Court Opinion

ID: 5209258
Source: CourtListenerOpinion
Date Created: 2022-01-06 16:09:05.154715+00
Date Added: 2024-06-11T08:27:21.642524
License: Public Domain

[Cite as Broadway Concrete Invests., L.L.C. v. Masonry Contracting Corp., 2022-Ohio-19.]

                              COURT OF APPEALS OF OHIO

                             EIGHTH APPELLATE DISTRICT
                                COUNTY OF CUYAHOGA

BROADWAY CONCRETE                                    :
INVESTMENTS, L.L.C.,
                                                      :
                Plaintiff-Appellee,                                        No. 110420
                                                      :
                v.
                                                      :
MASONRY CONTRACTING
CORP., ET AL.,                                        :

                Defendants-Appellants.                :

                               JOURNAL ENTRY AND OPINION

                JUDGMENT: AFFIRMED IN PART; REVERSED AND REMANDED
                          IN PART
                RELEASED AND JOURNALIZED: January 6, 2022

            Civil Appeal from the Cuyahoga County Court of Common Pleas
                                Case No. CV-18-903809

                                           Appearances:

                Stark & Knoll Co., L.P.A., Michael L. Fortney,
                Alexandra N. Nienaber, and Richard P. Schroeter, Jr., for
                appellee.

                The Law Offices of David M. Leneghan, David M.
                Leneghan, K. Scott Carter, and Catana Chrostowski, for
                appellants.
 KATHLEEN ANN KEOUGH, P.J.:

               Defendants-appellants, Mason Contracting Corp. (“MCC”) and

Western Surety Company (“Western Surety”), appeal the trial court’s judgment,

rendered after a bench trial, that found in favor of plaintiff-appellee, Broadway

Concrete Investments L.L.C. d.b.a. Pompili Precast Concrete (“Pompili”) on Pompili’s

claims for breach of contract and violation of Ohio’s Prompt Payment Act and

awarded Pompili $82,388.51 in damages, plus $21,230.86 in interest and

$101,945.05 in attorney fees. For the reasons that follow, we affirm in part and

reverse and remand in part for further proceedings consistent with this opinion.

 I.   Background

               This case arises out of the Nord Family Greenway construction

project on the Case Western Reserve University campus. The prime contractor for

the project was Gilbane Building Company. Gilbane subcontracted with Platform

Cements, Inc. d.b.a. Platform Contracting (“Platform”) for Platform to perform

excavation, site concrete, and hard cast (including precast concrete) for the project.

Platform subcontracted the precast concrete work to MCC, which in turn

subcontracted the supply of the precast concrete to Pompili by way of a purchase

order in the amount of $366,830.75 executed on October 26, 2016.

               The evidence at trial demonstrated that prior to receiving the

purchase order from MCC, Pompili submitted a written quote for the precast work

directly to Platform. A copy of Pompili’s quote, which included various contract

terms, was attached to the signed purchase order between MCC and Pompili, and a
handwritten note on the purchase order stated, “Note: see Broadway Concrete LLC

Terms & Conditions – Attached as Information Only.” Likewise, the written terms of

the purchase order stated, “Special Conditions: See attached Quotation #0209-001

for reference only.” Each page of the attached quotation from Pompili was marked

“INFORMATION ONLY.”

               With respect to payment of Pompili’s invoices by MCC, the purchase

order required all invoices to be submitted to MCC by the 25th of the month “in order

for the invoices to be put on the appropriate draws. Receiving invoices after the 25th

will delay your payment.” The contract stated further that MCC “will issue checks

within 5 banking days after we receive payment.”

               MCC submitted three pay applications to Platform in 2016: the first

in September, another in November, and the third in December. Pompili had not yet

submitted any invoices to MCC and accordingly, none of these pay applications

included any Pompili invoices. Matthew Birch, owner and president of MCC, testified

at trial that MCC’s first pay application to Platform, in the amount of $50,000, was

the result of an agreement with Platform that he would reduce his quote by $50,000

and Platform would give him an up front payment to help his start-up company.

