Farrell v. Whiteman

• Decision Date: 22 January 2009
• Docket Number: No. 34383.,34383.
• Citation: 200 P.3d 1153,146 Idaho 604
• Parties: Damian FARRELL, Plaintiff-Respondent, v. Kent WHITEMAN, in his individual capacity, and Whitehorse Properties, LLC, a Michigan limited liability company, Defendants-Appellants. Kent Whiteman and Whitehorse Properties, LLC, a Michigan limited liability company, Counterclaimants, v. Damian Farrell, Counter defendant.
• Court: Idaho Supreme Court

200 P.3d 1153

146 Idaho 604

Damian FARRELL, Plaintiff-Respondent, v. Kent WHITEMAN, in his individual capacity, and Whitehorse Properties, LLC, a Michigan limited liability company, Defendants-Appellants.

Kent Whiteman and Whitehorse Properties, LLC, a Michigan limited liability company, Counterclaimants, v. Damian Farrell, Counter defendant.

No. 34383.

Supreme Court of Idaho, Twin Falls, November 2008 Term.

January 22, 2009.

Speck & Aanestad, P.C., Ketchum, for appellants. Douglas J. Aanestad argued.

Edward Simon, Ketchum, for respondent.

J. JONES, Justice.

Damian Farrell sued Kent Whiteman to recover for architect services he rendered for Whiteman's condominium project in Ketchum. Whiteman asserted that Farrell was not entitled to be compensated because of his failure to comply with Idaho's architect licensing statutes. After a bench trial the district court awarded Farrell damages, and Whiteman appealed. We vacate the damage award and remand for further proceedings to determine damages.

I.

Farrell, a Michigan-licensed architect, and Whiteman, a real estate developer,¹ both Michigan residents, were friends for many years. Beginning in 2002, Farrell and Whiteman discussed the possibility of working together on a condominium project in Ketchum. Based on their discussions, Farrell understood that he and Whiteman would be partners in the project and that in exchange for his work—which included designing the building, securing site plan approval, overseeing the development of the construction documents, and working as the project architect—he would receive twenty-five percent of the project's profits. Whiteman testified that they discussed a partnership and profit-sharing arrangement, but never reached an agreement regarding how Farrell would be compensated for his architectural services.

Despite the failure of the parties to reach a definite agreement, Farrell worked on the project from the spring of 2003 until the end of July 2004. Farrell hired CAD Design Services (CDS), a Ketchum drafting service without any licensed architects in its staff, to assist in preparing construction documents. Some of Farrell's work was performed in Michigan, where he held an architect's license. However, Farrell also performed some work in Idaho before he received his license to practice architecture in Idaho on February 17, 2004.

In July, 2004, Whiteman terminated Farrell from the project. Even after the project was completed and units had been sold, Whiteman refused to pay Farrell for his work. Farrell filed suit, alleging breach of contract, quantum meruit, and unjust enrichment. Whiteman defended based on Idaho's architect licensing statutes, claiming that because Farrell had not complied with them, the entire contract was illegal and unenforceable. Whiteman also counterclaimed that Farrell breached any contract to provide architectural services by failing to meet deadlines and failing to meet the standard of care required by architects.

After a bench trial, the district court found that, because there was no meeting of the minds, there was no partnership or profit-sharing agreement. However, the court found an implied-in-fact contract and awarded Farrell damages under the theory of quantum meruit, as well as reimbursement for amounts Farrell spent on behalf of Whiteman in furtherance of the project. The court concluded "that Farrell had a license to practice architecture in Idaho at the critical times such a license was necessary" and, therefore, the contract was not illegal. It dismissed the counterclaim and held that Farrell's work was performed adequately. The court also awarded Farrell costs and attorney fees under Idaho Code § 12-120(3). Whiteman appealed to this Court.

II.

On appeal, we are concerned with three issues: 1) whether the district court erred in concluding that the contract between Farrell and Whiteman was not illegal, 2) whether the district court erred in awarding Farrell damages based on quantum meruit, and 3) whether either party is entitled to attorney fees and costs.

A.

Whiteman contends that the implied-in-fact contract found by the district court was illegal for two reasons: 1) because Farrell did not have a license to practice architecture in Idaho until midway through his work on the project, and 2) because Farrell's employment of CDS violated another provision of the architect licensing statutes. Farrell counters that because most of his architectural work was performed in Michigan, where he was licensed, the contract was legal.

