As Reported by House Civil and Commercial Law Committee 1
123rd General Assembly 4
Regular Session Sub. H. B. No. 292 5
1999-2000 6
REPRESENTATIVES WILLAMOWSKI-BUEHRER-DePIERO-PRINGLE-SCHULER- 8
TAYLOR-TERWILLEGER-VESPER-WOMER BENJAMIN-SALERNO 9
_________________________________________________________________ 10
A B I L L
To amend sections 1309.47 and 1309.49 and to enact 11
section 1301.21 of the Revised Code to provide 12
for the enforceability of commitments to pay 13
attorney's fees in certain commercial contracts
of indebtedness. 14
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO: 16
Section 1. That sections 1309.47 and 1309.49 be amended 18
and section 1301.21 of the Revised Code be enacted to read as 19
follows:
Sec. 1301.21. (A) AS USED IN THIS SECTION: 21
(1) "CONTRACT OF INDEBTEDNESS" MEANS A NOTE, BOND, 23
MORTGAGE, CONDITIONAL SALE CONTRACT, RETAIL INSTALLMENT CONTRACT, 24
LEASE, SECURITY AGREEMENT, OR OTHER WRITTEN EVIDENCE OF 25
INDEBTEDNESS, OTHER THAN INDEBTEDNESS INCURRED FOR PURPOSES THAT 26
ARE PRIMARILY PERSONAL, FAMILY, OR HOUSEHOLD.
(2) "COMMITMENT TO PAY ATTORNEY'S FEES" MEANS AN 28
OBLIGATION TO PAY ATTORNEY'S FEES THAT ARISES IN CONNECTION WITH 29
THE ENFORCEMENT OF A CONTRACT OF INDEBTEDNESS. 30
(3) "MATURITY OF THE DEBT" INCLUDES MATURITY UPON DEFAULT 32
OR OTHERWISE.
(B) IF A CONTRACT OF INDEBTEDNESS INCLUDES A COMMITMENT TO 34
PAY ATTORNEY'S FEES, AND IF THE CONTRACT IS ENFORCED THROUGH 35
JUDICIAL PROCEEDINGS OR OTHERWISE AFTER MATURITY OF THE DEBT, A 36
PERSON THAT HAS THE RIGHT TO RECOVER ATTORNEY'S FEES UNDER THE 37
COMMITMENT, AT THE OPTION OF THAT PERSON, MAY RECOVER ATTORNEY'S 38
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FEES IN ACCORDANCE WITH THE COMMITMENT, TO THE EXTENT THAT THE 39
COMMITMENT IS ENFORCEABLE UNDER DIVISIONS (C) AND (D) OF THIS 40
SECTION.
(C) A COMMITMENT TO PAY ATTORNEY'S FEES IS ENFORCEABLE 43
UNDER THIS SECTION ONLY IF THE TOTAL AMOUNT OWED ON THE CONTRACT 44
OF INDEBTEDNESS AT THE TIME THE CONTRACT WAS ENTERED INTO EXCEEDS 45
TWO HUNDRED FIFTY THOUSAND DOLLARS. 46
(D) A COMMITMENT TO PAY ATTORNEY'S FEES IS ENFORCEABLE 48
ONLY TO THE EXTENT THAT IT OBLIGATES PAYMENT OF A REASONABLE 50
AMOUNT. IN DETERMINING THE AMOUNT OF ATTORNEY'S FEES THAT IS 51
REASONABLE, ALL RELEVANT FACTORS SHALL BE CONSIDERED, INCLUDING 52
BUT NOT LIMITED TO, THE NATURE OF THE SERVICES RENDERED, THE TIME 54
EXPENDED IN RENDERING THE SERVICES, THE AMOUNT OF MONEY AND THE
VALUE OF THE PROPERTY AFFECTED, AND THE PROFESSIONAL SKILL AND 55
EXPERTISE OF THE ATTORNEY RENDERING THE SERVICES. UNLESS A COURT 56
HAS BEEN REQUESTED TO MAKE A DETERMINATION OF THE AMOUNT OF 58
ATTORNEY'S FEES THAT IS REASONABLE AND FINDS TO THE CONTRARY BY A 59
PREPONDERANCE OF THE EVIDENCE, THE FOLLOWING ARE DEEMED
REASONABLE AMOUNTS:
(1) IF THE COMMITMENT TO PAY ATTORNEY'S FEES IS BASED UPON 61
A SPECIFIC PERCENTAGE OF THE TOTAL PRINCIPAL, INTEREST, AND OTHER 62
CHARGES OWED ON THE CONTRACT OF INDEBTEDNESS, THE PERCENTAGE OF 63
THE TOTAL SO OWED AS SPECIFIED IN THE CONTRACT OF INDEBTEDNESS; 64
(2) IF THE COMMITMENT TO PAY ATTORNEY'S FEES IS NOT BASED 66
UPON A SPECIFIC PERCENTAGE OF THE TOTAL PRINCIPAL, INTEREST, AND 67
OTHER CHARGES OWED ON THE CONTRACT OF INDEBTEDNESS, AN AMOUNT 68
EQUAL TO THE ATTORNEY'S FEES CUSTOMARILY CHARGED BY THE ATTORNEY 69
RENDERING THE SERVICES.
Sec. 1309.47. (A) A secured party after default may sell, 78
lease, or otherwise dispose of any or all of the collateral in 79
its then condition or following any commercially reasonable 80
preparation or processing. Any sale of goods is subject to 81
Chapter 1302. of the Revised Code. The proceeds of disposition 82
shall be applied in the order following to: 83