Birch testified that when he submitted his original bid to Platform, he met with Jason

Klar, the owner of Platform, who told him that his bid was high. Birch told Jason that

he could reduce his bid if Platform paid him $50,000 to help start his newly formed

company. Birch testified that Jason agreed, paid him the agreed-upon $50,000, and

told him to invoice Platform.
                 Jeremy Kler, the project manager for Platform on the project, was

 called as a witness by Pompili. Kler testified that Jason negotiated Platform’s contract

 with MCC and agreed to pay MCC $50,000 up front for its first pay application. Kler

 testified that he reviewed the pay application and approved it, even though none of

 the billed items had been completed at that point.        Kler likewise confirmed that

 MCC’s initial quote to Platform was for $674,980, but the contract executed between

 Platform and MCC was for $624,980. Platform paid MCC’s first pay application of

 $50,000 on October 13, 2016 — the same day it executed its contract with MCC and

 13 days before MCC and Pompili executed their subcontract.

                 Pompili submitted its first invoice in the amount of $3,500 to MCC

on January 31, 2017. MCC included Pompili’s invoice on its fourth pay application to

Platform on January 25, 2017.1 Platform paid MCC’s fourth pay application on May 4,

2017; MCC paid Pompili’s invoice on April 20, 2017, 14 days before it received payment

from Platform.

                 Pompili submitted its second invoice in the amount of $20,000 on

 April 20, 2017. MCC included Pompili’s invoice on its seventh pay application to

 Platform on April 25, 2017.       MCC received a partial payment of its total pay

 application from Platform on June 17, 2017, and tendered the full amount of Pompili’s

 invoice to Pompili on June 21, 2017.

         1 Birch testified that he included money for Pompili in his fourth pay application
 before receiving Pompili’s invoice because he knew Pompili was working on shop drawings.
               Pompili’s third invoice, dated May 19, 2017, was for $30,000 and

included on MCC’s eighth pay application to Platform on May 25, 2017. MCC received

payment from Platform on August 1, 2017, and paid Pompili on August 3, 2017.

               Pompili’s fourth invoice, dated June 29, 2017, in the amount of

$5,000, was included on MCC’s ninth pay application to Platform dated June 25,

2017. MCC paid Pompili on August 31, 2017, even though it did not receive payment

from Platform on this application until September 27, 2017.

               Pompili’s fifth invoice, dated August 15, 2017, in the amount of

$70,000, was included on MCC’s 11th pay application submitted to Platform on

August 25, 2017. MCC paid Pompili on November 27, 2017, 17 days before it received

payment from Platform on December 4, 2017.

               Pompili’s sixth invoice, dated September 18, 2017, for $36,500, was

included on MCC’s 12th pay application to Platform on September 25, 2017. MCC

paid Pompili on November 27, 2017, 17 days before receiving payment from Platform

on December 14, 2017.

               On October 14, 2017, Pompili submitted its seventh invoice for

$110,000. MCC included the invoice on its 13th pay application to Platform. Platform

rejected the application, however, and informed MCC the owner had decided it would

no longer pay for material that was stored off-site and would pay only for material

that was installed or on-site. Platform advised Birch to revise his pay application.

Birch conducted an on-site survey and concluded that Pompili’s invoices were

overstated as compared to what material was on-site or installed. Platform agreed
with Birch’s conclusion. Birch then revised Pompili’s invoice downward to reflects its

overbilling and submitted a revised 13th pay application to Platform. Platform paid

this pay application on January 18, 2018, but MCC made no payment to Pompili

because of its overbilling credit.

                 In November 2017, Pompili issued MCC a credit in the amount of

$56,102.31 for its overbilling.      Pompili did not submit any invoices to MCC for

November 2017, December 2017, and January 2018. Birch testified that during these

months, he resubmitted Pompili’s October invoice, as adjusted, to Platform on MCC’s

14th, 15th, and 16th pay applications.     MCC included $12,500 for Pompili on pay

application 14, which was submitted to Platform on November 25, 2017, and paid by

Platform on January 18, 2018. MCC did not pay Pompili upon receipt of Platform’s

payment because the $12,500 invoiced for Pompili on pay application 14 was offset

by a $12,500 credit on pay application 13. MCC invoiced $5,000 for Pompili on pay

application 15, which it submitted to Platform on December 25, 2017. MCC paid

Pompili on January 31, 2018, before Platform paid the application on March 14, 2018.

