5th AND LA v. Western Waterproofing Co., Inc.

Filed 1/19/23
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
5TH AND LA, B313679
Plaintiff and Appellant, Los Angeles County
Super. Ct. No. 20STCV02781
v.
WESTERN WATERPROOFING
COMPANY, INC.,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of
Los Angeles County, Armen Tamzarian, Judge. Affirmed.
Law Offices of Tabone and Derek L. Tabone for Plaintiff
and Appellant.
Thomas | Lucas and Timothy D. Lucas for Defendant and
Respondent.
____________________
This is a second lawsuit about an increasingly leaky roof.
After a jury found the company that coated the roof was not at
fault, the building owner sued a second time when more leaks
appeared. The trial court rightly found claim preclusion barred
the new lawsuit and granted summary judgment for the
company. The owner brought—or should have brought—all
claims about the company’s installation in its first suit. The
owner neither alleged nor presented evidence of a new or latent
way the company’s work could have harmed the owner.
Therefore the first judgment bars this second suit. We affirm.
I
We have two actors: a building owner and a roofing
company. The building owner is 5th AND LA. The roofing
company is Western Waterproofing Company, Inc. The owner
operates a building in Los Angeles with retail space on the
ground floor and office space, storage units, and parking on the
roof. In 2012, the owner contracted with the company to remove
the roof parking surface and recoat it. In their briefs, the owner
calls this “roof replacement,” while the company calls it a “roof
coating system.” We use the shorter term “coating.”
The parties entered a contract detailing the coating process
in about a page of text. This text includes the statement that
“[t]his includes a 5 year warranty for materials and labor tha[t]
can be renewed at the end of 5 years.” Next is a schedule for the
work and the cost: $285,000.
After that is a section called “Alternate Cost #1 - 2017.” It
states, in part:
“This includes a 5 and 5 warranty from the manufacturer.
This project will be reviewed with the owner/Sika [the
manufacturer of the coating material] and Western in 5 years. If
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in 5 years there is a requirement to re top coat the deck from
wear and tear the following would be the cost. This would be a
requirement to extend the warranty another 5 years. . . . Total
Cost . . . . $37,000.”
We call the just-quoted paragraph the renewal paragraph.
Other provisions not pertinent to this dispute follow this
paragraph.
The company finished work in July 2012. Within a month,
the owner saw problems and concluded the company improperly
installed the coating. By July 2013, the owner believed the entire
coating needed to be removed and replaced.
In October 2013, the owner filed the first suit on theories of
breach of an express warranty against product failure and
breaches of implied warranties. The owner alleged the entire
coating was beginning to fail and demanded the company remove
and replace it all rather than merely undertake a leak-by-leak
repair.
The case went to trial in 2015. By then the roof had about
10 leaks. The company admitted to errors in its work, such as
improper ordering and timing of material applications. The
company argued, though, that the owner had not shown these
errors caused the leaks.
The owner lost at trial. The jury found: (1) the company
provided a warranty for its work, (2) the coating did not perform
as promised within the warranty period, (3) the owner took
reasonable steps to notify the company that the coating did not
perform as promised, and (4) the owner was harmed, but (5) the
failure of the coating to perform as promised was not a
substantial factor in causing the owner’s harm. The special
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verdict form had four more questions that the jury, following the
form’s instructions, did not answer.
The owner appealed and argued the special verdict was
inconsistent and unsupported. The Court of Appeal affirmed,
finding the jury could have concluded “the incorrect installation .
. . was not so faulty as to allow water to penetrate, and any leaks
came from some other source.” (5th AND LA v. Western
Waterproofing Company, Inc. (Mar. 29, 2017, B266363) [nonpub.
opn.] [p. 7].) The court found sufficient evidence for this result
because (1) the owner’s expert never explicitly said the issues
with the coating caused the leaks, and (2) the company’s expert
identified possible sources of the leaks outside the company’s
work, such as “gaps in door frames and cracks in the masonry
and stucco.” (Id. [p. 9].)
After the March 2017 appellate opinion, the owner wrote to
the company in May 2017 to “invok[e]” the option to renew the
warranty. The company “will need to inspect the deck” and the
owner would pay up to $37,000 “for any required work.” The
original five-year warranty expired in July 2017.
In August 2017, the company responded to the owner’s
letter and said claim preclusion barred the owner’s claims. The
company did not inspect the roof.
In January 2020, the owner filed this second suit with the
following allegations. The roof now had about 50 leaks “all due to
failures of labor (workmanship) by [the company].” The company
“refused to inspect the roof or honor the extension of the
warranty.” The company breached the contract’s express
warranty by “refus[ing] to . . . honor its warranty and repair
and/or replace the roof to stop the leaks in the subject roof, and
prevent further leaks.” The owner sought damages of $300,000,
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did not separate its complaint into distinct causes of action, and
did not label its claim.
The company moved for summary judgment on two
grounds: (1) claim preclusion, or (2) the warranty had expired
and had not been renewed. The court granted summary
judgment on both grounds.
The court found claim preclusion applied because the owner
was suing on the same primary right: “for [the company] to
honor its warranty for the work it did in 2012.”
