Home Loan Savs. Bank v. Jahweh L.L.C.

[Cite as Home Loan Savs. Bank v. Jahweh L.L.C., 2022-Ohio-1118.]

COURT OF APPEALS
COSHOCTON COUNTY, OHIO
FIFTH APPELLATE DISTRICT

THE HOME LOAN SAVINGS BANK, : JUDGES:
: Hon. Earle E. Wise, P.J.
Plaintiff - Appellee : Hon. Patricia A. Delaney, J.
: Hon. Craig R. Baldwin, J.
-vs- :
:
JAHWEH LLC, et al., : Case No. 2022CA0001
:
Defendant - Appellant : OPINION

CHARACTER OF PROCEEDING: Appeal from the Coshocton County
Court of Common Pleas, Case No.
2018CI418

JUDGMENT: Reversed and Remanded

DATE OF JUDGMENT: March 31, 2022

APPEARANCES:

For Plaintiff-Appellee For Defendant-Appellant

JAMES R. SKELTON BRIAN W. BENBOW
Pomerene, Burns & Skelton Benbow Law Offices LLC
309 Main Street 265 Sunrise Center Drive
Coshocton, Ohio 43812 Zanesville, Ohio 43701
Coshocton County, Case No. 2022CA0001 2

Baldwin, J.

{¶1} Jahweh, LLC, appellant, is appealing the decision of the Coshocton County

Court of Common Pleas denying its motion to vacate the judgment rendered against it.

Appellant is The Home Loan Savings Bank.

STATEMENT OF FACTS AND THE CASE

{¶2} The Home Loan Savings Bank filed a complaint seeking judgment on a

cognovit note with the note attached. Home Loan filed a Statement and Confession of

Judgment with the complaint. On October 31, 2018 the trial court issued a judgment on

confession, awarding judgment in the amount of “$977,471.46, together with interest

thereon at the rate of five (5.00%) percent per annum from October 3, 2018” against

Jahweh, LLC, North Pointe Fitness Institute, LLC and Phillip F. Arthur. The clerk of courts

issued notice of the judgment to all defendants via registered mail, return receipt

requested, but all three notices were returned as unclaimed.

{¶3} More than three years after issuance of the judgment, on December 6,

2021, the defendants filed Defendants' Motion To Void The October 31, 2018 Judgment

And To Dismiss The Complaint. North Pointe, LLC and Philip Arthur argued that they did

not sign the note and therefor were “entitled to service of process. None was attempted.

The judgment against these Defendants must be vacated against these Defendants

accordingly.” (Defendants' Motion To Void The October 31, 2018 Judgment And To

Dismiss The Complaint, Dec. 6, 2021, p. 2) The defendants also argued that the note

signed on behalf of Jahweh, LLC was not a cognovit note because check boxes next to

the language what would create a cognovit note were not checked. Appellant and its co-
Coshocton County, Case No. 2022CA0001 3

defendants argued that parties did not agree to a cognovit provision and the judgment

must not stand.

{¶4} The defendants also argued that Home Loan did not present the underlying

promissory note, did not offer a running account and offered insufficient evidence to

pierce the corporate veil and hold Phillip Arthur individually liable.

{¶5} The trial court found in favor of Phillip Arthur and North Pointe Fitness, LLC,

holding that “there is only one guarantor on the note, and that guarantor is Jahweh, LLC.”

(Judgment Entry, January 5, 2022, p. 1). The trial court found against Jahweh, LLC,

finding that:

* * * the terms of the guarantee are unambiguous and clear, and need no

interpretation, and this Court must give effect to all of the contract

provisions. Sutton Bank v. Progressive Polymers, L.L.C., 161 Ohio St.3d

387 (2020). The cognovit language also complies with the statutory

requirements set forth in R.C. 2323.13. Defendant Jahweh argues that the

boxes next to the relevant language were not checked. However the

contract is completely silent as to what effect, if any, marking the box would

have on the terms of the contract. In addition, Defendant Jahweh cites no

caselaw in support of the proposition that the box must be checked for the

cognovit provisions to be enforceable. It is also beyond comprehension that

a businessman guaranteeing a note for $977,471.46 would misunderstand

the cognovit language or find that it was inconsistent with the guarantee

language on page 2 of the note.

