Agarwal v. Matthews ( 2012 )


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  • [Cite as Agarwal v. Matthews, 
    2012-Ohio-161
    .]
    Court of Appeals of Ohio
    EIGHTH APPELLATE DISTRICT
    COUNTY OF CUYAHOGA
    JOURNAL ENTRY AND OPINION
    No. 96950
    MUNNA AGARWAL
    PLAINTIFF-APPELLEE
    vs.
    CHARLES J. MATTHEWS, ET AL.
    DEFENDANT-APPELLANTS
    JUDGMENT:
    REVERSED AND REMANDED
    Civil Appeal from the
    Cuyahoga County Common Pleas Court
    Case No. CV-681836
    BEFORE: E. Gallagher, J., Sweeney, P.J., and S. Gallagher, J.
    2
    RELEASED AND JOURNALIZED:               January 19, 2012
    ATTORNEY FOR APPELLANTS
    Janice A. Isakoff
    Belkin Garfield LLC
    25700 Science Park Dr.
    Suite 270
    Beachwood, Ohio 44122
    ATTORNEY FOR APPELLEE
    Harold Pollock
    Harold Pollock Co., L.P.A.
    5900 Harper Road, Suite 107
    Solon, Ohio 44139
    EILEEN A. GALLAGHER, J.:
    {¶ 1} Appellants,       Charles   and   Jacquelyn     Matthews,   appeal   the
    judgment of the Cuyahoga County Court of Common Pleas denying their
    motion for relief from cognovit judgment as untimely filed.              Appellants
    argue that the trial court erred in that ruling because the trial court lacked
    jurisdiction to enter the cognovit judgment as the underlying loan was a
    consumer loan. After a thorough review of the record, and for the reasons
    set forth below, we reverse and remand.
    {¶ 2} On January 14, 2009, appellee Munna Agarwal (“Agarwal”) filed a
    3
    cognovit complaint against appellants, alleging that appellants owed
    Agarwal $122,952.14 in principal and interest on a promissory note. The
    promissory note, which was dated June 4, 2008, was for a loan from Agarwal
    to appellants in the amount of $110,114.14.
    {¶ 3} The trial court granted Agarwal a cognovit judgment on January
    14, 2009.   Appellants filed a Civ.R. 60(B) motion for relief from cognovit
    judgment on April 5, 2010. Appellants attached to that motion an affidavit
    from Charles Matthews wherein he stated the loan proceeds stemmed from
    monthly payment obligations relating to the purchase of a family home.
    {¶ 4} On May 26, 2011, the trial court denied appellants’ motion for
    relief from cognovit judgment as untimely filed.      Appellants brought this
    appeal, raising the following two assignments of error, which we address
    together.
    {¶ 5} Appellants’ assignments of error state:
    1. The trial court failed to find that the cognovit note
    arose from a consumer loan thereby rendering the warrant of
    attorney to confess judgment granted to plaintiff-appellee
    Munna Agarwal (“Agarwal”), in that cognovit promissory note
    invalid; and
    2. The trial court improperly found that Matthews’
    Motion for Relief From Cognovit Judgment was not timely filed
    because requests to vacate brought pursuant to [R.C. 2323.13(E)]
    relate to the subject-matter jurisdiction of the court so there is no
    time limit for filing a motion for relief from judgment.
    {¶ 6} In order to prevail on a motion brought under Civ.R. 60(B), the
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    movant must demonstrate the following: (1) the party has a meritorious
    defense or claim to present if relief is granted; (2) the party is entitled 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, and, where the grounds of
    relief are Civ.R. 60(B)(1), (2) or (3), not more than one year after the
    judgment, order or proceeding was entered or taken. GTE Automatic Elec. v.
    ARC Industries, 
    47 Ohio St.2d 146
    , 
    351 N.E.2d 113
     (1976), paragraph two of
    the syllabus. A motion for relief from judgment will be overruled if these
    three elements are not satisfied. Rose Chevrolet, Inc. v. Adams, 
    36 Ohio St.3d 17
    , 
    520 N.E.2d 564
     (1988). However, in the case of a judgment on a
    cognovit note, only two of the three elements need to be satisfied. Meyers v.
    McGuire, 
    80 Ohio App.3d 644
    , 646, 
    610 N.E.2d 542
     (1992). “[R]elief from a
    judgment taken upon a cognovit note, without prior notice, is warranted by
    authority of Civ.R. 60(B)(5) when the movant (1) establishes a meritorious
    defense, (2) in a timely application.” 
    Id.
    {¶ 7} R.C. 2323.13(E) prohibits a warrant of attorney to confess
    judgment when the note arises out of a consumer loan. In Shore W. Constr.
    Co. v. Sroka, 
    61 Ohio St.3d 45
    , 48, 
    572 N.E.2d 646
     (1991), the Supreme
    Court, applying R.C. 2323.13(E), held that a judgment entered on a cognovit
    note that arises out of a consumer transaction is void and must be vacated
    5
    for lack of jurisdiction.   The Court in Shore W. then interpreted what
    constitutes a “consumer loan” under R.C. 2323.13(E) as follows:
    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. 
    Id.
    {¶ 8} In Shore W. the court held that a cognovit note that was used as a
    down payment on a 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. This court has previously found a
    party’s argument that a cognovit judgment against her was void due to an
    underlying consumer loan to be a meritorious defense under Civ.R. 60(B).
    Dodick v. Dodick, 8th Dist. Nos. 67385, 68588 (Jan. 25, 1996).
    {¶ 9} In regards to timeliness, in Solomon v. Vizurraga, 8th Dist. No.
    87160, 
    2006-Ohio-3841
    , 
    2006 WL 2098713
    , this court allowed a Civ.R. 60(B)
    challenge to a cognovit judgment under the present grounds despite a nearly
    four-year gap between the judgment and the motion to vacate. In Solomon
    we explained that, “[l]ack of subject matter jurisdiction can never be waived,
    and it can be raised at any point in the proceedings.            Subject matter
    jurisdiction does not relate to the rights of the parties (which a party can
    6
    either affirmatively waive, or constructively waive, as in laches) but rather
    relates to the power of the court to hear and decide a controversy. The
    parties by their action, or inaction, cannot create a power in a court that is
    not there.” Id. at ¶ 12. (Internal citations omitted.)
    {¶ 10} Though we find that the trial court erred in denying appellants’
    motion as untimely, we note that the trial court made no finding as to
    whether or not the loan underlying the present cognovit note constituted a
    consumer loan. Agarwal opposed appellants’ motion for relief and attached
    his own affidavit to support his argument that the underlying transaction
    was not a consumer loan but rather a commercial transaction between
    himself and Mt. Sinai Church. In Shore W., the Ohio Supreme Court noted
    that the appropriate course under the present circumstances is a remand,
    “for an evidentiary hearing on the elements of R.C. 2323.13(E)(1).” Shore
    W., 61 Ohio St.3d at 49.
    {¶ 11} Based on the foregoing, we reverse the judgment of the trial court
    and remand the case for further proceedings in accordance with law.
    It is ordered that appellants recover from appellee 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.
    7
    A certified copy of this entry shall constitute the mandate pursuant to
    Rule 27 of the Rules of Appellate Procedure.
    EILEEN A. GALLAGHER, JUDGE
    JAMES J. SWEENEY, P.J., and
    SEAN C. GALLAGHER, J., CONCUR