COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 68574 MARC GLASSMAN, INC. : : Plaintiff-Appellee : : JOURNAL ENTRY -vs- : AND : OPINION BAG-A-SWEET CANDY CO., ET AL. : : Defendants : : : [Appeal by Thomas J. Scheiman : and Judith R. Scheiman : : Defendants-Appellants] : DATE OF ANNOUNCEMENT OF DECISION DECEMBER 14, 1995 CHARACTER OF PROCEEDING Civil appeal from Court of Common Pleas Case No. 269548 JUDGMENT Reversed and vacated DATE OF JOURNALIZATION APPEARANCES: For Plaintiff-Appellee: For Defendants-Appellants Thomas J. Scheiman and Judith JACK M. SCHULMAN, ESQ. R. Scheiman: Schulman, Schulman & Meros 1700 Standard Building PATRICK J. KEATING, ESQ. 1370 Ontario Street KAREN KELLY GRASSO, ESQ. Cleveland, Ohio 44113 Buckingham, Doolittle & Burroughs 50 South Main Street P.O. Box 1500 Akron, Ohio 44309-5300 - 3 - JAMES M. PORTER, P.J., Defendants-appellants Thomas J. and Judith R. Scheiman appeal from the trial court's denial of their Civ. R. 60(B) motion for relief from a cognovit judgment against them as guarantors in favor of plaintiff-appellee Marc Glassman, Inc. Defendants claim the trial court abused its discretion in not vacating the judgment because the defendants presented timely and meritorious defenses to the full amount of the judgment taken. We find merit to the appeal and reverse and vacate the cognovit judgment. The facts in this case are undisputed. Bag-A-Sweet Candy Company is a packager of candy. It was operated and owned by Thomas J. Scheiman. Other owners were principals of Marc Glassman, Inc. ("MGI") which operates Marc's discount stores in Northeast Ohio. Bag-A-Sweet obtained two loans from National City Bank, evidenced by cognovit notes. The notes were secured by the assets of Bag-A-Sweet and the cognovit guarantees of MGI, Thomas Scheiman and his wife, Judith. Bag-A-Sweet defaulted on the notes. The Bank foreclosed and liquidated Bag-A-Sweet's assets, which left an outstanding balance of $87,839.79 on the notes with interest. MGI, as guarantor, paid off National City Bank and took an assignment of the notes and Scheiman guarantees. MGI then proceeded against Bag-A-Sweet and the Scheimans, and on April 27, - 4 - 1994 obtained a cognovit judgment for $87,839.79 plus interest against them. On July 5, 1994, the Scheimans filed a Civ. R. 60(B) motion for relief from judgment contending that they could not be liable for the full amount of the debt since MGI was a pro rata guarantor and should be liable for its one-third of the obligation. In the motion papers, MGI acknowledged that to the extent the Scheimans actually paid more than their pro rata share of the liability, i.e., two-thirds, they would have a right to contribution from MGI for any amount they paid in excess of the two-thirds. MGI agrees on this appeal that it cannot collect more than two-thirds the total liability from the Scheimans. MGI offered below to reduce its cognovit judgment against the Scheimans by one-third, i.e., to $58,559.86 with interest. (Appee Brf. at 4). On January 18, 1995, the trial court made the following entry: Defendants Scheimans' Motion to Vacate Judgment filed on July 5, 1994 is hereby Denied. The Motion is not well taken unless and until the Scheimans' pay 2/3 of the debt. A timely appeal ensued. Defendants' sole assignment of error states as follows: I. THE TRIAL COURT ERRED IN OVERRULING THE SCHEIMANS' MOTION TO VACATE JUDGMENT. - 5 - The requirements necessary for a motion seeking relief from judgment have been set forth in paragraph two of the syllabus of GTE Automatic Electric v. ARC Industries (1976), 47 Ohio St.2d 146: 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 for 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. Recently followed and quoted with approval in Strack v. Pelton (1994), 70 Ohio St.3d 172, 174. The issue on this appeal from the denial of a Civ. R. 60(B) motion for relief from judgment is whether the trial court abused its discretion. Strack v. Pelton, supra at 174; Moore v. Emmanuel Family Training Ctr. (1985), 18 Ohio St.3d 64. The term, "abuse of discretion" connotes more than an error of law or judgment; it implies that the court's attitude is unreasonable, arbitrary or unconscionable. Blakemore v. Blakemore (1983), 5 Ohio St.3d 217, 219. Furthermore, where timely relief is sought, and the movant has a meritorious defense, doubt, if any, should be resolved in favor of the motion to set aside the judgment so that cases may be decided on their merits. GTE Automatic Elec. v. ARC Industries, Inc., supra. - 6 - Where the judgment sought to be vacated is a cognovit judgment, the party filing a 60(B) motion has a lesser burden. Because the defendant has never had a chance to be heard in cognovit proceedings, he should be given his day in court. In such a case, existence of a valid defense to all or part of the claim constitutes a ground for relief. See Davidson v. Hayes (1990), 69 Ohio App.3d 28; Society National Bank v. Val Halla Athletic Club & Recreation Center, Inc. (1989), 63 Ohio App.3d 413. The moving party does not have to prove his case on the motion, only that he had a meritorious claim or defense to assert. Rose Chevrolet, Inc. v. Adams (1988), 36 Ohio St.3d 17, 20; Moore v. Emmanuel Family Training Ctr. (1985), 18 Ohio St.3d 64, 67; Meyers v. McGuire (1992), 80 Ohio App.3d 644, 646. The motion herein was