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           

                                                          2      


                                                                 
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           

                                                          3      


                                                                 
      (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          

                                                          4      


                                                                 
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          

                                                          5      


                                                                 
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          

                                                          6      


                                                                 
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.