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Burnham & Hammond v. Cen. Bapt. Home

OPINION FILED SEPTEMBER 28, 1983.

BURNHAM & HAMMOND, INC., PLAINTIFF-APPELLEE AND CROSS-APPELLANT,

v.

CENTRAL BAPTIST HOME FOR THE AGED, DEFENDANT-APPELLANT AND CROSS-APPELLEE — (BILAL ENGINEERING COMPANY ET AL., DEFENDANTS).



Appeal from the Circuit Court of Cook County; the Hon. Franklin I. Kral, Judge, presiding.

JUSTICE MCGILLICUDDY DELIVERED THE OPINION OF THE COURT:

The plaintiff, Burnham & Hammond, Inc. (Burnham & Hammond), an architectural and engineering firm, brought this action in chancery to foreclose a mechanic's lien against the defendant, Central Baptist Home for the Aged (Central Baptist). Central Baptist filed an answer alleging breach of contract and a counterclaim alleging breach of duty. The trial court granted the plaintiff's motion for summary judgment, entered a decree of foreclosure and sale, and stayed enforcement of the decree pending resolution of defendant's counterclaim. The trial court further decreed, as follows: "This is a final order from which an appeal may be taken immediately." The trial court also transferred the counterclaim to the law division of the circuit court of Cook County for trial on its merits. The counterclaim is still pending. Central Baptist appeals from the order granting summary judgment to the plaintiff, and Burnham & Hammond cross-appeals from the order staying enforcement of the summary judgment. The issues raised by the parties are whether genuine issues of material fact existed as to cost limitation or performance in accordance with professional standards, and whether the trial court erred in staying enforcement of the decree of foreclosure and sale.

Burnham & Hammond produced a feasibility study for Central Baptist containing recommendations and a $1,535,000 construction estimate for the development of a skilled care addition. Based on the study, Burnham & Hammond contracted to render architectural and engineering services for the project. The standard form agreement, which was signed on February 19, 1973, contained the following relevant provision:

"CONSTRUCTION COST * * * 3.4 Statements of Probable Construction Cost and Detailed Cost Estimates prepared by the Architect represent his best judgment as a design professional familiar with the construction industry. It is recognized, however, that neither the Architect nor the Owner has any control over the cost of labor, materials or equipment, over the contractors' methods of determining bid prices, or over competitive bidding or market conditions. Accordingly, the Architect cannot and does not guarantee that bids will not vary from any Statement of Probable Construction Cost or other cost estimate prepared by him."

In May 1973, Burnham & Hammond submitted its initial design and a revised construction cost estimate of $2,203,780, increasing the cost of the new construction of a skilled care facility from $1,152,000 to $1,785,780. Central Baptist's Board of Directors (the Board) approved the design and revision. On July 12, 1973, Central Baptist remitted $14,343.75 to Burnham & Hammond. Further modifications of the program, including a cost estimate of $2,370,000 for the skilled care addition, were approved by a letter dated October 2, 1973, from the Board. The letter authorized Burnham & Hammond to proceed, stating: "Preliminary drawings, for State review and construction estimates, are to be prepared as soon as possible." On November 19, 1973, Burnham & Hammond produced the preliminary drawings and a revised total project budget of $2,789,975 for the skilled care addition. This amount included a construction estimate of $2,370,000 plus fees and furnishings of $419,975. Both were accepted and approved by Central Baptist.

On January 10, 1974, Burnham & Hammond sent Central Baptist an invoice for $57,570.15, based upon the $2,370,000 estimate for the skilled care addition and $673,975 for an apartment building or a total construction cost of $3,043,975. Central Baptist paid the invoice in full on January 28, 1974. A letter from Central Baptist dated April 22, 1974, authorized Burnham & Hammond to prepare construction documents for bidding on the skilled care addition and to prepare specifications for bidding on the apartment building, and stated that the Board understood there would be an adjustment in fee.

By letter dated August 27, 1974, Central Baptist directed Burnham & Hammond to "hold in abeyance work on the plans of the Skilled Care Addition until we have resolved the problem of State Comprehensive Plan Agency Authorization." Accordingly, on October 21, 1974, Burnham & Hammond submitted to Central Baptist a final invoice in the amount of $20,472, based upon the $3,043,975 total construction cost estimate. Central Baptist paid the invoice in full on December 17, 1974.

On January 3, 1975, Central Baptist advised Burnham & Hammond as follows:

"The Board of Directors of the Central Baptist Home for the Aged has voted to proceed with the building of the Skilled Care Addition. The motion reads, `to inform Burnham and Hammond, Inc. of our letter to Mr. William K. Ewing of the Illinois Health Facilities Planning Board requesting a review of the plans for our Skilled Care Addition'. The intent of this motion is to continue (or reactivate, if necessary) the contract with your firm for the Architectual [sic] and Engineering services of the Nursing Building project."

In March 1975, the Health Facilities Planning Board in Springfield informed Central Baptist that health facilities whose construction contracts were signed before the Certificate of Need Law became effective would be permitted to build. Central Baptist called a "very urgent" meeting of its executive and building committees for April 7, 1975, stating that "we must investigate all possibilities to avoid further delays in the Home Development [sic] program." Central Baptist believed that if it failed to enter into a contract with a builder before July 1975, it would be necessary to request permission to build under the certificate-of-need law, and it was possible that such request would be denied.

On June 9, 1975, Central Baptist advised the Illinois Department of Public Health, Division of Geriatric & Long Term Care Programs, of its contract with Burnham & Hammond. On the same day, the Board authorized Central Baptist to enter into a contract with S.N. Nielsen (Nielsen) for the construction of the skilled care addition "at a guaranteed maximum cost * * * not to exceed four million dollars." On June 23, 1975, Burnham & Hammond submitted to Central Baptist an interim report covering a summary of contract negotiations with Nielsen indicating the current guaranteed maximum cost proposal of $3,964,771. The report indicated that this represented the maximum contract amount, and that competitive bidding was expected to result in a lower total construction cost. It also included a list of features which could be eliminated in order to reduce expenses. On June 25, 1975, Central Baptist entered into a contract with Nielsen for the construction of the skilled care facility at the maximum cost of $3,964,771.

By October 3, 1975, the project had reached the bidding or negotiation phase. Pursuant to the contract, the amount of the architect's fee which would be due at this point would be calculated at 80% of 6.75% of the construction cost of $3,964,771, per the contract with Nielsen. Accordingly, Burnham & Hammond sent an invoice to Central Baptist stating the amount due as follows:

Construction cost $3,964,771.00 _____________ Architect's fee at 6.75% $ 267,622.04 _____________ Fee now due 80% $ 214,097.63 Previous payments 55,991.25 _____________ Amount due $ 158,106.38 Add - Printing and reproduction 2,852.64 Travel 364.46 _____________ Amount due $ 161,323.48 =============

On October 12, 1975, Central Baptist authorized Nielsen to begin construction immediately. On November 13, 1975, Central Baptist directed Burnham & Hammond to proceed with certain changes in the storm water retention system. In a letter dated December 30, 1975, ...


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