Novak v. Novak

[Cite as Novak v. Novak, 2014-Ohio-10.]

IN THE COURT OF APPEALS

ELEVENTH APPELLATE DISTRICT

LAKE COUNTY, OHIO

JOSEPH WILLIAM NOVAK, : OPINION

Plaintiff-Appellant, :
CASE NOS. 2013-L-047
- vs - : and 2013-L-063

TONI GAYLE NOVAK, :

Defendant-Appellee. :

Civil Appeal from the Lake County Court of Common Pleas, Domestic Relations
Division, Case No. 92 DR 001086.

Judgment: Affirmed.

Stephen J. Futterer, Willoughby Professional Building, 38052 Euclid Avenue, Suite
105, Willoughby, OH 44094 (For Plaintiff-Appellant).

Linda D. Cooper, Cooper & Forbes, 166 Main Street, Painesville, OH 44077-3403 (For
Defendant-Appellee).

THOMAS R. WRIGHT, J.

{¶1} These appeals are from two judgments in a divorce case before the Lake

County Court of Common Pleas, Domestic Relations Division. In the first judgment, the

trial court denied appellant Joseph William Novak’s motion for relief from a prior entry in

which he was ordered to pay appellee Toni Gayle Novak $110,000 under the terms of a

settlement agreement. In the second judgment, the trial court denied his motion to stay

all pending proceedings to enforce payment of the debt. Under both appeals, appellant

essentially argues that he should not be required to comply with the settlement
agreement because he had three meritorious defenses to appellee’s claim.

{¶2} After a fifteen-year marriage, the parties were granted a divorce in August

1994. Under one provision of the final decree, appellant was obligated to hold appellee

harmless from a number of listed marital debts. Included in the list was a joint liability of

$65,000, owed to Darla A Francesconi. In regard to other existing debts, a second term

of the divorce decree provided:

{¶3} “In the event [appellant] files bankruptcy, either personally or through

corporate bankruptcy or through a Trustee, or if a creditor files an action against

[appellee] for any debts allegedly discharged by [appellant] for himself or his corporate

debt, excluding any personal debts individually incurred by [appellee], then [appellant]

will provide and pay for [appellee’s] defense, and if judgments are procured in relation to

[appellant’s] debts or [appellant’s] corporate debts, [appellant] will reimburse [appellee]

for any payments.”

{¶4} Approximately nine years after issuance of the divorce decree, Darla

Francesconi brought an action against appellee based upon a cognovit note which she

and appellant executed in favor of Francesconi in 1990. The note had been drafted by

appellant’s former business partner, Connie Helmenak, who was also Francesconi’s

mother. Even though appellant provided some assistance to appellee in defending the

“note” action, Francesconi ultimately obtained a judgment against appellee for

$110,000, plus interest. Appellee then satisfied the judgment.

{¶5} In September 2011, appellee filed a motion to show cause in the divorce

action, claiming that appellant should be held in contempt for failing to comply with the

provision of the divorce decree requiring reimbursement. Specifically, she alleged that

appellant refused to reimburse her for the Francesconi judgment and the expenses she

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incurred in defending the case. After the matter was pending for three months, appellee

submitted an amended motion to show cause that was based on the same allegations,

but was accompanied by copies of the relevant provisions of the 1994 decree.

{¶6} An initial hearing on the contempt motion was held before a magistrate on

December 20, 2011. At that time, the magistrate informed appellant that the contempt

proceeding would be quasi-criminal in nature, and that he was entitled to certain rights.

Moreover, two days after the initial hearing, the trial court appointed a public defender to

represent appellant. A final hearing on the contempt motion was set for February 24,

2012.

{¶7} Four days after the scheduled date for the hearing, the magistrate issued

a decision indicating that the contempt motion had been “resolved” because the parties

were able to negotiate a settlement of the pending issue. According to the magistrate,

appellant agreed to pay appellee $110,000 and interest at the statutory rate. Upon

concluding that the settlement agreement was fair and equitable, the magistrate entered

judgment in favor of appellee for the stated sum. One day later, the trial court adopted

the decision and entered judgment in accordance with the settlement.