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(1) The reasonable expenses of retaking, holding, 85
preparing for sale or lease, selling, leasing, and the like, AND, 86
TO THE EXTENT PROVIDED FOR IN AN AGREEMENT WITH THE SECURED PARTY 87
AND NOT PROHIBITED BY SECTION 1301.21 OF THE REVISED CODE, THE 88
REASONABLE ATTORNEY'S FEES AND LEGAL EXPENSES INCURRED BY THE 89
SECURED PARTY; 90
(2) The satisfaction of indebtedness secured by the 92
security interest under which the disposition is made; 93
(3) The satisfaction of indebtedness secured by any 95
subordinate security interest in the collateral if written 96
notification of demand therefor is received before distribution 97
of the proceeds is completed. If requested by the secured party, 98
the holder of a subordinate security interest must SHALL 99
seasonably furnish reasonable proof of his THE HOLDER'S interest, 101
and unless he THE HOLDER does so, the secured party need not 103
comply with his THE HOLDER'S demand.
(B)(1) If the underlying transaction was a sale of 105
accounts or chattel paper, the debtor is entitled to any surplus 106
or is liable for any deficiency only if the security agreement so 107
provides. 108
(2)(a) If the security interest secures an indebtedness, 110
the secured party must SHALL account to the debtor for any 111
surplus, and, unless otherwise agreed, the debtor is liable for 113
any deficiency. 114
(b) If the secured party in disposing of collateral 116
pursuant to this section has complied with the requirements of 117
division (C) of this section, the amount of the deficiency, if 118
any, to which the secured party is entitled shall be based on the 119
actual proceeds of the disposition. 120
(c) If the secured party in disposing of collateral 122
pursuant to this section has failed to comply with the 123
requirements of division (C) of this section, the amount of the 124
deficiency, if any, to which the secured party is entitled shall 125
be based on the appropriate value of the collateral as provided 126
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in division (B)(2)(d) or (e) of this section. 127
(d) The appropriate value of the collateral under division 129
(B)(2)(c) of this section shall be presumed to equal the secured 130
indebtedness. The secured party may rebut this presumption by 131
introducing some credible evidence of a lower appropriate value 132
of the collateral. Evidence of the amount of the actual proceeds 133
of the disposition is not, of itself, sufficient to rebut the 134
presumption. 135
(e) If the secured party rebuts the presumption described 137
in division (B)(2)(d) of this section, the appropriate value of 138
the collateral shall be deemed to equal the actual proceeds of 139
the disposition, unless the debtor establishes that a greater 140
amount would have been realized had the secured party complied 141
with the requirements of division (C) of this section, in which 142
case, the greater amount established by the debtor shall be 143
deemed the appropriate value of the collateral. The debtor bears 144
the burden of establishing the amount that would have been 145
realized had the secured party complied with the requirements of 146
division (C) of this section. 147
(C) Disposition of the collateral may be by public or 149
private proceedings and may be made by way of one or more 150
contracts. Sale or other disposition may be as a unit or in 151
parcels, and at any time and place, and on any terms, but every 153
aspect of the disposition, including the method, manner, time, 154
place, and terms must, SHALL be commercially reasonable. Unless 156
collateral is perishable or threatens to decline speedily in 157
value or is of a type customarily sold on a recognized market, 158
