[Cite as Agarwal v. Matthews, 2012-Ohio-161.]


         Court of Appeals of Ohio
                               EIGHTH APPELLATE DISTRICT
                                  COUNTY OF CUYAHOGA


                              JOURNAL ENTRY AND OPINION
                                       No. 96950




                                   MUNNA AGARWAL

                                                      PLAINTIFF-APPELLEE

                                                vs.

                       CHARLES J. MATTHEWS, ET AL.
                                                      DEFENDANT-APPELLANTS




                                   JUDGMENT:
                             REVERSED AND REMANDED


                                      Civil Appeal from the
                                Cuyahoga County Common Pleas Court
                                      Case No. CV-681836

        BEFORE: E. Gallagher, J., Sweeney, P.J., and S. Gallagher, J.
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      RELEASED AND JOURNALIZED:               January 19, 2012


ATTORNEY FOR APPELLANTS

Janice A. Isakoff
Belkin Garfield LLC
25700 Science Park Dr.
Suite 270
Beachwood, Ohio 44122

ATTORNEY FOR APPELLEE

Harold Pollock
Harold Pollock Co., L.P.A.
5900 Harper Road, Suite 107
Solon, Ohio 44139




EILEEN A. GALLAGHER, J.:

      {¶ 1} Appellants,       Charles   and   Jacquelyn     Matthews,   appeal   the

judgment of the Cuyahoga County Court of Common Pleas denying their

motion for relief from cognovit judgment as untimely filed.              Appellants

argue that the trial court erred in that ruling because the trial court lacked

jurisdiction to enter the cognovit judgment as the underlying loan was a

consumer loan. After a thorough review of the record, and for the reasons

set forth below, we reverse and remand.

      {¶ 2} On January 14, 2009, appellee Munna Agarwal (“Agarwal”) filed a
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cognovit complaint against appellants, alleging that appellants owed

Agarwal $122,952.14 in principal and interest on a promissory note. The

promissory note, which was dated June 4, 2008, was for a loan from Agarwal

to appellants in the amount of $110,114.14.

      {¶ 3} The trial court granted Agarwal a cognovit judgment on January

14, 2009.   Appellants filed a Civ.R. 60(B) motion for relief from cognovit

judgment on April 5, 2010. Appellants attached to that motion an affidavit

from Charles Matthews wherein he stated the loan proceeds stemmed from

monthly payment obligations relating to the purchase of a family home.

      {¶ 4} On May 26, 2011, the trial court denied appellants’ motion for

relief from cognovit judgment as untimely filed.      Appellants brought this

appeal, raising the following two assignments of error, which we address

together.

      {¶ 5} Appellants’ assignments of error state:

            1. The trial court failed to find that the cognovit note
      arose from a consumer loan thereby rendering the warrant of
      attorney to confess judgment granted to plaintiff-appellee
      Munna Agarwal (“Agarwal”), in that cognovit promissory note
      invalid; and

             2. The trial court improperly found that Matthews’
      Motion for Relief From Cognovit Judgment was not timely filed
      because requests to vacate brought pursuant to [R.C. 2323.13(E)]
      relate to the subject-matter jurisdiction of the court so there is no
      time limit for filing a motion for relief from judgment.
      {¶ 6} In order to prevail on a motion brought under Civ.R. 60(B), the
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movant must demonstrate the following: (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. GTE Automatic Elec. v.

ARC Industries, 47 Ohio St.2d 146, 351 N.E.2d 113 (1976), paragraph two of

the syllabus. A motion for relief from judgment will be overruled if these

three elements are not satisfied. Rose Chevrolet, Inc. v. Adams, 36 Ohio

St.3d 17, 520 N.E.2d 564 (1988). However, in the case of a judgment on a

cognovit note, only two of the three elements need to be satisfied. Meyers v.

McGuire, 80 Ohio App.3d 644, 646, 610 N.E.2d 542 (1992). “[R]elief 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.” Id.

      {¶ 7} R.C. 2323.13(E) prohibits a warrant of attorney to confess

judgment when the note arises out of a consumer loan. In Shore W. Constr.

Co. v. Sroka, 61 Ohio St.3d 45, 48, 572 N.E.2d 646 (1991), the Supreme

Court, applying R.C. 2323.13(E), held that a judgment entered on a cognovit

note that arises out of a consumer transaction is void and must be vacated
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for lack of jurisdiction.   The Court in Shore W. then interpreted what

constitutes a “consumer loan” under R.C. 2323.13(E) as follows:

      R.C. 2323.13(E)(1) sets forth essentially four elements in the
      definition of consumer loan: (1) there must be a “loan”; (2) to a
      “natural person”; (3) by which a debt is incurred; (4) for
      primarily personal, family, educational or household purposes.
      There is no hint in this definition that real estate cannot serve
      primarily personal, family, educational or household purposes.
      Indeed, it is clear that the purchase of a home serves the most
      fundamental of personal and family purposes. Id.

      {¶ 8} In Shore W. the court held that a cognovit note that was used as a

down payment on a home was a consumer transaction under R.C. 2323.13

and that the trial court, therefore, did not have jurisdiction to enter

judgment upon a warrant of an attorney. This court has previously found a

party’s argument that a cognovit judgment against her was void due to an

underlying consumer loan to be a meritorious defense under Civ.R. 60(B).

Dodick v. Dodick, 8th Dist. Nos. 67385, 68588 (Jan. 25, 1996).

      {¶ 9} In regards to timeliness, in Solomon v. Vizurraga, 8th Dist. No.

87160, 2006-Ohio-3841, 2006 WL 2098713, this court allowed a Civ.R. 60(B)

challenge to a cognovit judgment under the present grounds despite a nearly

four-year gap between the judgment and the motion to vacate. In Solomon

we explained that, “[l]ack of subject matter jurisdiction can never be waived,

and it can be raised at any point in the proceedings.            Subject matter

jurisdiction does not relate to the rights of the parties (which a party can
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either affirmatively waive, or constructively waive, as in laches) but rather

relates to the power of the court to hear and decide a controversy. The

parties by their action, or inaction, cannot create a power in a court that is

not there.” Id. at ¶ 12. (Internal citations omitted.)

      {¶ 10} Though we find that the trial court erred in denying appellants’

motion as untimely, we note that the trial court made no finding as to

whether or not the loan underlying the present cognovit note constituted a

consumer loan. Agarwal opposed appellants’ motion for relief and attached

his own affidavit to support his argument that the underlying transaction

was not a consumer loan but rather a commercial transaction between

himself and Mt. Sinai Church. In Shore W., the Ohio Supreme Court noted

that the appropriate course under the present circumstances is a remand,

“for an evidentiary hearing on the elements of R.C. 2323.13(E)(1).” Shore

W., 61 Ohio St.3d at 49.

      {¶ 11} Based on the foregoing, we reverse the judgment of the trial court

and remand the case for further proceedings in accordance with law.

      It is ordered that appellants recover from appellee costs herein taxed.

      The court finds there were reasonable grounds for this appeal.

      It is ordered that a special mandate be sent to said court to carry this

judgment into execution.
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     A certified copy of this entry shall constitute the mandate pursuant to

Rule 27 of the Rules of Appellate Procedure.




EILEEN A. GALLAGHER, JUDGE

JAMES J. SWEENEY, P.J., and
SEAN C. GALLAGHER, J., CONCUR
