Evans, Mechwart, Hambleton & Tilton, Inc. v. Triad Architects, Ltd.

• Decision Date: 29 September 2011
• Docket Number: No. 10AP–1154.,10AP–1154.
• Citation: 965 N.E.2d 1007
• Court: Ohio Court of Appeals
• Parties: EVANS, MECHWART, HAMBLETON & TILTON, INC., Appellant, v. TRIAD ARCHITECTS, LTD., Appellee.

965 N.E.2d 1007

EVANS, MECHWART, HAMBLETON & TILTON, INC., Appellant,

v.TRIAD ARCHITECTS, LTD., Appellee.

No. 10AP–1154.

Court of Appeals of Ohio, Tenth District, Franklin County.

Decided Sept. 29, 2011.

Burman & Robinson and Randal D. Robinson, Columbus, for appellant.

Law Offices of Russell A. Kelm, Russell A. Kelm, and Joanne W. Detrick, Columbus, for appellee.

KLATT, Judge.

{¶ 1} Plaintiff-appellant, Evans, Mechwart, Hambleton & Tilton, Inc. ("EMH & T"), appeals from a judgment of the Franklin County Court of Common Pleas in favor of defendant-appellee, Triad Architects, Ltd. ("Triad"). For the following reasons, we reverse the judgment and remand the cause.

{¶ 2} In January 2007, Triad entered into an agreement with Centurion Development Group, L.L.C. ("Centurion") to provide architectural and engineering plans for a residential development that Centurion wanted to build. Triad asked EMH & T to supply civil-engineering services on the project. On January 22, 2007, Triad and EMH & T executed a contract whereby Triad agreed to pay EMH & T $128,550 for environmental- and engineering-due-diligence work, surveys, and development plans, as well as additional specified services.

{¶ 3} Centurion also hired Triad to work on another development project. In a second contract with Centurion, Triad agreed to provide architectural and engineering plans for a nine-story condominium building. Again, Triad turned to EMH & T for the civil-engineering work on the project. On July 9, 2007, Triad and EMH & T entered into a contract whereby Triad agreed to pay EMH & T $60,200 for a construction plan, landscape plan, topographical survey, geotechnical investigation, and other services.

{¶ 4} For the most part, Triad and EMH & T relied on the American Institute of Architects ("AIA") Standard Form of Agreement Between Architect and Consultant (Document C141–1997) to supply the terms of their January 22 and July 9, 2007 contracts. Thus, both contracts provided:

§ 12.5 Payments to the Consultant shall be made promptly after the Architect is paid by the Owner under the Prime Agreement. The Architect shall exert reasonable and diligent efforts to collect prompt payment from the Owner. The Architect shall pay the Consultant in proportion to amounts

received from the Owner which are attributable to the Consultant's services rendered.

In both contracts, the parties added the following term to the AIA form agreement:

§ 13.4.3 * * * The Consultant shall be paid for their services under this Agreement within ten (10) working days after receipt by the Architect from the Owner of payment for the services performed by the Consultant on behalf of their Part of the Project.

{¶ 5} EMH & T substantially completed all services required under the two contracts by December 11, 2007. EMH & T then billed Triad a total of $150,482.29. Triad, however, refused to pay. In response to EMH & T's attempts to recover payment, Triad contended that sections 12.5 and 13.4.3 of the parties' contracts required it to pay EMH & T only when and to the extent that Centurion paid it. Centurion canceled both projects and refused to pay Triad. Because Triad never collected payment from Centurion, Triad disclaimed any obligation to pay EMH & T.

{¶ 6} EMH & T filed suit against Triad, asserting claims for an account stated, professional services rendered, breach of contract, and unjust enrichment. Both parties moved for summary judgment. On November 17, 2010, the trial court entered a decision and final judgment granting Triad's motion for summary judgment and denying EMH & T's motion for summary judgment. EMH & T now appeals from that judgment, and it assigns the following errors:

[1.] The trial court erred in overruling Plaintiff–Appellant's Motion for Summary Judgment when it failed to consider established Ohio case law and construction industry standards in deciding that the language contained in the parties' contracts with respect to payment by Appellee constituted a "pay-if-paid" rather than "pay-when-paid" obligation as a matter of law.

[2.] The trial court erred in sustaining Defendant–Appellee's Motion for Summary Judgment since the pleadings and affidavits filed by Defendant–Appellee are inadequate and inadmissible as parol evidence, but even if considered, create rather than eliminate genuine issues of material fact.

{¶ 7} Because EMH & T's two assignments of error are interrelated, we will address them together. Both assignments of error challenge the trial court's ruling on the parties' motions for summary judgment. Entry of summary judgment is appropriate when the moving party demonstrates that (1) there is no genuine issue of material fact, (2) the moving party is entitled to judgment as a matter of law, and (3) reasonable minds can come to but one conclusion when viewing the evidence most strongly in favor of the nonmoving party, and that conclusion is adverse to the nonmoving party. Hudson v. Petrosurance, Inc., 127 Ohio St.3d 54, 2010-Ohio-4505, 936 N.E.2d 481, ¶ 29; Sinnott v. Aqua–Chem, Inc., 116 Ohio St.3d 158, 2007-Ohio-5584, ¶ 29. Appellate review of a trial court's ruling on a motion for summary judgment is de novo. Hudson at ¶ 29. This means that an appellate court conducts an independent review without deference to the trial court's determination. Zurz v. 770 W. Broad AGA, L.L.C., 192 Ohio App.3d 521, 2011-Ohio-832, 949 N.E.2d 595, ¶ 5; White v. Westfall, 183 Ohio App.3d 807, 2009-Ohio-4490, 919 N.E.2d 227, ¶ 6.

