§ 19-12-7 - Priority of claims.
SECTION 19-12-7
§ 19-12-7 Priority of claims. – (a) When the superior court assumes jurisdiction of a receivership proceedingwith respect to a financial institution or credit union subject to theprovisions of this title, the expenses and claims against the financialinstitution or credit union shall have priority in receiving distributions,including (without limitation) any assumption of liabilities out of the assetsof the financial institution or credit union in the following order; except tothe extent otherwise provided by subsection (b) of this section, pro rata amongany class of claimants having priority until the members of the class have beenpaid or provided for in full before distribution to any junior class ofclaimants:
(1) Reasonable administrative expenses as allowed by thecourt in connection with the administration of the receivership estate,including (without limitation) payment of any loans, together with interestthereon, obtained by the receiver with the approval of the court to fund theoperations of the receivership estate and the administration of thereceivership proceeding, repayable only from the assets in the estate.
(2) Unsecured claims for wages earned by individuals whoprovided services as employees to the financial institution or credit union asprovided in § 28-14-6.1, in amounts recommended by the receiver subject tothe approval of the court.
(3) Subject to subsections (b) and (d) of this section,unsecured claims of depositors in the financial institution or credit unionwhich does not have, or which has failed to obtain, federal deposit insurance;provided, however, that any such claim shall only have priority under thissubsection to the extent that, if the financial institution or credit union hadmaintained insurance with the federal deposit insurance corporation and whetheror not the financial institution or credit union would have been eligible tomaintain insurance with the federal deposit insurance corporation, the depositwith respect to which the claim relates would have been an "insured deposit" asthe term is defined in section (m) of the Federal Deposit Insurance CorporationAct (12 U.S.C. § 1813(m)) as in effect as of December 31, 1990 and wouldhave been covered by deposit insurance under the rules and regulations of thefederal deposit insurance corporation in effect as of December 31, 1990. Forthe purpose of applying the preceding sentence, in the case of a credit union,all types of the credit union's member share accounts, including regularshares, share certificates and share draft accounts, except to the extent theaccounts constitute equity ownership interests in the credit union under theterms of the charter or by-laws of the credit union, shall be deemed an insureddeposit.
(4) Subject to subsections (b) and (d), unsecured claims ofdepositors in the financial institution or credit union which does not have, orwhich has failed to obtain, federal deposit insurance for its deposits, to theextent their deposit claims exceed amounts recovered under subsection (a)(3).
(5) Unsecured claims of any local, state or federal taxingagency entitled by law to priority in distributions from any receivershipestate, to the extent of that priority, in any amounts as shall be approved bythe court.
(6) Unsecured claims of all general creditors and depositorsof the financial institution or credit union to the extent not accordedpriority pursuant to subsections (1) through (4) of this section, in anyamounts as shall be approved by the court.
(b) Distributions entitled to priority under subsection(a)(3) and/or (4) shall be reduced or limited to the extent that either of thefollowing paragraphs apply:
(1) Any distribution to a depositor pursuant to subsection(a)(3) and/or (4) of this section shall be subject to any legally availablesetoff and reduction to the extent of any default on any debt of the depositorto the financial institution or credit union at the time of such distribution.
(2) Any distribution to a depositor entitled to prioritypursuant to subsection (a)(3) and/or (a)(4) of this section may be affected,reduced or extended in time to the extent that the receiver may recommend, andthe court may approve, a plan of distribution with respect to depositor claimsentitled to priority that pays promptly (i) a subclass of the claims in full upto a stated amount for administrative convenience and (ii) if the receiver sorecommends and the court approves, the stated amount to all other depositorsentitled to priority under subsection (a)(3) and/or (a)(4) of this sectionwhose claims exceed the stated amount to provide partial and more timely relieffor those depositors.
(c) The claim of a creditor that is secured by a mortgage,security interest or lien on property in which the financial institution orcredit union has an interest is a secured claim to the extent of the value ofthe estate's interest in the property or to the extent of amounts subject tosetoff, as the case may be, and is an unsecured claim to the extent that thevalue of the creditor's interest or the amount so subject to setoff is lessthan the amount of the claim as approved by the court. Only the unsecuredportion of the claim of the secured creditor shall participate in adistribution provided for in subsection (a) hereof.
(d) Notwithstanding the provisions of subsection (a)(3)and/or (a)(4) of this section or the provisions of § 42-116-7(c)(1) and/or(c)(2) or § 42-116-12, no priority shall be afforded under subsection(a)(3) and/or (a)(4) of this section to the unsecured claims of any officer,director or employee of any financial institution or credit union or of theRhode Island share and indemnity corporation or any other person who, withknowledge of the actual or impending insolvency and/or the impending closing ofa financial institution or credit union or of the actual or impendinginsolvency of and/or the actual or impending cessation of business by the RhodeIsland share and deposit indemnity corporation, and for the purpose of avoidingthe loss of funds and/or access to funds in any depository account in anyinsolvent financial institution or credit union, withdrew from any insolventfinancial institution or credit union any amount of money within thirty (30)days prior to the closing of that financial institution or credit union byproclamation of the governor dated January 1, 1991.