Court Opinion

ID: 2707016
Source: CourtListenerOpinion
Date Created: 2014-08-05 13:22:29.672673+00
Date Added: 2024-06-11T12:24:14.805698
License: Public Domain

[Cite as Huntington Natl. Bank v. G.J.P. Properties, L.L.C., 2014-Ohio-124.]
                              IN THE COURT OF APPEALS OF OHIO

                                   TENTH APPELLATE DISTRICT

The Huntington National Bank,                          :

                 Plaintiff-Appellee,                   :
                                                                     No. 12AP-1008
v.                                                     :        (C.P.C. No. 11CVH-06-7490)

G.J.P. Properties, LLC,                                :
                                                               (REGULAR CALENDAR)
                 Defendant-Appellant,                  :

Patricia A. Petrosky, Individually,                    :

                 Defendant-Appellee.                   :

                                         D E C I S I O N

                                    Rendered on January 16, 2014

                 Weltman, Weinberg & Reis, Co. L.P.A., Allen J. Reis, and
                 Matthew G. Burg, for Huntington National Bank.

                 Brent C. Stobbs, for appellant.

                  APPEAL from the Franklin County Court of Common Pleas.

BROWN, J.
        {¶ 1} This is an appeal by defendant-appellant, G.J.P. Properties, LLC ("GJP"),
from entries of the Franklin County Court of Common Pleas, including an entry granting
summary judgment in favor of plaintiff-appellee, The Huntington National Bank
("Huntington").
        {¶ 2} On September 21, 2000, GJP received a business line of credit from
Huntington, the terms of which were governed by a line of credit agreement ("credit
agreement"). The credit agreement was guaranteed by separate guaranty agreements
No. 12AP-1008                                                                                    2

executed by Gerold J. Petrosky, the president of GJP, and Patricia A. Petrosky (the former
spouse of Gerold), now known as Patricia Fox (hereafter "Fox").
       {¶ 3} On June 20, 2011, Huntington filed a complaint against GJP and Fox,
individually, alleging claims for breach of the credit agreement and the guaranty executed
by Fox.1 The complaint alleged that defendants had been granted a $50,000 line of credit
under the terms of the credit agreement and were now in default, owing Huntington the
sum of $49,260.52, plus interest. The complaint also alleged that the guaranty executed
by Fox contained a cognovit provision.
       {¶ 4} On the same date Huntington filed its complaint, James G. Kozelek, an
attorney, filed an answer confessing judgment on behalf of Fox, individually, pursuant to
a warrant of attorney. By entry filed June 29, 2011, the trial court granted judgment in
favor of Huntington and against Fox, individually, in the amount of $49,260.52, plus
interest.
       {¶ 5} GJP filed an answer on September 6, 2011. GJP filed a counterclaim against
Huntington on October 25, 2011, alleging in part that Huntington's confessed judgment
against Fox was void and invalid.          On March 16, 2012, GJP filed a suggestion of
bankruptcy, seeking to stay the trial court action on the basis that a Chapter 7 bankruptcy
proceeding, filed in 2009 by Gerold J. Petrosky (hereafter "Petrosky"), had been
reopened. On March 20, 2012, the trial court entered an order of stay. On April 4, 2012,
Huntington filed a motion to vacate the stay.
       {¶ 6} On May 7, 2012, GJP filed a motion to dismiss Huntington's action and to
vacate the prior judgment against Fox. In the motion, GJP argued that Huntington failed
to properly invoke the jurisdiction of the trial court for lack of required cognovit language
in the debt instrument, and therefore "the judgment against Patricia Fox should never
have been granted and must be vacated, nunc pro tunc." GJP further argued that it had
never been properly served, nor had it been served notice of the cognovit judgment
against Fox.
       {¶ 7} Huntington filed a brief in opposition to the motion to dismiss, asserting
that the credit agreement between Huntington and GJP did not include a cognovit

1The remaining guarantor, Gerold J. Petrosky, filed for bankruptcy in 2009 and was not named in the
complaint.
No. 12AP-1008                                                                             3

provision, and that the arguments raised by counsel for GJP were based on Huntington's
cause of action against Fox, a party that counsel for GJP did not represent. GJP filed a
memorandum contra Huntington's brief in opposition to the motion to dismiss. By
decision and entry filed August 27, 2012, the trial court granted Huntington's motion to
vacate stay and denied GJP's motion to dismiss Huntington's action and vacate the prior
judgment.
       {¶ 8} On September 21, 2012, GJP filed a motion to strike all pleadings of Fox,
asserting that the trial court's judgment against her was void, and that the pleadings filed
by attorney Kozelek were void for lack of authority. Huntington subsequently filed a reply
to GJP's motion to strike. On October 3, 2012, Huntington filed a motion for summary
judgment against GJP, to which GJP filed no response. On October 31, 2012, the trial
court filed an entry granting summary judgment in favor of Huntington, and against GJP,
in the amount of $49,260.52, plus interest.
       {¶ 9} On appeal, GJP sets forth the following nine assignments of error for this
court's review:
              Assignment of Error Number I.

