SF 2942

Introduction - 94th Legislature (2025 - 2026)

Posted on 03/25/2025 10:08 a.m.

A bill for an act
relating to financial institutions; adopting the Uniform Special Deposits Act;
proposing coding for new law in Minnesota Statutes, chapter 47.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [47.90] TITLE.
new text end

new text begin Sections 47.90 to 47.985 may be cited as the "Uniform Special Deposits Act."
new text end

Sec. 2.

new text begin [47.905] DEFINITIONS.
new text end

new text begin (a) For purposes of sections 47.90 to 47.985, the following terms have the meanings
given.
new text end

new text begin (b) "Account agreement" means an agreement that:
new text end

new text begin (1) is in a record between a bank and one or more depositors;
new text end

new text begin (2) may have one or more beneficiaries as additional parties; and
new text end

new text begin (3) states the intention of the parties to establish a special deposit governed by sections
47.90 to 47.985.
new text end

new text begin (c) "Bank" means a person engaged in the business of banking and includes a savings
bank; savings and loan association; credit union; trust company; and a baking institution,
as defined in section 48.01, subdivision 2. Each branch or separate office of a bank is a
separate bank for the purpose of sections 47.90 to 47.985.
new text end

new text begin (d) "Beneficiary" means a person that:
new text end

new text begin (1) is identified as a beneficiary in an account agreement; or
new text end

new text begin (2) if not identified as a beneficiary in an account agreement, may be entitled to payment
from a special deposit:
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new text begin (i) under the account agreement; or
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new text begin (ii) on termination of the special deposit.
new text end

new text begin (e) "Contingency" means an event or circumstance stated in an account agreement that
is not certain to occur but must occur before the bank is obligated to pay a beneficiary.
new text end

new text begin (f) "Creditor process" means attachment, garnishment, levy, notice of lien, sequestration,
or similar process issued by or on behalf of a creditor or other claimant.
new text end

new text begin (g) "Depositor" means a person that establishes or funds a special deposit.
new text end

new text begin (h) "Good faith" means honesty in fact and observance of reasonable commercial
standards of fair dealing.
new text end

new text begin (i) "Knowledge" of a fact means:
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new text begin (1) with respect to a beneficiary, actual knowledge of the fact; or
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new text begin (2) with respect to a bank holding a special deposit:
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new text begin (i) if the bank:
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new text begin (A) has established a reasonable routine for communicating material information to an
individual to whom the bank has assigned responsibility for the special deposit; and
new text end

new text begin (B) maintains reasonable compliance with the routine, actual knowledge of the fact by
that individual; or
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new text begin (ii) if the bank has not established and maintained reasonable compliance with a routine
described in item (i) or otherwise exercised due diligence, implied knowledge of the fact
that would have come to the attention of an individual to whom the bank has assigned
responsibility for the special deposit.
new text end

new text begin (j) "Obligated to pay a beneficiary" means a beneficiary is entitled under the account
agreement to receive from the bank a payment when:
new text end

new text begin (1) a contingency has occurred; and
new text end

new text begin (2) the bank has knowledge the contingency has occurred.
new text end

new text begin "Obligation to pay a beneficiary" has a corresponding meaning.
new text end

new text begin (k) "Permissible purpose" means a governmental, regulatory, commercial, charitable,
or testamentary objective of the parties stated in an account agreement. Permissible purpose
includes an objective to:
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new text begin (1) hold funds:
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new text begin (i) in escrow, including for a purchase and sale, lease, buyback, or other transaction;
new text end

new text begin (ii) as a security deposit of a tenant;
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new text begin (iii) that may be distributed to a person as remuneration, retirement or other benefit, or
compensation under a judgment, consent decree, court order, or other decision of a tribunal;
or
new text end

new text begin (iv) for distribution to a defined class of persons after identification of the class members
and their interest in the funds;
new text end

new text begin (2) provide assurance with respect to an obligation created by contract, such as earnest
money to ensure a transaction closes;
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new text begin (3) settle an obligation that arises in the operation of a payment system, securities
settlement system, or other financial market infrastructure;
new text end

