Journal of the Senate
of the First Session of the 111th General Assembly
of the State of South Carolina
being the Regular Session Beginning Tuesday, January 10, 1995

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SECTION 288. References in the the 1976 Code to the Director of the Department of Insurance mean the Chief Insurance Commissioner and references to the deputy director of the Department of Insurance mean the designee of the Chief Insurance Commissioner. The Code Commissioner shall change references in the 1976 Code to conform with this act, and such changes must be included in the next printing of replacement volumes or cumulative supplements.

SECTION 289. References in the 1976 Code to the Board of Probation, Parole and Pardon Services mean Board of Paroles and Pardons. The Code Commissioner shall change references in the 1976 Code to conform to this act, and such changes must be included in the next printing of replacement volumes or cumulative supplements.

SECTION 290. References in the 1976 Code to Department of Revenue and Taxation mean Department of Revenue. The Code Commissioner shall change references in the 1976 Code to conform to this act, and such changes must be included in the next printing of replacement volumes or cumulative supplements.

SECTION 291. References in the 1976 Code to the Commissioner of Labor or Commissioner of the Department of Labor mean the Director of the Department of Labor, Licensing, and Regulation. The Code Commissioner shall change references in the 1976 Code to conform with this act, and such changes must be included in the next printing of replacement volumes or cumulative supplements.

SECTION 292. (A) Chapter 19 of Title 6, Chapter 61 of Title 40, Sections 41-15-310, 43-21-150, 44-6-60, 48-9-230, 49-5-130, 49-21-80, and Chapter 17 of Title 51 are repealed upon approval by the Governor.

(B) Chapter 5 of Title 12 is repealed effective February 1, 1995.

(C) Sections 43-21-120 and 43-21-140 are repealed effective July 1, 1995.

SECTION 293. Section 14-1-205 of the 1976 Code, as last amended by Section 36A, Part II, Act 497 of 1994, is further amended to read:

"Section 14-1-205. Except as provided in Sections 17-15-260, 34-11-90, 50-1-150, 50-1-170, and 56-5-4160, on January 1, 1995, 56 percent of all costs, fees, fines, penalties, forfeitures, and other revenues generated by the circuit courts and the family courts must be remitted to the county in which the proceeding is instituted and 44 percent of the revenues must be delivered to the county treasurer to be remitted monthly by the fifteenth day of each month to the State Treasurer on forms and in a manner prescribed by him. When a payment is made to the county in

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installments, the state's portion must be remitted to the State Treasurer by the county treasurer on a monthly basis. The 44 percent remitted to the State Treasurer must be deposited as follows:

(1) 72.93 66.93 percent to the general fund;

(2) 6.00 percent to the Law Enforcement Enhancement Account;

(3) 16.73 percent to the Department of Mental Health to be used exclusively for the treatment and rehabilitation of drug addicts within the department's addiction center facilities;

(3) (4) 10.34 percent to the State Office of Victim Assistance under the South Carolina Victim's Compensation Fund.

The Law Enforcement Enhancement Account must be maintained in the State Treasurer's Office. In expending the funds deposited to the Law Enforcement Enhancement Account, the Director of the Department of Public Safety must consider the need for (1) additional other funded troopers and officers, (2) pay shift differential for troopers and officers, and (3) continuing education and training for troopers and officers. Any unexpended balance on June 30 of the prior fiscal year may be retained and carried forward to the current fiscal year.

In any court, when sentencing a person convicted of an offense which has proximately caused physical injury or death to the victim, the court may order the defendant to pay a restitution charge commensurate with the offense committed, not to exceed ten thousand dollars, to the Victim's Compensation Fund."

SECTION 294. Section 17-5-130 of the 1976 Code, as last amended by Act 307 of 1994, is further amended to read:

"Section 17-5-130. (A) A coroner in this State must have the following qualifications:

(1) be a citizen of the United States;

(2) be a resident of the county in which he seeks the office of coroner for at least one year before qualifying for the election to the office;

(3) be a registered voter;

(4) attained the age of twenty-one years before the date of qualifying for election to the office;

(5) obtained a high school diploma or its recognized equivalent; and

(6) have not been convicted of a felony offense or any offense involving moral turpitude contrary to the laws of this State, any other state, or the United States.

