Huntington Natl. Bank v. Clark , 2014 Ohio 2629 ( 2014 )

[Cite as Huntington Natl. Bank v. Clark, 2014-Ohio-2629.]
STATE OF OHIO ) IN THE COURT OF APPEALS
)ss: NINTH JUDICIAL DISTRICT
COUNTY OF SUMMIT )
HUNTINGTON NATIONAL BANK C.A. No. 26883
Appellee
v. APPEAL FROM JUDGMENT
ENTERED IN THE
CLARK DEVELOPMENT, INC., et al. COURT OF COMMON PLEAS
COUNTY OF SUMMIT, OHIO
Appellant CASE No. CV 2009-04-2807
DECISION AND JOURNAL ENTRY
Dated: June 18, 2014
MOORE, Presiding Judge.
{¶1} Defendant-Appellant, Melvin H. Clark, appeals from the April 19, 2013 judgment
entry of the Summit County Court of Common Pleas. We reverse.
I.
{¶2} On April 9, 2009, Plaintiff-Appellee, Huntington National Bank, filed a complaint
against Clark Development, Inc., Karen Clark, and Mr. Clark for failure to make the payments
required by a cognovit promissory note (“note”) and personal guaranties. The complaint asserted
that, on March 21, 2005, Clark Development, Inc. executed and delivered to Unizan Bank, N.A.
(“Unizan”), Huntington National Bank’s predecessor in interest, a note in the amount of
$1,500,317.92, at an interest rate of 6.5 percent per year. The complaint also asserted that Karen
Clark and Melvin Clark executed certain unlimited guaranties in favor of Unizan.
{¶3} The note and guaranties contained the following language:
WARNING- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT
TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A
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COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT
YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN
BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS
YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO
COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE.
(Emphasis sic.) Additionally, as of April 3, 2009, the note had an outstanding balance of
$1,312,135.90, plus interest, costs, advances, and attorney fees. A warrant attorney filed an
answer confessing judgment on behalf of Mr. Clark and the other defendants, and the trial court
entered judgment for Huntington National Bank.
{¶4} On January 10, 2013, Mr. Clark moved to vacate the cognovit judgment, pursuant
to Civ.R. 60(B)(5), alleging that it was void ab initio, against public policy, and voidable due to
the existence of several meritorious defenses. Mr. Clark then filed a substitute motion, making
the same arguments as before, and also adding an argument regarding a contemporaneous case
pending in another county. The substitute motion was supported by Mr. Clark’s affidavit.
{¶5} Huntington National Bank filed responses in opposition to Mr. Clark’s motions,
asserting that they should be denied because they are untimely and do not set forth a meritorious
defense.
{¶6} The trial court denied Mr. Clark’s motion without a hearing1, stating that:
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We note that, in its judgment entry, the trial court incorrectly relied upon the Civ.R. 60(B)
standard in GTE Automatic Electric, Inc. v. ARC Industries, Inc. 47 Ohio St.2d 146 (1976),
instead of the modified standard for cognovit judgments. See Stojkoski v. Main 271 S., LLC, 9th
Dist. Summit No. 25407, 2011-Ohio-2117, ¶ 5 (stating “[c]onsequently, a movant seeking to
vacate a cognovit judgment faces a less demanding burden of proof. If the motion for relief was
timely filed, the movant need only demonstrate [t]he existence of a valid defense to all or part of
a claim in order to obtain relief.” (Internal quotations and citations omitted.)) Accord Meyers v.
McGuire, 80 Ohio App.3d 644, 646 (9th Dist.1992) (noting that “[t]he prevailing view is that
relief from a judgment taken upon a cognovit note * * * is warranted by authority of Civ.R.
60(B)(5) when the movant (1) establishes a meritorious defense, (2) in a timely application”).
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[Mr. Clark] asserts that he never received notice of the underlying cognovit
judgment. [Mr.] Clark further asserts that there are issues as to whether the
proceeds from the loan [] were used for consumer rather than commercial
purposes and that there is a jurisdictional issue as to where the cognovit [note]
was signed (because [Mr.] Clark lived in Florida). [Mr.] Clark raises further
issues such as the potential impact of a receiver in a Federal case and the effect if
any of settlement negotiations.
