Court Opinion

ID: 4248504
Source: CourtListenerOpinion
Date Created: 2018-02-27 16:10:28.108292+00
Date Added: 2024-06-11T14:43:39.218527
License: Public Domain

FILED
                                                                               Feb 27 2018, 9:30 am

                                                                                   CLERK
                                                                               Indiana Supreme Court
                                                                                  Court of Appeals
                                                                                    and Tax Court

ATTORNEY FOR APPELLANT
Mickey J. Lee
Maurice Wutscher, LLP
Indianapolis, Indiana

                                            IN THE
    COURT OF APPEALS OF INDIANA

EBF Partners, LLC,                                         February 27, 2018
Appellant-Plaintiff,                                       Court of Appeals Case No.
                                                           49A05-1710-CC-2384
        v.                                                 Appeal from the Marion Superior
                                                           Court
Evolving Solutions Inc. d/b/a,                             The Honorable Gary L. Miller,
et al.                                                     Judge
Appellees-Defendants.                                      Trial Court Cause No.
                                                           49D03-1611-CC-40313

Bailey, Judge.

Court of Appeals of Indiana | Opinion 49A05-1710-CC-2384 | February 27, 2018                       Page 1 of 9
                                            Case Summary
[1]   EBF Partners, LLC (“EBF”) petitioned to domesticate a money judgment that

      it had obtained against Evolving Solutions Inc.1 and Frank Terranova

      (collectively, “Evolving”) from a court in the State of New York. In the

      procurement of the foreign judgment, there had been no notice to Evolving and

      no hearing; the New York judgment relied upon an Affidavit of Confession of

      Judgment—known as a cognovit note—that Evolving executed when incurring

      the debt. The Indiana trial court initially entered judgment in favor of EBF, but

      set aside the judgment upon Evolving’s Trial Rule 60(B) motion. EBF now

      appeals, contending that the trial court erred in setting aside the judgment.

[2]   We reverse.

                             Facts and Procedural History
[3]   In early July of 2016, Evolving Solutions Inc., an Indiana corporation, agreed

      to sell $69,000 of its future proceeds to EBF, a Delaware company with a place

      of business in New York, for a purchase price of $50,000. The agreement

      provided that Evolving would make regular payments to EBF until Evolving

      had paid out the full $69,000, and Frank Terranova executed a personal

      guaranty. Evolving also executed a document captioned Affidavit of

      1
       At some point, “d/b/a” was appended to the entity name, see, e.g., App. at 12, and is used in our caption. It
      appears, however, that the entity is simply “Evolving Solutions Inc.” See, e.g., id. at 11, 19, 25, 28, 31.

      Court of Appeals of Indiana | Opinion 49A05-1710-CC-2384 | February 27, 2018                      Page 2 of 9
      Confession of Judgment, in which Evolving “confess[ed] judgment, jointly,

      severally, and individually, and authorize[d] the entry of judgment in favor of

      [EBF] and against [Evolving] in the sum of [$69,000], less any payments made

      in accordance with [the agreement].” App. at 39. Evolving also consented to

      the jurisdiction of New York courts, and the affidavit set forth applicable

      interest rates and a calculation for attorney’s fees.

[4]   EBF stopped receiving payments in late July. Thereafter, without notice to

      Evolving and without any hearing, EBF obtained a confessed judgment from a

      court in the State of New York. EBF then filed in Marion County a petition to

      domesticate the judgment. Evolving challenged the petition, and the trial court

      eventually entered judgment against Evolving on March 9, 2017.

[5]   Several months later, Evolving filed a Trial Rule 60(B) motion seeking to set

      aside the judgment. Evolving did not identify a specific ground for relief, but

      alleged that counsel had not received notice of the entry of judgment from the

      trial court’s automated system, and that “[i]t was not until late June 2017, or

      early July 2017,” that “counsel became aware” of the final judgment. Id. at 69.

      In its motion, Evolving essentially argued that it had not received notice and a

      hearing before EBF had procured the foreign judgment, and that Indiana law

      rendered the foreign judgment unenforceable. The trial court set aside the

      judgment, and EBF now appeals.

