Failure to Strictly Comply with Cognovit Note Language Renders Provision Useless

Ohio’s Eighth District Court of Appeals recently mandated strict compliance with cognovit judgment language in order to enforce a cognovit note.  In 2017, L&M Estates, L.L.C. (“L&M”) executed a Cognovit Note in favor of Ace Property Group of Ohio, L.L.C. (“Ace Property”).  The Note stemmed from a commercial loan that L&M received from Ace Property (the “Note”).  As part of the commercial loan transaction, a principal of L&M, Lisa Cochran (“Cochran”), executed a personal guaranty (the “Guaranty”). After the borrower failed to timely make required payments on the Note, Ace Property obtained cognovit judgments against L&M under the Note and against Cochran under the Guaranty.  Cochran appealed on the basis that the Guaranty did not contain the required language under Ohio law to obtain a cognovit judgment.

On appeal, the Eighth District Court of Appeals overturned the trial court’s decision.  The Court of Appeals held that cognovit provisions must strictly comply with Ohio law in order to be enforceable.

The Ace Property case is a helpful reminder to commercial real estate professionals to make sure cognovits provisions strictly comply with the requirements of Ohio law if enforcing it is important to you.