[Mr.] Clark asserts, without any evidence, that the signature on the Certified Mail
card is not his signature. This Court finds that this self-serving denial of service is
not accepted. Furthermore, even if service had not been accomplished in 2009 on
the Cognovit Judgment, the multitude of other lawsuits would have put [Mr.]
Clark on notice of the potential for other litigation. In fact, the foreclosure case
pending before Judge Gallagher in this Courthouse was filed in October of 2011,
over a year before the motion to vacate was filed herein.
[Mr.] Clark filed the motion to vacate on January 10, 2013, the same day as the
Decree in Foreclosure was issued by Judge Gallagher, on the same commercial
property.
[Mr.] Clark has offered no explanation for why the motion was not made within a
reasonable time – at least from the filing of the foreclosure action. There are no
operative facts or reasons justifying why [Mr.] Clark did not file this motion
earlier.
{¶7} Mr. Clark timely appealed, and raises two assignments of error for our
consideration.
II.
ASSIGNMENT OF ERROR I
THE TRIAL COURT ERRED WHEN IT FAILED TO RECOGNIZE THE
JURISDICTIONAL DEFECTS IN THE COGNOVIT JUDGMENT AT ISSUE[.]
{¶8} In his first assignment of error, Mr. Clark argues that, pursuant to R.C. 2323.12
and 2323.13, the trial court lacked subject matter jurisdiction to grant the cognovit judgment.
Specifically, Mr. Clark argues that the trial court lacked subject matter jurisdiction because (1)
there is no evidence that Huntington National Bank presented the original warrants of attorney at
the time it confessed judgment, (2) the complaint did not include any reference to the 2007
agreements which modified and consolidated the 2005 note and guaranties, (3) it is impossible to
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calculate the amount due on the note based upon the documentation provided by Huntington
National Bank, and (4) execution of the cognovit guaranty in the state of Florida renders it
invalid and unenforceable.
{¶9} In response, Huntington National Bank asserts that Mr. Clark’s contentions are
meritless for several reasons, including: (1) based upon this Court’s decision in FirstMerit Bank,
N.A. v. Inks, 9th Dist. Summit Nos. 25980, 26182, 2012-Ohio-5155, (reversed on other grounds
by FirstMerit Bank, N.A. v. Inks, 138 Ohio St.3d 384, 2014-Ohio-789) Mr. Clark presented no
evidence that the bank failed to produce the original warrants of attorney, (2) Huntington
National Bank had no duty to keep the original note and guaranties on file with the trial court,
and (3) at the time judgment was taken, Mr. Clark resided in Summit County, Ohio.
{¶10} We will first address Mr. Clark’s argument that the record does not contain any
evidence that Huntington National Bank presented the original warrants of attorney to the trial
court at the time it confessed judgment.
{¶11} “[T]he statutory provisions at issue, R.C. 2323.12 and 2323.13, govern a trial
court’s jurisdiction over cognovit notes, ‘and these statutory requirements must be met in order
for a valid judgment to be granted upon a cognovit note, or for a court to have subject[]matter
jurisdiction over it.’” Huntington Natl. Bank v. 199 S. Fifth St. Co., 10th Dist. Franklin No.
10AP-1082, 2011-Ohio-3707, ¶ 9, quoting Buehler v. Mallo, 10th Dist. Franklin No. 10AP-84,
2010-Ohio-6349, ¶ 9, citing Klosterman v. Turnkey-Ohio, L.L.C., 182 Ohio App.3d 515, 2009-
Ohio-2508, ¶ 19 (10th.Dist.). “Jurisdictional challenges raise questions of law which require de
novo review.” Adkins v. Adkins, 9th Dist. Summit No. 23228, 2006-Ohio-6956, ¶ 19, citing
Smith v. Smith, 9th Dist. Summit No. 21204, 2003-Ohio-1478, ¶ 10, citing McClure v. McClure,
119 Ohio App.3d 76, 79 (4th Dist.1997). Further, “[a] judgment issued by a court without
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subject matter jurisdiction is void ab initio.” Simon v. Crow, 9th Dist. Summit No. 22172, 2005-
Ohio-1266, ¶ 5.
