Case Title: Wilborn v. Bank One Corp.

Citation: 2009-Ohio-306

Docket Number: 20070558

State: ohio

Court: Ohio Supreme Court

Date: 2009-02-03T00:00:00Z

Document:
[Cite as Wilborn v. Bank One Corp., 121 Ohio St.3d 546, 2009-Ohio-306.] 
 
 
 
WILBORN ET AL., APPELLANTS, v. BANK ONE  
CORPORATION ET AL., APPELLEES. 
[Cite as Wilborn v. Bank One Corp., 121 Ohio St.3d 546, 2009-Ohio-306.] 
Contracts — Mortgages — Residential-mortgage loan agreement — Provision 
requiring defaulting borrower to pay lender’s reasonable attorney fees as 
condition for terminating foreclosure proceedings and reinstating loan is 
not against public policy or statutory or decisional law. 
(No. 2007-0558 — Submitted March 11, 2008 — Decided February 3, 2009.) 
APPEAL from the Court of Appeals for Mahoning County,  
No. 04-MA-182, 2007-Ohio-596. 
__________________ 
SYLLABUS OF THE COURT 
A provision in a residential-mortgage contract requiring a defaulting borrower to 
pay a lender’s reasonable attorney fees as a condition of terminating 
pending lender-initiated foreclosure proceedings on a defaulted loan and 
reinstating the loan is not contrary to Ohio statutory or decisional law or 
against Ohio public policy.  (Leavans v. Ohio Natl. Bank (1893), 50 Ohio 
St. 591, 34 N.E. 1089, and Miller v. Kyle (1911), 85 Ohio St. 186, 97 N.E. 
372, distinguished.) 
__________________ 
 
CUPP, J. 
{¶ 1} In this case we decide whether a provision in a residential-
mortgage contract requiring a borrower to pay the lender’s attorney fees as a 
condition of reinstatement of the borrower’s defaulted mortgage after the lender 
initiates foreclosure proceedings violates Ohio’s public policy.  Because we 
SUPREME COURT OF OHIO 
2 
conclude that such a provision does not violate public policy, we affirm the court 
of appeals’ judgment. 
I 
{¶ 2} The 11 plaintiff-appellants (“borrowers”) in this matter filed a 
class-action complaint in August 2003 against various financial institutions 
(“lenders”), defendant-appellees herein.  One of the plaintiffs, Sharon Wilborn, 
entered into a home-equity loan agreement with her lender.  The agreement was 
secured by her primary residence.  Upon Wilborn’s default of the home-equity 
loan agreement, her lender instituted foreclosure proceedings.  The agreement did 
not include a reinstatement provision, but it did allow Wilborn to make additional 
payments on her balance at any time.  Upon Wilborn’s request, she was given a 
payoff statement from which she completely paid all amounts owed on her loan.  
The payoff balance paid by Wilborn included attorney fees incurred by the lender 
because of the pending lender-initiated foreclosure proceedings.  Once Wilborn 
satisfied the payoff balance and resolved her default, the lender discontinued its 
foreclosure action against her.  The attorney fees were included in the lender’s 
loan-payoff statement pursuant to a term in the home-equity agreement providing 
that “Mortgagor shall be liable to Mortgagee for all legal costs, including but not 
limited to reasonable attorney fees and costs and charges of any sale in any action 
to enforce any of its rights hereunder whether or not such action proceeds to 
judgment.” 
{¶ 3} The remaining plaintiff-appellants are borrowers who each entered 
into residential-mortgage contracts with their respective lenders.  It is undisputed 
that each borrower defaulted on the mortgage and the respective lenders instituted 
foreclosure proceedings.  It is also undisputed that each borrower’s mortgage 
contract contains a reinstatement provision, which permits a borrower, after 
default but prior to a judgment enforcing the mortgage and note, to bring the 
payments current, to have the foreclosure litigation discontinued, and to have the 
January Term, 2009 
3 
mortgage reinstated provided that the lender recovers all its costs, including 
reasonable attorney fees, incurred in the foreclosure litigation.1    
{¶ 4} After the lenders instituted foreclosure proceedings but before 
foreclosure judgments were entered, the borrowers, through mortgage 
reinstatement or some other workout provision such as modification of the 
mortgage, each paid their respective lender the amount for which they were in 
default, as well as costs and attorney fees.  Thereafter, the borrowers filed suit 
against the lenders alleging that the payment of the lenders’ attorney fees in 
connection with surrendered foreclosure proceedings and the loan reinstatement is 
contrary to Ohio’s public policy and therefore void. 
{¶ 5} In response to the borrowers’ allegations, the lenders filed motions 
to dismiss for failure to state a claim upon which relief could be granted.  The trial 
court granted the lenders’ motions.  The Seventh District Court of Appeals 
affirmed.  Wilborn v. Bank One Corp., 7th Dist. No. 04-MA-182, 2007-Ohio-596.  
In doing so, the appellate court adopted the rationale set forth in Washington Mut. 
Bank v. Mahaffey, 154 Ohio App.3d 44, 2003-Ohio-4422, 796 N.E.2d 39, that 
because a borrower in default is not entitled by law to reinstatement, when a 
                                                 