new text begin (4) provide assurance with respect to an obligation that arises in the operation of a
payment system, securities settlement system, or other financial market infrastructure; or
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new text begin (5) hold margin, other cash collateral, or funds that support the orderly functioning of
financial market infrastructure or the performance of an obligation with respect to the
infrastructure.
new text end

new text begin (l) "Person" means an individual; estate; business or nonprofit entity; government or
governmental subdivision, agency, or instrumentality; or other legal entity. Person includes
a protected series, however denominated, of an entity if the protected series is established
under law that limits, or limits if conditions specified under law are satisfied, the ability of
a creditor of the entity or of any other protected series of the entity to satisfy a claim from
assets of the protected series.
new text end

new text begin (m) "Record" means information:
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new text begin (1) inscribed on a tangible medium; or
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new text begin (2) stored in an electronic or other medium and retrievable in perceivable form.
new text end

new text begin (n) "Special deposit" means a deposit that satisfies section 47.92.
new text end

new text begin (o) "State" means a state of the United States, the District of Columbia, Puerto Rico, the
United States Virgin Islands, or any other territory or possession subject to the jurisdiction
of the United States. State includes an agency or instrumentality of the state.
new text end

Sec. 3.

new text begin [47.91] SCOPE; CHOICE OF LAW; FORUM.
new text end

new text begin (a) Sections 47.90 to 47.985 apply to a special deposit under an account agreement that
states the intention of the parties to establish a special deposit governed by sections 47.90
to 47.985, regardless of whether a party to the account agreement or a transaction related
to the special deposit, or the special deposit itself, has a reasonable relation to this state.
new text end

new text begin (b) The parties to an account agreement may choose a forum in this state for settling a
dispute arising out of the special deposit, regardless of whether a party to the account
agreement or a transaction related to the special deposit, or the special deposit itself, has a
reasonable relation to this state.
new text end

new text begin (c) Sections 47.90 to 47.985 do not affect:
new text end

new text begin (1) a right or obligation relating to a deposit other than a special deposit under sections
47.90 to 47.985; or
new text end

new text begin (2) the voidability of a deposit or transfer that is fraudulent or voidable under other law.
new text end

Sec. 4.

new text begin [47.915] VARIATION BY AGREEMENT OF AMENDMENT.
new text end

new text begin (a) The effect of sections 47.905 to 47.925, 47.935 to 47.96, and 47.975 may not be
varied by agreement, except as provided in those sections. Subject to paragraph (b), the
effect of sections 47.93, 47.965, and 47.97 may be varied by agreement.
new text end

new text begin (b) A provision in an account agreement or other record that substantially excuses liability
or substantially limits remedies for failure to perform an obligation under sections 47.90 to
47.985 is not sufficient to vary the effect of a provision of sections 47.90 to 47.985.
new text end

new text begin (c) If a beneficiary is a party to an account agreement, the bank and the depositor may
amend the agreement without the consent of the beneficiary only if the agreement expressly
permits the amendment.
new text end

new text begin (d) If a beneficiary is not a party to an account agreement and the bank and the depositor
know the beneficiary has knowledge of the agreement's terms, the bank and the depositor
may amend the agreement without the consent of the beneficiary only if the amendment
does not adversely and materially affect a payment right of the beneficiary.
new text end

new text begin (e) If a beneficiary is not a party to an account agreement and the bank and the depositor
do not know whether the beneficiary has knowledge of the agreement's terms, the bank and
the depositor may amend the agreement without the consent of the beneficiary only if the
amendment is made in good faith.
new text end

Sec. 5.

new text begin [47.92] REQUIREMENTS OF SPECIAL DEPOSIT.
new text end

new text begin A deposit is a special deposit if it is:
new text end

new text begin (1) a deposit of funds in a bank under an account agreement;
new text end

new text begin (2) for the benefit of at least two beneficiaries, one or more of which may be a depositor;
new text end

new text begin (3) denominated in a medium of exchange that is currently authorized or adopted by a
domestic or foreign government;
new text end

new text begin (4) for a permissible purpose stated in the account agreement; and
new text end

new text begin (5) subject to a contingency.
new text end

Sec. 6.