{¶12} R.C. 2323.13(A) states, in relevant part, that “[a]n attorney who confesses
judgment in a case, at the time of making such confession, must produce the warrant of attorney
for making it to the court before which he makes the confession. * * * The original or a copy of
the warrant shall be filed with the clerk.” In Simon at ¶ 6, this Court stated:
[A] warrant of attorney to confess judgment is to be strictly construed against the
person in whose favor the judgment is given; and the proceeding on a warrant of
attorney to confess judgment should conform in every essential detail with the
statutory law which governs such a proceeding. * * * Strictly construing the
warrant of judgment is required, as a confession of judgment is a quick process
involving a forfeiture without the procedural safeguards provided by notice or an
opportunity for a hearing.
(Emphasis added.) (Internal citations and quotations omitted.) See also Lathrem v. Foreman,
168 Ohio St. 186 (1958), paragraph one of the syllabus. As such, “interpreting R.C. 2323.13(A)
to require the production of the original warrant of attorney not only comports with the statutory
language[,] but also is in accord with the general rule that we construe the statutory requirements
strictly against the party seeking the cognovit judgment due to the extraordinary nature of the
proceedings.” (Emphasis added.) 199 S. Fifth Street Co. at ¶ 20. “Requiring the attorney
confessing judgment to produce the original warrant of attorney provides a minimal level of
assurance that the note is authentic and actually exists[.]” Id.{¶13} In its brief, Huntington National Bank urges us to rely upon Inks, 2012-Ohio-
5155, and conclude that the trial court had subject matter jurisdiction over this matter, even
though the record does not establish that Huntington National Bank produced the original
warrants of attorney when confessing judgment. In Inks at ¶ 10, we stated that:
The [appellants] bear the burden on appeal of establishing that the trial court did
not have jurisdiction to enter judgment based on their confessions. Knapp v.
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Edwards Labs., 61 Ohio St.2d 197, 199 (1980). (“[A]n appellant bears the burden
of showing error by reference to matters in the record.”); Howiler v. Connor, 9th
Dist. Summit No. 10648, 1982 WL 2779, *1 (Oct. 6, 1982) (“In courts of general
jurisdiction a legal presumption arises in favor of jurisdiction, want of which must
be affirmatively demonstrated on the record.”). The record does not indicate that
the lawyer who confessed judgment for the [appellants] failed to produce the
original warrants of attorney to the trial court. Accordingly, the [appellants] have
not established that the trial court lacked jurisdiction to enter judgment against
them.
{¶14} We note that, prior to Inks, this Court addressed jurisdictional requirements for
cognovit judgments in Simon, 2005-Ohio-1266. In Simon at ¶ 5-8, we reversed the judgment of
the trial court for lack of subject matter jurisdiction where there was no evidence in the record
that, pursuant to R.C. 2323.13(E), the instrument arose out of a commercial loan or transaction.
In reversing the judgment, we stated that the “appellees failed to allege either in the complaint or
specify on the face of the note itself that the cognovit note was not a consumer transaction or that
it did not arise out of a consumer loan.” Id. at ¶ 8.
{¶15} Further, in Taranto v. Wan-Noor, 10th Dist. Franklin No. 90AP-1, 1990 WL
63036, * 2 (May 15, 1990), the Tenth District Court of Appeals also reversed a cognovit
judgment where the record was silent on whether a R.C. 2323.13 jurisdictional requirement was
adhered to by the appellees. In reversing, the Tenth District reasoned:
While R.C. 2323.13 does not expressly require a pleading averment relating to
subsection (E), as a jurisdictional prerequisite a cognovit complaint should
specifically address [the] same. In the alternative, the trial court must make some
finding thereon in the record, at least in the entry rendering judgment.
(Emphasis sic.)
{¶16} Based upon the record before us, we find this matter analogous to Simon and
Taranto, and conclude that it is appropriate to follow their logic because the jurisdictional
requirements in R.C. 2323.13 must be strictly construed against the party in whose favor the
judgment is given: Huntington National Bank. See Simon at ¶ 6; see also 199 S. Fifth Street Co.
