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Claim for Breach of Contract Barred Under Res Judicata
U.K. Constr. & Mgmt., LLC v. Gore
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 The arbitrator further expressed that any extra expenses Gore incurred were no longer valid claims because she did not provide U.K. Construction the opportunity to remedy any deficiencies in the work.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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