As Passed by the Senate                       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-SENATORS CUPP-JOHNSON                  10           


_________________________________________________________________   12           

                          A   B I L L                                           

             To amend sections 1309.47 and 1309.49 and to enact    15           

                section 1301.21 of the Revised Code to provide     16           

                for the enforceability of commitments to pay       17           

                attorneys' fees in certain commercial contracts                 

                of indebtedness.                                   18           




BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:        20           

      Section 1.  That sections 1309.47 and 1309.49 be amended     23           

and section 1301.21 of the Revised Code be enacted to read as      24           

follows:                                                                        

      Sec. 1301.21.  (A)  AS USED IN THIS SECTION:                 26           

      (1)  "CONTRACT OF INDEBTEDNESS" MEANS A NOTE, BOND,          28           

MORTGAGE, CONDITIONAL SALE CONTRACT, RETAIL INSTALLMENT CONTRACT,  29           

LEASE, SECURITY AGREEMENT, OR OTHER WRITTEN EVIDENCE OF            30           

INDEBTEDNESS, OTHER THAN INDEBTEDNESS INCURRED FOR PURPOSES THAT   31           

ARE PRIMARILY PERSONAL, FAMILY, OR HOUSEHOLD.                                   

      (2)  "COMMITMENT TO PAY ATTORNEYS' FEES" MEANS AN            33           

OBLIGATION TO PAY ATTORNEYS' FEES THAT ARISES IN CONNECTION WITH   34           

THE ENFORCEMENT OF A CONTRACT OF INDEBTEDNESS.                     35           

      (3)  "MATURITY OF THE DEBT" INCLUDES MATURITY UPON DEFAULT   37           

OR OTHERWISE.                                                                   

      (B)  IF A CONTRACT OF INDEBTEDNESS INCLUDES A COMMITMENT TO  39           

PAY ATTORNEYS' FEES, AND IF THE CONTRACT IS ENFORCED THROUGH       40           

JUDICIAL PROCEEDINGS OR OTHERWISE AFTER MATURITY OF THE DEBT, A    41           

PERSON THAT HAS THE RIGHT TO RECOVER ATTORNEYS' FEES UNDER THE     42           

                                                          2      


                                                                 
COMMITMENT, AT THE OPTION OF THAT PERSON, MAY RECOVER ATTORNEYS'   43           

FEES IN ACCORDANCE WITH THE COMMITMENT, TO THE EXTENT THAT THE     44           

COMMITMENT IS ENFORCEABLE UNDER DIVISIONS (C) AND (D) OF THIS      45           

SECTION.                                                                        

      (C)  A COMMITMENT TO PAY ATTORNEYS' FEES IS ENFORCEABLE      48           

UNDER THIS SECTION ONLY IF THE TOTAL AMOUNT OWED ON THE CONTRACT   49           

OF INDEBTEDNESS AT THE TIME THE CONTRACT WAS ENTERED INTO EXCEEDS  50           

ONE HUNDRED THOUSAND DOLLARS.                                      51           

      (D)  A COMMITMENT TO PAY ATTORNEYS' FEES IS ENFORCEABLE      53           

ONLY TO THE EXTENT THAT IT OBLIGATES PAYMENT OF A REASONABLE       55           

AMOUNT.  IN DETERMINING THE AMOUNT OF ATTORNEYS' FEES THAT IS      56           

REASONABLE, ALL RELEVANT FACTORS SHALL BE CONSIDERED, INCLUDING    57           

BUT NOT LIMITED TO, THE NATURE OF THE SERVICES RENDERED, THE TIME  59           

EXPENDED IN RENDERING THE SERVICES, THE AMOUNT OF MONEY AND THE                 

VALUE OF THE PROPERTY AFFECTED, AND THE PROFESSIONAL SKILL AND     60           

EXPERTISE OF THE ATTORNEY OR ATTORNEYS RENDERING THE SERVICES.     61           

UNLESS A COURT HAS BEEN REQUESTED TO MAKE A DETERMINATION OF THE   63           

AMOUNT OF ATTORNEYS' FEES THAT IS REASONABLE AND FINDS TO THE      64           

CONTRARY BY A PREPONDERANCE OF THE EVIDENCE, THE FOLLOWING ARE     65           

DEEMED REASONABLE AMOUNTS:                                                      