Id. pp. 1-2.
Coshocton County, Case No. 2022CA0001 4

{¶6} Jahweh filed a timely appeal and submitted one assignment of error:

A. ASSIGNMENT OF ERROR NUMBER ONE

{¶7} “THE TRIAL COURT ERRED AS A MATTER OF LAW IN FINDING THAT

THE PARTIES ENTERED INTO A CONTRACT CONTAINING A COGNOVIT

PROVISION. THE TRIAL COURT FURTHER PREJUDICIALLY ERRED BY

CONSTRUING THE UNMARKED TERMS OF THE PARTIES' FORM AGREEMENT

AGAINST APPELLANT INSTEAD OF CONSTRUING THAT PROVISION AGAINST THE

DRAFTER OF THE CONTRACT AND THE COMMERCIAL ENTITY WHO CHOSE THE

BOILERPLATE COGNOVIT PROVISION.”

{¶8} “THE TRIAL COURT LACKED PERSONAL JURISDICTION OVER

APPELLANT IN THAT APPELLEE NEVER SERVED APPELLANT. THERE IS NO

EVIDENCE IN THE RECORD TO SUPPORT THE TRIAL COURT'S FINDING THAT

APPELLANT EXPRESSLY WAIVED SERVICE. THE TRIAL COURT THUS LACKED

SUBJECT MATTER JURISDICTION OVER APPELLEE'S COMPLAINT. THE TRIAL

COURT ACCORDINGLY COMMITTED PREJUDICIAL ERROR BY DENYING

APPELLANT'S MOTION TO VACATE THE OCTOBER 31, 2018 JUDGMENT ENTRY,

AS THAT JUDGMENT ENTRY WAS VOID FOR LACK OF PERSONAL JURISDICTION

OVER APPELLANT.”

{¶9} “THE TRIAL COURT COMMITTED PREJUDICIAL ERROR IN NOT

DISMISSING APPELLEE'S COMPLAINT IN THAT APPELLEE NEVER COMMENCED

ITS LAWSUIT BY SERVING ANY PARTY WITHIN ONE YEAR OF FILING ITS

COMPLAINT. THE TRIAL COURT LACKED SUBJECT MATTER JURISDICTION OVER
Coshocton County, Case No. 2022CA0001 5

APPELLEE'S COMPLAINT, AS THE CASE WAS NOT TIMELY COMMENCED UNDER

CIV.R. 3(A). THE TRIAL COURT'S RULING WAS THUS VOID AB INITIO.”

{¶10} “B. EVEN IF THE TRIAL COURT PROPERLY HAD JURISDICTION OVER

THE SUBJECT MATTER AND THE PARTIES, THE TRIAL COURT ERRED AS A

MATTER OF LAW WHEN IT ISSUED JUDGMENT WITHOUT PROOF OF A

CONTRACTUAL BREACH OR DAMAGES.”

{¶11} Appellant, Jahweh, LLC submitted only one assignment of error with distinct

subparts that could arguably stand as separate assignments of error. While Jahweh does

not expressly divide its brief, the argument can be logically divided into assertions that

the finding that the relevant document was a cognovit note was error and, because the

document was not a cognovit note, the trial court lacked jurisdiction and its judgment was

void ab initio.

{¶12} While Jahweh did not expressly frame its arguments as a motion to vacate

under Civ. R. 60(B), we find that portion of the motion presented to the trial court regarding

the judgment against Jahweh and the context within which it was presented provided

sufficient argument to trigger the application of that Rule. In the court below, Jahweh

captioned its motion “Defendants' Motion to Void the October 31, 2018 Judgment and to

Dismiss the Complaint.” We have previously found that “[c]ourts of this state have

recognized that the name given to a pleading or motion is not controlling. Lungard v.

Bertram, 86 Ohio App. 392, 395, 88 N.E.2d 308(1949). Rather, the substance of the

pleading or motion determines the operative effect thereof. Id. State ex rel. Browning v.

