COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 69594 : WILLIAM D. ELDER, ET AL. : : : JOURNAL ENTRY Plaintiffs-Appellees : : and v. : : OPINION SCOTT LIFETIME, INC., ET AL. : : : Defendant-Appellant : : : DATE OF ANNOUNCEMENT OF DECISION: NOVEMBER 14, 1996 CHARACTER OF PROCEEDING: Civil appeal from Common Pleas Court Case No. CV-285381 JUDGMENT: Affirmed. DATE OF JOURNALIZATION: __________________________ APPEARANCES: For Plaintiffs-Appellees: For Defendant-Appellant: JAMES W. JORDAN, ESQ. DONALD P. McFADDEN, ESQ. 80 Dorchester Square McFADDEN & ASSOCIATES CO. Westerville, Ohio 43081 1700 Standard Building 1370 Ontario Street Cleveland, Ohio 44113 - 2 - KARPINSKI, J.: Defendant-appellant, Scott Lifetime, Inc., appeals from the judgment of the trial court denying defendant's motion to vacate the agreed judgment entry. On appeal, defendant argues that the trial court abused its discretion (1) in requiring defendant to establish a meritorious defense as opposed to merely alleging a meritorious defense and (2) in denying the motion to vacate. The relevant facts follow. Husband and wife, Jeffrey W. Scott and Roberta L. Scott, were interested in operating their own McDonald's restaurant. In February, 1993, they formed the defendant corporation, Scott Lifetime, Inc. Jeffrey Scott owned 51 percent of the corporation and acted as president, treasurer, and one of the two directors of the corporation. Roberta L. Scott acted as vice-president, secretary, and the other director of the corporation. In order to purchase the franchise, the corporation needed financing and thus began discussions with plaintiffs, William and Mary Elder, Roberta Scott's parents, about the possibility of the Elders supplying the necessary money. The Elders supplied $209,000 to the corporation. The nature of this transaction was later disputed. The Elders and Roberta Scott contend that this money was a loan from the Elders to the corporation. Defendant argues that this money was a gift. To obtain a franchise, McDonald's requires that the prospective buyer or franchisee "have the ability to make a cash - 3 - injection, from unencumbered funds, of at least 25% of the total price." For that purpose, McDonald's requested verification that the money from the Elders was unencumbered. Thereafter, in January of 1993 the Elders signed a letter stating that the money for the purchase of the franchise was a gift. On May 30, 1993, Roberta Scott, as vice-president of Scott Lifetime Corporation, signed a promissory note to William and Mary Elder for $133,800. On February 24, 1995, the Elders filed a complaint against Scott Lifetime on the promissory note alleging that the entire amount was due and unpaid. The problem in the case at bar is that Scott Lifetime takes two contradictory positions. First, Scott Lifetime, at the direction of Roberta Scott, did not contest the note. Later, however, Scott Lifetime, this time at the direction of Jeffrey Scott, did contest the validity of the note. Specifically, on March 14, 1995, attorney Phillip Eyerman, at the request of Roberta Scott and on behalf of Scott Lifetime, Inc., filed an answer and admitted the validity of the note in the amount of $153,593.29. On that same date the parties filed an agreed judgment entry signed by (1) James Jordon, the attorney for the Elders, (2) Phillip Eyerman, who represented Scott Lifetime, Inc., and (3) Roberta Scott, who signed as vice- president of Scott Lifetime, Inc. The entry was signed by the trial judge and journalized also on March 14, 1995. Soon after, on March 24, 1995, Scott Lifetime, Inc., now at the request of Jeffrey Scott and through attorney Alan Rapoport, filed another - 4 - answer which, this time, denied the allegations made in the Elders' complaint. On August 2, 1995, Scott Lifetime filed a motion to vacate the agreed judgment entry of March 24, 1995. On this motion, the trial court held a full evidentiary hearing at which both Elders, as well as Jeffrey and Roberta Scott, testified. The trial court found that Scott Lifetime, Inc., failed to establish a meritorious defense and denied the motion to vacate. Scott Lifetime, Inc., timely appealed raising two assignments of error, which state as follows: 1. THE TRIAL COURT ABUSED ITS DISCRETION WHEN IT DENIED THE MOTION TO VACATE A CONSENT JUDGMENT ON A PROMISSORY NOTE WHERE THE CORPORATE DEFENDANT HAD NOT BORROWED ANY MONEY, HAD NOT AUTHORIZED THE EXECUTION OF A PROMISSORY NOTE AND HAD NOT AUTHORIZED THE CONFESSION OF JUDGMENT. 2. THE TRIAL COURT ABUSED ITS DISCRETION WHEN AT THE HEARING ON THE MOTION TO VACATE, IT REQUIRED THE DEFENDANT MOVANT TO PROVE BY A PREPONDERANCE OF THE EVIDENCE THE MERITS OF ITS ALLEGED DEFENSES. In order to prevail on a motion brought under Civ.R. 60(B), the 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 Electric v. ARC Industries (1976), 47 Ohio St.2d 146, 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 (1988), 36 Ohio St.3d 17. A trial - 5 - court's decision to deny a 60(B) motion is reviewed under an abuse of discretion standard. In the case at bar, both parties agree that Scott Lifetime's motion for relief from judgment was timely filed, and appellees do not contest the trial court's finding that Scott Lifetime established grounds for relief under Civ.R. 60(B). The only issue is whether Scott Lifetime, Inc., has met the second prong and established a meritorious defense. The trial court found that Scott Lifetime, Inc., did not. Generally, a trial court's factual findings in deciding a motion for relief from judgment will be sustained if they are supported by competent, credible evidence. Brown v. Akron Beacon Journal Publishing Co. (1991), 81 Ohio App.3d 135. If the