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Damian Farrell v. Kent Whiteman

January 10, 2012

DAMIAN FARRELL, PLAINTIFF-COUNTERDEFENDANT-RESPONDENT,
v.
KENT WHITEMAN, IN HIS INDIVIDUAL CAPACITY, AND WHITEHORSE
PROPERTIES, LLC, A MICHIGAN LIMITED LIABILITY COMPANY,
DEFENDANTS-COUNTERCLAIMANTS-APPELLANTS.



Appeal from the District Court of the Fifth Judicial District of the State of Idaho, Blaine County. Hon. Robert J. Elgee, District Judge.

The opinion of the court was delivered by: W. Jones, Justice

2012 Opinion No. 12

Stephen W. Kenyon, Clerk

The decision of the district court is affirmed. Attorney's fees and costs on appeal are awarded to respondent.

I. NATURE OF THE CASE

Appellants, Kent Whiteman and Whitehorse Properties, LLC, (collectively referred to herein as "Whiteman"), bring a second appeal of this case before this Court. In the original trial, Respondent, Damian Farrell, sued Whiteman for uncompensated architect services rendered for Whiteman's West View Condominium project from 2003 to 2004. Whiteman counterclaimed arguing that Farrell was not entitled to compensation due to his failure to obtain a license to practice architecture in Idaho. Farrell is a resident of Michigan and was licensed as an architect in the states of Michigan, Texas, and New York when he began working with Whiteman. Farrell did not receive his architect's license in Idaho until February 17, 2004. The district court found that an implied in fact contract existed between the parties and awarded Farrell damages in quantum meruit for services rendered, expenses incurred, and attorney's fees and costs. Whiteman appealed and this Court vacated the district court's damage award and its award of attorney's fees, finding that any damages awarded to Farrell prior to being licensed in Idaho should be based on unjust enrichment, not quantum meruit. On remand, the district court heard new evidence and awarded Farrell damages for reimbursement of out of pocket expenses incurred prior to licensing under unjust enrichment, damages for architectural services rendered after Farrell obtained his license based on quantum meruit, and attorney's fees and costs. The total amount awarded on remand, $208,690.05, was $9,000 more than the amount originally awarded in the first trial. Whiteman again filed a timely appeal of the district court's judgment on remand.

II. FACTUAL AND PROCEDURAL BACKGROUND

Kent Whiteman is a lawyer, but left the practice of law to become involved in real estate development. Damian Farrell is a licensed architect and resident of Michigan. Whiteman and Farrell were friends, and in 2002, they discussed working together on Whiteman's West View Condominium project, (the "Project") in Ketchum, Idaho. At that time, Farrell was not licensed to practice architecture in Idaho, but was licensed in the states of Michigan, Texas, and New York. Farrell agreed to be the lead architect for the condominium project in exchange for twenty-five percent (25%) of the profits. Based on their oral conversations, Farrell undertook performance with the anticipation that he would be a partner in the company and that Whiteman would eventually provide him with a written contract outlining the terms of the profit-sharing arrangement they discussed. As a result, Farrell did not keep track of the hours he spent on each phase of the job or submit billings. Farrell also advanced Whiteman expenses for the Project without seeking immediate reimbursement.

Farrell began working on the seven unit condominium Project in June of 2003.

Whiteman was expected to present a written contract setting forth the partnership agreement and establishing Farrell's compensation by September of 2003. Whiteman misrepresented Idaho law by telling Farrell that he could not be an owner of the company because he was not a fifty percent (50%) contributor. Whiteman did not provide Farrell with any written contract proposals until February of 2004, yet no agreement could be reached between the parties. Despite failing to agree upon the terms of Farrell's compensation, Farrell continued working on the Project as the lead architect and obtained his architecture license from the State of Idaho on February 17, 2004. Although Farrell prepared the necessary design plans prior to his Idaho licensure, the initial design plans were received by the City of Ketchum for review on February 18, 2004, one day after Farrell became licensed in Idaho. On April 16, 2003, Farrell proposed a fixed fee of ten percent (10%) based on a percentage of total construction costs as is typically used in Farrell's architecture firm, Hobbs and Black. This fee arrangement was rejected by Whiteman. On April 26, 2004, the City of Ketchum approved the design review and site plan submitted by Farrell. Farrell then prepared the construction drawings and submitted them to the city for approval. In early July, the City of Ketchum issued a building permit that allowed construction to begin on the Project.