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at ¶ 20. Additionally, we agree that although R.C. 2323.13 does not expressly require a cognovit
complaint to aver that its jurisdictional requirements have been satisfied, the cognovit complaint
should specifically address this issue, or, alternatively, the trial court should make jurisdictional
findings on the record. See Taranto at *2. This reasoning is sound because, in a cognovit action,
the defendant has no notice of the hearing prior to judgment being rendered. At that point in
time, if the record is completely silent as to whether the plaintiff adhered to the R.C. 2323.13
jurisdictional requirements, it would be nearly impossible for a defendant to challenge subject
matter jurisdiction.
{¶17} Here, like the appellees in Simon and Taranto, Huntington National Bank also
failed to allege a jurisdictional requirement in its complaint and/or affidavit. Specifically,
Huntington National Bank failed to allege that it produced the original warrants of attorney at the
time it confessed judgment to the trial court. The complaint indicates that copies of the note and
guaranties were attached as exhibits, and the affidavit also indicates that copies of these
documents were attached to the complaint. However, neither the complaint nor affidavit reflect
that Huntington National Bank “conform[ed] in every essential detail with the statutory law,”
governing cognovit proceedings, by producing the original warrants of attorney at the time it
confessed judgment. Simon at ¶ 6. Further, the trial court’s judgment entry makes the following
specific jurisdictional findings:
Defendants are subject to the jurisdiction of the [c]ourt and [] Defendants’ duly
authorized attorney entered an appearance in this case and confessed on behalf of
Defendants that all allegations set forth in the [c]omplaint are true and accurate.
The [c]ourt further finds that the note and guaranties were not executed in
connection with a consumer loan or a consumer transaction.
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One could infer that if Huntington National Bank actually produced the original warrants of
attorney, the trial court would have also made this jurisdictional finding along with the others in
its judgment entry.
{¶18} Therefore, because there is no evidence in the record that Huntington National
Bank strictly complied with R.C. 2323.13(A) by producing the original warrants of attorney at
the time it confessed judgment, we conclude that the trial court lacked jurisdiction to enter
judgment on the cognovit note. As such, we decline to further address the other alleged
jurisdictional deficiencies set forth in Mr. Clark’s first assignment of error.
{¶19} Accordingly, Mr. Clark’s first assignment of error is sustained.
ASSIGNMENT OF ERROR II
THE TRIAL COURT ABUSED ITS DISCRETION WHEN IT FAILED TO
SCHEDULE A HEARING ON [MR. CLARK’S] MANY MERITORIOUS
DEFENSES AFTER IT ERRONEOUSLY CONCLUDED [HIS] MOTION WAS
NOT TIMELY.
{¶20} In his second assignment of error, Mr. Clark argues that the trial court erred in
denying his Civ.R. 60(B) motion as untimely without first holding a hearing.
{¶21} Based upon our resolution of Mr. Clark’s first assignment of error, we conclude
that his second assignment of error is moot and decline to address it.
III.
{¶22} In sustaining Mr. Clark’s first assignment of error, and deeming his second
assignment of error moot, the judgment of the Summit County Court of Common Pleas is
reversed and this cause remanded for further proceedings consistent with this decision.
Judgment reversed,
and cause remanded.
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There were reasonable grounds for this appeal.
We order that a special mandate issue out of this Court, directing the Court of Common
Pleas, County of Summit, State of Ohio, to carry this judgment into execution. A certified copy
of this journal entry shall constitute the mandate, pursuant to App.R. 27.
Immediately upon the filing hereof, this document shall constitute the journal entry of
judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the
period for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is
instructed to mail a notice of entry of this judgment to the parties and to make a notation of the
mailing in the docket, pursuant to App.R. 30.
Costs taxed to Appellee.
CARLA MOORE
FOR THE COURT
WHITMORE, J.
HENSAL, J.
CONCUR.
APPEARANCES:
TODD PORTUNE, Attorney at Law, for Appellant.
STEVEN SHANDOR, Attorney at Law, for Appellee.