Agarwal v. Matthews

[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.
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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
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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
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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
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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.
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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