(B) Each person serving as a coroner in his first term is required to complete a basic training session to be determined by the South Carolina Law Enforcement Training Council (council) Director of the South

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Carolina Department of Public Safety (director). This basic training session must be completed no later than the end of the calendar year following his election as coroner. A person appointed to fill the unexpired term in the office of coroner must complete a basic training session to be determined by the council director within one calendar year of the date of appointment. This section shall not be construed to require an individual to repeat the basic training session if he has successfully completed the session prior to his election or appointment as coroner. A coroner who is unable to attend this training session when offered because of an emergency or extenuating circumstances shall, within one year from the date the disability or cause terminates, complete the standard basic training session required of coroners. A coroner who does not fulfill the obligations of this subsection is subject to suspension by the Governor until the coroner completes the training session.

(C) A person holding the office of coroner or deputy coroner who was elected, appointed, or employed prior to January 1, 1994, and who has served continuously since that time must attend a minimum of sixteen hours training annually as may be selected determined by the council director on or before December 31, 1995. Each year thereafter, all coroners and deputy coroners must complete a minimum of sixteen hours training annually as may be selected by the council director. Certification or records of attendance or training shall be maintained as directed by the council Department of Public Safety.

(D)(1) The basis for the minimum annual requirement of in-service training is the calendar year. A coroner who satisfactorily completes the basic training session in accordance with the provisions of subsection (B) is excused from the minimum annual training requirements of subsection (C) for the calendar year in which the basic training session is completed.

(2) The Board of Directors of the South Carolina Coroners Association, in its discretion, may grant a waiver of the requirements of the annual in-service training upon presentation of evidence by a coroner that he was unable to complete the training due to an emergency or extenuating circumstances.

(3) A coroner who fails to complete the minimum annual in-service training required by this section may be suspended from office, without pay, by the Governor for ninety days. The Governor may continue to suspend a coroner until he completes the annual minimum in-service training required in this section. The Governor shall appoint, at the time of the coroner's suspension, a qualified person to perform as acting coroner during the suspension.

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(E) The provisions of items (4) and (5) of subsection (A) do not apply to a coroner serving on the effective date of this section.

(F) The South Carolina Law Enforcement Training Council director must appoint a Coroners Training Advisory Committee to assist in the determination of training requirements for coroners and deputy coroners. The committee shall consist of no fewer than five coroners and at least one physician trained in forensic pathology as recommended by the South Carolina Coroners Association. The members of the committee shall serve without compensation.

(G) Expenses of all training authorized or required by this section must be paid by the county the coroner or deputy coroner serves, and the South Carolina Law Enforcement Training Council Department of Public Safety is authorized to set and collect fees for such training."

SECTION 295. Section 40-65-40, as last amended by Act No. 181 of 1993, is further amended to read:

"Section 40-65-40. Each member of the advisory council may receive twenty-five dollars an amount as provided for in the annual General Appropriations Act for each day actually engaged in the services of the department and shall be reimbursed for all actual travelling, incidental, and clerical expenses necessarily incurred in carrying out the provisions of this chapter. These expenses shall be paid from general appropriations of the department."

SECTION 296. Section 40-65-60, as last amended by Act No. 181 of 1993, is further amended to read:

"Section 40-65-60. The advisory council shall hold at least two regular meetings each year. Special meetings may be held as the bylaws of the council provide. The council shall elect annually a chairman and a vice-chairman. The chief soil scientist, SCLRCC State Soil Scientist, SCDNR, shall serve as secretary-treasurer of the council. A quorum of the council shall consist of three members."

SECTION 297. Section 44-1-40 of the 1976 Code, as amended by Act No. 181 of 1993 and as becomes effective February 1, 1995, is further amended to read:

"Section 44-1-40. The board shall select a director commissioner for the department who shall serve a four-year term and who shall have such authority and perform such duties as may be directed by the board. The salary of the director commissioner shall be fixed by the board, upon approval of the State Budget and Control Board. For any vacancy occurring in the office of director commissioner on or after February 1, 1995, the board, after consultation with and approval by the Governor, must submit the name of its appointee to the Senate for the Senate's advice

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and consent. On or after February 1, 1995, the board may remove a director commissioner only after consultation with and approval by the Governor."

