Newman Memorial Hosp. v. Walton Const. Co., 94,473.

• Decision Date: 12 January 2007
• Docket Number: No. 94,473.,94,473.
• Citation: 149 P.3d 525
• Parties: NEWMAN MEMORIAL HOSPITAL, d/b/a Newman Regional Health Center, Plaintiff/Appellee, v. WALTON CONSTRUCTION COMPANY, INC., Defendant, Everton Oglesby Askew Architects, Defendant/Appellant, Fairbury Glass Co., Inc., d/b/a Concordia Mirror and Glass Company, Defendant, Belles & Associates, Inc., Defendant, and AMCO Insurance Company, Defendant.
• Court: Kansas Court of Appeals

149 P.3d 525

NEWMAN MEMORIAL HOSPITAL, d/b/a Newman Regional Health Center, Plaintiff/Appellee, v. WALTON CONSTRUCTION COMPANY, INC., Defendant Everton Oglesby Askew Architects, Defendant/Appellant Fairbury Glass Co., Inc., d/b/a Concordia Mirror and Glass Company, Defendant Belles & Associates, Inc., Defendant, and AMCO Insurance Company, Defendant.

No. 94,473.

Court of Appeals of Kansas.

January 12, 2007.

COPYRIGHT MATERIAL OMITTED

Wyatt A. Hoch and Carolyn L. Matthews, of Foulston Siefkin LLP, of Wichita, and James D. Oliver, of Foulston Siefkin LLP, of Overland Park, for appellant.

Harold S. Youngentob, John A. Bausch, and Nathan D. Leadstrom, of Goodell, Stratton, Edmonds & Palmer, L.L.P., of Topeka, for appellee.

Before MALONE, P.J., CAPLINGER, J., and LARSON, S.J.

LARSON, S.J.

This is Everton Oglesby Askew Architects' (EOAA) direct appeal from (1) the district court's ruling that Newman Memorial Hospital, d/b/a Newman Regional Health Center (Newman) was not subject to EOAA's statute of limitations defense because Newman was acting in a governmental and not a proprietary manner in building and leasing an office building to physicians at commercial rates; (2) rulings relating to its contract for architectural services to Newman; (3) rulings relating to the jury trial where EOAA was found liable for damages of $907,693; (4) denial of EOAA's motion for judgment as a matter of law; (5) denial of EOAA's motion alleging the jury's verdict was not supported by substantial competent evidence; and (6) jury instructions given and denied which are claimed to constitute reversible error.

FACTUAL AND PROCEDURAL BACKGROUND

The medical office building

Newman is a county hospital located in Emporia, Lyon County, Kansas. It is organized and exists pursuant to the provisions of K.S.A. 19-4601 et seq. which allow establishment of a hospital but do not require it. There is likewise no statutory or other legal obligations to build and maintain an office building for physicians, but it is a permitted activity.

In 1994, the Newman Board of Trustees began consideration of constructing an office building next to the hospital for rental to physicians or other tenants. The minutes of the Newman Board of Trustees' meeting of June 28, 1995, contained the following statement relating to the construction of a medical office building:

"Dr. Geitz advised he has had strong feelings about this building for 1-1/2 years and the need to have adequate space available for physicians being recruited. Physicians being brought in who are not connected with any group have no place to go. He noted the community will have a problem over the next few years with seven primary care doctors over the age of 60; it is already difficult for people who need doctors to get in to see them. Dr. Geitz referred to Mr. Hanna's concern that this project will be harmful to local developers; however, the need has not been met by local developers. If the Hospital doesn't do something, something is going to be done. Dr. Geitz expressed his concern that an outside agency could come into the community and build the necessary facility, establishing outpatient/radiology/lab services as well, and taking business away from the community and Hospital."

A decision was made by the Newman Board of Trustees to proceed with the project of establishing a medical office building.

In June 1995, Newman contracted with EOAA to provide architectural services for the design and construction of the medical office building. EOAA had previously provided architectural services to Newman for a construction project.

The agreement for architectural services

On June 15, 1995, EOAA and Newman entered into a written agreement titled "Standard Form of Agreement Between Owner and Architect" (hereinafter "Agreement") which was the standard contract published by the American Institute of Architects, but contained numerous and substantial modifications involving deleted language and additions showing provisions of the Agreement had been negotiated by the parties.

