MCM Home Builders, L.L.C. v. Sheehan
2019 Ohio 3899
Ohio Ct. App.2019Background
- The Sheehans contracted with MCM under a cost-plus construction agreement (budget $499,235; 10% builder fee) to build a custom home; MCM (sole employee Marc Moldovan) managed invoices and an Excel budget.
- The Sheehans directed numerous upgrades and changes during construction that increased costs; MCM drew the $512,000 construction loan and paid subcontractors; no mechanic’s liens filed, but MCM later drew the full loan.
- After certificate of occupancy, disputes over punch-list performance led the Sheehans to tell MCM (by email dated Jan. 5, 2015) not to return; MCM filed a mechanic’s lien and sued for unpaid contract balance (~$124,900).
- The jury found the Sheehans breached the contract on Jan. 5, 2015, awarded MCM $124,868.85 plus a $5,000 contract termination fee, and found the breach was in bad faith/vexatious/wanton/obdurate/malicious.
- The trial court (after a post-trial hearing) awarded MCM $221,452.88 in attorney’s fees; the Sheehans appealed, raising evidentiary rulings, expert exclusion, bad-faith submission/weight, attorney-fee award, and manifest-weight arguments.
Issues
| Issue | Plaintiff's Argument (MCM) | Defendant's Argument (Sheehans) | Held |
|---|---|---|---|
| Admissibility of subcontractor invoices (Ex. 12) | Invoices are business records and admissible under Evid.R. 803(6) and Burton cost-plus framework to prove amounts invoiced/paid; limiting instruction suffices | Invoices are hearsay within hearsay and inadmissible; jury cannot rely on out-of-court vendor statements | Court admitted invoices under business-record exception and Burton framework with limiting instructions; no abuse of discretion |
| Exclusion of Sheehans' expert (motion in limine) | N/A (MCM sought exclusion for discovery noncompliance) | Exclusion improper; proffered testimony should be allowed | Court properly excluded defendant’s expert and denied late substitution for failure to comply with local discovery rule; no abuse of discretion |
| Submission of bad-faith issue to jury (after denial of amendment to add tort-based bad-faith claim) | Jury may decide whether breach was in bad faith for purpose of attorney-fee exception to American Rule; not a new tort claim | Allowing bad-faith to go to jury improperly permits unpled tort claim / prejudices Sheehans | Court permitted bad-faith as the limited contract-based exception to the American Rule (attorney-fee issue); defendants waived contemporaneous objection; no plain error |
| Award of attorney’s fees based on jury bad-faith finding | Fees recoverable under American Rule exception where breach is in bad faith; trial court should determine amount | Bad-faith finding was unsupported; fees award improper or excessive | Trial court exercised discretion to accept jury finding and set fees ($221,452.88, with a deduction for defense work); award affirmed as not an abuse of discretion |
Key Cases Cited
- Burton v. Durkee, 158 Ohio St. 313 (1952) (establishes cost-plus contract recovery principles)
- Burton v. Durkee, 162 Ohio St. 433 (1954) (places burden on owners to show costs were erroneous or false in cost-plus contracts)
- Eastley v. Volkman, 132 Ohio St.3d 328 (2012) (standard for manifest-weight review in civil cases)
- Rigby v. Lake County, 58 Ohio St.3d 269 (1991) (trial court discretion in evidentiary rulings)
- Pang v. Minch, 53 Ohio St.3d 186 (1990) (presumption that jury follows court instructions)
- State v. Steffen, 31 Ohio St.3d 111 (1987) (hearsay rule and exceptions analysis)