No. 89-569
IN THE SUPREME COURT OF THE STATE OF MONTANA
1991
NORTHERN MONTANA HOSPITAL, a
Montana nonprofit corporation,
Plaintiff, Respondent,
and Cross-Appellant
KENNETH KNIGHT, a sole proprietor,
d/b/a KNIGHT & COMPANY, CLERK OF SUPREME COURT
STATE OF MONTANA
Plaintiff, Appellant,
and Cross-Respondent
APPEAL FROM: District Court of the Twelfth Judicial District,
In and for the County of Hill,
The Honorable John Warner, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Tracy A. Axelberg argued, Jack L. Lewis; Jardine,
Stephenson, Blewett & Weaver, Great Falls, Montana
For Respondent:
Ronald F. Waterman argued; Gough, Shanahan,
Johnson & Waterman, Helena Montana
Patrick A. Sullivan; Winston & Cashatt,
Spokane, Washington
For Amici Curiae: (American Institute of Architects and
Montana Chapter/American Institute of Architects)
Charles I. Hadden argued, Sean M. Hanifin; Ross,
Dixon & Masback, Washington, D.C.
Sherman V. Lohn, William Evan Jones; Garlington,
Lohn & Robinson, Missoula, Montana
Submitted: May 9, 1991
Filed:
~usticeWilliam E. Hunt, Sr., delivered the opinion of the
Court.
Defendant Kenneth Knight (Architect) appeals from a jury
verdict rendered against him and in favor of plaintiff Northern
Montana Hospital in the Twelfth Judicial District Court, Hill
County. The Hospital cross-appeals from the District Court's
denial of its motion for prejudgment interest. We affirm.
The Architect raises the following issues:
1. Were the Hospital's claims barred by the statute of
limitations?
2. Was expert testimony on the custom of the architectural
profession properly admitted into evidence?
3. Was the Architect's motion to compel production of
documents reviewed by the Hospital's expert witness in preparation
for his deposition properly denied by the District Court?
The sole issue raised by the Hospital on cross-appeal is
whether the District Court properly denied its motion for pre-
judgment interest.
In 1968, the Hospital's board of directors engaged the
Architect and his firm to provide architectural services for the
construction of a hospital in Havre. Construction commenced in
1973 and the building was substantially completed by mid-June 1975.
Shortly after completion, several problems arose, most
centering around the structure's heating, ventilating, and
air-conditioning systems. Temperatures fluctuated tremendously
throughout the building. Air-conditioning equipment on the roof
transmitted noise and vibrations to the rooms below. Drafts and
boiler room fumes permeated the facility. Gases from the
incinerator were sucked into the nursery. The elevator doors
constantly whistled as wind rushed through the elevator shafts.
The Hospital administration sought assistance from the
Architect in its attempts to remedy the problems. The Architect
assured the Hospital that the problems were not the result of
design deficiencies but were caused by either the Hospital
maintenance staff or the contractor.
In 1979, the Hospital employed the RMH Group, a Denver-based
consulting firm, to conduct an energy audit and systems review.
The RMH report, which the Hospital received in 1980, concluded that
the various atmospheric problems were the result of building code
violations and design defects. RMH suggested a major redesign and
reconstruction of the system. The Hospital retained the consultant
to correct the problems.
On July 2, 1981, the Hospital filed suit against the
Architect, alleging that he had breached and negligently breached
his express and implied contractual duties; breached the contract's
implied warranty of fitness of the design; breached his implied
duty to supervise the project's construction; negligently designed
the building; negligently supervised the facility's construction;
and fraudulently concealed known or suspected design deficiencies,
preventing the Hospital from discovering the cause of those
problems.
3
In March 1989 the Architect moved for summary judgment,
arguing that the claims were barred by the statute of limitations.
