Sunrise Cooperative, Inc. v. Joppeck

2017 Ohio 7654

• Court: Ohio Court of Appeals
• Decided: September 18, 2017
• Docket: 16CA010984
• Status: Published

Opinion

[Cite as Sunrise Cooperative, Inc. v. Joppeck, 2017-Ohio-7654.]

STATE OF OHIO ) IN THE COURT OF APPEALS )ss: NINTH JUDICIAL DISTRICT COUNTY OF LORAIN )

SUNRISE COOPERATIVE, INC. C.A. No. 16CA010984

Appellant/Cross-Appellee

v. APPEAL FROM JUDGMENT ENTERED IN THE LARRY JOPPECK COURT OF COMMON PLEAS COUNTY OF LORAIN, OHIO Appellee/Cross-Appellant CASE No. 15CV187566

DECISION AND JOURNAL ENTRY

Dated: September 18, 2017

CALLAHAN, Judge.

{¶1} Appellant/Cross-Appellee, Sunrise Cooperative, Inc. (“Sunrise”), appeals the

judgment of the Lorain County Court of Common Pleas. Additionally, Appellee/Cross-

Appellant, Larry Joppeck, appeals from the trial court’s judgment. For the reasons set forth

below, this Court affirms in part, reverses in part, and remands.

I.

{¶2} Mr. Joppeck executed a cognovit line of credit note with Sunrise in the amount of

$50,000. Mr. Joppeck used the line of credit to purchase products and services for his

commercial farming operation. The promissory note contained a warrant of attorney.

{¶3} Sunrise filed a cognovit complaint against Mr. Joppeck in March 2015 for his

alleged default under the terms of the note. Sunrise obtained a cognovit judgment in the amount

of $49,562.75, which was satisfied in May 2015. 2

{¶4} In September 2015, Sunrise filed a second cognovit complaint against Mr.

Joppeck based on the same note. The trial court entered judgment in the amount of $39,168.66.

This amount originated as a charge back from Mr. Joppeck’s John Deere Credit Plan and was not

included in the first cognovit complaint and judgment.

{¶5} Two months later, Mr. Joppeck filed a motion to vacate the second cognovit

judgment. In a subsequent reply brief, Mr. Joppeck included a motion for attorney fees based

upon Sunrise’s alleged frivolous conduct. The trial court granted Mr. Joppeck’s motion to vacate

the second cognovit judgment and dismissed the complaint with prejudice. Additionally, the

trial court denied Mr. Joppeck’s motion for attorney fees. It is from this judgment, that Sunrise

timely appeals and Mr. Joppeck cross-appeals. To facilitate the analysis, this Court will address

the assignments of error out of order.

II.

SUNRISE’S ASSIGNMENT OF ERROR NO. 2

THE TRIAL COURT ERRED BY CONSIDERING AND APPLYING THE DOCTRINE OF RES JUDICATA TO BAR [SUNRISE’S] CLAIMS.

{¶6} Sunrise argues in its second assignment of error that the trial court erred in

considering and applying res judicata, because the trial court lacked subject matter jurisdiction.

Sunrise concedes on appeal that based on the trial court’s determination that it did not present the

original warrant of attorney at the time of confessing judgment, the trial court did not have

subject matter jurisdiction to enter the cognovit judgment.

{¶7} Mr. Joppeck argues the trial court only decided the issue of res judicata and not

subject matter jurisdiction. While Mr. Joppeck concedes he presented both arguments in his

motion to vacate, he contends subject matter jurisdiction was an alternative argument, whereas

res judicata was his primary argument. Mr. Joppeck insists that the trial court determined his 3

motion to vacate solely on res judicata and any reference to the lack of original warrant of

attorney “was noted in passing.” This Court agrees with Sunrise that the trial court erred in

considering and applying res judicata, because it lacked subject matter jurisdiction.

{¶8} The dismissal of a case for lack of subject matter jurisdiction “‘inherently raises

questions of law,’” which requires a de novo review. Servpro v. Kinney, 9th Dist. Summit No.