Numerous other parties became involved in the planning for and construction of the office building. Some were initial defendants in this case, but all except EOAA either settled or were dismissed prior to the jury trial. We will mention each one briefly but only as their obligations and actions relate to the issues on appeal between EOAA and Newman.

Newman hired Walton Construction Company, Inc. (Walton) as its construction manager for the project. Walton provided two full-time employees to supervise the work of contractors and assure the quality of their work. Walton sought and obtained bids for the project, but each contractor had its own contract with Newman, not with Walton.

Firms hired by Walton which had contracts with Newman included Belles & Associates, Inc. (Belles) for site grading, foundation, and structural steel, and Concordia Mirror and Glass Company (Concordia) to furnish and install the windows.

Under the Agreement, Newman was required to furnish the services of a geotechnical engineer to investigate, evaluate, and report on soil conditions at the building site. The Agreement (paragraph 4.9) stated EOAA was entitled to rely on the accuracy and completeness of the geotechnical engineer's report. Newman contracted with Barnett, Stuart, and Associates of Topeka, a division of Terracon Consultants, to provide these services.

Although Newman selected and furnished the report of the geotechnical engineer referred to above, EOAA hired numerous other engineering consultants for the project, including structural, mechanical, plumbing, and electrical engineers. For structural engineering services, EOAA hired EMC Structural Engineers, who designated Mark Buchanan as structural engineer of record for the project.

Certain provisions of the Agreement between EOAA and Newman are particularly applicable to the issues in this case. The negotiated Agreement contained the following provision dealing with the statute of limitations:

"9.3 Causes of action between the parties to this Agreement pertaining to acts or failures to act shall be deemed to have accrued and the applicable statutes of limitations shall commence to run not later than either the date of Substantial Completion for acts or failures to act occurring prior to Substantial Completion, or the date of issuance of the final Certificate for Payment for acts or failures to act occurring after Substantial Completion."

With regard to the construction phase of the project, the Agreement provided, in relevant part:

"2.6.5 The Architect shall visit the site at intervals appropriate to the stage of construction or as otherwise agreed by the Owner and Architect in writing to become generally familiar with the progress and quality of the Work completed and to determine in general if the Work is being performed in a manner indicating that the Work when completed will be in accordance with the Contract Documents. However, the Architect shall not be required to make exhaustive or continuous on-site inspections to check the quality or quantity of the Work. On the basis of on-site observations as an architect, the Architect shall keep the Owner informed of the progress and quality of the Work, and shall endeavor to guard the Owner against defects and deficiencies in the Work. . . .

"2.6.6 The Architect shall not have control over or charge of and shall not be responsible for construction means, methods, techniques, sequences or procedures, or for safety precautions and programs in connection with the Work, since these are solely the Contractor's responsibility under the Contract for Construction. The Architect shall not be responsible for the Contractor's schedules or failure to carry out the Work in accordance with the Contract Documents. The Architect shall not have control over or charge of acts or omissions of the Contractor, Subcontractors, or their agents or employees, or of any other persons performing portions of the Work. However, if the Architect becomes aware of failures of the Contractor to carry out the Work in accordance with the Contract Documents, the Architect shall immediately notify the Owner of such failures."

The last sentence of paragraph 2.6.6 was a typed-in addition to the standard AIA contract language.

The geotechnical report, building design, and construction

Barnett's report documented EMC's findings based on subsurface exploration and made recommendations for foundation construction noting the medical office building was planned to have a "slab-on-grade" at the first floor level. A slab-on-grade is a concrete floor placed directly on the soil with a structural slab being one that supports itself without coming into contact with the soil. Comparatively speaking, a slab-on-grade floor is very economical in that it can cost only one-fifth of the cost of a structural slab floor.

The Barnett report made detailed recommendations regarding both foundation support and the preparation of the site for that type of foundation. As to the risk of floor movement, the report stated:

"The procedures recommended above for moisture control during and after construction of the floor slab subgrade and use of low plasticity and low volume change material should reduce the potential for subgrade volume change and floor slab movement resulting from variations in moisture content. However, since highly plastic soils on the site extend to a considerable depth, some long term volume change of the subgrade could occur and should be considered. If it is desired to further reduce the potential for subgrade volume change, the use of a greater thickness of low plasticity soil beneath the floor slab would be necessary. To eliminate the risk of floor movement, a structural slab should be considered."

The medical office building was constructed using a slab-on-grade on the first floor, as was an adjacent building for which EOAA had been the architect.

Construction...