              Plaintiff's Judgment against Patricia Petrosky is void ab initio
              for failure to comply with the confession of judgment statute
              (by failing to attach the "original" loan document[/s] to the
              complaint), such that the Court thus lacked jurisdiction to
              grant judgment against Patricia Fox.)

              Assignment of Error Number II.

              Plaintiff's Judgment against Patricia Petrosky is void ab initio
              for failure to comply with the confession of judgment statute
              (by admittedly failing to include required statutory cognovit
              notices in bold print immediately above the signature line on
              the debt instrument, the Note) after the Court correctly held
              that, "Plaintiff's claims against Defendant GJP [and Patricia
              Fox] are based upon the Original Business Line of Credit
              Agreement, which did not contain a cognovit provision.")

              Assignment of Error Number III.

              Plaintiff's Judgment against Patricia Petrosky "..is void ab
              initio for lack of jurisdiction because it requires the Court to
              consider documentation outside the four corners of the
No. 12AP-1008                                                                 4

           promissory Note to determine the amount due and owing[,]
           "(particularly on this open-ended line of credit loan, being (a)
           impossible for the Court to calculate the conclusory
           $49,260.52 judgment).

           Assignment of Error Number IV.

           Plaintiffs initial "confessed" judgment of $49,260.52 against
           Co-Defendant Fox unfairly prejudiced the Court's 2nd
           judgment against Co-Defendant GJP, being (1) void and (2)
           without proper evidentiary support.

           Assignment of Error Number V.

           The Court erred by granting two judgments, doubling the
           claim to over $100,000.00 total, in the lawsuit only seeking
           approximately $54,000.00 as of date of appeal (failing to find
           the Defendants jointly and severally liable, and instead
           making two different judgments, each for $49,260.52, plus
           $1099.13 accrued interest, plus $100 late fees, and interest
           from June 3, 2011.).

           Assignment of Error Number VI.

           The trial Court erred in refusing to grant Defendant GJP'[s]
           timely motion to vacate judgment (after cognovit action was
           shown to be void).

           Assignment of Error Number VII.

           Trial Court erred in failing to address conflicts of interest
           properly, (1) Ignoring Attorney Kozelek's actual conflict of
           interest (hired by Plaintiff; filed an answer representing
           Defendant) (2) by overlooking Plaintiff's bank's counsel's
           actual conflicts (representing Plaintiff bank, but also (a)
           having an agent file pleadings for a Defendant), (b) arguing
           motions for a Defendant at all, (c) and for one who was
           already represented by counsel), and (3) rejecting pleadings of
           Defendant GJP, unfairly accusing Defendant GJP's counsel of
           a conflict (specifically finding that GJP's counsel was
           "improper[ly]" arguing for Co-Defendant Fox by alleging that
           a Court action was void.)
No. 12AP-1008                                                                             5

              Assignment of Error Number VIII.

              The trial Court erred in granting summary judgment without
              even ruling on (a) the Counterclaim or (b) Defendant's motion
              to strike (which each clearly suggested significant questions of
              fact), and erred by refusing to strike all pleadings of Attorney
              Kozelek (not authorized by statute or by his alleged client) in
              which created an unexcused conflict of interest).

              Assignment of Error Number IX

              Service upon Defendant GJP was untimely and knowingly
              improper, violating O.R.Civ.P. Rule 4 and 4.2(F), is clearly not
              reasonably intended to reach Defendant, as sent to an address
              GJP never used, (See complaint caption), while knowing the
              actual address of the entity, and even still using the correct
              address regularly for other banking business, and yet all initial
              service attempts failed. Nothing in evidence suggested that
              GJP should be served at his ex-wife's current address.

