DEBTOR - CREDITOR LAW

Tom Hoffman

Spring, 1995 Exam

1. Kirby, a struggling law student, visited Twins National Bank in Eagan, Minnesota, to apply for a loan to pay his living expenses while attending interesting and informative classes at the local law school in St. Paul, Minnesota. While he was at the Bank, the consumer banking manager, Tom K., unequivocally told Kirby that his application for a $15,000.00 loan would be "no problem". Kirby relied on this comment and consequently turned down a great job opportunity at a large law firm with the belief he could borrow money to pay his living expenses and thereby focus his attention on his studies. However, Tom K. wrote to Kirby several weeks later and informed Kirby that his loan had been denied because the Twins Bank now had information that Kirby had several judgments entered against him and Kirby was a known "trouble maker". Kirby cannot find another law clerk position and he has asked Tom K. where Twins Bank obtained this information because Kirby claims that he has no knowledge of judgments being entered against him. Tom K. refused to tell Kirby where Twins Bank obtained the information.

a. Discuss all claims Kirby may have against Twins Bank and all defenses available to Twins Bank arising out of Tom K.'s comment that the loan would be "no problem" and the Bank's denial of Kirby's loan application (10 points)

b. If you were representing Kirby, discuss all available remedies and procedures which may be available to Kirby to clear his record of the judgments and the statement that he is a "trouble maker". Also, discuss Kirby's possible claims against Twins Bank for failing to provide the source of this information to Kirby. (10 points)

2. Killebrew State Bank of Bovey, Minnesota has a growing list of bad consumer loans. Scott, the president of the bank decided to undertake several unilateral actions to collect Killebrew State Bank of Bovey's bad consumer loans. His action plan included:

(a) accepting all late payments and not wasting money sending notices to customers before they have their "repo guy", Kevin, engage in self-help repossession;

(b) telling Kevin to pick up automobiles in underground parking lots in apartment buildings;

(c) instructing their local collection agency (which happens to be owned by Scott) to increase its pressure on these "deadbeats" by telling these "scum" that they will go to jail if they do not pay and by calling them after 10:00 p.m. to "wake them up into paying";

(d) instructing the collection agency to send a letter that gives the customer ten days to pay or the Bank will send the sheriff out; and

(e) to publishing a list of all "deadbeats" that Scott can proudly display at the post office.

Discuss your advice to Scott relative to the advisability of enacting these proposals. (15 points)

3. A local Minnesota sports team, Dome Sports, Inc. obtained a $10,000.00 judgment against Chuck. Chuck was recently in the local jail overnight on a disorderly conduct charge. Chuck has a savings account at a local Minnesota bank, the Karl State Bank, and he works at a local restaurant, Herbie's Restaurant. Advise Dome Sports, Inc. which remedy to use to obtain the funds in the savings account and from Chuck's earnings from Herbie's Restaurant and discuss generally the procedures Dome Sports, Inc. must follow under each remedy. (20 points)

4. Rick was frustrated trying to informally collect the $8,000.00 he recently lent to Marty. Marty told several friends of Rick that he was going to sell his homestead in Minnesota and move to Iowa to get away from Rick. Rick is selling his homestead for $350,000.00. The day before Marty's closing to sell his homestead, Rick decides to seek legal advice from you. Discuss the alternatives Rick has to legally collect his money and all procedural issues involved for each alternative (include a brief discussion of any constitutional issues which are involved in prejudgment seizure situations). (15 points)

5. The Pedro Rental Car Company ("PRCC") recently obtained a judgment against Harmon in the state of Minnesota and PRCC retains you to collect the judgment. PRCC wants answers to the following questions:

a. Is there a homestead exemption in Minnesota? Within the city limits, what is the homestead exemption? (5 points)

b. Harmon has a baby grand piano. Is the piano exempt? Can Harmon exempt the full amount of the piano? (5 points)

c. Where does PRCC obtain a writ of execution? (5 points)

d. How does PRCC obtain more information about Harmon's assets? (5 points)

6. You represent Doug, a paralegal who makes $2,000.00 per week. Doug has had his wages garnished in Grand Rapids, Minnesota. How much should Doug's employer withhold on an earnings garnishment? Show all relevant calculations. (10 points)