Blue Durham Properties v. Krantz , 2019 Ohio 4459 ( 2019 )

[Cite as Blue Durham Properties v. Krantz, 2019-Ohio-4459.]
COURT OF APPEALS OF OHIO
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
BLUE DURHAM PROPERTIES, :
Plaintiff-Appellee, :
Nos. 107974 and 108167
v. :
MARK K. KRANTZ, ET AL., :
Defendants-Appellants. :
JOURNAL ENTRY AND OPINION
JUDGMENT: AFFIRMED
RELEASED AND JOURNALIZED: October 31, 2019
Civil Appeal from the Cuyahoga County Court of Common Pleas
Case No. CV-07-638134
Appearances:
Levinson L.L.P., and Jeffrey M. Levinson, for appellee.
David V. Gedrock, for appellant Stephen P. Hanudel.
Mark Krantz, pro se.
Stacey Krantz, pro se.
MICHELLE J. SHEEHAN, J.:
Attorney Stephen P. Hanudel appeals from the trial court’s denial of
his motion to vacate sanctions awarded against him. Hanudel’s clients, defendants-
appellants Marc and Stacey Krantz, also filed an appeal of the trial court’s order
denying their motion to vacate sanctions in Blue Durham Properties v. Krantz, 8th
Dist. Cuyahoga No. 108167. This court determined that the appeals would be treated
as companion appeals, separately briefed and argued and disposed of by the same
merit panel. For purposes of this opinion, we have decided the merits of both
appeals together. And for the following reasons, we affirm the trial court’s decision
regarding Hanudel’s motion to vacate sanctions as well as the Krantzes’ motion to
vacate sanctions.
I. Procedural History and Substantive Facts
In August 2007, the Krantzes executed two cognovit notes, each in the
amount of $100,000, in favor of Blue Durham Properties (“Blue Durham”). The
notes contained warrants of attorney confessing judgment against the Krantzes. The
Krantzes defaulted under the terms of both cognovit notes, and Blue Durham
obtained judgment against them in the amount of $284,208, plus interest. In March
2009, the Krantzes paid the judgment in full and the case was dismissed.
Five years later, in October 2012, the Krantzes filed a motion for relief
from judgment, arguing that because the cognovit notes involved consumer loans,
the warrants of attorney were invalid and the court lacked subject-matter
jurisdiction to grant judgment by confession in the case. The trial court denied the
Krantzes’ motion for relief, and in November 2012, they appealed. See Blue Durham
Properties, L.L.C. v. Krantz, 8th Dist. Cuyahoga No. 99201, 2013-Ohio-2098(“Krantz I”). On appeal, this court found the loans were commercial loans and
therefore the Krantzes lacked a meritorious defense. Id. at ¶ 14. This court also
found the motion for relief was untimely, stating that 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 * * *” and “in the absence of any evidence explaining the delay,”
the Krantzes failed to demonstrate timeliness. Id. at ¶ 15. Finding the trial court
did not abuse its discretion in denying the Krantzes’ motion for relief from
judgment, the panel affirmed the trial court’s judgment. Id. at ¶ 18. The Ohio
Supreme Court declined to accept the Krantzes’ appeal. Blue Durham Properties,
L.L.C. v. Krantz, 137 Ohio St.3d 1411, 2013-Ohio-5096, 998 N.E.2d 510.
Four years later, in November 2016, the Krantzes, through their
attorney, Stephen Hanudel, filed a second motion for relief from the same judgment.
This time, the Krantzes argued that the trial court lacked subject-matter jurisdiction
to enter judgment on the cognovit notes because Blue Durham never produced the
original warrants of attorney when it applied for judgment.