1.  
{¶ a} The reinstatement clause in the borrowers’ mortgage contracts were substantially 
similar.  The following clause is representative:   
{¶ b} “Borrower’s Right to Reinstate.  If Borrower meets certain conditions, Borrower 
shall have the right to have enforcement of this Security Instrument discontinued at any time prior 
to the earlier of: (a) 5 days (or such other period as applicable law may specify for reinstatement) 
before sale of the Property pursuant to any power of sale contained in this Security Instrument; or 
(b) entry of a judgment enforcing this Security Instrument.  Those conditions are that Borrower: 
(a) pays Lender all sums which then would be due under this Security Instrument and the Note as 
if no acceleration had occurred; (b) cures any default of any other covenants or agreements; (c) 
pays all expenses incurred in enforcing this Security Instrument, including, but not limited to, 
reasonable attorneys’ fees; and (d) takes such action as Lender may reasonably require to assure 
that the lien of this Security Instrument, Lender’s rights in the Property and Borrower’s obligation 
to pay the sums secured by this Security Instrument shall continue unchanged.  Upon 
reinstatement by Borrower, this Security Instrument and the obligations secured hereby shall 
remain fully effective as if no acceleration had occurred.  However, this right to reinstate shall not 
apply in the case of acceleration under Paragraph 17 [because of a transfer of the property or the 
beneficial interest of Borrower].” 
 
SUPREME COURT OF OHIO 
4 
borrower chooses to seek reinstatement under the mortgage documents, “the 
payment of attorney fees is merely a condition for reinstatement, not an obligation 
that arises in connection with the enforcement of the contract” of indebtedness.  
Mahaffey at ¶40.  As a result, the appellate court upheld the validity of the 
attorney-fee provision in connection with loan reinstatement.  Wilborn at ¶32. 
{¶ 6} The borrowers again appealed, and we accepted the case under our 
discretionary jurisdiction on the following proposition of law:  “A provision in a 
residential mortgage to the effect that a borrower in default whose mortgage has 
been made the subject of a foreclosure action may only reinstate the mortgage, 
and thereby avoid foreclosure, upon payment of the attorney fees incurred by the 
lender in initiating the foreclosure action, is against public policy and void.  
Miller v. Kyle (1911), 85 Ohio St. 186 [97 N.E. 372], construed and applied and 
R.C. 1301.21, construed and applied.”  Wilborn v. Bank One Corp., 114 Ohio 
St.3d 1478, 2007-Ohio-3699, 870 N.E.2d 730. 
II 
{¶ 7} Ohio has long adhered to the “American rule” with respect to 
recovery of attorney fees: a prevailing party in a civil action may not recover 
attorney fees as a part of the costs of litigation.  Nottingdale Homeowners’ Assn., 
Inc. v. Darby (1987), 33 Ohio St.3d 32, 33-34, 514 N.E.2d 702; State ex rel. 
Beebe v. Cowley (1927), 116 Ohio St. 377, 382, 156 N.E. 214.  However, there 
are exceptions to this rule.  Attorney fees may be awarded when a statute or an 
enforceable contract specifically provides for the losing party to pay the 
prevailing party's attorney fees, Nottingdale, 33 Ohio St.3d at 34, 514 N.E.2d 702, 
or when the prevailing party demonstrates bad faith on the part of the 
unsuccessful litigant, Pegan v. Crawmer (1997), 79 Ohio St.3d 155, 156, 679 
N.E.2d 1129. 
{¶ 8} When the right to recover attorney fees arises from a stipulation in 
a contract, the rationale permitting recovery is the “fundamental right to contract 
January Term, 2009 
5 
freely with the expectation that the terms of the contract will be enforced.”  
Nottingdale at 36, 514 N.E.2d 702.  The presence of equal bargaining power and 
the lack of indicia of compulsion or duress are characteristics of agreements that 
are entered into freely.  See id. at 35, 514 N.E.2d 702.  In these instances, 
agreements to pay another’s attorney fees are generally “enforceable and not void 
as against public policy so long as the fees awarded are fair, just and reasonable as 
determined by the trial court upon full consideration of all of the circumstances of 
the case.”  Id. at syllabus.  See also Worth v. Aetna Cas. & Sur. Co. (1987), 32 
Ohio St.3d 238, 241, 243, 513 N.E.2d 253 (an indemnity agreement requiring the 
payment of qualified legal expenses arising from free and understanding 
negotiation is enforceable and not contrary to Ohio’s public policy). 
{¶ 9} In contrast, agreements to pay attorney fees in a “contract of 
adhesion, where the party with little or no bargaining power has no realistic 
choice as to terms,” are not enforceable.  Nottingdale, 33 Ohio St.3d at 37, 514 
N.E.2d 702, fn. 7.  To hold such provisions enforceable would be contrary to the 
principle that “freedom in bargaining and equality of bargaining * * * are the 
theoretical parents of the American law of contracts.”  Neal v. State Farm Ins. 
Cos. (1961), 188 Cal.App.2d 690, 694, 10 Cal.Rptr. 781. 
{¶ 10} Similarly, contracts for the payment of attorney fees upon the 
default of a debt obligation are void and unenforceable.  In the context of 
foreclosure actions, we stated in Leavans v. Ohio Natl. Bank (1893), 50 Ohio St. 
591, 34 N.E. 1089, syllabus:  
{¶ 11} “A stipulation in a mortgage to the effect that, in case an action 
should be brought to foreclose it, a reasonable attorney fee, to be fixed by the 
court, for the services of the plaintiff’s attorney in the foreclosure action, should 
be included in the decree, and paid out of the proceeds arising from the sale of 
mortgaged property, is against public policy and void.” 
SUPREME COURT OF OHIO 
6 
{¶ 12} The rule in Leavans was affirmed several years later in Miller v. 
Kyle (1911), 85 Ohio St. 186, 97 N.E. 372, syllabus, which held: 
{¶ 13} “It is the settled law of this state that stipulations incorporated in 
promissory notes for the payment of attorney fees, if the principal and interest be 
not paid at maturity, are contrary to public policy and void.” 
{¶ 14} In other words, a provision in a mortgage or promissory note that 
awards attorney fees upon the enforcement of the lender’s rights when the 
borrower defaults, such as a foreclosure action that has proceeded to judgment, is 
unenforceable.  The rationale for this rule as articulated in Leavans, and 
reaffirmed in Miller, is that “the stipulation to pay attorney fees operates as a 
penalty to the defaulting party and encourages litigation to establish either a 
breach of the agreement or a default on the obligation.”  Worth, 32 Ohio St.3d at 
242, 513 N.E.2d 253. 
{¶ 15} The syllabus law of Leavans and Miller has not been repudiated by 
this court despite the recognition of numerous situations in which contractual 
stipulations for attorney fees may be enforced.2  Worth, 32 Ohio St.3d at 243, 513 
N.E.2d 253 (“our decision today leaves undisturbed our holding in [Miller] and 
like cases”).  See also New Market Acquisitions, Ltd. v. Powerhouse Gym 
(S.D.Ohio 2001), 154 F.Supp.2d 1213, 1226 (“it is true that the Ohio Supreme 
Court has never explicitly overruled Miller”). 
III 
                                                 