MCC included $30,122.60 for Pompili on pay application 16, which was submitted to

Platform on January 25, 2018. Platform paid MCC on March 14, 2018; MCC had

already paid Pompili on January 31, 2018.

                Pompili’s next invoice in the amount of $88,000 was submitted to

MCC on February 28, 2018. MCC included the invoice on payment application 17 to

Platform, who tendered payment to MCC on April 24, 2018. MCC sent a check to

Pompili on April 30, 2018.
                 On March 30, 2018, Pompili invoiced MCC $15,000. On April 23,

2018, it invoiced MCC $8,867.81, and on May 24, 2018, it invoiced MCC $2,500 as

its final billing on the project.

                 Birch testified that the last invoice he submitted to Platform for

Pompili was its March 30th invoice because Pompili had already invoiced $303,000

and been paid $260,000 on its contract, so it was a good time to “hold off on payment

and invoicing” to close out the contract — meaning to finalize what changes had been

made to the contract requirements due to change orders or work authorizations that

would affect the contract price. However, on April 30, 2018, the same day Birch sent

Pompili a check for its February 28, 2018 invoice, Pompili filed a mechanic’s lien on

the project. MCC stopped payment on the check and escrowed the money with

Platform, who ultimately paid Pompili $80,000.

                 Pompili filed suit against MCC, Platform, Case Western Reserve

University, and Travelers Casualty and Surety Company of America.            Pompili

subsequently amended its complaint, which omitted Case Western Reserve

University but added Western Surety as a defendant. Pompili later dismissed all its

claims against Platform and Travelers. MCC later substituted a bond with Western

Surety for the mechanic’s lien.

                 In its amended complaint, Pompili asserted a breach-of-contract

claim against MCC, contending that MCC had breached the contract by failing to pay

it $82,388.51 still owing pursuant to the terms of the contract. Pompili also asserted

a claim against MCC for violation of Ohio’s Prompt Payment Act, alleging that MCC
did not pay its invoices within ten days of receiving payment from Platform, as

required by the Act. Pompili alleged that it was entitled to interest and attorney fees

as a result of MCC’s violation of the Act.

                MCC filed an answer and two counterclaims: one alleging Pompili’s

breach of contract for its failure to perform timely product deliveries, resulting in

delays and additional work in the amount of $37,537.09 incurred by MCC; and

tortious interference with MCC and Platform’s contract relating to Pompili’s failure

to timely deliver the precast material to MCC, causing project delays, and its conduct

during the project in entering into a direct contract with Platform to provide certain

precast material for the project not specified in its contract with MCC.         MCC

dismissed the tortious interference claim at trial.

                A bench trial commenced against MCC and Western Surety in August

2019. In its subsequent opinion and order, the trial court rendered judgment in favor

of Pompili on its breach-of-contract claim, finding that MCC breached the contract

by failing to pay Pompili $82,388.51, which the court concluded was the amount due

on the contract according to Pompili’s invoices less the $80,000 paid to Pompili by

Platform and the $180,110.34 paid to Pompili by MCC. The court rendered judgment

against MCC on its breach-of-contract claim.

                With respect to the alleged Prompt Pay Act violation, the court found

that MCC did not pay any of Pompili’s invoices within the ten-day payment period

required by the Act. The court awarded $21,230.86 to Pompili in interest for MCC’s

late payments, and ordered that interest would accrue at $26.64 per day until paid in
full, which the court calculated to represent $82,388.51 at 18 percent interest over

365 days. After a hearing, the court also awarded Pompili $101,945.05 in attorney

fees.

                This court dismissed MCC’s first appeal for lack of a final appealable

order because the trial court’s judgment did not resolve Pompili’s claim against

Western Surety. Broadway Concrete Invest., L.L.C. v. Masonry Contr. Corp., 8th

Dist. Cuyahoga No. 109839, 2021-Ohio-1813. The trial court subsequently entered

an order that Western Surety was obligated to satisfy MCC’s judgment up to the

amount of the bond, and this appeal followed.

 II. Law and Analysis

        A. Ohio’s Prompt Payment Act

                In its first assignment of error, MCC contends that the trial court

erred in finding that it violated Ohio’s Prompt Payment Act, which is set forth in R.C.

4113.61.

