Buzby v. Chamoun , 2014 Ohio 4676 ( 2014 )

[Cite as Buzby v. Chamoun, 2014-Ohio-4676.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
No. 100755
JOSEPHINE A. BUZBY
PLAINTIFF-APPELLEE
vs.
ELIE CHAMOUN, ET AL.
DEFENDANTS-APPELLANTS
JUDGMENT:
REVERSED, VACATED, AND REMANDED
Civil Appeal from the
Cuyahoga County Court of Common Pleas
Case No. CV-13-806549
BEFORE: E.T. Gallagher, J., Jones, P.J., and Keough, J.
RELEASED AND JOURNALIZED: October 23, 2014
ATTORNEY FOR APPELLANTS
Edgar H. Boles
Moriarty & Jaros, P.L.L.
30000 Chagrin Blvd., Suite 200
Pepper Pike, Ohio 44124
ATTORNEY FOR APPELLEE
L. Bryan Carr
1392 SOM Center Road
Mayfield Heights, Ohio 44124
EILEEN T. GALLAGHER, J.:
{¶1} This cause came to be heard on the accelerated calendar pursuant to App.R.
11.1 and Loc.R. 11.1. Defendants-appellants, Elie Chamoun and Bar One Downtown,
L.L.C. (“appellants”), appeal from the trial court’s denial of their Civ.R. 60(B) motion for
relief from judgment on a cognovit judgment against them. Finding merit to the appeal,
we reverse and vacate the cognovit judgment granted to plaintiff-appellee, Josephine A.
Buzby (“Buzby”).
{¶2} In April 2010, Buzby loaned appellants $75,000. On April 14, 2010, the
parties executed a cognovit note for the same amount. The note states that all payments
shall be made to Buzby, as the sole payee, at her home address in Highland Heights.
From June 2010 until December 2012, Buzby concedes that appellants made monthly
payments on the note, directly to her at her home address as prescribed. However, after
December 2012, Buzby claims the remaining balance went unpaid. Buzby claims
appellants began at that time making payments to her estranged husband.
{¶3} In May 2013, Buzby filed for a cognovit judgment against appellants for the
balance owed to her. A cognovit judgment was granted in her favor for $9,400.23. In
June 2013, appellants filed a Civ.R. 60(B) motion for relief from judgment, arguing that
the debt had been paid in full. This motion was supported by an affidavit from Buzby’s
husband, who claimed to have collected the last few payments himself and that the debt
was paid in full. Buzby responded to the motion, arguing any payments made by
appellants to her estranged husband did not constitute repayment of the note. The court
held a pretrial on the matter. Appellants then filed a brief in support of their Civ.R.
60(B) motion for relief from judgment, raising for the first time the argument that the
judgment was void because the original note and warrant of attorney were never
produced.
{¶4} In November 2013, the trial court denied appellants’ motion for relief from
judgment. It is from this denial that appellants now appeal, raising four assignments of
error.
Standard of Review
{¶5} By signing the cognovit note, a debtor relinquishes the possibility of notice,
hearing, or appearance at an action to collect in the event of nonrepayment. Medina
Supply Co., Inc. v. Corrado, 116 Ohio App.3d 847, 851, 689 N.E.2d 600 (8th Dist.1996).
The purpose of a cognovit note is to allow the holder of the note to quickly obtain
judgment, without the possibility of a trial. Fogg v. Friesner, 55 Ohio App.3d 139, 140,
562 N.E.2d 937 (6th Dist.1988). To accomplish this, cognovit notes are accompanied by
a warrant of attorney by which the debtor provides a waiver of the prejudgment notice
and hearing requirements. Id.{¶6} In the event the debtor believes justice was not served by a judgment obtained
by cognovit note, relief may be pursued through a Civ.R. 60(B) motion for relief from
judgment. Masters Tuxedo Charleston, Inc. v. Krainock, 7th Dist. Mahoning No. 02 CA
80, 2002-Ohio-5235, ¶ 7. To make a successful Civ.R. 60(B) motion, a movant typically
must establish the following (1) he has a meritorious defense to present, (2) he is entitled
to relief from judgment under Civ.R. 60(B)(1) through (5), and (3) the motion is timely.