{¶8} In June 2012, appellee instituted proceedings to execute on the money

judgment. Approximately one month later, appellant filed a Civ.R. 60(B) motion for relief

from the money judgment. Essentially, he argued that the settlement agreement was

unenforceable because, on the day it was supposedly negotiated, he was so “severely

ill” that he could not have acted knowingly and voluntarily. Appellant further asserted

that he was given bad advice by his appointed attorney during negotiation of the

settlement. As to his alleged liability to appellee based upon the Francesconi note, he

argued he was not obligated to reimburse appellee because: (1) the note was

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fraudulent; (2) no consideration was given for the note; and (3) the note pertained to

appellee’s personal debt, and thus was not covered under the provisions of the divorce

decree.

{¶9} After considerable delay in service of the 60(B) motion on appellee, an

evidentiary hearing on that motion was held before the magistrate on February 6, 2013.

In her subsequent decision, the magistrate concluded that appellant was not entitled to

relief from the “settlement” judgment because his evidence was insufficient to meet any

of the three requirements under Civ.R. 60(B). Regarding appellant’s “illness” assertion,

the magistrate found that his testimony did not establish that his illness rendered him

unable to knowingly and voluntarily enter into the settlement agreement. In relation to

the timing of the 60(B) motion, the magistrate concluded that appellant was not diligent

in requesting relief from the settlement because he waited until appellee tried to collect

on the judgment before filing the motion. Finally, the magistrate held that appellant did

not demonstrate he had a meritorious defense as to the underlying debt on the cognovit

note to Francesconi.

{¶10} In objecting to the foregoing decision, appellant raised specific challenges

to the magistrate’s finding concerning the extent of his illness when the settlement was

reached and the magistrate’s conclusion as to the lack of a meritorious defense to the

Francesconi debt. However, his objections never addressed the magistrate’s separate

holding that his 60(B) motion was not submitted timely. Furthermore, appellant did not

support his objections with a transcript of the evidentiary hearing before the magistrate.

Instead, he attempted to submit new evidence by attaching to his objections copies of

pleadings appellee filed when she initiated a bankruptcy proceeding in 2004. According

to appellant, since the pleadings contained no reference to appellee’s claim against him

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as to the Francesconi debt, she should be estopped from asserting the claim under her

contempt motion.

{¶11} After hearing oral arguments on the objections, the trial court rendered its

final judgment overruling those objections and adopting the magistrate’s decision as to

the disposition of appellant’s Civ.R.60(B) motion. In relation to each objection, the court

concluded that the substance of appellant’s argument could not be addressed because

he had not provided a transcript of the magistrate’s evidentiary hearing. Moreover, the

court did not consider the merits of appellant’s “estoppel” argument because the copies

of the bankruptcy pleadings were not submitted to the magistrate for review. Therefore,

appellee’s money judgment against appellant, based upon the settlement agreement,

was upheld.

{¶12} Within fifteen days of the denial of his 60(B) motion, appellant moved the

trial court to stay/dismiss all proceedings in aid of the execution of the money judgment.

As one basis for the new motion, appellant again argued that appellee should not be

allowed to recover from him based upon the Francesconi debt because she did not list

her claim against him in her bankruptcy pleadings. In a separate judgment denying the

stay/dismiss request, the trial court again held that appellant waived the “estoppel” issue

by failing to introduce the copies of the bankruptcy pleadings into evidence during the

evidentiary hearing on the 60(B) motion.

{¶13} Appellant brought separate appeals from the denial of his motion for relief

from the settlement judgment and the denial of his motion to stay/dismiss the execution

proceedings. In his brief for both appeals, he asserts four assignments for review:

{¶14} “[1.] The trial court erred in denying [appellant’s] objection to the

magistrate’s Conclusion of Law (C) that [appellant] had entered into the ‘agreement to

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hold [appellee] harmless from this debt that she paid on his behalf’ when the debt was

not one described in the divorce decree.

{¶15} “[2.] The trial court erred in denying [appellant’s] objection to the

magistrate’s Conclusion of Law (G) that ‘. . . promissory notes do not necessarily fail

due to a want of consideration where nothing of value was received from one party to

the transaction’ as this is an error of law.

{¶16} “[3.] The trial court erred in denying [appellant’s] objection to the

magistrate’s Conclusion of Law (G) that [appellant] did not satisfy his burden to prove a

justifiable reason for relief from the judgment and that he had a meritorious defense to

the judgment on the basis of lack of transcript and refusing to consider the bankruptcy

filings of [appellee] that were attached to the objections.

