Ebf Partners, LLC v. Novabella, Inc.
Decision Date | 28 February 2018 |
Docket Number | Court of Appeals Case No. 49A02–1705–CC–961 |
Parties | EBF PARTNERS, LLC, Appellant–Plaintiff, v. NOVABELLA, INC. d/b/a and Frank Terranova, Appellee–Defendant. |
Court | Indiana Appellate Court |
Attorney for Appellant: Mickey J. Lee, Maurice Wutscher, LLP, Indianapolis, Indiana
[1] EBF Partners, LLC ("EBF") appeals the trial court's order dismissing with prejudice its petition to domesticate a foreign judgment from New York, which was entered pursuant to a confession of judgment in a cognovit note, against Novabella Inc. ("Novabella") and Frank Terranova ("Terranova"). EBF argues that the trial court erred by dismissing its petition and by failing to give full faith and credit to the New York judgment.
[2] Although cognovit notes are prohibited in Indiana, the Full Faith and Credit Clause of our Federal Constitution requires reversal of the trial court's judgment. Because the New York judgment appears on its face to be rendered by a court of competent jurisdiction and Novabella did not challenge the jurisdiction of the New York court to enter the judgment, the trial court was required to afford full faith and credit to the New York judgment.
[3] We reverse.
Whether the trial court erred by dismissing EBF's petition to domesticate the judgment of a sister state.
[4] EBF is a Delaware limited liability company with its place of business in New York. Novabella is an Indiana corporation with its place of business in Indiana. Terranova, the owner of Novabella, is a resident of Indiana.
[5] On June 28, 2016, Novabella entered into a Payment Rights Purchase and Sale Agreement ("Purchase Agreement") wherein Novabella sold $204,000 of its future receivables to EBF for a purchase price of $150,000.1 Thus, Novabella received $150,000 up front from EBF and agreed to repay EBF $204,000 from Novabella's business receipts. Under the Purchase Agreement, Novabella was required to deposit its sales proceeds into a designated account from which EBF would withdraw a daily payment of either $1,457.14 or fifteen percent (15%) of the daily deposit until EBF had received its full purchased amount. Terranova also signed a Security Agreement and Guaranty ("Guaranty") to guarantee Novabella's performance under the Purchase Agreement.
[6] The Purchase Agreement contained the following relevant provisions regarding EBF's available remedies in the event of a default:
(App. Vol. 2 at 21). The Purchase Agreement also contained a clause indicating that it would be governed by and construed under the laws of New York.
[7] A few days later, on July 6, 2016, Terranova, individually and on behalf of Novabella, signed an Affidavit of Confession of Judgment ("Confession of Judgment"),2 in which he again consented to the jurisdiction of any court in New York. The Confession of Judgment also contained the following relevant provisions:
[8] Thereafter, on August 8, 2016, EBF filed, in a New York trial court, the Confession of Judgment. EBF also filed an affidavit from an EBF collections manager, who averred that Novabella and Terranova had breached the Purchase Agreement on July 21, 2016 by "placing a stop payment on all debits of the specified percentage from the designated deposit account" and interfered with EBF's ability to collect its daily payment. (App. Vol. 2 at 15). EBF obtained a "confessed" judgment in the amount of $237,570.27 against Novabella and Terranova ("New York confessed judgment").3 (App. Vol. 2 at 35). This New York confessed judgment was obtained without notice to Novabella and Terranova and without a hearing.
[9] Subsequently, on November 1, 2016, EBF filed, in Marion County Superior Court, a Notice and Petition to Domesticate Foreign Judgment ("foreign judgment enforcement petition"), seeking to have Indiana recognize and enforce the New York confessed judgment that remained unsatisfied. In December 2016, Novabella and Terranova (collectively, "Novabella") filed an answer and affirmative defenses. Among its defenses, Novabella contended that EBF's foreign judgment enforcement petition was barred because it was "illegal[ ]" and "contrary to [the] public policy in the state of Indiana." (App. Vol. 2 at 62). Additionally, it requested that the trial court dismiss EBF's foreign judgment enforcement petition with prejudice.
[10] Thereafter, in March 2017, EBF filed a motion to strike Novabella's answer. In its motion, EBF argued that the answer was not relevant and that Novabella was barred from raising any defenses to the New York confessed judgment because that case had already been "decided on the merits[.]" (App. Vol. 2 at 64). On March 9, 2017, the trial court entered an order ("the Motion to Strike Order"), in which it granted EBF's motion to strike Novabella's answer.
[11] On March 16, 2017, Novabella filed a motion to set aside, in which it requested the trial court to: (1) set aside the Motion to Strike Order; and (2) dismiss EBF's foreign judgment enforcement petition.4 Novabella argued that EBF's New York confessed judgment had been entered without service of process and was "improper in the state of Indiana" and "in direct violation of Indiana Code [§] 34–54–3–4." (App. Vol. 2 at 68). Novabella also argued that the Confession of Judgment, which EBF included in a cognovit note and had Terranova sign prior to the occurrence of any default or the accrual of any cause of action, was contrary to Indiana statutes.
[12] On April 5, 2017, the trial court held a hearing on Novabella's motion.5 That same day, the trial court entered an order in which it: (1) granted Novabella's motion to set aside the Motion to Strike Order; and (2) dismissed the case with prejudice. EBF now appeals.
[13] EBF argues that the trial court erred by dismissing with prejudice its foreign judgment enforcement petition and by failing to give full faith and credit to the New York confessed judgment.
[14] Initially, we note that Novabella and Terranova have not filed an Appellee Brief. When an Appellee fails to submit an appellate brief, " ‘we need not undertake the burden of developing an argument on the [A]ppellee's behalf.’ " Front Row Motors, LLC v. Jones , 5 N.E.3d 753, 758 (Ind. 2014) (quoting Trinity Homes, LLC v. Fang , 848 N.E.2d 1065, 1068 (Ind. 2006) ). Rather, " ‘we will reverse the trial court's judgment if the appellant's brief presents a case of prima facie error.’ " Id. (quoting Trinity Homes , 848 N.E.2d at 1068 ). "Prima facie error in this context is defined as, at first sight, on first appearance, or on the face of it." Id. (internal quotation marks and citation omitted).
[15] This appeal stems from EBF's attempt to domesticate a foreign judgment that was based upon a confession of judgment contained in a cognovit note. A "cognovit is the ancient legal device by which the debtor consents in advance to the holder's obtaining a judgment without notice or hearing, and possibly even with...
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