9   notice of lien, sequestration, or similar process issued by or on
10   behalf of a creditor or other claimant.
11       (6) "Depositor" means a person that establishes or funds a
12   special deposit.
13       (7) "Good faith" means honesty in fact and observance of
14   reasonable commercial standards of fair dealing.
15        (8) "Knowledge" of a fact means:
16        (a) With respect to a beneficiary, actual knowledge of the fact;
17   or
18       (b) With respect to a bank holding a special deposit:
19       (i) If the bank:
20       (A) Has established a reasonable routine for communicating
21   material information to an individual to whom the bank has assigned
22   responsibility for the special deposit; and
23       (B) Maintains reasonable compliance with the routine, actual
24   knowledge of the fact by that individual; or
25       (ii) If the bank has not established and maintained reasonable
26   compliance with a routine described in (b)(i) of this subsection (8)
27   or otherwise exercised due diligence, implied knowledge of the fact
28   that would have come to the attention of an individual to whom the
29   bank has assigned responsibility for the special deposit.
30       (9)(a) "Obligated to pay a beneficiary" means a beneficiary is
31   entitled under the account agreement to receive from the bank a
32   payment when:
33       (i) A contingency has occurred; and
34       (ii) The bank has knowledge the contingency has occurred.
35       (b) "Obligation to pay a beneficiary" has a corresponding
36   meaning.
37       (10) "Permissible purpose" means a governmental, regulatory,
38   commercial, charitable, or testamentary objective of the parties
39   stated in an account agreement. The term includes an objective to:
40       (a) Hold funds:
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 1       (i) In escrow, including for a purchase and sale, lease, buyback,
 2   or other transaction;
 3       (ii) As a security deposit of a tenant;
 4       (iii) That may be distributed to a person as remuneration,
 5   retirement or other benefit, or compensation under a judgment,
 6   consent decree, court order, or other decision of a tribunal; or
 7       (iv) For distribution to a defined class of persons after
 8   identification of the class members and their interest in the funds;
 9       (b) Provide assurance with respect to an obligation created by
10   contract, such as earnest money to ensure a transaction closes;
11       (c) Settle an obligation that arises in the operation of a
12   payment system, securities settlement system, or other financial
13   market infrastructure;
14       (d) Provide assurance with respect to an obligation that arises
15   in the operation of a payment system, securities settlement system,
16   or other financial market infrastructure; or
17       (e) Hold margin, other cash collateral, or funds that support the
18   orderly functioning of financial market infrastructure or the
19   performance of an obligation with respect to the infrastructure.
20       (11) "Person" means an individual, estate, business or nonprofit
21   entity,   government   or   governmental   subdivision,   agency,   or
22   instrumentality, or other legal entity. The term includes a protected
23   series, however denominated, of an entity if the protected series is
24   established under law that limits, or limits if conditions specified
25   under law are satisfied, the ability of a creditor of the entity or
26   of any other protected series of the entity to satisfy a claim from
27   assets of the protected series.
28       (12) "Record" means information:
29       (a) Inscribed on a tangible medium; or
30       (b) Stored in an electronic or other medium and retrievable in
31   perceivable form.
32       (13) "Special deposit" means a deposit that satisfies section 5
33   of this act.
34       (14) "State" means a state of the United States, the District of
35   Columbia, Puerto Rico, the United States Virgin Islands, or any other
36   territory or possession subject to the jurisdiction of the United
37   States. The term includes an agency or instrumentality of the state.


38       NEW SECTION. Sec. 3. SCOPE, CHOICE OF LAW, AND FORUM. (1) This
39   chapter applies to a special deposit under an account agreement that
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 1   states the intention of the parties to establish a special deposit
 2   governed by this chapter, regardless of whether a party to the
 3   account agreement or a transaction related to the special deposit, or
 4   the special deposit itself, has a reasonable relation to Washington
 5   state.
 6       (2) The parties to an account agreement may choose a forum in
 7   this state for settling a dispute arising out of the special deposit,
 8   regardless of whether a party to the account agreement or a
 9   transaction related to the special deposit, or the special deposit
10   itself, has a reasonable relation to this state.
11       (3) This chapter does not affect:
12       (a) A right or obligation relating to a deposit other than a
13   special deposit under this chapter; or
14       (b) The voidability of a deposit or transfer that is fraudulent
15   or voidable under other law.


16       NEW SECTION.   Sec. 4.   VARIATION BY AGREEMENT OR AMENDMENT. (1)
17   The effect of sections 2 through 6, 8 through 11, and 14 of this act
18   may not be varied by agreement, except as provided in those sections.
19   Subject to subsection (2) of this section, the effect of sections 7,
20   12, and 13 of this act may be varied by agreement.
21       (2) A provision in an account agreement or other record that
22   substantially excuses liability or substantially limits remedies for
23   failure to perform an obligation under this chapter is not sufficient
24   to vary the effect of a provision of this chapter.
25       (3) If a beneficiary is a party to an account agreement, the bank
26   and the depositor may amend the agreement without the consent of the
27   beneficiary only if the agreement expressly permits the amendment.
28       (4) If a beneficiary is not a party to an account agreement and
29   the bank and the depositor know the beneficiary has knowledge of the
30   agreement's terms, the bank and the depositor may amend the agreement
31   without the consent of the beneficiary only if the amendment does not
32   adversely and materially affect a payment right of the beneficiary.
33       (5) If a beneficiary is not a party to an account agreement and
34   the bank and the depositor do not know whether the beneficiary has
35   knowledge of the agreement's terms, the bank and the depositor may
36   amend the agreement without the consent of the beneficiary only if
37   the amendment is made in good faith.



