Legal Document

405 U.S. 174 92 Supreme Court Reporter 775. 31 United States Reports Lawyer’s Edition 2d Series KF101.8 U54 124 D. or Haw. Hawai‘i KFH45 A2 OVERMYER CO., INC., OF OHIO, et al., Petitioners,v.FRICK COMPANY. Number 69—5. Argued Nov. 9, 1971. Decided Feb. 24, 1972. Syllabus After a corporation (Overmyer) had defaulted in its payments for equipment manufactured and being installed by respondent company (Frick), Overmyer under post-contract arrangement made partial cash payment issued an installment note the balance, Frick completed work, which accepted as satisfactory. Thereafter again asked relief and, with counsel both corporations participating negotiations, first was replaced second, contained 'cognovit' provision conformity Ohio law at that time whereby consented advance, should it default interest principal payments, to Frick's obtaining judgment without notice hearing, certain second mortgages favor, agreeing release three mechanic's liens, reduce monthly amounts rate, extend final payment. When Overmyer, claiming contract breach, stopped making on new note, Frick, cognovit provision, through attorney unknown but behalf of personal service prior caused be entered note. Overmyer's motion vacate overruled after post-judgment court's decision affirmed appeal against contention procedure violated due process requirements. Held: consideration full awareness legal consequences, waived rights prejudgment facts this case, involved contractual arrangements between two acting advice counsel, clause (which is not unconstitutional per se) did violate Fourteenth Amendment rights. Pp. 182—188. Affirmed. Russell Morton Brown, Washington, D.C., petitioners. Gregory M. Harvey, Philadelphia, Pa., respondent. Mr. Justice BLACKMUN delivered opinion Court. 1 This case presents issue constitutionality, Due Process Clause Amendment, authorized Rev.Code § 2323.13.1 2 The ancient device debtor consents advance holder's possibly even appearance, debtor's behalf, designated holder.2 It known least far back Blackstone's time. 3 W. Blackstone, Commentaries *397.3 In applying law, said purpose 'to permit holder obtain trial possible defenses signers notes might assert.' Hadden versus Rumsey Products, Inc., 196 Federal Reporter, 2nd 92, 96 (CA2 1952). And long ago method described Chief New Jersey 'the loosest way binding man's property ever devised any civilized country.' Alderman Diament, 7 N.J.L. 197, 198 (1824). Dickens noted obvious disfavor. Pickwick Papers, chapter 47. has been subject comment, much critical.4 Statutory treatment varies widely. Some specifically authorize cognovit.5 Others disallow it.6 go so make employment misdemeanor.7 majority, however, regulate use many prohibit small loans consumer sales.8 4 recognized statute court decision. Chase's Statutes, 243, 34 (1810); Osborn Hawley, 19 130 (1850); Marsden Soper, 11 St. 503 (1860); Watson Paine, 25 340 (1874); Clements Hull, 35 141 (1878). State's courts, give instrument strict limited construction. See Peoples Banking Brumfield Hay & Grain Co., 172 545, 548, 179 North Eastern 53, 55 (1961). 5 apparently decided only cases concerning notes, have come here faith credit context. National Exchange Bank Wiley, 195 257, 70, 49 L.Ed. 184 (1904); Grover Baker Sewing Machine Radcliffe, 137 287, 670 (1890). American Surety Baldwin, 287 156, 53 98, 77 231 (1932). 6 * argument kind offensive current notions is, glance, appealing one. However, here, nearly every are important. We state them chronologically: 1. Petitioners Ohio, Kentucky, segments warehousing enterprise one point litigation having built 'in years . 180 warehouses thirty states.' corporate structure complex. Because identity individuality respective entities relevant we refer aggregate 'Overmyer.' 8 2. 