SECTION 298. Section 44-53-710 of the 1976 Code is amended to read:

"Section 44-53-710. The South Carolina Department of Health and Environmental Control shall have exclusive control over the controlled substance methadone, except for the South Carolina Department of Mental Health facilities or treatment programs licensed by the South Carolina Department of Mental Health and approved by the South Carolina Department of Alcohol and Other Drug Abuse Services or the federal government."

SECTION 299. Section 44-53-730 of the 1976 Code is amended to read:

"Section 44-53-730. No supplier, distributor, or manufacturer shall sell or distribute methadone or its salts to anyone other than a facility licensed by the Department of Health and Environmental Control or the South Carolina Department of Mental Health, except as provided in Section 44-53-720."

SECTION 300. Section 44-53-740 of the 1976 Code is amended to read:

"Section 44-53-740. The Board of Health and Environmental Control shall promulgate regulations as may be necessary to carry out the provisions of this article in coordination with the Department of Alcohol and Other Drug Abuse Services. Such These regulations shall not include criteria for admission to, continuance in, or discharge from any methadone maintenance program in a facility of the South Carolina Department of Mental Health or facility licensed by the South Carolina Department of Mental Health and approved by the South Carolina Department of Alcohol and Other Drug Abuse Services or the federal government."

SECTION 301. References in the 1976 Code to the Director of the Department of Health and Environmental Control mean the Commissioner of the Department of Health and Environmental Control. The Code Commissioner shall change references in the 1976 Code to conform with this act, and such changes must be included in the next printing of replacement volumes or cumulative supplements.

SECTION 302. Title 36 of the 1976 Code is amended by adding:

"CHAPTER 4A.

Uniform Commercial Code--Funds Transfers

SOUTH CAROLINA REPORTER'S INTRODUCTORY NOTE

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In the spring of 1995, the South Carolina Senate Judiciary Committee requested the South Carolina Law Institute to appoint a committee (the "Committee") to evaluate the impact of proposed uniform Article 4A on South Carolina law and to assist the Senate Judiciary Committee in considering Article 4A for adoption in South Carolina. The Committee was comprised of lawyers, professors, bankers, corporate users of wire transfer services, and a representative of the Office of the Consumer Advocate. The Reporter and a research assistant provided support to the Committee. After review of the uniform statute and the Official Comments thereto, versions of Article 4A adopted by other states, South Carolina statutory and common law, and scholarly commentary, the Committee unanimously recommended that South Carolina adopt the uniform version of Article 4A.

Uniformity Of Article 4A.

Funds transfers are effected across state lines and often through different funds transfer systems. If participants in a funds transfer are to be certain of their obligations and liabilities, uniformity of funds transfer rules is imperative.

Virtually all jurisdictions have adopted Article 4A without change from the proposed uniform statute. The Committee reviewed all non-uniform provisions enacted by other states and determined that most of the provisions were not substantive. The Committee found no reason to vary Article 4A from the uniform version and accordingly recommended that South Carolina adopt the uniform version of Article 4A.

Like other Articles in the Uniform Commercial Code, the uniform version of Article 4A includes "Official Comments" addressing the purpose and meaning of the various sections and the policy considerations on which they are based. Because the Official Comments provide information of high value in interpreting and understanding Article 4A, the Committee recommended that they be included as part of South Carolina's Article 4A legislation. The majority of adopting states have done likewise. Only Oklahoma, one of the first states to enact Article 4A, adopted comprehensive state reporter's comments in addition to the Official Comments. See OKLA. STAT. ANN. tit. 12A Section 4A (West Supp. 1995). In order to avoid any implication of non-uniformity that might be raised by the content of Reporter's Comments, the Committee decided to include South Carolina Reporter's Comments only after sections which call for comment.

The Impact Of Article 4A On South Carolina Law.

At the time of the Committee's deliberations, no South Carolina statutory or case law dealt with funds transfers. Very few published

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opinions from other jurisdictions were available. Prior to the general enactment of Article 4A, courts decided funds transfer cases using various common law principles, or by analogy to Article 4 of the U.C.C. As a result, pre-Article 4A case law provides little guidance as to how a court would likely decide a funds transfer issue. For a discussion of how cases decided prior to the enactment of Article 4A might have been decided, see OKLA. STAT. ANN. tit. 12A, Section 4A (West Supp. 1995); Tony M. Davis, Comparing Article 4A with Existing Case Law on Funds Transfers: A Series of Case Studies, 42 ALA. L. REV. 823 (1991).