GTE Automatic Elec., Inc. v. ARC Industries, Inc., 47 Ohio St.2d 146, 351 N.E.2d 113(1976), at paragraph two of the syllabus.
{¶7} In cases involving a Civ.R. 60(B) motion for relief from judgment taken on a
cognovit note, a movant “need only establish (1) a meritorious defense and (2) that the
motion was timely made.” Buehler v. Mallo, 10th Dist. Franklin No. 10AP-84,
2010-Ohio-6349, ¶ 8, quoting Medina Supply Co. v. Corrado. In examining whether
appellants sufficiently alleged a meritorious defense, we must be mindful that a movant
need not prove he will prevail on that defense. Rose Chevrolet, Inc. v. Adams, 36 Ohio
St.3d 17, 20, 520 N.E.2d 564 (1988).
{¶8} A reviewing court will not disturb a trial court’s decision regarding a Civ.R.
60(B) motion unless there is an abuse of discretion. State ex rel. Russo v. Deters, 80
Ohio St.3d 152, 153, 684 N.E.2d 1237 (1997). An abuse of discretion implies that the
court’s attitude is unreasonable, arbitrary, or unconscionable. Blakemore v. Blakemore, 5
Ohio St.3d 217, 219, 450 N.E.2d 1140 (1983).
{¶9} Here, however, the statutory provisions at issue, R.C. 2323.12 and 2323.13,
govern a trial court’s jurisdiction over cognovit notes, “and these statutory requirements
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 over it.” Buehler at ¶ 9, citing Klosterman v.
Turnkey-Ohio, L.L.C., 182 Ohio App.3d 515, 2009-Ohio-2508, 913 N.E.2d 993, ¶ 19
(10th Dist.). We review the issue of subject matter jurisdiction de novo. Klosterman at
¶ 19, citing Cheap Escape Co., Inc. v. Tri-State Constr., L.L.C., 173 Ohio App.3d 683,
2007-Ohio-6185, 880 N.E.2d 122, ¶ 18 (10th Dist.).
Subject Matter Jurisdiction
{¶10} In their first assignment of error, appellants argue the trial court erred in
entering a cognovit judgment when the original warrant of attorney to confess judgment
was not produced by Buzby during the cognovit proceedings. Appellants contend the
trial court’s judgment is void because, in failing to produce the original warrant of
attorney, Buzby did not comply with R.C. 2323.13(A), resulting in a lack of subject
matter jurisdiction. In their second assignment of error, appellants argue the trial court
erred in denying their Civ.R. 60(B) motion after they presented the court with evidence
that the original warrant of attorney was not produced and that Buzby made
misrepresentations about being in possession of the original note. These two
assignments of error are closely related and shall be addressed together.
{¶11} R.C. 2323.13(A) provides:
An attorney who confesses judgment in a case, at the time of making such
confession, must produce the warrant of attorney for making it to the court
before which he makes the confession. Notwithstanding any agreement to
the contrary, if the maker or any of several makers resides within the
territorial jurisdiction of a municipal court established under section
1901.01 of the Revised Code, 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.
Where a cognovit note does not comply with R.C. 2323.13, the trial court lacks subject
matter jurisdiction to render judgment, and a judgment entered on that cognovit note is
void ab initio. Klosterman at ¶ 25, citing Taranto v. Wan-Noor, 10th Dist. Franklin No.
90AP-1, 1990 Ohio App. LEXIS 2077 (May 15, 1990), citing Patton v. Diemer, 35 Ohio
St.3d 68, 518 N.E.2d 941 (1988).