      (1)  IF THE COMMITMENT TO PAY ATTORNEYS' FEES IS BASED UPON  67           

A SPECIFIC PERCENTAGE OF THE TOTAL PRINCIPAL, INTEREST, AND OTHER  68           

CHARGES OWED ON THE CONTRACT OF INDEBTEDNESS, THE PERCENTAGE OF    69           

THE TOTAL SO OWED AS SPECIFIED IN THE CONTRACT OF INDEBTEDNESS;    70           

      (2)  IF THE COMMITMENT TO PAY ATTORNEYS' FEES IS NOT BASED   72           

UPON A SPECIFIC PERCENTAGE OF THE TOTAL PRINCIPAL, INTEREST, AND   73           

OTHER CHARGES OWED ON THE CONTRACT OF INDEBTEDNESS, AN AMOUNT      74           

EQUAL TO THE ATTORNEYS' FEES CUSTOMARILY CHARGED BY THE ATTORNEY   75           

OR ATTORNEYS RENDERING THE SERVICES.                                            

      Sec. 1309.47.  (A)  A secured party after default may sell,  84           

lease, or otherwise dispose of any or all of the collateral in     85           

its then condition or following any commercially reasonable        86           

preparation or processing.  Any sale of goods is subject to        87           

Chapter 1302. of the Revised Code.  The proceeds of disposition    88           

                                                          3      


                                                                 
shall be applied in the order following to:                        89           

      (1)  The reasonable expenses of retaking, holding,           91           

preparing for sale or lease, selling, leasing, and the like, AND,  92           

TO THE EXTENT PROVIDED FOR IN AN AGREEMENT WITH THE SECURED PARTY  93           

AND NOT PROHIBITED BY SECTION 1301.21 OF THE REVISED CODE, THE     94           

REASONABLE ATTORNEYS' FEES AND LEGAL EXPENSES INCURRED BY THE      95           

SECURED PARTY;                                                     96           

      (2)  The satisfaction of indebtedness secured by the         98           

security interest under which the disposition is made;             99           

      (3)  The satisfaction of indebtedness secured by any         101          

subordinate security interest in the collateral if written         102          

notification of demand therefor is received before distribution    103          

of the proceeds is completed.  If requested by the secured party,  104          

the holder of a subordinate security interest must SHALL           105          

seasonably furnish reasonable proof of his THE HOLDER'S interest,  107          

and unless he THE HOLDER does so, the secured party need not       109          

comply with his THE HOLDER'S demand.                                            

