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

Supreme Court of the United States · 1972 · Civil Procedure

Civil ProcedureDue ProcessConfession of JudgmentWaiverDue Process ClauseFourteenth Amendmentcognovit noteconfession of judgment

Facts

Frick contracted to install a refrigeration system in an Overmyer warehouse project, but Overmyer fell behind on payments. After further negotiations conducted with counsel on both sides, Overmyer executed a second installment note containing a cognovit clause in exchange for substantial concessions from Frick, including release of mechanic's liens, lower monthly payments, more time to pay, and a lower interest rate. When Overmyer later defaulted again, Frick had judgment entered in Ohio without prior notice through an attorney designated under the warrant of attorney in the note. Overmyer challenged the judgment as violating due process because it had no prejudgment notice or hearing.

Issue

Does entry of judgment pursuant to an Ohio cognovit provision, without prior notice or hearing, violate the Due Process Clause of the Fourteenth Amendment? More specifically, may a debtor validly waive in advance its rights to prejudgment notice and hearing by executing a cognovit note?

Rule

The due process rights to notice and hearing prior to a civil judgment are subject to waiver. At least where the waiver is voluntary, knowing, and intelligent, and is made in an arm's-length commercial setting without overreaching or unequal bargaining power and for consideration, a cognovit provision is not unconstitutional per se.

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Cascade Steel Storage, a multistate warehouse developer based in Denver, fell behind on payments owed to Red Mesa Cooling, a fictional equipment contractor. After negotiations conducted by lawyers for both companies, Cascade signed a new installment note containing a confession-of-judgment clause in exchange for lower monthly payments, a reduced interest rate, and release of recorded construction liens; Cascade later defaulted and judgment was entered in Ohio without prior notice.

If Cascade argues that the Fourteenth Amendment always forbids entry of a civil money judgment without prior notice and hearing, how should a court rule?

Explanation. The majority held that due process rights to notice and hearing before a civil judgment are subject to waiver. It further held that a cognovit or confession-of-judgment clause is not per se unconstitutional. On facts showing arm's-length commercial bargaining, counsel involvement, and consideration, the waiver is valid if voluntary, knowing, and intelligent.