The Ohio Judicial Conference has issued a bench card, a copy of which is attached, that gives Ohio’s Common Pleas Court judges a checklist they may use when presented with an order seeking judgment on a note containing a warrant of attorney. While the bench card is merely advisory, it represents a victory for those who want to limit the use of warrants of attorney to confess judgment to monetary defaults only, and appears to be an end-run around the legislative process.
The checklist contains the following six items (quoted verbatim):
- Original Note produced and Complaint has copy of note attached as exhibit?
- Complaint incudes statement regarding last known address of the defendant either in averment or within caption?
- At least one maker resides in jurisdiction or Note executed in jurisdiction where Complaint is filed?
- Note includes “warrant of attorney” with statutory language above or below signature?
- The Note does not arise from a consumer transaction?
- Default consists of nonpayment on note, rather than default of other provision unrelated to payment”.
There is debate on both sides of the debtor/ creditor bar about whether a warrant of attorney may be used on confess judgment for a non-monetary default, also known as a covenant default. By issuing this bench card, the Common Pleas Court judges in Ohio’s 88 counties have (albeit non-binding) guidance that warrants of attorney may only be used for a monetary default, not in a covenant default situation.
The advice to creditor’s counsel facing a covenant default is to (i) accelerate the debt; (ii) sue after passage of the cure period; and (iii) plead that the debt was accelerated and due in full.
“How did we get to this bench card?” you might ask. As reported last year in this blog (HB 67 Warrants of Attorney dated February 24, 2017), a bill limiting the use of warrants of attorney to situations involving “the settlement of a dispute” was introduced into the 132nd General Assembly on February 16, 2017 by Representative Ron Young (R- Leroy Township). Vigorous debate ensured, and, in the interest of full discourse, the author objected to the bill. A later amendment to H.B. 67 replaced the “settlement of a dispute” language with a limitation on the use of warrants of attorney to “monetary defaults”, a phrase that was not defined in H.B. 67. The amended version of H.B. 67 also faced strenuous opposition.
The bench card was issued last fall without notice or warning, and in October, 2017, Rep. Young endorsed the bench card as set forth in the attached press release. The press release reflects the largely anecdotal stories that were offered by proponents of the bill regarding the horrors purportedly committed by commercial lenders, who were allegedly forcing borrowers to sign “away their business, their homes, their checking accounts, and their personal property, without notice and without the right to defend themselves even in cases where the lender was at fault.”
There are two problems with the proponents’ allegations: first, they were completely unsupported by authority. If lenders were filing baseless lawsuits, there would be public record documents available. The author requested such documentation, and received nothing. There might also be Rule 11 and other sanctions motions brought against creditor’s rights counsel filing frivolous and baseless suits.
Second, the proponents of limiting the use of warrants of attorney ignore the remedy of a motion for relief from judgment under Ohio Civil Rule 60(B). As creditor’s rights lawyers will attest, motions for relief from judgment are freely granted when filed after a judgment by confession is rendered.
The bottom line is this: the Ohio Judicial Conference has issued its bench card, clearly to the joy of opponents of warrants of attorney. Creditor’s rights counsel are advised to draft their complaints to make clear that there has been a monetary default, even if it arises from an acceleration based on a covenant default.