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Minnesota Voyageur Houseboats, Inc. v. Las Vegas Marine Supply

January 11, 2005

MINNESOTA VOYAGEUR HOUSEBOATS, INC., RESPONDENT,
v.
LAS VEGAS MARINE SUPPLY, INC., A NEVADA CORPORATION, ET AL., RESPONDENTS, NORTHERN NATIONAL BANK, N/K/A WELLS FARGO BANK, APPELLANT.



St. Louis County District Court C6-97-600295.

Considered and decided by Toussaint, Chief Judge; Shumaker, Judge; and Halbrooks, Judge.

SYLLABUS BY THE COURT

When a debtor defaults under a promissory note and the note provides for the alternative and cumulative remedies of acceleration and setoff upon default, the debt is "due and owing" upon default and the bank may exercise its right of setoff without first declaring the entire indebtedness immediately due and owing.

The opinion of the court was delivered by: Toussaint, Chief Judge

Reversed

Appellant-garnishee bank challenges the summary judgment entered in favor of respondents-creditors. Because the bank properly exercised its right of setoff against the accounts of the debtor upon its default, we reverse.

FACTS

On cross-motions for summary judgment, appellant-garnishee Wells Fargo Bank (the bank) and respondents-creditors Las Vegas Marine Supply, Inc. and others (the creditors) did not dispute the material facts and filed a stipulation of fact with the district court.

On August 24, 1994, respondent-debtor Minnesota Voyageur Houseboats, Inc. (the debtor) executed a promissory note in favor of the bank in the amount of $530,160. The debtor agreed to make three payments of principal and interest each year on the first of July, August, and September and gave the bank a security interest in its collateral. The note contained paragraphs setting out what constitutes "default" and what constitutes the "rights of [the] lender on default." Those paragraphs state, in relevant part, that the debtor will be in default . . . in the event that [the debtor] . . . (e) permits the entry or service of any garnishment, judgment, tax levy, attachment or lien against [the debtor], any guarantor, or any of their property or the Collateral[.] . . .

If there is a default under this Note, [the bank] will be entitled to exercise one or more of the following remedies without notice or demand (except as required by law)[, including]:

(a) to declare the principal amount plus accrued interest under this Note and all other present and future obligations of [the debtor] immediately due and payable in full [and] . . .

(f) to set-off [debtor's] obligations against any amounts due to [the debtor].

The note also states that the bank's "rights are cumulative and may be exercised together, separately, and in any order" and that its contractual remedies "are in addition to those available at common law, including, but not limited to, the right of set-off."

The debtor made its payments on the loan, and there is no allegation that it was in arrears. On January 7, 1997, however, the creditors obtained a judgment for attorney fees, costs, and interest against the debtor in Nevada. The creditors caused the ...


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