Thibodeau v. Crum

• Decision Date: 19 February 1992
• Docket Number: No. H008203,H008203
• Citation: 6 Cal.Rptr.2d 27,4 Cal.App.4th 749
• Court: California Court of Appeals Court of Appeals
• Parties: Peter THIBODEAU, et al., Plaintiffs and Respondents, v. Michael CRUM, Defendant and Appellant.

Page 27

6 Cal.Rptr.2d 27

4 Cal.App.4th 749

Peter THIBODEAU, et al., Plaintiffs and Respondents, v. Michael CRUM, Defendant and Appellant.

No. H008203.

Court of Appeal, Sixth District, California.

Feb. 19, 1992.

Edward W. Newman, Newman & Marcus, Capitola, for plaintiffs and respondents.

Raymond E. Frost, Raymond E. Frost & Associates, Fremont, for defendant and appellant.

CAPACCIOLI, Acting Presiding Justice.

After arbitrating numerous construction deficiencies with the general contractor on their single-family home, plaintiffs asserted contract and tort claims against the subcontractor who constructed the driveway. Defendant subcontractor argued that the action was barred by application of the doctrine of res judicata, based upon the prior arbitration award. The court below rejected the defense of res judicata, conducted a trial, and entered judgment for plaintiffs.

On defendant's appeal, we conclude that the action is indeed barred by res judicata and reverse.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

In August 1986, Peter and Judy Thibodeau entered into a contract with Paul Eller & Associates for the construction of a single-family home in Aptos. Assisted by several subcontractors, Eller began construction in October 1986. The project was completed beyond the contract deadline and passed county and fire department inspections in December 1987. In February 1988, the Thibodeaus moved in.

The Thibodeaus complained of numerous construction deficiencies. They initiated arbitration proceedings against Eller pursuant to the construction contract which, in the words of the arbitrator, provided that "[d]isputes arising out of the construction project were to be resolved by arbitration...." After a three-day hearing in April 1989, the arbitrator awarded Eller the original contract price, plus amounts for changes made by the Thibodeaus and other allowance items. The arbitrator awarded the Thibodeaus certain credits, including contract payments already made, as well as damages for poor workmanship and unexcused delay in the project. After set-offs, the Thibodeaus owed Eller $20,660. Because the construction contract provided for an award of attorney fees to the prevailing party and because the arbitrator believed he had no discretion in the matter, the arbitrator also awarded Eller $13,275 in attorney fees.

In August 1989, the Thibodeaus filed in superior court a petition to correct the arbitration award (see Code Civ.Proc., § 1286.6), contending the arbitrator had failed to consider outstanding mechanics liens and that, after set-offs, the Thibodeaus, not Eller, were the prevailing parties. (Thibodeau v. Eller & Associates (Super. Co. Santa Cruz County, 1989, No. 111065).) ¹ During the pendency of the Thibodeaus' petition to correct, Eller filed a Chapter 11 bankruptcy petition in federal court (see 11 U.S.C. § 1101 et seq.). Due to the automatic stay in bankruptcy (see 11 U.S.C. § 362), the superior court has never ruled on the petition to correct, and neither the Thibodeaus nor Eller has ever moved to confirm the arbitration award (see Code Civ.Proc., §§ 1287.4, 1288).

Eller subcontracted the cement work on the Thibodeau project to Michael Crum. The cement work included construction of a 5,200 square foot circular driveway. In December 1987, shortly after completion of the driveway, the Thibodeaus sent a letter to Crum and Eller complaining that radiating cracks were appearing in the driveway and that, in some areas, chunks had broken off. In the arbitration with Eller, the Thibodeaus presented an estimate for repair of the chunks. The arbitrator inspected the Thibodeau project, including the circular driveway. Under the heading "Owner's Repairs of Poor Workmanship," the arbitrator awarded the Thibodeaus $2,261 for "Concrete driveway repair." Under the heading "Contractor's Claims for Extras," the arbitrator refused to award the contractor additional payment for "Wider driveway," "Wider parking lot," and "Add driveway base rock."

Following the Thibodeau/Eller arbitration, the radiating cracks increased and worsened. Six to eight months after the arbitration, the Thibodeaus hired a concrete expert who concluded that the driveway had not been properly constructed and that repair would cost $26,194. When Crum was unresponsive to the Thibodeaus' complaints, they filed the instant action against Crum in superior court in September 1989.

Among his affirmative defenses, Crum alleged: "Plaintiffs are estoppel [sic ] from asserting the allegedly wrongful acts described in their Complaint." Crum next filed a "Motion for judgment on the pleadings/exclusion of evidence/judgment under CCP § 631.8." Crum argued that the Thibodeaus were estopped from litigating the driveway issue because the matter had already been litigated in the Thibodeau/Eller arbitration.

