Overland Constructors, Inc. v. Millard School Dist., School Dist. No. 17, Douglas County

• Decision Date: 14 June 1985
• Docket Number: No. 84-241,84-241
• Citation: 220 Neb. 220,369 N.W.2d 69
• Parties: , 25 Ed. Law Rep. 569 OVERLAND CONSTRUCTORS, INC., Appellee, v. The MILLARD SCHOOL DISTRICT, SCHOOL DISTRICT NO. 17, DOUGLAS COUNTY, Nebraska, Defendant and Third-Party Plaintiff, Appellant, Kirkham-Michael & Associates, Inc., Third-Party Defendant, Appellee.
• Court: Nebraska Supreme Court

Page 69

369 N.W.2d 69

220 Neb. 220, 25 Ed. Law Rep. 569

OVERLAND CONSTRUCTORS, INC., Appellee, v. The MILLARD SCHOOL DISTRICT, SCHOOL DISTRICT NO. 17, DOUGLAS COUNTY, Nebraska, Defendant and Third-Party Plaintiff, Appellant Kirkham-Michael & Associates, Inc., Third-Party Defendant, Appellee.

No. 84-241.

Supreme Court of Nebraska.

June 14, 1985.

Syllabus by the Court

1. Administrative Law: Contracts: Arbitration and Award. A contract to compel parties to arbitrate future disputes and, thus, to oust the courts of jurisdiction to settle such disputes is against public policy and is void. The distinction is whether the agreement to submit to arbitration is entered into before the dispute arises and before the parties know the nature and extent of their dispute or whether it is entered into after the dispute has arisen and at a time when the parties are aware of the nature of the dispute and have agreed to a method of resolving that dispute.

2. Architects: Words and Phrases. A professional act or service is one arising out of a vocation, calling, occupation, or employment involving specialized knowledge, labor, or skill, and the labor or skill involved is predominantly mental or intellectual, rather than physical or manual. An architect performs professional services, as do lawyers, doctors, accountants, and investment advisers.

3. Architects: Contracts: Negligence. In determining whether an architect is negligent in failing to specifically set out the contractor's responsibility for charges in the contract, the test is whether the architect has exercised that degree of skill and diligence ordinarily exercised under like circumstances by architects in good standing in the same or similar communities.

4. Architects: Evidence: Negligence: Proof. The question of whether an architect has failed to perform in accordance with the standards of the profession is a matter which must be proved by expert testimony and cannot be left to lay witnesses.

Rjean K. Knowles and Frank M. Schepers of Young & White, Omaha, for appellant.

David D. Ernst and John H. Cotton of Gaines, Otis, Haggart, Mullen & Carta, Omaha, for appellee Overland Constructors.

Dean F. Suing and Moira B. White of Katskee & Henatsch, Omaha, for appellee Kirkham-Michael & Associates.

KRIVOSHA, C.J., and CAPORALE, SHANAHAN, and GRANT, JJ., and COLWELL, D.J., Retired.

KRIVOSHA, Chief Justice.

This is a suit instituted by Overland Contractors, Inc. (Overland), seeking a declaration as to whether Overland or the Millard School District (School District), for which Overland constructed an elementary school building, was obligated to pay certain charges imposed by the Metropolitan Utilities District (M.U.D.). Overland maintained that the charges imposed by M.U.D. were the obligation of the School District. The School District, on the other hand, maintained that the charges were fees which, under the terms of the project contract, were to be paid by Overland. After the suit was commenced the School District obtained leave to implead Kirkham-Michael & Associates, Inc., the architect for the project. The School District maintained that, while it believed that the M.U.D. charges should be paid by Overland, if the School District was obligated to make the payments to M.U.D., then the architect should be required to indemnify the School District.

Following trial, the district court for Douglas County, Nebraska, held that the M.U.D. charges were the obligation of the School District and not Overland. The district court also held that the architect was not obligated to indemnify the School District. It is from that decision that the School District appeals to this court. We believe that the judgment of the district court must be affirmed except as otherwise modified.

The School District has separated its assignments of error into two divisions. The first division relates to alleged errors committed by the district court with regard to the suit brought by Overland against the School District. The second division relates to alleged errors committed by the district court with regard to the School District's claim against the architect.

The assignments of error with regard to Overland are essentially as follows: (1) That the district court erred in failing to find as a matter of law that the contract between Overland and the School District was unambiguous and therefore not subject to explanation by parol evidence; (2) That the district court erred in failing to find that the project contract required Overland to pay the M.U.D. charges either because the contract clearly imposed that obligation upon Overland or because the architect, pursuant to an arbitration clause contained in the contract, previously determined so; and (3) That the district court erred in refusing to permit representatives of the architect to testify regarding the usual and customary arrangement as to payment of charges such as the M.U.D. charges.

