As Passed by the House 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-GRENDELL- 9
SULZER-JONES 10
_________________________________________________________________ 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 certain commercial contracts
of indebtedness. 15
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO: 17
Section 1. That sections 1309.47 and 1309.49 be amended 19
and section 1301.21 of the Revised Code be enacted to read as 20
follows:
Sec. 1301.21. (A) AS USED IN THIS SECTION: 22
(1) "CONTRACT OF INDEBTEDNESS" MEANS A NOTE, BOND, 24
MORTGAGE, CONDITIONAL SALE CONTRACT, RETAIL INSTALLMENT CONTRACT, 25
LEASE, SECURITY AGREEMENT, OR OTHER WRITTEN EVIDENCE OF 26
INDEBTEDNESS, OTHER THAN INDEBTEDNESS INCURRED FOR PURPOSES THAT 27
ARE PRIMARILY PERSONAL, FAMILY, OR HOUSEHOLD.
(2) "COMMITMENT TO PAY ATTORNEY'S FEES" MEANS AN 29
OBLIGATION TO PAY ATTORNEY'S FEES THAT ARISES IN CONNECTION WITH 30
THE ENFORCEMENT OF A CONTRACT OF INDEBTEDNESS. 31
(3) "MATURITY OF THE DEBT" INCLUDES MATURITY UPON DEFAULT 33
OR OTHERWISE.
(B) IF A CONTRACT OF INDEBTEDNESS INCLUDES A COMMITMENT TO 35
PAY ATTORNEY'S FEES, AND IF THE CONTRACT IS ENFORCED THROUGH 36
JUDICIAL PROCEEDINGS OR OTHERWISE AFTER MATURITY OF THE DEBT, A 37
PERSON THAT HAS THE RIGHT TO RECOVER ATTORNEY'S FEES UNDER THE 38
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COMMITMENT, AT THE OPTION OF THAT PERSON, MAY RECOVER ATTORNEY'S 39
FEES IN ACCORDANCE WITH THE COMMITMENT, TO THE EXTENT THAT THE 40
COMMITMENT IS ENFORCEABLE UNDER DIVISIONS (C) AND (D) OF THIS 41
SECTION.
(C) A COMMITMENT TO PAY ATTORNEY'S FEES IS ENFORCEABLE 44
UNDER THIS SECTION ONLY IF THE TOTAL AMOUNT OWED ON THE CONTRACT 45
OF INDEBTEDNESS AT THE TIME THE CONTRACT WAS ENTERED INTO EXCEEDS 46
TWO HUNDRED FIFTY THOUSAND DOLLARS. 47
(D) A COMMITMENT TO PAY ATTORNEY'S FEES IS ENFORCEABLE 49
ONLY TO THE EXTENT THAT IT OBLIGATES PAYMENT OF A REASONABLE 51
AMOUNT. IN DETERMINING THE AMOUNT OF ATTORNEY'S FEES THAT IS 52
REASONABLE, ALL RELEVANT FACTORS SHALL BE CONSIDERED, INCLUDING 53
BUT NOT LIMITED TO, THE NATURE OF THE SERVICES RENDERED, THE TIME 55
EXPENDED IN RENDERING THE SERVICES, THE AMOUNT OF MONEY AND THE
VALUE OF THE PROPERTY AFFECTED, AND THE PROFESSIONAL SKILL AND 56
EXPERTISE OF THE ATTORNEY RENDERING THE SERVICES. UNLESS A COURT 57
HAS BEEN REQUESTED TO MAKE A DETERMINATION OF THE AMOUNT OF 59
ATTORNEY'S FEES THAT IS REASONABLE AND FINDS TO THE CONTRARY BY A 60
PREPONDERANCE OF THE EVIDENCE, THE FOLLOWING ARE DEEMED
REASONABLE AMOUNTS:
(1) IF THE COMMITMENT TO PAY ATTORNEY'S FEES IS BASED UPON 62
A SPECIFIC PERCENTAGE OF THE TOTAL PRINCIPAL, INTEREST, AND OTHER 63
CHARGES OWED ON THE CONTRACT OF INDEBTEDNESS, THE PERCENTAGE OF 64
THE TOTAL SO OWED AS SPECIFIED IN THE CONTRACT OF INDEBTEDNESS; 65
(2) IF THE COMMITMENT TO PAY ATTORNEY'S FEES IS NOT BASED 67
UPON A SPECIFIC PERCENTAGE OF THE TOTAL PRINCIPAL, INTEREST, AND 68
OTHER CHARGES OWED ON THE CONTRACT OF INDEBTEDNESS, AN AMOUNT 69
EQUAL TO THE ATTORNEY'S FEES CUSTOMARILY CHARGED BY THE ATTORNEY 70
RENDERING THE SERVICES.
