Medina Supply Co. v. Corrado

• Decision Date: 23 December 1996
• Docket Number: No. 70561,70561
• Citation: 116 Ohio App.3d 847,689 N.E.2d 600
• Parties: MEDINA SUPPLY COMPANY, INC., Appellee, v. CORRADO et al., Appellants. Eighth District, Cuyahoga County
• Court: Ohio Court of Appeals

Page 847

116 Ohio App.3d 847

689 N.E.2d 600

MEDINA SUPPLY COMPANY, INC., Appellee, v. CORRADO et al., Appellants.

No. 70561.

Court of Appeals of Ohio,

Eighth District, Cuyahoga County.

Decided Dec. 23, 1996.

Laribee & Hertrick, and Paul J. Kray, Brunswick, for appellee.

David A. Corrado, Cleveland, for appellants.

KARPINSKI, Judge.

Defendants, Kenneth Corrado and Northpoint Homes, Inc., appeal from the judgment of the trial court denying their motion to vacate the judgment entered in favor of plaintiff, Medina Supply Company, Inc. Plaintiff obtained judgment on a cognovit note signed by defendants. Defendants moved to vacate this judgment because the warrant-of-attorney provision on the cognovit note was not sufficiently highlighted on the note. The trial court denied this motion to vacate. For the reasons that follow, we affirm the judgment of the court below.

Defendant Kenneth Corrado is the president of Northpoint Homes, Inc. On April 22, 1994, Corrado, as president of Northpoint, signed an application for credit with Medina Supply. The credit agreement stated that even though the agreement was executed in a corporate capacity, each signer of the note personally guaranteed any payment to Medina Supply. After defendants' indebtedness grew, defendants executed a cognovit note, on November 7, 1994, in favor of Medina Supply. The note was signed by Kenneth Corrado individually and as president of Northpoint Homes. The note stated as follows:

"FOR VALUE RECEIVED, the undersigned, Kenneth Corrado, individually and Northpoint Homes, Inc. by Kenneth Corrado, its President, jointly and severally, promises to pay to the order of Medina Supply Co. the sum of Thirteen Thousand Seventy-Seven and 80/100 Dollars ($13,077.80), plus interest at the rate of ten percent (10%) per annum, to be paid on or before the 30th of each and every month, in accordance with attached payment scheduled marked 'Exhibit A.' "

Thereafter, on September 9, 1995, plaintiff filed a complaint on the note, alleging that $11,288.34 was still due on the note. On September 11, 1995, attorney Steve Gall, by virtue of the warrant-of-attorney provision contained in the cognovit note, filed an answer and confessed judgment on behalf of Northpoint Homes and Kenneth Corrado. The trial court then entered judgment for plaintiff in the amount of $11,288.34, plus interest at the rate of ten percent per annum from December 31, 1994.

On November 22, 1995, defendants filed a motion for relief from judgment. The trial court denied this motion, and defendants timely appealed, raising three assignments of error. The first two assignments state as follows:

"I. The trial court erred as a matter of law by failing to grant defendants' motion for relief from cognovit judgment, since the court was without subject matter jurisdiction to enter judgment by confession upon a cognovit note.

"II. The trial court abused its discretion by failing to grant relief from a judgment by confession when the motion for relief was supported by an affidavit which alleged that defendants had a meritorious defense to present; that relief was available pursuant to Rule 60(B)(5); and that the motion was timely filed."

In order to prevail on a motion brought under Civ.R. 60(B), the 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 for 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. Inc. v. ARC Industries, Inc. (1976), 47 Ohio St.2d 146, 1 O.O.3d 86, 351 N.E.2d 113, 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 (1988), 36 Ohio St.3d 17, 520 N.E.2d 564. A trial court's decision to deny a Civ.R. 60(B) motion is reviewed under an abuse of discretion standard.

This court recently described a cognovit note as "a legal device by which the debtor consents in advance to the holder's obtaining a judgment without notice or hearing, and possibly even with the appearance, on the debtor's behalf, of an attorney designated by the holder. D.H. Overmyer Co. v. Frick Co. (1972) 405 U.S. 174, 92 S.Ct. 775, 31 L.Ed.2d 124, 61 O.O.2d 528. Often, judgment on a cognovit note is entered pursuant to a warrant of attorney. 'A warrant of attorney consented to by a debtor provides for a waiver of prejudgment notice and hearing.' Fogg v. Friesner (1988), 55 Ohio App.3d 139, 140, 562 N.E.2d 937, 939." Dodick v. Dodick (Jan. 25, 1996), Cuyahoga App. Nos. 67385 and 67388, unreported, at 4.

Because of the special circumstances of a cognovit note, courts have dispensed with the requirement of grounds for relief and allowed relief from judgment when only two of the three elements are satisfied. Soc. Natl. Bank v. Val Halla Athletic Club & Recreation Ctr., Inc. (1989), 63 Ohio App.3d 413, 418 579 N.E.2d 234, 237-238. In other words, a movant who files for relief from a judgment taken upon a cognovit note need only establish (1) a meritorious defense and (2) that the motion was timely made. Meyers v. McGuire (1992), 80 Ohio App.3d 644, 646, 610 N.E.2d 542, 543-544; Dodick, supra.

In the case at bar, defendants' motion was timely filed; however, defendants have not established the required meritorious defense. The gist of defendants' argument is that the trial court lacked jurisdiction to enter judgment on the cognovit note because the warrant-of-attorney provision in the note did not comply with R.C. 2323.13(D), which states as follows:

"A warrant of attorney to confess judgment contained in any promissory note, bond, security agreement, lease, contract, or other evidence of indebtedness executed on or after January 1, 1974, is invalid and the courts are without authority to render a judgment based upon such a warrant unless there appears on the instrument evidencing the indebtedness, directly above or below the space or spaces provided for the signature of the makers, or other person authorizing the confession, in such type size or distinctive marking that it appears more clearly and conspicuously than anything else on the document:

" 'Warning--By signing this paper you give up your right to notice and court trial. If you do not pay on time a court judgment may be taken against you without your prior knowledge and the powers of a court can be used to collect from you regardless of any claims you may have against the creditor whether for returned goods, faulty goods, failure on his part to comply with the agreement, or any other cause.' "

This statute thus gives explicit instructions as to what warning must be given on a cognovit note.

In the case at bar, the note signed by defendants contained, word for word, the statutorily mandated warning contained in R.C. 2323.13(D). This warning appeared in all capital letters immediately above the signatures of defendants. Defendants argue that this warning is insufficient because it does not appear more clearly and conspicuously than anything else on the document. Specifically, defendants point to the fact that the title of the note, "NOTE," is in capitals and also underlined, whereas the warning is merely in capitals with no underlining. We find this argument to be specious. First, a four-letter title is an inadequate basis for comparison to a paragraph. An objective review of the cognovit note shows the warning prominently displayed immediately above the signatures. The document itself is only one page long. Most important, the warning is the only paragraph set off entirely in capital letters. Thus, in type, location, and proportion, the warning satisfies the law. The statute does not require the warning be a flashing neon light. Accordingly, we find that the cognovit note complied with R.C. 2323.13.

Defendants also contend that the note was signed under duress...