Cognovit Judgments Are Obtained Before The Complaint Is Served On The Defendant
It may seem obvious to creditors who use cognovit judgments that the Answer and Confession Of Judgment can be filed by the attorney acting pursuant to an appropriate Warrant Of Attorney in a loan document before the clerk of court effectuates service of process on the defendant. Still, some defendants have tried to get relief from a cognovit judgment by asserting they were entitled to service of process under the rules of civil procedure before the judgment was taken.
Recognizing that cognovit judgments routinely granted before the debtor receives a summons and the complaint from the clerk of court, one appellate court determined that the “assert it or lose it” rule of compulsory counterclaims did not apply because cognovit defendants are never required to file an answer due to the fact that an answer and confession of judgment has already been filed on their behalf. In Leonard v. Bank One of Youngstown, 1992 Ohio App. LEXIS 804 (7th Dist. Feb. 27, 1992).
Generally, the cases hold that service of process on the defendant (and soon to be cognovit judgment debtor) is not required because part of the cognovit language is a waiver of service. Second Nat. Bank of Warren v. Web Producers, Inc., 2004 Ohio 5786, 2004 Ohio App. LEXIS 5251 (7th Dist. Oct. 25, 2004) (“By executing a cognovit provision in a note and allowing a confession of judgment, the maker of the note waives his or her rights to notice and a prejudgment hearing” citing D.H. Overmyer Co., Inc. of Ohio v. Frick Co., 405 U.S. 174, 176-177 (1972) and Medina Supply Co., Inc. v. Corrado, 116 Ohio App. 3d 847, 850 (8th Dist. 1996)).
In a twist, an appellate court invalidated a local rule requiring that the complaint seeking a cognovit judgment be served by the clerk of court before the creditor could seek a cognovit judgment. Fogg v. Friesner, 55 Ohio App. 3d 139 (6th Dist. 1988). Overruling a Wood County local rule the appellate court said:
Appellant specifically argues that appellee failed to comply with Loc. R. 7.02 of the Wood County Court of Common Pleas. This rule calls for proper service of the complaint and an opportunity to answer. It is well-established that: ‘The very purpose of cognovit notes is to permit the note holder to obtain judgment without a trial of possible defenses which the signers of the notes might assert.’ Thus, by requiring notice and a response before judgment, Loc. R. 7.02 defeats the purpose of cognovit notes. . . . A warrant of attorney consented to by a debtor provides for waiver of prejudgment notice and hearing. Accordingly, Loc. R. 7.02 is also in conflict with the purpose underlying warrants of attorney. (citation and footnote omitted. emphasis added).
In Fifth Third Bank v. Schoessler’s Supply Room, 190 Ohio App. 3d 1 (12th Dist. 2010) the court analyzed the standard for ruling on a judgment debtor’s Rule 60 motion for relief from a cognovit judgment, the court said “[S]ince the judgment debtor lacks both notice and the opportunity to answer the complaint before a trial court enters judgment on the cognovit note, the movant need only demonstrate that a meritorious defense or claim exists and the motion is timely made.” In other words, the appellate court recognized that the requirements for relief from a judgment under Ohio R. Civ. P. 60(B) are unique in a cognovit judgment situation because “the judgment debtor lacks both notice and the opportunity to answer the complaint before a trial court enters judgment on the cognovit note.” Id.
For better or worse, Ohio permits cognovit judgments and loan documents that say a judgment may be taken against the borrower without notice mean just that and the waived or delayed notice includes service of process by the clerk of court.
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William T. Repasky practices with the Litigation Department at Frost Brown Todd. He focuses on lending and commercial services; banking litigation and financial institutions.