As Introduced 1
123rd General Assembly 4
Regular Session H. B. No. 292 5
1999-2000 6
REPRESENTATIVES WILLAMOWSKI-BUEHRER-DePIERO-PRINGLE- 8
SCHULER-TAYLOR-TERWILLEGER-VESPER-WOMER BENJAMIN 9
_________________________________________________________________ 11
A B I L L
To amend sections 1309.47 and 1309.49 and to enact 12
section 1301.21 of the Revised Code to provide 13
for the enforceability of commitments to pay 14
attorney's fees in commercial contracts of 15
indebtedness. 16
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO: 18
Section 1. That sections 1309.47 and 1309.49 be amended 20
and section 1301.21 of the Revised Code be enacted to read as 21
follows:
Sec. 1301.21. (A) AS USED IN THIS SECTION: 23
(1) "CONTRACT OF INDEBTEDNESS" MEANS A NOTE, BOND, 25
MORTGAGE, CONDITIONAL SALE CONTRACT, RETAIL INSTALLMENT CONTRACT, 26
LEASE, SECURITY AGREEMENT, OR OTHER WRITTEN EVIDENCE OF 27
INDEBTEDNESS, OTHER THAN INDEBTEDNESS INCURRED FOR PURPOSES THAT 28
ARE PRIMARILY PERSONAL, FAMILY, OR HOUSEHOLD.
(2) "COMMITMENT TO PAY ATTORNEY'S FEES" MEANS AN 30
OBLIGATION TO PAY ATTORNEY'S FEES THAT ARISES IN CONNECTION WITH 31
THE ENFORCEMENT OF A CONTRACT OF INDEBTEDNESS. 32
(3) "MATURITY OF THE DEBT" INCLUDES MATURITY UPON DEFAULT 34
OR OTHERWISE.
(B) IF A CONTRACT OF INDEBTEDNESS INCLUDES A COMMITMENT TO 36
PAY ATTORNEY'S FEES, AND IF THE CONTRACT IS ENFORCED THROUGH 37
JUDICIAL PROCEEDINGS OR OTHERWISE AFTER MATURITY OF THE DEBT, A 38
PERSON THAT HAS THE RIGHT TO RECOVER ATTORNEY'S FEES UNDER THE 39
COMMITMENT, WHETHER OR NOT NAMED IN THE CONTRACT AS HAVING SUCH A 40
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RIGHT, MAY RECOVER ATTORNEY'S FEES IN ACCORDANCE WITH THE 41
COMMITMENT, TO THE EXTENT THAT THE COMMITMENT IS ENFORCEABLE
UNDER DIVISION (C) OF THIS SECTION. 42
(C) A COMMITMENT TO PAY ATTORNEY'S FEES IS ENFORCEABLE 44
ONLY TO THE EXTENT THAT IT OBLIGATES PAYMENT OF A REASONABLE 46
AMOUNT. IN DETERMINING THE AMOUNT OF ATTORNEY'S FEES THAT IS 47
REASONABLE, A COURT SHALL CONSIDER ALL RELEVANT FACTORS, 48
INCLUDING, BUT NOT LIMITED TO, THE NATURE OF THE SERVICES
RENDERED, THE TIME EXPENDED IN RENDERING THE SERVICES, THE AMOUNT 49
OF MONEY AND THE VALUE OF THE PROPERTY AFFECTED, AND THE 50
PROFESSIONAL SKILL AND EXPERTISE OF THE ATTORNEY RENDERING THE 51
SERVICES. IN THE ABSENCE OF A PREPONDERANCE OF THE EVIDENCE TO 52
THE CONTRARY, THE FOLLOWING ARE DEEMED REASONABLE AMOUNTS:
(1) IF THE COMMITMENT TO PAY ATTORNEY'S FEES IS BASED UPON 54
A SPECIFIC PERCENTAGE OF THE TOTAL PRINCIPAL, INTEREST, AND OTHER 55
CHARGES OWED ON THE CONTRACT OF INDEBTEDNESS, AND IF THE TOTAL SO 56
OWED IS ONE HUNDRED THOUSAND DOLLARS OR LESS, WHICHEVER OF THE 58
FOLLOWING IS GREATER:
(a) ONE THOUSAND DOLLARS; 60
(b) THE LESSER OF TWENTY PER CENT OF THE TOTAL SO OWED OR 62
THE PERCENTAGE OF THE TOTAL SO OWED AS SPECIFIED IN THE CONTRACT 63
OF INDEBTEDNESS.
