Massachusetts 2025-2026 Regular Session

Massachusetts House Bill H1281 Compare Versions

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2	2	HOUSE DOCKET, NO. 3436 FILED ON: 1/17/2025
3	3	HOUSE . . . . . . . . . . . . . . . No. 1281
4	4	The Commonwealth of Massachusetts
5	5	_________________
6	6	PRESENTED BY:
7	7	Alice Hanlon Peisch
8	8	_________________
9	9	To the Honorable Senate and House of Representatives of the Commonwealth of Massachusetts in General
10	10	Court assembled:
11	11	The undersigned legislators and/or citizens respectfully petition for the adoption of the accompanying bill:
12	12	An Act relative to the uniform special deposit.
13	13	_______________
14	14	PETITION OF:
15	15	NAME:DISTRICT/ADDRESS :DATE ADDED:Alice Hanlon Peisch14th Norfolk1/17/2025 1 of 13
16	16	HOUSE DOCKET, NO. 3436 FILED ON: 1/17/2025
17	17	HOUSE . . . . . . . . . . . . . . . No. 1281
18	18	By Representative Peisch of Wellesley, a petition (accompanied by bill, House, No. 1281) of
19	19	Alice Hanlon Peisch relative to uniform special deposits. Financial Services.
20	20	The Commonwealth of Massachusetts
21	21	_______________
22	22	In the One Hundred and Ninety-Fourth General Court
23	23	(2025-2026)
24	24	_______________
25	25	An Act relative to the uniform special deposit.
26	26	Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority
27	27	of the same, as follows:
28	28	1 SECTION 1. The General Laws are hereby amended by inserting after chapter 167J the
29	29	2following chapter:-
30	30	3 CHAPTER 167K. THE SPECIAL DEPOSITS ACT.
31	31	4 SECTION 1. Definitions
32	32	5 As used in this chapter, the following words shall, unless the context clearly requires
33	33	6otherwise, have the following meanings:—
34	34	7 “Account agreement” means an agreement that:
35	35	8 (A) is in a record between a bank and one or more depositors;
36	36	9 (B) may have one or more beneficiaries as additional parties; and
37	37	10 (C) states the intention of the parties to establish a special deposit governed by this act. 2 of 13
38	38	11 “Bank” means a person engaged in the business of banking and includes a savings bank,
39	39	12savings and loan association, credit union, trust company, and a bank as defined in Section 1 of
40	40	13Chapter 167 of the General Laws. Each branch or separate office of a bank is a separate bank for
41	41	14the purpose of this act.
42	42	15 “Beneficiary” means a person that:
43	43	16 (A) is identified as a beneficiary in an account agreement; or
44	44	17 (B) if not identified as a beneficiary in an account agreement, may be entitled to payment
45	45	18from a special deposit:
46	46	19 (i) under the account agreement; or (ii) on termination of the special deposit.
47	47	20 “Contingency” means an event or circumstance stated in an account agreement that is not
48	48	21certain to occur but must occur before the bank is obligated to pay a beneficiary.
49	49	22 “Creditor process” means attachment, garnishment, levy, notice of lien, sequestration, or
50	50	23similar process issued by or on behalf of a creditor or other claimant.
51	51	24 “Depositor” means a person that establishes or funds a special deposit.
52	52	25 “Good faith” means honesty in fact and observance of reasonable commercial standards
53	53	26of fair dealing.
54	54	27 “Knowledge” of a fact means:
55	55	28 (A) with respect to a beneficiary, actual knowledge of the fact; or
56	56	29 (B) with respect to a bank holding a special deposit: 3 of 13
57	57	30 (i) if the bank:
58	58	31 (I) has established a reasonable routine for communicating material information to an
59	59	32individual to whom the bank has assigned responsibility for the special deposit; and
60	60	33 (II) maintains reasonable compliance with the routine, actual knowledge of the fact by
61	61	34that individual; or (ii) if the bank has not established and maintained reasonable compliance with
62	62	35a routine described in clause (i) or otherwise exercised due diligence, implied knowledge of the
63	63	36fact that would have come to the attention of an individual to whom the bank has assigned
64	64	37responsibility for the special deposit.
65	65	38 “Obligated to pay a beneficiary” means a beneficiary is entitled under the account
66	66	39agreement to receive from the bank a payment when:
67	67	40 (A) a contingency has occurred; and
68	68	41 (B) the bank has knowledge the contingency has occurred.
69	69	42 “Obligation to pay a beneficiary” has a corresponding meaning.
