Cerny v. Andrews

Citations

• 2025 Ohio 2864

Syllabus

Liquidated damages; penalty; cognovit note; settlement agreement; breach of contract; remand. The parties entered into a settlement agreement in which Appellants would pay Appellees $215,000. Appellants breached the agreement. A provision of the agreement provided that upon a breach of the agreement by Appellants, Appellees had the ability to enforce a cognovit note that was executed pursuant to the settlement agreement in the amount of $465,000 against Appellants. The trial court issued an order enforcing the note against Appellants. The trial court's judgment was reversed. The provision of the settlement agreement creating the cognovit note is a liquidated-damages clause. While there are generally limited defenses to be raised against the holder of a cognovit note, a cognovit note may not be used to enforce a provision in a settlement agreement in violation of public policy. The trial court did not address this aspect of Appellants' argument. As such, the case is remanded to the trial court to make that determination in the first instance.