Blue Durham Properties v. Krantz

[Cite as Blue Durham Properties v. Krantz, 2019-Ohio-4459.]

COURT OF APPEALS OF OHIO

EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA

BLUE DURHAM PROPERTIES, :

Plaintiff-Appellee, :
Nos. 107974 and 108167
v. :

MARK K. KRANTZ, ET AL., :

Defendants-Appellants. :

JOURNAL ENTRY AND OPINION

JUDGMENT: AFFIRMED
RELEASED AND JOURNALIZED: October 31, 2019

Civil Appeal from the Cuyahoga County Court of Common Pleas
Case No. CV-07-638134

Appearances:

Levinson L.L.P., and Jeffrey M. Levinson, for appellee.

David V. Gedrock, for appellant Stephen P. Hanudel.

Mark Krantz, pro se.

Stacey Krantz, pro se.

MICHELLE J. SHEEHAN, J.:

Attorney Stephen P. Hanudel appeals from the trial court’s denial of

his motion to vacate sanctions awarded against him. Hanudel’s clients, defendants-
appellants Marc and Stacey Krantz, also filed an appeal of the trial court’s order

denying their motion to vacate sanctions in Blue Durham Properties v. Krantz, 8th

Dist. Cuyahoga No. 108167. This court determined that the appeals would be treated

as companion appeals, separately briefed and argued and disposed of by the same

merit panel. For purposes of this opinion, we have decided the merits of both

appeals together. And for the following reasons, we affirm the trial court’s decision

regarding Hanudel’s motion to vacate sanctions as well as the Krantzes’ motion to

vacate sanctions.

I. Procedural History and Substantive Facts

In August 2007, the Krantzes executed two cognovit notes, each in the

amount of $100,000, in favor of Blue Durham Properties (“Blue Durham”). The

notes contained warrants of attorney confessing judgment against the Krantzes. The

Krantzes defaulted under the terms of both cognovit notes, and Blue Durham

obtained judgment against them in the amount of $284,208, plus interest. In March

2009, the Krantzes paid the judgment in full and the case was dismissed.

Five years later, in October 2012, the Krantzes filed a motion for relief

from judgment, arguing that because the cognovit notes involved consumer loans,

the warrants of attorney were invalid and the court lacked subject-matter

jurisdiction to grant judgment by confession in the case. The trial court denied the

Krantzes’ motion for relief, and in November 2012, they appealed. See Blue Durham

Properties, L.L.C. v. Krantz, 8th Dist. Cuyahoga No. 99201, 2013-Ohio-2098

(“Krantz I”). On appeal, this court found the loans were commercial loans and
therefore the Krantzes lacked a meritorious defense. Id. at ¶ 14. This court also

found the motion for relief was untimely, stating that a motion to vacate a default

judgment, “which is filed five years after the judgment was rendered and three and

one-half years after paying the judgment, does not, on its face, satisfy the reasonable

time requirement * * *” and “in the absence of any evidence explaining the delay,”

the Krantzes failed to demonstrate timeliness. Id. at ¶ 15. Finding the trial court

did not abuse its discretion in denying the Krantzes’ motion for relief from

judgment, the panel affirmed the trial court’s judgment. Id. at ¶ 18. The Ohio

Supreme Court declined to accept the Krantzes’ appeal. Blue Durham Properties,

L.L.C. v. Krantz, 137 Ohio St.3d 1411, 2013-Ohio-5096, 998 N.E.2d 510.

Four years later, in November 2016, the Krantzes, through their

attorney, Stephen Hanudel, filed a second motion for relief from the same judgment.

This time, the Krantzes argued that the trial court lacked subject-matter jurisdiction

to enter judgment on the cognovit notes because Blue Durham never produced the

original warrants of attorney when it applied for judgment.