1966 corporation, then later date became affiliate, executed manufacture installation cost $223,000, automatic refrigeration system warehouse construction Toledo, Ohio. 9 3. fell behind progress from contract. By end September approximately $120,000 overdue. delinquency, work October 10. indicated letter date, willingness accept offer pay $35,000 'provided balance can evidenced interest-bearing notes.' 10 4. On November filed leins Toledo total $194,031, amount price allegedly unpaid 5. parties continued negotiate. January 1967 accommodation, agreed complete upon immediate 10% ($19,403.10) $174,627.90 12 equal installments 1/2% annum. February 17 calling $15,498.23 each beginning March 1, 1967. no confession-of-judgment provision. recited operate waiver also stated would forgo enforcement those lien there 6. resumed it, sent completion. vice president acknowledged writing 'completed satisfactory manner' 'accepted conditions.' 13 7. Subsequently, requested additional payments. liens property. Negotiations finally resulted agreement June (a) execute then-outstanding $130,997 21 $6,891.85 each, 1967, ending 1969, completion (as contrasted 1968 specified note); (b) rate 6% rather than 1/2%; (c) liens; (d) mortgages, mortgagee, Tampa Louisville; (e) contain clause. signed petitioners some months dated 2, accompanied five checks general counsel. were recorded, released. following clause: 14 'The undersigned hereby Holder hereof appear record State waive issuance process, confess favor Note, Note plus if defaults shall continue period fifteen (15) days.' 15 8. 1968, ceased asserting breach original contract, proceeded institute diversity action District Southern York. sought damages excess $170,000 stay all proceedings July Judge Frankel vacated ex parte he theretofore granted. August Mansfield denied reinstatement stay. He concluded, 'Plaintiff failed show likelihood will prevail merits. contrary, extensive documentary evidence furnished defendant indicates plaintiff's lacks merit.' 16 9. 12, (specifically here) Common Pleas Lucas County, remaining namely, $62,370, May costs. effected appearance defendants (petitioners action. His 'by virtue warrant attorney' lawyer confessed judgment. retained communicated entry As required 2323.13(C), clerk court, 16, mailed notices addresses York, Kentucky. 18 11. 22 motions execution trial. latter referred '(i)rregularity rpevailing party .' 6, tendered answer counterclaim alleging damages. A hearing held. Both sides submitted affidavits. Those asserted lack before alleged Frick. copy Mansfield's findings, conclusions, placed record. motion. 12. appealed Appeals deprivation violative Constitutions. That brief journal entry. 20 13. 'sua sponte dismisse(d) reason substantial constitutional question exists herein.' granted certiorari. 401 992, 91 1220, 28 530 (1971). II chronology clearly reveals situation, now complains, brought about largely own misfortune failure inability pay. initial routine subcontract. do times. promissory 23 delinquent naturally refrained further work. impasse resolved arrangement, pursuant balance. Although suggested clause, kind. 24 relief. At side participated negotiations. second. finds offensive. exchange received benefit form reduction payment, paid, half rate. Were concerned validity principles readily resolved. Obviously undeniably, delivery adequate product negotiations carried competent 26 More mere here. III 27 Petitioner asserts invalid because voluntary genuine behalf. Thus, said, jurisdiction over proceeding. petitioner invokes Pennoyer Neff, 95 714, 732, 565 (1878), other courts enunciating long-established personam jurisdiction. McDonald Mabee, 243 90, 91, 37 343, 61 608 (1917); Vanderbilt Vanderbilt, 354 416, 418, 1360, 1362, 1456 (1957); Sears Weimer, 143 312, 413 (1944); Railroad Goodman, 57 641, 50 Northeastern KF135 N59 1132 (1897); Cleveland Leader Printing Green, 52 487, 491, 40 201, 203 (1895). whether defendant's determined proceeding, earlier when signed; unauthorized cannot confer jurisdiction; who appeared sense word, agent 29 proceeds grounds. requires reasonable opportunity heard, citing Boddie Connecticut, 371, 378, 780, 786, 113 acknowledged, context 'contract waiver, suit filed, dispute arisen' 'whereby gives up his right defend other, matter what may have, represented choice.'9 words, position 'unconstitutional present defense note.'10 conceded power open proper showing. Bellows Bowlus, 83 App. 93, 82 429, 432 (1948). But claimed such move discretionary ordinarily disturbed appeal, prevent notice. Griffin Griffin, 327 220, 231—232, 66 556, 561—562, 90 635 (1946). Goldberg Kelly, 397 254, 1011, (1970), Sniadach Family Finance Corp., 395 337, 89 1820, 349 (1969), cited. 30 civil waiver. Equipment Rental, Limited Szukhent, 375 311, 84 411, (1964), observed: '(I)t settled agree submit given served opposing party, altogether.' Id., 315—316, S.Ct., 414. 32 supra, waiver.' U.S., 378—379, 786. 33 This, course, parallels recognition criminal where liberty, right, involved. Illinois Allen, 342—343, 1057, 1060, 353 (1970) (right trial); Miranda Arizona, 384 436, 444, 86 1602, 1612, 694 (1966) (rights compulsory self-incrimination); Fay Noia, 372 391, 439, 822, 849, 837 (1963) (habeas corpus); Rogers States, 367, 71 438, 440, 344 (1951) self-incrimination). Even if, purposes, assume standard corporate-property-right same applicable voluntary, knowing, intelligently made, Brady 742, 748, 1463, 1468, 747 (1970); 'an intentional relinquishment abandonment privilege,' Johnson Zerbst, 304 458, 464, 58 1019, 1023, 1461 (1938); area, '(w)e presume acquiescence loss fundamental rights,' Bell Tel. Public Utilities Comm'n, 301 292, 307, 724, 731, 81 1093 (1937), fully satisfied corporation. Its complicated. activities widespread. proceeding stated, 'tens thousands contracts contractors.' unequal bargaining overreaching. Overmyer-Frick agreement, start, adhesion. There refusal part deal unless cognovit. When, later, came into being, too, matured claim relief, containing executed. 36 does contend aware significance Indeed, could light facts. 1966, readjusting it. return benefits Overmyer. Particularly important, seem, were, addition, monetary amount, able predict accuracy just how proceed confession occurred, did, itself militate effective 757, 1473; McMann Richardson, 759, 772—773, 1441, 1449 1450, 763 (1970). 38 therefore hold voluntarily, intelligently, knowingly otherwise possessed consequences. 39 Insurance Morse, Wall. 445, 365 (1874), affords comfort foreign insurance company, desiring qualify State, remove federal court. quite struck down statute, thwarted authority vested Congress Privileges Immunities Clause. Myers Jenkins, 63 101, 120, 1089, (1900), involving called adjustment claims alone resort similarly unhelpful. IV concluding comments order: 41 Our holding necessarily means not, se, process. constitutionally invalid. observed above, amply demonstrate well serve useful commercial world vulnerable attack. 42 holding, controlling precedent cases. For example, adhesion, great disparity power, receives nothing consequences ensue. 43 merely rendered defenseless. concedes showing valid indeed, If mistaken identity, asserted. see prevented pursuing breach-of-contract forum. Here, again, precisely attempted do, thus unsuccessfully, 44 affirmed. 45 POWELL REHNQUIST took case. 46 DOUGLAS, whom MARSHALL concurs, concurring. 47 N Dec. Immigration Nationality Decisions heavy burden rights, applies matters, (1937); Aetna Kennedy, 389, 393, 809, 811, 1177 effectively rebutted presented Whatever procedural hardship scheme worked voluntarily understandingly self-inflicted arm's-length these parties. 