Browning, 5th Dist. Muskingum No. CT2011-CA-55, 2012-Ohio-2158, ¶ 43. In this matter

the motion, though captioned “Motion to Vacate” does state an argument for relief under
Coshocton County, Case No. 2022CA0001 6

Civ. R. 60(B).1 We will review the case and the facts to the extent that they are relevant

to the resolution of this issue

STANDARD OF REVIEW

{¶13} Jahweh sought an order vacating the judgment against it and cited several

grounds for relief, including an analysis of its allegations in the context of a motion under

Civ.R. 60(B). Because Jahweh seeks to vacate a prior judgment and because that relief

is available through Civ.R. 60(B), we will rely on that Rule and the relevant precedent to

frame our analysis.

{¶14} GTE Automatic Elec., Inc. v. ARC Industries, Inc., 47 Ohio St.2d 146, 351

N.E.2d 113 (1976), paragraph two of the syllabus, is the leading case regarding Civ.R.

60(B) motions:

To prevail on a motion brought under Civ.R. 60(B), the movant must

demonstrate 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, and, where the grounds of relief are Civ.R. 60(B)(1), (2) or

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

entered or taken.

{¶15} Where the judgment sought to be vacated is a cognovit judgment, the

standard set forth by GTE is modified. In such a case, the party seeking to vacate a

1
Appellant contends in its Reply in the case below that it was not arguing that Civ.R.
60(B) applies. After close review of that argument, we conclude that this reference is
intended to apply to the two co-defendants who are not part of this appeal and was not
intended to limit the argument regarding Jahweh.
Coshocton County, Case No. 2022CA0001 7

cognovit judgment need only show that the motion to vacate was timely made and that a

meritorious defense is available. See Fifth Third Bank v. Jarrell, Franklin App. No. 04AP-

358, 2005-Ohio-1260 at ¶ 11. World Tire Corp. v. Webb, 5th Dist. Knox No. 06CA10,

2007-Ohio-5135, ¶ 30.

Courts in this state have repeatedly held that cognovit judgments

present special circumstances, and ‘[t]he prevailing view is that relief from

a judgment taken upon a cognovit note, without prior notice, is warranted

by authority of Civ.R. 60(B)(5) when the movant (1) establishes a

meritorious defense, (2) in a timely application.’ Meyers v. McGuire (1992),

80 Ohio App .3d 644, 646, 610 N.E.2d 542. See also Medina Supply Co. v.

Corrado (1996), 116 Ohio App.3d 847, 850-51, 689 N.E.2d 600; Star Bank,

N.A. v. Jackson (Dec. 1, 2000), Hamilton App. No. C 000242, at *2.

Furthermore, in establishing a meritorious defense, the ‘movant's burden is

only to allege a meritorious defense, not to prove that he will prevail on that

defense.’ Meyers, supra, citing Rose Chevrolet, Inc. v. Adams (1988), 36

Ohio St.3d 17, 20, 520 N.E.2d 564.

World Tire Corp. v. Webb, 5th Dist. Knox No. 06CA10, 2007-Ohio-5135, ¶¶ 33.

{¶16} Trial courts are vested with discretionary authority in determining whether

movants have demonstrated meritorious defenses or claims. In order to find an abuse of

that discretion, we must determine 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, as quoted in Bichsel v. Dr. Laughlin, 5th Dist. Tuscarawas

No. 95 AP 030010, 1995 WL 768029 (Sept. 27, 1995) *1.
Coshocton County, Case No. 2022CA0001 8

ANALYSIS

{¶17} Jahweh’s sole assignment of error contains references to several errors,

but we will focus on the assertion that “the trial court erred as a matter of law in finding

that the parties entered into a contract containing a cognovit provision” as addressing that

alleged error will allow the most efficient resolution of the case.

{¶18} First, we note that the record contains no clear evidence of when Jahweh

received notice of the judgment. The record shows that the trial court’s attempts to serve

notice of the judgment were returned as unclaimed. Home Loan refers to foreclosure

actions filed in Coshocton County Common Pleas Court that establish that Jahweh had

notice of the judgments in 2019, but none of this information is contained within the record

before us and, as noted by Home Loan “this Court is bound by the record and cannot

consider any facts that are not contained within said record.” (Appellee’s Brief, p.6).

{¶19} Further, the trial court did not expressly address the timeliness of the motion

in its entry but granted the motion in part and denied it in part, tacitly finding that the

motion was timely.