In response to the Krantzes’ second motion for relief, Blue Durham’s
counsel sent a letter to Hanudel, asking that Hanudel withdraw this second motion
for relief because it lacked any basis in law or fact. Blue Durham advised the
Krantzes that their motion was frivolous, untimely, and subject to res judicata in
light of this court’s 2013 decision finding the Krantzes’ motion to vacate the default
judgment filed three and one-half years after the Krantzes paid the judgment was
untimely. Blue Durham’s counsel also warned Hanudel that if he failed to withdraw
the motion, Blue Durham would request sanctions. Rather than withdrawing the
motion, Hanudel sent Blue Durham a letter demanding $405,019.18 in exchange for
a dismissal of the motion. Consequently, Blue Durham filed an opposition to the
motion for relief from judgment and a motion for sanctions in the amount of
$19,335.66. On November 15, 2016, the trial court denied the Krantzes’ second
motion for relief and held a hearing on the motion for sanctions.
On January 18, 2017, following the sanctions hearing, the trial court
awarded sanctions against the Krantzes and their attorney, Hanudel, jointly and
severally, in favor of Blue Durham, in the amount of $6,743.76. In awarding
sanctions, the trial court stated as follows:
Defendants Marc and Stacey Krantz fail to appear despite notice. The
court also notes that [the Krantzes’] brief in opposition to the motion
for sanctions contained no law or authority as a response. Plaintiff’s
motion for sanctions [is] granted in part, denied in part. The court
finds that the [Krantzes’] counsel Hanudel did violate [R.C.
2323.51(B)(1) and Civ.R. 11] in the filing of the 60(B) motion filed on
November 7, 2016.
The court further finds that the claim contained in that motion was
frivolous and that the plaintiff was adversely affected. The court
further finds that the defendants’ counsel, Mr. Hanudel, did not have
good grounds to support this pleading, that he failed to adequately
investigate before filing this motion, and that the motion was filed for
purposes of delay.
Hanudel and the Krantzes appealed the trial court’s orders denying the
second motion for relief from judgment and awarding sanctions. See Blue Durham
Properties, L.L.C. v. Krantz, 8th Dist. Cuyahoga No. 105236, 2017-Ohio-8230(“Krantz II”).1 In October 2017, this court found that the trial court properly denied
the appellants’ second motion for relief from judgment because there was no
evidence that the trial court unlawfully entered judgment in the absence of the
original warrants of attorney:
Although R.C. 2323.13 requires the attorney to produce the original
warrant of attorney at the time he appears, in person, to confess
judgment to the court, it does not require that the original warrants of
attorney be filed with the court. Therefore, even if the original
warrants of attorney were not filed with the complaint, the trial court
would have had subject matter jurisdiction to render judgment as long
as counsel produced the originals when he confessed judgment to the
court.
The Krantzes produced no evidence establishing that the trial court
unlawfully entered judgment in the absence of original warrants of
attorney. Indeed, Hanudel admitted that he never investigated
whether the trial court failed to follow R.C. 2323.13 by requiring
production of the original warrants of attorney when it entered
judgment on cognovit notes. Therefore, the Krantzes failed to
demonstrate that the trial court lacked subject matter jurisdiction to
enter judgment on the cognovit notes, and the trial court properly
denied the motion for relief from judgment.
Id. at ¶ 19-20.
The Krantz II panel also found that the trial court properly awarded
sanctions for frivolous conduct where the motion for relief from judgment lacked
any basis in law or fact and counsel failed to properly investigate the accuracy of the
1 On December 6, 2016, the Krantzes appealed the trial court’s decision denying
their motion for relief from judgment in Blue Durham Properties, L.L.C. v. Krantz, 8th
Dist. Cuyahoga No. 105236, and on January 24, 2017, the Krantzes appealed the trial
court’s sanctions order in Blue Durham Properties, L.L.C. v. Krantz, 8th Dist. Cuyahoga
No. 105394. This court consolidated the two appeals and issued one opinion on both
orders in Krantz II.
allegations in the motion. Finding the trial court’s conclusion that the appellants
engaged in frivolous conduct was not an abuse of discretion, this court stated:
The Krantzes’ claims lacked any factual or legal basis, and Hanudel
failed to investigate the claims alleged in the second motion for relief
from judgment, even after Blue Durham’s counsel put him on notice
that the Krantzes’ claims were unfounded. By arguing that the trial
court rendered judgment in the absence of original warrants of
attorney, the Krantzes accused Blue Durham’s lawyer and the court of
fraudulently entering judgment against them. These are serious
accusations. Common sense dictates that these allegations should be
confirmed before they are publicly made.