On July 29, 2004, Farrell was terminated from the Project for alleged missed deadlines and poor designs that Whiteman claimed would require re-designing in order to sell on the market. At the time Farrell was terminated, some of the construction documents remained uncompleted; nevertheless, Farrell's construction drawings allowed Dembergh, the construction company that was eventually hired for the Project, to submit an accurate construction bid. Furthermore, no other architect was hired to complete or re-design Farrell's work. Whiteman refused to pay Farrell for the architectural work done on the Project. Farrell sued Whiteman to recover for the architect services he rendered on behalf of the Project. Farrell based the cause of action upon breach of oral partnership, breach of oral employment contract, quantum meruit, unjust enrichment, and promissory estoppel. In his Answer, Whiteman asserted eight (8) affirmative defenses and counterclaimed alleging architectural malpractice/negligence, misrepresentation, fraud, deceit, and breach of contract. The district court found that Farrell was licensed to practice architecture in Idaho during the critical aspects of the Project's construction. Thus, in the first trial, the court found that an implied in fact contract existed between the parties and awarded Farrell damages under quantum meruit. The district court also dismissed Whiteman's counterclaim and awarded Farrell attorney's fees and costs.

Whiteman appealed to this Court arguing that the lower court erred in construing the contract to be legal. On the first appeal, this Court vacated the district court's award of damages and remanded the case for further consideration. Farrell v. Whiteman, 146 Idaho 604, 613, 200 P.3d 1153, 1162 (2009). This Court specifically instructed the district court to "determine the quantum meruit recovery due for services rendered after Farrell received his Idaho license (February 17, 2004) and the unjust enrichment recovery due, if any, for services rendered prior to licensing." Id. The Court reasoned that any services rendered prior to Farrell obtaining his Idaho architecture's license were made under an illegal contract and therefore must be measured under a theory of unjust enrichment, not quantum meruit. Id. Finally, this Court left it to the district court to determine the proper fee on remand. Id.

On remand, the district court held an evidentiary hearing and allowed the parties to present new evidence to the court, which was not available at the time of the first trial. The additional evidence proved that Whiteman sold all seven condominium units in the Project under Farrell's original design.*fn1 The evidence also showed that the total sales price for all of the units was $7,134,000, and that Whiteman made a profit of $2,022,855 from the proceeds of the sales.*fn2 The district court then evaluated the findings of fact made during the first trial with the new evidence presented on remand and balanced the equitable factors accordingly. The district court found that no equities weighed in Whiteman's favor. Although Whiteman claimed that Farrell should have completed some of the work faster, the court found that Farrell's performance was reasonable and timely. The court also found Whiteman's claims that Farrell's poor design diminished the value of units 2, 3, and 5, making them difficult or impossible to sell, were not supported by the new evidence.

On remand, the district court stated "[n]ot only did Whiteman suffer no loss as a result of Farrell's work, he profited handsomely." The new evidence established that all of the units sold at prices higher than what Whiteman had originally projected at the first trial under Farrell's design. As such, the district court considered the high quality of Farrell's work in determining the reasonable value of the services rendered under a theory of quantum meruit. The district court awarded Farrell $130,000 for architectural services rendered after receiving his Idaho architectural license. The court also found that Farrell was not entitled to an architect's fee prior to obtaining his Idaho architecture license under a theory of unjust enrichment. Nevertheless, the court awarded Farrell $13,408.58 as reimbursement for the out of pocket expenses Farrell incurred on Whiteman's behalf under unjust enrichment, plus ...


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