Sec. 1309.47. (A) A secured party after default may sell, 79
lease, or otherwise dispose of any or all of the collateral in 80
its then condition or following any commercially reasonable 81
preparation or processing. Any sale of goods is subject to 82
Chapter 1302. of the Revised Code. The proceeds of disposition 83
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shall be applied in the order following to: 84
(1) The reasonable expenses of retaking, holding, 86
preparing for sale or lease, selling, leasing, and the like, AND, 87
TO THE EXTENT PROVIDED FOR IN AN AGREEMENT WITH THE SECURED PARTY 88
AND NOT PROHIBITED BY SECTION 1301.21 OF THE REVISED CODE, THE 89
REASONABLE ATTORNEY'S FEES AND LEGAL EXPENSES INCURRED BY THE 90
SECURED PARTY; 91
(2) The satisfaction of indebtedness secured by the 93
security interest under which the disposition is made; 94
(3) The satisfaction of indebtedness secured by any 96
subordinate security interest in the collateral if written 97
notification of demand therefor is received before distribution 98
of the proceeds is completed. If requested by the secured party, 99
the holder of a subordinate security interest must SHALL 100
seasonably furnish reasonable proof of his THE HOLDER'S interest, 102
and unless he THE HOLDER does so, the secured party need not 104
comply with his THE HOLDER'S demand.
(B)(1) If the underlying transaction was a sale of 106
accounts or chattel paper, the debtor is entitled to any surplus 107
or is liable for any deficiency only if the security agreement so 108
provides. 109
(2)(a) If the security interest secures an indebtedness, 111
the secured party must SHALL account to the debtor for any 112
surplus, and, unless otherwise agreed, the debtor is liable for 114
any deficiency. 115
(b) If the secured party in disposing of collateral 117
pursuant to this section has complied with the requirements of 118
division (C) of this section, the amount of the deficiency, if 119
any, to which the secured party is entitled shall be based on the 120
actual proceeds of the disposition. 121
(c) If the secured party in disposing of collateral 123
pursuant to this section has failed to comply with the 124
requirements of division (C) of this section, the amount of the 125
deficiency, if any, to which the secured party is entitled shall 126
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be based on the appropriate value of the collateral as provided 127
in division (B)(2)(d) or (e) of this section. 128
(d) The appropriate value of the collateral under division 130
(B)(2)(c) of this section shall be presumed to equal the secured 131
indebtedness. The secured party may rebut this presumption by 132
introducing some credible evidence of a lower appropriate value 133
of the collateral. Evidence of the amount of the actual proceeds 134
of the disposition is not, of itself, sufficient to rebut the 135
presumption. 136
(e) If the secured party rebuts the presumption described 138
in division (B)(2)(d) of this section, the appropriate value of 139
the collateral shall be deemed to equal the actual proceeds of 140
the disposition, unless the debtor establishes that a greater 141
amount would have been realized had the secured party complied 142
with the requirements of division (C) of this section, in which 143
case, the greater amount established by the debtor shall be 144
deemed the appropriate value of the collateral. The debtor bears 145
the burden of establishing the amount that would have been 146
realized had the secured party complied with the requirements of 147
division (C) of this section. 148
(C) Disposition of the collateral may be by public or 150
private proceedings and may be made by way of one or more 151
contracts. Sale or other disposition may be as a unit or in 152
parcels, and at any time and place, and on any terms, but every 154
aspect of the disposition, including the method, manner, time, 155
