Claim for Breach of Contract Barred Under Res Judicata
(May 2011) By Lindsey N. Lanzendorfer, Summer Associate
For more information, contact Paul
Farquharson.
U.K. Constr. & Mgmt., LLC v. Gore,
Case No.: 2824 (Court of Special Appeals of Maryland, May 26, 2011) | View pdf
In U.K. Constr. & Mgmt., LLC v. Gore, the Maryland Court of
Special Appeals found that a property owner’s petition to compel arbitration,
alleging that a construction company breached express and implied warranties of
a contract, was barred under the doctrine of res judicata. Specifically, writing
for the court, Judge Wright determined that the doctrine of res judicata applied
to final arbitration awards and that a previous arbitration finding that a
property owner prevented a construction company from finishing work was
dispositive of the property owner’s current petition alleging the construction
company breached contract warranties.
Appellant U.K. Construction & Management, LLC (“U.K.
Construction”), and Appellee Patricia Gore entered into a home improvement
contract on August 10, 2007 for renovation of a property owned by Gore. The
relevant contract terms provided that Gore was to pay U.K. Construction $202,800
in five (5) scheduled installments; that U.K. Construction was to guarantee
certain materials and workmanship; and that the parties were to settle any and
all disputes through final and binding arbitration.
When the final installment came due, Gore refused to
pay, claiming that several punch list items were deficient. Gore then locked
U.K. Construction out of the property, hired other contractors, did not
cooperate with U.K. Construction for a final inspection of the property by
the City, obtained an occupancy permit on her own, and obtained a mortgage
loan to pay off the construction loan without paying U.K. Construction. U.K.
Construction filed a petition to compel arbitration in circuit court on
March 27, 2008. The arbitrator found in favor of U.K. Construction,
reasoning that Gore’s actions, described above, represented a repudiation of
the contract. The arbitrator further expressed that any extra expenses Gore
incurred were no longer valid claims because she did not provide U.K.
Construction the opportunity to remedy any deficiencies in the work.
Although Gore did not exercise her right to vacate or
modify the award, she filed for petition to compel arbitration in circuit
court on September 2, 2009, alleging U.K. Construction breached express and
implied warranties of the contract. The circuit court not only denied Gore’s
petition, it also granted U.K. Construction’s Motion for Sanctions against
Gore. Gore filed a Motion for Reconsideration, and the circuit court granted
Gore’s petition to compel arbitration without acknowledging the prior
arbitration decision.
Res judicata bars relitigation of a claim if there was
a final judgment entered in previous litigation where the claim was actually
litigated or should have been litigated. In the present case, Judge Wright
preliminarily held that a final award of arbitration is given the same res
judicata effect as a final judgment of a judicial decision as long as the
arbitration proceeding contains the same principles of due process —
affording the opportunity to present evidence and argument — as a judicial
proceeding. The parties in the present case did not allege to have been
denied due process. Thus, to determine if the arbitration in the present
case was a final judgment, Judge Wright employed the “Exxon Test:” (1)
whether the [arbitrator] was acting in judicial capacity; (2) whether the
issue presented to the [present] court was actually litigated before the
[arbitrator]; and (3) whether its resolution was necessary to the
[arbitrator’s] decision.
Gore alleges that U.K. Construction breached the
contract’s warranties. This, however, was previously argued before an
arbitrator. There, the arbitrator found that Gore relieved U.K. Construction
from its warranty obligations. Specifically, the arbitrator determined that
Gore should have pursued allegations of deficiencies in the work under the
warranty clause of the contract because U.K. Construction was entitled to an
opportunity to fulfill its warranty obligations. Instead, Gore changed the
locks and completed the alleged deficient work herself. Therefore, she
repudiated the contract. Judge Wright also determined that, in making the
final award in favor of U.K. Construction, it was necessary for the
arbitrator to determine that Gore had relieved U.K. Construction of its
warranties and repudiated the contract. Because Gore’s claim that U.K.
Construction breached the contract’s warranties was previously decided, her
claim was barred by res judicata. As such, Judge Wright reversed the circuit
court’s decision to grant Gore’s petition to compel arbitration.
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