(2) IF THE COMMITMENT TO PAY ATTORNEY'S FEES IS BASED UPON 65
A SPECIFIC PERCENTAGE OF THE TOTAL PRINCIPAL, INTEREST, AND OTHER 66
CHARGES OWED ON THE CONTRACT OF INDEBTEDNESS, AND IF THE TOTAL SO 67
OWED EXCEEDS ONE HUNDRED THOUSAND DOLLARS, THE PERCENTAGE OF THE 68
TOTAL SO OWED AS SPECIFIED IN THE CONTRACT OF INDEBTEDNESS; 69
(3) IF THE COMMITMENT TO PAY ATTORNEY'S FEES IS NOT BASED 71
UPON A SPECIFIC PERCENTAGE OF THE TOTAL PRINCIPAL, INTEREST, AND 72
OTHER CHARGES OWED ON THE CONTRACT OF INDEBTEDNESS, AND IF THE 73
TOTAL SO OWED IS ONE HUNDRED THOUSAND DOLLARS OR LESS, THE 74
GREATER OF ONE THOUSAND DOLLARS OR AN AMOUNT NOT EXCEEDING TWENTY 75
PER CENT OF THE TOTAL SO OWED;
(4) IF THE COMMITMENT TO PAY ATTORNEY'S FEES IS NOT BASED 77
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UPON A SPECIFIC PERCENTAGE OF THE TOTAL PRINCIPAL, INTEREST, AND 78
OTHER CHARGES OWED ON THE CONTRACT OF INDEBTEDNESS, AND IF THE 79
TOTAL SO OWED EXCEEDS ONE HUNDRED THOUSAND DOLLARS, AN AMOUNT 80
EQUAL TO THE ATTORNEY'S FEES CUSTOMARILY CHARGED BY THE ATTORNEY 81
RENDERING THE SERVICES.
Sec. 1309.47. (A) A secured party after default may sell, 91
lease, or otherwise dispose of any or all of the collateral in 92
its then condition or following any commercially reasonable 93
preparation or processing. Any sale of goods is subject to 94
Chapter 1302. of the Revised Code. The proceeds of disposition 95
shall be applied in the order following to: 96
(1) The reasonable expenses of retaking, holding, 98
preparing for sale or lease, selling, leasing, and the like, AND, 99
TO THE EXTENT PROVIDED FOR IN AN AGREEMENT WITH THE SECURED PARTY 100
AND NOT PROHIBITED BY SECTION 1301.21 OF THE REVISED CODE, THE 101
REASONABLE ATTORNEY'S FEES AND LEGAL EXPENSES INCURRED BY THE 102
SECURED PARTY; 103
(2) The satisfaction of indebtedness secured by the 105
security interest under which the disposition is made; 106
(3) The satisfaction of indebtedness secured by any 108
subordinate security interest in the collateral if written 109
notification of demand therefor is received before distribution 110
of the proceeds is completed. If requested by the secured party, 111
the holder of a subordinate security interest must SHALL 112
seasonably furnish reasonable proof of his THE HOLDER'S interest, 114
and unless he THE HOLDER does so, the secured party need not 116
comply with his THE HOLDER'S demand.