new text begin [47.925] PERMISSIBLE PURPOSE.
new text end

new text begin (a) A special deposit must serve at least one permissible purpose stated in the account
agreement from the time the special deposit is created in the account agreement until
termination of the special deposit.
new text end

new text begin (b) If, before termination of the special deposit, the bank or a court determines the special
deposit no longer satisfies paragraph (a), sections 47.935 to 47.96 cease to apply to any
funds deposited in the special deposit after the special deposit ceases to satisfy paragraph
(a).
new text end

new text begin (c) If, before termination of a special deposit, the bank determines the special deposit
no longer satisfies paragraph (a), the bank may take action it believes is necessary under
the circumstances, including terminating the special deposit.
new text end

Sec. 7.

new text begin [47.93] PAYMENT TO BENEFICIARY BY BANK.
new text end

new text begin (a) Unless the account agreement provides otherwise, the bank is obligated to pay a
beneficiary if there are sufficient actually and finally collected funds in the balance of the
special deposit.
new text end

new text begin (b) Except as provided in paragraph (c), the obligation to pay the beneficiary is excused
if the funds available in the special deposit are insufficient to cover such payment.
new text end

new text begin (c) Unless the account agreement provides otherwise, if the funds available in the special
deposit are insufficient to cover an obligation to pay a beneficiary, a beneficiary may elect
to be paid the funds that are available or, if there is more than one beneficiary, a pro rata
share of the funds available. Payment to the beneficiary making the election under this
paragraph discharges the bank's obligation to pay a beneficiary and does not constitute an
accord and satisfaction with respect to another person obligated to the beneficiary.
new text end

new text begin (d) Unless the account agreement provides otherwise, the obligation of the bank obligated
to pay a beneficiary is immediately due and payable.
new text end

new text begin (e) The bank may discharge its obligation under this section by:
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new text begin (1) crediting another transaction account of the beneficiary; or
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new text begin (2) taking other action that:
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new text begin (i) is permitted under the account agreement for the bank to obtain a discharge; or
new text end

new text begin (ii) otherwise would constitute a discharge under law.
new text end

new text begin (f) If the bank obligated to pay a beneficiary has incurred an obligation to discharge the
obligation of another person, the obligation of the other person is discharged if action by
the bank under paragraph (e) would constitute a discharge of the obligation of the other
person under law that determines whether an obligation is satisfied.
new text end

Sec. 8.

new text begin [47.935] PROPERTY INTEREST OF DEPOSITOR OR BENEFICIARY.
new text end

new text begin (a) Neither a depositor nor a beneficiary has a property interest in a special deposit.
new text end

new text begin (b) Any property interest with respect to a special deposit is only in the right to receive
payment if the bank is obligated to pay a beneficiary and not in the special deposit itself.
Any property interest under this paragraph is determined under other law.
new text end

Sec. 9.

new text begin [47.94] WHEN CREDITOR PROCESS ENFORCEABLE AGAINST BANK.
new text end

new text begin (a) Subject to paragraph (b), creditor process with respect to a special deposit is not
enforceable against the bank holding the special deposit.
new text end

new text begin (b) Creditor process is enforceable against the bank holding a special deposit with respect
to an amount the bank is obligated to pay a beneficiary or a depositor if the process:
new text end

new text begin (1) is served on the bank;
new text end

new text begin (2) provides sufficient information to permit the bank to identify the depositor or the
beneficiary from the bank's books and records; and
new text end

new text begin (3) gives the bank a reasonable opportunity to act on the process.
new text end

new text begin (c) Creditor process served on a bank before it is enforceable against the bank under
paragraph (b) does not create a right of the creditor against the bank or a duty of the bank
to the creditor. Other law determines whether creditor process creates a lien enforceable
against the beneficiary on a contingent interest of a beneficiary, including a depositor as a
beneficiary, even if not enforceable against the bank.
new text end

Sec. 10.

new text begin [47.945] INJUNCTION OR SIMILAR RELIEF.
new text end

new text begin A court may enjoin, or grant similar relief that would have the effect of enjoining, a
bank from paying a depositor or beneficiary only if payment would constitute a material
fraud or facilitate a material fraud with respect to a special deposit.
new text end

Sec. 11.