In response to the Krantzes’ second motion for relief, Blue Durham’s

counsel sent a letter to Hanudel, asking that Hanudel withdraw this second motion

for relief because it lacked any basis in law or fact. Blue Durham advised the

Krantzes that their motion was frivolous, untimely, and subject to res judicata in

light of this court’s 2013 decision finding the Krantzes’ motion to vacate the default

judgment filed three and one-half years after the Krantzes paid the judgment was

untimely. Blue Durham’s counsel also warned Hanudel that if he failed to withdraw
the motion, Blue Durham would request sanctions. Rather than withdrawing the

motion, Hanudel sent Blue Durham a letter demanding $405,019.18 in exchange for

a dismissal of the motion. Consequently, Blue Durham filed an opposition to the

motion for relief from judgment and a motion for sanctions in the amount of

$19,335.66. On November 15, 2016, the trial court denied the Krantzes’ second

motion for relief and held a hearing on the motion for sanctions.

On January 18, 2017, following the sanctions hearing, the trial court

awarded sanctions against the Krantzes and their attorney, Hanudel, jointly and

severally, in favor of Blue Durham, in the amount of $6,743.76. In awarding

sanctions, the trial court stated as follows:

Defendants Marc and Stacey Krantz fail to appear despite notice. The
court also notes that [the Krantzes’] brief in opposition to the motion
for sanctions contained no law or authority as a response. Plaintiff’s
motion for sanctions [is] granted in part, denied in part. The court
finds that the [Krantzes’] counsel Hanudel did violate [R.C.
2323.51(B)(1) and Civ.R. 11] in the filing of the 60(B) motion filed on
November 7, 2016.

The court further finds that the claim contained in that motion was
frivolous and that the plaintiff was adversely affected. The court
further finds that the defendants’ counsel, Mr. Hanudel, did not have
good grounds to support this pleading, that he failed to adequately
investigate before filing this motion, and that the motion was filed for
purposes of delay.

Hanudel and the Krantzes appealed the trial court’s orders denying the

second motion for relief from judgment and awarding sanctions. See Blue Durham

Properties, L.L.C. v. Krantz, 8th Dist. Cuyahoga No. 105236, 2017-Ohio-8230
(“Krantz II”).1 In October 2017, this court found that the trial court properly denied

the appellants’ second motion for relief from judgment because there was no

evidence that the trial court unlawfully entered judgment in the absence of the

original warrants of attorney:

Although R.C. 2323.13 requires the attorney to produce the original
warrant of attorney at the time he appears, in person, to confess
judgment to the court, it does not require that the original warrants of
attorney be filed with the court. Therefore, even if the original
warrants of attorney were not filed with the complaint, the trial court
would have had subject matter jurisdiction to render judgment as long
as counsel produced the originals when he confessed judgment to the
court.

The Krantzes produced no evidence establishing that the trial court
unlawfully entered judgment in the absence of original warrants of
attorney. Indeed, Hanudel admitted that he never investigated
whether the trial court failed to follow R.C. 2323.13 by requiring
production of the original warrants of attorney when it entered
judgment on cognovit notes. Therefore, the Krantzes failed to
demonstrate that the trial court lacked subject matter jurisdiction to
enter judgment on the cognovit notes, and the trial court properly
denied the motion for relief from judgment.

Id. at ¶ 19-20.

The Krantz II panel also found that the trial court properly awarded

sanctions for frivolous conduct where the motion for relief from judgment lacked

any basis in law or fact and counsel failed to properly investigate the accuracy of the

1 On December 6, 2016, the Krantzes appealed the trial court’s decision denying
their motion for relief from judgment in Blue Durham Properties, L.L.C. v. Krantz, 8th
Dist. Cuyahoga No. 105236, and on January 24, 2017, the Krantzes appealed the trial
court’s sanctions order in Blue Durham Properties, L.L.C. v. Krantz, 8th Dist. Cuyahoga
No. 105394. This court consolidated the two appeals and issued one opinion on both
orders in Krantz II.
allegations in the motion. Finding the trial court’s conclusion that the appellants

engaged in frivolous conduct was not an abuse of discretion, this court stated:

The Krantzes’ claims lacked any factual or legal basis, and Hanudel
failed to investigate the claims alleged in the second motion for relief
from judgment, even after Blue Durham’s counsel put him on notice
that the Krantzes’ claims were unfounded. By arguing that the trial
court rendered judgment in the absence of original warrants of
attorney, the Krantzes accused Blue Durham’s lawyer and the court of
fraudulently entering judgment against them. These are serious
accusations. Common sense dictates that these allegations should be
confirmed before they are publicly made.

The Krantzes’ frivolous conduct unnecessarily cost Blue Durham
significant attorney fees. Monetary sanctions provide redress to the
injured party and serve as a deterrent against future frivolous
conduct. * * * The Krantzes, through Hanudel, have twice challenged
the court’s subject matter jurisdiction, and neither challenge had any
merit. Indeed, Blue Durham argued in the trial court that both
motions for relief from judgment were frivolous. Although challenges
to subject matter jurisdiction may be made at any time, the claims
must be not frivolous or sanctions may be ordered.

Id. at ¶ 33-34.

In April 2018, the Ohio Supreme Court declined to accept the

Krantzes’ appeal of this court’s 2017 decision. Blue Durham Properties, L.L.C. v.

Krantz, 152 Ohio St.3d 1444, 2018-Ohio-1600, 96 N.E.3d 299. The Supreme Court

also denied the Krantzes’ motion for reconsideration of its decision to decline

jurisdiction. See 6/27/2018 Case Announcements, 2018-Ohio-2418, 100 N.E.3d

446.

On November 13, 2018, Blue Durham filed a motion with the trial

court for a debtor’s examination of Hanudel and both Marc and Stacey Krantz in an

effort to collect on the judgment. The record shows that three days later, on
November 16, 2018, Hanudel filed an affidavit of disqualification of the trial court

judge and a supplemental affidavit, seeking to disqualify Judge Nancy Margaret

Russo from presiding over any further proceedings in the case. See In re Russo, 156

Ohio St.3d 1201, 2018-Ohio-5457, 123 N.E.3d 1043. Hanudel alleged bias and

argued that the judge’s conduct in the sanctions hearing of January 17, 2017, violated

the Code of Judicial Conduct for multiple reasons, including yelling at him, falsely

accusing him of challenging the professionalism of a different judge who issued a

prior ruling in the case, asking him a series of prejudicial questions, and becoming

an advocate for the plaintiff. Id. at ¶ 4.

On December 4, 2018, the Ohio Supreme Court denied the affidavit of

disqualification, finding that the record did not clearly establish that the trial judge

was biased against him and “[the trial] judge believed — and was later affirmed on

appeal — that Mr. Hanudel had engaged in frivolous conduct.” Id. at ¶ 5, citing

Krantz II. Within its judgment entry, the Ohio Supreme Court stated that it had

already denied two affidavits of disqualification against Judge Russo that were filed

by Hanudel’s clients. Id. at ¶ 6.

Also on November 16, 2018, Hanudel, through his attorney, filed with

the trial court a third motion for relief from judgment under Civ.R. 60(B), entitled

“motion to vacate sanctions.” This time, Hanudel argued that the sanctions were

procured by a fraud upon the court because Blue Durham’s attorney did not follow

the proper procedure requiring presentment of the original warrant of attorney to

obtain a cognovit judgment. Specifically, Hanudel states that Blue Durham’s
counsel submitted a false affidavit attesting to the fact that court procedure was in

fact followed. The trial court denied Hanudel’s motion, and on December 12, 2018,

Hanudel filed the present appeal in this matter.

On January 22, 2019, the Krantzes filed a pro se motion to vacate

sanctions in which they advanced the same arguments made in Hanudel’s motion.