The District Court denied the motion, ruling that the action
constituted architectural malpractice and was governed by the
three-year limitations period for general tort actions. The court
found that, although the Hospital was put on inquiry notice more
than three years before it filed the lawsuit, the action was not
time barred because the Hospital made reasonable inquiry of the
Architect and the Architect kept it from knowing the magnitude of
the problems by assuring it that the systems were fine. The court
therefore concluded that the Architect was equitably estopped from
relying on the statute of limitations defense.
Trial proceeded on the merits on May 22, 1989. After the
close of the Hospital's case-in-chief, the Architect moved for a
directed verdict, arguing that the Hospital had not presented
sufficient evidence to support the breach of contract and warranty
claims. He also raised the timeliness issue once again. The court
denied the Architect's statute of limitations defense, reserved
ruling on the contract claim, and granted the Architect a directed
verdict on the warranty issue.
At the close of the evidence, the Architect again moved for
a directed verdict on the statute of limitations defense and the
breach of contract claim. The court denied the motion on the
timeliness issue but this time dismissed the contract claim. The
court also refused to allow the fraud claim to go to the jury.
The negligent design and negligent breach of contract claims
were submitted to the jury. The jury found that the Architect had
not negligently designed the facility but that he had negligently
breached the contract. It awarded the Hospital $1,750,000 in
damages.
Post trial, the Architect moved for judgment notwithstanding
the verdict, raising the timeliness issue for the fourth time. The
Hospital moved for prejudgment interest. Both motions were denied.
The Architect appeals and the Hospital cross-appeals.
I.
Were the Hospital's claims barred by the statute of
limitations?
When determining which statute of limitations applies to a
cause of action, this Court looks to the gravamen of the action
rather than relying on the label given to the claim by the
plaintiff. Erickson v. Croft, 233 Mont. 146, 153, 760 P . 2 d 706,
710 (1988). If the essence of the action is tortious, the tort
statute of limitations applies. Similarly, if the essence of the
action is contractual, the contract statute of limitations applies.
Quitmeyer v. Theroux, 144 Mont. 302, 311, 395 P . 2 d 965, 969 (1964).
In a case that concerns the breach of a professional service
contract, it is oftentimes difficult to determine whether the
claims are strictly tortious or strictly contractual. The rule in
such circumstances is that if the claims are based upon breach of
specific provisions in the contract, the action sounds in contract
and the contract statute of limitations applies. If, however, the
claims are based on a breach of a legal duty imposed by law that
arises out of the performance of the contract, the action sounds
in tort and the tort statute of limitations applies. Billings
Clinic v. Peat Marwick Main & Co., 797 P.2d 899, 908, 47 St.Rep.
1464, 1473-74 (Mont. 1990) .
In the present case, the Hospital based its claims against the
Architect on several theories, including breach of express and
implied contractual terms, breach of warranty, negligent breach of
contract, negligent design, and fraudulent concealment. The
District Court directed a verdict against the Hospital on the
breach of contract, breach of warranty, and fraudulent concealment
allegations. Consequently, the court instructed the jury
exclusively on negligent theories of law and the jury considered
only the negligent design and negligent breach of contract claims,
claims which were, in essence, grounded in the tort of
architectural malpractice. Because no specific statute of
limitations governed architectural malpractice, the general three-
year tort statute of limitations found in § 27-2-204(1), MCA,
controlled the action.
The statute of limitations begins to run when a cause of
action accrues. The term accrual was not defined in Montana by
statute until 1987. Act of April 9, 1987, ch. 441, 5 1, 1987 Mont.
Laws 977. Therefore, at the time the acts complained of in this
case occurred and at the time the lawsuit was filed, accrual was
defined by common law.
6
Generally, at common law, a cause of action grounded in
negligence accrues when the negligent act or omission occurs, if
the plaintiff is immediately and directly injured by the act or
omission. If the plaintiff's injury is consequential, rather than
direct, the action accrues when the injury is sustained. Heckaman
v. Northern Pac. Ry. Co., 93 Mont. 363, 375-76, 20 P.2d 258, 261
(1933). In suits alleging architectural malpractice, the action
accrues either when the design is submitted to and accepted by the
owner or upon substantial completion of the building. See
generally Annot., 90 A.L.R.3d 507, 513-21 (1979).
