Yes, we believe that your institution has a valid right of setoff in the president’s personal deposit account, since he is the guarantor of the business debt.

Under Illinois law, the right of setoff can arises under the common law if there is “mutuality” of parties — where the deposit account is owned by the same party that owes the debt to the bank. Because the business president is the loan guarantor, there is a mutuality of ownership in the deposit account (which is owned by the business president) and the debt owed to your bank (which is owed by the business president under the guarantee agreement). Consequently, your bank may exercise its common law right of setoff in the president’s deposit account to satisfy his debt to the bank.

For resources related to our guidance, please see:

• Selby v. DuQuoin State Bank, 223 Ill.App.3d 105, 107 (5th Dist. 1991) (“Under common law a bank has the power to apply the deposit to the payment of such depositor’s indebtedness only when there are mutual demands and debts between the parties and this right of setoff arises at the time the depositor’s indebtedness to the bank has matured.”)

• Pope v. First of Am., N.A., 699 N.E.2d 178, 180 (3rd Dist. 1998) (This court held that a bank could exercise its contractual right of setoff for customer’s unauthorized withdrawals from another customer’s bank account.)