Witherspoon, Gibson B

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North Dakota Law Review Volume 31 Number 1 Article 3 1955 When Is an Architect Liable Gibson B. Witherspoon Follow this and additional works at: https://commons.und.edu/ndlr  Part of the Law Commons Recommended Citation Witherspoon, Gibson B. (1955) "When Is an Architect Liable," North Dakota Law Review: Vol. 31 : No. 1 , Article 3. Available at: https://commons.und.edu/ndlr/vol31/iss1/3 This Article is brought to you for free and open access by the School of Law at UND Scholarly Commons. It has been accepted for inclusion in North Dakota Law Review by an authorized editor of UND Scholarly Commons. For more information, please contact und.commons@library.und.edu. WHEN IS AN ARCHITECT LIABLEBy: GIBSON B. WTH-EBSPOON*T HE LIABILITY of an architect is governed by the rules ofcommon law. Usually it is held that the architect's judgmentis binding on all parties because he has been agreed upon by themand thus he acts in a quasi-judicial capacity, without a court ofappellate jurisdiction to overrule his decisions. Of course, it hasbeen held that where the difficulty of proving fraud were overcomethe architect is liable to his employer for the resulting damages.'Also, where there was a fraudulent combination on the part ofthe architect with the builder to give a false certificate, a cause ofaction was allowed against both.2 It was held an architect is re-sponsible for damages sustained by his employer where due tounreasonable negligence and lack of skill his plans and :specifica-tions were faulty and defective.3 The fact that the owner ap-proved the plans before they were used does not excuse the archi-tect.4 There is no warranty, either express or implied, as to asatisfactory end result and liability, if any, rests only on unskill-fulness or negligence and not upon errors of judgment.P It de-veloped early in our jurisprudence that the architect was thefavorite of the law and as he was acting in a dual capacity, hisjudgment should be final. Now where mistakes in the plans andspecifications of an. architect engaged to draw plans and super-vise a pretentious country home were excused, the Cojurt pointingout that the house was of an unusual design and there necessarilywould be some mistakes in the plans and specifications in suchan undertaking. Therefore, the Court held the architect was notliable for the errors where the record disclosed that he devotedto this work a reasonable degree of skill and fidelity. 6Usually the architect's certificate is agreed to be conclusive asbetween the parties and as he is acting in a dual capacity and* Past President of Mississippi State Bar; Associate Editor, Commercial Law Journal;Mississippi Commissioner to National Conference on Uniform State Laws; Charter Memberof Scribes (Sec. 1954-55); A. B. A.; International Association of Insurance Counsel;Federated Insurance Counsel and author of many legal articles; Director, American Judi-cature Society.1. Edward Barron Estate Co. v. Woodruff Co., 163 Cal. 561, 126 Pac. 351.2. Corey v. Eastman, 166 Mass. 279, 44 N.E. 217.3. Schreiner v. Mller, 67 Iowa 91, 24 N.W. 738; Chapel v. Clark 117,Mich. 638,76 N.W. 62.4. Annotation 25 ALR(2d) 1090.5. Coombs v. Beede, 89 Me. 187, 36 A. 104.6. Annotation 25 ALR(2d) 1091.WHEN IS AN ARCHITECT LIABLE?quasi-arbitrator there is no resulting liability7 The courts are notliberal in allowing the measure of damages once liability is estab-lished. One rule allows damages measured only by the cost ofremedying the defect.8 The more liberal rule allows the measureof damages as the difference between the value of the buildingas designed and built and the value it would have had if it hadbeen properly designed and constructed.9The American Institute of Architects has zealously fought topreserve the high standing of all architects in the courts of ournation and to preserve the immunity which its members have en-joyed for centuries. The contracts, which they have promulgatedand which are used as standard forms in most building contracts,are most favorable to the architects. 