                The interpretation of a statute involves a purely legal question. Thus,

an appellate court conducts a de novo review of the trial court’s judgment interpreting

a statute without according any deference to the trial court’s interpretation.

Worldwide Asset Purchasing L.L.C. v. Easterly, 186 Ohio App.3d 478, 2009-Ohio-

6196, 928 N.E.2d 1148, ¶ 48 (10th Dist.).

                We apply a manifest weight standard, however, to the trial court’s

findings of fact. Sonis v. Rasner, 8th Dist. Cuyahoga No. 101929, 2015-Ohio-3028,

¶ 52. In assessing whether a verdict in a civil bench trial is against the manifest
weight of the evidence, we examine the entire record, weigh the evidence and all

reasonable inferences, consider the witnesses’ credibility, and determine whether, in

resolving conflicts in the evidence, the trier of fact clearly lost its way and created such

a manifest miscarriage of justice that the verdict must be overturned and a new trial

ordered. Sonis at ¶ 53, citing State v. Martin, 20 Ohio App.3d 172, 175, 485 N.E.2d

717 (1st Dist.1983). In weighing the evidence, we are guided by a presumption that

the findings of the trier of fact are correct. Sonis at ¶ 54, citing Seasons Coal v.

Cleveland, 10 Ohio St.3d 77, 461 N.E.2d 1273 (1984). Every reasonable presumption

must be made in favor of the judgment and the findings of fact. Id., citing Seasons

Coal at 80, fn. 3.

                 Ohio’s Prompt Payment Act is set forth in R.C. 4113.61, captioned

“Procedure when subcontractor or material supplier submits request for payment to

contractor or intermediate subcontractor in time for inclusion in pay request to owner

or contractor.” As relevant to this case, R.C. 4113.61(A)(2)(b) provides:

        (2) If a * * * lower tier material supplier submits an application or
        request for payment or an invoice for materials to a subcontractor * * *
        in sufficient time to allow the subcontractor * * * to include the
        application, request, or invoice in the subcontractor’s * * * own pay
        request submitted to a contractor * * * the subcontractor * * * within
        ten calendar days after receipt of payment from the subcontractor * * *
        shall pay to the:

        ***

        (b) Lower tier material supplier, an amount that is equal to all or that
        portion of the invoice for materials which represents the material
        furnished by the lower tier material supplier.
                The Prompt Payment Act “is a penal statute and must be strictly

construed.” Intercargo Ins. Co. v. Mun. Pipe Contrs., Inc., 127 Ohio Misc.2d 48,

2003-Ohio-7363, 805 N.E.2d 606, ¶ 24 (C.P.) (The Act is penal in nature because it

imposes an 18 percent fine, which is well over the market rate, for failing to perform

a required act, and allows the trial court to impose a sanction of attorney fees.);

Wright v. State, 69 Ohio App.3d 775, 779, 591 N.E.2d 1279 (10th Dist.1990) (a penal

statute is one that imposes a penalty).

                A penal statute “should be construed according to its exact and

technical meaning, recognizing nothing that is not expressed, and limiting its

application to cases clearly described within the words used.” Commercial Credit Co.

v. Schreyer, 120 Ohio St. 568, 575, 166 N.E. 808 (1929). Penal statutes “‘may not be

extended by implication to cases not falling within their terms.’” Macedonia v. Burns,

9th Dist. Summit No. 20404, 2001 Ohio App. LEXIS 2288, 8 (May 23 2001), quoting

Cleveland v. Jorski, 142 Ohio St. 529, 53 N.E.2d 513 (1944), paragraph one of the

syllabus. When strictly construing a statute, “a court cannot introduce an exception

to the statute which the legislature has not authorized.” Pearl v. Koch, 5 Ohio Dec. 5,

8, 1894 Ohio Misc. LEXIS 192 (1894). The “statute must be read without expansion

beyond its letter [and] is to be confined to such subjects or applications as are

obviously within its terms and purpose.” Mathers v. Bull, 9 Ohio Dec. 408, 410, 1898

Ohio Misc. LEXIS 187 (Nov.1898). When construing a statute, courts must give the

words therein “their usual, normal, and/or customary meanings.” Washington Cty.
Home v. Ohio Dept. of Health, 178 Ohio App.3d 78, 2008-Ohio-4342, 896 N.E.2d

1011, ¶ 28 (4th Dist.).

