Warburton v. Tacoma School District No. 10

350 P.2d 161, 55 Wash. 2d 746, 1960 Wash. LEXIS 567

• Court: Washington Supreme Court
• Decided: March 17, 1960
• Docket: 34752
• Status: Published

Opinions

Ott, J.

Gordon Norman Johnston, a licensed architect, entered into a contract with the board of directors of Tacoma school district No. 10 to prepare plans, secure bids, and supervise the construction of an addition to the Sheridan elementary school, at a cost not to exceed $212,102.45, for an agreed fee of six per cent of the total accepted bid. The employment contract provided, inter alia:

“Article II. The Architect’s professional services consist of necessary conferences, preparation of preliminary studies, working drawing, specifications, large scale and full size detail drawings, the drafting of forms of proposals and contracts, all of which shall be approved by the Owner before submitted to bidders and before execution, the issuance of certificates of payment, keeping of accounts, general administration of the business and supervision of the work.

“Article VII. Extra Services and Special Costs: If, after a definite scheme for the building has been approved, the Owner makes a decision which, for its proper execution, involves extra services and expenses for changes in or additions to the drawings, specifications and other documents, or if the Architect is put to labor and expense by delays caused by the Owner or Contractors, or by the delinquency or insolvency of the Contractor, or as a result of damages to the building by fire, he shall be equitably paid for such extra services and expense, the amount of which shall be determined prior to the rendition thereof.

“Should the execution of any work designated or specified by the Architect, or any part of such work, be abandoned or suspended, the Architect is to be paid in accordance with or in proportion to the terms of Article VIII for the services rendered on account of it, up to the time of such abandonment or suspension. . . .

“Article XVI. It is hereby understood that the Owner has available for the construction or modification of said building, including incidental site development, the sum of $180,000.00, and it is agreed by the Architect and the Owner that in the event the estimate of costs and/or bids for construction of said building or modification shall exceed such sum or shall exceed the maximum per square foot cost allowable for the designed type of building by the State Department of Education, the Architect shall revise such plans and specifications, with the approval of the Owner, until the estimated cost and/or minimum responsible bidder’s bid will come within such sums.”

The architect’s plans and specifications were approved by the board, and bids were received. The lowest bid, in the sum of $310,892.67, was rejected by the district, after attempts to negotiate failed. Thereafter, preparatory to another call for bids, the board ordered the architect to alter the originally adopted plans and specifications in the following particulars: (1) change the design of the proposed annex by attaching it to the existing structure, instead of building a separate structure connected by covered passageways, as originally planned, (2) provide for alternate plans and specifications and for alternate bids with reference thereto, and (3) substitute less expensive materials for the original, more expensive, materials which had added principally to the building costs.

The architect revised the plans and specifications, as requested by the board, and, thereafter, a bid of $239,223.39 was received and accepted. The building was constructed, and the architect received a fee for his services of six per cent of the bid.

October 31, 1956, before the completion and acceptance of the annex and the full payment of the basic fee, the architect billed the district for additional professional services, in the sum of $3,446.56, as follows:

“Addition to Basic Fee for Redesign work due to necessity of Rebidding the Addition to the Sheridan Elementary School.

“Architectural Redesign .............. $1,360.00

“Smith & Murray, Structural Engineers 1,288.75

“Walter S. Gordon, Electrical Engineer.. 340.46

“David M. Hopkins, Mechanical Engineer 197.08

“Tacoma Blueprint Company.......... 191.71

“Graham Blueprint Company.......... 68.56

“Total Amount Due.............. $3,446.56”

The allowance of the claim was questioned by the Pierce County Taxation Bureau and interested persons. The board requested its attorney to furnish a legal opinion as to the validity of the architect’s claim. He recommended that the claim be disallowed. The opinion- of the attorney for the architect was contrary to that of the school district’s attorney, and a deputy prosecuting attorney for Pierce county concurred in the opinion of the attorney for the architect.

After several public meetings and conferences had been held, the board and the architect, upon advice of their réspective attorneys, entered into a written agreement of compromise and settlement which reads, in part, as follows:

“Whereas, after considerable negotiations by the Architect, the School District, by Resolution of August 9, 1956, rejected all bids and directed the Architect to revise the plans and call for new bids; and

“Whereas, the Architect re-drafted the plans, which were approved by the School District, new bids were called for, contracts let, and the Sheridan addition is now under construction; and

“Whereas, a bona fide dispute as to the legal meaning and effect of the agreement of June 23, 1955 and as to the rights and liabilities of the parties has arisen; and

“Whereas, after considerable negotiations between the School District and the Architect, and their respective attorneys, the parties are desirous of reaching a mutually satisfactory accord of their differences;

“Now, Therefore, it is agreed between the parties hereto that the School District shall pay to the Architect the sum of $3,019.69 in addition to the amount agreed upon in their contract of June 23, 1955, in full satisfaction of all claims by the Architect for additional compensation by reason of any and all extra work and expenses incurred or to be incurred by the Architect in regard to the said addition to Sheridan School as a result of the events and circumstances heretofore set forth.”

May 31,1957, the Pierce County Taxation Bureau was apprised of the action of the school board, and was informed that the claim would be presented for payment by warrant on June 10, 1957. The prosecuting attorney for Pierce county declined to institute an action to enjoin the board from issuing the warrant. Thereafter, Stanton Warburton, Jr., individually, and as secretary of the Pierce County Taxation Bureau, commenced this action against the school district to enjoin and restrain it from issuing the warrant in payment of the claim. Whether the plaintiff had the capacity to seek such relief was not questioned; hence, his capacity to sue is not an issue in this proceeding.