{¶ 8} The parties' dispute centers on the meaning of the contractual language setting forth Triad's obligation to pay EMH & T. Triad argues that sections 12.5 and 13.4.3 create a condition precedent: it must receive payment from Centurion for its duty to pay EMH & T to arise. According to Triad's interpretation of the parties' contracts, it owes EMH & T nothing because Centurion did not pay it. EMH & T disagrees, and instead contends that sections 12.5 and 13.4.3 impose on Triad an absolute duty to pay EMH & T within a reasonable time. Under EMH & T's interpretation, Centurion's failure to pay Triad does not negate Triad's obligation to pay EMH & T.

{¶ 9} This dispute is an iteration of a long-standing disagreement between general contractors and subcontractors over the enforcement of "pay-when-paid" and "pay-if-paid" contractual provisions. " ‘A typical "pay-when-paid" clause might read: "Contractor shall pay subcontractor within seven days of contractor's receipt of payment from the owner." ’ " MidAmerica Constr. Mgt., Inc. v. MasTec N. Am., Inc. (C.A.10, 2006), 436 F.3d 1257, 1261, quoting Robert F. Carney and Adam Cizek, Payment Provisions in Construction Contacts and Construction Trust Fund Statutes: A Fifty State Survey (Fall 2004), 24 Construction Law. 5, 5. The majority of courts, including Ohio courts, hold that this type of provision means that the contractor's obligation to make payment is suspended for a reasonable period of time for the contractor to receive payment from the owner. Id.; Power & Pollution Servs., Inc. v. Suburban Power Piping Corp. (1991), 74 Ohio App.3d 89, 91, 598 N.E.2d 69; Franklin Consultants, Inc. v. Osborne (Oct. 1, 1979), 11th Dist. No. 7–050, 1979 WL 208177 ; Thos. J. Dyer Co. v. Bishop Internatl. Eng. Co. (C.A.6, 1962), 303 F.2d 655, 661 (holding that a pay-when-paid provision is "designed to postpone payment for a reasonable period of time after work [is] completed, during which the general contractor would be afforded the opportunity of procuring from the owner the funds necessary to pay the subcontractor"); Ziegenfuss Drilling, Inc. v. Frontier–Kemper Constructors, Inc. (Aug. 20, 2009), S.D.W.Va. No. 2:07–cv–00342, 2009 WL 2599308, at *3; Fixture Specialists, Inc. v. Global Constr., L.L.C. (Mar. 30, 2009), D.N.J. No. 07–5614(FLW), 2009 WL 904031, at *3; Envirocorp Well Servs., Inc. v. Camp Dresser & McKee, Inc. (Oct. 25, 2000), S.D.Ind. No. IP99–1575–C–T/G, 2000 WL 1617840, at *5; Lafayette Steel Erectors, Inc. v. Roy Anderson Corp. (S.D.Miss.1997), 71 F.Supp.2d 582, 587; Statesville Roofing & Heating Co., Inc. v. Duncan (W.D.N.C.1988), 702 F.Supp. 118, 121; Havens Steel Co. v. Randolph Eng. Co. (W.D.Mo.1985), 613 F.Supp. 514, 539, affirmed (C.A.8, 1987), 813 F.2d 186; Seal Tite Corp. v. Ehret, Inc. (D.N.J.1984), 589 F.Supp. 701, 704; Midland Eng. Co. v. John A. Hall Constr. Co. (N.D.Ind.1975), 398 F.Supp. 981, 993 (holding that pay-when-paid provisions "are not intended to provide the contractor with an eternal excuse for nonpayment"); Fed. Ins. Co. v. I. Kruger, Inc. (Ala.2002), 829 So.2d 732, 740 (holding that "the majority of jurisdictions construe [a pay-when-paid] * * * provision as allowing payment under the contract to be delayed but not stopped altogether"); Wm. R. Clarke Corp. v. Safeco Ins. Co. (1997), 15 Cal.4th 882, 885, 64 Cal.Rptr.2d 578, 938 P.2d 372 (holding that "the majority view is that, if reasonably possible, clauses in construction subcontracts stating that the subcontractor will be paid when the general contractor is paid [will be construed as] merely fixing the usual time for payment to the subcontractor, with the implied understanding that the subcontractor in any event has an unconditional right to payment within a reasonable time"); Koch v. Constr. Technology, Inc. (Tenn.1996), 924 S.W.2d 68, 71; West–Fair Elec. Contrs. v. Aetna Cas. & Sur. Co. (1995), 87 N.Y.2d 148, 155, 638 N.Y.S.2d 394, 661 N.E.2d 967; A.J. Wolfe Co. v. Baltimore Contrs., Inc. (1969), 355 Mass. 361, 365–366, 244 N.E.2d 717; Atlantic States Constr. Co. v. Drummond Co. (1968), 251 Md. 77, 83, 246 A.2d 251; MECO Sys., Inc. v. Dancing Bear Ent., Inc. (Mo.App.2001), 42 S.W.3d 794, 806; Avon Bros., Inc. v. Tom Martin Constr. Co. (Aug. 30, 2000), N.J.Super.A.D. No. A–740–99TI, 2000 WL 34241102, at *7; 8 Lord, Williston on Contracts (4th Ed.2010) 633, Section 19:59 ("The majority of courts have long held that * * * [a pay-when-paid] clause will be construed as creating an absolute obligation on the part of the...