24969, 2010-Ohio-3494, ¶ 11, quoting Exchange St. Assocs., L.L.C. v. Donofrio, 187 Ohio

App.3d 241, 2010-Ohio-127, ¶ 4 (9th Dist.). “‘A de novo review requires an independent review

of the trial court’s decision without any deference to the trial court’s determination.’” Ohio

Receivables, L.L.C. v. Landaw, 9th Dist. Wayne No. 09CA0053, 2010-Ohio-1804, ¶ 6, quoting

State v. Consilio, 9th Dist. Summit No. 22761, 2006-Ohio-649, ¶ 4. Accordingly, this Court

reviews Sunrise’s assignment of error de novo.

{¶9} While the majority of Mr. Joppeck’s motion to vacate addressed res judicata, a

court cannot ignore issues regarding subject matter jurisdiction. See Nord Community Mental

Health Ctr. v. Lorain Cty., 93 Ohio App.3d 363, 365 (9th Dist.1994). Subject matter jurisdiction

can never be waived and may be raised at any time, by any party, or sua sponte by the court.

Civ.R. 12(H)(3); First Merit v. Boesel, 9th Dist. Summit No. 21667, 2004-Ohio-1875, ¶ 4.

“[J]urisdiction is a condition precedent to the court’s ability to hear the case. If a court acts

without jurisdiction, then any proclamation by that court is void.” State ex rel. Tubbs Jones v.

Suster, 84 Ohio St.3d 70, 75 (1998); see Lorain Natl. Bank v. Corna, 9th Dist. Lorain No.

13CA010472, 2015-Ohio-432, ¶ 6.

{¶10} R.C. 2323.12 and R.C. 2323.13 set forth the statutory requirements necessary for

a trial court to have subject matter jurisdiction over a cognovit note. Huntington Natl. Bank v.

Clark Dev., Inc., 9th Dist. Summit No. 26883, 2014-Ohio-2629, ¶ 11, quoting Huntington Natl. 4

Bank v. 199 S. Fifth St. Co., L.L.C., 10th Dist. Franklin No. 10AP-1082, 2011-Ohio-3707, ¶ 9.

Production of the original warrant of attorney to the trial court prior to confessing judgment is

one of the statutory requirements for subject matter jurisdiction in a cognovit action. R.C.

2323.13(A); see Clark at ¶ 12, quoting 199 S. Fifth St. Co., L.L.C. at ¶ 20; Simon v. Crow, 9th

Dist. Summit No. 22172, 2005-Ohio-1266, ¶ 5.

{¶11} In this case, Mr. Joppeck’s motion to vacate raised the issue of subject matter

jurisdiction, in addition to res judicata. The trial court discussed and found res judicata to be

applicable. However, the trial court also addressed subject matter jurisdiction. In fact, the trial

court began its analysis by quoting case law from this Court regarding the requirements for

subject matter jurisdiction in a cognovit note matter. The trial court went on to indicate that

“[Mr. Joppeck] appears to argue that the judgment rendered in [this case] is void” and treated

Mr. Joppeck’s motion to vacate “as a common law motion to vacate or to set aside the

judgment.” See In re. R.P., 9th Dist. Summit No. 26271, 2012-Ohio-4799, ¶ 19 (“[A] common

law motion to vacate is the appropriate means by which to challenge a judgment that is void.”).

Because Mr. Joppeck was seeking to vacate a void judgment, the trial court properly treated the

motion as a common law motion to vacate. See Corna at ¶ 7.

{¶12} The trial court acknowledged the statutory requirement contained in R.C.