2. 
Contractual attorney-fee provisions have been determined to be enforceable in a number 
of situations.  See Nottingdale Homeowners’ Assn., Inc. v. Darby (1987), 33 Ohio St.3d 32, 514 
N.E.2d 702, syllabus (upholding an attorney-fee provision in a condominium-foreclosure case); 
First Capital Corp. v. G & J Indus., Inc. (1999), 131 Ohio App.3d 106, 721 N.E.2d 1084 
(upholding an attorney-fee provision in an accounts-receivable finance agreement if the parties 
have equal bargaining power, similar sophistication, and an opportunity to obtain counsel); 
Goldfarb v. Robb Report, Inc. (1995), 101 Ohio App.3d 134, 147, 655 N.E.2d 211 (upholding an 
attorney-fee provision in a franchise agreement); Gaul v. Olympia Fitness Ctr., Inc. (1993), 88 
Ohio App.3d 310, 623 N.E.2d 1281 (upholding an attorney-fee provision in a loan-guarantee 
agreement). 
January Term, 2009 
7 
{¶ 16} The proposition of law presented by the borrowers, to the extent it 
is modeled after the syllabus of the Leavans and Miller cases, is an accurate 
statement of the law regarding the enforceability of attorney-fee provisions in 
connection with the enforcement of a debt obligation, including a foreclosure 
proceeding.  With the exception of the circumstance presented by appellant 
Wilborn, however, that statement is incompatible with the facts of this case. 
{¶ 17} Foreclosure is a legal process guided by common law and statute.  
See, e.g., R.C. Chapter 2329 (execution against property); Carr v. Home Owners 
Loan Corp. (1947), 148 Ohio St. 533, 36 O.O. 177, 76 N.E.2d 389.  As a result, 
foreclosure affords a number of mechanisms and processes intended as legal 
protection for the debtor.  See, e.g., R.C. 2329.02 (public foreclosure 
proceedings); R.C. 2329.09 (writs of execution); R.C. 2329.17 (appraisal of 
property).  One such legal protection is the right of redemption, an absolute right 
that allows the defaulting borrower to redeem the property even after its public 
sale (but before confirmation) and to thereby terminate the lender’s foreclosure 
proceedings.  Kuehnle & Levey, Baldwin’s Ohio Real Estate Law (2008), Section 
33:4; R.C. 2329.33; Hausman v. Dayton (1995), 73 Ohio St.3d 671, 676, 653 
N.E.2d 1190.  The statutory and common-law nature of foreclosure proceedings 
and of the right of redemption results in a system of “checks and balances” for the 
borrower and lender.  The foreclosure proceeding is the enforcement of a debt 
obligation, and in that situation, the rule against paying another party’s attorney 
fees as articulated in the Leavans and Miller cases well applies. 
{¶ 18} Reinstatement, however, differs from redemption.  A defaulting 
borrower is not entitled by law to have a mortgage loan reinstated.  Upon a 
borrower’s default, a lender is entitled to initiate foreclosure proceedings, to be 
paid in full, and to sever its relationship with the defaulting borrower.  A 
defaulting borrower’s right to reinstate the mortgage loan arises solely from the 
terms of the residential-mortgage contract between the parties.  Reinstatement 
SUPREME COURT OF OHIO 
8 
occurs only when the defaulting borrower chooses reinstatement and, 
consequently, chooses in the existing foreclosure proceeding to forgo those 
statutory protections arising from the foreclosure process.  The defaulting 
borrower’s agreement to pay the lender’s attorney fees incurred in connection 
with the foreclosure proceedings is a reasonable exchange for the right to require 
the lender to reinstate the defaulted mortgage loan and to forbear the lender’s 
legal rights to foreclose, be presently paid in full, and sever the relationship with 
the defaulting borrower. 
{¶ 19} Thus, a mortgage-reinstatement provision in a residential-mortgage 
contract creates no obligation on a defaulting borrower to pay a lender’s attorney 
fees until the borrower exercises his or her choice to reinstate.  Thus, the 
borrower’s obligation to pay such fees does not arise solely as a consequence of 
the lender-initiated foreclosure action.  Instead, the obligation arises only upon the 
defaulting borrower’s voluntary exercise of the contractual right to reinstate the 
mortgage loan, a right gained in exchange for the lender’s surrender of the present 
right to foreclosure.3  Thus, reinstatement is not the enforcement of a debt 
obligation, and the public-policy concerns expressed in Miller and Leavans 
regarding the imposition of a penalty against a debtor upon default have no 
relevance. 
IV 
{¶ 20} Another argument advanced by the borrowers is that the inclusion 
of the mortgage reinstatement or other workout provision in the mortgages 
presented to the borrowers by the lenders was not the product of free and 
understanding negotiation between parties with equal bargaining power.  
Therefore, the borrowers assert, the attorney-fees provision in the mortgages is a 
                                                 
