Folgers Architects Ltd. v. Kerns

Decision Date14 September 2001
Docket Number No. S-98-1327, No. S-98-1326, No. S-98-1328.
Citation633 N.W.2d 114,262 Neb. 530
PartiesFOLGERS ARCHITECTS LIMITED, assignee of Folgers Architects & Facility Design, Inc., a Delaware corporation, Appellee and Cross-Appellant, v. Richard A. KERNS et al., Appellants and Cross-Appellees.
CourtNebraska Supreme Court

P. Shawn McCann, Omaha, of Sodoro, Daly & Sodoro, for appellants.

Gregory C. Scaglione, Omaha, of Koley, Jessen, Daubman, & Rupiper, P.C., L.L.O., for appellee.

HENDRY, C.J., and WRIGHT, CONNOLLY, GERRARD, STEPHAN, McCORMACK, and MILLER-LERMAN, JJ.

STEPHAN, Justice.

In these consolidated actions, Folgers Architects Limited (FAL), as the assignee of Folgers Architects & Facility Design, Inc. (FAFD), seeks to recover professional fees relating to several apartment construction projects. Claims were asserted against Richard A. Kerns, as well as various corporations and limited partnerships. Following a bench trial, the district court for Douglas County entered judgment in favor of FAL on all but one of the projects. The defendants below appealed, and FAL cross-appealed. The Nebraska Court of Appeals affirmed in part, affirmed in part as modified, reversed and dismissed in part, and in part vacated and set aside the judgment of the district court. Folgers Architects v. Kerns, 9 Neb.App. 406, 612 N.W.2d 539 (2000). FAL filed a petition for further review. A second petition for further review was filed jointly on behalf of Kerns; Burwick Apartments, Ltd.; Thornberry Apartments, Inc.; Sussex Place Apartments, Inc.; Ashberry Apartments, Inc.; and Walton Heath Apartments, Inc. We granted both petitions for further review.

I. BACKGROUND
1. FACTS

The facts relevant to the issues on appeal are set forth in detail in the opinion of the Court of Appeals and briefly summarized here. In late 1992 or early 1993, Jeffrey Anderzhon, an architect associated with Anderzhon Architects, Inc. (AAI), met with Kerns to discuss the possibility of AAI's providing architectural services for the development of several apartment complexes. Several breakfast meetings were subsequently held to discuss the development of the apartment complexes, which were to include projects known as Thornberry, Burwick, Walton Heath, Ashberry, Sussex Place, Greely, Wingpoint, Devonshire, and Kennamare. It was agreed that the design of the projects would be based on two other apartment complexes designed by Anderzhon and that fees would be paid on a per unit basis. Anderzhon was to be paid a $5,000 initial retainer fee for each project and would issue invoices for his services as work progressed. It was further agreed that as each apartment project progressed, ownership entities would be formed and a written standard form contract prepared by the American Institute of Architects (AIA), known in the industry as a B181 contract, would be executed by the ownership entities and the architect. The written contracts were to comply with the requirements of Housing and Urban Development.

In April 1993, Anderzhon began providing architectural services for the projects. In July 1994, AAI merged its operation with FAFD, although Anderzhon retained the accounts receivable for the work already performed by AAI. All services provided by Anderzhon and FAFD after July 1994 were billed by FAFD.

On the Burwick and Walton Heath projects, ownership entities were formed and B181 contracts were executed. On the Thornberry, Ashberry, and Sussex Place projects, ownership entities were formed but no written contracts were executed. On the Greely, Wingpoint, Kennamare, and Devonshire projects, no entities were formed and no written contracts were executed. Anderzhon and FAFD provided services for all projects. Due to a lack of funding, none of the projects were completed, and in May 1995, Anderzhon sent Kerns a letter of termination.

In 1995, 1996, and 1997, FAFD filed separate lawsuits which were subsequently consolidated against Kerns; Burwick Apartments, Ltd.; Thornberry Apartments, Inc.; Sussex Place Apartments, Inc.; Ashberry Apartments, Inc.; and Walton Heath Apartments, Inc. On or about May 1, 1997, Anderzhon resigned his position with FAFD. At that time, Anderzhon assigned to FAFD the accounts receivable of AAI for architectural services provided on the projects prior to July 1994. In 1997, FAFD discontinued its operations and assigned its accounts receivable to JLK Enterprises, which Anderzhon referred to as an "assignment entity." Subsequently, FAL purchased the accounts receivable of JLK Enterprises, which included the accounts at issue in these actions.