10 Their members of the Asso-ciation are loyal and fraternal in the defense of fellow members andif you had to prove lack of good faith, fraud, failure to exerciseskill and care, or negligence, you probably would be confrontedwith a most difficult situation. Perhaps your status would be ana-logous to the Plaintiff in a malpractice case and you wished to securethe'testimony of a disinterested doctor.Nevertheless there has been at least one new field recentlyopened for liability against an architect by a very outstandingdecision. Chester Owen was a contractor, with the usual skills plusa pleasing personality. On July 6, 1951, Owen contacted theachitect and told him his job was in good condition and requested$11,000.00 of the retained percentage on his school job be released.After some conversation the architect gave the contractor a letterto the Board of Trustees as follows:"Gentlemen:Enclosed is estimate of Chester Owens. There is a balance dueon original contracts of $15,347.38. If the entire 15% is retainedthere will be due this estimate $1,544.09. Mr. Owen wishes todraw $11,000.00 of the retained percentage in order to meetan obligation in Meadville. If the board wishes to make thisadvance, this office approves. This would leave a balance of$2,803.29 which should be sufficient to complete the contract.Yours very truly,"The contract was on the Standard AIA form providing for 85%progress payments monthly and Article 5 provided:7 42 LRA(NS) 282, Ann. Cases 191, E 653.8. Foeller v. Heintz, 137 Wis. 169, 118 N.W. 543.; 24 LRA(NS) 32 Annotation LRA(1918D) 898.9. Bayshore Development Co. v. Bondfoey, 75 Fla. 455, 78 So. '507.10. Note the Fifth Edition Form A2 A.I.A.NORTH DAKOTA LAW REVIEW"ACCEPTANCE AND FINAL PAYMENT-Final paymentsshall be due 30 days after. ubstantial completion of the workprovided the work be then fully completed and the contract per-formed. Upon receipt of written notice that the work is ready forfinal inspection and acceptance, the Architect shall promptly makesuch inspection and when he finds the work acceptable under thecontract and the contract fully performed he shall promptly issuea final certificate, over his own signature, stating that the work pro-vided for in the contract has been completed and is acceptedbyhim under the terms and conditions thereof, and that the entirebalance found to be due the contract, and noted in said final cer-tificate, is due and payable.""Before issuance of final certificate the contractor shall sub-mit evidence satisfactory to the architect that all payrolls, mate-rial bills, and other indebtedness connected with the work havebeen paid.""If after the work has been substantially completed, full com-pletion thereof is materially delayed through no fault of thecontractor, and the Architect so certified, the owner shall, uponcertificate of the architect, and without termination of the con-tract, make payment of the balance due for that portion of thework fully completed and accepted. Such payment shall bemade under the terms and conditions governing final payment,except that it shall not constitute a waiver of claims."On July 2nd, just four days before the letter quoted above waswritten, the Architect had written the Board of Trustees advisingthe auditorium and cafeteria building had been substantially com-pleted but noting five substantial items to be done by the con-tractor before acceptance. Considering that the Fourth of Julywas 'a holiday and that the contractor received a copy of the letterof July 2nd on the 3rd and spent the 4th with his family and the5th getting up estimate No. 8, there was no opportunity for com-pleting the five outstanding and unfinished items.Having obtained the architect's letter July 6th and knowing theBoard of Trustees would probably require the 5 items to be com-pleted before releasing the 11,000.00 retainage, our contractor ap-pears at the Superintendent of Education's office. This politicallyinclined gentleman was out making his campaign for re-election.Armed with the architect's letter and blessed by regular features,he appeared to the young lady in charge of the office, the Deputy.Soon he had from her a directive to the Chancery Clerk to pay,without the usual Trustees' Order and secured the warrant forestimate No. 8 and the 11,000.00 retainage.The contractor, after collecting his warrant, notified his suretythat' he was in default and for it to finish the bulding and completeWHEN IS AN ARCHITECT LIABLE?the contract, which included the payment of $17,500.00 outstandingmaterial bills which he had not liquidated. After the completion ofthe building and the payment of the bills the subrogated surety hada cause of action (A) against the architect, (B) against the Super-intendent of Education, for a breach of his faithful performanceobligation, and (C) against the surety of Superintendent of Edu-cation for breach of his statutory b6nd.The architect may never have been sued had'it