3. 
We note that any attorney fees awarded must be “fair, just and reasonable as determined 
by the trial court upon full consideration of all of the circumstances of the case.”  Nottingdale, 33 
Ohio St.3d 32, 514 N.E.2d 702, at syllabus. 
January Term, 2009 
9 
contract of adhesion and unenforceable.  Plainly stated, the argument asserts that 
the documents involved are standard, uniform mortgage forms, and presumably 
little, if any, negotiation occurred between the borrowers and the lenders as to 
many of the terms contained in those forms.  To this extent, the mortgages may 
well resemble adhesion contracts.4   
{¶ 21} Nevertheless, the terms contained in the uniform mortgage forms 
themselves, including the mortgage-reinstatement and other workout provisions, 
are in reality the result of free and understanding negotiation between parties with 
equal bargaining power.  The following discussion will show that although none 
of the borrowers or lenders in this case were involved, those who did participate 
in the process that created the uniform mortgage forms were virtual proxies for 
the consumers and lenders who would eventually use the product.  That process 
brought together many sophisticated parties with competing interests and 
significant bargaining power.  The reinstatement provision, including the payment 
of attorney fees incurred by the lender as a condition of reinstatement, was thus 
agreed to in a representative process of free and understanding negotiation 
between parties with equal bargaining power. 
A 
{¶ 22} The uniform mortgage forms were promulgated by the Federal 
National Mortgage Association (“Fannie Mae”) and the Federal Home Loan 
Mortgage Corporation (“Freddie Mac”).  The forms were an attempt to achieve 
the objectives of Fannie Mae and Freddie Mac: to establish a secondary market 
                                                                                                                                     
 
4. 
{¶ a} Indeed, it appears that the terms contained in the uniform mortgage forms are not 
open to negotiation.  As advised in 1 Sherman, Ohio Residential Real Estate (2008) 3-7, Section 
3.06: 
 
{¶ b} “Do not attempt to negotiate any of the terms of a form note and mortgage, except 
possibly the escrow of taxes and insurance. If the form note and mortgage are altered in any way, 
the secondary market will not purchase the loan.  For that reason, there is no room for 
negotiation.” 
 
SUPREME COURT OF OHIO 
10 
for residential mortgages.  See, generally, former Section 1451, Title 12, 
U.S.Code, Pub.L. No. 101-73, 103 Stat. 183, 429 (Congressional statement of 
purpose); Section 1716, Title 12, U.S.Code (same, for Fannie Mae). 
{¶ 23} Prior to September 7, 2008, Fannie Mae was a privately owned and 
managed corporation, created by Congress and subject to broad regulatory control 
by the secretary of Housing and Urban Development.5  See Sections 1716b and 
1717(a)(1).  As set forth in the enabling legislation, Fannie Mae is “authorized 
pursuant to commitments or otherwise, to purchase, service, sell, or otherwise 
deal in any mortgages” that are (1) insured or guaranteed by certain federal 
government agencies or (2) not insured or guaranteed by certain federal 
government agencies (i.e., conventional mortgages) generally originated by 
banking institutions and mortgage brokers.  Section 1717(b)(1) and (2), Title 12, 
U.S.Code.  The statutory purpose of Fannie Mae is fivefold: 
{¶ 24} “(1) [To] provide stability in the secondary market for residential 
mortgages; 
{¶ 25} “(2) [To] respond appropriately to the private capital market; 
{¶ 26} “(3) [To] provide ongoing assistance to the secondary market for 
residential mortgages (including activities relating to mortgages on housing for 
low- and moderate-income families involving a reasonable economic return that 
may be less than the return earned on other activities) by increasing the liquidity 
of mortgage investments and improving the distribution of investment capital 
available for residential mortgage financing; 
{¶ 27} “(4) [To] promote access to mortgage credit throughout the Nation 
(including central cities, rural areas, and underserved areas) by increasing the 
                                                 