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 1       NEW SECTION.    Sec. 5.     REQUIREMENTS FOR SPECIAL DEPOSIT. A
 2   deposit is a special deposit if it is:
 3       (1) A deposit of funds in a bank under an account agreement;
 4       (2) For the benefit of at least two beneficiaries, one or more of
 5   which may be a depositor;
 6       (3) Denominated in a medium of exchange that is currently
 7   authorized or adopted by a domestic or foreign government;
 8       (4) For a permissible purpose stated in the account agreement;
 9   and
10       (5) Subject to a contingency.


11       NEW SECTION. Sec. 6. PERMISSIBLE PURPOSE. (1) A special deposit
12   must serve at least one permissible purpose stated in the account
13   agreement from the time the special deposit is created in the account
14   agreement until termination of the special deposit.
15       (2) If, before termination of the special deposit, the bank or a
16   court determines the special deposit no longer satisfies subsection
17   (1) of this section, sections 8 through 11 of this act cease to apply
18   to any funds deposited in the special deposit after the special
19   deposit ceases to satisfy subsection (1) of this section.
20       (3) If, before termination of a special deposit, the bank
21   determines the special deposit no longer satisfies subsection (1) of
22   this section, the bank may take action it believes is necessary under
23   the circumstances, including terminating the special deposit.


24       NEW SECTION. Sec. 7. PAYMENT TO BENEFICIARY BY BANK. (1) Unless
25   the account agreement provides otherwise, the bank is obligated to
26   pay a beneficiary if there are sufficient actually and finally
27   collected funds in the balance of the special deposit.
28       (2) Except as provided in subsection (3) of this section, the
29   obligation to pay the beneficiary is excused if the funds available
30   in the special deposit are insufficient to cover such payment.
31       (3) Unless the account agreement provides otherwise, if the funds
32   available in the special deposit are insufficient to cover an
33   obligation to pay a beneficiary, a beneficiary may elect to be paid
34   the funds that are available or, if there is more than one
35   beneficiary, a pro rata share of the funds available. Payment to the
36   beneficiary making the election under this subsection discharges the
37   bank's obligation to pay a beneficiary and does not constitute an


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 1   accord and satisfaction with respect to another person obligated to
 2   the beneficiary.
 3       (4) Unless the account agreement provides otherwise, the
 4   obligation of the bank obligated to pay a beneficiary is immediately
 5   due and payable.
 6       (5) The bank may discharge its obligation under this section by:
 7       (a) Crediting another transaction account of the beneficiary; or
 8       (b) Taking other action that:
 9       (i) Is permitted under the account agreement for the bank to
10   obtain a discharge; or
11       (ii) Otherwise would constitute a discharge under law.
12       (6) If the bank obligated to pay a beneficiary has incurred an
13   obligation to discharge the obligation of another person, the
14   obligation of the other person is discharged if action by the bank
15   under subsection (5) of this section would constitute a discharge of
16   the obligation of the other person under law that determines whether
17   an obligation is satisfied.


18       NEW SECTION.     Sec. 8.     PROPERTY INTEREST OF DEPOSITOR OR
19   BENEFICIARY. (1) Neither a depositor nor a beneficiary has a property
20   interest in a special deposit.
21       (2) Any property interest with respect to a special deposit is
22   only in the right to receive payment if the bank is obligated to pay
23   a beneficiary and not in the special deposit itself. Any property
24   interest under this subsection is determined under other law.


25       NEW SECTION. Sec. 9. WHEN CREDITOR PROCESS ENFORCEABLE AGAINST
26   BANK. (1) Subject to subsection (2) of this section, creditor process
27   with respect to a special deposit is not enforceable against the bank
28   holding the special deposit.
29       (2) Creditor process is enforceable against the bank holding a
30   special deposit with respect to an amount the bank is obligated to
31   pay a beneficiary or a depositor if the process:
32       (a) Is served on the bank;
33       (b) Provides sufficient information to permit the bank to
34   identify the depositor or the beneficiary from the bank's books and
35   records; and
36       (c) Gives the bank a reasonable opportunity to act on the
37   process.


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1        (3) Creditor process served on a bank before it is enforceable
2    against the bank under subsection (2) of this section does not create
3    a right of the creditor against the bank, or a duty of the bank to
4    the creditor. Other law determines whether creditor process creates a
5    lien enforceable against the beneficiary on a contingent interest of
6    a beneficiary, including a depositor as a beneficiary, even if not
7    enforceable against the bank.