The enactment of Article 4A in South Carolina, although important to clarify national uniformity in regulation of funds transfers, should work little practical change in South Carolina law for two reasons. First, for funds transfer issues arising after 1989, it is likely that a South Carolina court would have looked to Article 4A for guidance. See, Manufacturas Int'l Ltda. v. Manufacturers Hanover Trust Co., 792 F.Supp. 180 (E.D.N.Y. 1992) (declining to apply Article 4A but discussing its provisions by analogy). Second, South Carolina banks using Fedwire as a funds transfer system have operated under Article 4A since January 1, 1991. Regulation J, which governs funds transfers through Fedwire, and which incorporated Article 4A as of that date, preempts inconsistent state law.1

NATIONAL CONFERENCE OF COMMISSIONERS

ON UNIFORM STATE LAWS

PREFATORY NOTE

The National Conference of Commissioners on Uniform State laws and The American Law Institute have approved a new Article 4A to the Uniform Commercial Code. Comments that follow each of the sections of the statute are intended as official comments. They explain in detail the purpose and meaning of the various sections and the policy considerations on which they are based.

Description of transaction covered by Article 4A. ____________________ 1 Note, however, that not all parties to a Fedwire are governed by Regulation J and therefore, by Article 4A. Specifically, Regulation J applies to parties in privity with a Reserve Bank, beneficiaries that maintain or use an account at a Reserve Bank, and other parties in a funds transfer that have notice of the use of Fedwire and of the applicability of Regulation J to Fedwire. 12 C.F.R. Section 210.25(b)(2)(1992).

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There are a number of mechanisms for making payments through the banking system. Most of these mechanisms are covered in whole or part by state or federal statutes. In terms of number of transactions, payments made by check or credit card are the most common payment methods. Payment by check is covered by Articles 3 and 4 of the UCC, and some aspects of payment by credit card are covered by federal law. In recent years electronic funds transfers have been increasingly common in consumer transactions. For example, in some cases a retail customer can pay for purchases by use of an access or debit card inserted in a terminal at the retail store that allows the bank account of the customer to be instantly debited. Some aspects of these point-of-sale transactions and other consumer payments that are effected electronically are covered by a federal statute, the Electronic Fund Transfer Act (EFTA). If any part of a funds transfer is covered by EFTA, the entire funds transfer is excluded from Article 4A.

Another type of payment, commonly referred to as a wholesale wire transfer, is the primary focus of Article 4A. Payments that are covered by Article 4A are overwhelmingly between business or financial institutions. The dollar volume of payments made by wire transfer far exceeds the dollar volume of payments made by other means. The volume of payments by wire transfer over the two principal wire payment systems -- the Federal Reserve wire transfer network (Fedwire) and the New York Clearing House Interbank Payments Systems (CHIPS) -- exceeds one trillion dollars per day. Most payments carried out by use of automated clearing houses are consumer payments covered by EFTA and therefore not covered by Article 4A. There is, however, a significant volume of non-consumer ACH payments that closely resemble wholesale wire transfers. These payments are also covered by Article 4A.

There is some resemblance between payments made by wire transfer and payments made by other means such as paper-based checks and credit cards or electronically-based consumer payments, but there are also many differences. Article 4A excludes from its coverage these other payment mechanisms. Article 4A follows a policy of treating the transaction that it covers--a "funds transfer"--as a unique method of payment that is governed by unique principles of law that address the operational and policy issues presented by this kind of payment.

The funds transfer that is covered by Article 4A is not a complex transaction and can be illustrated by the following example which is used throughout the Prefatory Note as a basis for discussion. X, a debtor, wants to pay an obligation owed to Y. Instead of delivering to Y a negotiable instrument such as a check or some other writing such as a

