Nelson v. Com.

• Decision Date: 22 April 1988
• Docket Number: No. 841717,841717
• Citation: 235 Va. 228,368 S.E.2d 239
• Parties: Donald C.G. NELSON, et al., etc. v. COMMONWEALTH of Virginia, et al. Record
• Court: Virginia Supreme Court

Page 239

368 S.E.2d 239

235 Va. 228

Donald C.G. NELSON, et al., etc. v. COMMONWEALTH of Virginia, et al.

Record No. 841717.

Supreme Court of Virginia.

April 22, 1988.

Michael W. Smith (Mary T. Metil, Richmond, Jeanne M. Forneris, Minneapolis, Minn., Christian, Barton, Epps, Brent & Chappell, Richmond, Hart & Bruner, P.A., Minneapolis, Minn., on briefs), for appellants.

Karen A. Gould (William G. Broaddus, Atty. Gen., James T. Moore, III, Sr. Asst. Atty. Gen., Crews, Hancock & Dunn, Richmond, on brief), for appellees.

Amicus Curiae: Virginia Society of Architects/AIA (Arthur T. Kornblut, Chevy Chase, Md., Joseph M. Spivey, III, Richmond, Kornblut & Sokolove, Chevy Chase, Md., Hunton & Williams, Richmond, on brief), for appellants.

Present: CARRICO, C.J., POFF, COMPTON, STEPHENSON, RUSSELL, and WHITING, JJ., and HARRISON, Retired Justice.

POFF, Justice.

In this appeal, the architects of a state-owned project challenge a judgment confirming a jury's finding of liability for breach of their construction contract administration duties. The Commonwealth of Virginia contests that portion of the verdict awarding the architects damages for unpaid fees.

I. FACTS

Most of the relevant facts are not in dispute. This action arose out of the design and construction of the 11-story, 550-bed teaching hospital (the hospital or the project) on the campus of the Medical College of Virginia, Virginia Commonwealth University (VCU). In 1971, VCU engaged the services of Ellerbe Architects and Engineers (Ellerbe or the architects) of St. Paul, Minnesota, for the early planning stages of the project. Ellerbe, in turn, engaged the services of Lee, King, Poole & White (LKP&W), a Richmond architectural firm, to assist Ellerbe as associate architects. In January 1976, VCU advised Ellerbe to proceed with the preparation of preliminary plans and specifications. The parties entered into a contract on April 30, 1976 for Ellerbe to design the working drawings and to administer the construction contract.

The 1976 contract incorporated by reference the "Manual for the Planning and Execution of Capital Outlays" (the Blue Book) and its attached General Conditions, published by the Division of Engineering and Buildings of the Office of the Governor. The contract divided the architects' basic services into four phases: schematic design, preliminary design, working drawings, and construction. During the initial phase, the architects were required to assist VCU in planning the project and in developing additional detail, including schematic plans. Blue Book § 43.02.3. As a second phase, the architects agreed to supply preliminary drawings "to fix and describe the size and character of the entire Project". Id. § 43.03(A). In the working-drawings phase, Ellerbe was obligated to provide detailed drawings setting forth the nature and extent of the work to be performed, the materials, equipment, and supplies required, and the methods of installation and construction. Id. § 43.04.

With respect to Ellerbe's duties during the construction phase, the contract provided:

The Architect or Engineer shall check construction schedules; keep the Owner informed of progress of the work; check and approve shop drawings; approve materials and equipments and tests thereof; maintain accounts for the work, including the issuing of change orders at the direction of the Owner; check Contractor's applications for payment, and issue Certificates for Payment in approved amounts; and provide on-site observation of the work.

Id. § 45.03. The employment contract also required Ellerbe to visit the construction site at least twice a month "to familiarize [itself] generally with the progress and quality of the work and to determine in general if the work is proceeding in accordance with the contract documents." Id. § 45.06. Finally, the contract charged Ellerbe with the duty to "make [its] recommendation to the Owner on all change orders to the construction contract". Id. § 45.09.

Under the contract, Ellerbe's fee was based on a percentage of the cost of construction. VCU was required to pay Ellerbe periodically for services performed: 15 percent of the fee was due after completion of the schematic phase, 25 percent after Ellerbe finished the preliminary design, 75 percent after completion of the working drawings, 95 percent as construction progressed, and 100 percent after Ellerbe submitted "as-built" drawings for the project. Id. § 50.07. The employment contract also provided that VCU would pay the architects additional fees for services provided after final payment to the contractor and beyond the contractor's one-year guarantee period. Id. § 46.01(E); see also id. § 45.02.

