Source: https://www.bankingandfinancelawreport.com/articles/commercial-law/
Timestamp: 2019-04-26 10:30:55+00:00

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Earlier this month, SB 220, the Ohio law that amended Ohio’s version of the Uniform Electronic Transaction Act (UETA) became effective. The amendment to the UETA confirms that records, contracts, and signatures that are secured through blockchain technology, i.e., a technology that creates an unalterable electronic ledger, will be considered an electronic recording holding the same legal legitimacy as its printed counterpart. As a result, records, contracts, and electronic signatures secured through blockchain technology cannot be denied legal effect or enforceability solely because it is in electronic form.
By expressly stating that the UETA applies to electronic records and signatures secured through blockchain technology, the Ohio legislature has reaffirmed that the law is adapting to modern trends of efficient Internet-based transacting. This change not only reduces paper waste, but decreases burdens associated with paper transacting, such as printing, scanning, mailing, and filing.
The Ohio Judicial Conference has issued a bench card, a copy of which is attached, that gives Ohio’s Common Pleas Court judges a checklist they may use when presented with an order seeking judgment on a note containing a warrant of attorney. While the bench card is merely advisory, it represents a victory for those who want to limit the use of warrants of attorney to confess judgment to monetary defaults only, and appears to be an end-run around the legislative process.
Original Note produced and Complaint has copy of note attached as exhibit?
Complaint incudes statement regarding last known address of the defendant either in averment or within caption?
At least one maker resides in jurisdiction or Note executed in jurisdiction where Complaint is filed?
Note includes “warrant of attorney” with statutory language above or below signature?
The Note does not arise from a consumer transaction?
Default consists of nonpayment on note, rather than default of other provision unrelated to payment”.
Another attack on the use of warrants of attorney to confess judgment was recently introduced into the 132nd Ohio General Assembly. H.B. 67 was introduced on February 16, 2017 by Representative Ron Young, a Republican of Leroy Township in Lake County. The bill has not yet been assigned to a committee.
The bill seeks to amend R.C. §2323.13(A) to limit a confession of judgment to situations involving “the settlement of a dispute”. The bill does not further define that phrase. Echoing the “dispute settlement” language, H.B. 67 would also amend R.C. §2323.12 to limit confessions of judgment to the “settlement of a dispute” under R.C. §2323.13 and makes a violation of the law a first degree misdemeanor.
Bankers and other business persons should carefully consider a significant change this year to the state’s law regarding contractual default clauses. The change was made by a little-noticed Ohio Supreme Court decision that requires the fairness of such clauses to be assessed from the perspective of the relationship of the parties at the beginning of the contract. In the case at issue this led to enforcement of an extreme damages claim.
For years, it was generally accepted that mortgage creditors and bankruptcy trustees could assert the status of a bona fide purchaser and treat a defectively notarized mortgage as if that mortgage did not exist. On February 16, 2016, our Supreme Court provided clarity regarding the legal effects of R.C. §1301.401 and provided protection to lenders regardless of whether their mortgages were defective.
In Re Messer, 2016-Ohio-510 was a referral to the Ohio Supreme Court from the Bankruptcy Court for the Southern District of Ohio. Mr. and Mrs. Messer (the “Messers”) owned real property in Ohio. In order to finance the purchase of the property, the Messers executed and delivered a mortgage to Mortgage Electronic Registration Systems (“MERS”) as nominee for M/I Financial Corp. The mortgage was later assigned to JP Morgan Chase Bank, N.A. (“Chase”). Although the mortgage was correctly signed by the Messers, the notary failed to certify the mortgage acknowledgment, although the notary did notarize other documents at the time of the closing. The Franklin County Recorder accepted and recorded the mortgage on December 4, 2007.
The Ohio General Assembly is currently considering a bill that would greatly restrict creditors’ ability to ask debtors to sign cognovit notes. A cognovit note allows a creditor, upon a debtor’s default, to enter judgment against the debtor without the usual notice or hearing.
Determining whether a security interest is properly perfected by using a state’s online lien search may be leading you astray.