The trial court denied the Krantzes’ motion. And on January 28, 2019, the Krantzes,

pro se, filed their companion appeal. Once again, the Krantzes advanced the same

arguments on appeal as Hanudel’s appeal.

In one assignment of error, Hanudel contends that the trial court

erred by denying his motion to vacate sanctions. The Krantzes, in their sole

assignment of error, allege that the trial court erred “by awarding the wrong amount

[and] excessive amount of sanctions damages.” Because the substance of the

arguments are identical, we will address Hanudel’s and the Krantzes’ (collectively

“Appellants”) arguments together.

II. Law and Analysis

In their sole assignment of error, Appellants argue that the trial court

erred in denying their motion to vacate sanctions that was filed pursuant to

Civ.R. 60(B). Specifically, Appellants argue that Blue Durham fraudulently

procured sanctions against them and they are entitled to relief under Civ.R.

60(B)(5).
 A. Standard of Review

We review a trial court’s decision denying a Civ.R. 60(B) motion for

relief from judgment for an abuse of discretion. Baon v. Fairview Hosp., 8th Dist.

Cuyahoga No. 107946, 2019-Ohio-3371, ¶ 15, citing Rose Chevrolet, Inc. v. Adams,

36 Ohio St.3d 17, 20, 520 N.E.2d 564 (1988). An abuse of discretion “connotes more

than an error of law or judgment,” rather, it occurs when the court’s decision is

unreasonable, arbitrary, or unconscionable. Blakemore v. Blakemore, 5 Ohio St.3d

217, 219, 450 N.E.2d 1140 (1983). Under this deferential standard, the reviewing

court may not substitute its judgment for that of the trial court. Id.; C.S.J. v. S.E.J.,

8th Dist. Cuyahoga No. 107401, 2019-Ohio-3273, ¶ 8.

B. Motion for Relief from Judgment Under Civ.R. 60(B)

Civ.R. 60(B) delineates several reasons for which a party may obtain

relief from a final judgment:

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 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.

Civ.R. 60(B).
 The rule further provides that 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.” Civ.R. 60(B). While a motion

filed pursuant to Civ.R. 60(B)(5) is not subject to the one-year limitation, the motion

must be filed within a “reasonable time.” Simmons v. Simmons, 8th Dist. Cuyahoga

No. 97975, 2012-Ohio-4164, ¶ 8, citing GTE Automatic Elec., Inc. v. ARC Industries,

Inc., 47 Ohio St.2d 146, 351 N.E.2d 113 (1976), paragraph two of the syllabus. The

moving party has the burden of presenting evidence demonstrating the motion was

filed within a “reasonable time.” Id., citing Youssefi v. Youssefi, 81 Ohio App.3d 49,

53, 610 N.E.2d 455 (9th Dist.1991). And what constitutes a reasonable time depends

upon the circumstances of the case. Simmons.

To prevail on a motion for relief from judgment under Civ.R. 60(B),

the moving party must establish that: (1) the party has a meritorious defense or

claim to present if relief is granted; (2) the party 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., Inc. at paragraph two of the syllabus.

Failure to prove any of the three elements is fatal to the motion, as the elements are

“independent and in the conjunctive, not the disjunctive.” Id. at 151.

Appellants in this case argue that they were entitled to relief from

judgment under Civ.R. 60(B)(5). This provision is known as the “catchall” provision

of the rule and should not be used in place of a more specific ground for relief listed

in Civ.R. 60(B); rather, this fifth provision should be used only in extraordinary
cases when justice warrants it. Cerney v. Norfolk & W. Ry., 104 Ohio App.3d 482,

491, 662 N.E.2d 827 (8th Dist.1995), citing Adomeit v. Baltimore, 39 Ohio App.2d

97, 105, 316 N.E.2d 469 (1974).

