Article

Note:To assure performance of a turnkey contract to construct public housing projects, the contractor, Wallick Enterprises, Inc., caused its bank to issue an LC for the benefit of the Lorain Metropolitan Housing Authority. When the Housing Authority drew on the letter of credit, the contractor/applicant sued the Housing Authority, claiming wrongful drawing on the LC and breach of contract. The Housing Authority counterclaimed for breach of contract for failure to make necessary repairs under the contract.

The Franklin County Court of Common Pleas granted judgment in favor of the Housing Authority for US$218,988 on the basis of a Magistrate's Report, having concluded that there was a breach of contract due to the failure to promptly make repairs.

On appeal, the contractor argued that the trial court's conclusions were unsupported by the evidence. The Ohio Court of Appeals, Tenth Appellate District, Tyack, P.J. Klatt and Bowmann, JJ., affirmed.

The appellate court noted that there was credible evidence to support the finding that the contractor "did not perform in a workmanlike manner in regard to installation of the vinyl siding and that appellant failed to repair and/or timely repair the problems arising therefrom." It noted that "the problems stemmed from a variety of factors such as improper nailing, panels being cut improperly, and heat trap."

The contractor also argued that the Housing Authority improperly drew down the LC when there was no default. The appellate court rejected this argument, concluding that, although the project was finished shortly after the drawing, substantial repairs were still necessary before the contract was performed. With the expiration date looming, the contractor had not even started any of the repairs at the time of the drawing. The appellate division ruled that the trial court had not erred in finding that the Housing Authority properly called the letter of credit since it was obvious that the repairs would not be complete by the time the LC expired.

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