{¶ 29} I respectfully dissent.
{¶ 30} On May 18, 2001, appellant signed an "unconditional and continuing guarantee" of personal liability to establish a $300,000 line of credit with appellee on behalf of Gregory, Inc.
{¶ 31} By signing the unconditional and continuing guarantee, appellant is precluded from claiming that he was unaware of its contents. A person who signs a guarantee is charged, as a matter of law, "with knowledge of the content of the guarantee." Barclays Am./Commercial, Inc. v. ROYP MarketingGroup, Inc. (1988), 61 Ohio App.3d 701, 706, 573 N.E.2d 1115;Jazwa v. Alesci (Sept. 12, 1996), 8th Dist. Nos. 69857 and 69881, 1996 WL 517639, at *14 ("it is unreasonable for any court to assume that a guarantor signs a guaranty without understanding the nature of the document"). Appellant's acknowledged liability was "unconditional and continuing."
{¶ 32} In response to an inquiry by appellant, a loan officer for appellee erroneously left a telephone message that appellant was "not a personal guarantor on that line [of credit]." The credit "line" referred to is not otherwise identified. Appellant alleges that he relied upon this representation to his detriment.
{¶ 33} When Gregory, Inc. defaulted on its payments to the bank, appellee filed a complaint for judgment against appellant personally under the guarantee along with a warrant acknowledging the debt signed by appellant's attorney. The trial court entered judgment in favor of appellee.
{¶ 34} About a month later, appellant filed a motion for relief from judgment raising the defenses of waiver and estoppel. The trial court denied appellant's motion on the grounds that appellant had failed to raise a meritorious defense. The court found that waiver was inapplicable because appellee did not have the *Page 670 intent to, i.e., did not voluntarily, relinquish its right to personal judgment against appellant. The court denied appellant's estoppel claim on the grounds that appellant's reliance on the telephone message was not reasonable in light of the fact that he had signed a note personally guaranteeing the debt.
{¶ 35} The majority reverses under a novel theory of "waiver by estoppel." In light of appellant's execution of the guarantee, this theory, which is based on subsequent events, is inapplicable and inappropriate in this case.
{¶ 36} "It is well-established law in Ohio that, `by definition, a cognovit provision in a promissory note cuts off every defense, except payment, which the maker of the note may have against enforcement of the note.'" Bates v. Midland Titleof Ashtabula Cty., Inc., 11th Dist. No. 2003-L-127,2004-Ohio-6325, 2004 WL 2694923, at ¶ 25, quoting Tinnes v.Immobilaire IV, Ltd. (Feb. 13, 2001), Franklin App. No. 00AP-87, 2001 WL 122073, at *6. "[A] meritorious defense is one that goes to the integrity and validity of the creation of the debt or note, the state of the underlying debt at the time of confession of judgment, or the procedure utilized in the confession of judgment on the note." First Natl. Bank of Pandora v. Freed, 3rd Dist. No. 5-03-36, 2004-Ohio-3554, 2004 WL 1489074, at ¶ 10.
{¶ 37} Neither of appellant's alleged meritorious defenses encompasses the validity or the integrity of the debt. Therefore, they do not entitle appellant to relief from judgment. If every conceivable defense to a cognovit judgment constituted a meritorious defense, there would be no point in the creation of cognovit notes.
{¶ 38} Even if the defenses of waiver, estoppel, and waiver by estoppel were applicable, appellant has failed to allege operative facts that demonstrate the existence of these defenses in this case.
{¶ 39} The majority focuses on whether appellee waived its right to enforce the guarantee against appellant personally because appellee's "acts and conduct [were] inconsistent with an intent to claim" appellee's right under the guarantee. However, at the time appellee's representative made her erroneous representation, appellee had not made any effort to enforce appellee's rights under the note. According to the complaint and answer filed, payment became due only as of February 5, 2004. Apart from an erroneous response to appellant's inquiry, there has been no action or conduct by appellee inconsistent with an intent to assert appellee's rights.
{¶ 40} The majority finds "two separate occasions" in which appellee "informed [appellant] that he was not a personal guarantor of Gregory, Inc.'s debt." The first is a letter in which, according to the majority, appellant was notified that the debt "was secured by business assets only." (Emphasis added). The word *Page 671 "only" does not appear in the letter itself. The letter merely states that Gregory, Inc.'s line of credit is "in good standing" and is "secured by business assets." Nothing in the letter would lead a reasonable person to conclude that these unidentified "business assets" were the sole guarantee of payment on the debt. Therefore, the majority's conclusion that this letter evidences that the debt "was secured by business assets only" is incorrect.
{¶ 41} The majority also erroneously concludes that appellant relied on appellee's erroneous representation to his detriment by expending funds derived from the sale of Gregory, Inc.'s stock.
{¶ 42} At the hearing, appellant testified that, in reliance on appellee's misrepresentation, he, in his capacity as company president, sold about $70,000 of common stock owned by thecompany and used those funds to pay other creditors, rather than appellee. Appellant further testified that, had he been aware of the personal guarantee, he would have paid appellee instead. The fact that appellant had multiple, apparently lawful debts and paid some of those debts is totally irrelevant to appellant's liability under the guarantee. The defense of "had I known I owed appellee money, I would have not paid my other creditors and paid appellee instead" is meritless. Appellant's actions do not constitute any sort of detriment on appellant's part. Appellant sold company stock, not stock he owned personally. Appellant used the funds to pay his creditors. Appellant had an obligation, as company president, to pay the company's debts. Appellant cannot claim as a personal detriment the performance of his duties as the president of the company.
{¶ 43} Finally, the element of reasonable or justifiable reliance is completely lacking from the operative facts alleged by appellant. The voice mail from appellee's representative doesnot change the reality that appellant freely signed the guarantee and is charged, as a matter of law, with the contents of that document. Barclays Am./Commercial,61 Ohio App.3d at 706, 573 N.E.2d 1115; Jazwa, 1996 WL 517639 at *5.
{¶ 44} Since, as a matter of law, appellant had knowledge that he was personally liable in the event of default by Gregory, Inc., appellant could not reasonably rely to his detriment on the erroneous representation of appellee's agent. Appellant's guarantee was given as consideration for a $100,000 extension of Gregory, Inc.'s line of credit with appellee. Appellee had no duty to advise appellant that he was liable under the guarantee. Appellee's statement to appellant was simply a gratuitous response to appellee's inquiry. All appellant had to do wasread the guarantee he signed. Appellant cannot benefit from his failure to review the guarantee he executed or from the subsequent misinterpretation of that document by appellee's representative. *Page 672
{¶ 45} Under the majority's holding, a $100,000 liability may be called into question based solely on a subsequent single erroneous representation by one of the parties. The stability of contracts may not be so easily undermined. The majority's decision invites debtors and guarantors to claim ignorance of their written commitments to escape liability under such contracts when the opportunity arises. Such approach threatens the certainty of written contracts, which is central to our system of commerce.
{¶ 46} I must respectfully dissent from the majority's opinion because the defenses of waiver and estoppel do not entitle appellant to relief from judgment under a cognovit note, the only misrepresentation by appellee was subsequent to appellant's execution of the guarantee and based on a single telephone voice mail, there was no detrimental reliance by appellant, and appellant's reliance was not reasonable or justified. For these reasons, the judgment of the Portage County Court of Common Pleas should be affirmed.