       {¶ 10} GJP's first, second, third, fourth, and sixth assignments of error are
interrelated and will be considered together. Under these assignments of error, GJP
challenges the judgment rendered against Fox individually under the guaranty agreement.
Specifically, GJP argues that the judgment entered against Fox is void for failure to attach
the original loan document to the complaint, and for failure to include required statutory
cognovit notices in bold print above the signature line. GJP further argues that the court's
judgment against Fox is void for lack of jurisdiction because it requires the court to
consider documentation outside the four corners of the promissory note to determine the
amount due and owing. GJP asserts it was unfairly prejudiced by the court's confessed
judgment against Fox, and that the trial court erred in refusing to grant its motion to
vacate judgment after showing that the cognovit judgment against Fox was void.
       {¶ 11} In response, Huntington argues that the primary focus of GJP throughout
this litigation has been, erroneously, on the judgment against Fox. Huntington maintains
that the trial court properly found that GJP does not have standing to challenge, by means
of a motion to vacate, the judgment entered against Fox on the guaranty as GJP was not a
party to that contract. We agree.
       {¶ 12} In denying GJP's motion to dismiss Huntington's action and vacate the
prior judgment against Fox, the trial court held in part:
No. 12AP-1008                                                                             6

              [A] cognovit judgment was * * * rendered against Defendant
              Fox on June 29, 2011. That judgment remains of record and
              Defendant Fox has made no appearance in this case (with the
              exception of counsel appearing to confess judgment), and has
              never contested the judgment against her in this action. The
              action remains pending as to Defendant GJP only, with
              Defendant GJP having filed an Answer to Plaintiff's claims, as
              well as a Counterclaim against Plaintiff. Plaintiff's claims
              against Defendant GJP are based on the original Business
              Line of Credit Agreement, which did not contain a cognovit
              provision. Thus, Plaintiff made no attempt to obtain a
              cognovit judgment against Defendant GJP based on R.C.
              2323.13, and has only obtained a cognovit judgment against
              Defendant Fox based on the Guaranty Agreement, which did
              in fact contain a cognovit provision.

              The Court further finds * * * that the Motion to Dismiss and
              Vacate Judgment is essentially an attack by Defendant GJP on
              Plaintiff's cognovit judgment against Defendant Fox.
              However, Defendant GJP's counsel does not represent
              Defendant Fox, and in fact represents Mr. Petrosky in the
              divorce proceedings against Defendant Fox. As such, the
              Court finds that it is improper for Defendant GJP's counsel to
              bring such arguments before the Court.

       {¶ 13} In general, under Ohio law a cognovit note "contains provisions designed to
cut off defenses available to a debtor in the event of default." Huntington Natl. Bank v.
Royal Mt. Sterling Corp., 10th Dist. No. 12AP-174, 2012-Ohio-4514, ¶ 11.       As such, the
holder of a cognovit note that is in default "obtains a judgment without a trial of possible
defenses that the signers of the note might otherwise assert * * * because, under a
cognovit note, the debtor consents in advance to the holder obtaining a judgment without
notice or hearing." Id. The debtor on a cognovit judgment "may pursue a Civ.R. 60(B)
motion for relief from judgment." Id. at ¶ 12, citing Masters Tuxedo Charleston, Inc. v.
Krainock, 7th Dist. No. 02 CA 80, 2002-Ohio-5235,¶ 7.
       {¶ 14} In the present case, as recognized by the trial court, Huntington's claims
against GJP are based on the credit agreement, which does not contain a cognovit
provision; further, we agree with the trial court that GJP's motion to vacate was an attack
on the cognovit judgment against Fox. In its motion to dismiss Huntington's action and
vacate the prior judgment, GJP argued that dismissal of the judgment against Fox was
appropriate under Civ.R. 60(B).
No. 12AP-1008                                                                              7