reasonable notification of the time and place of any public sale 159
or reasonable notification of the time after which any private 160
sale or other intended disposition is to be made shall be sent by 161
the secured party to the debtor if he THE DEBTOR has not signed 162
after default a statement renouncing or modifying his THE 164
DEBTOR'S right to notification of sale. In the case of consumer 166
goods, no other notification need be sent. In other cases, 167
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notification shall be sent to any other secured party from whom 168
the secured party has received, before sending his notification 169
to the debtor or before the debtor's renunciation of his THE 170
DEBTOR'S rights, written notice of a claim of an interest in the 172
collateral. The secured party may buy at any public sale, and, 173
if the collateral is of a type customarily sold in a recognized 174
market or is of a type which is the subject of widely distributed 175
standard price quotations he, THE SECURED PARTY may buy at A 177
private sale.
(D) When collateral is disposed of by a secured party 179
after default, the disposition transfers to a purchaser for value 180
all of the debtor's rights therein IN THE COLLATERAL, AND 181
discharges the security interest under which it is made and any 184
security interest or lien subordinate thereto TO IT. The 185
purchaser takes free of all such rights and interests even though 187
the secured party fails to comply with the requirements of 188
sections 1309.44 to 1309.50 of the Revised Code or of any 189
judicial proceedings:
(1) In the case of a public sale, if the purchaser has no 191
knowledge of any defects in the sale and if he THE PURCHASER does 193
not buy in collusion with the secured party, other bidders, or 194
the person conducting the sale; or 195
(2) In any other case, if the purchaser acts in good 197
faith. 198
(E) A person who is liable to a secured party under a 200
guaranty, indorsement, repurchase agreement, or the like and who 201
receives a transfer of collateral from the secured party or is 202
subrogated to his THE SECURED PARTY'S rights has thereafter the 203
rights and duties of the secured party. Such a transfer of 205
collateral is not a sale or disposition of the collateral under 206
this chapter.
(F) This section is subject to the limitations of section 208
1317.16 of the Revised Code. 209
Sec. 1309.49. At any time before the secured party has 218
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disposed of collateral or entered into a contract for its 219
disposition under section 1309.47 of the Revised Code or before 220
the obligation has been discharged under division (B) of section 221
1309.48 of the Revised Code, the debtor or any other secured
party may, unless otherwise agreed in writing after default, 222
redeem the collateral by tendering fulfillment of all obligations 224
secured by the collateral as well as, the expenses reasonably 226
incurred by the secured party in retaking, holding, and preparing 227
the collateral for disposition, in arranging for the sale, AND, 228
TO THE EXTENT PROVIDED FOR IN AN AGREEMENT WITH THE SECURED PARTY 229
AND NOT PROHIBITED BY SECTION 1301.21 OF THE REVISED CODE, THE 230
REASONABLE ATTORNEY'S FEES AND LEGAL EXPENSES INCURRED BY THE 231
SECURED PARTY.
Section 2. That existing sections 1309.47 and 1309.49 of 233
the Revised Code are hereby repealed. 234
Section 3. Section 1301.21 of the Revised Code applies 236
only to commitments to pay attorney's fees that are included in 237
contracts of indebtedness that are enforced, through judicial 238
proceedings or otherwise, on and after the effective date of this 239
act.