The complaint alleged, inter alia, that the claim lacked consideration, and that the compromise settlement agreement to pay it was void for the same reason. The school district’s answer alleged that the compromise settlement of the claim was based upon a bona fide dispute, which arose out of an ambiguity in the contract.

By order of the court, Gordon Norman Johnston was joined as a party defendant. His answer alleged, inter alia, that the extra services claimed were performed, and compensation therefor was earned, due, and unpaid; that payment for such extra services was provided for under article No. 7 of the contract, and that the compromise settlement was effected “under the threat of litigation and upon the advice of the said Prosecutor’s Office,” and was based upon a valid consideration. The affirmative matters pleaded were denied by the plaintiff.

The cause was tried to the court, which entered judgment in favor of the defendants. From a judgment of dismissal, the plaintiff has appealed.

The appellant assigns error to the court’s finding of fact that a dispute existed, and that the compromise was valid, and to its conclusions of law and judgment based thereon.

Appellant contends that the claim lacked consideration, for the reason that the architect (as shown by the itemized claim) performed no service for the district, other than that required of him by article No. 16 of the contract, and that the claim, therefore, had no validity either in fact or in law.

In the instant proceeding, we are not primarily concerned with whether or not the claim was one which would stand the test of its validity in court. The primary issue here is the validity of the compromise agreement. The facts are not in dispute, and are substantially as set out heretofore. The rules of law relating to compromise settlements are well established, and, in so far as they are applicable to the instant proceeding, are as follows:

The law favors compromise settlements. Buob v. Feenaughty Machinery Co., 4 Wn. (2d) 276, 294, 103 P. (2d) 325 (1940). A municipal corporation has inherent power to enter into a compromise settlement of disputed claims, arising out of a subject matter concerning which the municipality has the general power to contract. Abrams v. Seattle, 173 Wash. 495, 502, 23 P. (2d) 869 (1933). See, also, Christie v. Port of Olympia, 27 Wn. (2d) 534, 179 P. (2d) 294 (1947).

In the absence of a showing of fraud or manifest abuse of discretion, the elements which govern the power and authority of a municipal corporation to exercise its discretion and compromise a claim are as follows:

(1) The claim must arise out of a subject matter upon which the municipality has general power to contract.

(2) There must be a bona fide dispute as to the municipality’s liability, either in fact or in law.

(3) The settlement must be effected by the exercise of good faith.

Do the facts establish (as the trial court found) that a bona fide dispute existed at the time the parties compromised and settled the claim?

We believe that the record supports the court’s finding. After the “definite scheme for the building” had been approved by the board the board made substantial physical changes in the plans and specifications, which resulted in a contract. Whether the changes, as made by the board after the original “scheme” was approved, came within the purview of article No. 7 (for which the architect was to be paid) or article No. 16 (which required no additional payment) gave rise to a dispute as to the proper interpretation to be placed upon the contract. The basis of the dispute was not groundless or frivolous. It was a dispute which could be conclusively determined only after it had stood the test of a court action.

The board, in the proper exercise of its discretion and acting in a manner it believed to be in the best interest of the district, concluded that the claim should be compromised, rather than risk additional cost and expense to the district in litigating its validity. There is no contention here that, in this regard, the board did not act in good faith.

Since the board’s compromise settlement of the claim was valid, it is immaterial whether or not, in a proper legal proceeding, it might subsequently be established that the claim was illegal. As we said in Abrams v. Seattle, supra [p. 502]:

“ a municipality has the power to compromise claims. Franklin County v. Carstens, 68 Wash. 176, 122 Pac. 999. The power to settle does not depend on the possible ultimate decision for or against the validity of the asserted claim. 44 C. J. 1449.”

See, also, Opitz v. Hayden, 17 Wn. (2d) 347, 369 et seq., 135 P. (2d) 819 (1943); Jones v. Reese, 191 Wash. 16, 70 P. (2d) 811 (1937); Franklin County v. Carstens, 68 Wash. 176, 122 Pac. 999 (1912); Hutchinson v. Mt. Vernon Water & Power Co., 49 Wash. 469, 95 Pac. 1023 (1908).

Finally, appellant contends that the amount to be paid for such extra service was not determined prior to the rendition thereof, as provided by article No. 7, and that, hence, the claim was invalid and the board was without authority to pay it.

The performance of this condition did not relate to the substance of the service performed, but to the procedure by which payment therefor would be determined, prior to its rendition. Here, the board, in order to meet a certain construction time limit, ordered the extra service performed, and the architect promptly performed the service satisfactorily. There is nothing in the contract which indicates that the service would be gratuitously performed, if the amount of the fee was not agreed upon before the rendition thereof. On the contrary, the contract is subject to the inference or interpretation that, in the absence of an agreement fixing the amount, the architect would be paid upon some equitable basis for the service actually performed. The procedural provision was for the protection of the district, and was one which the board, in the exercise of its discretion, could properly waive. One who asserts abuse of discretion has the burden of proof to establish that the exercise of the questioned discretion has been abused.

From our examination of the record, we conclude that the appellant has not sustained the burden of proof in this regard.

The judgment is affirmed.

Donworth, Rosellini, and Hunter, JJ., concur.