The Krantzes’ frivolous conduct unnecessarily cost Blue Durham
significant attorney fees. Monetary sanctions provide redress to the
injured party and serve as a deterrent against future frivolous
conduct. * * * The Krantzes, through Hanudel, have twice challenged
the court’s subject matter jurisdiction, and neither challenge had any
merit. Indeed, Blue Durham argued in the trial court that both
motions for relief from judgment were frivolous. Although challenges
to subject matter jurisdiction may be made at any time, the claims
must be not frivolous or sanctions may be ordered.
Id. at ¶ 33-34.
In April 2018, the Ohio Supreme Court declined to accept the
Krantzes’ appeal of this court’s 2017 decision. Blue Durham Properties, L.L.C. v.
Krantz, 152 Ohio St.3d 1444, 2018-Ohio-1600, 96 N.E.3d 299. The Supreme Court
also denied the Krantzes’ motion for reconsideration of its decision to decline
jurisdiction. See 6/27/2018 Case Announcements, 2018-Ohio-2418, 100 N.E.3d
446.
On November 13, 2018, Blue Durham filed a motion with the trial
court for a debtor’s examination of Hanudel and both Marc and Stacey Krantz in an
effort to collect on the judgment. The record shows that three days later, on
November 16, 2018, Hanudel filed an affidavit of disqualification of the trial court
judge and a supplemental affidavit, seeking to disqualify Judge Nancy Margaret
Russo from presiding over any further proceedings in the case. See In re Russo, 156
Ohio St.3d 1201, 2018-Ohio-5457, 123 N.E.3d 1043. Hanudel alleged bias and
argued that the judge’s conduct in the sanctions hearing of January 17, 2017, violated
the Code of Judicial Conduct for multiple reasons, including yelling at him, falsely
accusing him of challenging the professionalism of a different judge who issued a
prior ruling in the case, asking him a series of prejudicial questions, and becoming
an advocate for the plaintiff. Id. at ¶ 4.
On December 4, 2018, the Ohio Supreme Court denied the affidavit of
disqualification, finding that the record did not clearly establish that the trial judge
was biased against him and “[the trial] judge believed — and was later affirmed on
appeal — that Mr. Hanudel had engaged in frivolous conduct.” Id. at ¶ 5, citing
Krantz II. Within its judgment entry, the Ohio Supreme Court stated that it had
already denied two affidavits of disqualification against Judge Russo that were filed
by Hanudel’s clients. Id. at ¶ 6.
Also on November 16, 2018, Hanudel, through his attorney, filed with
the trial court a third motion for relief from judgment under Civ.R. 60(B), entitled
“motion to vacate sanctions.” This time, Hanudel argued that the sanctions were
procured by a fraud upon the court because Blue Durham’s attorney did not follow
the proper procedure requiring presentment of the original warrant of attorney to
obtain a cognovit judgment. Specifically, Hanudel states that Blue Durham’s
counsel submitted a false affidavit attesting to the fact that court procedure was in
fact followed. The trial court denied Hanudel’s motion, and on December 12, 2018,
Hanudel filed the present appeal in this matter.
On January 22, 2019, the Krantzes filed a pro se motion to vacate
sanctions in which they advanced the same arguments made in Hanudel’s motion.
The trial court denied the Krantzes’ motion. And on January 28, 2019, the Krantzes,
pro se, filed their companion appeal. Once again, the Krantzes advanced the same
arguments on appeal as Hanudel’s appeal.