                The language of the Prompt Payment Act is clear and unambiguous.

If a lower tier material supplier submits an invoice to a subcontractor in time for that

subcontractor to include the invoice in its pay application to the contractor, the

subcontractor must pay the lower tier material supplier within ten days after the

subcontractor receives payment from the contractor. Thus, as applicable to this case,

if Pompili submitted an invoice to MCC in time for MCC to include the invoice in its

pay application to Platform, MCC was required to pay Pompili within ten days after

receiving payment from Platform. MCC would be in violation of the Act if it did not

do so.

                The trial court concluded that MCC violated the Act because it

submitted a pay application for $50,000 to Platform before Pompili had completed

any work and was paid for this invoice on October 13, 2016. The court found that

Pompili submitted its first invoice for shop drawings in the amount of $3,500 on

January 31, 2017, and even though MCC had previously been paid by Platform for

that work, MCC did not pay Pompili for this invoice until May 3, 2017. The court

further concluded that MCC submitted its second and third pay applications to

Platform prior to receiving invoices from Pompili and was paid on those pay

applications. Accordingly, the court concluded that each of Pompili’s invoices had

been “prepaid” by Platform to MCC before Pompili submitted the invoice to MCC,
and therefore, MCC was late with each payment it made to Pompili and, thus, in

violation of the Prompt Payment Act.

                However, the trial court’s interpretation of the law and its application

of the law to the facts of this case was incorrect. The Prompt Payment Act provides

that a subcontractor will be liable for a prompt payment violation if: (1) a material

supplier submits an invoice to the subcontractor in time for the subcontractor to

include the invoice on its pay application; (2) the subcontractor receives payment on

the application; and (3) the subcontractor fails to pay the material supplier’s invoice

within ten days of receiving payment on the application. It is clear from the statute

that the ten-day prompt payment clock begins to run on the date the upstream

contractor tenders payment to a lower tier subcontractor on the subcontractor’s pay

application containing an invoice from a material supplier.

                Here, however, the trial court read into the Act a requirement that

MCC was required to pay Pompili from funds it received on pay applications that did

not include any Pompili invoices. The trial court concluded that even though MCC

received funds from Platform on a pay application it submitted before MCC and

Pompili executed their contract, and months before Pompili submitted its first

invoice, because MCC had received what the court concluded were “project funds,” it

was obligated to pay Pompili throughout the project within ten days of its receipt of

Pompili’s invoices. That is not the law. The ten-day clock clearly and unambiguously

begins to run upon payment by the contractor of the subcontractor’s pay application
that contained the material supplier’s invoice; it does not start running when the

lower tier material supplier submits its invoice.

                The trial court included a chart with its findings of fact and

conclusions of law that set forth the dates of Pompili’s invoices, the amount of each

invoice, and the due date for payment by MCC. But the trial court’s due dates for the

invoices are inconsistent. The court found that MCC was required to pay Pompili’s

first four invoices within ten days of MCC’s receipt of the invoice. But then, without

explanation, the court found that Pompili’s fifth invoice, which was dated August 15,

2017, had a due date of October 8, 2017. The court concluded that Pompili’s sixth

invoice, dated September 18, 2017, had a due date of October 28, 2017; its seventh

invoice, dated October 14, 2017, had a payment due date of January 20, 2018; and its

eighth invoice, dated February 23, 2018, was due March 5, 2018. The court gave no

explanation or reason for why some invoices were due in 10 days from receipt of the

invoice but others were not due for nearly 30 days. Further, and most importantly,

the chart did not include any reference to when MCC submitted a pay application to

Platform, which Pompili invoices were included in those pay applications, when MCC

was paid on the pay applications, and the amount of the payment. Thus, the trial

court’s ruling the MCC had violated the Act was not premised on the conditions

required by the Act to find a violation.