record contains competent, credible evidence to support the trial court's factual findings, the court's ruling on a motion for relief from judgment will be reversed only if the court abused its discretion. In re Murphy (1983), 10 Ohio App.3d 134. Scott Lifetime argues that the motion to vacate should have been granted because, in order to obtain relief under Civ.R.60(B), the movant need only allege operative facts which would constitute a meritorious defense if found to be true. Colley v. Bazell (1980), 64 Ohio St.2d 243. While this point is well taken, it is also true that, "[i]f the movant files a motion for relief from judgment and it contains allegations of operative facts which would warrant relief under Civil Rule 60(B), the trial court may grant a hearing to take evidence and verify the - 6 - facts before it rules on the motion." Adomeit v. Baltimore (1974), 39 Ohio App.2d 97, 105 (emphasis added); Coulson v. Coulson (1983), 5 Ohio St.3d 12. Thus, even though 60(B) motions can be overruled without a hearing, see generally Ameritrust Co. v. Hicks Dev. Corp. (1993), 91 Ohio App.3d 377, the trial court in the case at bar gave all parties the opportunity to present any evidence at the hearing. Regarding the hearing on a 60(B) motion, "*** [m]ere allegations of a meritorious defense are not sufficient once a hearing has been granted." Kasputis v. Blystone (Apr. 20, 1990), Ashtabula App. No. 88-A-1416, unreported at 7. "If a hearing is granted, the movant must present evidence in support of the alleged defense which permits the court to test the veracity of the asserted defense." Nappi v. Cantagallo (Nov. 24, 1995), Ashtabula App. No. 95-A-0016, unreported at 3. The Franklin County Court of Appeals has repeatedly affirmed its earlier decision that the court may determine at the hearing whether the "defense is a sham." Canal Winchester Bank v. Exile (1938), 61 Ohio App. 253 at 259. See, also, Baldwin's Ohio Civil Practice (1996) 107-108, Section 53.05; Brenner v. Shore (1973), 34 Ohio App.2d 209; The Pool Man, Inc. v. Jimmy Rea (Oct. 17, 1995), Franklin App. No. 95APG04-438, unreported. This court, furthermore, has previously ruled that if "the evidence received at a hearing on the motion is of the same quality as that which would be received at trial on the merits, and is sufficient for a judge to rule on the merits, then, modifications of a judgment - 7 - should be permitted on a motion for relief from judgment." Quinn v. Bloom (Jan. 25, 1979), Cuyahoga App. No. 38090, unreported at 7. If under such conditions a court has authority to modify its judgment, the court, under the same conditions regarding the quality of evidence, also has authority to deny the motion to vacate. In the case at bar, the trial court tested the veracity of Scott Lifetime's evidence in support of its defense that the note was a gift. All the parties were afforded the opportunity to present and cross-examine witnesses. After all the evidence had been presented, the trial court, disbelieving Jeffrey Scott's testimony, found that the money was in fact a loan from the Elders to Scott Lifetime. The court found as follows: The second prong is that the party must show that there is a defense, a viable defense. And that's what the Court has been looking at. And it is my judgment that in that portion, that you do have a viable defense, has not been established. Just the opposite. The opposite being is that the money was given not as a gift, but as a loan. Therefore, on the second prong, you have not succeeded, and the Court will not reopen the case. It remains as a default judgment. (Tr. 138.) We conclude that the court did not abuse its discretion by denying the 60(B) motion, because the trial court's findings were supported by competent, credible evidence. Mary Elder, William Elder, and Roberta Scott all testified that the money was intended to be a loan, not a gift. Mary Elder testified that the money was placed in a joint bank account so that if anything happened to the Scotts, the money would return to the Elders. Roberta Scott also testified that the promissory note was typed - 8 - in the presence of her husband and that both she and her husband acknowledged, in a hearing before a domestic relations referee, that they owed money to the Elders. Regarding the letter sent to McDonald's stating the money was a gift, Roberta Scott, Mary Elder, and William Elder all testified that the letter was written only to satisfy McDonald's requirement that a portion of the purchase price be unencumbered funds. Finally, the 60(B) motion did not specify any further evidence, either by way of document or testimony, that was not presented at the hearing. Accordingly, the trial court did not abuse its discretion by denying the motion to vacate. Scott Lifetime's two assignments of error are overruled. Judgment affirmed. - 9 - It is ordered that appellees recover of appellant their costs herein taxed. The court finds there were reasonable grounds for this appeal. It is ordered that a special mandate issue out of this court directing the common pleas court 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. HARPER, P.J., and O'DONNELL, J., CONCUR. DIANE KARPINSKI JUDGE N.B. This entry is an announcement of the court's decision. See App.R. 22(B), 22(D) and 26(A); Loc.App.R. 27. This decision will be journalized and will become the judgment and order of the court pursuant to App.R. 22(E) unless a motion for reconsideration with supporting brief, per App.R. 26(A), is filed within ten (10) days of the announcement of the court's decision. The time period for review by the Supreme Court of Ohio shall begin to run upon the journalization of this court's announcement .