In one assignment of error, Hanudel contends that the trial court
erred by denying his motion to vacate sanctions. The Krantzes, in their sole
assignment of error, allege that the trial court erred “by awarding the wrong amount
[and] excessive amount of sanctions damages.” Because the substance of the
arguments are identical, we will address Hanudel’s and the Krantzes’ (collectively
“Appellants”) arguments together.
II. Law and Analysis
In their sole assignment of error, Appellants argue that the trial court
erred in denying their motion to vacate sanctions that was filed pursuant to
Civ.R. 60(B). Specifically, Appellants argue that Blue Durham fraudulently
procured sanctions against them and they are entitled to relief under Civ.R.
60(B)(5).
A. Standard of Review
We review a trial court’s decision denying a Civ.R. 60(B) motion for
relief from judgment for an abuse of discretion. Baon v. Fairview Hosp., 8th Dist.
Cuyahoga No. 107946, 2019-Ohio-3371, ¶ 15, citing Rose Chevrolet, Inc. v. Adams,
36 Ohio St.3d 17, 20, 520 N.E.2d 564 (1988). An abuse of discretion “connotes more
than an error of law or judgment,” rather, it occurs when the court’s decision is
unreasonable, arbitrary, or unconscionable. Blakemore v. Blakemore, 5 Ohio St.3d
217, 219, 450 N.E.2d 1140 (1983). Under this deferential standard, the reviewing
court may not substitute its judgment for that of the trial court. Id.; C.S.J. v. S.E.J.,
8th Dist. Cuyahoga No. 107401, 2019-Ohio-3273, ¶ 8.
B. Motion for Relief from Judgment Under Civ.R. 60(B)
Civ.R. 60(B) delineates several reasons for which a party may obtain
relief from a final judgment:
On motion and upon such terms as are just, the court may relieve a
party or his legal representative from a final judgment, order or
proceeding for the following reasons: (1) mistake, inadvertence,
surprise or excusable neglect; (2) newly discovered evidence which by
due diligence could not have been discovered in time to move for a
new trial under Rule 59(B); (3) fraud (whether heretofore
denominated intrinsic or extrinsic), misrepresentation or other
misconduct of an adverse party; (4) the judgment has been satisfied,
released or discharged, or a prior judgment upon which it is based has
been reversed or otherwise vacated, or it is no longer equitable that
the judgment should have prospective application; or (5) any other
reason justifying relief from the judgment.
Civ.R. 60(B).
The rule further provides that the motion “shall be made within a
reasonable time, and for reasons (1), (2), and (3) not more than one year after the
judgment, order or proceeding was entered or taken.” Civ.R. 60(B). While a motion
filed pursuant to Civ.R. 60(B)(5) is not subject to the one-year limitation, the motion
must be filed within a “reasonable time.” Simmons v. Simmons, 8th Dist. Cuyahoga
No. 97975, 2012-Ohio-4164, ¶ 8, citing GTE Automatic Elec., Inc. v. ARC Industries,
Inc., 47 Ohio St.2d 146, 351 N.E.2d 113 (1976), paragraph two of the syllabus. The
moving party has the burden of presenting evidence demonstrating the motion was
filed within a “reasonable time.” Id., citing Youssefi v. Youssefi, 81 Ohio App.3d 49,
53, 610 N.E.2d 455 (9th Dist.1991). And what constitutes a reasonable time depends
upon the circumstances of the case. Simmons.
To prevail on a motion for relief from judgment under Civ.R. 60(B),
the moving party must establish that: (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. GTE Automatic Elec., Inc. at paragraph two of the syllabus.
Failure to prove any of the three elements is fatal to the motion, as the elements are
“independent and in the conjunctive, not the disjunctive.” Id. at 151.
Appellants in this case argue that they were entitled to relief from
judgment under Civ.R. 60(B)(5). This provision is known as the “catchall” provision
of the rule and should not be used in place of a more specific ground for relief listed
in Civ.R. 60(B); rather, this fifth provision should be used only in extraordinary
cases when justice warrants it. Cerney v. Norfolk & W. Ry., 104 Ohio App.3d 482,
491, 662 N.E.2d 827 (8th Dist.1995), citing Adomeit v. Baltimore, 39 Ohio App.2d
97, 105, 316 N.E.2d 469 (1974).
