Opinion ID: 1060160
Heading Depth: 3
Heading Rank: 2

Heading: Application of Res Judicata to Breach of Warranty Claim

Text: The original arbitration demand filed by the 49ers described the dispute as a breach of contract. The alleged breach, as explained by the 49ers' arbitration counsel, consisted of specific design and construction defects. The 49ers assert that the second demand claiming breach of warranty as a result of the damaged bulkhead was not identical to the first, and could not have been, because the bulkhead had not failed at the time of the first demand. Relying on Allstar Towing, Inc. v. City of Alexandria, 231 Va. 421, 344 S.E.2d 903 (1986), the 49ers argue that, for res judicata purposes, a cause of action is an assertion of particular legal rights which have arisen out of a definable factual transaction. Id. at 425, 344 S.E.2d at 906. Thus, they assert, since the event giving rise to the cause of action, i.e., the partial collapse of the bulkhead, had not occurred at the time of the first arbitration, the claims could not have been the same. The 49ers misapply Allstar Towing. In that case the city of Alexandria rejected the towing company's initial bid to provide services because the company was not a registered corporation and, therefore, was ineligible for award of the contract. The company unsuccessfully challenged that decision. Id. at 422-23, 344 S.E.2d at 904-05. Thereafter, the company submitted a bid in response to the city's second invitation to bid. The city awarded the contract to another towing enterprise. The company filed a second protest asserting that it met the bid requirements, but the company receiving the contract did not. The Court in Allstar Towing held that the company's second action was not subject to a res judicata bar because the legal rights asserted by the company arose from the second transaction. The second action was not related to the first transaction in which the company's bid was rejected because it was an unresponsive bidder. Id. In this case, the legal rights asserted by the 49ers in the first arbitration action were based on its contractual right to construction of a bulkhead free of design or construction defects. The storm damage to the bulkhead after the first arbitration did not increase or alter the contractual rights the 49ers acquired at the time the contract was executed. Furthermore, no plans were altered and no work was performed on the bulkhead between the filing of the first and second demands for arbitration. The damages suffered as a result of the alleged defects may have increased when the bulkhead collapsed, but any defects in construction and design which existed at the time of the first arbitration had not changed at the time of the second demand for arbitration. Furthermore, even though the first demand described only specific defects, the doctrine of res judicata applies to all claims which could have been brought, thereby preventing a party from splitting his cause of action. Flora, Flora & Montague, Inc. v. Saunders, 235 Va. 306, 310-11, 367 S.E.2d 493, 495 (1988); Bates, 214 Va. at 670-71, 202 S.E.2d at 920-21. Here, the 49ers had engaged an engineer to evaluate the bulkhead prior to filing its first demand for arbitration. Their engineer reported that the design and construction of the bulkhead was deficient. In the first arbitration, the 49ers chose to limit the items of alleged deficient construction and design. Having made that choice, they are not entitled to bring forward additional items at a later date, particularly when, as set out above, there had been no further construction or design activity on the bulkhead between the two arbitration demands. The claim for breach of warranty asserted by the 49ers in their second arbitration demand was no different than the claim for breach of contract asserted in the first arbitration demand. Labeling the claim a breach of warranty rather than a breach of contract does not alter the nature of the claim. That label is a distinction without a difference. As pointed out by WMC, a breach of the warranty is a breach of the construction contract. Werner Sabo, Legal Guide to AIA Documents § 418, at 199 (3rd ed. 1989). The record demonstrates that the first arbitration was between the 49ers and WMC, and, as a result of that proceeding, a valid final arbitration award was entered rejecting the 49ers' claim for breach of contract due to defective design and construction of the bulkhead. Thus, we conclude that WMC met its burden of proof to sustain its plea of res judicata. The 49ers' demand for arbitration of their breach of warranty claim is barred by the first arbitration award under principles of res judicata.