{¶17} “[4.] The trial court erred in adopting the magistrate’s decision in its

entirety and in denying [appellant’s] motion for relief from judgment.”

{¶18} Since our resolution of appellant’s fourth assignment is dispositive of this

appeal, it will be addressed first. Under that assignment, he contends that the

magistrate and the trial court erred in concluding that he failed to satisfy all three

requirements for relief from a final judgment pursuant to Civ.R. 60(B). Appellant first

argues that the agreement is unenforceable against him because the evidence

established that he was too ill on the date of the contempt hearing to have knowingly

and voluntarily agreed to the settlement.

{¶19} Civ.R. 60(B) provides, in pertinent part:

{¶20} “On motion and upon such terms as are just, the court may relieve a party

or his legal representative from a final judgment, order or proceeding for the following

reasons: (1) mistake, inadvertence, surprise or excusable neglect; (2) newly discovered

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evidence which by due diligence could not have been discovered in time to move for a

new trial under Rule 59(B); (3) fraud (whether heretofore denominated intrinsic or

extrinsic), misrepresentation or other misconduct of an adverse party; (4) the judgment

has been satisfied, released or discharged, or a prior judgment upon which it is based

has been reversed or otherwise vacated, or it is no longer equitable that the judgment

should have prospective application; or (5) any other reason justifying relief from the

judgment. The motion shall be made within a reasonable time, and for reasons (1), (2)

and (3) not more than one year after the judgment, order or proceeding was entered or

taken. * * *.”

{¶21} “In order to prevail on a Civ.R. 60(B) motion, a movant must demonstrate

that: (1) [he] has a meritorious claim or defense; (2) [he] is entitled to relief under one of

the grounds stated in Civ.R. 60(B)(1) through (5); and (3) the motion is made within a

reasonable time. GTE Automatic Elec. V. ARC Industries (1976), 47 Ohio St.2d 146,

* * *, paragraph two of the syllabus. If any of these three requirements are not met, the

motion should be denied. Svoboda v. Brunswick (1983), 6 Ohio St.3d 348, 351 * * *.

We review the trial court’s decision on a Civ.R. 60(B) motion for an abuse of discretion.

Griffey v. Rajan (1987), 33 Ohio St.3d 75, 77 * * *. In order to find an abuse of

discretion, we must find that the trial court’s decision was unreasonable, arbitrary or

unconscionable and not merely an error of law or judgment. Blakemore v. Blakemore

(1983), 5 Ohio St.3d 217, 219 * * *.” EMC Mort. Corp. v. Pratt, 10th Dist. Franklin No.

07AP-214, 2007-Ohio-4669, ¶7.

{¶22} As noted previously, in applying the 60(B) standard to the situation in this

case, the magistrate expressly concluded that appellant failed to satisfy any of the three

requirements for relief under the rule. As to the requirement of establishing a justifiable

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reason for relief from the prior judgment, the magistrate rejected appellant’s contention

that he had been too ill to agree to the settlement: “[Appellant] also claims he was so ill

that day he essentially entered into the agreement so he could leave the courthouse.

However, the testimony presented is not persuasive such that [appellant’s] illness

precluded him from being able to knowingly and voluntarily enter into the agreement to

hold [appellee] harmless from this debt she paid on his behalf.”

{¶23} As an initial point, the magistrate’s analysis regarding the persuasiveness

of the testimony as to the extent of his illness constituted a factual finding; i.e., based on

the magistrate’s consideration of the applicable testimony, she found that the nature of

appellant’s illness during the contempt hearing was not so great as to render him unable

to knowingly and voluntarily agree to the settlement. As part of his written objections to

the magistrate’s decision, appellant argued that he “testified sufficiently as to his illness

and state of body and mind that precluded a knowing and voluntary agreement to a

judgment against him.” However, despite raising this point, appellant did not afford the

trial court the opportunity to review his testimony through the submission of a transcript

of the evidentiary hearing on his Civ.R. 60(B) motion.