5. 
On September 7, 2008, the director of the Federal Housing Finance Agency (“FHFA”) 
announced a federal takeover of Fannie Mae and Freddie Mac.  Both Fannie Mae and Freddie Mac 
were placed into conservatorship run by the FHFA to ensure their financial soundness.  See 
statement of James B. Lockhart, September 7, 2008, found at http://www.treas.gov/ 
press/releases/reports/fhfa__statement__090708hp1128.pdf (last accessed on January 26, 2009). 
January Term, 2009 
11 
liquidity of mortgage investments and improving the distribution of investment 
capital available for residential mortgage financing; and  
{¶ 28} “(5) [To] manage and liquidate federally owned mortgage 
portfolios in an orderly manner, with a minimum of adverse effect upon the 
residential mortgage market and minimum loss to the Federal Government.”  
Section 1716, Title 12, U.S.Code. 
{¶ 29} Prior to September 7, 2008, Freddie Mac, like Fannie Mae, was 
also a privately owned and managed corporation, created by Congress to act in the 
residential-mortgage secondary market, subject to the broad regulatory control of 
the secretary of Housing and Urban Development.6  Sections 1452(a), (b) and (c) 
and 1455(j), Title 12, U.S.Code.  Similar to Fannie Mae, Freddie Mac is 
“authorized to purchase, and make commitments to purchase, residential 
mortgages.  [Freddie Mac] may hold and deal with, and sell or otherwise dispose 
of, * * * any such mortgage or interest therein.”  Section 1454(a)(1), Title 12, 
U.S.Code.  Freddie Mac transacts in conventional mortgages, i.e., mortgages that 
are not guaranteed or insured by the government and that are originated, 
generally, by federal savings and loan associations and other institutions whose 
deposits are federally insured.  Section 1451(i), Title 12, U.S.Code.  The statutory 
purpose of Freddie Mac is threefold and corresponds to the first three of the five 
Fannie Mae purposes.  Former Section 1451, Title 12, U.S.Code, Pub.L. No. 101-
73, 103 Stat. 183, 429 (Congressional statement of purpose).  See also Section 
4501(7), Title 12, U.S.Code (“[Fannie Mae and Freddie Mac] have an affirmative 
obligation to facilitate the financing of affordable housing for low- and moderate-
income families in a manner consistent with their overall public purposes, while 
maintaining a strong financial condition and a reasonable economic return”). 
                                                 
6. 
See supra, note 5. 
SUPREME COURT OF OHIO 
12 
{¶ 30} Immediately after the 1970 amendments to Fannie Mae and the 
creation of Freddie Mac, it became apparent that the lack of standardization in 
mortgage documents would hinder the development of a secondary market for 
conventional mortgages. 7  Leibold, Uniform Conventional Mortgage Documents: 
FHLMC Style (1972), 7 Real Prop.Prob. & Tr.J. 435, 437; Murray, The 
Developing National Mortgage Market: Some Reflections and Projections (1972), 
7 Real Prop.Prob. & Tr.J. 441, 446.  Thus, upon the creation of Freddie Mac, the 
first order of business for the two corporate entities was to lead a concerted effort 
to create a uniform mortgage form to be used nationwide.  Carrozzo, Marketing 
the American Mortgage: The Emergency Home Finance Act of 1970, 
Standardization and the Secondary Market Revolution (2005), 39 Real Prop.Prob. 
& Tr.J. 765, 797.  The result was the establishment of a set of forms developed 
through compromise: while the initial drafts “were quite pro-lender, the final 
versions gave both lenders and consumers a good deal to show for their efforts.”  
2 Nelson & Whitman, Real Estate Finance Law (3d Ed.1993) 316, Section 14.1. 
B 
{¶ 31} The process used to create the uniform mortgage forms was 
extensive.  Representatives of Fannie Mae and Freddie Mac circulated several 
draft documents to approximately 10,000 lenders and other experts in the 
mortgage-finance field.  Leibold, Uniform Conventional Mortgage Documents, 7 
Real Prop.Prob. & Tr.J. at 437; Jensen, Mortgage Standardization: History of 
Interaction of Economics, Consumerism and Governmental Pressure (1972), 7 
Real Prop.Prob. & Tr.J. 397, 401.  Because lenders, consumer advocates, and 
members of Congress voiced extreme dissatisfaction with the draft documents, 
Fannie Mae and Freddie Mac representatives coordinated two days of public 
                                                 