       {¶ 15} As indicated above, a debtor may seek relief from a cognovit judgment, and
Civ.R. 60(B) provides relief from a judgment on motion by "a party or his legal
representative." However, the commercial guaranty agreement in this case was signed by
Fox individually, the sole party against whom the cognovit judgment was rendered, and
GJP was not a "party" or "legal representative" who could seek to vacate the cognovit
judgment entered against Fox. See, e.g., Zanders v. Jones, 1st Dist. No. C-920961 (Dec.
29, 1993) (Insurer had no standing to file a Civ.R. 60(B) motion on behalf of its insured
because insurer was neither a "party" against whom the judgment was entered, nor a
"legal representative" empowered to seek relief on behalf of a party who had not
challenged judgment against him).
       {¶ 16} As also noted by the trial court, Fox has never filed a Civ.R. 60(B) motion or
otherwise sought to challenge the cognovit judgment rendered against her. Accordingly,
we agree with the trial court that GJP cannot pursue relief on behalf of Fox with respect to
the cognovit judgment, and we therefore conclude the trial court did not err in denying
GJP's motion to dismiss and vacate the cognovit judgment against Fox. See Augaitis v.
Reichard, 2d Dist. No. 13693 (June 28, 1993) (defendant did not have standing to bring
Civ.R. 60(B) motion on behalf of party who had not sought Civ.R. 60(B) relief from
judgment rendered against him). Similarly, we find no error with the trial court's
determination that counsel for GJP was without authority to act on behalf of Fox as to the
cognovit judgment.
       {¶ 17} Accordingly, the arguments raised by GJP under the first, second, third,
fourth, and sixth assignments of error, all challenging aspects of the trial court's cognovit
judgment entered against Fox, are without merit and those assignments of error are
hereby overruled.
       {¶ 18} Under the fifth assignment of error, GJP contends the trial court erred by
entering default judgment against Fox for $49,260.52, and thereafter granting summary
judgment in favor of Huntington, and against GJP, for the same amount. GJP maintains
that the court erred by failing to make the debtors "jointly and severally liable."
       {¶ 19} GJP's contention that the court erred in failing to designate GJP and the
guarantor (Fox) jointly and severally liable is without merit. Under Ohio law, "[t]he
obligation of a guarantor is collateral and secondary to that of a principal debtor and is
No. 12AP-1008                                                                               8

fixed only by the inability of the principal debtor to discharge the obligation for which he
is primarily liable." Covitt v. Braff, 7th Dist. No. 75 C.A. 45 (Nov. 5, 1975), citing Madison
Natl. Bank of London, Ohio v. Weber, 117 Ohio St. 290, 293 (1927). See also Jazwa v.
Alesci, 8th Dist. No. 69857 (Sept. 12, 1996) ("A guarantor's liability is secondary to that of
the debtor, arising only upon the debtor's default in payment"). Thus, as a guarantor, Fox
was not jointly and severally liable with GJP.
       {¶ 20} We note that Huntington acknowledges it can collect only one amount, and
maintains it has only obtained separate judgments against GJP and the guarantor (Fox)
for one balance due (i.e., one satisfaction). We further note there is no indication in the
record that the default judgment rendered against Fox (under the guaranty agreement)
has ever been satisfied. Regardless, the trial court did not err in failing to designate GJP
and Fox jointly and severally liable.
       {¶ 21} Appellant's fifth assignment of error is without merit and is overruled.
       {¶ 22} Under the seventh assignment of error, GJP contends the trial court erred
in failing to address certain conflicts of interest. Specifically, GJP argues that attorney
Kozelek had no authority to represent Fox or to confess judgment on her behalf, and GJP
maintains the trial court should have granted its motion to strike the pleadings filed by
Kozelek.
       {¶ 23} The arguments of GJP are not persuasive in light of Ohio law regarding
agreements containing cognovit (i.e., confession of judgment) provisions. As noted above,
in the case of a contractual obligation containing a cognovit provision, "the debtor
consents in advance to the holder obtaining a judgment without notice or hearing." Royal
Mt. Sterling at ¶ 11. Under such circumstances, "[a]n attorney, whom the note holder
may designate, appears on behalf of the debtor and, pursuant to provisions of the cognovit
note, confesses judgment and waives the debtor's right to notice of the proceedings." Id.
Furthermore, in the present case, any defense based upon an allegation that the attorney
lacked authority to confess judgment would lie with Fox, the individual who executed the
guaranty containing the cognovit provision. As already discussed, however, Fox has never
challenged the authority of Kozelek to enter an appearance and confess judgment
pursuant to the guaranty. GJP's seventh assignment of error is without merit and is
overruled.
No. 12AP-1008                                                                            9