{¶24} Civ.R. 53(D)(3)(b)(iii) states that an “objection to a factual finding, whether

or not specifically designated as a finding of fact under Civ.R. 53(D)(3)(a)(ii), shall be

supported by a transcript of all the evidence submitted to the magistrate relevant to that

finding or an affidavit of that evidence if a transcript is not available.” “If an objecting

party fails to submit a transcript or affidavit, the trial court must accept the magistrate’s

factual findings and limit its review to the magistrate’s legal conclusions. In re Estate of

Lucas, 2d Dist. No. 23088, 2009-Ohio-6392, ¶32. Thus, on appeal of a judgment

rendered without the benefit of a timely transcript or affidavit, an appellate court only

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considers whether the trial court correctly applied the law to the facts as set forth in the

magistrate’s decision. Id.” King v. King, 11th Dist. Geauga Nos. 2012-G-3068 and

2012-G-3079, 2013-Ohio-2038. ¶28.

{¶25} In light of appellant’s failure to satisfy the “transcript” requirement of Civ.R.

53(D)(3)(b)(iii), he cannot question the propriety of the magistrate’s finding that, even if

he was ill on the date of the contempt hearing in February 2012, he was still capable of

“knowingly and voluntarily” entering into the settlement agreement with appellee.

{¶26} A settlement agreement is considered a form of a contract. B.W. Rogers

Co. v. Wells Brothers, Inc., 3d Dist. Shelby No. 17-11-25, 2012-Ohio-750, ¶27. As part

of a decision analyzing the proper construction of a settlement agreement, the Supreme

Court of Ohio has indicated: “‘A contract is generally defined as a promise, or a set of

promises, actionable upon breach. Essential elements of a contract include an offer,

acceptance, contractual capacity, consideration (the bargained for legal benefit and/or

detriment), a manifestation of mutual assent and legality of object and of consideration.’”

(Emphasis added.) Kostelnik v. Helper, 96 Ohio St.3d 1, 2002-Ohio-2985, ¶16, quoting

Perimuter Printing Co. v. Strome, Inc., 436 F.Supp. 409, 414 (N.D.Ohio 1976).

{¶27} Regarding a party’s contractual capacity, the focus of the analysis is upon

the person’s ability to comprehend the meaning of the proposed agreement and agree

to its terms:

{¶28} “An essential element of a contract is assent to the terms of the

agreement. Parties entering into a contract must be competent to assent to the terms

thereof. Where there is no capacity to understand these terms, there can be no

contract. See, generally, 17 Ohio Jurisprudence 3d (1980) 442, Contracts, Section 13,

and cases cited therein.

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 {¶29} “The test of competency to contract is whether the powers of a person’s

mind have been so affected as to destroy the ability to understand the nature of the act

in which he is engaged, its scope and effect or its nature and consequences. In Re

Appropriation for Hwy. Purposes (C.P. 1969), 19 Ohio Misc. 81, * * *. If a person, at the

time of entering into a contract, understands the nature, extent and scope of the

business he is about to transact, and possesses that degree of mental strength which

would enable him to transact ordinary business, he is in law considered a person of

sound mind and memory. Vnerakraft, Inc. v. Arcaro (1959), 110 Ohio App. 62, * * *.”

Davis v. Marshall, 10th Dist. Franklin No. 94APE02-158, 1994 Ohio App. LEXIS 3538,

*7-8, (Aug. 8, 1994).

{¶30} In this case, the magistrate did not frame her factual finding in terms of the

foregoing standard for contractual capacity. Instead, the magistrate framed her findings

to address the specific argument raised by appellant: whether he agreed to the

settlement knowingly and voluntarily. Nevertheless, given that the word “knowing”

necessarily entails the ability to comprehend and the word “voluntary” denotes a lack of

physical or mental coercion, the magistrate’s findings were legally sufficient to support

the conclusion that, despite any illness on the date of the contempt hearing, appellant

had the requisite capacity to enter into a binding contract. In other words, the finding

supported the holding that appellant’s illness was not so great as to “destroy” his ability

to understand both the meaning and effect of the settlement agreement. Cf., Miller v.

Miller, 9th Dist. Summit No. 21770, 2004-Ohio-1989, ¶16, in which the failure to prove

that the husband acted involuntarily in signing a settlement agreement was equated to a

failure to show a lack of contractual capacity.