This catchall provision provides relief from a judgment procured by a

fraud upon the court by an officer of the court. Coulson v. Coulson, 5 Ohio St.3d 12,

448 N.E.2d 809 (1983), paragraph two of the syllabus; Hill v. Ross, 8th Dist.

Cuyahoga Nos. 99094 and 99122, 2013-Ohio-1903, ¶ 18. A “fraud upon the court”

is “[a]ny fraud connected with the presentation of a case to a court[.]” Coulson at

15, citing 11 Wright & Miller, Federal Practice and Procedure, Section 2870, 253

(1973); Hartford v. Hartford, 53 Ohio App.2d 79, 84, 371 N.E.2d 591 (8th Dist.1977)

(defining fraud upon the court as conduct that “defiles the court itself,” or fraud that

is perpetrated by officers of the court “so as to prevent the judicial system from

functioning in the customary manner of deciding the cases presented in an impartial

manner”); Toscano v. Commr. of Internal Revenue, 441 F.2d 930, 933 (9th

Cir.1971) (permitting a Civ.R. 60(B)(5) motion for relief where an attorney “actively

participates in defrauding the court”). The trial court has wide discretion in

determining whether a fraud has been perpetrated upon it. Hartford at 85.

However, the doctrine of res judicata prevents repeated attacks on a

final judgment and applies to all issues that were or might have been litigated. Bank

of New York v. Jackson, 8th Dist. Cuyahoga No. 99874, 2013-Ohio-5133, ¶ 10, citing

Rogers v. Whitehall, 25 Ohio St.3d 67, 494 N.E.2d 1387 (1986). And where the facts

alleged in successive motions were available to an appellant at the time he or she
filed an earlier motion, the principles of res judicata bar the later motion. D’Agnese

v. Holleran, 8th Dist. Cuyahoga No. 86769, 2006-Ohio-2470, ¶ 6, citing Bahgat v.

Bahgat, 10th Dist. Franklin No. 83AP-469, 1984 Ohio App. LEXIS 11749 (Dec. 6,

1984). The doctrine of res judicata “‘prevents the successive filings of Civ.R. 60(B)

motions [for] relief from a valid, final judgment when based upon the same facts and

same grounds or based upon facts that could have been raised in the prior motion.’”

Harris v. Anderson, 109 Ohio St.3d 101, 2006-Ohio-1934, 846 N.E.2d 43, ¶ 8,

quoting Beck-Durell Creative Dept., Inc. v. Imaging Power, Inc., 10th Dist. Franklin

No. 02AP-281, 2002-Ohio-5908, ¶ 16; Cuyahoga Metro. Hous. Auth. v. Rabb, 8th

Dist. Cuyahoga No. 105384, 2017-Ohio-9017, ¶ 17.

Additionally, a Civ.R. 60(B) motion for relief from judgment cannot

be used as a substitute for an appeal. Antonyzyn v. Kelly, 8th Dist. Cuyahoga

No. 107838, 2019-Ohio-2829, ¶ 19. And issues that could have been raised on

appeal may not be raised in a Civ.R. 60(B) motion for relief from judgment. Zimmie

v. Zimmie, 8th Dist. Cuyahoga No. 54860, 1988 Ohio App. LEXIS 5211, 12 (Dec. 22,

1988), citing Blasco v. Mislik, 69 Ohio St. 2d 684, 433 N.E.2d 612 (1982).

Here, in their third motion for relief from judgment, Appellants once

again challenge the procedure by which Blue Durham’s counsel obtained the

cognovit judgment. This time, however, rather than argue that Blue Durham’s

counsel never produced the original warrants of attorney when it applied for

judgment (as made in the second motion for relief from judgment in 2016),

Appellants argue that Blue Durham’s counsel made false representations to the
court regarding the procedure counsel followed in presenting the original warrants

of attorney. Specifically, Appellants allege that counsel submitted a false affidavit

attesting to the fact that the trial court’s procedure for obtaining a cognovit judgment

was followed, when in fact, the civil case cover sheet filed with the original complaint

was completed by another attorney who shared office space with Blue Durham’s

counsel, and therefore, Blue Durham’s counsel could not have known that the

court’s cognovit procedure was followed. According to Appellants, this purported

misrepresentation contributed to the trial court’s award of sanctions against them.

