2016 Ohio 3029
Ohio Ct. App.2016Background
- H&H Glass (subcontractor) contracted with Empire Building (general contractor) to supply and install aluminum window systems at Sayler Park School; Travelers was Empire’s surety.
- H&H submitted monthly pay applications; disputes arose over billing accuracy, timeliness of payment, and retainage amounts, culminating in H&H walking off the job.
- Empire hired Andy’s Glass to complete H&H’s work and counterclaimed for damages based on H&H’s abandonment.
- H&H sued Empire (and Travelers) for breach of contract seeking $27,084.80 (including $11,095.01 for custom storefront materials) and brought a Prompt Pay Act claim for prejudgment interest and attorney fees.
- The trial court found Empire materially breached by wrongfully withholding labor payments and excused H&H’s further performance, awarded H&H $27,084.80 (including cost of the custom materials), and denied attorney fees and Prompt Pay relief; both sides appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Empire’s breach was material, excusing H&H’s further performance | H&H: Empire repeatedly withheld payments/retainage in violation of the contract, justifying walk-off | Empire: Withheld amounts were not material; H&H’s walk-off was wrongful | Court: Breach was material—Empire wrongfully and consistently withheld labor payments; decision affirmed |
| Whether Empire is entitled to set-off for costs to finish work and to use withheld retainage against replacement contractor costs | H&H: Excused from performance; contractual set-offs unavailable after material breach | Empire: Contract permits set-off/retainage to cover costs of completing work | Court: After Empire’s material breach, contractual set-offs were not available to Empire; set-off/retainage claims rejected |
| Whether H&H sold or offered custom-made storefront materials to Empire (affecting damages) | H&H: Materials were custom, in H&H’s possession, and H&H offered to sell them to Empire | Empire: H&H never offered to sell materials; award should exclude their cost | Court: Credited H&H’s testimony; trial court’s factual finding not against manifest weight; award stands |
| Whether H&H was entitled to Prompt Pay Act remedies (18% prejudgment interest and attorney fees) | H&H: Timely payments were made to Empire (or should have been), so Prompt Pay Act applies | Empire: Payments/disputes were bona fide and in good faith; Prompt Pay Act inapplicable under disputed-claim exception | Court: Prompt Pay Act inapplicable because of good-faith, disputed claims over work, retainage, and materials; no statutory interest or fees awarded |
Key Cases Cited
- Natl. City Bank of Cleveland v. Erskine & Sons, 110 N.E.2d 598 (Ohio 1953) (definition of breach of contract)
- Kichler’s, Inc. v. Persinger, 265 N.E.2d 319 (Ohio Ct. App. 1970) (minor/trivial breaches do not excuse performance)
- Software Clearing House, Inc. v. Intrak, Inc., 538 N.E.2d 1056 (Ohio Ct. App. 1989) (materiality requires essentiality to contract purpose)
- Eastley v. Volkman, 972 N.E.2d 517 (Ohio 2012) (standard for manifest weight review)
- Masiongale Elec.-Mechanical, Inc. v. Constr. One, Inc., 806 N.E.2d 148 (Ohio 2004) (Prompt Pay Act inapplicable where contractor withholds in good faith over disputed performance)
- Ernst v. Ohio Dept. of Adm. Serv., 590 N.E.2d 812 (Ohio Ct. App. 1990) (wrongful withholding of payment can go to essence of agreement)
- Garofalo v. Chicago Title Ins. Co., 661 N.E.2d 218 (Ohio Ct. App. 1995) (contractual offsets not available where nonbreaching party excused due to material breach)