       {¶ 24} In its eighth assignment of error, GJP challenges the trial court's grant of
summary judgment in favor of Huntington. Under this assignment of error, GJP argues
that the court failed to rule on its counterclaim, as well as its motion to strike the
pleadings of Kozelek.
       {¶ 25} Pursuant to Civ.R. 56(C), summary judgment shall be granted if the filings
in the action, including the pleadings and affidavits, "show that there is no genuine issue
as to any material fact and that the moving party is entitled to judgment as a matter of
law." This court's review of a trial court's decision granting summary judgment is de
novo. Bonacorsi v. Wheeling & Lake Erie Ry. Co., 95 Ohio St.3d 314, 2002-Ohio-2220,
¶ 24. In order to prevail on a motion for summary judgment, "the moving party has the
initial burden to affirmatively demonstrate that there is no genuine issue of material fact
to be resolved in the case, relying on evidence in the record pursuant to Civ.R. 56(C)."
Renzi v. Hillyer, 11th Dist. No. 2012-L-041, 2012-Ohio-5579, ¶ 10, citing Dresher v. Burt,
75 Ohio St.3d 280, 292 (1996). If the moving party meets this initial burden, "the
nonmoving party then bears the reciprocal burden to set forth specific facts which prove
there remains a genuine issue to be litigated, pursuant to Civ.R. 56(E)." Id. at ¶ 10.
       {¶ 26} In its motion for summary judgment, Huntington argued before the trial
court that (1) GJP's obligation under the credit agreement had not been paid, (2) the
answer filed by GJP "admits the existence of the credit agreement, and does not allege
payment of the debt," and that (3) both the answer and counterclaim filed by GJP "raise
issues and defenses related to Gerold Petrosky and Patricia Petrosky (Fox), that are not
relevant to the liability of GJP on the obligation in question." Attached to Huntington's
motion for summary judgment was the affidavit of Mark Mastenbrook, the "duly
authorized representative and keeper of the records" of Huntington. In the affidavit,
Mastenbrook avers that Huntington was the holder of the credit agreement, that GJP "has
failed to pay in accordance with the terms of the Agreement * * * and that there is due
* * * the principal sum of $49,260.52, together with accrued interest in the sum of
$1,099.13 and late charges of $100.00 through June 3, 2011, plus interest." Also attached
to Huntington's motion was a copy of the credit agreement signed by Petrosky on behalf
of GJP.
No. 12AP-1008                                                                            10

       {¶ 27} As noted under the facts, GJP did not file a response to Huntington's
motion for summary judgment. Thus, while Huntington submitted evidentiary materials
in its motion for summary judgment to establish the existence and terms of the credit
agreement, as well as the affidavit of Mastenbrook averring GJP was in default and stating
the amount owed, GJP provided no affidavits or other evidence denying it owed the
amount alleged, or that the amount alleged was incorrect. Based upon this court's de
novo review, the trial court properly granted summary judgment in favor of Huntington.
See, e.g., Discover Bank v. Doran, 10th Dist. No. 10AP-496, 2011-Ohio-205, ¶ 16
(affirming summary judgment in favor of plaintiff bank; once plaintiff presented
uncontroverted evidence that defendant was in default under agreement, defendant failed
to meet reciprocal burden by providing affidavit or any other evidence as required by
Civ.R. 56 that would have created a genuine issue of material fact).
       {¶ 28} GJP also contends the trial court, in granting summary judgment in favor of
Huntington, erred in failing to rule on its motion to strike the pleadings filed by attorney
Kozelek. Under Ohio law, however, "[w]hen a trial court fails to rule upon a motion, it
will be presumed that it was overruled." Georgeoff v. O'Brien, 105 Ohio App.3d 373, 378
(9th Dist.1995), citing Newman v. Al Castrucci Ford Sales, Inc., 54 Ohio App.3d 166, 169
(1st Dist.1988). Further, as discussed under the preceding assignment of error, any
argument with respect to the authority of Kozelek to file the pleadings at issue would lie
with Fox, not GJP.
       {¶ 29} Accordingly, GJP's eighth assignment of error is not well-taken and is
overruled.
       {¶ 30} Under the ninth assignment of error, GJP asserts that the trial court erred
in failing to find service was defective. In its motion to dismiss Huntington's action, GJP
argued before the trial court that it was never properly served with the complaint. GJP
contends that service was attempted upon it at an address GJP never used, i.e., the
current address of Fox, the ex-wife of Petrosky, GJP's CEO.
       {¶ 31} In response, Huntington argues that GJP was properly served on
December 21, 2011, and thus the trial court had jurisdiction over that party. Upon review,
we agree.
No. 12AP-1008                                                                          11

      {¶ 32} The record indicates that the initial complaint, filed on June 20, 2011, set
forth the same address (Ashville Park Dr., Columbus) for both GJP and Fox. While
service was made on Fox at that address, service as to GJP was refused. On September 6,
2011, GJP filed an answer, which included an allegation that Huntington had failed to
serve GJP with the complaint. The record further reflects, however, that service upon
GJP was effectuated on December 21, 2011 (at an address other than Ashville Park Dr.,
Columbus).    Accordingly, GJP has not demonstrated that the trial court lacked
jurisdiction over the parties. GJP's ninth assignment of error is without merit and is
overruled.
      {¶ 33} Based upon the foregoing, GJP's nine assignments of error are overruled,
and the judgment of the Franklin County Court of Common Pleas is hereby affirmed.
                                                                    Judgment affirmed.

                       SADLER, P.J., and CONNOR, J., concur.

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