{¶20} The trial court overruled the motion with regard to Jahweh, LLC only. The

trial court rejected Jahweh’s defense that the note was not a cognovit note for lack of a

check mark by those provisions that are a mandatory part of a cognovit note. The trial

court found that cognovit language complied with R.C. 2323.13, that the “contract is

completely silent as to what effect, if any, marking the box would have on the terms of the

contract” and that Jahweh provided no caselaw supporting the proposition that the box

must be checked for the cognovit provisions to be effective. The trial court also found it
Coshocton County, Case No. 2022CA0001 9

beyond comprehension that a business person would misunderstand the cognovit

language.

{¶21} We find that the necessary cognovit language is contained within the

guaranty signed by Phillip F. Arthur, on behalf of Jahweh, LLC, but the question remains

as to whether the document was converted into a cognovit note by the addition of that

language or whether the checkboxes immediately adjacent to the required language must

be checked to activate that language.

{¶22} Marking one or more boxes or blank, underlined spaces in a document is a

common strategy that allows the drafter to create a multipurpose document that can be

used in different circumstances rather than producing one document for each distinct

factual situation. This shortcut can lead to questions regarding the meaning or validity of

an agreement based upon the presence or absence of a checkmark. PNC Bank, N.A. v.

May, 8th Dist. Cuyahoga No. 98071, 2012-Ohio-4291, ¶¶ 26-27, (Not unreasonable for

party to disregard section describing obligations of guarantor when box on application

near “guarantor” was not checked); Banez v. Banez, 5th Dist. Stark No. 2006CA00216,

2007-Ohio-4584, ¶¶ 304-306, (Check mark indicates intent to replace contract of

insurance); Commonwealth Petroleum Co. v. Petrosol Intern., Inc., 901 F.2d 1314, 1315

(6th Cir.1990), (No box checked for delivery method, because propane was not physically

moved); In re McZeal, Bankr. N.D. Ohio No. 14-15947, 2019 WL 1271398, *4, (Failure to

check box supported conclusion the transaction was a consumer transaction);

McCandlish v. McCandlish, 5th Dist. Licking No. 13-CA-37, 2013-Ohio-5066, ¶ 27,

(Father claims he was not aware that the issues of parenting time and child support would

be argued at the hearing because box was not checked); Robins v. Glob. Fitness
Coshocton County, Case No. 2022CA0001 10

Holdings, LLC, 838 F.Supp.2d 631, 646, (Failure to check appropriate cancellation box

supported denial of unjust enrichment claim); Planet Clair LLC, v. American Honda Motor

Co., Inc., Cal. App. No. B308151, 2022 WL 779270, (March 15, 2022) *4 (Defendant

requests judicial notice of contract on which plaintiff failed to check box indicating primary

use of vehicle was for business or commercial purposes); Albrecht v. Marinas Internatl.

Consol., L.P., 9th Dist. Summit No. 25246, 2010-Ohio-5732, ¶ 23, (Failing to check

appropriate box submitted as defense to failure to winterize intake generator.)

{¶23} The checkmark, whether in a box or a blank space, has become a material

part of many form pleadings, judgment orders and contracts and the presence or absence

of a checkmark can have a significant impact on the document. The presence or absence

of a check mark in a space so reserved indicates that the parties intended that the

adjacent language will play some role in the document. Generally, the presence of a

checkmark indicates that the language following it shall be considered a part of the

agreement and the lack of the checkmark is a signal that the language will not apply.

{¶24} In the matter before us, the document contains several check boxes, some

are checked and others are not. The box next to “Specific Debts” is checked and the box

next to “All Debts” is not checked, supporting a conclusion that Jahweh is guarantying

only the specific debt described and no other.

{¶25} The next section, captioned “Exclusions,” contains three check boxes with

related text and none of the boxes are checked. We would conclude that the language

after the unchecked boxes is inapplicable. In the next section, captioned “Security,” the

document contains two check boxes and the box next to the phrase “the guaranty is
Coshocton County, Case No. 2022CA0001 11

unsecured” is checked while the box near “secured by” is unchecked leading to the

conclusion that this guaranty is not secured.