In order to alleviate the harshness sometimes worked by a
strict application of the statute of limitations, courts have
devised exceptions to the general rules. Thus, this Court has
applied the discovery rule to latent injuries, holding that the
limitations period does not commence until the plaintiff discovers
the injury. Johnson v. St. Patrick's Hospital, 148 Mont. 125, 417
P.2d 469 (1966). Other courts have utilized the continuing
relationship doctrine in cases involving professional malpractice.
Schoenrock v. Tappe, 419 N.W.2d 197 (S.D. 1988) (legal
malpractice); Sharsmith v. Hill, 764 P.2d 667 (Wyo. 1988) (medical
malpractice); Lincoln Grain, Inc. v. Coopers & Lybrand, 338 N.W.2d
594 (Neb. 1983) (accountant malpractice) ; Greene v. Greene, 451
N.Y.S.2d 46 (N.Y. 1982) (legal malpractice); Borgia v. City of New
York, 187 N.E.2d 777 (N.Y. 1962) (medical malpractice).
The continuing relationship doctrine may be used when, during
the course of an ongoing relationship between a professional and
his client, the professional commits a tortious act that injures
the client. The relationship must not be intermittent or sporadic.
Instead, there must be "clear indicia of an ongoing, continuous,
developing, and dependent relationship between [the parties]."
Schoenrock, 419 N.W.2d at 201.
The doctrine suspends the accrual of the cause of action in
order to give the professional an I1opportunity to remedy, avoid or
establish that there was no error or attempt to mitigate damages."
Pittman v. McDowell, Rice & Smith, Chartered, 752 P.2d 711, 716
(Kan. Ct. App. 1988) (quoting Mallen and Levit, Legal Malpractice
§ 391, at 460-61 (2d ed. 1981)). Thus, the cause of action does
not accrue until either the professional relationship ends or, if
a general professional relationship continues between the parties,
the professional ceases to treat or advise the client for the
particular act causing the injury. The continuing treatment must
relate to the same or a related injury that caused the initial
problem. The mere continuity of a general professional
relationship after cessation of treatment for or advice on the
injury caused by the negligent act will not prevent the statute
from running. Schoenrock, 419 N.W.2d at 201.
The New York courts have extended the continuing relationship
doctrine to the area of architectural malpractice. County of
Broome v. Vincent J. Smith, Inc., 358 N.Y.S.2d 998 (N.Y. Sup. Ct.
1974); Board of Educ. v. Thompson Constr. Corp., 488 N.Y.S.2d 880
(N.Y. App. Div. 1985); Greater Johnstown City School Dist. v.
Cataldo & Waters, Architects, P.C., 5 5 1 N.Y.S.2d 1003 (N.Y. App.
Div. 1990).
In County of Broome, an architect contracted to design a
library for the plaintiff. Shortly after construction was
completed, the roof began to leak. The architect thereafter
negotiated with the contractors, who made attempts to remedy the
situation. During this time, the architect communicated regularly
with the plaintiff, assuring it that Ittheresulting roof will equal
the original plans and specifications. Three years later, the
plaintiff filed suit. The architect claimed that the statute of
limitations had run. The court rejected the argument, ruling that
the continuing treatment by the architect after the completion of
the library had lulled the plaintiff into an unfounded assurance
that the problem would be corrected. Under these circumstances,
the statute of limitations did not begin to run until the
professional relationship terminated.
