D. H. Overmyer Co. v. Frick Co.

FACTS:
As authorized under Ohio law, the Common Pleas Court of Lucas
County, Ohio, entered a confessed judgment in favor of a corporate
creditor against a corporate debtor, pursuant to the debtor's installment
note which contained a cognovit clause authorizing the creditor, upon
the debtor's default in payment, to designate any attorney to waive the
issuance and service of process and to confess judgment against the
debtor in any state court of record. The cognovit note was the result of
negotiations conducted by counsel for both parties for the replacement
of an earlier instalment note which contained no cognovit clause, and
which had been given after the debtor defaulted in progress payments
under a contract, later completed, for the installation of a refrigeration
system in the debtor's warehouse. In return for the debtor's execution of
the cognovit note, the creditor released its mechanics' liens, reduced the
amount of the instalment payments, extended the time for total payment,
and reduced the interest rate. Asserting a claim of deprivation of due
process, petitioner corporation sought review of a decision from the Court
of Appeals of Ohio, Lucas County, which affirmed a judgment in favor of
respondent creditor. The Supreme Court affirmed a judgment in favor of
respondent.

ISSUE:
Did petitioner knowingly and voluntarily waive its rights to notice and
hearing?

HELD:
Yes. The Supreme Court affirmed a judgment in favor of respondent
contractor on a cognovit provision contained within a second installment
note written by petitioner corporation. The cognovit provision allowed
respondent to secure entry of a judgment for default on payments on the
note by authorizing an attorney to appear on petitioner's behalf in order
to confess the judgment, without personal notice to petitioner or voluntary
appearance by petitioner. The court held that petitioner, in its execution
and delivery to respondent of the second installment note, voluntarily,
intelligently, and knowingly waived the rights it otherwise possessed to
prejudgment notice and hearing and that petitioner did so with full
awareness of the legal consequences. The parties' contract was not a
contract of adhesion or the product of disparity in the parties' bargaining
power. In fact, petitioner provided the second installment note to
respondent in exchange for substantial benefits and consideration.
Therefore, under the circumstances of this particular case, the court
concluded that cognovit provisions did not, per se, violate due process.