Blue Durham Properties, L.L.C. v. Krantz , 2013 Ohio 2098 ( 2013 )

[Cite as Blue Durham Properties, L.L.C. v. Krantz, 2013-Ohio-2098.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
No. 99201
BLUE DURHAM PROPERTIES, L.L.C.
PLAINTIFF-APPELLEE
vs.
MARC K. KRANTZ, ET AL.
DEFENDANTS-APPELLANTS
JUDGMENT:
AFFIRMED
Civil Appeal from the
Cuyahoga County Court of Common Pleas
Case No. CV-638134
BEFORE: Kilbane, J., Boyle, P.J., and Blackmon, J.
RELEASED AND JOURNALIZED: May 23, 2013
ATTORNEY FOR APPELLANTS
Stephen P. Hanudel
326 North Court Street
Medina, Ohio 44256
ATTORNEY FOR APPELLEE
Jeffrey M. Levinson
3783 S. Green Road
Cleveland, Ohio 44122
MARY EILEEN KILBANE, J.:
{¶1} Defendants-appellants, Marc K. Krantz (“Marc”) and Stacey Krantz
(“Stacey”) (collectively referred to as “the Krantzes”), appeal the trial court’s judgment
denying their motion for relief from judgment. We find no merit to the appeal and affirm
the trial court’s judgment.
{¶2} On August 7, 2007, the Krantzes executed and delivered two promissory
notes, each in the amount of $100,000, plus interest to plaintiff-appellee, Blue Durham
Properties, L.L.C. (“Blue Durham”). 1 The first note provided that interest was to be
calculated from February 21, 2006, at a rate of 22 percent per annum. The interest rate
automatically changed to 23 percent retroactive to April 28, 2006, if the loan was not
repaid in full by August 23, 2007. The note required payment in full on or before the
earlier of (1) the date of sale, transfer, financing and/or refinancing of all or any part of
the Cleveland Heights property, or (2) the maturity date of the note, September 10, 2007.
The note was secured by a mortgage on residential property located at Yellowstone Road,
Cleveland Heights, Ohio (“the Cleveland Heights property”).
{¶3} The second note provided that interest was to be calculated from February
21, 2006, at the rate of 24 percent per annum. The interest rate automatically changed to
1 These notes revise and restate a note executed by the Krantzes on June
15, 2007.
25 percent retroactive to February 21, 2006, if the loan was not repaid in full by August
23, 2007. The second note required payment in full on or before the earlier of (1) the
date of sale, transfer, financing and/or refinancing of all or any part of the Shaker Heights
property, or (2) the maturity date of the note, September 10, 2007. The second note was
secured by a mortgage on residential property located at 19701 S. Woodland, Shaker
Heights, Ohio 44122.
{¶4} Both cognovit notes contained warrants of attorney confessing judgment
against the Krantzes. According to the terms of the notes, the holder was entitled to
declare all unpaid principal and accrued interest to be immediately due and payable
without demand or notice after default of the terms.
{¶5} The Krantzes defaulted on the terms of both notes. Blue Durham filed a
complaint and obtained a judgment in the amount of $284,208, plus interest from the date
of judgment at a rate of 10 percent per annum. In December 2007, the trial court entered
its order in aid of execution, and on January 3, 2008, it issued a writ of execution against
the Krantzes. In March 2009, the Krantzes paid the debt in full, and the case was settled
and dismissed.
{¶6} On October 11, 2012, five years after the court entered judgment against the
Krantzes, the Krantzes filed a motion for relief from judgment, arguing that because the
cognovit notes involved consumer loans, the warrants of attorney were invalid under R.C.
2323.13(E) and the court lacked subject matter jurisdiction to grant judgment by
confession in this case. The trial court denied the motion, and this appeal followed.
{¶7} In their sole assignment of error, the Krantzes argue that the trial court erred
by denying their motion for relief from judgment without a hearing. They contend that
their motion was timely filed under Civ.R. 60(B) and that they presented a meritorious
defense that warranted vacatur of the judgment.
{¶8} We review the trial court’s ruling on a motion for relief from judgment
pursuant to Civ.R. 60(B) for an abuse of discretion. Griffey v. Rajan, 33 Ohio St.3d 75,
77, 514 N.E.2d 1122 (1987).
{¶9} To prevail on a motion for relief from judgment pursuant to Civ.R. 60(B),
the movant must demonstrate: (1) a meritorious claim or defense; (2) entitlement to relief
under one of the grounds stated in Civ.R. 60(B)(1) through (5); and (3) the motion is
made within a reasonable time. GTE Automatic Elec., Inc. v. ARC Industries, Inc., 47
Ohio St.2d 146, 351 N.E.2d 113 (1976), paragraph two of the syllabus. If any of these
three requirements is not met, the motion is properly overruled. Strack v. Pelton, 70
Ohio St.3d 172, 174, 1994-Ohio-107, 637 N.E.2d 914. Relief from judgment on a
cognovit note is warranted pursuant to Civ.R. 60(B)(5) if the movant establishes a
meritorious defense, in a timely application. Agarwal v. Matthews, 8th Dist. No. 96950,
2012-Ohio-161, ¶ 6.
