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Acceleration Clause in Promissory Note

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  • 07-15-2014, 07:07 AM
    tensore
    Acceleration Clause in Promissory Note
    Long story short: I lend my friend $ 7000. I reside in North Dakota and she is in Texas. She has failed to make her installment payment this month and has ceased communication. Below, you will find the ten clauses. My questions pertains to clause 4, 7, and 9.

    1.FOR VALUE RECEIVED, The Borrower promises to pay to the Lender at such address as may be provided in writing to the Borrower, the principal sum of $7,000.00 USD, without interest payable on the unpaid principal.

    2.This Note will be repaid in consecutive monthly installments of $300.00 USD each on the fifteenth of each month commencing the month following executing of this Note and continuing until April 15th, 2016 with the balance then owing under this Note being paid at that time.

    3.At any time while not in default under this Note, the Borrower may pay the outstanding balance then owing under this Note to the Lender without further bonus or penalty.

    4.Notwithstanding anything to the contrary in this Note, if the Borrower defaults in the performance of any obligation under this Note, then the Lender may declare the principal amounting owing and interest due under this Note at that time to be immediately due and payable.

    5.All costs, expenses and expenditures including, and without limitation, the complete legal costs incurred by the Lender in enforcing this Note as a result of any default by the Borrower, will be added to the principal then outstanding and will immediately be paid by the Borrower.

    6.If any term, covenant, condition or provision of this Note is held by a court of competent jurisdiction be invalid, void or unenforceable, it is the parties’ intent that such provision be reduced in scope by the court only to the extend deemed necessary by that court to render the provision reasonable and enforceable and the remainder of the provisions of this Note will in no way be affected, impaired or invalidated as a result.

    7.This Note will be construed in accordance with and governed by the laws of the State of North Dakota.

    8.This Note will endure to the benefit of and be binding upon the respective heirs, executors, administrators, successors and assigns of the Borrower and the Lender. The Borrower waives presentment for payment, notice of non-payment, protest and notice of protest.

    9.If any installment payment due under this Note is not received by Lender within 10 days of its due date, Borrower will pay a late fee of five percent of the amount of the monthly payment. The late fee will be due immediately. If any installment payment is not received by lender within 90 days of its due date, Lender may demand, in writing, that Borrower repay the entire amount of unpaid principal immediately. After receiving Lender’s demand, Borrower will pay the entire unpaid principal.

    10.This Note represents the entire agreement between Borrower and Lender. Any modifications must be in writing and signed by both Borrower and Lender.


    Questions

    1. Does clause 4 prevail over clause 9.

    2. What state would be the best to sue her in? Do I have to sue her in North Dakota or can I go to Texas to file a lawsuit there?

    Thank you for your help!
  • 07-15-2014, 08:25 AM
    adjusterjack
    Re: Prevailing Clause in Promissory Note
    Quote:

    Quoting tensore
    View Post

    1. Does clause 4 prevail over clause 9.

    If you mean can you call the note due and payable immediately, I don't think so.

    Clause 4 gives you the right to call the note due and payable but Clause 9 limits you to the circumstances under which you can call the note due and payable.

    In other words, you'd have to wait 90 days from default.

    Granted, there appears to be a conflict between 4 and 9, but you provided the contract so a court will construe any ambiguities and conflicts liberally in favor of the borrower and likely rule that Clause 9 modifies Clause 4.

    Quote:

    Quoting tensore
    View Post

    2. What state would be the best to sue her in? Do I have to sue her in North Dakota or can I go to Texas to file a lawsuit there?

    Generally, it's better to sue somebody where they live, work and bank so the local court there would have leverage over the defendant.

    Unfortunately, that costs you in travel time and time off from work and you don't get any of that back.

    You could, of course, try suing in ND and see how it goes. You might end up with a default judgment that you can transfer and enforce in Texas. However, there is always a chance that the defendant could claim lack of "personal jurisdiction" (google it) and get the ND case dismissed and you'd have to start all over again in a Texas court.
  • 07-16-2014, 08:25 AM
    tensore
    Re: Prevailing Clause in Promissory Note
    Quote:

    Quoting adjusterjack
    View Post
    If you mean can you call the note due and payable immediately, I don't think so.

    Clause 4 gives you the right to call the note due and payable but Clause 9 limits you to the circumstances under which you can call the note due and payable.

    In other words, you'd have to wait 90 days from default.

    Granted, there appears to be a conflict between 4 and 9, but you provided the contract so a court will construe any ambiguities and conflicts liberally in favor of the borrower and likely rule that Clause 9 modifies Clause 4.



    Generally, it's better to sue somebody where they live, work and bank so the local court there would have leverage over the defendant.

    Unfortunately, that costs you in travel time and time off from work and you don't get any of that back.

