Pheils v. Glass City Sales, L.L.C. , 2009 Ohio 4623 ( 2009 )

[Cite as Pheils v. Glass City Sales, L.L.C., 2009-Ohio-4623.]
IN THE COURT OF APPEALS OF OHIO
THIRD APPELLATE DISTRICT
SENECA COUNTY
DAVID R. PHEILS, JR.,
PLAINTIFF-APPELLANT, CASE NO. 13-09-19
v.
GLASS CITY SALES, LLC, ET AL., OPINION
DEFENDANTS-APPELLEES.
Appeal from Seneca County Common Pleas Court
Trial Court No. 09 CV 0010
Judgment Affirmed
Date of Decision: September 8, 2009
APPEARANCES:
David R. Pheils, Jr., Appellant
Arnold N. Gottlieb for Appellee
Case No. 13-09-19
WILLAMOWSKI, J.,
{¶1} Plaintiff-Appellant, David R. Pheils, Jr. (“Pheils”), appeals the
judgment of the Seneca County Court of Common Pleas granting a motion to
vacate judgment on a cognovit note. For the reasons set forth below, the judgment
is affirmed.
{¶2} On January 8, 2009, Pheils filed a complaint against Defendants-
Appellees, Glass City Sales, LLC, Dan Novotny, and Scott Salsbury (collectively,
“Appellees”), 1 to enforce a cognovit note in the amount of $50,160, plus interest.
Pheils had a business relationship with Appellees since 2002 in which Pheils
would provide funds for Appellees to purchase foreclosed manufactured homes
and property which were then resold for a profit.
{¶3} In July 2006, Pheils provided the funding for Appellees to purchase
a single family home and property at 108 Woodland Avenue, Fostoria, in Seneca
County. On July 21, 2006, Appellees executed a cognovit note agreeing to repay
$50,160 plus 8% compound interest per annum. The note was signed by Scott
Salsbury, individually, Dan Novotny, individually, and Scott Salsbury in his
representative capacity for Glass City Sales, LLC. The note contained the
1
The complaint, which was amended on January 23, 2009, also included additional parties and causes of
action, which are not the subject of this appeal. The trial court’s judgment expressly found that there was
“no just reason for delay” as to the judgment concerning the cognovit note. On June 17, 2009, this Court
determined that the judgment was a final appealable order and dismissed Appellees’ motion to dismiss the
appeal.
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following language:
It is further agreed that default in payment of any installment
for one days after the same shall become due, shall cause the
entire sum then remaining unpaid to become at once due and
payable. And we hereby authorize any attorney-at-law in the
United States to appear in my/our behalf in any court of record
in the County in which we reside or any one of us resides, or the
County in which we or any one of us signed this instrument,
after the above obligation becomes due and payable according to
the terms and conditions hereof, and waive the issuing and
service of process upon us and confess judgment against us in
favor of the holder hereof, for the amount then appearing due
hereon, together with the costs of suit, and thereupon to release
all errors and waive all rights of appeal.
{¶4} On January 23, 2009, the trial court held a cognovit hearing. An
attorney filed Appellees’ confession of judgment and the trial court granted
judgment on the cognovit claim. Thereafter, the trial court issued a Certificate of
Judgment.2
{¶5} On March 11, 2009, Appellees filed a Motion to Vacate Judgment
on the cognovit note pursuant to Civ.R. 60(B). The Appellees claimed that (1) the
court did not have jurisdiction to enter the judgment because none of the parties
resided in Seneca County and (2) Appellees had paid Pheils in full for the loan.
Appellees attached copies of two checks, which they claimed satisfied the
2
The Certificate of Judgment was issued on January 26, 2009. On February 20, 2009, Appellant was
notified that the Certified Mail Service upon Glass City Sales, LLC, sent to 108 Woodland Avenue,
Fostoria, had been returned unclaimed. On March 5, 2009, Appellant directed the Clerk to serve Glass City
Sales, LLC by regular U.S. Mail Service with Certificate of Mailing, under Civ.R. 4.1 and 4.6. There is no
record that the regular mail service was returned.