{¶10} These requirements are independent and written in the conjunctive;
therefore, all three must be clearly established in order to be entitled to relief. GTE
Automatic Elec. at 151. They must be shown by “operative facts” that demonstrate the
movant’s entitlement to relief. Rose Chevrolet, Inc. v. Adams, 36 Ohio St.3d 17, 21, 520
N.E.2d 564 (1988). Although the movant is not required to submit evidentiary material
in support of the motion, the movant must do more than make bare allegations of
entitlement to relief. Kay v. Marc Glassman, Inc., 76 Ohio St.3d 18, 20, 1996-Ohio-430,
665 N.E.2d 1102. When the movant fails to demonstrate any of the three requirements
under the GTE test, the court must deny the motion. Rose Chevrolet at 20.
{¶11} The Krantzes argue that because the cognovit notes arose from consumer
loans, the trial court lacked jurisdiction to enter judgment against them on the notes.
R.C. 2323.13(E) prohibits a warrant of attorney to confess judgment when the note arises
out of a consumer loan. In support of their argument, the Krantzes rely on Agarwal, 8th
Dist. No. 96950, 2012-Ohio-161, in which this court reversed a cognovit judgment that
arose from a consumer loan used to make a down payment on a family home. Id. at ¶ 3, 8.
However, not all loans for residential properties are consumer loans.
{¶12} In determining what constitutes a “consumer loan” under R.C. 2323.13(E),
the Ohio Supreme Court explained:
R.C. 2323.13(E)(1) sets forth essentially four elements in the definition of
consumer loan: (1) there must be a “loan”; (2) to a “natural person”; (3) by
which a debt is incurred; (4) for primarily personal, family, educational or
household purposes. There is no hint in this definition that real estate cannot
serve primarily personal, family, educational or household purposes.
Indeed, it is clear that the purchase of a home serves the most fundamental
of personal and family purposes. Shore W. Constr. Co. v. Sroka, 61 Ohio
St.3d 45, 48, 572 N.E.2d 646 (1991).
{¶13} As in Agarwal, the Supreme Court in Shore W. held that a cognovit note that
was used as a down payment on a family home was a consumer transaction under R.C.
2323.13 and that the trial court, therefore, did not have jurisdiction to enter judgment
upon a warrant of an attorney.
{¶14} Despite the Krantzes’ assertion that the cognovit notes at issue here arose
from consumer loans, the evidence demonstrates that these loans were commercial loans.
The notes were secured by mortgages in two separate residential properties, neither of
which were the Krantzes’ family home located at 24877 Letchworth Road, Beachwood,
Ohio 44122. The terms of the notes, providing that the loans may be repaid when the
properties are sold, suggests the properties were used for business purposes. Therefore,
we are not persuaded that the cognovit notes arose out of a consumer loan or a consumer
transaction, and we find the Krantzes failed to establish a meritorious defense.
{¶15} Moreover, a motion to vacate a default judgment, which is filed five years
after the judgment was rendered and three and one-half years after paying the judgment,
does not, on its face, satisfy the reasonable time requirement of the GTE test. GTE, 47
Ohio St.2d 146, 351 N.E.2d 113, paragraph two of the syllabus. When a movant is
aware that there are grounds for relief and delays filing the motion, the movant must
provide a reasonable explanation for the delay. Kaczur v. Decara, 8th Dist. No. 67546,
1995-Ohio-3038 (Civ.R. 60(B) motion untimely filed when movant offered no reasonable
explanation for a nine-month delay in filing the motion); Sec. Fed. Sav. & Loan Assn. of
Cleveland v. Keyes, 11th Dist. No. 89-G1524, 1990 Ohio App. LEXIS 2732 (June 29,
1990) (holding that failure to explain an 18-week delay in filing a motion to vacate the
default judgment was untimely). In the absence of any evidence explaining the delay, the
movant has failed to demonstrate the timeliness of the motion. Mt. Olive Baptist Church
v. Pipkins Paints & Home Improvement Ctr., Inc., 64 Ohio App.2d 285, 413 N.E.2d 850(8th Dist.1979), paragraph two of the syllabus.
{¶16} The Krantzes argue that pursuant to this court’s decision in Ameritrust Co.
v. Spigutz, 8th Dist. No. 84199, 2004-Ohio-6014, the requirements of Civ.R. 60(B) do not
apply when the movant challenges the court’s personal jurisdiction. However, the
movants in Ameritrust argued that they were never served with the complaint. Here,
Blue Durham obtained judgment against the Krantzes pursuant to two cognovit notes in
which they waived the issuance of service of process. There is no question that the court
had personal jurisdiction over the Krantzes.
{¶17} It is undisputed that the Krantzes became aware of the judgment against
them in October 2007. They participated in debtor’s examinations in 2008 and attempted
to negotiate a settlement after the judgment. They ultimately paid the debt in full three
and one-half years before filing the motion for relief from judgment. They have not
offered any explanation for their delay in seeking relief from the judgment. Therefore,
their motion for relief from judgment was untimely.
{¶18} Because the Krantzes failed to establish a meritorious defense and because
their motion was untimely, we find no abuse of discretion in the trial court’s judgment
denying their motion for relief from judgment.
{¶19} The Krantzes’ sole assignment of error is overruled.
{¶20} Judgment affirmed.
It is ordered that appellee recover from appellants costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to said court to carry this judgment into
execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of
the Rules of Appellate Procedure.
MARY EILEEN KILBANE, JUDGE
MARY J. BOYLE, P.J., and
PATRICIA A. BLACKMON, J., CONCUR