Perfecting a security interest in collateral establishes the priority of the secured party’s claim to such collateral, providing the perfected secured party with an interest in such collateral superior to the rights held by most subsequently perfected security creditors or judicial lien creditors. For most types of collateral owned by an entity, a security interest may be perfected by filing a financing statement describing the security interest with the secretary of state’s office in the state where such entity is formed. A financing statement is a form of public notice intended to inform others dealing with such borrower (referred to as a “debtor”) that the debtor has granted a security interest in its assets.
Effective March 23, 2015, Ohio’s antiquated receivership statute (Ohio Rev. Code Chapter 2735) will be modernized, particularly as it relates to the appointment of a receiver in commercial mortgage foreclosures and the ability of a receiver to sell real estate free and clear of liens.
Although not every settlement agreement has to be reviewed by a tax lawyer if you are representing a creditor or a debtor and the subject matter of the settlement involves the compromise of a debt or a cancellation of an indebtedness, there are some basic tax matters which must be considered.
If you are representing the creditor, you should consider whether the cancellation or compromise of the debt will be deemed income for tax purposes. This consideration will lead to a determination of whether the creditor must issue a Form 1099-C to the IRS and to the debtor.
If you are representing the debtor, you must consider whether the settlement qualifies as a contested liability dispute. If the debtor-taxpayer, in good faith, disputes the liability of the obligation, then a subsequent settlement of the disputed debt may not result in income, and thus, the creditor would not have to issue a Form 1099-C.
Constructively charged with having retroactive actual notice when challenging an improperly recorded defective mortgage…wait, what?
“Great cases…make bad law” declared Supreme Court Justice Oliver Wendell Holmes Jr. in his dissenting opinion in the Northern Securities antitrust case of 1904. One of the most oft-quoted phrases any aspiring lawyer will hear in law school, this maxim stands for the proposition that decisions in cases of great importance from a public or social perspective make a poor basis upon which to construct a general law. Although an otherwise innocuous adversary bankruptcy proceeding (Daren A. Messer, et al. v. JPMorgan Chase Bank, NA (In re Messer), Adv. Pro. No. 13-2448) can hardly be called a matter of high social importance, it did result in the United States Bankruptcy Court for the Southern District of Ohio certifying two novel questions of state law for consideration by the Ohio Supreme Court that “could potentially affect tens of thousands of [mortgages]” in Ohio. The Ohio Supreme Court has not yet ruled on this matter, but given the implications I felt it worth putting on people’s radar at this time.
Does a conflict of interest arise under the Ohio Rules of Professional Conduct (“Rules”) when an attorney confesses judgment on a cognovit note? No, according to a recent opinion (Opinion 2014-3, August 8, 2014) issued by The Supreme Court of Ohio’s Board of Commissioners on Grievances & Discipline (“Board”), so long as the cognovit note contains a warrant of attorney that expressly waives a conflict and permits a creditor’s attorney to confess judgment pursuant to R.C. §2323.13. In issuing the Opinion, the Board reaffirmed and updated Advisory Opinion 93-3, which found no conflict existed under Ohio’s former Code of Professional Responsibility, which the current Rules replaced in 2007.
R.C. §2323.13 permits an attorney hired by a creditor to obtain cognovit judgment without notice or hearing in certain commercial transactions (typically loans and guaranties of loans) by producing in court a valid warrant of attorney that also contains a specific warning to the debtor of the rights being surrendered and otherwise complies with law. Ohio courts grant such cognovit judgments because the debtor consented in advance to the creditor obtaining a judgment upon the debtor’s default.
Last Spring, we discussed on this blog a trifecta of noteworthy lending cases pending before the Ohio Supreme Court. Today, the Court resolved one of them, and in doing so also resolved a certified conflict among Ohio’s appellate districts regarding whether Ohio’s Statute of Frauds bars a party from relying on an oral forbearance agreement to defeat a judgment that was entered pursuant to a written contract. The court’s unanimous opinion in FirstMerit Bank, N.A. v. Inks, Slip Opinion No. 2014-Ohio-789, is available here.

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