                Pompili claims there was no error in the trial court’s judgment,

however, because there is no requirement in the Act that the material supplier’s

invoice be included on the subcontractor’s next invoice in order to be paid; rather, the
only requirement is that the material supplier submit its invoice in time for the

invoice to be included in the subcontractor’s pay application to the contractor. It

contends that MCC was prepaid for all of Pompili’s work, beginning with the $50,000

payment to MCC from Platform after MCC’s first pay application, and was afforded

sufficient time to include all of Pompili’s invoices in its pay applications. This

argument fails. There is no language in the Act that requires a subcontractor to pay a

lower tier material supplier from sums received on pay applications submitted before

the material supplier submits an invoice or before the subcontractor and material

supplier even entered into a contract. Because no invoices from Pompili were

included in MCC’s first, second, or third pay applications, MCC had no prompt

payment obligations to Pompili under the Act regarding those applications.

                Pompili contends that we should nonetheless affirm the trial court

because adopting an interpretation of the Act that allows a subcontractor to submit

pay applications before the lower tier subcontractor or material supplier submits an

invoice would allow the subcontractor to avoid its obligations under the Prompt

Payment Act by being prepaid for the lower tier subcontractor or material supplier’s

work. The Prompt Payment Act does not address this situation and under rules of

strict construction, we cannot read anything into the Act that is not there. The Act

clearly conditions prompt payment on the receipt of payment on the pay application

that contained the material supplier’s invoice. For the trial court to read anything

else into the Act was an error of law.
               Moreover, it does not appear that MCC was trying to avoid its

payment obligations to Pompili. The evidence at trial demonstrated that MCC

consistently submitted Pompili’s invoices on its pay applications to Platform and,

after receiving payment from Platform, paid Pompili.

               To summarize, because none of Pompili’s invoices were included with

MCC’s first three payment applications to Platform, MCC had no prompt payment

obligation to pay Pompili’s first invoice, dated January 31, 2017, or succeeding

invoices, out of funds Platform paid MCC for these pay applications. The trial court’s

finding that MCC was late with every payment to Pompili because it was prepaid for

Pompili’s work is contrary to the Act, which clearly provides that the ten-day prompt

payment obligation begins to run only after the subcontractor receives payment on a

pay application that included the material supplier’s invoice. Accordingly, the trial

court’s judgment finding that MCC violated the Prompt Payment Act is reversed.

               Likewise, the trial court’s judgment that MCC owes Pompili interest

for its violation of the Act is reversed. The trial court erroneously determined that

interest was due on the paid invoices because it concluded, under its flawed

interpretation of the Prompt Payment Act, that MCC had been prepaid for Pompili’s

work and was therefore required to pay Pompili within ten days of receiving its

invoices. Similarly, the trial court erroneously concluded that MCC owed interest on

the disputed unpaid invoices, even though under R.C. 4113.61(A)(2)(b), “the

subcontractor * * * may withhold amounts that may be necessary to resolve disputed

liens or claims involving the work or labor performed or material furnished by the
lower tier subcontractor or lower tier material supplier.” Our review of the record

demonstrates there were ongoing disputes relating to the amount and quality of

materials that Pompili delivered to the project.        Furthermore, MCC obviously

disputed Pompili’s mechanic’s lien, which Pompili filed on April 30, 2018.

                Finally, the trial court’s judgment ordering MCC to pay Pompili’s

attorney fees as a result of its alleged violation of the Prompt Payment Act is reversed.

R.C. 4113.61(B)(2) provides that in making a determination to award attorney fees for

a violation of the Prompt Payment Act, the trial court should consider all relevant

factors, including (1) the presence or absence of good faith allegations or defenses

asserted by the parties; (2) the proportion of the amount of recovery as it relates to

the amount demanded; and (3) the nature of the services rendered and the time

expended in rendering the services.

                The trial court obviously erred in awarding attorney fees for invoices

that MCC timely paid under a strict construction of R.C. 4113.61. Regarding disputed

invoices, the trial court found that MCC did not have a good-faith defense for

withholding payment to Pompili on any of Pompili’s invoices because it was prepaid

for Pompili’s work under its first payment application. However, as discussed above,

MCC’s first payment application to Platform is wholly irrelevant to an analysis of

whether MCC violated the Prompt Payment Act because no Pompili invoice was

included with the payment application. Accordingly, MCC’s good faith in withholding

monies from Pompili on any disputed invoices is in no way related to its receipt of

payment on its first pay application. Furthermore, as noted above, the record reflects
a good-faith dispute regarding Pompili’s mechanic’s lien. Accordingly, the trial

court’s determination that MCC had no good-faith defense to paying the disputed

invoices is in error.