7. 
House and Senate Banking and Currency Committee Reports on the act establishing 
Fannie Mae’s authority also directed Fannie Mae to develop standard forms.  Murray, The 
Developing National Mortgage Market (1972), 7 Real Prop.Prob. & Tr.J. 441, 446. 
January Term, 2009 
13 
meetings in 1971. 8  Leibold, Uniform Conventional Mortgage Documents, 7 Real 
Prop.Prob. & Tr.J. at 438; Jensen, Mortgage Standardization, 7 Real Prop.Prob. & 
Tr.J. at 402.  Prior to the public meetings, the proposed forms were published in 
the Federal Register.  36 Fed.Reg. 48 (4712-4715) (Mar. 11, 1971).  Forty 
witnesses testified, representing the lending industry and consumer groups, 
including the American Bar Association, Ralph Nader’s Public Interest Research 
Group, and law professors.  Jensen, Mortgage Standardization, 7 Real Prop.Prob. 
& Tr.J. at 402; 2 Nelson & Whitman, Real Estate Finance Law at 315, Section 
14.1.  Others submitted prepared statements.  Jensen at 402.  After the public 
meetings, draft forms were revised and circulated to various groups for additional 
comment.  Leibold, Uniform Conventional Mortgage Documents, 7 Real 
Prop.Prob. & Tr.J. at 438. 
{¶ 32} As a result of the testimony of the consumer advocates at the 
public meeting, the revised final uniform mortgage forms contained extensive 
consumer protections.  See Jensen, Mortgage Standardization, 7 Real Prop.Prob. 
& Tr.J. at 410-415 (listing consumer-oriented provisions added to the final draft 
as a result of pressure from consumer advocates).  One such compromise 
provision pertained to a borrower’s right to reinstate in the event of a mortgage 
default.  It has been paraphrased as follows:   
{¶ 33} “[A]ny proceedings begun by a lender to enforce the mortgage 
must be discontinued prior to entry of a judgment if (a) the borrower pays all 
                                                 
8.  
Because Fannie Mae and Freddie Mac are private corporations, it was deemed improper 
to hold formal “public hearings,” publish any testimony in the Federal Register or otherwise 
invoke the provisions of the Administrative Procedure Act as argued by consumer advocates.  
Jensen, Mortgage Standardization, 7 Real Prop. Prob. & Tr. J. at 402.  Nevertheless, public 
pressure was sufficient to force the public meetings chaired by former Congressman Albert Rains 
of Alabama, and with the consent of the Senate, publish the testimony from the “meetings” as a 
permanent reference work.  Id. at 402, fn. 11 (referring to the Senate Committee on Banking, 
Housing and Urban Affairs, Federal National Mortgage Association Public Meeting on 
Conventional Mortgage Forms, S.Doc. No. 92-21, 92d Cong., 1st Sess. (1971)). 
 
SUPREME COURT OF OHIO 
14 
sums which would be due as if no acceleration had occurred, (b) the borrower 
cures all breaches of any other covenants, (c) the borrower pays all reasonable 
expenses incurred by lender and (d) the borrower takes such action as lender may 
reasonably require to assure that the lien of the mortgage and the borrower’s 
obligation to pay will continue unimpaired.”  Jensen, 7 Real Prop.Prob. & Tr.J. at 
415. 
{¶ 34} In the end, although a mortgage form uniform to both Fannie Mae 
and Freddie Mac was not created, each produced its own standard form that was 
adopted by its board. 9  Id.; Carrozzo, 39 Real Prop.Prob. & Tr.J. at 799.  The 
degree of acceptance of these uniform mortgage forms has been noteworthy:  
“The resulting forms have been modified in several respects since their 
promulgation, but most of the original language remains intact, and they are very 
widely employed, even by lenders who have no expectation of selling their loans 
to [Fannie Mae or Freddie Mac].”  2 Nelson & Whitman, Real Estate Finance 
Law at 316, Section 14.1.  See also Restatement of the Law 3d, Property 
(Mortgages) (1997) 569, Section 8.1 (Reporter’s Notes) (stating that the Fannie 
Mae and Freddie Mac uniform mortgage forms are the most commonly used 
mortgage documents in the United States). 
{¶ 35} The “borrower’s right to reinstatement” provision, added to the 
uniform mortgage forms as a result of the public meetings, continues to be used in 
the Fannie Mae and Freddie Mac uniform mortgage forms and has not been 
revised in any significant manner.  Id. (setting forth the full text of the provisions 
of “Paragraph 18.  Borrower’s Right to Reinstate”).  As stated in the uniform 
                                                 
9. 
{¶ a} Specifically, the Fannie Mae and Freddie Mac representatives were unable to agree 
on prepayment privileges and due-on-sale provisions.  Jensen, Mortgage Standardization, 7 Real 
Prop.Prob. & Tr.J. at 415-417; Carrozzo, Marketing the American Mortgage, 39 Real Prop.Prob. 
& Tr.J. at 799.   
 