70	70	43 “Permissible purpose” means a governmental, regulatory, commercial, charitable, or
71	71	44testamentary objective of the parties stated in an account agreement. The term includes an
72	72	45objective to:
73	73	46 (A) hold funds:
74	74	47 (i) in escrow, including for a purchase and sale, lease, buyback, or other transaction;
75	75	48 (ii) as a security deposit of a tenant; 4 of 13
76	76	49 (iii) that may be distributed to a person as remuneration, retirement or other benefit, or
77	77	50compensation under a judgment, consent decree, court order, or other decision of a tribunal; or
78	78	51 (iv) for distribution to a defined class of persons after identification of the class members
79	79	52and their interest in the funds;
80	80	53 (B) provide assurance with respect to an obligation created by contract, such as earnest
81	81	54money to ensure a transaction closes;
82	82	55 (C) settle an obligation that arises in the operation of a payment system, securities
83	83	56settlement system, or other financial market infrastructure;
84	84	57 (D) provide assurance with respect to an obligation that arises in the operation of a
85	85	58payment system, securities settlement system, or other financial market infrastructure; or
86	86	59 (E) hold margin, other cash collateral, or funds that support the orderly functioning of
87	87	60financial market infrastructure or the performance of an obligation with respect to the
88	88	61infrastructure.
89	89	62 “Person” means an individual, estate, business or nonprofit entity, government or
90	90	63governmental subdivision, agency, or instrumentality, or other legal entity. The term includes a
91	91	64protected series, however denominated, of an entity if the protected series is established under
92	92	65law that limits, or limits if conditions specified under law are satisfied, the ability of a creditor of
93	93	66the entity or of any other protected series of the entity to satisfy a claim from assets of the
94	94	67protected series.
95	95	68 “Record” means information:
96	96	69 (A) inscribed on a tangible medium; or 5 of 13
97	97	70 (B) stored in an electronic or other medium and retrievable in perceivable form.
98	98	71 “Special deposit” means a deposit that satisfies Section 4.
99	99	72 “State” means a state of the United States, the District of Columbia, Puerto Rico, the
100	100	73United States Virgin Islands, or any other territory or possession subject to the jurisdiction of the
101	101	74United States. The term includes an agency or instrumentality of the state.
102	102	75 SECTION 2. Scope; Choice of Law; Forum
103	103	76 (a) This act applies to a special deposit under an account agreement that states the
104	104	77intention of the parties to establish a special deposit governed by this act, regardless of whether a
105	105	78party to the account agreement or a transaction related to the special deposit, or the special
106	106	79deposit itself, has a reasonable relation to this state.
107	107	80 (b) The parties to an account agreement may choose a forum in this state for settling a
108	108	81dispute arising out of the special deposit, regardless of whether a party to the account agreement
109	109	82or a transaction related to the special deposit, or the special deposit itself, has a reasonable
110	110	83relation to this state.
111	111	84 (c) This act does not affect:
112	112	85 (1) a right or obligation relating to a deposit other than a special deposit under this act; or
113	113	86 (2) the voidability of a deposit or transfer that is fraudulent or voidable under other law.
114	114	87 SECTION 3. Variation by Agreement or Amendment 6 of 13
115	115	88 (a) The effect of Sections 1 through 5, 7 through 10, and 13 may not be varied by
116	116	89agreement, except as provided in those sections. Subject to subsection (b), the effect of Sections
117	117	906, 11, and 12 may be varied by agreement.
118	118	91 (b) A provision in an account agreement or other record that substantially excuses
119	119	92liability or substantially limits remedies for failure to perform an obligation under this act is not
120	120	93sufficient to vary the effect of a provision of this act.
121	121	94 (c) If a beneficiary is a party to an account agreement, the bank and the depositor may
122	122	95amend the agreement without the consent of the beneficiary only if the agreement expressly
123	123	96permits the amendment.
124	124	97 (d) If a beneficiary is not a party to an account agreement and the bank and the depositor
125	125	98know the beneficiary has knowledge of the agreement’s terms, the bank and the depositor may
126	126	99amend the agreement without the consent of the beneficiary only if the amendment does not
127	127	100adversely and materially affect a payment right of the beneficiary.
128	128	101 (e) If a beneficiary is not a party to an account agreement and the bank and the depositor
129	129	102do not know whether the beneficiary has knowledge of the agreement’s terms, the bank and the
130	130	103depositor may amend the agreement without the consent of the beneficiary only if the
131	131	104amendment is made in good faith.