                 The first assignment of error is sustained. The trial court’s judgment

finding MCC in violation of the Prompt Payment Act and liable for interest and

attorney fees is reversed.

 III. Breach of Contract

                 The trial court found that Pompili “fully performed its scope of work

under the contract” with MCC and that MCC breached the contract by failing to pay

Pompili $82,388.51, which the trial court concluded was the amount due on Pompili’s

invoices after subtracting the $80,000 paid to Pompili by Platform and the

$180,110.34 paid by MCC.2 In its second assignment of error, MCC contends that the

trial court erred in finding that it had breached the contract.3

        2 This amount is inconsistent with a statement by Pompili’s counsel contained in a
May 11, 2018 memorandum to Case Western Reserve University advising the university of
Pompili’s mechanic’s lien. Counsel stated therein: “As a result of MCC’s failure to pay
Pompili amounts due pursuant to the contract, Pompili filed the attached Affidavit for
Mechanic’s Lien. At the time of the filing of the Lien, Pompili was owed $157,272.51 for
materials supplied to the project, and Pompili filed a lien in the amount of $113,217.81.
Since the filing of the Lien, Platform paid Pompili $80,000, thereby reducing the amount
owed to Pompili on the project to $77,272.51.”
        3 MCC contends that because the contract terms were ambiguous, the trial court

had an obligation to construe the contract terms before finding it had breached the
contract, and because it did not do so, its judgment should be reversed. Pompili contends
that MCC waived this argument because it did not raise it in the trial court. We need not
consider MCC’s argument nor determine whether it was waived because under our de novo
review of Pompili’s breach-of-contract claim, we conclude that the trial court incorrectly
determined the contract terms and then utilized those incorrect terms to find that Pompili
performed its duties under the contract.
                Contract interpretation is a question of law that is reviewed de novo

on appeal. Delta Fuels, Inc. v. Ohio DOT, 10th Dist. Franklin Nos. 15AP-28 and 15AP-

206, 2015-Ohio-5545, ¶ 39. “To prove a breach of contract, a plaintiff must prove the

existence and terms of a contract, the plaintiff’s performance of the contract, the

defendant’s breach of the contract, and damages or loss to the plaintiff.” (Emphasis

added.) Id.

                Upon our de novo review, we find that although the trial court

correctly determined there was a contract between the parties, it incorrectly

determined the terms of that contract. The purchase order from MCC to Pompili was

signed by Birch, on behalf of MCC, on October 25, 2016, and by Mark Melvin, on

behalf of Pompili, on October 26, 2016. A handwritten notation on the purchase

order noted that Pompili’s original proposal to Platform was attached to the purchase

order “as information only,” and each page of the proposal was marked

“INFORMATION ONLY.” Neither Pompili’s proposal nor the proposed joint check

agreement (which Jeremy Kler testified was never signed by Platform), were

incorporated into the purchase order. Thus, the terms of the contract between MCC

and Pompili are contained only in the purchase order.

                It appears, however, that the trial court found that various terms of

Pompili’s attached quotation were part of the contract between MCC and Pompili,

and relied upon those terms to conclude that Pompili “performed its duties under the

contract.” For example, in its opinion and order, the trial court stated that “Plaintiff’s

contract terms specifically exempted all field work including field measuring.” But
that term is not contained in the purchase order between MCC and Pompili; it is

contained in Pompili’s quotation attached to the purchase order, which stated: “All

field measuring and verification of dimensions on submitted erection drawings shall

be the responsibility of the contractor.”

                Likewise, the trial court concluded that Pompili “was merely required

to produce pieces pursuant to approved shop drawings,” and that “[Pompili] required

that production would only occur upon final approval of shop drawing[s] by the

Project architect.” But that is not a term contained in the purchase order between

MCC and Pompili; it is found in Item 5 of the General Contract Terms of Pompili’s

quotation to Platform, which states, “No production shall take place until approved

shop drawings are received.”      As explained above, Pompili’s quotation was for

information only; its terms were never incorporated into the contract between MCC

and Pompili. However, in reliance on this alleged contract term, the court concluded

that any “delays in the project were not caused by [Pompili].”

