Background. An Ohio church leased a Ricoh copier system from a local dealer for sixty months at a monthly payment of $1,068. The lease contract stated that if the dealer ever “assigned” the lease to another company, the rights of the parties would be enforced in accordance with the laws of the state of incorporation of the other company. Shortly after the church signed the lease contract, the leasing company assigned the contract to a New Jersey company. The church made monthly payments required under the contract for nearly two years, and then stopped making payments.
The New Jersey company sued the church in a New Jersey court. The church failed to respond to this out-of-state lawsuit, and a default judgment in the amount of $38,000 was entered against it by the New Jersey court. This judgment was filed with an Ohio court pursuant to the “Uniform Enforcement of Foreign Judgments Act” (a law that has been enacted by most states, and that permits legal judgments in one state to be enforced in other states) and an Ohio court entered a judgment against the church in the amount of $38,000.
The church raised several arguments to avoid enforcement of the New Jersey judgment, including the fact that the New Jersey courts had no jurisdiction over an Ohio church. The court rejected all of these arguments, noting that in the lease contract the church not only agreed that the contract could be enforced by an out-of-state assignee, but also consented to personal jurisdiction in any other state.
Relevance to church treasurers. This case illustrates three important points:
1. Never ignore a lawsuit that names your church as a defendant. As the church in this case learned, failure to respond to a lawsuit can result in a default judgment being entered against you. A default judgment is a judgment ordered by a court that grants what the plaintiff requested in the lawsuit, no matter how frivolous.
Key point. In order to avoid a default judgment, you must file an “answer” to a lawsuit within the time period prescribed by state law. In many states, this period is as short as 20 days. If you are served with a lawsuit, turn it over to your liability insurance company immediately. If your policy provides coverage for some or all of the claims made in the lawsuit, then you will be provided with an attorney who will answer the lawsuit on your behalf. But, if your insurance policy does not cover any of the claims, you will need to retain your own attorney.
2. Out-of-state lawsuits. Like the church in this case, your church may one day be served with a lawsuit informing you that you have been sued in another state. Do not assume that you can ignore such paperwork because you have no “presence” in the other state.
3. Understand what you are signing. Many churches have entered into lease contracts for copiers, computers, and other items. It is important to read these contracts before signing them, so that you are familiar with their terms. In this case, the church signed a lease contract consenting to being sued by an assignee of the contract in another state. If there are terms in a lease contract that are unacceptable, then ask that the contract be modified. Since this ordinarily will not be possible, you may want to do business with another dealer. Copelco Capital, Inc. v. St. Mark’s Presbyterian Church, N.E.2d (Ohio App. 2001).
This article first appeared in Church Treasurer Alert, March 2002.