132	132	105 SECTION 4. Requirements for Special Deposit
133	133	106 A deposit is a special deposit if it is:
134	134	107 (1) a deposit of funds in a bank under an account agreement;
135	135	108 (2) for the benefit of at least two beneficiaries, one or more of which may be a depositor; 7 of 13
136	136	109 (3) denominated in a medium of exchange that is currently authorized or adopted by a
137	137	110domestic or foreign government;
138	138	111 (4) for a permissible purpose stated in the account agreement; and
139	139	112 (5) subject to a contingency.
140	140	113 SECTION 5. Permissible Purpose
141	141	114 (a) A special deposit must serve at least one permissible purpose stated in the account
142	142	115agreement from the time the special deposit is created in the account agreement until termination
143	143	116of the special deposit.
144	144	117 (b) If, before termination of the special deposit, the bank or a court determines the special
145	145	118deposit no longer satisfies subsection (a), Sections 7 through 10 cease to apply to any funds
146	146	119deposited in the special deposit after the special deposit ceases to satisfy subsection (a).
147	147	120 (c) If, before termination of a special deposit, the bank determines the special deposit no
148	148	121longer satisfies subsection (a), the bank may take action it believes is necessary under the
149	149	122circumstances, including terminating the special deposit.
150	150	123 SECTION 6. Payment to Beneficiary by Bank
151	151	124 (a) Unless the account agreement provides otherwise, the bank is obligated to pay a
152	152	125beneficiary if there are sufficient actually and finally collected funds in the balance of the special
153	153	126deposit.
154	154	127 (b) Except as provided in subsection (c), the obligation to pay the beneficiary is excused
155	155	128if the funds available in the special deposit are insufficient to cover such payment. 8 of 13
156	156	129 (c) Unless the account agreement provides otherwise, if the funds available in the special
157	157	130deposit are insufficient to cover an obligation to pay a beneficiary, a beneficiary may elect to be
158	158	131paid the funds that are available or, if there is more than one beneficiary, a pro rata share of the
159	159	132funds available. Payment to the beneficiary making the election under this subsection discharges
160	160	133the bank’s obligation to pay a beneficiary and does not constitute an accord and satisfaction with
161	161	134respect to another person obligated to the beneficiary.
162	162	135 (d) Unless the account agreement provides otherwise, the obligation of the bank obligated
163	163	136to pay a beneficiary is immediately due and payable.
164	164	137 (e) The bank may discharge its obligation under this section by:
165	165	138 (1) crediting another transaction account of the beneficiary; or
166	166	139 (2) taking other action that:
167	167	140 (i) is permitted under the account agreement for the bank to obtain a discharge; or
168	168	141 (ii) otherwise would constitute a discharge under law.
169	169	142 (f) If the bank obligated to pay a beneficiary has incurred an obligation to discharge the
170	170	143obligation of another person, the obligation of the other person is discharged if action by the
171	171	144bank under subsection (e) would constitute a discharge of the obligation of the other person
172	172	145under law that determines whether an obligation is satisfied.
173	173	146 SECTION 7. Property Interest of Depositor or Beneficiary
174	174	147 (a) Neither a depositor nor a beneficiary has a property interest in a special deposit. 9 of 13
175	175	148 (b) Any property interest with respect to a special deposit is only in the right to receive
176	176	149payment if the bank is obligated to pay a beneficiary and not in the special deposit itself. Any
177	177	150property interest under this subsection is determined under other law.
178	178	151 SECTION 8. When Creditor Process Enforceable Against Bank
179	179	152 (a) Subject to subsection (b), creditor process with respect to a special deposit is not
180	180	153enforceable against the bank holding the special deposit.
181	181	154 (b) Creditor process is enforceable against the bank holding a special deposit with respect
182	182	155to an amount the bank is obligated to pay a beneficiary or a depositor if the process:
183	183	156 (1) is served on the bank;
184	184	157 (2) provides sufficient information to permit the bank to identify the depositor or the
185	185	158beneficiary from the bank’s books and records; and
186	186	159 (3) gives the bank a reasonable opportunity to act on the process.
187	187	160 (c) Creditor process served on a bank before it is enforceable against the bank under
188	188	161subsection (b) does not create a right of the creditor against the bank or a duty of the bank to the
189	189	162creditor. Other law determines whether creditor process creates a lien enforceable against the
190	190	163beneficiary on a contingent interest of a beneficiary, including a depositor as a beneficiary, even
191	191	164if not enforceable against the bank.
192	192	165 SECTION 9. Injunction or Similar Relief 10 of 13
193	193	166 A court may enjoin or grant similar relief that would have the effect of enjoining, a bank
194	194	167from paying a depositor or beneficiary only if payment would constitute a material fraud or
195	195	168facilitate a material fraud with respect to a special deposit.