not been for theapparent liability of the Superntendent of Education' and his surety.Neither the contractor's surety's Home Office nor the attorneyscould find where any such suit against an architect had prevailed.At the subsequent trial the architect testified that he asked thecontractor if his bills were paid and he replies, "Yes." The con-tractor and the architect's secretary neither remembered any con-versation about the bills being paid but rather that he needed theretained percentage to pay an obligation. The architect's damag-ing letter of July 8th stated, "Mr. Owen wishes to draw $11,000.00of the retained percentage in order to meet an obligation in Mead-vle." The able counsel for the architect raised every conceivabledefense to this litigation.1. That the retainage is not a trust fund and that there is nolien thereon either legal or equitable for the benefit of the suretyor others.2. Conceding the right of the surety to the retainage, by thedoctrine of equitable subrogation, it was contended that the surety'srights did not arise until its cause of action accrued which did notaccrue with either.(A) On July 12th when the contractor gave the surety noticeof his default, or(B) Subsequently when the surety paid the outstanding billsfor materials furnished on the job.3. That there was no privity of contract between the architectand the surety, either by virtue of the contract or otherwise-therefore the architect owed no duty to the surety and could notbe held liable regardless of negligent conduct and resulting dam-ages.4. The defense of contributory negligence.5. The architect was the sole judge of when the building wassubstantially completed and as to what evidence should be re-required that the bills for labor and materials were paid.NORTH DAKOTA LAW REVIEWThe Supreme Court in a very able opinion by Justice Holmes"held:(1) Where there is a contest between the contractor's assigneeand. the surety that the surety has no superior equity in the prog-ress payment funds over the assignee." But where the contractprovides for progress payments not to exceed 85o of the contractprice and 15% retainage, this said 15% retainage is for the mutualbenefit. and protection of the owner and surety and where thesurety is required to pay bills for labor and materials going intothe construction it may assert a claim to the retainage fund underthe equitable doctrine of subrogation. 13(2) The Surety's rights of subrogation began on the date-of theexecution of its bond and was therefore vested in the surety atthe time the retained funds were leased to the contractor. Thesurety had the right to the $11,000.00 retained, by equitable sub-rogation in the event the contractor failed to complete his. contract.The .fulfillment of his contract required not only that he com-plete the. structure but that he also pay for all labor and materialtherefor.-1'(3) This bond of the contractor was a statutory bond not onlyfor the completion of Ihe building but the additional obligationto 'make prompt payment to all persons supplying labor and ma-terial for the job. Such provisions and additional obligations arerequired to be read into the bond, whether the bond expressly soprovides or not.'" The architect prepared the contract on a formprovided by the A.I.A. and he knew its provisions with referenceto the retainage and the purpose thereof. He was charged with theknowledge of the law which imposed upon the surety, in the eventof the default of the contractor, the obligation to pay labor andmaterial bills. One very important duty was not to approve prog-ress payments in excess of 85% of the contract price before finalpayment to, make an inspection to find if the work was acceptableunder the contract, and if the contract had been fully performedand to require the contractor to submit satisfactory evidence that11. State of Miss., For the use of National Surety Corporation v. E. L. Malvaney,72 So(2d) 424.12. First National Bank of Aberdeen v. Monroe County, 131 Miss. 803, 95 So. 727.13. Canton Exchange Bank v. Yazoo County, et al 144 Miss. 579, 109 So. 1.14. Jackson Lumber Co. v. Mosley, 193 Miss. 11 So.2d 199. "This was a three-wayarrangement, consisting of the building .contract,, including the plans. and. specifications.the bond and the application therefor, with the mutually independent obligations, andrights 'therein contained. .The contract obligated' the contractor not only to go forwardand complete:the structure but also to pay for all material and labor therefor."15. Magee Commercial Bank v. Evans, 145 Mis. 643, 112 So. - 482.WHEN IS AN ARCHITECT LIABLE?all payrolls, material bills and other indebtedness connected withthe work have been paid."'This duty was owing both to the trustees and the surety, forwhose mutual benefit and protection the retainage funds were pro-vided. A contractual relation between the architect and the suretywas not requisite to the existence of this duty. It arose out of thegeneral contractual arrangements which contained mutually in-terdependent rights and obligations. 