                Accordingly, we find that the trial court erred by incorporating terms

from Pompili’s quotation into the contract between MCC and Pompili and then

applying the evidence presented at trial to those terms. In short, the trial court failed

to apply the evidence to the proper contract. The second assignment of error is

sustained, and the trial court’s judgment is therefore reversed.

 IV. Mechanic’s Lien Bond

                On October 17, 2018, the trial court in Cuyahoga C.P. No. CV-18-

900764 issued an order approving the stipulation of Pompili and MCC to Western
Surety’s bond and rider in the amount of $123,583, and rescinding the mechanic’s

lien that Pompili had filed on the property. In its third assignment of error, Western

Surety argues that the trial court erred in finding that it is liable for a portion of the

judgment against MCC.

                Under R.C. 1311.11(C), a mechanic’s lien may be replaced by a surety

bond. The bond serves as a substitute for the lien and is based upon the prior

existence of the lien. A&J Plumbing, Inc. v. Huntington Natl. Bank, 11th Dist. Lake

No. 2014-L-023, 2014-Ohio-5707, ¶ 18. Therefore, a valid claim cannot be brought

against a bond unless there is a valid existing mechanic’s lien. Id. at ¶ 24.

                One of the statutory requirements to establish a valid mechanic’s lien

is serving a notice of furnishing on the project owner if the owner has recorded a

notice of commencement. See R.C. 1311.05 and 1311.05. Western Surety argues that

Pompili failed to establish at trial that it timely served a notice of furnishing and,

therefore, failed to establish that its lien was valid. Western Surety has waived this

argument for purposes of appeal, however.

                 First, failure to timely serve a notice of furnishing is an affirmative

defense to a mechanic’s lien. But neither Western Surety nor MCC raised the

affirmative defense of failure to timely serve a notice of furnishing in their answers to

Pompili’s first amended complaint. Failure to raise an affirmative defense is a waiver

of the defense. Bell v. Teasley, 10th Dist. Franklin No. 10AP-850, 2011-Ohio-2744, ¶

13 (affirmative defenses not raised in the pleadings or an amendment to the pleadings

are waived).
                 Moreover, it is well settled that a party cannot raise new arguments

and legal issues for the first time on appeal, and the failure to raise an issue in the trial

court waives that issue for appellate purpose. Miller v. Cardinal Care Mgmt., 8th

Dist. Cuyahoga No. 107730, 2019-Ohio-2826, ¶ 23. Neither MCC nor Western Surety

presented any evidence or argument at trial that Pompili failed to timely serve the

notice of furnishing, nor did they challenge the validity of Pompili’s lien in any

manner. Although Western Surety cites the testimony of David Schaefer as support

for its argument that Pompili failed to serve a notice of furnishing, Schaefer did not

testify at trial; he testified in a post-judgment hearing regarding the award of attorney

fees. Schaefer’s involvement in the case was limited to his expert opinion on the

reasonableness of the hourly rate and fees of Pompili’s counsel for determining

attorney fees and thus, is insufficient to establish that MCC or Western Surety

challenged the validity of Pompili’s lien at trial.

                 Under R.C. 1311.06, to file a valid mechanic’s lien, a person shall

“make and file for record in the office of the county recorder in the counties in which

the improved property is located, an affidavit.” Once it is recorded, a copy of the

affidavit must be served on the owner of the property. R.C. 1311.07. Pompili

presented evidence at trial through the testimony of Mark Melvin, co-owner of

Pompili, that it had taken the necessary steps to properly file its mechanic’s lien.

Neither MCC nor Western Surety challenged the validity of Pompili’s lien at trial and

thus, they cannot do so now on appeal. The third assignment of error is overruled.

                 Affirmed in part; reversed and remanded in part.
      It is ordered that the parties share costs herein taxed.

      The court finds there were reasonable grounds for this appeal.

      It is ordered that a special mandate be sent to said court to carry this judgment

into execution.

      A certified copy of this entry shall constitute the mandate pursuant to Rule 27

of the Rules of Appellate Procedure.

KATHLEEN ANN KEOUGH, PRESDING JUDGE

MICHELLE J. SHEEHAN, J., and
EMANUELLA D. GROVES, J., CONCUR