196	196	169 SECTION 10. Recoupment or Set Off
197	197	170 (a) Except as provided in subsection (b) or (c), a bank may not exercise a right of
198	198	171recoupment or set off against a special deposit.
199	199	172 (b) An account agreement may authorize the bank to debit the special deposit:
200	200	173 (1) when the bank becomes obligated to pay a beneficiary, in an amount that does not
201	201	174exceed the amount necessary to discharge the obligation;
202	202	175 (2) for a fee assessed by the bank that relates to an overdraft in the special deposit
203	203	176account;
204	204	177 (3) for costs incurred by the bank that relate directly to the special deposit; or
205	205	178 (4) to reverse an earlier credit posted by the bank to the balance of the special deposit
206	206	179account, if the reversal occurs under an event or circumstance warranted under other law of this
207	207	180state governing mistake and restitution.
208	208	181 (c) The bank holding a special deposit may exercise a right of recoupment or set off
209	209	182against an obligation to pay a beneficiary, even if the bank funds payment from the special
210	210	183deposit.
211	211	184 SECTION 11. Duties and Liability of Bank
212	212	185 (a) A bank does not have a fiduciary duty to any person with respect to a special deposit. 11 of 13
213	213	186 (b) When the bank holding a special deposit becomes obligated to pay a beneficiary, a
214	214	187debtor-creditor relationship arises between the bank and beneficiary.
215	215	188 (c) The bank holding a special deposit has a duty to a beneficiary to comply with the
216	216	189account agreement and this act.
217	217	190 (d) If the bank holding a special deposit does not comply with the account agreement or
218	218	191this act, the bank is liable to a depositor or beneficiary only for damages proximately caused by
219	219	192the noncompliance. Except as provided by other law of this state, the bank is not liable for
220	220	193consequential, special, or punitive damages.
221	221	194 (e) The bank holding a special deposit may rely on records presented in compliance with
222	222	195the account agreement to determine whether the bank is obligated to pay a beneficiary.
223	223	196 (f) If the account agreement requires payment on presentation of a record, the bank shall
224	224	197determine within a reasonable time whether the record is sufficient to require payment. If the
225	225	198agreement requires action by the bank on presentation of a record, the bank is not liable for
226	226	199relying in good faith on the genuineness of the record if the record appears on its face to be
227	227	200genuine.
228	228	201 (g) Unless the account agreement provides otherwise, the bank is not required to
229	229	202determine whether a permissible purpose stated in the agreement continues to exist.
230	230	203 SECTION 12. Term and Termination
231	231	204 (a) Unless otherwise provided in the account agreement, a special deposit terminates five
232	232	205years after the date the special deposit was first funded. 12 of 13
233	233	206 (b) Unless otherwise provided in the account agreement, if the bank cannot identify or
234	234	207locate a beneficiary entitled to payment when the special deposit is terminated, and a balance
235	235	208remains in the special deposit, the bank shall pay the balance to the depositor or depositors as a
236	236	209beneficiary or beneficiaries.
237	237	210 (c) A bank that pays the remaining balance as provided under subsection (b) has no
238	238	211further obligation with respect to the special deposit.
239	239	212 SECTION 13. Principles of Law and Equity
240	240	213 Chapter 106 of the General Laws, consumer protection law, law governing deposits
241	241	214generally, law related to escheat and abandoned or unclaimed property, and the principles of law
242	242	215and equity, including law related to capacity to contract, principal and agent, estoppel, fraud,
243	243	216misrepresentation, duress, coercion, mistake, and bankruptcy, supplement this act except to the
244	244	217extent inconsistent with this act.
245	245	218 SECTION 14. Uniformity of Application and Construction
246	246	219 In applying and construing this uniform act, a court shall consider the promotion of
247	247	220uniformity of the law among jurisdictions that enact it.
248	248	221 SECTION 15. Transitional Provision
249	249	222 This act applies to:
250	250	223 (1) a special deposit made under an account agreement executed on or after the effective
251	251	224date of this act; and
252	252	225 (2) a deposit made under an agreement executed before the effective date of this act, if: 13 of 13
253	253	226 (A) all parties entitled to amend the agreement agree to make the deposit a special deposit
254	254	227governed by this act; and
255	255	228 (B) the special deposit referenced in the amended agreement satisfies Section 4.
256	256	229 SECTION 16. Severability
257	257	230 If a provision of this act or its application to a person or circumstance is held invalid, the
258	258	231invalidity does not affect another provision or application that can be given effect without the
259	259	232invalid provision.
260	260	233 SECTION 17. Effective Date
261	261	234 This act takes effect on January 1, 2026.