{¶ b} By contrast, Federal Housing Administration and Veterans Affairs form 
documents, which were created in the 1930s and 1940s, were not the result of any public process 
January Term, 2009 
15 
mortgage forms today, the right to reinstate requires the borrower to pay “all 
expenses incurred in enforcing the [residential-mortgage contracts], including, but 
not limited to, reasonable attorneys’ fees.”  Moreover, this is the same 
terminology used in most of the residential mortgages of the borrowers in this 
case. 
{¶ 36} It is in this light that “the simple grace and familiarity of individual 
lending in local institutions among neighbors and friends [have] given way to a 
new [process].  * * * [The public meetings] that took place thirty years ago 
negotiated the mortgage of today’s homebuyer.”  Carrozzo, Marketing the 
American Mortgage, 39 Real Prop.Prob. & Tr.J. at 803. 
C 
{¶ 37} In all, these uniform mortgage forms are the result of sophisticated 
parties, all with competing interests and wielding significant bargaining power, 
freely entering discussions, compromises, and negotiations for the purpose of 
creating “ ‘what the law of mortgages will be in 50 States in most of the home 
buying transactions for the next several decades.’ ”  Id. at 798 (quoting Ralph 
Nader’s testimony at the public meeting).  Accordingly, we are persuaded that 
both the borrowers and the lenders in this case are the beneficiaries of the 
negotiations that culminated in the inclusion of the mortgage-reinstatement or 
alternate-workout provision in the uniform mortgage forms. 
{¶ 38} Moreover, public policy strongly favors the use of these uniform 
mortgage forms to further Congress’s stated purpose and to permit the trading of 
Ohio’s conventional mortgages on the secondary market.  To declare some part of 
these forms unenforceable would make Ohio less competitive in the secondary 
mortgage market, thwarting the objectives of the Fannie Mae and Freddie Mac 
enabling legislation, denying lenders liquidity for their investment portfolios, and 
                                                                                                                                     
balancing lender and consumer interests.  See 2 Nelson & Whitman, Real Estate Finance Law at 
316, Section 14.1. 
SUPREME COURT OF OHIO 
16 
decreasing the capital available to borrowers for mortgages.  In light of the 
economic difficulties afflicting the national economy as of late, and particularly in 
the housing sector, our decision today also serves the public policy of this state by 
avoiding further destabilization. 
V 
{¶ 39} The final argument presented by the borrowers is that the 
provisions of R.C. 1301.21 are applicable to the mortgage-reinstatement terms 
and these provisions make the attorney-fees terms unenforceable.  R.C. 1301.21 
authorizes enforcement of provisions for reasonable attorney fees in contracts that 
do not evidence primarily personal, family, or household purpose indebtedness 
and are in excess of $100,000.10   
{¶ 40} The borrowers claim that because the mortgages evidence 
personal, family, or household indebtedness, the General Assembly has by 
implication legislatively eliminated the ability of one party to contractually agree 
to pay the attorney fees of another in transactions such as those represented by the 
mortgages.  The borrowers assert that since the statute permits contractual 
                                                 
10.   
{¶ a} 
R.C. 1301.21 states: 
{¶ b}  
“(A) As used in this section: 
{¶ c}  
“(1) ‘Contract of indebtedness’ means a note, bond, mortgage, conditional sale 
contract, retail installment contract, lease, security agreement, or other written evidence of 
indebtedness, other than indebtedness incurred for purposes that are primarily personal, family, or 
household. 
{¶ d}  
“(2) ‘Commitment to pay attorneys' fees’ means an obligation to pay attorneys' 
fees that arises in connection with the enforcement of a contract of indebtedness. 
{¶ e}  
“(3) ‘Maturity of the debt’ includes maturity upon default or otherwise. 
{¶ f}  
“(B) If a contract of indebtedness includes a commitment to pay attorneys' fees, 
and if the contract is enforced through judicial proceedings or otherwise after maturity of the debt, 
a person that has the right to recover attorneys' fees under the commitment, at the option of that 
person, may recover attorneys' fees in accordance with the commitment, to the extent that the 
commitment is enforceable under divisions (C) and (D) of this section.   
{¶ g}  
“(C) A commitment to pay attorneys’ fees is enforceable under this section only 
if the total amount owed on the contract of indebtedness at the time the contract was entered into 
exceeds one hundred thousand dollars. 
{¶ h}  
“(D) A commitment to pay attorneys’ fees is enforceable only to the extent that 
it obligates payment of a reasonable amount.”  
January Term, 2009 
17 
attorney fees in commercial transactions, the General Assembly’s silence as to 
residential mortgages indicates an intentional and purposeful prohibition of 
recovery of attorney fees in residential-mortgage transactions consistent with the 
rule in Miller and is a limitation of the Nottingdale principles. 
{¶ 41} This contention, however, overreads the statute.  The express terms 
of R.C. 1301.21 state that it applies only to provisions for attorney fees in 
commercial contracts.  R.C. 1301.21(A)(1).  Consequently, we decline to apply 
R.C. 1301.21 to residential-mortgage contracts by implication or by unnecessary 
statutory construction. 
{¶ 42} Moreover, we have already determined that the reinstatement 
provision is distinguishable from the enforcement of a debt.  Because R.C. 
1301.21 applies only to the enforcement of a debt, it has no relevance to 
reinstatement provisions. 
VI 
{¶ 43} Although we have concluded that that reinstatement is 
substantially distinguishable from the enforcement of a debt obligation, the 
circumstance presented by appellant Wilborn herein is also distinguishable from 
the circumstances of the other borrowers.  Wilborn’s home-equity loan agreement 
did not have a reinstatement provision, so she could not seek that option for 
remedying her default.  Instead, Wilborn paid off her entire principal and interest 
in a lump sum prior to judgment to terminate the foreclosure proceedings. Once 
she paid all of the outstanding principal, interest, and court costs in the 
foreclosure action, the debt to her lender was satisfied, and the lender was 
required to dismiss the foreclosure action not because of any reciprocal 
contractual obligation but because no debt remained to be enforced.  
Nevertheless, Wilborn’s lender required her to pay its attorney fees incurred in 
connection with the foreclosure action as a condition of dismissal. 
SUPREME COURT OF OHIO 
18 
{¶ 44} In paying the lender’s attorney fees in addition to all outstanding 
principal, interest, and court costs, Wilborn was not voluntarily exercising a 
contractual right prior to judgment in exchange for the surrender of some other 
right by the lender.  Once Wilborn paid off the entire debt, she had a right to 
dismissal, but instead she was required to pay the lender’s attorney fees incurred 
in the enforcement of the note and mortgage debt.  Such a circumstance has all the 
indicia of imposing attorney fees in connection with the enforcement of a debt, in 
contravention of the rule articulated in Leavans, 50 Ohio St. 591, 34 N.E. 1089, 
and Miller, 85 Ohio St. 186, 97 N.E. 372.  The fact that the principal and interest 
owing on the account, together with court costs, had been paid before the lender 
obtained a judgment does not transform the underlying legal action into anything 
other than an action to enforce a debt.  Thus, the attorney-fee provision contained 
in Wilborn’s loan agreement is unenforceable under Ohio’s long-standing rule 
that attorney fees may not be collected against the debtor in an action to enforce a 
debt. 
VII 
{¶ 45} Based on the foregoing, we hold that a provision in a residential-
mortgage contract requiring a defaulting borrower to pay a lender’s reasonable 
attorney fees as a condition of terminating pending lender-initiated foreclosure 
proceedings on a defaulted loan and reinstating the loan is not contrary to Ohio 
statutory or decisional law or against Ohio public policy. 
{¶ 46} The judgment of the court of appeals is reversed as to appellant 
Wilborn and is affirmed in all other aspects.  The cause is remanded to the trial 
court for further proceedings not inconsistent with this opinion. 
Judgment affirmed in part  
and reversed in part, 
and cause remanded. 
January Term, 2009 
19 
 
