D. H. Overmyer Company, Inc., of Ohio v. Frick

PETITIONER: D. H. Overmyer Company, Inc., of Ohio
RESPONDENT: Frick
LOCATION: Cold Storage Warehouse

DOCKET NO.: 69-5
DECIDED BY: Burger Court (1972-1975)
LOWER COURT: State appellate court

CITATION: 405 US 174 (1972)
ARGUED: Nov 09, 1971
DECIDED: Feb 24, 1972

ADVOCATES:
Gregory M. Harvey - for respondent
Russell Morton Brown - for petitioners

Facts of the case

In 1966, D.H. Overmyer Co. entered into a contract with Frick Co. for the manufacture and installation of a $223,000 automatic refrigeration system for a warehouse under construction in Toledo, Ohio. The agreement established a promissory note with monthly payment obligations. Overmyer began to fall behind on the monthly payments. Frick filed three mechanic's liens against the Toledo warehouse, and the two companies negotiated a new payment agreement in February 1967. Overmyer again fell behind on payments, and the two companies established a new note which contained a confession-of-judgment provision.

In June of 1968, Overmyer stopped making monthly payments under the new note and brought a claim against Frick in the United States District Court for the Southern District of New York for alleged breaches of the original contract. The District court concluded that the plaintiff failed to show any likelihood that it would prevail on the merits.

Frick came before the Common Pleas Court of Lucas County, Ohio and asked the court to enter a judgment against Overmyer for the remaining balance of the note plus interest. Overmyer did not receive notice prior to the entry of the judgment because the confession-of-judgment provision waived the issuance and service of process and confessed judgment.

After the entry of the adverse judgment, Overmyer filed several motions, including a motion to vacate the judgment due to a lack of notice. After a hearing was held, the court denied the motions. Overmyer appealed to the Court of Appeals for Lucas County, Ohio, asserting deprivation of due process in violation of the Ohio and Federal Constitutions. The appellate court affirmed the lower court's decision. The Supreme Court of Ohio dismissed the subsequent appeal, and Overmyer appealed to the Supreme Court.

Question

Can the constitutional right to notice be surrendered as part of consideration for a contract?

Media for D. H. Overmyer Company, Inc., of Ohio v. Frick

Audio Transcription for Oral Argument - November 09, 1971 in D. H. Overmyer Company, Inc., of Ohio v. Frick

Warren E. Burger:

-- Overmyer against Frick Company, Mr. Brown, you may proceed whenever you are ready.

Russell Morton Brown:

Thank you.

Mr. Chief Justice and may it please the Court.

This case brings up for consideration a judgment rendered in the Ohio State Court on a promissory note which contained a provision for confession of judgment.

This is the note, commonly known as cognovit note by which the maker of the note agrees that if there is any default in payment of an installment or in the principal of the note, that he appoints any attorney in the state to enter an appearance, waive notice and service of process and confess judgment for the amount demanded.

Appointment of this attorney has been made by the holder of the note, the adverse body to the maker of the note.

In the case that borrower, it appears that the party have a contract whereby the respondent, holder of the note, wants to install a cold storage, a refrigerating plant in very large warehouse and the original contract was for some $230,000.00 for $223,000.00.

The payment of $94,000.00 was made and a note in the amount of $130,000.00 was executed to cover the balance.

This was to be paid in monthly payments of some 16 months and it contained this provision that we are considering here, the cognovit provision, that is any attorney might be designated by the holder of the note to enter an appearance and confess judgment.

Now --

Contract is made in Ohio, was it?

Russell Morton Brown:

Yes, Your Honor, it was.

And there is no question that the applicable state laws are the Ohio Laws?

Russell Morton Brown:

That would be correct, yes sir.

Now after the installation was completed, the equipment was put in operation.

It was to be automatically controlled to produce a temperature or 10 degrees below zero and it functioned for a little while and then died of heart failure.

The warehouse company lost some ice cream and very nearly lost a large quantity of turkeys, but they were salvaged and they called on the supplier to remedy the defect and they tried, it was unsuccessful and they had to maintain a staff of people to watch the machinery and keep it going and keep it controlled.

And so the purchaser notified them that he would not make payment unless they could put in good order and refused to go forward with the scheduled payments.

And when that happened, they proceeded to take judgment, the attorney who confessed judgment for the defendant, the petitioner here, was completely unknown to the defendant, never communicated with the defendant, was obviously selected by the holder of the note and paid by the holder of the note and he simply entered an appearance and confessed judgment waiving notice and service.

Then under Ohio procedure, notice was given, that there is a judgment against you and the defendant engaged counsel in an attempt to set it aside.

They filed a motion for new trial, filed a motion to stay execution and a motion to vacate the judgment.

Setting forth that it was ended without notice and that they wanted a trial and tendered as sworn answer showing the difficulties with the equipment and the problems that had risen and also attached a course action which alleged to claims in excess of the amount demanded on the note as damages due to the malfunctioning of the equipment.

The trial court declined to entertain the course action and simply affirmed the judgment and refused to --

Potter Stewart:

Could the Court do that without any hearing at all?

Russell Morton Brown:

Yes, Your Honor.

There was some discussion as to whether it should or should not, but it did not go into the merits.

Potter Stewart:

There was little oral argument but no --

Russell Morton Brown:

Yes.

No witnesses.

No, nothing of that kind.