    You could, of course, try suing in ND and see how it goes. You might end up with a default judgment that you can transfer and enforce in Texas. However, there is always a chance that the defendant could claim lack of "personal jurisdiction" (google it) and get the ND case dismissed and you'd have to start all over again in a Texas court.


    Adjuster Jack,

    Thank you for your response. After 90 days if she is still behind on her payments, how do you recommend taking this to court. I have been told by my friends not to mess with her as she may try to tarnish my reputation by countersuing me such as using sexual harrassment as a leverage to have me drop my case duing initial negotiations.I really dont know what to do to legally claim my money back .

    Thanks.
  • 07-16-2014, 08:42 AM
    adjusterjack
    Re: Prevailing Clause in Promissory Note
    Quote:

    Quoting tensore
    View Post

    I have been told by my friends not to mess with her as she may try to tarnish my reputation by countersuing me such as using sexual harrassment as a leverage to have me drop my case duing initial negotiations.I really dont know what to do to legally claim my money back .

    I'll answer that question first, and you won't like the answer.

    If fear keeps you from pursuing the debt, then you might as well just kiss the money goodbye and get on with your life.

    Quote:

    Quoting tensore
    View Post
    After 90 days if she is still behind on her payments, how do you recommend taking this to court.

    The how is easy. You pick your court and follow the instructions.

    The small claims limits in both states exceed the $7000 so you can pick whichever you want.

    First thing I would do, however, is send her a demand letter indicating that payment is past due, the loan is in default and is fully due and payable immediately and failure to pay will result in a lawsuit.

    I'd send it by UPS or FedEx with a signature requirement. I wouldn't send it certified because people duck certified mail as trouble but still think of UPS and FedEx as not trouble. If you don't get a return receipt, send it regular mail.

    If you threaten to sue, make sure you are willing and able to sue. If you bluff and get called on it, she wins, and your money is gone forever.

    If you don't get your money, you do have the option of not waiting the 90 days and hoping she doesn't figure it out.
  • 07-16-2014, 09:46 PM
    tensore
    Re: Prevailing Clause in Promissory Note
    "I'd send it by UPS or FedEx with a signature requirement. I wouldn't send it certified because people duck certified mail as trouble but still think of UPS and FedEx as not trouble. If you don't get a return receipt, send it regular mail."

    Excellent point. I will make sure to either send it UPS or FedEX. She is late one her first payment, should I send her a letter every month, or just the first one and then the 90 day default letter? I know she wont be paying form this point on.

    "If you don't get your money, you do have the option of not waiting the 90 days and hoping she doesn't figure it out."

    Could you elaborate on this, I am not sure what you mean?

    THANK YOU for helping me on this situation!
  • 07-16-2014, 09:52 PM
    Dogmatique
    Re: Prevailing Clause in Promissory Note
    Just one minor thing.

    If you sue in Texas and win you're going to have an uphill battle to collect. Regular creditors cannot garnish wages.
  • 07-16-2014, 11:42 PM
    adjusterjack
    Re: Prevailing Clause in Promissory Note
    Quote:

    Quoting tensore
    View Post

    "If you don't get your money, you do have the option of not waiting the 90 days and hoping she doesn't figure it out."

    Could you elaborate on this, I am not sure what you mean?

    I mean you have the option of suing right away.

    The defendant will have to raise the 90 day thing as a defense. If she doesn't, you could win. If she does, the case could be dismissed and you'll have to wait and file all over again.
  • 07-16-2014, 11:42 PM
    tensore
    Re: Prevailing Clause in Promissory Note
    Quote:

    Quoting Dogmatique
    View Post
    Just one minor thing.

    If you sue in Texas and win you're going to have an uphill battle to collect. Regular creditors cannot garnish wages.

    Dogmatique,

    Can you explain the last sentence. I am not too familiar how garnishing wages work. If I sue in North Dakota, wont the court forward me to Texas anyway?
    Please advise what approach you recommend ..North Dakota then Texas..or straight to Texas. I am so new to this.
  • 07-16-2014, 11:47 PM
    adjusterjack
    Re: Prevailing Clause in Promissory Note
    Quote:

    Quoting Dogmatique
    View Post
    Just one minor thing.

    If you sue in Texas and win you're going to have an uphill battle to collect. Regular creditors cannot garnish wages.

    The Texas Constitution prohibits wage garnishment but doesn't distinguish between regular creditors and other creditors, except for child support and spousal maintenance.

    Article 16. Sec. 28. GARNISHMENT OF WAGES. No current wages for personal service shall ever be subject to garnishment, except for the enforcement of court-ordered:

    (1) child support payments; or

    (2) spousal maintenance.


    Even if the OP sued in ND, he would still be unable to garnish wages in TX.

    However, there is no prohibition against levying bank accounts or recording the judgment so it becomes a lien on real property.
  • 07-16-2014, 11:50 PM
    Dogmatique
    Re: Prevailing Clause in Promissory Note
    It was for ease purposes.

    As in, "Might as well draw the picture"
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