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cognovit debt and other monies owed, and an affidavit sworn by Scott Salsbury.
In the affidavit, Salsbury attested that neither he nor Dan Novotny resided in
Seneca County; that Glass City Sales, LLC had its primary place of business in
Holland, Ohio [Lucas County]; and, that the cognovit note was signed in Wood
County.
{¶6} At the April 1, 2009, hearing on the Motion to Vacate Judgment,
there were discussions between the trial court and the parties concerning whether
or not Glass City Sales had its principal place of business in Seneca County, and
therefore, whether the trial court had any subject matter jurisdiction over the
matter. The court ordered counsel to file any additional evidence regarding the
issue of residency within one week.
{¶7} Appellees filed a Supplemental Memorandum and submitted the
Affidavit of Daniel Novotny and the 2004 organizing documents for Glass City
Sales that were filed with the Ohio Secretary of State. The documents did not
provide an address for the entity. However, in his affidavit, Novotny stated: that
he was one of the organizing members of Glass City Sales, LLC; that the
designated statutory agent was Angela Hennen of Perrysburg, Wood County,
Ohio; that Glass City Sales had its principal place of business in Holland, in Lucas
County; that Glass City Sales had never “resided” nor had a business office in
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Seneca County; and, that the only contact with Seneca County was a single real
estate purchase in Fostoria.
{¶8} Pheils filed a Memorandum Regarding Cognovit Jurisdiction and an
affidavit describing the parties’ business relationship and the transaction involving
the subject cognovit note. Pheils did not provide any sworn evidence as to the
business location of Glass City Sales. However, in his memorandum, he argues
that Glass City Sales “resides” in Seneca County because there was no address
listed for Glass City Sales with its LLC filing and an internet search he conducted
did not locate an address for Glass City Sales in Ohio. Pheils also attached the
deed by which Glass City Sales took title to the property showing its tax mailing
address as 108 Woodland Avenue, Fostoria. Pheils also noted that the certified
mailing of the Amended Complaint was returned “unclaimed,” but the regular
postal mailing to the Woodland Avenue address was never returned and Appellees
filed their Civ.R. 60(B) Motion shortly thereafter. Pheils also moved to strike
Salsbury’s and Novotny’s Affidavits, asserting that they were not made upon
personal knowledge and did not contain operative facts.
{¶9} On April 17, 2009, the trial court denied Pheils’ motion to strike and
granted Appellees’ motion to vacate the cognovit judgment. It is from this
judgment that Pheils appeals, presenting the following assignments of error for our
review.
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First Assignment of Error
The trial court erred in granting Defendants’ motion for relief
from the final cognovit judgment without evidence supporting it.
Second Assignment of Error
The trial court erred in refusing to strike Defendants’ Salsbury
and Novotny’s affidavits which failed to demonstrate they were
made upon personal knowledge and contained only legal and
factual conclusions rather than operative facts.
For clarity of discussion, we elect to address the assignments of errors out of
order.
{¶10} In his second assignment of error, Pheils argues that the trial court
should have granted his motion to strike the affidavits because they were not made
on personal knowledge and contained conclusory assertions without operative
facts. A trial court’s decision to grant or deny a motion to strike an affidavit is
reviewed for an abuse of discretion. Snyder v. Ford Motor Co., 3d Dist. No. 1-05-
41, 2005-Ohio-6415, ¶ 9. The Ohio Supreme Court has defined “personal
knowledge” as “knowledge gained through firsthand observation or experience, as
distinguished from a belief based upon what someone else has said.” Bonacorsi v.
Wheeling & Lake Erie Ry. Co., 95 Ohio St.3d 314, 2002-Ohio-2220, 767 N.E.2d
707, ¶ 26 (quoting Black’s Law Dictionary).