{¶12} Appellants rely on Lathrem v. Foreman, 168 Ohio St. 186, 151 N.E.2d 905(1958), in support of their contention that the trial court lacked jurisdiction. In Lathrem,
the court ruled that:
Section 2323.13, Revised Code, requires the production of the warrant of
attorney to the court at the time of confessing judgment, and, where the
original warrant has been lost and can not be produced, the court, in an ex
parte proceeding, lacks the power and authority to restore or re-establish it
and then enter judgment by confession thereon, and a judgment so rendered
is void.
Id. at paragraph two of the syllabus. In Lathrem, the payee admitted to having lost the
note and acknowledged their inability to produce the original note to the court.
{¶13} In the instant case, Buzby, through her attorney, did not produce the original
warrant of attorney during the cognovit proceedings. Buzby admittedly filed and
produced a facsimile copy of the warrant of attorney. Furthermore, she admitted that she
has never personally been in possession of the original note. However, Buzby argues
that filing a copy of the warrant of attorney is sufficient to vest the trial court with subject
matter jurisdiction. She relies on Masters Tuxedo v. Krainock, 7th Dist. Mahoning No.
02 CA 80, 2002-Ohio-5235, and Fogg v. Friesner, 55 Ohio App.3d 139, 140, 562 N.E.2d
937 (6th Dist.1988).
In Fogg, the Sixth District Court of Appeals held that copies are acceptable
as an accurate reproduction of the warrant of attorney. 55 Ohio App. 3d at
141. R.C. 2323.13(A) states that an attorney must produce the warrant of
attorney to the court. The Fogg court reasoned that the statute does not
state that copies are invalid. Id. Therefore, it is acceptable for an accurate
reproduction to be submitted. Id.
Masters Tuxedo at ¶ 9.
{¶14} However, as pointed out by the Tenth District, Fogg’s interpretation of R.C.
2323.13(A) “seems to isolate the first sentence of the statute while ignoring the last.”
Huntington Natl. Bank v. 199 S. Fifth St. Co., L.L.C., 10th Dist. Franklin No. 10AP-1082,
2011-Ohio-3707, ¶ 17.
[I]nterpreting R.C. 2323.13(A) to require the production of the original
warrant of attorney not only comports with the statutory language but also is
in accord with the general rule that we construe the statutory requirements
strictly against the party seeking the cognovit judgment due to the
extraordinary nature of the proceedings. Bank One, N.A. v. DeVillers, 10th
Dist. No. 01AP-1258, 2002-Ohio-5079, ¶ 37 (stating “[w]arrants of attorney
to confess judgment are to be strictly construed against the person in whose
favor the judgment is given, and court proceedings based on such warrants
must conform in every essential detail with the statutory law governing the
subject.”), citing Lathrem at 188. Requiring the attorney confessing
judgment to produce the original warrant of attorney provides a minimal
level of assurance that the note is authentic and actually exists, while
allowing the plaintiff to file a copy of the warrant with the clerk allows the
plaintiff to retain control of the instrument after it is presented to the court if
the plaintiff so chooses. If the plaintiff is unable to produce the original
warrant of attorney, the plaintiff may proceed with a more traditional
complaint premised on the note itself.
Huntington Natl. Bank at ¶ 20. See also Firstmerit Bank v. Inks, 9th Dist. Summit Nos.
25980 and 26182, 2012-Ohio-5155, ¶ 9. As did the Tenth District in Huntington Natl.
Bank, we respectfully disagree with the Seventh District’s interpretation of R.C.
2323.13(A) in Masters Tuxedo.
{¶15} We find that having failed to produce the original warrant of attorney, the
trial court was never vested with subject matter jurisdiction to enter a cognovit judgment
in Buzby’s favor. Therefore, the trial court’s cognovit judgment entered in favor of
Buzby is void ab initio.
{¶16} Accordingly, appellants first two assignments of error are sustained. The
remaining assignments are moot and shall not be addressed.
{¶17} Judgment is reversed and vacated. Case is remanded to the trial court with
instructions to return the funds held during the pendency of this appeal to the appellants.
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 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.
EILEEN T. GALLAGHER, JUDGE
LARRY A. JONES, SR., P.J., and
KATHLEEN ANN KEOUGH, J., CONCUR