timely filed. It is also apparent that the Scheimans have asserted a meritorious defense to the underlying claim. Indeed, both the plaintiff and the court below have obliquely conceded that the judgment awarded to plaintiff for the full amount of the indebtedness exceeds the amount by a minimum of one-third of what plaintiff is due. Plaintiff is a co-guarantor on the National City Bank Notes with the Scheimans. As the plaintiff and the Scheimans are each co-guarantors, they have respective rights of contribution against each other. Baltimore & O.R. Co. v. Walker (1888), 45 Ohio St. 577; Pietro v. Leonette (1972), 30 Ohio St.2d 178. The right of contribution arises between co-guarantors where one has - 7 - paid more than his or her fair share of the obligation. Camp v. Bostwick (1870), 20 Ohio St. 337, 340; Huntington National Bank v. Marthaller (June 2, 1988), Cuyahoga App. No. 55121, unreported. Although the plaintiff might, under the proper circumstances, be entitled to a judgment for contribution against the Scheimans, it cannot, as a purported assignee, take judgment for the full amount alleged to be owed on the National City Bank Notes. Plaintiff's right of contribution is limited to the amount paid that exceeds plaintiff's proportionate share of the liability. Koch v. Steel Mill Services, Inc. (July 18, 1990), Lorain App. No. 89A004704, unreported. Plaintiff conceded below that it was not entitled to collect more than two-thirds of the liability from the Scheimans and offered to amend the judgment to reflect the offset. Under the circumstances, the trial court abused its discretion by not granting the Scheimans' motion. See Lewandowski v. Donohue Intelligraphics, Inc. (1994), 93 Ohio App.3d 430. In Lewandowski, a cognovit judgment was taken against a guarantor of certain promissory notes in an improper amount as a result of a miscalculation by the plaintiff. The court held that the guarantor had a "meritorious defense" to the judgment and was entitled to relief from judgment under Rule 60(B). See, also, Meyers, supra (makers of note entitled to - 8 - relief from judgment where payee failed to account for interest of deceased copayee). Defendants' assignment of error is sustained. The defendants' motion for relief from judgment is granted. The cognovit judgment is reversed and vacated. Case remanded for further proceedings in accordance with the law. - 9 - It is ordered that appellants recover of appellee their costs herein taxed. It is ordered that a special mandate be sent to the Court of Common Pleas to carry this judgment into execution. A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. O'DONNELL, J., CONCURS. KARPINSKI, J., DISSENTS (SEE ATTACHED DISSENTING OPINION) JAMES M. PORTER PRESIDING JUDGE N.B. This entry is made pursuant to the third sentence of Rule 22(D), Ohio Rules of Appellate Procedure. This is an announcement of decision (see Rule 26). Ten (10) days from the date hereof, this document will be stamped to indicate journalization, at which time it will become the judgment and order of the court and time period for review will begin to run. COURT OF APPEALS OF OHIO EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 68574 : MARC GLASSMAN, INC. : : : Plaintiff-Appellee : : DISSENTING -vs- : : OPINION BAG-A-SWEET CANDY CO., ET AL. : : : Defendants : : [Appeal by Thomas J. Scheiman : and Judith R. Scheiman] : DATE OF ANNOUNCEMENT OF DECISION: DECEMBER 14, 1995 KARPINSKI, J., DISSENTING: I respectfully dissent. The majority opinion, which reverses the trial court's ruling on the motion for relief from judgment and summarily vacates the cognovit judgment, improperly substitutes its judgment for that of the trial court. The record demonstrates that eight months prior to this action National City Bank ("NCB") demanded payment of the entire amount of the deficiency on the note from each of the three guarantors. The Scheimans dishonored their guarantees and paid nothing. Marc Glassman, Inc. ("MGI") made good and, as assignee, obtained a cognovit judgment against the Scheimans in accordance - 2 - with the terms of their guarantees. The Scheimans, after a further delay of two months, sought relief from the judgment against them based on their desire to continue to pay nothing while protracting the litigation. The trial court understandably denied such relief. The majority summarily vacates the judgment against the Scheimans by misapplying the abuse of discretion standard and substituting its judgment for that of the trial court in this case. The record, however, simply does not support the majority's contention that the trial court committed "more than an error of law or judgment" and that the denial of the Scheimans' motion was "unreasonable, arbitrary or unconscionable." The Scheimans' motion for relief from judgment did not establish any defense to their guarantees or the underlying $89,839.79 indebtedness on the note. The Scheimans merely argued that MGI, in the dual role of assignee and guarantor, was precluded from recovering the entire amount of the note from them as co-guarantors. However, this court has specifically recognized that the assignee of a cognovit guarantee has "the right to have judgment confessed in his favor to the same extent as enjoyed by the assignor prior to the assignment." Milstein v. Northeast Ohio Harness (1986), 