We find, however, that Appellants’ third motion for relief from

judgment is barred by res judicata because Appellants’ concern with the purported

conflict between the civil case cover sheet and counsel’s affidavit in support of

sanctions could have been raised at the sanctions hearing held in January 2017 or in

the prior appeal from the court’s sanctions award. Although Appellants assert a new

basis upon which they seek relief — fraud upon the court — no new events and no

new facts or evidence have been produced to support this new claim. The record

shows that both documents — the civil cover sheet and the affidavit—were available

to Appellants at the time of the sanctions hearing and prior to filing the appeal in

Krantz II. The civil cover sheet was filed with the complaint in 2007, and Blue

Durham’s counsel’s affidavit, which Blue Durham attached to its reply brief in

support of its motion for sanctions, was filed in December 2016. The affidavit

became part of the court’s docket one month before the sanctions hearing. The

record also shows that Hanudel in fact addressed Blue Durham’s counsel’s affidavit
at the sanctions hearing, where Hanudel’s attorney questioned counsel’s averment

that he “followed procedures.” At no time during the sanctions hearing or during the

prior appeal, however, did Appellants raise any issue with an alleged conflict

between the civil case cover sheet and counsel’s affidavit.

Moreover, we find Appellants’ third motion for relief from judgment

to be untimely. While it is true, as Appellants assert, that a claim under

Civ.R. 60(B)(5) is not subject to the one-year time limitation applied to motions filed

under Civ.R. 60(B)(1)-(3), motions asserting a fraud upon the court must be made

within a reasonable time, which is determined by the circumstances in each case.

Here, Appellants filed their motions for relief approximately two years after the trial

court’s award of sanctions.2 Further, none of the Appellants included in their

motions any evidence of a reasonable explanation for the delay. Appellants

therefore failed to demonstrate the timeliness of their motion. Rabb, 8th Dist.

Cuyahoga No. 105384, 2017-Ohio-9017, ¶ 16 (finding where the moving party fails

to demonstrate the timeliness of the motion, the movant “fails to present evidence

of a reasonable explanation for the delay” and his motion is untimely under

Civ.R. 60(B)); Simmons, 8th Dist. Cuyahoga No. 97975, 2012-Ohio-4164, ¶ 8.

2 Although we consider the appellants’ requests for relief from judgment together
for purposes of this opinion, we reiterate that two motions for relief were filed with the
trial court: Hanudel filed his motion for relief from judgment on November 16, 2018
(nearly two years after the trial court’s sanctions order), and the Krantzes, pro se, filed
their motion for relief on January 22, 2019 (precisely two years after judgment).
 Because Appellants’ third Civ.R. 60(B) motion for relief from

judgment was based on facts that could have been raised during the sanctions

hearing or in a prior appeal, their third motion is barred by res judicata. Appellants

are therefore not entitled to relief under Civ.R. 60(B). Appellants’ motions are also

untimely. Thus, the trial court’s denial of their third Civ.R. 60(B) motion was not

an abuse of discretion.

Appellants’ sole assignment of error is overruled.

Judgment against Hanudel and the Krantzes is affirmed.

It is ordered that appellee recover of Appellants costs herein taxed.

The court finds there were reasonable grounds for this appeal.

It is ordered that a special mandate issue out of this court directing the

common pleas court to carry this judgment into execution.

A certified copy of this entry shall constitute the mandate pursuant to Rule

27 of the Rules of Appellate Procedure.

___________________________
MICHELLE J. SHEEHAN, JUDGE

LARRY A. JONES, SR., P.J., and
RAYMOND C. HEADEN, J., CONCUR