2019 Ohio 3239
Ohio Ct. App.2019Background
- Progressive Polymers, LLC and Darin A. Bay (borrowers) signed a $500,000 cognovit promissory note in favor of Sutton Bank (lender) that included a warrant of attorney to confess judgment and the statutory R.C. 2323.13(D) warning in bold above the borrowers’ signatures.
- The note contained a definition clause stating pronouns: "I/me/my" refer to each borrower; "you/your" refer to the lender.
- Borrowers defaulted on payments; Sutton Bank filed for confession of judgment and obtained a summary judgment entry.
- Borrowers appealed and moved to vacate; the trial court denied the 60(B) motion and found no meritorious defense; appeals were consolidated.
- The core dispute was whether the note’s definitional clause altered the statutory warning so that the warning did not apply to borrowers, rendering the cognovit confession invalid under R.C. 2323.13(D).
Issues
| Issue | Plaintiff's Argument (Sutton Bank) | Defendant's Argument (Progressive Polymers/Bay) | Held |
|---|---|---|---|
| Whether the cognovit confession is valid despite the note’s definitional clauses | The statutory warning, read in context with the confession provision, applies to borrowers; the note meets R.C. 2323.13(D) and authorizes confession of judgment | The note’s definitions make "you/your" refer to the lender, so the statutory warning (which uses "you") does not warn the borrowers and thus the cognovit feature is invalid | Reversed judgment for bank — the note’s definitions render the warrant ineffective; confession not authorized; remanded |
| Whether the trial court had subject-matter jurisdiction to enter judgment on the cognovit note | Warning complied with statute and judgment was valid | Because the warning did not apply to borrowers, judgment was void for lack of authority to render cognovit judgment | Court held judgment void for that reason |
| Whether a 60(B) motion should have been granted after judgment entry | N/A (bank opposed relief) | Borrowers argued meritorious defense and timely 60(B) motion | Moot after court found confession invalid; 60(B) denial not addressed on merits |
| Proper standard for construing cognovit provisions | Statutory warning must be applied consistent with note as whole and commercial practices | Definitions must be strictly applied such that the warning became addressed to lender, not borrower | Court strictly construed the warrant/definitions and favored defendants’ reading |
Key Cases Cited
- Jones v. John Hancock Mut. Life Ins. Co., 289 F. Supp. 930 (W.D. Mich. 1968) (describing cognovit note as debtor’s written authority to entry of judgment)
- Lathrem v. Foreman, 168 Ohio St. 186 (Ohio 1958) (warrants of attorney to confess judgment must be strictly construed and meet statutory requirements)
- D.H. Overmyer Co., Inc. v. Frick Co., 405 U.S. 174 (U.S. 1972) (describing cognovit as device permitting holder to obtain judgment without notice or hearing)
- Nationwide Mut. Fire Ins. Co. v. Guman Bros. Farm, 73 Ohio St.3d 107 (Ohio 1995) (contract interpretation is a matter of law; intent is derived from the instrument as a whole)