The court in County of Broome noted that, in a malpractice
case, the professional renders advice or services of a highly
technical or specialized nature, outside of the knowledge of the
client. The client has the right to place his confidence and trust
in the professional and depend on the professional's advice if
problems arise during the course of the relationship. The client
should not be forced to unnecessarily disrupt the relationship by
having to consult with a different member of the profession to
ensure that he is receiving competent advice or services. County
of Broome, 358 N.Y.S.2d at 1001-03.
The continuing relationship doctrine prevents the professional
from assuring the client, whether fraudulently or in good faith,
that defects can be fixed or that another party is responsible
while the statute of limitations runs. The professional should not
be able to take advantage of the client's justifiable reliance by
claiming that the statute of limitations bars the cause of action
when the limitations period has expired because of the
professional's repeated assurances that the deficiencies could be
repaired. County of Broome, 358 N.Y.S.2d at 1001-03.
The facts of the present case fit squarely with those giving
rise to the use of the continuing relationship theory. Here, the
Architect was hired to design and oversee the building of the
facility. Shortly after completion, problems with the heating, air
conditioning, and ventilating systems manifested themselves. The
Hospital contacted the Architect, who in turn either worked with
the contractor to resolve the deficiencies or blamed the defects
on the Hospital's maintenance staff and suggested different ways
to operate the systems. Both the Hospital administrator and the
Architect himself testified that, until sometime in 1979, the
Hospital continued to seek and rely upon advice from the Architect
in an attempt to repair the defects.
As applied to this case, the continuing relationship doctrine
relieves the harshness rendered by a strict application of the
limitations period. We therefore adopt the continuing relationship
doctrine in this case, where no specific statute of limitations
governs the tort of architectural malpractice and where, at the
time of the acts giving rise to the action and the time of the
filing of the lawsuit, no statute defined the term accrual. We
note that our adoption of the doctrine here does not overrule our
earlier decision in Schneider v. Leaphart, 228 Mont. 483, 488, 743
P.2d 613, 617 (1987), where we declined to apply the continuing
relationship rule. Schneider concerned a legal malpractice action
that was controlled by a specific statute of limitations
incorporating the discovery rule but not the continuing
relationship rule. As we recognized above, the present action is
governed only by the general tort statute of limitations, which
does not include either the discovery or the continuing
relationship rule within its text.
In conclusion, this lawsuit was not barred by the statute of
limitations. Under the continuing relationship theory, the statute
of limitations, which would normally have started to run upon
substantial completion of the structure in 1975, was suspended
until the Hospital's relationship with the Architect ended in 1979.
The Hospital filed the complaint in 1981, well within the three-
year limitations period.
Was expert testimony on the custom of the architectural
profession properly admitted into evidence?
At trial, the Hospital's expert testified that, by the custom
and practice of the architectural profession, the Architect
undertook an obligation to ascertain that materials and equipment
were furnished and installed in accordance with the facility's
design. He also testified that the Architect violated his duty to
provide a good and safe building adequate to perform the tasks of
a hospital. The Architect argues that this testimony was
improperly admitted.
When confronted with a similar argument, the Eighth Circuit
Court of Appeals held:
[A]n architect whose contractual duties include
supervision of a construction project has the duty to
supervise the project with reasonable diligence and care.
An architect is not a guarantor or an insurer but as a
member of a learned and skilled profession he is under
the duty to exercise the ordinary, reasonable technical
skill, ability and competence that is required of an
architect in a similar situation; and if by reason of a
failure to use due care under the circumstances, a
foreseeable injury results, liability accrues. Whether
the required standard of care was exercised presents a
jury question.
Aetna Ins. Co. v. Hellmuth, Obata & Kassabaum, Inc., 392 F.2d 472,
476-77 (8th Cir. 1968).
We agree with the Eighth Circuit and hold that, in this case,
expert testimony on the custom of the architectural profession
constituted rebuttable proof aimed at assisting the trier of fact
to determine whether the Architect negligently performed the
contract. The testimony aided the jury in establishing whether the
Architect fulfilled the contract with care, skill, reasonable
expediency, and faithfulness according to the standards of his
profession.