new text begin [47.96] RECOUPMENT OR SET OFF.
new text end

new text begin (a) Except as provided in paragraph (b) or (c), a bank may not exercise a right of
recoupment or set off against a special deposit.
new text end

new text begin (b) An account agreement may authorize the bank to debit the special deposit:
new text end

new text begin (1) when the bank becomes obligated to pay a beneficiary, in an amount that does not
exceed the amount necessary to discharge the obligation;
new text end

new text begin (2) for a fee assessed by the bank that relates to an overdraft in the special deposit
account;
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new text begin (3) for costs incurred by the bank that relate directly to the special deposit; or
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new text begin (4) to reverse an earlier credit posted by the bank to the balance of the special deposit
account, if the reversal occurs under an event or circumstance warranted under other law
of this state governing mistake and restitution.
new text end

new text begin (c) The bank holding a special deposit may exercise a right of recoupment or set off
against an obligation to pay a beneficiary, even if the bank funds payment from the special
deposit.
new text end

Sec. 12.

new text begin [47.965] DUTIES AND LIABILITY OF BANK.
new text end

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

new text begin (b) When the bank holding a special deposit becomes obligated to pay a beneficiary, a
debtor-creditor relationship arises between the bank and beneficiary.
new text end

new text begin (c) The bank holding a special deposit has a duty to a beneficiary to comply with the
account agreement and sections 47.90 to 47.985.
new text end

new text begin (d) If the bank holding a special deposit does not comply with the account agreement
or sections 47.90 to 47.985, the bank is liable to a depositor or beneficiary only for damages
proximately caused by the noncompliance. Except as provided by other law of this state,
the bank is not liable for consequential, special, or punitive damages.
new text end

new text begin (e) The bank holding a special deposit may rely on records presented in compliance with
the account agreement to determine whether the bank is obligated to pay a beneficiary.
new text end

new text begin (f) If the account agreement requires payment on presentation of a record, the bank shall
determine within a reasonable time whether the record is sufficient to require payment. If
the agreement requires action by the bank on presentation of a record, the bank is not liable
for relying in good faith on the genuineness of the record if the record appears on its face
to be genuine.
new text end

new text begin (g) Unless the account agreement provides otherwise, the bank is not required to
determine whether a permissible purpose stated in the agreement continues to exist.
new text end

Sec. 13.

new text begin [47.97] TERM AND TERMINATION.
new text end

new text begin (a) Unless otherwise provided in the account agreement, a special deposit terminates
five years after the date the special deposit was first funded.
new text end

new text begin (b) Unless otherwise provided in the account agreement, if the bank cannot identify or
locate a beneficiary entitled to payment when the special deposit is terminated, and a balance
remains in the special deposit, the bank shall pay the balance to the depositor or depositors
as a beneficiary or beneficiaries.
new text end

new text begin (c) A bank that pays the remaining balance as provided under paragraph (b) has no
further obligation with respect to the special deposit.
new text end

Sec. 14.

new text begin [47.975] PRINCIPLES OF LAW AND EQUITY.
new text end

new text begin Chapter 336; consumer protection law; law governing deposits generally; law related
to escheat and abandoned or unclaimed property; and the principles of law and equity,
including law related to capacity to contract, principal and agent, estoppel, fraud,
misrepresentation, duress, coercion, mistake, and bankruptcy, supplement sections 47.90
to 47.985 except to the extent inconsistent with sections 47.90 to 47.985.
new text end

Sec. 15.

new text begin [47.98] UNIFORMITY OF APPLICATION AND CONSTRUCTION.
new text end

new text begin In applying and construing this uniform act, a court shall consider the promotion of
uniformity of the law among jurisdictions that enact it.
new text end

Sec. 16.

new text begin [47.985] TRANSITIONAL PROVISION.
new text end

new text begin Sections 47.90 to 47.985 apply to:
new text end

new text begin (1) a special deposit made under an account agreement executed on or after August 1,
2025; and
new text end

new text begin (2) a deposit made under an agreement executed before August 1, 2025, if:
new text end

new text begin (i) all parties entitled to amend the agreement agree to make the deposit a special deposit
governed by sections 47.90 to 47.985; and
new text end

new text begin (ii) the special deposit referenced in the amended agreement satisfies section 47.92.
new text end