from the Franklin County Municipal Court M.C. No.
Jeffrey A. Catri Co., LLC, and Jeffrey A. Catri, for
Legal Aid Society of Columbus, Jacqueline Gutter, Scott E.
Torguson, and Catherine L. Beck, for appellant.
Jeffrey A. Catri.
1} Stacia Ashley, defendant-appellant, appeals from
a judgment of the Franklin County Municipal Court, in which
the court denied appellant's motion to vacate.
2} In 2013, appellant obtained a loan from
plaintiff-appellee, 1st National Financial Services
("1st National") for $1, 998.31. Appellant failed
to pay according to the terms of the loan, and on September
24, 2014, 1st National filed a debt collection action. The
parties subsequently entered into a written payment
agreement, which included monthly payments and a lump sum
payment. Appellant did not pay according to the terms of the
agreement. The parties entered negotiations again and, on
February 28, 2015, appellant signed a cognovit note drafted
by 1st National's counsel, which set forth terms for
repayment of the loan and indicated it was for the settlement
of a commercial matter rather than a consumer loan, which
would be prohibited by R.C. 2323.13(E). On March 2, 2015, 1st
National dismissed its 2014 debt collection action.
3} However, appellant failed to pay according to the
terms of the cognovit note. Therefore, on April 27, 2015, 1st
National commenced the present action to enforce the cognovit
note. On April 30, 2015, the trial court entered a judgment
in favor of 1st National in the amount of $1, 073.70. On July
15, 2015, the court entered a garnishment order which ordered
appellant's wages garnished to satisfy the judgment.
4} On September 8, 2015, appellant filed a motion to
vacate the trial court's April 30, 2015 judgment,
asserting the trial court lacked subject-matter jurisdiction
over the cognovit note because it arose from a consumer loan,
and a cognovit note can only arise out of a commercial loan.
On November 23, 2015, 1st National filed a "Satisfaction
of Judgment" because it had received all or
substantially all of the funds requested in the garnishment
order. On the same date, 1st National responded to
appellant's motion to vacate, claiming the motion was
moot due to the "Satisfaction of Judgment."
5} On December 11, 2015, the trial court issued an
entry stating that all pending motions were moot without
6} Appellant appealed, and in 1st Natl. Fin.
Servs. v. Ashley, 10th Dist. No. 16AP-18, 2016-Ohio-5497
("Ashley I"), this court reversed the
trial court's judgment, finding the trial court erred
when it dismissed appellant's motions as moot without
examining whether it had subject-matter jurisdiction to enter
judgment. We remanded the matter for a hearing on whether the
cognovit note arose out of a consumer loan and whether the
trial court had subject-matter jurisdiction.
7} On May 11, 2017, the trial court held an
evidentiary hearing. On August 15, 2017, the trial court
issued judgment in favor of 1st National, finding that
appellant failed to sustain her burden to prove that the
cognovit note arose out of a commercial loan.
8} Appellant appealed and, in 1st Natl. Fin.
Servs. v. Ashley, 10th Dist. No. 17AP-638,
2018-Ohio-3134 ("Ashley II"), this court
reversed the trial court's judgment, finding the trial
court erred when it placed the burden of proof on appellant
and should have placed the burden of proof on 1st National to
prove the cognovit note arose from a commercial transaction.
We remanded the matter to the trial court.
9} On September 11, 2018, the trial court issued
another judgment, in which it denied appellant's motion
to vacate, finding that 1st National sustained its burden to
prove that the court had subject-matter jurisdiction.
Appellant appeals the judgment of the trial court, asserting
the following assignment of error:
The Trial Court Abused Its Discretion When it Denied Ms.
Ashley's Motion to Vacate.
10} Appellant argues in her sole assignment of error
the trial court abused its discretion when it denied her
motion to vacate. In Ashley II, we already discussed
the applicable standard of review, general law regarding
cognovit notes, and much of the relevant evidence presented.