The ~rchitectwas obligated under the contract to supervise
construction of the building, utilizing the ordinary care exercised
by members of his profession. The jury was so instructed. The
expert did not testify that an architect is an insurer against
defects in a project. The trial court did not err in allowing the
Hospital's expert to testify on the standard of the industry.
Was the Architect's motion to compel production of documents
reviewed by the Hospital's expert witness in preparation for his
deposition properly denied by the District Court?
The Architect cites Rule 612, M.R.Evid., to support his
contention that, because one of the Hospital's experts took to his
deposition a file containing documents he had reviewed to prepare
for the deposition, the entire file should be made available as a
deposition exhibit and as subject matter for cross-examination.
Rule 612, M.R.Evid., provides:
If a witness uses a writing to refresh his memory for the
purpose of testifying, either
(1) while testifying, or
(2) before testifyinq, if the court in its discretion
determines it is necessary in the interests of justice,
an adverse party is entitled to have the writing produced
at the hearing, to inspect it, to cross-examine the
witness thereon, and to introduce into evidence those
portions which relate to the testimony of the witness.
If it is claimed that the writins contains matters not
related to the subiect matter of the testimony the court
shall examine the writins in camera, excise any portions
not so related, and order delivery of the remainder to
the party entitled thereto. Any portion withheld over
objection shall be preserved and made available to the
appellate court in the event of an appeal. (Emphasis
added. )
The documents the Architect sought to compel were reviewed by
the trial court in camera following the Hospital's claim that two
letters in the file were not related to the subject matter of the
expert's testimony and were in any case protected by the attorney-
client privilege. The court, in compliance with Rule 612,
M.R.Evid., concluded that the letters were protected as attorney
work product and, furthermore, that they were of little relevance
to the expert's testimony and would not lead to further discovery.
The District Court did not abuse its discretion in so ruling.
IV.
Did the District Court properly deny the Hospital's motion for
prejudgment interest?
When the amount of recovery is certain or capable of being
made certain by calculation, a plaintiff shall recover prejudgment
interest. Section 27-1-211, MCA, provides:
Every person who is entitled to recover damages certain
or capable of being made certain by calculation and the
right to recover which is vested in him upon a particular
day is entitled also to recover interest thereon from
that day except during such time as the debtor is
prevented by law or by the act of the creditor from
paying the debt.
This Court has established three criteria that must be met to
be eligible for prejudgment interest under this statute. There
must be an underlying monetary obligation; the amount of recovery
must be certain or capable of being made certain by calculation;
and the right to recover the obligation must vest on a particular
day. Byrne v. Terry, 228 Mont. 387, 390, 741 P.2d 1341, 1343
(1987).
Prejudgment interest is inappropriate when the amount of a
party's damages is uncertain or disputed. In Carriger v.
Ballenger, 192 Mont. 479, 628 P.2d 1106 (1981), the builder failed
to complete construction of the plaintiff's home in a timely
manner. Plaintiff sought interest from the date of injury. We
rejected the request with the following language:
[Tlhe amount of the damages due upon breach was not
clearly ascertainable until determined by the trial
court. his Court has interpreted the statute to mean
that no interest can run until a fixed amount of damaqes
has been arrived at, either by asreement, appraisal, or
judgment. (Emphasis added.)
Carriqer, 192 Mont. at 486, 628 P.2d at 1110.
In this case, much evidence was presented at trial concerning
the Hospital's damages. The jury returned a verdict of $1,750,000.
This amount did not coincide with any amount set out as damages by
the Hospital. Clearly, the right to recover interest vested only
on the date of the jury verdict and not on an earlier particular
date. The trial court did not err in refusing to award the
Hospital prejudgment interest.
Affirmed.
/
Justice
We Concur:
i Justices ,
i
District Judge, sitting in
place of Justice Fred J. Weber