{¶11} In the evidence provided by Appellees, Daniel Novotny attested that
he was an organizing member of Glass City Sales, LLC, which would give him
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personal knowledge as to the location where Glass City Sales resides and conducts
its business. His sworn affidavit clearly sets forth the “fact” that Glass City Sales
has its principal place of business in Lucas County, that it has never or had a
business office in Seneca County, and its only contact with Seneca County was
one real estate purchase. Likewise, Scott Salsbury, who signed the note in his
representative capacity for Glass City Sales, also corroborated the fact that the
business location for the company was in Holland, Ohio.
{¶12} Both affidavits did lack the “boilerplate” language stating that they
were made upon “personal knowledge,” and did not contain many details.
However, the facts and testimony within the affidavits clearly set forth the basis
for the parties’ competence to testify as to the business location of Glass City
Sales based upon their personal knowledge. The trial court did not abuse its
discretion in denying Pheils’ motion to strike the affidavits. Pheils’ second
assignment of error is overruled.
{¶13} Pheils’ main issue, raised in his first assignment of error, complains
that that the trial court should not have granted Appellees’ motion for relief from
judgment because there were insufficient facts supporting their claim that Glass
City Sales, LLC resided in a location other than Seneca County.
{¶14} The purpose of a cognovit note is to allow the holder of the note to
obtain judgment quickly, without the necessity of a trial. First Nat. Bank of
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Pandora v. Freed, 3d Dist. No. 5-03-36, 2004-Ohio-3554, ¶ 5. By signing a
cognovit note, a debtor agrees to relinquish notice, a hearing, or appearance at an
action to collect in the event of nonpayment. Id. If a debtor disputes a cognovit
judgment, relief from judgment may be sought under Civil Rule 60(B), but only
for specified limited circumstances. Rothstein v. Rothstein, 8th Dist. No. 86090,
2005-Ohio-6381, ¶¶ 8-9.
{¶15} Cognovit judgments are governed by the Ohio Revised Code. R.C.
2323.13(A) sets forth special jurisdictional rules for cognovit judgment, and
specifically provides:
Notwithstanding any agreement to the contrary, if the maker or
any of several makers resides within the territorial jurisdiction
of a municipal court ***, or signed the warrant of attorney
authorizing confession of judgment in such territory, judgment
on such warrant of attorney shall be confessed in a municipal
court having jurisdiction in such territory, provided the court
has jurisdiction over the subject matter; otherwise, judgment
may be confessed in any court in the county where the maker or
any of several makers resides or signed the warrant of attorney.
The original or a copy of the warrant shall be filed with the
clerk.
R.C. 2323.13(A).
{¶16} All of the requirements of the statutory provision 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. Klosterman v. Turnkey Ohio, L.L.C., 10th Dist.
No. 08AP-774, 2009-Ohio-2508, ¶ 19. If the judgment on the cognovit note is not
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obtained in the county where the maker resides or the county in which the
cognovit note is executed, then the court does not have subject matter jurisdiction
and the cognovit judgment is void ab initio. Patton v. Diemer (1988), 35 Ohio
St.3d 68, 518 N.E.2d 941, paragraph three of the syllabus; Fifth Third Bank v.
Labate, 5th Dist. Nos. 2005CA00180, 2006CA00040, 2006-Ohio-4239, ¶¶ 19-20.
The party who asserts the existence of personal jurisdiction has the burden of
establishing jurisdiction once the opposing party challenges it. In re Blue Flame
Energy Corp., 171 Ohio App.3d 514, 2006-Ohio-6892, 871 N.E.2d 1227, ¶ 13.
{¶17} An appellate court reviews the issue of subject matter jurisdiction de
novo, without deference to the trial court’s decision. Klosterman, ¶ 19; Advantage
Bank v. Waldo Pub, L.L.C., 3d Dist. No. 9-08-67, 2009-Ohio-2816, ¶ 25. The
authority to vacate a void judgment is not derived from Civ.R. 60(B) but rather
constitutes an inherent power possessed by Ohio courts. Patton, supra, at
paragraph four of the syllabus.