This catchall provision provides relief from a judgment procured by a
fraud upon the court by an officer of the court. Coulson v. Coulson, 5 Ohio St.3d 12,
448 N.E.2d 809 (1983), paragraph two of the syllabus; Hill v. Ross, 8th Dist.
Cuyahoga Nos. 99094 and 99122, 2013-Ohio-1903, ¶ 18. A “fraud upon the court”
is “[a]ny fraud connected with the presentation of a case to a court[.]” Coulson at
15, citing 11 Wright & Miller, Federal Practice and Procedure, Section 2870, 253
(1973); Hartford v. Hartford, 53 Ohio App.2d 79, 84, 371 N.E.2d 591 (8th Dist.1977)
(defining fraud upon the court as conduct that “defiles the court itself,” or fraud that
is perpetrated by officers of the court “so as to prevent the judicial system from
functioning in the customary manner of deciding the cases presented in an impartial
manner”); Toscano v. Commr. of Internal Revenue, 441 F.2d 930, 933 (9th
Cir.1971) (permitting a Civ.R. 60(B)(5) motion for relief where an attorney “actively
participates in defrauding the court”). The trial court has wide discretion in
determining whether a fraud has been perpetrated upon it. Hartford at 85.
However, the doctrine of res judicata prevents repeated attacks on a
final judgment and applies to all issues that were or might have been litigated. Bank
of New York v. Jackson, 8th Dist. Cuyahoga No. 99874, 2013-Ohio-5133, ¶ 10, citing
Rogers v. Whitehall, 25 Ohio St.3d 67, 494 N.E.2d 1387 (1986). And where the facts
alleged in successive motions were available to an appellant at the time he or she
filed an earlier motion, the principles of res judicata bar the later motion. D’Agnese
v. Holleran, 8th Dist. Cuyahoga No. 86769, 2006-Ohio-2470, ¶ 6, citing Bahgat v.
Bahgat, 10th Dist. Franklin No. 83AP-469, 1984 Ohio App. LEXIS 11749 (Dec. 6,
1984). The doctrine of res judicata “‘prevents the successive filings of Civ.R. 60(B)
motions [for] relief from a valid, final judgment when based upon the same facts and
same grounds or based upon facts that could have been raised in the prior motion.’”
Harris v. Anderson, 109 Ohio St.3d 101, 2006-Ohio-1934, 846 N.E.2d 43, ¶ 8,
quoting Beck-Durell Creative Dept., Inc. v. Imaging Power, Inc., 10th Dist. Franklin
No. 02AP-281, 2002-Ohio-5908, ¶ 16; Cuyahoga Metro. Hous. Auth. v. Rabb, 8th
Dist. Cuyahoga No. 105384, 2017-Ohio-9017, ¶ 17.
Additionally, a Civ.R. 60(B) motion for relief from judgment cannot
be used as a substitute for an appeal. Antonyzyn v. Kelly, 8th Dist. Cuyahoga
No. 107838, 2019-Ohio-2829, ¶ 19. And issues that could have been raised on
appeal may not be raised in a Civ.R. 60(B) motion for relief from judgment. Zimmie
v. Zimmie, 8th Dist. Cuyahoga No. 54860, 1988 Ohio App. LEXIS 5211, 12 (Dec. 22,
1988), citing Blasco v. Mislik, 69 Ohio St. 2d 684, 433 N.E.2d 612 (1982).