MOYER, C.J., and LUNDBERG STRATTON, O’CONNOR, O’DONNELL, and 
LANZINGER, JJ., concur. 
 
PFEIFER, J., concurs in judgment only. 
__________________ 
 
Volkema Thomas, L.P.A., Michael S. Miller, and Daniel R. Volkema; 
National Consumer Law Center and Stuart T. Rossman; and Locks Law Firm 
P.L.L.C., and Seth R. Lesser, for appellants. 
 
Reed Smith, L.L.P., James C. Martin, Perry A. Napolitano, Joseph E. 
Culleiton, and David J. Bird; Comstock, Springer & Wilson Co., L.P.A., and 
Bobbie L. Flynt; Manchester, Bennett, Powers & Ullman and Stephen T. Bolton; 
and Mayer Brown, L.L.P., Lucia Nale, and Diane Swisher Andsager, for appellees 
Bank One, N.A. (Ohio), Ameriquest Mortgage Co., Wells Fargo Home Mortgage, 
Inc., Washtenaw Mortgage Co., Mortgage Electronic Registration Systems, Inc., 
and Chase Manhattan Mortgage Corp. 
 
Horton & Horton Co., L.P.A., Earle C. Horton, and Brett E. Horton, for 
Federal Deposit Insurance Corporation, as receiver of appellee Washington 
Mutual Bank (successor to Homeside Lending, Inc.). 
 
Lerner, Sampson & Rothfuss and Rick D. DeBlasis, for appellee Lerner, 
Sampson & Rothfuss. 
 
Tucker Ellis & West, L.L.P., Irene C. Keyse-Walker, and Karl A. Bekeny, 
urging affirmance for amici curiae Federal Home Loan Mortgage Corporation, 
American Bankers Association, American Financial Services Association, 
Consumer Bankers Association, Consumer Mortgage Coalition, Mortgage 
Bankers Association, Ohio Bankers League, and Ohio Mortgage Bankers 
Association. 
 
Richard Cordray, Attorney General, Benjamin C. Mizer, Solicitor General, 
and Todd A. Nist, Assistant Solicitor, urging reversal for amicus curiae state of 
Ohio. 
SUPREME COURT OF OHIO 
20 
 
Benson A. Wolman, Rachel K. Robinson, Paul B. Bellamy, and Judith B. 
Goldstein, urging reversal for amici curiae Equal Justice Foundation, Ohio State 
Legal Services Association, Southeastern Ohio Legal Services, Northeast Ohio 
Legal Services, Legal Aid of Western Ohio, Advocates for Basic Legal Equality, 
Legal Aid Society of Columbus, Legal Aid Society of Cleveland, and Coalition 
on Homelessness and Housing in Ohio. 
______________________