30 Ohio App.3d 248, 251. The trial court was warranted in denying the motion for relief from judgment based on Milstein, thereby leaving the Scheimans to resort to separate action for contribution. However, the trial court gave the Scheimans the option of (1) - 3 - obtaining relief from the $89,839.79 cognovit judgment by paying their proportionate share, or (2) pursuing a separate action for contribution, as follows: Defendants Scheimans' Motion to vacate Judgment filed on July 5, 1994 is hereby Denied. The Motion is not well taken unless and until the Scheimans pay 2/3 of the debt. This order is a sound practical decision, based on well established authority that the Scheimans, as guarantors, had no equitable right to compel payment by MGI as co-guarantor until the Scheimans paid their own proportionate share of the $89,839.79 guaranteed debt. Restatement of the Law of Security, Section 156; Annotation, Right to Compel Cosurety to Pay Share, 38 A.L.R.3d 680; Nissenberg v. Felleman (1959), 339 Mass. 717. Without such a meritorious defense to the cognovit judgment, the trial court properly denied the Scheimans' motion. The Ohio Supreme Court has recognized that Civ. R. 60(B) is designed to "strike a balance between the conflicting principles that litigation must be brought to an end and justice should be done." Colley v. Bazell (1980), 64 Ohio St.2d 243, 248. The trial court's determination strikes a proper balance and furthers both the interests of justice and finality by conditioning relief from judgment on payment by the Scheimans of their own proportionate share of the indebtedness. Cf. Neubauer v. Kender (1986), 32 Ohio App.3d 49 (conditionally granting, rather than conditionally denying, relief from judgment). Under the circumstances, the trial court's decision is sound, may avert - 4 - further litigation, and does not constitute "an abuse of discretion." The Scheimans still have the option of maintaining a separate action for contribution rather than obtaining relief from the cognovit judgment. In any event, however, the Scheimans will have to pay their own proportionate share of the guaranteed indebtedness. The matter boils down simply to who should pay first. The Scheimans dishonored their guarantees and stood by while MGI paid the entire debt to NCB and then had to resort to this litigation to collect against them. The equities do not favor the Scheimans. As noted in the authority they cite, because they have not paid anything they cannot seek to reduce their own liability via a right to contribution against MGI until they have paid more than their pro rata share of the debt. The Scheimans based their argument that MGI was precluded from obtaining the cognovit judgment against them for the entire amount of the guaranteed indebtedness on Moody v. Kirkpatrick (M.D. Tenn. 1964), 234 F.Supp. 537 (Texas law). However, their reliance on this authority was demonstrably misplaced because the Moody court erroneously based its opinion on a Texas decision which had been overruled. To support its decision, the majority relied upon a different case, Koch v. Steel Mill Services, Inc. (July 18, 1990), Lorain App. No. 89CA004704. However, Koch does not support the proposition for which it is cited; on the contrary, - 5 - the law announced by the court in Koch supports the position of MGI, and the facts are readily distinguishable. Koch involved distinct claims of a deceased guarantor and his widow who was subsequently assigned the note and a guarantee. The deceased guarantor's life insurance company paid the proceeds of his life insurance policy to the bank to extinguish the $72,100 principal of the guaranteed indebtedness. The remaining balance on the note after this payment was $764.46 in accrued interest. The bank assigned the note to the deceased guarantor's widow fourteen months later upon her payment of the $764.46 accrued interest balance. The Koch court specifically recognized that the widow, as assignee of the note and a guarantee, had a claim against the co- guarantors for the full amount of the balance due on the note at the time of the assignment. Id. at p. 3; accord Milstein v. Northeast Ohio Harness, supra. Accordingly, the widow could recover only the $764.46 in accrued interest she paid on the note, but not the $72,100 principal paid fourteen months prior to the assignment of the note to her. The Koch court recognized that the deceased guarantor's estate, which was not an assignee of the note, may have a claim for contribution against the co-guarantors of the debt. However, only the estate of the guarantor, not the widow, could resort to an action for contribution, because the principal debt on the note was extinguished by the guarantor fourteen months before the note was assigned to her. Unlike the facts in Koch, the - 6 - Scheimans never argued, and the record contains no indication, that MGI satisfied the note and extinguished the obligation prior to the assignment to MGI in this case. For these reasons, I would overrule the Scheimans' sole assignment of error and affirm the trial court's disposition of their motion for relief from judgment. Moreover, even if reversal of the trial court's determination were warranted as the majority contends, this court should remand the matter to the trial court rather than summarily vacating the cognovit judgment .