2323.13(A), requiring the original warrant of attorney be presented at the time of confessing

judgment, and the fact that this did not occur in this case. While the trial court did not explicitly

state that it lacked subject matter jurisdiction, it reviewed the facts and applied R.C. 2323.13 in

order to analyze whether it had subject matter jurisdiction. The trial court found that the original

warrant of attorney was not presented at the time of confessing judgment, which “[was] in direct

contradiction to R.C. 2323.13(A).” 5

{¶13} Further, in its conclusion the trial court deemed the cognovit judgment to be void

and vacated the judgment based upon its review of the “[m]otion to [v]acate, the subsequent

briefs, the record, and R.C. 2323.13 et seq.” While the trial court found res judicata applied, the

conclusion paragraph did not indicate res judicata was the basis for vacating the cognovit

judgment. Instead, the trial court specifically mentioned R.C. 2323.13, the statutory

requirements to confer subject matter jurisdiction, and found the cognovit judgment to be void.

Thus, the trial court specifically decided the motion to vacate on the issue of subject matter

jurisdiction.

{¶14} Because the trial court lacked subject matter jurisdiction it had no power to act, or

in this case, no power to consider and decide the issue of res judicata. See David Ingram, D.C.,

Inc. v. Ohio Civ. Rights Comm., 67 Ohio App.3d 648, 651 (9th Dist.1990); see also Pratts v.

Hurley, 102 Ohio St.3d 81, 2004-Ohio-1980, ¶ 11. Thus, the trial court’s determination

regarding res judicata is a nullity and void, just as the cognovit judgment is a nullity and void.

See State ex rel. Tubbs Jones, 84 Ohio St.3d at 75; Fifth St. Realty Co. v. Clawson, 9th Dist.

Lorain No. 94CA005996, 1995 WL 353722, *2 (June 14, 1995) (“If a trial court lacks

jurisdiction, any order it enters is a nullity and is void.”) (Emphasis added.). In this case, the trial

court lacked subject matter jurisdiction and thus erred in considering and deciding the issue of

res judicata. Sunrise’s second assignment of error is sustained on this point.

{¶15} Notwithstanding the lack of subject matter jurisdiction, Sunrise also asserts the

trial court erred in finding that res judicata barred the second cognovit complaint. Mr. Joppeck

argues the trial court correctly decided that res judicata barred the second cognovit complaint.

This Court declines to address this argument as it has been rendered moot in light of the 6

determination that there was no subject matter jurisdiction in the matter. See David Ingram,

D.C., Inc. at 651; App.R. 12(A)(1)(c).

SUNRISE’S ASSIGNMENT OF ERROR NO. 1

THE TRIAL COURT ERRED BY DISMISSING [SUNRISE’S] COMPLAINT WITH PREJUDICE.

{¶16} Sunrise asserts in its first assignment of error that the trial court erred when it

dismissed the complaint with prejudice. This Court agrees.

{¶17} Upon finding the cognovit judgment to have been granted in violation of R.C.

2323.13, the court deemed the judgment to be void and ordered it vacated, and then dismissed

the case with prejudice. Civ.R. 12(H)(3) provides that “[w]henever it appears by suggestion of

the parties or otherwise that the court lacks jurisdiction of the subject matter, the court shall

dismiss the action.” Civ.R. 41(B)(4)(a) provides that a dismissal for lack of subject matter

jurisdiction “operate[s] as a failure otherwise than on the merits[,]” which is a dismissal without

prejudice. See MBNA Am. Bank, N.A. v. Berlin, 9th Dist. Medina No. 05CA0058-M, 2005-Ohio-

6318, ¶ 10.

{¶18} In this case, Mr. Joppeck raised the issue and the trial court found that it lacked

subject matter jurisdiction to enter the cognovit judgment. While the trial court properly

proceeded to dismiss the case under Civ.R. 12(H)(3), the trial court’s dismissal did not comport

with Civ.R. 41(B)(4)(a). Accordingly, the trial court erred in dismissing the cognovit complaint

with prejudice. Sunrise’s first assignment of error is sustained.