      Court of Appeals of Indiana | Opinion 49A05-1710-CC-2384 | February 27, 2018   Page 3 of 9
                                 Discussion and Decision
[6]   We note at the outset that Evolving has not filed a brief. When an appellee fails

      to submit a brief, we need not undertake the burden of developing an argument

      on the appellee’s behalf. Front Row Motors, LLC v. Jones, 5 N.E.3d 753, 758

      (Ind. 2014). Instead, “we will reverse the trial court’s judgment if the

      appellant’s brief presents a case of prima facie error.” Trinity Homes, LLC v.

      Fang, 848 N.E.2d 1065, 1068 (Ind. 2006). Prima facie error in this context is

      defined as, “at first sight, on first appearance, or on the face of it.” Id. (internal

      quotation marks omitted).

[7]   Pursuant to Indiana Trial Rule 60(B), “[o]n motion and upon such terms as are

      just,” the trial court “may relieve a party . . . from a judgment.” Relief under

      this rule is “an equitable remedy within the trial court’s discretion,” and we

      accordingly “generally review a trial court’s Rule 60 ruling only for abuse of

      discretion.” In re Adoption of C.B.M., 992 N.E.2d 687, 691 (Ind. 2013).

      However, where—as here—the trial court has ruled on a paper record without

      conducting an evidentiary hearing, “we are ‘in as good a position as the trial

      court . . . to determine the force and effect of the evidence.’” Id. (quoting GKN

      Co. v. Magness, 744 N.E.2d 397, 401 (Ind. 2001)). “Under those circumstances,

      our review is de novo.” Id.

[8]   Trial Rule 60(B) sets forth eight potential grounds for relief, and requires that

      the movant “allege a meritorious claim or defense” when seeking relief under

      several of those grounds. T.R. 60(B). As to the allegation of a meritorious

      Court of Appeals of Indiana | Opinion 49A05-1710-CC-2384 | February 27, 2018   Page 4 of 9
      claim or defense, the rule “provides no further guidance as to what constitutes a

      proper allegation.” Shane v. Home Depot USA, Inc., 869 N.E.2d 1232, 1238 (Ind.

      Ct. App. 2007). However, the Indiana Supreme Court has explained that Trial

      Rule 60(B) “requires . . . a showing that ‘will prevail until contradicted and

      overcome by other evidence.’” Outback Steakhouse of Fla., Inc. v. Markley, 856
N.E.2d 65, 73 (Ind. 2006) (quoting Smith v. Johnston, 711 N.E.2d 1259, 1265

      (Ind. 1999)). In other words, the movant must make a prima facie showing that

      granting the motion will not be an empty exercise. See id.

[9]   Here, neither the Trial Rule 60(B) motion nor the appealed order specifies a

      particular ground for relief. Evolving’s motion is perhaps best characterized as

      claiming excusable neglect for its failure to timely appeal the judgment or to

      timely present legal arguments in a motion to correct error. See T.R. 60(B)(1)

      (setting forth “mistake, surprise, or excusable neglect” as a ground for relief).

      This ground for relief requires an allegation of a meritorious defense. See T.R.

      60(B). Furthermore, even if Evolving’s motion arguably invokes other grounds

      for relief, we are unable to discern any proffered ground that would be free from

      this requirement. Thus, assuming for the sake of argument that Evolving

      identified and demonstrated at least one proper ground for relief from the

      judgment, Evolving would be entitled to relief only if it had alleged a

      meritorious defense.2

      2
       We note that Evolving presented only its unverified motion, with no accompanying affidavit, and Evolving
      apparently did not request a hearing to develop a factual basis for any ground for relief. See Hardiman v.

      Court of Appeals of Indiana | Opinion 49A05-1710-CC-2384 | February 27, 2018                    Page 5 of 9
[10]   In moving for relief from the judgment, Evolving focused on Indiana Code

       provisions condemning legal instruments like the one Evolving had executed.

       Indeed, Indiana law prohibits cognovit notes, which are instruments permitting

       a money judgment to “be rendered or entered otherwise than by action of court

       upon a hearing after personal service upon the debtor.” I.C. § 34-6-2-22; I.C. §

       34-54-4-1 (making it a misdemeanor to “knowingly . . . procure[] another

       to . . . execute as maker . . . a cognovit note”). Moreover, our legislature has

       provided that certain foreign judgments are unenforceable in Indiana, I.C. § 34-

       54-3-4, including a foreign judgment based on a stipulation “given or entered

       into before a cause of action accrue[d] on a promise to pay.” I.C. § 34-54-3-3;

       cf. I.C. § 34-54-4-1 (making it a misdemeanor to “attempt[] to recover upon or

       enforce within Indiana a judgment obtained in any other jurisdiction based

       upon a cognovit note”). Evolving directed the trial court to these provisions,

       and argued that the New York judgment was unenforceable in Indiana.