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credit card slip that enables Y to obtain payment from a bank, X transmits an instruction to X's bank to credit a sum of money to the bank account of Y. In most cases X's bank and Y's bank are different banks. X's bank may carry out X's instruction by instructing Y's bank to credit Y's account in the amount that X requested. The instruction that X issues to its bank is a "payment order." X is the "sender" of the payment order and X's bank is the "receiving bank" with respect to X's order. Y is the "beneficiary" of X's order. When X's bank issues an instruction to Y's bank to carry out X's payment order, X's bank "executes" X's order. The instruction of X's bank to Y's bank is also a payment order. With respect to that order, X's bank is the sender, Y's bank is the receiving bank, and Y is the beneficiary. The entire series of transactions by which X pays Y is known as the "funds transfer." With respect to the funds transfer, X is the "originator," X's bank is the "originator's bank," Y is the "beneficiary" and Y's bank is the "beneficiary's bank." In more complex transactions there are one or more additional banks known as "intermediary banks" between X's bank and Y's bank. In the funds transfer the instruction contained in the payment order of X to its bank is carried out by a series of payment orders by each bank in the transmission chain to the next bank in the chain until Y's bank receives a payment order to make the credit to Y's account. In most cases, the payment order of each bank to the next bank in the chain is transmitted electronically, and often the payment order of X to its bank is also transmitted electronically, but the means of transmission does not have any legal significance. A payment order may be transmitted by any means, and in some cases the payment order is transmitted by a slow means such as first class mail. To reflect this fact, the broader term "funds transfer" rather than the narrower term "wire transfer" is used in Article 4A to describe the overall payment transaction.

Funds transfers are divided into two categories determined by whether the instruction to pay is given by the person making payment or the person receiving payment. If the instruction is given by the person making the payment, the transfer is commonly referred to as a "credit transfer." If the instruction is given by the person receiving payment, the transfer is commonly referred to as a "debit transfer." Article 4A governs credit transfers and excludes debit transfers.

Why is Article 4A needed?

There is no comprehensive body of law that defines the rights and obligations that arise from wire transfers. Some aspects of wire transfers are governed by rules of the principal transfer systems. Transfers made by Fedwire are governed by Federal Reserve Regulation J and transfers

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over CHIPS are governed by the CHIPS rules. Transfers made by means of automated clearing houses are governed by uniform rules adopted by various associations of banks in various parts of the nation or by Federal Reserve rules or operating circulars. But the various funds transfer system rules apply to only limited aspects of wire transfer transactions. The resolution of the many issues that are not covered by funds transfer system rules depends on contracts of the parties, to the extent that they exist, or principles of law applicable to other payment mechanisms that might be applied by analogy. The result is a great deal of uncertainty. There is no consensus about the juridical nature of a wire transfer and consequently of the rights and obligations that are created. Article 4A is intended to provide the comprehensive body of law that we do not have today.

Characteristics of a funds transfer.

There are a number of characteristics of funds transfers covered by Article 4A that have influenced the drafting of the statute. The typical funds transfer involves a large amount of money. Multimillion dollar transactions are commonplace. The originator of the transfer and the beneficiary are typically sophisticated business or financial organizations. High speed is another predominant characteristic. Most funds transfers are completed on the same day, even in complex transactions in which there are several intermediary banks in the transmission chain. A funds transfer is a highly efficient substitute for payments made by the delivery of paper instruments. Another characteristic is extremely low cost. A transfer that involves many millions of dollars can be made for a price of a few dollars. Price does not normally vary very much or at all with the amount of the transfer. This system of pricing may not be feasible if the bank is exposed to very large liabilities in connection with the transaction. The pricing system assumes that the price reflects primarily the cost of the mechanical operation performed by the bank, but in fact, a bank may have more or less potential liability with respect to a funds transfer depending upon the amount of the transfer. Risk of loss to banks carrying out a funds transfer may arise from a variety of causes. In some funds transfers, there may be extensions of very large amounts of credit for short periods of time by the banks that carry out a funds transfer. If a payment order is issued to the beneficiary's bank, it is normal for the bank to release funds to the beneficiary immediately. Sometimes, payment to the beneficiary's bank by the bank that issued the order to the beneficiary's bank is delayed until the end of the day. If that payment is not received because of the insolvency of the bank that is obliged to pay, the beneficiary's bank may suffer a loss. There is also risk of loss if a bank fails to execute the payment order of a customer, or if the order is

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executed late. There also may be an error in the payment order issued by a bank that is executing the payment order of its customer. For example, the error might relate to the amount to be paid or to the identity of the person to be paid. Because the dollar amounts involved in funds transfers are so large, the risk of loss if something goes wrong in a transaction may also be very large. A major policy issue in the drafting of Article 4A is that of determining how risk of loss is to be allocated given the price structure in the industry.

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