MR. JOPPECK’S ASSIGNMENT OF ERROR

THE TRIAL COURT ERRED AND ABUSED ITS DISCRETION WHEN IT DENIED [MR.] JOPPECK’S REQUEST FOR ATTORNEYS’ FEES PURSUANT TO []R.C. []2323.51 WITHOUT A HEARING IN SPITE OF THE EVIDENCE PRESENTED TO THE TRIAL COURT OF SUNRISE’S FRIVOLOUS CONDUCT. 7

{¶19} In his cross-appeal, Mr. Joppeck contends the trial court abused its discretion

when it denied his motion for attorney fees without a hearing. This Court disagrees.

{¶20} There are two preliminary matters that must be addressed before proceeding to

address the assignment of error: (1) this Court’s jurisdiction on the collateral issue of sanctions

under R.C. 2323.51, and (2) Mr. Joppeck’s pending motion for limited remand relative to a

second motion filed under R.C. 2323.51.

{¶21} First, in light of the above discussion regarding the trial court’s lack of subject

matter jurisdiction, it is necessary to determine if the trial court and this Court have jurisdiction

over a motion for attorney fees. While his motion to vacate was pending, Mr. Joppeck filed a

motion for attorney fees pursuant to R.C. 2323.51. A motion for attorney fees under Civ.R. 11

or R.C. 2323.51 is collateral to the original proceedings and thus the trial court retains limited

jurisdiction to address such motions even when jurisdiction has been divested in the underlying

matter. See Servpro, 2010-Ohio-3494, at ¶ 14, quoting Baker v. USS/Kobe Steel Co., 9th Dist.

Lorain No. 98CA007151, 2000 WL 14044, *2 (Jan. 5, 2000). The fact that the cognovit

complaint was dismissed due to a lack of subject matter jurisdiction did not deprive the trial

court of its jurisdiction to decide a motion for attorney fees. See Flatinger v. Flatinger, 10th Dist.

Franklin No. 01AP-1481, 2002-Ohio-3781, ¶ 7. Because the trial court had jurisdiction over this

collateral motion, this Court has jurisdiction to consider Mr. Joppeck’s assignment of error.

{¶22} Second, immediately following the filing of this appeal, Mr. Joppeck filed another

motion in the trial court for attorney fees or in the alternative a motion for reconsideration of the

denial of the attorney fees. Additionally, Mr. Joppeck filed a motion for limited remand in this

Court to allow the trial court to rule on the newly filed motion for attorney fees and

reconsideration. 8

{¶23} In his second motion for attorney fees, Mr. Joppeck acknowledged the trial

court’s denial of his first motion for attorney fees. Additionally, Mr. Joppeck reasserted and

incorporated his arguments from his prior motion in support of the second motion for attorney

fees. This motion was improperly filed. The trial court’s previous denial of Mr. Joppeck’s

motion for attorney fees was a final, appealable order. The Supreme Court of Ohio has held that

a motion for reconsideration filed after a final judgment is not contemplated by the Ohio Rules of

Civil Procedure and thus is a nullity. Pitts v. Ohio Dept. of Transp., 67 Ohio St.2d 378 (1981),

paragraph one of the syllabus. Since the motion to reconsider is a nullity, there is no basis to

remand this matter to the trial court. Further, Mr. Joppeck’s proper recourse to challenge the

denial of the first motion for attorney fees was to file an appeal, which he has done.

Accordingly, Mr. Joppeck’s motion for limited remand is denied.

{¶24} A decision of whether to impose a sanction of attorney fees for frivolous conduct

under R.C. 2323.51 is squarely within the broad discretion of the trial court. S & S Computer

Sys., Inc. v. Peng, 9th Dist. Summit No. 20889, 2002-Ohio-2905, ¶ 9. Thus, this Court will

review the trial court’s denial of Mr. Joppeck’s motion for attorney fees for an abuse of

discretion. An abuse of discretion is “‘more than an error of law or judgment; it implies that the

court’s attitude is unreasonable, arbitrary or unconscionable.’” Blakemore v. Blakemore, 5 Ohio

St.3d 217, 219 (1983), quoting State v. Adams, 62 Ohio St.2d 151, 157 (1980). When applying

the abuse of discretion standard, this Court may not simply substitute its own judgment for that

of the trial court. Pons v. Ohio State Med. Bd., 66 Ohio St.3d 619, 621 (1993).