Rather than reinvent these elements, we will reiterate them
nearly verbatim herein. Generally, we review a trial
court's decision on a motion to vacate for abuse of
discretion. Young v. Locke, 10th Dist. No. 13AP-608,
2014-Ohio-2500, ¶ 20. However, in the present case,
appellant's motion to vacate implicated the trial
court's subject-matter jurisdiction. We review questions
of subject-matter jurisdiction de novo. Klosterman v.
Turnkey-Ohio, LLC, 182 Ohio App.3d 515, 2009-Ohio-2508,
¶ 19 (10th Dist.).
11} "The 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 the appearance, on the debtor's behalf, of an
attorney designated by the holder." D.H. Overmyer
Co., Inc. v. Frick Co., 405 U.S. 174, 176 (1972).
"[T]he cognovit has long been recognized [in Ohio] by
both statute and court decision." Id. at 178.
Strict compliance with statutory requirements is required to
obtain judgment on a cognovit note. "A cognovit judgment
is valid if the warrant of attorney to confess judgment and
all note terms are strictly construed against the person
obtaining the judgment, and court proceedings, based upon
such warrant, must conform to every essential detail with the
statutory law governing the subject." Fifth Third
Bank v. Pezzo Constr., Inc., 10th Dist. No. 11AP-251,
2011-Ohio-5064, ¶ 11, citing Lathrem v.
Foreman, 168 Ohio St. 186 (1958).
12} Notwithstanding the long legal recognition of
cognovit notes in Ohio, the General Assembly has curtailed
the use of cognovit notes in consumer transactions. R.C.
2323.13(E) provides that "[a] warrant of attorney to
confess judgment contained in any instrument executed on or
after January 1, 1974, arising out of a consumer loan or
consumer transaction, is invalid and the court shall have no
jurisdiction to render a judgment based upon such a
warrant." The statute defines a consumer loan as "a
loan to a natural person and the debt incurred is primarily
for a personal, family, educational, or household
purpose." R.C. 2323.13(E)(1). If a cognovit note arises
out of a consumer loan or a consumer transaction, then a
judgment entered based on that cognovit note is void and must
be vacated for lack of subject-matter jurisdiction. Shore
W. Constr. Co. v. Sroka, 61 Ohio St.3d 45, 48 (1991).
13} "By its very terms, a cognovit note allows
for judgment to be taken against the debtor-party without
notice or hearing." Dollar Bank v. Bernstein Group,
Inc., 71 Ohio App.3d 530, 533 (10th Dist.1991). Thus,
the issue of subject-matter jurisdiction or any other
defenses available to a defendant may not be fully and fairly
litigated by a trial court prior to entering judgment on a
cognovit note. Id. In recognition of the unique
circumstances presented by cognovit judgments, Ohio courts
have held that when a party files a motion to vacate a
cognovit judgment pursuant to Civ.R. 60(B), a modified test
is appropriate. "Where the relief from judgment sought
is on a cognovit note, '[t]he prevailing view is that
relief 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.'" Fifth Third Bank
at ¶ 8, quoting Meyers v. McGuire, 80 Ohio
App.3d 644, 646 (9th Dist.1992). Further, "[u]nder
Civ.R. 60(B), a movant's burden is only to allege a
meritorious defense, not to prove that he will prevail on
that defense." Rose Chevrolet v. Adams, 36 Ohio
St.3d 17, 20 (1988).
14} In the present case, appellant filed a common
law motion to vacate judgment rather than a motion for relief
from judgment pursuant to Civ.R. 60(B). However, as we stated
in Ashley II, "similar considerations arise
because of the nature of a cognovit judgment.
[Appellant's] motion challenged the trial court's
subject-matter jurisdiction, which is an issue that can be
raised at any time and renders a court's judgment void ab
initio." Id. at ¶ 11, citing Bank of
Am., NA. v. Kuchta,141 Ohio St.3d 75, 2014-Ohio-4275,
¶ 17. Appellant argued in her motion to vacate that the
underlying loan was a consumer loan and, therefore, pursuant
to R.C. 2323.13(E), the warrant to confess judgment contained
in the cognovit note was invalid and the court lacked
subject-matter jurisdiction to enter judgment on it.
Appellant averred that she obtained the original loan to help
pay personal bills and all funds she obtained from that loan
were used for family and household purposes. ...