 8       NEW SECTION. Sec. 10. INJUNCTION OR SIMILAR RELIEF. A court may
 9   enjoin, or grant similar relief that would have the effect of
10   enjoining, a bank from paying a depositor or beneficiary only if
11   payment would constitute a material fraud or facilitate a material
12   fraud with respect to a special deposit.


13       NEW SECTION.    Sec. 11.   RECOUPMENT OR SET OFF. (1) Except as
14   provided in subsection (2) or (3) of this section, a bank may not
15   exercise a right of recoupment or set off against a special deposit.
16       (2) An account agreement may authorize the bank to debit the
17   special deposit:
18       (a) When the bank becomes obligated to pay a beneficiary, in an
19   amount that does not exceed the amount necessary to discharge the
20   obligation;
21       (b) For a fee assessed by the bank that relates to an overdraft
22   in the special deposit account;
23       (c) For costs incurred by the bank that relate directly to the
24   special deposit; or
25       (d) To reverse an earlier credit posted by the bank to the
26   balance of the special deposit account, if the reversal occurs under
27   an event or circumstance warranted under other law of this state
28   governing mistake and restitution.
29       (3) The bank holding a special deposit may exercise a right of
30   recoupment or set off against an obligation to pay a beneficiary,
31   even if the bank funds payment from the special deposit.


32       NEW SECTION. Sec. 12. DUTIES AND LIABILITY OF BANK. (1) A bank
33   does not have a fiduciary duty to any person with respect to a
34   special deposit.
35       (2) When the bank holding a special deposit becomes obligated to
36   pay a beneficiary, a debtor-creditor relationship arises between the
37   bank and beneficiary.
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 1       (3) The bank holding a special deposit has a duty to a
 2   beneficiary to comply with the account agreement and this chapter.
 3       (4) If the bank holding a special deposit does not comply with
 4   the account agreement or this chapter, the bank is liable to a
 5   depositor or beneficiary only for damages proximately caused by the
 6   noncompliance. Except as provided by other law of this state, the
 7   bank is not liable for consequential, special, or punitive damages.
 8       (5) The bank holding a special deposit may rely on records
 9   presented in compliance with the account agreement to determine
10   whether the bank is obligated to pay a beneficiary.
11       (6) If the account agreement requires payment on presentation of
12   a record, the bank shall determine within a reasonable time whether
13   the record is sufficient to require payment. If the agreement
14   requires action by the bank on presentation of a record, the bank is
15   not liable for relying in good faith on the genuineness of the record
16   if the record appears on its face to be genuine.
17       (7) Unless the account agreement provides otherwise, the bank is
18   not required to determine whether a permissible purpose stated in the
19   account agreement continues to exist.


20       NEW SECTION.     Sec. 13.     TERM AND TERMINATION. (1) Unless
21   otherwise provided in the account agreement, a special deposit
22   terminates five years after the date the special deposit was first
23   funded.
24       (2) Unless otherwise provided in the account agreement, if the
25   bank cannot identify or locate a beneficiary entitled to payment when
26   the special deposit is terminated, and a balance remains in the
27   special deposit, the bank shall pay the balance to the depositor or
28   depositors as a beneficiary or beneficiaries.
29       (3) A bank that pays the remaining balance as provided under
30   subsection (2) of this section has no further obligation with respect
31   to the special deposit.


32       NEW SECTION. Sec. 14. PRINCIPLES OF LAW AND EQUITY. Title 62A
33   RCW, consumer protection law, law governing deposits generally, law
34   related to escheat and abandoned or unclaimed property, and the
35   principles of law and equity, including law related to capacity to
36   contract, principal and agent, estoppel, fraud, misrepresentation,
37   duress, coercion, mistake, and bankruptcy, supplement this chapter,
38   except to the extent inconsistent with this chapter.
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1        NEW SECTION.      Sec. 15.    UNIFORMITY AND APPLICATION AND
2    CONSTRUCTION. In applying and construing this uniform act, a court
3    shall consider the promotion of uniformity of the law among
4    jurisdictions that enact it.


 5       NEW SECTION.    Sec. 16.    TRANSITIONAL PROVISION. This chapter
 6   applies to:
 7       (1) A special deposit made under an account agreement executed on
 8   or after the effective date of this section; and
 9       (2) A deposit made under an account agreement executed before the
10   effective date of this section, if:
11       (a) All parties entitled to amend the account agreement agree to
12   make the deposit a special deposit governed by this chapter; and
13       (b) The special deposit referenced in the amended account
14   agreement satisfies section 5 of this act.


15       NEW SECTION.    Sec. 17.   If any provision of this act or its
16   application to any person or circumstance is held invalid, the
17   remainder of the act or the application of the provision to other
18   persons or circumstances is not affected.


19      NEW SECTION.   Sec. 18.   This act takes effect July 1, 2024.


20       NEW SECTION. Sec. 19. Sections 1 through 16 and 18 of this act
21   constitute a new chapter in Title 32 RCW.

                                   --- END ---




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