{¶25} This Court has held that R.C. 2323.51 requires the trial court to hold a hearing

before it can award attorney fees as a sanction for frivolous conduct, but the same is not required

when the trial court declines to award attorney fees. See Avon Poured Wall, Inc. v. Boarman, 9th 9

Dist. Lorain No. 04CA008448, 2004-Ohio-4588, ¶ 24. While acknowledging this proposition of

law, Mr. Joppeck relies upon Turowski v. Johnson, 68 Ohio App.3d 704 (9th Dist.1990), to argue

that the trial court arbitrarily denied his request for attorney fees, thereby abusing its discretion.

“An arbitrary denial occurs when (1) the record clearly evidences frivolous conduct and (2) the

trial court nonetheless denies a motion for attorney fees without holding a hearing.” Poindexter

v. Grantham, 8th Dist. Cuyahoga No. 95825, 2011-Ohio-1576, ¶ 12, citing Bikkani v. Lee, 8th

Dist. Cuyahoga No. 89312, 2008-Ohio-3130, ¶ 31.

{¶26} The trial court’s order contained no discussion or analysis regarding Mr.

Joppeck’s request for attorney fees. The order simply stated “[Mr. Joppeck’s] [r]equest for

[a]ttorneys’ [f]ees is hereby denied.” “While it is preferable that the trial court give more

specific reasons for denying the motion, the failure of the trial court to so explain is not grounds

for reversal.” Ohio Dept. of Adm. Servs. v. Robert P. Madison Internatl., Inc., 138 Ohio App.3d

388, 399 (10th Dist.2000).

{¶27} Further, the trial court’s discussion regarding res judicata in the order is void due

to the lack of jurisdiction, see Clawson, 1995 WL 353722, at *2, and thus cannot serve as basis

for the trial court having arbitrarily denied the motion for attorney fees. Compare Turowski at

706 (The trial court was found to have arbitrarily denied a motion for attorney fees after having

stated on the record in a hearing that it could not “‘by any stretch of the imagination in any

manner whatsoever see how in the world * * * Ohio Edison can be brought into this action by

what you told me so far. It just boggles my mind to understand that.’”). Accordingly, Mr.

Joppeck’s reliance upon Turowski is misplaced because the record does not clearly contain

evidence of frivolous conduct. Thus, the trial court did not arbitrarily deny the motion for

attorney fees without a hearing. Mr. Joppeck’s assignment of error is overruled. 10

III.

{¶28} Sunrise’s first and second assignments of error are sustained. This Court declines

to address Sunrise’s merit arguments regarding res judicata in its second assignment of error as

they have been rendered moot. Mr. Joppeck’s motion for limited remand is denied and his cross-

appeal is overruled.

{¶29} The judgment of the Lorain County Court of Common Pleas is affirmed in part,

reversed in part, and this matter is remanded with the instruction that the trial court dismiss the

complaint without prejudice.

Judgment affirmed in part, reversed in part, and cause remanded.

There were reasonable grounds for this appeal.

We order that a special mandate issue out of this Court, directing the Court of Common

Pleas, County of Lorain, State of Ohio, to carry this judgment into execution. A certified copy of

this journal entry shall constitute the mandate, pursuant to App.R. 27.

Immediately upon the filing hereof, this document shall constitute the journal entry of

judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the

period for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is

instructed to mail a notice of entry of this judgment to the parties and to make a notation of the

mailing in the docket, pursuant to App.R. 30. 11

Costs taxed to Appellee/Cross-Appellant.

LYNNE S. CALLAHAN FOR THE COURT

HENSAL, P. J. CARR, J. CONCUR.

APPEARANCES:

DAVID J. WIGHAM and LUCAS K. PALMER, Attorneys at Law, for Appellant/Cross- Appellee.

KATHLEEN M. AMERKHANIAN, Attorney at Law, for Appellee/Cross-Appellant.