{¶31} By failing to submit a transcript of the magistrate’s hearing on his Civ.R.

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60(B) motion, appellant waived his right to challenge her finding as to the extent of his

illness when the settlement was reached. In turn, her findings of fact supported the

ultimate conclusion that appellant had the contractual capacity to reach an agreement

with appellee as to the disposition of her “Francesconi” claim. Thus, appellant’s “illness”

assertion did not state a viable reason for relief from the settlement judgment under

Civ.R. 60(B)(1) or (B)(5).

{¶32} In attempting to satisfy the “justifiable reason” prong of the 60(B) standard,

appellant also asserted at the trial level that his decision to agree to the settlement was

based in part upon bad advice from his appointed counsel. According to appellant, his

counsel replied “yes” when he asked whether he would be able to subsequently contest

appellee’s claim even if he consented to the settlement. However, in addressing similar

arguments raised in relation to settlement agreements, Ohio appellate court have held

that such agreements cannot be set aside on the grounds of poor legal advice because

it is not a viable defense to the enforceability of a contract. Yatsko v. Yatsko, 9th Dist.

Medina App. No. 2681-M, 1998 Ohio App. LEXIS 3526, *8-9, (July 29, 1998); Wade v.

Wade, 6th Dist. Fulton No. F-02-014, 2003-Ohio-686, ¶8. Hence, appellant’s assertion

was legally insufficient to state a viable reason for relief under 60(B)(1) or (B)(5).

{¶33} As a final “justifiable reason” for relief from the settlement and the related

judgment, appellant also maintained that his potential liability was based on fraudulent

behavior. But, as part of her factual findings, the magistrate noted that appellant did not

show any fraud by appellee in the negotiation of the settlement; instead, his allegation

of fraud pertained solely to Francesconi and the cognovit note. While fraud in regard to

the cognovit note may have been a potential defense to appellee’s claim predicated on

her payment of that note, it did not constitute a justifiable reason for setting aside the

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settlement agreement. Therefore, appellant was not entitled to relief from the previous

judgment under Civ.R. 60(B)(3).

{¶34} Pursuant to the foregoing, appellant did not satisfy any of the five grounds

in Civ.R. 60(B) for granting relief from a prior final judgment. Since all three

requirements of the 60(B) standard must be met before such relief is warranted, the

denial of appellant’s motion can be upheld on this basis alone.

{¶35} The magistrate further held that appellant failed to submit his Civ.R. 60(B)

motion in a timely manner. In objecting to the magistrate’s decision, appellant never

challenged this particular conclusion. As a result, the trial court was permitted to adopt

the magistrate’s decision solely on appellant’s failure to satisfy the “timeliness”

requirement.

{¶36} Given that appellant was unable to establish any error in the magistrate’s

analysis of the second and third requirements of the 60(B) standard, the trial court did

not abuse its discretion in overruling his objections and ordering the denial of the Civ.R.

60(B) motion. For this reason, appellant’s fourth assignment is without merit.

{¶37} Each of appellant’s first three assignments pertains to whether he had a

meritorious defense to appellee’s claim for re-payment of the Francesconi debt. Under

his first assignment, he argues that he could not be held liable under the divorce decree

because the cognovit note only covered appellee’s own personal debt to Francesconi.

Under the second, he states that the cognovit note was unenforceable because it was

fraudulent and not supported by proper consideration. Under the third, he submits that

the trial court erred in not considering the merits of his contention that appellee should

be estopped from maintaining any claim against him based upon the cognovit note.

{¶38} Again, since the moving party for relief from a final judgment must satisfy

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all three prongs of the 60(B) standard before he can prevail on his motion, whether

appellant had a meritorious defense is of no consequence because he did not establish

a justifiable reason for setting aside the settlement agreement and the related judgment,

or that his motion was timely. Thus, the merits of the first three assignments need not

be reviewed because they are now moot in light of our disposition of the fourth

assignment. See App.R. 12(A)(1)(c).

{¶39} As the first three assignments of error are moot and the fourth assignment

lacks merit, it is the judgment and order of this court that the judgment of the Lake

County Court of Common Pleas, Domestic Relations Division, is affirmed.

TIMOTHY P. CANNON, P.J.,

CYNTHIA WESTCOTT RICE, J.,

concur.

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