VCU hired the New Jersey consulting firm of Wood & Tower to advise VCU on methods to curtail construction costs, and based on that firm's recommendation, VCU asked Ellerbe to expedite the documents relating to the hospital's structural steel to enable VCU to solicit bids for that portion of the project in a more favorable market. Ellerbe complied with the request but advised VCU that issuance of the structural package prior to completion of the architectural, mechanical, and electrical drawings likely would result in the need for revisions of that package and possible additions to the contract price, a concern endorsed by Wood & Tower.

Ellerbe completed the remaining working documents in May 1977, and VCU advertised for bids on construction that summer. Blake Construction Company (the contractor) of Washington, D.C., was the low bidder, and VCU entered into an agreement with the contractor on October 21, 1977 for the bid price of $42,374,000. The construction contract set November 29, 1980 as the project's scheduled date of completion.

Construction was plagued with delays, which each party claims were due, in part, to the fault of the other. As a result, VCU, Ellerbe, and the contractor agreed to a one-year extension of the contract to November 30, 1981. The project still was not complete in February 1982, and VCU began withholding payment of fees due Ellerbe. Construction of the hospital finally was substantially complete in June 1982.

II. PROCEEDINGS

The parties were unable to settle their dispute concerning the fees, and Ellerbe ¹ filed a motion for judgment against the Commonwealth, its Comptroller, and VCU (collectively, VCU). VCU denied that it owed any fees to Ellerbe and filed a counterclaim alleging that Ellerbe breached its contract with VCU by defectively designing certain portions of the project and by failing to perform its duties to administer the construction contract. In its grounds of defense to VCU's amended counterclaim, Ellerbe asserted that the claim for design defects was barred by the statute of limitations and that all of VCU's claims had been satisfied in a settlement consummated between VCU and the contractor.

The case was tried to a jury, and after VCU concluded its case on the counterclaim, Ellerbe moved to strike the evidence on the grounds that VCU's design claims were time-barred, that VCU had failed to establish by competent testimony the applicable standard of care and the alleged breach thereof, and that VCU had failed to prove its damages with reasonable certainty. The trial court held that the design-defect allegations were time-barred but otherwise overruled Ellerbe's motion. At this stage of the proceedings, VCU agreed that its sole remaining claim against Ellerbe was for breach of its contract administration duties and that its damage claims were limited to architectural malpractice in four areas: (1) in administering construction of the curtain wall system (the outer skin of the building); (2) in administering construction of the heating, ventilation, and air conditioning (HVAC) systems; (3) in attaining compliance with life-safety codes; and (4) in managing the proposed change orders (PCO's).

By its verdict, the jury awarded Ellerbe $800,623.09 on its fee claims and VCU $1,286,750.00 on its counterclaim, and the trial court entered judgment confirming the verdict. We granted Ellerbe an appeal from the judgment on the counterclaim and agreed to consider VCU's assignments of cross-error addressed both to its counterclaim and to Ellerbe's action for unpaid fees. Upon request, we permitted the Virginia Society of Architects/AIA to appear on brief amicus curiae. We consider, first, two questions which we find dispositive of the several issues relating to VCU's counterclaim.

III. VCU'S COUNTERCLAIM

A. Expert Testimony

Ellerbe asserts that VCU failed to carry its burden to establish the standard of care required of Ellerbe in its contract administration duties and the alleged breach of those duties. Specifically, Ellerbe claims that VCU was required to produce but failed to produce qualified expert testimony relating to Ellerbe's duties during the construction phase as distinct from its duties during the earlier phases of the project.

Absent a provision to the contrary, implicit in every contract of employment between an owner and an architect is the duty of the architect to "exercise the care of those ordinarily skilled in the business". Surf Realty Corp. v. Standing, 195 Va. 431, 442-43, 78 S.E.2d 901, 907 (1953). This professional standard of care applies to the administration of project construction as well as to project design. Id.; see also Virginia Military Institute v. King, 217 Va. 751, 760, 232 S.E.2d 895, 901 (1977) (hereinafter VMI ); Willner v. Woodward, 201 Va. 104, 107-08, 109 S.E.2d 132, 134 (1959). Consistent with this standard, the contract of employment between Ellerbe and VCU provides, "The Architect or Engineer will administer the project consistent with normal architectural and engineering practices to assure that construction is in accordance with the contract documents." Blue Book § 62.04.

Although we have not had occasion previously to decide whether expert testimony generally is required to establish the standard of...