ABL WHOLESALE DISTRIBUTORS, INC. v. QUICK SHOP, ET AL.
No. 97897
Court of Appeals of Ohio EIGHTH APPELLATE DISTRICT COUNTY OF CUYAHOGA
August 9, 2012
2012-Ohio-3576
Kilbane, J., Blackmon, A.J., and E. Gallagher, J.
Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-729493
Nate N. Malek
Law Office of Nate N. Malek, LLC
29025 Bolingbrook Road
Cleveland, Ohio 44124
ATTORNEYS FOR APPELLEE
James Oh
Stephan P. Babik
Robert N. Lurie
Javitch, Block, Eisen & Rathbone, LLC
1100 Superior Avenue - 19th Floor
Cleveland, Ohio 44114
{¶1} This case came to be heard upon the accelerated calendar pursuant to
{¶2} Defendants-appellants, Quick Shop (“Quick Shop“) and Hamid Sarkis (“Sarkis“), appeal from the order of the trial court that denied their motion for relief from a cognovit judgment obtained by ABL Wholesale Distributors, Inc. (“ABL“). For the reasons set forth below, we reverse and remand this matter for a hearing on defendants’ motion for relief from judgment.
{¶3} On June 17, 2010, ABL filed a complaint against Sarkis and Quick Shop alleging that $25,927.14 is due on an account for merchandise. According to ABL, Sarkis, as Individual Guarantor of Quick Shop, completed a credit application that provided for the creation of an open account promissory note with cognovit provisions, “such that if the Applicant fails to pay pursuant to the terms thereof, the undersigned authorizes any attorney to appear on behalf of the undersigned Guarantor in an action to collect upon such amount past due, to waive issuance of service of process, and to confess judgment in favor of ABL Wholesale Distributors, Inc. against Guarantor.” This document also contained a cognovit warning, pursuant to
{¶5} On December 17, 2010, defendants filed a motion to vacate the cognovit judgment, alleging that there was no warrant of attorney in this matter as required under
{¶6} The trial court scheduled a hearing on the motion on March 22, 2011, and the hearing on the motion was reset to May 20, 2011, and then to October 13, 2011. The court held telephone conferences on August 16, 2011, and December 12, 2011. According to the parties, no hearing before the court was held on that date. In an order journalized on January 3, 2012, the trial court denied the motion filed by defendants to vacate the cognovit judgment.
{¶7} Defendants appeal, raising two assignments of error for our review.
ASSIGNMENT OF ERROR TWO
The trial court erred when it failed to hold an oral hearing on Defendants’ Motion to Vacate.
{¶8}
On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, order or proceeding for the following reasons: (1) mistake, inadvertence, surprise or excusable neglect; (2) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59(B); (3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation or other misconduct of an adverse party; (4) the judgment has been satisfied, released or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application; or (5) any other reason justifying relief from the judgment. * * *
{¶10} The moving party fails the GTE test by not meeting any one of the three requirements. Rose Chevrolet, Inc. v. Adams, 36 Ohio St.3d 17, 20, 520 N.E.2d 564 (1988). Ohio courts have determined, however, that in cognovit proceedings, the movant need only demonstrate that the motion was timely made and that he has a meritorious defense. See Medina Supply Co. v. Corrado, 116 Ohio App.3d 847, 850-851, 689 N.E.2d 600 (8th Dist.1996), citing Soc. Natl. Bank v. Val Halla Athletic Club & Recreation Ctr., Inc., 63 Ohio App.3d 413, 579 N.E.2d 234 (9th Dist.1989).
{¶11} A party who files a
{¶13} In the case at bar, defendants’ motion was filed six months after the entry of the cognovit judgment, and plaintiff does not challenge the timeliness of the motion. As to the issue of whether defendants demonstrated a meritorious defense, we note that in general, “[a] cognovit note contains provisions designed to cut off defenses available to a debtor in the event of default.” Classic Bar & Billiards, Inc. v. Fouad Samaan, 10th Dist. No. 08AP-210, 2008-Ohio-5759, ¶ 8. By definition, cognovit notes cut off every defense, except payment, which the maker of the note may have against enforcement of the note. First Natl. Bank of Pandora v. Freed, 3d Dist. No. 5-03-36, 2004-Ohio-3554, ¶ 9, quoting Advanced Clinical Mgmt., Inc. v. Salem Chiropractic Ctr., Inc., 5th Dist. No. 2003CA00108, 2004-Ohio-120, ¶ 18. Ohio courts have also recognized additional meritorious defenses involving the integrity and validity of cognovit notes, including: “improper conduct in obtaining the debtor‘s signature on the note; deviation from proper procedures in confessing judgment on the note; and miscalculation of the amount remaining due on the note at the time of confession of judgment.” Freed at ¶ 9.
{¶15} This assignment of error is sustained, and the matter is remanded to the trial court to conduct a hearing on the motion for relief from judgment.
ASSIGNMENT OF ERROR ONE
The trial court erred when it denied Defendants’ Motion to Vacate.
{¶16} In the first assignment of error, defendants argue that the trial court erred and abused its discretion by denying their motion for relief from judgment. In light of our disposition of the second assignment of error, we overrule the first assignment of error as moot. See
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.
A certified copy of this entry shall constitute the mandate pursuant to
MARY EILEEN KILBANE, JUDGE
PATRICIA A. BLACKMON, A.J., and EILEEN A. GALLAGHER, J., CONCUR