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Del Bianco & Associates, Inc. v. Adam

JUNE 15, 1972.

IN RE MATTER OF ARBITRATION — (DEL BIANCO & ASSOCIATES, INC., PLAINTIFF-APPELLEE,

v.

SAM ADAM ET AL., DEFENDANTS-APPELLANTS.)



APPEAL from the Circuit Court of Cook County; the Hon. CHARLES R. BARRETT, Judge, presiding.

MR. JUSTICE MCNAMARA DELIVERED THE OPINION OF THE COURT:

Plaintiff initiated this action before an arbitrator to recover damages under a written contract providing for arbitration of disputed matters. Plaintiff, an architectural firm, had contracted with defendants, both of whom are attorneys, to perform architectural services in connection with the construction of an office building on land owned by defendants in the City of Chicago. Plaintiff claimed a breach of contract and sought arbitration. The arbitrator made an award in favor of plaintiff; the trial court allowed plaintiff's motion to confirm the award and entered judgment in favor of plaintiff, and defendants appeal. At this point, a review of the chronology of the proceedings is essential to fully understand the issues.

After plaintiff sought arbitration, defendants were given eight notices of proposed hearings in 1966. Despite receipt of these notices, defendants did not appear for any of the hearings. Finally, on February 1, 1967, the arbitrator conducted an ex parte hearing, took evidence and subsequently awarded plaintiff $7,981.38 including arbitration costs. Plaintiff filed suit to confirm the award and for judgment, and defendants moved to vacate or modify the award.

At the contested hearing to confirm the award, a court reporter testified that she had inaccurately transcribed one portion of the arbitration proceedings. She stated that, although the testimony indicated that a letter canceling the contract had been sent by Nathaniel J. Reed on behalf of defendants, she had typed the name of Dan Mangaimele, Jr. The trial court found that the arbitrator may have been misled; vacated the award and remanded the cause to the same arbitrator. Defendants made no objection to that order.

Both sides were represented by counsel at the second arbitration hearing. The arbitrator sought to limit the hearing to that portion of the testimony which allegedly misled him in his first award. However defendants objected, and the arbitrator reheard the entire testimony. After the second hearing had begun, one of defendants' attorneys requested that the matter be heard by another arbitrator. When the arbitrator denied the request, counsel sent a telegram to the Arbitration Association requesting another arbitrator. The request was also denied.

After hearing the evidence, the arbitrator awarded $10,114.66 to plaintiff. Plaintiff again brought suit to confirm the award and the court, over defendants' objections, confirmed the award and entered judgment. On appeal, defendants contend that the court erred in not looking beyond "the four corners of the award" to determine its validity; that the arbitrator was prejudiced against defendants; that the arbitrator exceeded his powers; that the award was obtained by fraud, corruption and undue means; that, under the terms of the contract, the matter could not be arbitrated; that plaintiff failed to give defendants a notice of its intention to arbitrate; and that the award was a nullity.

On June 29, 1965, the parties entered into a written contract by which plaintiff was to draft the plans for the construction of the building and perform the other functions of an architect. Article 3 of the contract described the basic services to be performed by plaintiff and provided that plaintiff was to receive six percent of the cost of construction. The contract also provided as follows:

"Arbitration of all questions in dispute under this Agreement shall be at the choice of either party and shall be in accordance with the provisions, then obtaining, of the Standard Form of Arbitration Procedure of The American Institute of Architects. This Agreement shall be specifically enforceable under the prevailing arbitration law and judgment upon the award rendered may be entered in the court of the forum, state or federal, having jurisdiction. The decisions of the arbitrators shall be a condition precedent to the right of any legal action."

The following pertinent evidence was adduced at the second arbitration hearing.

Robert Schwartz, plaintiff's vice-president, testified that plaintiff had received a retainer of $1000 from defendants on the contract. The proposed office building was to be two stories, contain ten offices and have an elevator. Schwartz identified a survey plot, drawings, sketches, photographs and blueprints of the site and proposed building. Building plans had been drawn under Schwartz' supervision by J.P. Donovan and Associates at a cost of $1,181.78. Plans had been blueprinted for $198.37. Schwartz also testified that there was no cost limitation on the contract, and that plaintiff was to receive the standard six percent of the cost of construction for its basic services. Universal Builders was to be the general contractor on the job, and Schwartz understood that there was a written contract between Universal and defendants. Albert Danielson, plaintiff's office manager, testified that plaintiff had paid $2203 in wages on the project, and that Schwartz had performed 94 hours of work on the contract.

Lee Turoff, president of Universal Builders, testified for plaintiff that Universal was to be general contractor for the building and that the costs of construction were to be $237,000. (Defendants note that at the first hearing, he testified that the costs would be $226,000.) Daniel Mangaimele, an attorney, testified for plaintiff that it was he who introduced the parties to each other. At the time, the witness was a law student; he never was defendants' agent, but worked for Turoff and was promised $200 if the deal went through.

Nathaniel J. Reed, Jr., an attorney, testified for the plaintiff that he had been counsel for defendants. As counsel, Reed wrote the letter canceling the contract. The witness identified the letter, acknowledged his signature and stated that he had mailed it. Reed declined to further testify urging that the attorney-client relationship with defendants barred further comment. Counsel for plaintiff read the letter into evidence without objection by defendants. The letter further advised the plaintiff that the defendants considered the $1000 already paid as full payment for their obligation. The letter indicated that a carbon copy was mailed to the defendants.

John Macsai, an architect, testified as an expert witness for plaintiff that the usual and customary fee for architectural services would be no less than six percent of the construction costs. If the architect provided plans and specifications, but performance of the contract was not rendered, then the usual customary credit given to the owner for the construction supervision phase of the contract would be twenty-five to thirty percent. Macsai testified to an alternative method of figuring an architect's compensation other than by charging a certain percentage of the total construction costs. Under that formula, the architect would charge 2 1/2 times the amount of direct salary expenses, would add what it was obligated to pay for mechanical and structural engineering drawing expenses plus a ten to fifteen percent profit, and add the cost of blueprints. According to Macsai, where the plaintiff received the down payment and became obligated to pay the salaries, fees for mechanical and structural engineering services, and the cost of blueprinting, all in reliance on the contract, the total sum of $8985 would be due the plaintiff for its services.

Counsel for plaintiff pointed out that, based on Turoff's testimony, and following the six percent formula, the amount due was $9371; based on the testimony of Macsai, plaintiff was entitled to $8985. Counsel also submitted the arbitration costs at $1,129.66.

R. Eugene Pincham, one of the defendants, testified at the arbitration hearing that Adam and he purchased the site in question and planned to erect an office building. They met with plaintiff, and all parties agreed that defendants would pay plaintiff $1000 to draw plans for the job. It was further agreed that defendants would pay an additional fee of six percent of the total costs only if the building were completed. Pincham testified that he had never met or talked with Reed, and that neither he nor Adam had cancelled the contract, nor had they authorized anyone to cancel the contract in their behalf.

• 1 Defendants first argue that the trial court erred in failing to "look beyond the four corners of the award" and making its own determination of the case. We note initially that this contention is based upon a remark made by plaintiff's counsel to the trial judge, and overlooks what transpired in the trial court. At the hearing on the motion to confirm the second award, the following colloquy took place:

"THE COURT: What you are saying is that this award was obtained by fraudulent and corrupt means, and ...


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