At the close of trial, FAL sought and received leave to file a consolidated petition to conform the pleadings with the evidence presented. On August 27, 1998, FAL filed a consolidated petition naming as additional defendants Burwick Apartments, Inc.; Thornberry Apartments, Ltd.; Sussex Place Apartments, Ltd.; Ashberry Apartments, Ltd.; and Walton Heath Apartments, Ltd. On September 8, these newly added defendants filed a special appearance, objecting to the jurisdiction of the court for the reason that no sufficient and proper service of summons had been served upon them. The district court overruled the special appearance.

2. JUDGMENT OF DISTRICT COURT
(a) Burwick and Walton Heath Projects

On November 12, 1998, the district court entered an order of judgment. As to the Burwick and Walton Heath projects, the district court found a breach of enforceable written and oral contracts between Anderzhon (the architect) and Kerns; Burwick Apartments, Inc.; and Burwick Apartments, Ltd. The court also found a breach of enforceable written and oral contracts between the architect and Kerns; Walton Heath Apartments, Inc.; and Walton Heath Apartments, Ltd. Furthermore, the district court found that Kerns and the above entities were liable to FAL, as assignee, on the theories of promissory estoppel and quantum meruit. Judgment was therefore entered against Kerns; Burwick Apartments, Inc.; and Burwick Apartments, Ltd., in the principal amount of $98,433.46, plus prejudgment interest of $62,097.78 and postjudgment interest at 18 percent per annum. Judgment was entered against Kerns; Walton Heath Apartments, Inc.; and Walton Heath Apartments, Ltd., in the principal amount of $200,238.24, plus prejudgment interest of $126,323.10 and postjudgment interest at 18 percent per annum.

(b) Thornberry, Ashberry, and Sussex Place Projects

With respect to the Thornberry, Ashberry, and Sussex Place projects, the district court found a breach of enforceable oral contracts between the architect and Thornberry Apartments, Inc.; Thornberry Apartments, Ltd.; Ashberry Apartments, Inc.; Ashberry Apartments, Ltd.; Sussex Place Apartments, Inc.; and Sussex Place Apartments, Ltd. The court also found all of the above ownership entities liable to FAL on the theories of promissory estoppel and quantum meruit. Judgment was entered against Thornberry Apartments, Inc., and Thornberry Apartments, Ltd., in the principal amount of $116,668.48, plus prejudgment interest of $49,068.15. Judgment was entered against Sussex Place Apartments, Inc., and Sussex Place Apartments, Ltd., in the principal amount of $72,470.36, plus prejudgment interest of $30,479.61. Judgment was entered against Ashberry Apartments, Inc., and Ashberry Apartments, Ltd., in the principal amount of $37,218.32, plus prejudgment interest of $15,653.46.

(c) Greely, Wingpoint, and Kennamare Projects

With respect to the Greely, Wingpoint, and Kennamare projects, the district court found a breach of an enforceable oral contract for Kerns to pay the architect $5,000 per project as an initial fee or retainer. The court also determined that there was sufficient evidence to find Kerns liable to FAL on these projects on the theories of promissory estoppel and quantum meruit. Judgment was entered against Kerns in the principal amount of $15,000, plus prejudgment interest of $6,308.71.

(d) Devonshire Project

With respect to the Devonshire project, the district court found that FAL failed to satisfy its burden of proof on any cause of action.

3. JUDGMENT OF COURT OF APPEALS

Kerns and the various corporations and partnerships found liable by the district court appealed to the Court of Appeals, and FAL cross-appealed. We separately address each assignment of error considered by the Court of Appeals and its disposition by that court.

(a) Issues Raised by Kerns et al.

In their initial assignments of error, Kerns and the ownership entities contended that the district court erred in overruling the special appearances of the defendants named for the first time in the consolidated petition. The Court of Appeals found that no service was obtained on these parties, and therefore held that the district court erred in overruling the special appearances of Burwick Apartments, Inc.; Thornberry Apartments, Ltd.; Sussex Place Apartments, Ltd.; Ashberry Apartments, Ltd.; and Walton Heath Apartments, Ltd. The judgments against these parties were vacated.

Next, Kerns and the ownership entities assigned that FAL's claims based upon breach of written contracts on the Burwick and Walton Heath projects were barred by an anti-assignment provision in those contracts. After reviewing case law from other jurisdictions, the Court of Appeals held, as a matter of first impression in Nebraska, that a contractual provision prohibiting an assignment of rights under a contract, unless a different intention is manifested, does not forbid the assignment of a right to collect money damages for breach of the contract. Finding that the general rule applied to the facts of this case, the Court of Appeals held that the assignment to FAL was not prohibited by the terms of the written contracts.

Kerns and the ownership entities next assigned that the district court erred in permitting recovery on the written contracts for the Burwick and Walton Heath projects because neither project had obtained final approval from...

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