place, and terms must, SHALL be commercially reasonable. Unless 157
collateral is perishable or threatens to decline speedily in 158
value or is of a type customarily sold on a recognized market, 159
reasonable notification of the time and place of any public sale 160
or reasonable notification of the time after which any private 161
sale or other intended disposition is to be made shall be sent by 162
the secured party to the debtor if he THE DEBTOR has not signed 163
after default a statement renouncing or modifying his THE 165
DEBTOR'S right to notification of sale. In the case of consumer 167
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goods, no other notification need be sent. In other cases, 168
notification shall be sent to any other secured party from whom 169
the secured party has received, before sending his notification 170
to the debtor or before the debtor's renunciation of his THE 171
DEBTOR'S rights, written notice of a claim of an interest in the 173
collateral. The secured party may buy at any public sale, and, 174
if the collateral is of a type customarily sold in a recognized 175
market or is of a type which is the subject of widely distributed 176
standard price quotations he, THE SECURED PARTY may buy at A 178
private sale.
(D) When collateral is disposed of by a secured party 180
after default, the disposition transfers to a purchaser for value 181
all of the debtor's rights therein IN THE COLLATERAL, AND 182
discharges the security interest under which it is made and any 185
security interest or lien subordinate thereto TO IT. The 186
purchaser takes free of all such rights and interests even though 188
the secured party fails to comply with the requirements of 189
sections 1309.44 to 1309.50 of the Revised Code or of any 190
judicial proceedings:
(1) In the case of a public sale, if the purchaser has no 192
knowledge of any defects in the sale and if he THE PURCHASER does 194
not buy in collusion with the secured party, other bidders, or 195
the person conducting the sale; or 196
(2) In any other case, if the purchaser acts in good 198
faith. 199
(E) A person who is liable to a secured party under a 201
guaranty, indorsement, repurchase agreement, or the like and who 202
receives a transfer of collateral from the secured party or is 203
subrogated to his THE SECURED PARTY'S rights has thereafter the 204
rights and duties of the secured party. Such a transfer of 206
collateral is not a sale or disposition of the collateral under 207
this chapter.
(F) This section is subject to the limitations of section 209
1317.16 of the Revised Code. 210
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Sec. 1309.49. At any time before the secured party has 219
disposed of collateral or entered into a contract for its 220
disposition under section 1309.47 of the Revised Code or before 221
the obligation has been discharged under division (B) of section 222
1309.48 of the Revised Code, the debtor or any other secured
party may, unless otherwise agreed in writing after default, 223
redeem the collateral by tendering fulfillment of all obligations 225
secured by the collateral as well as, the expenses reasonably 227
incurred by the secured party in retaking, holding, and preparing 228
the collateral for disposition, in arranging for the sale, AND, 229
TO THE EXTENT PROVIDED FOR IN AN AGREEMENT WITH THE SECURED PARTY 230
AND NOT PROHIBITED BY SECTION 1301.21 OF THE REVISED CODE, THE 231
REASONABLE ATTORNEY'S FEES AND LEGAL EXPENSES INCURRED BY THE 232
SECURED PARTY.
Section 2. That existing sections 1309.47 and 1309.49 of 234
the Revised Code are hereby repealed. 235
Section 3. Section 1301.21 of the Revised Code applies 237
only to commitments to pay attorney's fees that are included in 238
contracts of indebtedness that are enforced, through judicial 239
proceedings or otherwise, on and after the effective date of this 240
act.