{¶26} The next two check boxes are adjacent to the language relevant to this

appeal and none are checked. The first is next to the following:

CONFESSION OF JUDGMENT. If Guarantor defaults, it authorizes any

attorney to appear in a court of record and confess judgment against it

in favor of Lender. The confession of judgment may be without process

and for any amount due on this Guaranty including collection costs and

reasonable attorneys' fees.

{¶27} The second unchecked box precedes the statutory warning required by

R.C. 2323.13(D). Jahweh contends that because these boxes are not checked a cognovit

note was not created and that the judgment should therefore be vacated. The trial court

found that Jahweh failed to provide any authority supporting its contention, that the

agreement is silent regarding the consequence of unchecked boxes and that Jahweh’s

representative should have understood its obligations as a competent business person.

{¶28} The fact that the guaranty is silent regarding the meaning of a check mark

does not support a conclusion that the inclusion or omission of a check mark is

meaningless. The fact that the parties executed a document with some boxes checked

and others unchecked is a tacit recognition that the action of checking the boxes held

some significance. Due to the lack of checkmarks next to the cognovit note language, this

document could be interpreted as a simple guaranty of the debt of Northpointe, LLC

without the cognovit provisions. The record contains insufficient evidence to reach a

conclusion regarding this document, but the lack of the check mark and appellant’s
Coshocton County, Case No. 2022CA0001 12

allegations do raise a question regarding the intent of the parties and whether the trial

court abused its discretion by not finding that Jahweh had alleged a meritorious defense.

{¶29} We have held that “[a]ppellants need to allege operative facts with enough

specificity to allow the trial court to decide whether a meritorious defense exists” and that

“[f]or purposes of a successful motion for relief from a judgment obtained by cognovit

note, where relief is pursued in a timely manner and in light of a proper allegation of a

meritorious defense, any doubt should be resolved in favor of setting aside the judgment

so that the case may be decided on the merits.” (Citations omitted.) Advanced Clinical

Mgt., Inc. v. Salem Chiropractic Ctr., Inc., 5th Dist. Stark No. 2003CA00108, 2004-Ohio-

120, ¶¶ 15-16. “* * * [A] proffered defense is meritorious if it is not a sham and when, if

true, it states a defense in part, or in whole, to the claims for relief set forth in the

complaint. (Citations omitted.) Amzee Corp. v. Comerica Bank-Midwest, 10th Dist.

Franklin No. 01AP-465, 2002-Ohio-3084, ¶ 20.

{¶30} The lack of marks in the boxes, in conjunction with the allegations described

in the Appellant’s motion and its verification of their truth, if believed, cast doubt on the

validity and enforceability of the cognovit note.

{¶31} We also take issue with the trial court’s finding that the language of the

guaranty was unambiguous in light of its comment that it contained no instruction

regarding the treatment of the checkboxes adjacent to the language that comprised the

cognovit note provisions. While the trial court did not expressly state its rational, it is

evident that it concluded that the unchecked boxes were meaningless. That conclusion

contradicts the parties use of the checkbox in the language preceding the cognovit note

language and the common use of checkboxes as noted in the precedent we have cited.
Coshocton County, Case No. 2022CA0001 13

Upon the record before us, a reasonable person could conclude that the absence of any

mark in the checkboxes indicates that the cognovit note provisions do not apply,

potentially creating an enforceable guaranty without the remedy offered by R.C. 2323.13.

See PNC Bank, N.A. v. May, 8th Dist. Cuyahoga No. 98071, 2012-Ohio-4291, ¶ 27

(“Pocos did not check, however, the only box on the front of the application as the

‘guarantor’ of All Trade's obligations under the line of credit. It was not, therefore,

unreasonable for Pocos to simply disregard this section because he did not believe he

was a ‘personal guarantor.’ ”).

{¶32} We hold that Jahweh has filed a timely motion for relief from judgment and

that its assertion that the guaranty was not converted into a cognovit note supplies a

meritorious defense and that, therefor, the trial court abused its discretion by failing to

grant relief from judgment.
Coshocton County, Case No. 2022CA0001 14

{¶33} The decision of the Coshocton County Court of Common Pleas is reversed

and this matter is remanded for further proceedings consistent with this opinion.

By: Baldwin, J.

Wise, Earle, P.J. and

Delaney, J. concur.