{¶18} In this case, the amount of the cognovit note was over the monetary
limit of a municipal court. Therefore, in order to obtain a confessed judgment,
Pheils was required to adjudicate the note in the county in which at least one of the
makers resided, or in which the note was signed, in order for the court to have
subject matter jurisdiction. See Sunset Land Partnership v. Trowsdell, No. 20895,
2002-Ohio-4152 (no jurisdiction because none of the makers resided in the county
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and the note was not signed in the county; only the plaintiff resided in the county);
The First Nat. Bank of Waverly v. Netherton, 4th Dist. No. 05CA738, 2005-Ohio-
6518, ¶ 9 (finding jurisdiction because one of the signatories to the warrant of
confession had its “principal place of business” in the county where the plaintiff
had filed the confession of judgment.). The parties do not dispute that the
cognovit note was signed in Wood County and that Salsbury and Novotny do not
reside in Seneca County. The sole issue is whether Glass City Sales resides in
Seneca County.
{¶19} As discussed above, there are two sworn statements from principal
business agents of Glass City Sales stating that Glass City Sales’ principal place of
business is in Holland, Ohio, and that it is not located in Seneca County. In
contrast, Pheils has not provided any sworn evidence that Glass City Sales resides
in Seneca County, but merely speculates that it is located in the county based upon
a few unproven occurrences.
{¶20} The lack of a physical address for Glass City Sales, LLC in its 2004
filing with the State of Ohio, and the fact that Pheils did not find an address during
an “Internet search,” does not in any way prove that the company is located in
Seneca County. Pheils also speculates that Glass City Sales received the U.S.
Postal Service mailing of the amended complaint sent to the Fostoria address.
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Even if this was true, it does not prove the Glass City Sales resides at that location.
The mail could have been forwarded or picked up.
{¶21} Pheils also submitted two documents which he claims demonstrates
that Glass City Sales resides in Fostoria. However, the documents were prepared
by other parties, and there is no proof that the addresses typed on the paperwork
have any actual bearing to the principal place of business of Glass City Sales, or
that Glass City Sales had any part in providing the addresses or information. The
first document is the Limited Warranty Deed, using typical language to convey the
Fostoria property “unto Glass City Sales, the ‘Grantee,’ its successors and assigns,
with a tax mailing address of 108 Woodland Ave. Fostoria Oh 44830 , [address
typed on the line] the following described real property ***.” Attached to the
deed in the court documents, however, is a July 21, 2006, letter from Pheils to the
selling party, conveying the payment check, the legal description of the property,
and indicating that the property was at 108 Woodland Avenue, Fostoria, and that it
was being purchased by Glass City Sales, LLC. The fact that Glass City Sales
purchased the property and its name was placed on the deed using the property’s
address does not, without more, prove that it conducted its business from the site.
The Ohio Revised Code required the property to be in Glass City Sales’ name.
See R.C. 1705.34 (which mandates that all “[r]eal and personal property owned or
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purchased by a limited liability company shall be held and owned in the name of
the company.”).
{¶22} The other documents allegedly associating Glass City Sales with the
Woodland Avenue address are the court documents concerning the filing for the
confession of judgment and documents directing service thereof. However, once
again, these documents were prepared by Pheils, and he provided the Fostoria
address in Seneca County for Glass City Sales for these documents.
{¶23} In examining the evidence de novo, we do not find that Pheils has
submitted any evidence that would establish that Glass City Sales, LLC resided in
Seneca County. It does not appear that Glass City Sales had any contact with
Seneca County, other than one real estate transaction. Appellees provided two
sworn affidavits stating that Glass City Sales did not reside in Seneca County.
{¶24} Thus, the Seneca County Court of Common Pleas did not have
subject matter jurisdiction to hear the confession of judgment for the cognovit note
and did not err in vacating the judgment on the cognovit note. Pheils’ first
assignment of error is overruled.
{¶25} Having found no error prejudicial to the appellant herein, in the
particulars assigned and argued, we affirm the judgment of the trial court.
Judgment Affirmed
PRESTON, P.J. and ROGERS, J., concur.
/jlr
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