'On the other hand, a con-tractual relation between parties is not necessary to the existenceof a duty the violation of which may constitute actionable neg-negligence, where the relation which is requisite to existence ofa duty to exercise due care, is to be found in something else.'-,1(4) There was no evidence of contributory negligence on thepart of the surety.(5) The architect, by his contract with the trustees assumed theobligation to supervise the performance of the contract and hisfailure to exercise due care and diligence to ascertain if there wereoutstanding bills for labor and materials before releasing the re-tainage might result in loss to the surety by depriving it of itsrights under the doctrine of equitable subrogation. So the architectundertook the performance of an act, which it was apparent, ifnegligently done would result in loss to the surety. Therefore thelaw imposes upon the architect a duty to exercise due care toavoid such a loss."Accordingly. the law imposes upon every person who under-takes the performance of an act which, it is apparent, if not donecarefully, will be dangerous to other persons or the property ofother persons, the duty to exercise his sense of intelligence toavoid injury, and he may be held responsible at law for injuryto person or to property which is directly attributable to a breachof such duty. The duty so arising is absolute. The law requiresnothing more; it will excuse nothing less than performance,although the degree of care to be exercised is relative to the cir-cumstances of the case." '1The holding of this far reaching decision will undoubtedly cause!he architects to be more careful in the future before the retainedpercentage is released. It should not be very difficult, as a practicalproposition, to get letters or receipts from the materialmen thattheir bills are paid. Especially where the architect makes regularinspections he knows who is furnishing the various materials whichgo into the job and it would take only a few minutes time to scanthe receipts or ackniwledgments before the final certificate is issued16. 38 Am. Jur., Sec. 21, Page 663.17. 38 Am. Jur., Pages 656, 657.NORTH DAKOTA LAW REVIEWand the 15% retainage is released. Perhaps the A.I.A. will changetheir contract but this is doubtful. The members of the associationare certain to be alerted to the court's ruling and the effect of thisably rendered opinion will be most wholesome on the architectswhen they handle the release of the retainage in the future.After reviewing this late case we conclude the architect is morethan just the owner's agent 18 with authority to decide everythingwithout regarding the contract between the parties, which is thesource of his connection with the building project.18. Hall v. Union Indemnity Company, 61 F.24 85 (8th Cir. 1932).NORTH DAKOTA LAW REVIEWMember, National Conference of Law ReviewsVOLUME 31 JANUARY, 1955 NUMBER 1STATE BAR ASSOCIATION OF NORTH DAKOTAJohn A. ZugerPresidentJohn E. RillingSecretary-TreasurerRoland A. HeringerVice PresidentRonald N. DaviesExecutive DirectorEDITORIAL COMMITTEERonald N. Davies, ChairmanDean 0. H. ThormodsgardHarold D. ShaftCharles L. CrumErnst N. PaulUNIVERSITY OF NORTH DAKOTA SCHOOL OF LAWCONSULTING FACULTY MEMBERS0. H. Thormodsgard, DeanTheron W. AtwoodPaul C. MatthewsRoss C. TisdaleSTUDENT EDITORIAL BOARDKenneth MoranEditor-in-ChiefLouis R. MooreRecent Case EditorBayard LewisBook Review EditorDouglas BirdzellRecent Case EditorFrancis BreidenbachGeorge DynesCharles A. FesteGerald C. GlaserJon N. VogelWilliam C. KelschJames O'KeefeHarry PippinThales SecrestRobert L. HellandFaculty AdvisorThe views herein expressed are those of the individual writers and are notnecessarily those of the North Dakota Bar Association or the University ofNorth Dakota School of Law.A. MCl ChristopherNote Editor

When Is an Architect Liable

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When Is an Architect Liable

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