The trial court denied Crum's motion and conducted a one-day court trial. The court entered judgment for the Thibodeaus in the amount of $23,933. The court relied upon the testimony of the Thibodeaus' expert that repair of the driveway would cost $26,194. The court then deducted $2,261, the amount already awarded by the arbitrator.

Crum appeals.

THE PARTIES' CONTENTIONS

Crum argues on appeal that the Thibodeaus' suit regarding deficiencies in construction of the driveway is barred by application of the doctrine of res judicata. He contends the Thibodeau/Eller arbitration and the arbitrator's award encompassed the driveway issue. Crum argues alternatively that, if there is some ambiguity as to what is encompassed in the arbitration award, the trial court erred in "declining Crum's offer to have the Arbitrator testify at the time of trial that the entire driveway had been considered as part of the Arbitration Award."

The Thibodeaus maintain (1) that Crum did not adequately plead res judicata as an affirmative defense, (2) that an arbitration award cannot have a res judicata effect when it is unconfirmed and subject to a pending petition to correct, (3) that res judicata does not apply anyway because the arbitration did not concern the radiating cracks in the driveway, and (4) that the trial court did not refuse to hear testimony by the arbitrator.

DISCUSSION

"The doctrine of res judicata precludes parties or their privies from relitigating a cause of action that has been finally determined by a court of competent jurisdiction. Any issue necessarily decided in such litigation is conclusively determined as to the parties or their privies if it is involved in a subsequent lawsuit on a different cause of action." (Bernhard v. Bank of America (1942) 19 Cal.2d 807, 810, 122 P.2d 892.)

"[U]nder what circumstances is a matter to be deemed decided by the prior judgment? Obviously, if it is actually raised by proper pleadings and treated as an issue in the cause, it is conclusively determined by the first judgment. But the rule goes further. If the matter was within the scope of the action, related to the subject-matter and relevant to the issues, so that it could have been raised, the judgment is conclusive on it despite the fact that it was not in fact expressly pleaded or otherwise urged.

The reason for this is manifest. A party cannot by negligence or design withhold issues and litigate them in consecutive actions. Hence the rule is that the prior judgment is res judicata on matters which were raised or could have been raised, on matters litigated or litigable." (Sutphin v. Speik (1940) 15 Cal.2d 195, 202, 99 P.2d 652; see also Federated Department Stores, Inc. v. Moitie (1981) 452 U.S. 394, 398-399, 101 S.Ct. 2424, 2427-2428, 69 L.Ed.2d 103; California Coastal Com. v. Superior Court (1989) 210 Cal.App.3d 1488, 1499, 258 Cal.Rptr. 567; Ruby v. Debovsky (1954) 126 Cal.App.2d 21, 25, 271 P.2d 983 ["[T]he law will not allow litigation to be conducted in a piecemeal fashion."]; Code Civ.Proc., §§ 1908, subd. (a)(2), 1911; 7 Witkin, Cal.Procedure (3d ed. 1985) Judgment, § 188 et seq., p. 621.)

The doctrine of res judicata applies not only to judicial proceedings but also to arbitration proceedings. (Lehto v. Underground Constr. Co. (1977) 69 Cal.App.3d 933, 939, 138 Cal.Rptr. 419.) And while it is well established that the "arbitrator derives his power solely from the arbitration agreement and has no power to decide issues not submitted" (Ray Wilson Co. v. Anaheim Memorial Hospital Assn. (1985) 166 Cal.App.3d 1081, 1091-1092, 213 Cal.Rptr. 62; see also Code Civ.Proc., § 1286.2, subd. (d)), case law also indicates that arbitrating parties are obliged, in the manner of Sutphin, to place before their arbitrator all matters within the scope of the arbitration, related to the subject matter, and relevant to the issues (see generally Corral v. State Farm Mutual Auto. Ins. Co. (1979) 92 Cal.App.3d 1004, 1014, 155 Cal.Rptr. 342; Downer Corp. v. Union Paving Co. (1959) 172 Cal.App.2d 126, 131, 342 P.2d 64 (dis. opn. of Van Dyke, P.J.); see also Straus v. North Hollywood Hosp., Inc. (1957) 150 Cal.App.2d 306, 310, 309 P.2d 541 [presumption that, when parties submit dispute to arbitration, they intend all matters in dispute to be decided] ).

Judy Thibodeau testified at trial that radiating cracks began appearing "immediately after the driveway was poured" in October 1987. In December 1987, the Thibodeaus sent Crum and Eller a letter complaining "that there were numerous radiating cracks in the driveway...." That was more than one year before the arbitration hearing but, in Judy Thibodeau's words, the Thibodeaus did not seek damages for the cracks because "the arbitration was such a large thing" and they focused on more pressing problems. They obtained a pre-arbitration bid to repair the chunks that had broken off the driveway but did not obtain a bid to repair the cracks. Yet when counsel inquired, "So the cracks weren't that bad at that point?," Judy Thibodeau insisted, "They were. They had gotten worse. They had gotten progressively worse."

Judy Thibodeau...