48 add word opening judgments higher persuasion imposed defendants. read judges traditionally enjoyed wide discretion vacating judgments. Jur.2d, Judgments 558 (1958). Livingstone Rebman, 169 109, 158 366 (1959), safeguards exercise judge's petition where, affirmative consideration. Using preponderance-of-the-evidence test, found insufficient support dismissed open. reversed degree proof needed Said court: '(I)f credible supporting minds reach different duty suspend raised pleadings tried jury, or, jury waived, court.' 121 122, N.E.2d, 375. (Emphasis supplied.) Thus opened poses question, sufficient directed verdict him. minimal obstacle.* 51 fact judge duty-bound obtained clauses debtors questions unbridled governs disposition petitions vacate. Goodyear Stone, 124, 376 (1959); McMillen Willard Garage App.2d 112, 115, 237 155, (1968); Central Standard Loan Finance, 104, 597, 600 (1964). shows explain their rejected solely adduced thereof too thin presentation jury. challenged read: 'Sec. 2323.13. (A) An confesses confession, must produce makes county maker several makers resides authorizing judgment, contrary notwithstanding; clerk. '(B) represents creditor include statement setting forth best knowledge last address defendant. '(C) Immediately entering notify registered certified mail him set petition.' Senate Bill 85, 133 Laws 196—198 (1969—1970), Sept. 1970, amended paragraphs (C), ways pertinent added paragraph (D): '(D) bond, security lease, indebtedness 1971, render based appears evidencing indebtedness, directly above below signature maker, person type size distinctive marking more conspicuously anything else document: "Warning—By signing paper you your taken powers used collect employer regardless returned goods, faulty comply cause." Iowa succinctly defined written direction enter therein.' Blott Blott, 227 1108, 1111—1112, 290 Northwestern N69 74, 76 (1940). Jones John Hancock Mutual Life 289 F.Supp. 930, 935 (WD Mich.1968), aff'd, 416 829 (CA6 1969), Fox, pertinently 'A ordinary indeed extraordinary authorizes persons obligation paid due. Such cuts off have. likewise it.' Historical references General Contract Purchase Corporation Max Keil Real Estate Del. 531, 532—533, 170 Atlantic 797, 798 (1933), First Nat. Bk. White, 220 Mo. 717, 728 120 Southwestern S79 36, 39—40 (1909). Recent Cases, Confession Judgments—Refusal York Enforce Pennsylvania Cognovit Judgments, 74 Dick.L.Rev. 750 Enforcement Sister Wayne L.Rev. 1181 Goodrich, Conflict 73, Page 122 (4th ed. 1964); Hopson, Judgments: Ignored Problem Full Faith Credit, U.Chi.L.Rev. 111 (1961); Hunter, Warrant Attorney Confess Judgment, St.L.J. (1941); Clash Ohio?: Notes Business Ethic UCC, U.Cin.L.Rev. 470 (1966); Comment, Effect Credit U.Colo.L.Rev. 173 Confessions Judgment: Defects, Temp.L.Q. 279 Clause, B.U.L.Rev. 330 Constitutional Considerations, 70 Col.L.Rev. 1118 102 U.Pa.L.Rev. 524 (1954); Foreign Courts Deny Must Do So Entered Pursuant Unlimited Attorney, 56 Va.L.Rev. 554 Should Judgment Validly One Recognized State?, Md.L.Rev. 350 Ill.Rev.Stat., 110, 50; Mo.Rev.Stat. 511.100; 2323.13; Pa.Stat.Ann., Tit. §§ 738 739 Pa. Rules Civil Procedure 2950—2976, P.S. Appendix; S.D.Comp.Laws 21—26—1. See, Ala.Code, 20, 62, 248; Ariz.Rev.Stat.Ann. 6—629 44—143; Mass.Gen.Laws Ann., 231, 13A. Ind.Ann.Stat. 2—2904 2—2906, IC 34—2—25—1, 2—26—1; N.M.Stat.Ann. 21—9—16 21—9—18; R.I.Gen.Laws Ann. 19—25—24 19—25—36. Conn.Gen.Stat.Rev. 42—88 36—236; Mich.Comp.Laws 600.2906 493.12, Mich.Stat.Ann. 27A.2906 23.667(12); Minn.Stat. 548.22, 168.71, 56.12; N.J.Stat.Ann. 2A:16—9. Brief 16. Trans. Oral Arg. 17. places undue marked contrast Swarb Lennox, 191, 767, 138. Pennsylvania, order borrower prove preponderance mustering enough question. Once vacated, moreover, subsequent effect, win consecutive trials, simply Given proclivities men differ probative value questions, requirement twice sustaining imposes stiffer persuasion.

Classification Label: 1