While there is controversy regarding the law applicable in this case, there appears to be little disagreement concerning the facts. On October 6, 1980, the School District entered into an agreement with the architect in which the architect agreed to prepare the plans and specifications and all necessary documents, administer the construction contract, provide explanations of the drawings and specifications, and provide all architectural services necessary for the construction of the school.

The architect prepared all of the documents necessary for the project, including the specifications and drawings for the project. The architect also prepared the project contract which is the subject of this litigation.

In late May 1981, bids for the project were submitted by various contractors and were opened by the architect. Some of the bids indicated that the M.U.D. charges or some part of them had not been included in the bid. Overland's bid did not indicate whether any of the M.U.D. charges had been included. Following an analysis of the bids, the architect recommended that the contract be awarded to Overland for a total cost of $1,672,500. Based upon the architect's recommendation, the School District awarded the contract for the project to Overland.

Shortly after the contract was awarded, a dispute arose as to who was responsible for the payment of the M.U.D. charges in the amount of $21,481.26. When the parties were unable to resolve their dispute, the architect, pursuant to the contract documents, determined that Overland was responsible for the payment of all M.U.D. charges. Overland disagreed with the architect's determination, and a meeting was held. Following that meeting, the architect modified its earlier determination, finding that certain of the charges were the responsibility of Overland, the others the responsibility of the School District. Each of the parties has paid various charges under protest, reserving its right to litigate the issues. With that background in mind we turn to the legal questions presented.

The first issue raised by the parties is the standard of review in this court. The School District asserts that this court should review the record de novo, while Overland argues that this court must review the record in the same manner as it would in any other action at law. The answer seems clear. In Larutan Corp. v. Magnolia Homes Manuf. Co., 190 Neb. 425, 433, 209 N.W.2d 177, 182 (1973), we said:

This court has treated the determination of factual issues in a declaratory judgment action which would otherwise be an action at law in the same manner as if a jury had been waived. The findings of the trial court therefore have the effect of the verdict of a jury and will not be set aside unless clearly wrong. See Belek v. Travelers Ind. Co., 187 Neb. 470, 191 N.W.2d 819.

See, also, Quinn v. Godfather's Investments, 213 Neb. 665, 330 N.W.2d 921 (1983); Roth v. School Dist. of Scottsbluff, 213 Neb. 545, 330 N.W.2d 488 (1983).

We turn to the next question, whether the parties are bound by the determination made by the architect pursuant to an arbitration clause contained in the contract documents. We believe that under the circumstances in this case the parties are not bound. While this court is supportive of parties resolving their differences through arbitration, if possible, we have consistently held that an arbitration agreement entered into before a dispute arises, denying to the parties their right to seek the assistance of the courts, is contrary to public policy and is not enforceable. In a long line of cases beginning with German-American Ins. Co. v. Etherton, 25 Neb. 505, 41 N.W. 406 (1889), and continuing through City of Lincoln v. Soukup, 215 Neb. 732, 340 N.W.2d 420 (1983), we have consistently held that a contract to compel parties to arbitrate future disputes and, thus, to oust the courts of jurisdiction to settle such disputes is against public policy and is void. See, also, National Masonic Accident Association v. Burr, 44 Neb. 256, 62 N.W. 466 (1895); Schrandt v. Young, 62 Neb. 254, 86 N.W. 1085 (1901); Phoenix Ins. Co. v. Zlotky, 66 Neb. 584, 92 N.W. 736 (1902); Wilson & Co., Inc. v. Fremont Cake & Meal Co., 153 Neb. 160, 43 N.W.2d 657 (1950); Heisner v. Jones, 184 Neb. 602, 169 N.W.2d 606 (1969). The School District directs our attention to the cases of Simpson v. Simpson, 194 Neb. 453, 232 N.W.2d 132 (1975), and Knigge v. Knigge, 204 Neb. 421, 282 N.W.2d 581 (1979), in support of its contention that arbitration clauses are enforceable. It neglects, however, to note the significant distinction in both Simpson and Knigge. In each of those cases a dispute had already arisen and the parties agreed to submit their known dispute to arbitration. In such cases we do enforce the decision growing out of the arbitration proceeding. The distinction is whether the agreement to submit to arbitration is entered into before the dispute arises and before the parties know the nature and extent of their dispute or...