(B)(1) If the underlying transaction was a sale of 118
accounts or chattel paper, the debtor is entitled to any surplus 119
or is liable for any deficiency only if the security agreement so 120
provides. 121
(2)(a) If the security interest secures an indebtedness, 123
the secured party must SHALL account to the debtor for any 124
surplus, and, unless otherwise agreed, the debtor is liable for 126
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any deficiency. 127
(b) If the secured party in disposing of collateral 129
pursuant to this section has complied with the requirements of 130
division (C) of this section, the amount of the deficiency, if 131
any, to which the secured party is entitled shall be based on the 132
actual proceeds of the disposition. 133
(c) If the secured party in disposing of collateral 135
pursuant to this section has failed to comply with the 136
requirements of division (C) of this section, the amount of the 137
deficiency, if any, to which the secured party is entitled shall 138
be based on the appropriate value of the collateral as provided 139
in division (B)(2)(d) or (e) of this section. 140
(d) The appropriate value of the collateral under division 142
(B)(2)(c) of this section shall be presumed to equal the secured 143
indebtedness. The secured party may rebut this presumption by 144
introducing some credible evidence of a lower appropriate value 145
of the collateral. Evidence of the amount of the actual proceeds 146
of the disposition is not, of itself, sufficient to rebut the 147
presumption. 148
(e) If the secured party rebuts the presumption described 150
in division (B)(2)(d) of this section, the appropriate value of 151
the collateral shall be deemed to equal the actual proceeds of 152
the disposition, unless the debtor establishes that a greater 153
amount would have been realized had the secured party complied 154
with the requirements of division (C) of this section, in which 155
case, the greater amount established by the debtor shall be 156
deemed the appropriate value of the collateral. The debtor bears 157
the burden of establishing the amount that would have been 158
realized had the secured party complied with the requirements of 159
division (C) of this section. 160
(C) Disposition of the collateral may be by public or 162
private proceedings and may be made by way of one or more 163
contracts. Sale or other disposition may be as a unit or in 164
parcels, and at any time and place, and on any terms, but every 166
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aspect of the disposition, including the method, manner, time, 167
place, and terms must, SHALL be commercially reasonable. Unless 169
collateral is perishable or threatens to decline speedily in 170
value or is of a type customarily sold on a recognized market, 171
reasonable notification of the time and place of any public sale 172
or reasonable notification of the time after which any private 173
sale or other intended disposition is to be made shall be sent by 174
the secured party to the debtor if he THE DEBTOR has not signed 175
after default a statement renouncing or modifying his THE 177
DEBTOR'S right to notification of sale. In the case of consumer 179
goods, no other notification need be sent. In other cases, 180
notification shall be sent to any other secured party from whom 181
the secured party has received, before sending his notification 182
to the debtor or before the debtor's renunciation of his THE 183
DEBTOR'S rights, written notice of a claim of an interest in the 185
collateral. The secured party may buy at any public sale, and, 186
if the collateral is of a type customarily sold in a recognized 187
market or is of a type which is the subject of widely distributed 188
standard price quotations he, THE SECURED PARTY may buy at A 190
private sale.
(D) When collateral is disposed of by a secured party 192
after default, the disposition transfers to a purchaser for value 193
all of the debtor's rights therein IN THE COLLATERAL, AND 194
discharges the security interest under which it is made and any 197
security interest or lien subordinate thereto TO IT. The 198
purchaser takes free of all such rights and interests even though 200
the secured party fails to comply with the requirements of 201
sections 1309.44 to 1309.50 of the Revised Code or of any 202
judicial proceedings:
(1) In the case of a public sale, if the purchaser has no 204
knowledge of any defects in the sale and if he THE PURCHASER does 206
not buy in collusion with the secured party, other bidders, or 207
the person conducting the sale; or 208
(2) In any other case, if the purchaser acts in good 210
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faith. 211
(E) A person who is liable to a secured party under a 213
guaranty, indorsement, repurchase agreement, or the like and who 214
receives a transfer of collateral from the secured party or is 215
subrogated to his THE SECURED PARTY'S rights has thereafter the 216
rights and duties of the secured party. Such a transfer of 218
collateral is not a sale or disposition of the collateral under 219
this chapter.
(F) This section is subject to the limitations of section 221
1317.16 of the Revised Code. 222
Sec. 1309.49. At any time before the secured party has 231
disposed of collateral or entered into a contract for its 232
disposition under section 1309.47 of the Revised Code or before 233
the obligation has been discharged under division (B) of section 234
1309.48 of the Revised Code, the debtor or any other secured
party may, unless otherwise agreed in writing after default, 235
redeem the collateral by tendering fulfillment of all obligations 237
secured by the collateral as well as, the expenses reasonably 239
incurred by the secured party in retaking, holding, and preparing 240
the collateral for disposition, in arranging for the sale, AND, 241
TO THE EXTENT PROVIDED FOR IN AN AGREEMENT WITH THE SECURED PARTY 242
AND NOT PROHIBITED BY SECTION 1301.21 OF THE REVISED CODE, THE 243
REASONABLE ATTORNEY'S FEES AND LEGAL EXPENSES INCURRED BY THE 244
SECURED PARTY.
Section 2. That existing sections 1309.47 and 1309.49 of 246
the Revised Code are hereby repealed. 247
Section 3. Section 1301.21 of the Revised Code applies 249
only to commitments to pay attorney's fees that are included in 250
contracts of indebtedness that are enforced, through judicial 251
proceedings or otherwise, on and after the effective date of this 252
act.