Whether a contract is illegal is a question of law for the court to determine from all the facts and circumstances of each case. Trees v. Kersey, 138 Idaho 3, 6, 56 P.3d 765, 768 (2002). The illegality of a contract can be raised at any stage in litigation. Id. In fact, the court has the duty to raise the issue of illegality sua sponte. Id. While this Court is bound by the district court's findings of fact unless they are clearly erroneous, it is not bound by the district court's conclusions of law, and may draw its own conclusions from the facts presented. Griffith v. Clear Lakes Trout Co., 143 Idaho 733, 737, 152 P.3d 604, 608 (2007). Thus, we freely review whether or not the contract in this case was illegal.

Idaho has long disallowed judicial aid to either party to an illegal contract. McShane v. Quillin, 47 Idaho 542, 547, 277 P. 554, 559 (1929) ("No principle in law ... is better settled than that which, with certain exceptions, refuses redress to either party to an illegal contract."). An illegal contract is one that rests on illegal consideration consisting of any act or forbearance which is contrary to law or public policy. Quiring v. Quiring, 130 Idaho 560, 566, 944 P.2d 695, 701 (1997). Generally, when the consideration for a contract explicitly violates a statute, the contract is illegal and unenforceable. Barry v. Pac. W. Constr., Inc., 140 Idaho 827, 832, 103 P.3d 440, 445 (2004). In most cases, the court will leave the parties to an illegal contract as it finds them. Id.

i.

Whiteman argues that the district court erred in determining the contract to be legal based on its finding that Farrell had an Idaho architect's license during "critical times such a license was necessary." Farrell claims this was a factual finding that cannot be overturned unless clearly erroneous. Contrary to Farrell's assertion, the question of contract illegality is one of law, which this Court freely reviews.

Idaho Code § 54-301 reads: "In order to safeguard life, health, and property, and to promote the public welfare, any person practicing or offering to practice architecture, as herein defined, in the state of Idaho, shall submit evidence of his qualifications so to practice and be licensed as hereinafter provided." The code defines "architect" as "a person who engages in the practice of architecture as herein defined." I.C. § 54-309(a). It defines the "practice of architecture" as:

rendering or offering those services hereinafter described, in connection with the design, construction, enlargement, or alteration of a building or a group of buildings. The services covered within this definition include architectural planning, advice and consultation; providing preliminary studies; architectural designs, drawings and specifications; technical submissions; and, administration of construction contracts.

I.C. § 54-309(c). It further defines the term "technical submissions," as mentioned in the above section, as any "involving the practice of architecture, consist[ing] of designs, drawings, specifications, studies and other technical reports prepared in the course of practicing architecture." I.C. § 54-309(g). Additionally, Idaho Code § 54-310 states that "[a]ny person, not otherwise exempted, who shall practice or offer to practice ... architecture in this state ... without first securing an architect's license ... or who shall violate any of the provisions of this chapter, shall be guilty of a misdemeanor."

The trial court found that Farrell performed some architectural services while in Idaho before he received his license. Nonetheless, the trial court found that because Farrell was licensed at "critical times" he did not violate the statute. We disagree with the district court's interpretation of the architecture licensing statutes.

Since the consequences of a court finding a contract to be illegal are harsh, only those contracts which involve consideration that is expressly prohibited by the relevant prohibitory statute are void. See Miller v. Haller, 129 Idaho 345, 352, 924 P.2d 607, 614 (1996) (holding that a referral agreement did not violate a statute prohibiting agreements to share fees in exchange for medical referrals because it did not involve sharing or splitting fees, which was the activity expressly barred by the statute); Johnson v. Delane, 77 Idaho 172, 177, 290 P.2d 213, 216 (1955) (holding that engineer's actions were not "practicing professional engineering in this state" because the services were performed in Washington). Such statutes must be narrowly construed, and only those contracts violating express provisions thereof will be deemed illegal.

To support his contention that the contract in this case is legal and enforceable, Farrell cites Johnson v. Delane. In that case, Johnson, a Washington-licensed engineer, entered into a contract with Delane to furnish plans and specifications to construct a building in Idaho. Johnson, 77 Idaho at 174, 290 P.2d at 214. After Johnson completed the plans, Delane decided not to complete the construction of the building and refused to pay Johnson for his engineering work. Id. Johnson sued for damages, and Delane argued that the contract was illegal, based on Idaho Code § 54-1222, which read: "[a]ny person who shall practice, or offer to practice, professional engineering ... in this state without being registered ... shall be guilty of a misdemeanor." Id. at 177, 290 P.2d at 216. After considering...