Here, in their third motion for relief from judgment, Appellants once
again challenge the procedure by which Blue Durham’s counsel obtained the
cognovit judgment. This time, however, rather than argue that Blue Durham’s
counsel never produced the original warrants of attorney when it applied for
judgment (as made in the second motion for relief from judgment in 2016),
Appellants argue that Blue Durham’s counsel made false representations to the
court regarding the procedure counsel followed in presenting the original warrants
of attorney. Specifically, Appellants allege that counsel submitted a false affidavit
attesting to the fact that the trial court’s procedure for obtaining a cognovit judgment
was followed, when in fact, the civil case cover sheet filed with the original complaint
was completed by another attorney who shared office space with Blue Durham’s
counsel, and therefore, Blue Durham’s counsel could not have known that the
court’s cognovit procedure was followed. According to Appellants, this purported
misrepresentation contributed to the trial court’s award of sanctions against them.
We find, however, that Appellants’ third motion for relief from
judgment is barred by res judicata because Appellants’ concern with the purported
conflict between the civil case cover sheet and counsel’s affidavit in support of
sanctions could have been raised at the sanctions hearing held in January 2017 or in
the prior appeal from the court’s sanctions award. Although Appellants assert a new
basis upon which they seek relief — fraud upon the court — no new events and no
new facts or evidence have been produced to support this new claim. The record
shows that both documents — the civil cover sheet and the affidavit—were available
to Appellants at the time of the sanctions hearing and prior to filing the appeal in
Krantz II. The civil cover sheet was filed with the complaint in 2007, and Blue
Durham’s counsel’s affidavit, which Blue Durham attached to its reply brief in
support of its motion for sanctions, was filed in December 2016. The affidavit
became part of the court’s docket one month before the sanctions hearing. The
record also shows that Hanudel in fact addressed Blue Durham’s counsel’s affidavit
at the sanctions hearing, where Hanudel’s attorney questioned counsel’s averment
that he “followed procedures.” At no time during the sanctions hearing or during the
prior appeal, however, did Appellants raise any issue with an alleged conflict
between the civil case cover sheet and counsel’s affidavit.
Moreover, we find Appellants’ third motion for relief from judgment
to be untimely. While it is true, as Appellants assert, that a claim under
Civ.R. 60(B)(5) is not subject to the one-year time limitation applied to motions filed
under Civ.R. 60(B)(1)-(3), motions asserting a fraud upon the court must be made
within a reasonable time, which is determined by the circumstances in each case.
Here, Appellants filed their motions for relief approximately two years after the trial
court’s award of sanctions.2 Further, none of the Appellants included in their
motions any evidence of a reasonable explanation for the delay. Appellants
therefore failed to demonstrate the timeliness of their motion. Rabb, 8th Dist.
Cuyahoga No. 105384, 2017-Ohio-9017, ¶ 16 (finding where the moving party fails
to demonstrate the timeliness of the motion, the movant “fails to present evidence
of a reasonable explanation for the delay” and his motion is untimely under
Civ.R. 60(B)); Simmons, 8th Dist. Cuyahoga No. 97975, 2012-Ohio-4164, ¶ 8.
2 Although we consider the appellants’ requests for relief from judgment together
for purposes of this opinion, we reiterate that two motions for relief were filed with the
trial court: Hanudel filed his motion for relief from judgment on November 16, 2018
(nearly two years after the trial court’s sanctions order), and the Krantzes, pro se, filed
their motion for relief on January 22, 2019 (precisely two years after judgment).
Because Appellants’ third Civ.R. 60(B) motion for relief from
judgment was based on facts that could have been raised during the sanctions
hearing or in a prior appeal, their third motion is barred by res judicata. Appellants
are therefore not entitled to relief under Civ.R. 60(B). Appellants’ motions are also
untimely. Thus, the trial court’s denial of their third Civ.R. 60(B) motion was not
an abuse of discretion.
Appellants’ sole assignment of error is overruled.
Judgment against Hanudel and the Krantzes is affirmed.
It is ordered that appellee recover of Appellants costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this court directing the
common pleas 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.
___________________________
MICHELLE J. SHEEHAN, JUDGE
LARRY A. JONES, SR., P.J., and
RAYMOND C. HEADEN, J., CONCUR