Northern Ohio Bank v. Ket Associates, Inc. , 74 Mich. App. 286 ( 1977 )

74 Mich. App. 286 (1977) 253 N.W.2d 734

NORTHERN OHIO BANK
v.
KET ASSOCIATES, INC.

Docket No. 24517.

Michigan Court of Appeals.

Decided March 28, 1977.

Sommers, Schwartz, Silver, Schwartz & Tyler, P.C. (by Edward R. Stein) (Squire, Sanders & Dempsey, by James P. Murphy, of counsel), for plaintiff.

August, Thompson, Sherr & Miller, P.C. (by W. Kent Clarke, Jr., and Alan R. Miller), for defendant.

Before: DANHOF, C.J., and D.E. HOLBROOK, JR. and M.J. KELLY, JJ.

DANHOF, C.J.

The plaintiff commenced this action in circuit court seeking to enforce certain Ohio judgments against the defendants. From summary judgment of $656,931.71 in the plaintiff's favor the defendants appeal as of right.

The plaintiff's complaint alleged that the Ohio judgments against the defendants remained unsatisfied and it prayed for entry of a judgment in this state. The defendants answered, simply denying each of the plaintiff's allegations, and asserting an affirmative defense that underlying the Ohio judgments were cognovit notes and that such notes are illegal in Michigan, hence, not entitled to full faith and credit.

Plaintiff responded with a motion for summary judgment on the grounds that (1) there was no genuine issue of material fact, and (2) the defendants failed to state a valid defense. GCR 1963, 117.2(2), 117.2(3). A proper affidavit supporting the plaintiff's allegations was also filed. GCR 1963, 117.3.

Since denial of the essential elements of the plaintiff's cause of action is a sufficient defense, plaintiff could not have prevailed on the theory that a valid defense was not stated. However, the defendants failed completely to respond to plaintiff's motion on the remaining ground and no documents to support the defendants' factual allegations are found in the court file as of the date of the hearing on the motion. The duty of the party opposing a motion for summary judgment based on sub-rule 117.2(3) is clear:

"``Motions grounded upon sub-rule 117.2(3) must be supported by affidavits. The purpose of the affidavit is to assert the dispositive fact or facts upon which the moving party claims no genuine dispute exists. Although the Rule does not require opposing affidavits, it is the obligation of the opposing party to make a showing by opposing affidavits, testimony, depositions, admissions or documentary evidence on file that a genuine issue of disputed fact does exist as to the questioned element of the claim or defense. Durant v Stahlin, 375 Mich 628; 135 NW2d 392 (1965).'" Rizzo v Kretschmer, 389 Mich 363, 371; 207 NW2d 316 (1973).

The defendants having failed to respond with any of these documents, summary judgment in the absence of other considerations, would have been properly entered by the trial court on the pleadings. We do not feel, however, that summary judgment was the proper ultimate disposition of the case at the time it was granted. Summary judgment is a drastic and final remedy. The record shows that at the hearing on this motion, the defendants urged that they be given the opportunity to amend their answer so as to allege the additional defenses of illegality in the forum state, illegality in the state of judgment and denial of procedural due process in the state of judgment.

Because of the finality of summary judgment and because summary judgment may more reflect mispleading than actual justice, sub-rule 117.3 further provides:

"Each party shall be given opportunity to amend his pleadings as provided by Rule 118 unless the evidence then before the court shows amendment would not be justified."

Rule 118 states, "[after 15 days] a party may amend his pleading only by leave of court or by written consent of the adverse party. Leave shall be freely given when justice so requires". If any of the additional defenses urged by the defendants at the hearing are potentially meritorious, we feel the trial court abused his discretion in proceeding to entry of summary judgment without allowing the defendants one pleading amendment. We therefore, proceed to a brief examination of these additional defenses.

The defendants first argue that Michigan courts could not, as a matter of law, honor the cognovit notes underlying the Ohio judgments. They additionally assert that such notes were or should have been equally repugnant to Ohio law and that the Ohio courts erred in entry of judgment. A judgment entered by a court of competent jurisdiction is not subject to collateral attack against the underlying obligation. Fauntleroy v Lum, 210 US 230; 28 S Ct 641; 52 L Ed 1039 (1908). The underlying obligation has been extinguished and replaced by the judgment. Union Guardian Trust Co v Rood, 308 Mich 168, 171; 13 NW2d 248 (1944). It is therefore clear that the defendants may not assert illegality of the cognovit notes in either Michigan or Ohio.

The only avenue of attack upon such a judgment available to the defendants is to demonstrate to the court's satisfaction that the judgment was entered by a court without proper, competent jurisdiction:

"A judgment is conclusive as to all the media concludendi (United States v California & O. Land Co., 192 U.S. 355; 24 Sup. Ct. Rep. 266; 48 L ed 476 [1904]); and it needs no authority to show that it cannot be impeached either in or out of the state by showing that it was based upon a mistake of law. Of course, a want of jurisdiction over either the person or the subject-matter might be shown." Fauntleroy v Lum, supra, at 237.

It appears that defendants have raised just such a defense in their third argument. It is possible to demonstrate, we believe, that the particular notes in question and procedure employed in entry of judgment, were so repugnant to due process as to deprive the rendering court of jurisdiction. See Atlas Credit Corp v Ezrine, 25 NY2d 219; 303 NYS2d 382; 250 NE2d 474 (1969).

We make no judgment on the merits of the defendant's case. We merely observe that defendants sought leave to amend their answer to include a potentially meritorious defense. It was, therefore, error for the trial court to enter summary judgment without allowing such amendment.

The matter is remanded to the circuit court for entry of an order allowing defendants a reasonable time in which to amend their answer to raise a valid defense. Should defendants fail to so amend, summary judgment may properly be entered against them. Nothing herein shall be construed to prohibit a motion for summary judgment on the amended pleadings.

Reversed and remanded. Costs to defendants.