      (B)(1)  If the underlying transaction was a sale of          111          

accounts or chattel paper, the debtor is entitled to any surplus   112          

or is liable for any deficiency only if the security agreement so  113          

provides.                                                          114          

      (2)(a)  If the security interest secures an indebtedness,    116          

the secured party must SHALL account to the debtor for any         117          

surplus, and, unless otherwise agreed, the debtor is liable for    119          

any deficiency.                                                    120          

      (b)  If the secured party in disposing of collateral         122          

pursuant to this section has complied with the requirements of     123          

division (C) of this section, the amount of the deficiency, if     124          

any, to which the secured party is entitled shall be based on the  125          

actual proceeds of the disposition.                                126          

      (c)  If the secured party in disposing of collateral         128          

pursuant to this section has failed to comply with the             129          

requirements of division (C) of this section, the amount of the    130          

deficiency, if any, to which the secured party is entitled shall   131          

                                                          4      


                                                                 
be based on the appropriate value of the collateral as provided    132          

in division (B)(2)(d) or (e) of this section.                      133          

      (d)  The appropriate value of the collateral under division  135          

(B)(2)(c) of this section shall be presumed to equal the secured   136          

indebtedness.  The secured party may rebut this presumption by     137          

introducing some credible evidence of a lower appropriate value    138          

of the collateral.  Evidence of the amount of the actual proceeds  139          

of the disposition is not, of itself, sufficient to rebut the      140          

presumption.                                                       141          

      (e)  If the secured party rebuts the presumption described   143          

in division (B)(2)(d) of this section, the appropriate value of    144          

the collateral shall be deemed to equal the actual proceeds of     145          

the disposition, unless the debtor establishes that a greater      146          

amount would have been realized had the secured party complied     147          

with the requirements of division (C) of this section, in which    148          

case, the greater amount established by the debtor shall be        149          

deemed the appropriate value of the collateral.  The debtor bears  150          

the burden of establishing the amount that would have been         151          

realized had the secured party complied with the requirements of   152          

division (C) of this section.                                      153          

      (C)  Disposition of the collateral may be by public or       155          

private proceedings and may be made by way of one or more          156          

contracts.  Sale or other disposition may be as a unit or in       157          

parcels, and at any time and place, and on any terms, but every    159          

aspect of the disposition, including the method, manner, time,     160          

place, and terms must, SHALL be commercially reasonable.  Unless   162          

collateral is perishable or threatens to decline speedily in       163          

value or is of a type customarily sold on a recognized market,     164          

reasonable notification of the time and place of any public sale   165          

or reasonable notification of the time after which any private     166          

sale or other intended disposition is to be made shall be sent by  167          

the secured party to the debtor if he THE DEBTOR has not signed    168          

after default a statement renouncing or modifying his THE          170          

DEBTOR'S right to notification of sale.  In the case of consumer   172          

                                                          5      


                                                                 
goods, no other notification need be sent.  In other cases,        173          

notification shall be sent to any other secured party from whom    174          

the secured party has received, before sending his notification    175          

to the debtor or before the debtor's renunciation of his THE       176          

DEBTOR'S rights, written notice of a claim of an interest in the   178          

collateral.  The secured party may buy at any public sale, and,    179          

if the collateral is of a type customarily sold in a recognized    180          

market or is of a type which is the subject of widely distributed  181          

standard price quotations he, THE SECURED PARTY may buy at A       183          

private sale.                                                                   

      (D)  When collateral is disposed of by a secured party       185          

after default, the disposition transfers to a purchaser for value  186          

all of the debtor's rights therein IN THE COLLATERAL, AND          187          

discharges the security interest under which it is made and any    190          

security interest or lien subordinate thereto TO IT.  The          191          

purchaser takes free of all such rights and interests even though  193          

the secured party fails to comply with the requirements of         194          

sections 1309.44 to 1309.50 of the Revised Code or of any          195          

judicial proceedings:                                                           

      (1)  In the case of a public sale, if the purchaser has no   197          

knowledge of any defects in the sale and if he THE PURCHASER does  199          

not buy in collusion with the secured party, other bidders, or     200          

the person conducting the sale; or                                 201          

      (2)  In any other case, if the purchaser acts in good        203          

faith.                                                             204          

      (E)  A person who is liable to a secured party under a       206          

guaranty, indorsement, repurchase agreement, or the like and who   207          

receives a transfer of collateral from the secured party or is     208          

subrogated to his THE SECURED PARTY'S rights has thereafter the    209          

rights and duties of the secured party.  Such a transfer of        211          

collateral is not a sale or disposition of the collateral under    212          

this chapter.                                                                   

      (F)  This section is subject to the limitations of section   214          

1317.16 of the Revised Code.                                       215          

                                                          6      


                                                                 
      Sec. 1309.49.  At any time before the secured party has      224          

disposed of collateral or entered into a contract for its          225          

disposition under section 1309.47 of the Revised Code or before    226          

the obligation has been discharged under division (B) of section   227          

1309.48 of the Revised Code, the debtor or any other secured                    

party may, unless otherwise agreed in writing after default,       228          

redeem the collateral by tendering fulfillment of all obligations  230          

secured by the collateral as well as, the expenses reasonably      232          

incurred by the secured party in retaking, holding, and preparing  233          

the collateral for disposition, in arranging for the sale, AND,    234          

TO THE EXTENT PROVIDED FOR IN AN AGREEMENT WITH THE SECURED PARTY  235          

AND NOT PROHIBITED BY SECTION 1301.21 OF THE REVISED CODE, THE     236          

REASONABLE ATTORNEYS' FEES AND LEGAL EXPENSES INCURRED BY THE      237          

SECURED PARTY.                                                                  

      Section 2.  That existing sections 1309.47 and 1309.49 of    240          

the Revised Code are hereby repealed.                              241          

      Section 3.  Section 1301.21 of the Revised Code applies      243          

only to commitments to pay attorneys' fees that are included in    244          

contracts of indebtedness that are enforced, through judicial      245          

proceedings or otherwise, on and after the effective date of this  246          

act.