Court of Appeals again reverses, finds for New York lender

February 28, 2018

In a second dispute involving an Indiana business, a New York company, stopped payments and cognovit notes, the Indiana Court of Appeals has again reversed and found in favor of EBF Partners.

The ruling in EBF Partners, LLC v. Novabella, Inc, d/b/a and Frank Terranova, 49A02-1705-CC-961, comes one day after the Court of Appeals issued a similar opinion in EBF Partners, LLC, v. Evolving Solutions Inc. d/b/a, et al., 49A05-1710-CC-2384.

Both cases involve New York-based EBF Partners and Terranova. Also, Novabella, owned by Terranova, and Evolving Solutions, are based in Indiana.

Similar to its agreement with Evolving Solutions, EBF agreed to pay $150,000 for $204,000 of Novabella’s future receivables. The Indiana business got $150,000 up front and agreed to repay EBF the $204,000 from its business receipts.

A clause in the purchase agreement indicated it would be governed by and construed under the laws of New York. Terranova and Novabella consented to the jurisdiction of any court in New York.

Little over a year later, EBF went to court, charging Novabella and Terranova with breaching the purchase agreement. The New York business claimed Novabella and Terranova stopped payments and interfered with EBF’s ability to collect its daily payment.

Without notice to Novabella and Terranova and without a hearing, EBF obtained a “confessed” judgment from a New York trial court for $237,5780.72.

Then EBF filed a petition in Marion Superior Court to have Indiana recognize and enforce the New York confessed judgment that remained unsatisfied. Novabella contended that EBF’s petition is barred because it was illegal and contrary to the public policy of Indiana.

Ultimately, the trial court ruled for Novabella and dismissed the case with prejudice.

EBF appealed. Like Evolving, Novabell and Terranova did not file a brief.

The Court of Appeals noted the case stems from EBF’s attempt to domesticate a foreign judgment that was based upon a confession of judgment contained in a cognovit note. Moreover, pointing to Cox v. First Nat. Bank of Woodlawn, 426 N.E.2d 426, 430 (Ind. Ct. App. 1981), the court explained that even though cognovit notes are prohibited in Indiana, a valid foreign judgment based on a cognovit note will be given full faith and credit in the Hoosier state.

“Because the New York confessed judgment appears on its face to be rendered by a court of competent jurisdiction and Novabella did not challenge the jurisdiction of the New York court to enter the confessed judgment, the trial court was required to afford full faith and credit to the New York confessed judgment,” Judge Rudolph Pyle wrote for the court.

The Court of Appeals reversed and remanded for further proceedings.


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