[11]   Yet, the Indiana Code is not the final authority on the enforceability of foreign

       judgments. Rather, Article IV, Section 1 of the United States Constitution

       provides that “Full Faith and Credit shall be given in each State to the public

       Acts, Records, and judicial Proceedings of every other State.” See U.S. Const.

       art. VI, cl. 2 (setting forth the supremacy of the United States Constitution as

       Hardiman, 152 Ind. App. 675, 680, 284 N.E.2d 820, 823 (1972) (observing that unsworn statements and
       unverified pleadings constitute no proof of the facts they allege). Putting aside Evolving’s bare assertions
       concerning any ground for relief, we elect to address the other requirement: whether Evolving ultimately
       alleged a meritorious defense.

       Court of Appeals of Indiana | Opinion 49A05-1710-CC-2384 | February 27, 2018                         Page 6 of 9
       well as federal laws and treaties). The Full Faith and Credit Clause has some

       limitation, in that a forum state may consider its own public policy “in

       determining the law applicable to a controversy.” Baker v. Gen. Motors Corp., 522
U.S. 222, 233 (1998). Yet, there is “no roving ‘public policy exception’ to the

       full faith and credit due judgments.” Id. Indeed, “[r]egarding judgments, . . . the

       full faith and credit obligation is exacting. A final judgment in one State, if

       rendered by a court with adjudicatory authority over the subject matter and

       persons governed by the judgment, qualifies for recognition throughout the

       land.” Id.; see also V.L. v. E.L., 577 U.S.                   (2016). Thus, “in spite of

       Indiana’s aversion to cognovit provisions, a valid foreign judgment based on a

       cognovit note will be given full faith and credit.” Jaehnen v. Booker, 806 N.E.2d
31, 34 (Ind. Ct. App. 2004); see W.H. Barber Co. v. Hughes, 223 Ind. 570, 588, 63
N.E.2d 417, 424 (1945) (giving full faith and credit to an Illinois judgment

       based upon a cognovit note).

[12]   In seeking relief, Evolving made no allegation that the New York court lacked

       adjudicatory authority or that EBF had not actually obtained a final judgment

       that was valid under New York law; in fact, Evolving conceded that New York

       “allows for” confessed judgments. App. at 70. Moreover, Evolving did not

       allege that EBF’s petition to domesticate the judgment was somehow deficient.

       Rather, Evolving’s Trial Rule 60(B) motion relied on principles of Indiana law

       that cannot surmount the mandates of the Full Faith and Credit Clause. As we

       discern no allegation of a meritorious defense in support of Trial Rule 60(B)

       relief, we conclude that the trial court erred in setting aside the judgment.

       Court of Appeals of Indiana | Opinion 49A05-1710-CC-2384 | February 27, 2018           Page 7 of 9
[13]   Reversed.

       Kirsch, J., concurs.
       Pyle, J., concurs with separate opinion.

       Court of Appeals of Indiana | Opinion 49A05-1710-CC-2384 | February 27, 2018   Page 8 of 9
                                                   IN THE
           COURT OF APPEALS OF INDIANA

       EBF Partners, LLC,                                         Court of Appeals Case No.
                                                                  49A05-1710-CC-2384
       Appellant-Plaintiff,

               v.

       Evolving Solutions Inc. d/b/a,
       et al.
       Appellees-Defendants.

       Pyle, Judge, concurring with opinion.

[14]   I concur with my colleagues holding that the Full Faith and Credit Clause of

       our Federal Constitution requires reversal of the trial court’s judgment.

       However, it is important to reemphasize that cognovit notes are prohibited in

       Indiana. In fact, it is a misdemeanor to induce someone into signing one. See

       Ind. Code § 34-54-4-1. Additionally, even Section 3.2(c) of the purchase

       agreement executed by the parties states that the confession of judgment can

       only be enforced “if permitted under the laws of the state in which the seller

       resides, . . . .” (App. Vol. 2, Pg. 22). This fact would likely make the

       confession of judgment unenforceable. But, that is a matter for the trial court in

       the State of New York.

       Court of Appeals of Indiana | Opinion 49A05-1710-CC-2384 | February 27, 2018           Page 9 of 9