The court interpreted the contract to extend the warranty
only if the coating required no new work in 2017 or if the roof
needed a new top coat due to wear and tear and the owner paid
$37,000. The court found neither option applied.
The owner appealed the summary judgment ruling.
II
The summary judgment was correct. We independently
review this decision by applying the familiar standard. (See
Bacoka v. Best Buy Stores, L.P. (2021) 71 Cal.App.5th 126, 132.)
We proceed, first, by interpreting the scope of the warranty, and
second, by addressing claim preclusion.
A
The warranty covers harm from the company’s materials
and labor but not damage arising from other causes.
We interpret contracts to give effect to the parties’ mutual
intent. (Civ. Code, § 1636.) Contractual language governs so
long as it is clear, explicit, and not absurd. (Civ. Code, § 1638.)
The text shows the warranty covers only the company’s
materials and labor and does not apply to leaks from other
causes. The contract, with our emphasis, has a “5 year warranty
for materials and labor tha[t] can be renewed at the end of 5
5
years.” The warranty covers what it says it covers: materials
and labor. Successful claims on this warranty must be about
defects caused by the company’s materials or labor.
The owner incorrectly interprets the warranty to guarantee
there are no leaks from any cause. The owner founds its claim
preclusion arguments on this misinterpretation. We describe the
owner’s stance and identify its error.
The owner has said the cause of leaks is immaterial to its
second lawsuit. Its response to the company’s separate statement
repeatedly stated, with our emphasis, that the lawsuit was
“focused on breach of the express 10 year warranty-that the roof
is not watertight, whatever the cause, not that [the company] did
a poor installation job.” Its opening brief maintained the
warranty requires the company to keep the roof “watertight” for
ten years.
These interpretations are incorrect because they fail to
honor the warranty’s limiting words about “materials and labor.”
Under this wording, the company is not an insurer. It is not
obligated to keep the roof watertight no matter the cause.
In its reply brief, the owner finally concedes the warranty
does indeed relate to the company’s work. With our emphasis,
the owner’s reply brief says the company “warranted its materials
and workmanship for ten years and there would be no leaks due
to its workmanship or failure of materials.”
To prove the company breached the warranty, then, the
owner must prove harm due to the company’s materials or labor.
The owner cites Dell, Inc. v. Superior Court (2008) 159
Cal.App.4th 911, a case that does not affect the interpretation of
this warranty. The owner quotes a definition from that case: “An
express warranty is both a representation of fitness and an
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agreement to repair.” (Id. at p. 927.) That definition is not
pertinent to interpreting the words “materials and labor.”
The parties dispute whether the warranty was renewed,
but that issue is not decisive. The company prevails on claim
preclusion grounds no matter how we might decide the renewal
issue, so we assume without deciding that the warranty was
renewed and lasts 10 years.
The owner argues that the warranty’s requirement that the
company review the project after five years for wear and tear is a
reason the warranty extended to 10 years. The owner does not
raise this point as an independent source of relief, so we do not
consider the issue. The key here is not the duration of the
warranty but its content, and the relationship of the first
judgment to the second suit.
The company cites testimony from the owner’s manager
about how the manager interpreted the renewal paragraph. The
owner says this argument violates the parol evidence rule. We do
not decide this issue because this testimony is not relevant to our
analysis of the warranty’s scope.
In sum, the warranty covered materials and labor only,
which was the issue in the first suit, as the next section
demonstrates.
B
Claim preclusion bars the owner’s second suit.
Claim preclusion bars a new lawsuit if the first case had (1)
the same cause of action; (2) between the same parties, or parties
in privity; and (3) a final judgment on the merits. (DKN
Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 824–825 (DKN).)
Following our Supreme Court’s lead, we refer to this doctrine as
“claim preclusion,” not “res judicata.” (Id. at pp. 823–824.) The
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doctrine promotes judicial economy by preventing claim splitting.
It requires all claims based on the same cause of action, which
were or could have been raised, to be decided in a single suit.
(Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73,
92–93.)
The owner concedes elements two and three, so this case is
about only the first element, which asks whether the second suit
is about the same cause of action. But how does one determine
this issue?
This issue can be knotty.
Reigning doctrine tells us that, in applying this first
element, courts must discern whether the lawsuits involve the
same “primary right”—the plaintiff’s right to be free from the
injury suffered—and breach of duty. We examine the claimed
harm and determine whether it is the same in both actions. (See
DNK, supra, 61 Cal.4th at p. 818 & fn. 1.)
The case Thibodeau v. Crum (1992) 4 Cal.App.4th 749(Thibodeau) is instructive as it, like this case, involves a
worsening condition following a new physical installation. In
Thibodeau, homeowners arbitrated claims about construction
deficiencies with a general contractor, and then filed a second
action against a subcontractor who installed their driveway. (Id.
at pp. 752–754.) Before arbitration, the driveway had radiating
cracks and broken chunks. During arbitration, the homeowners
presented an estimate to fix the broken chunks and the arbitrator
awarded money for “ ‘Concrete driveway repair.’ ” (Id. at p. 753.)
The radiating cracks worsened and the homeowners sued the
subcontractor. (Id. at pp. 753–754.) The Court of Appeal
concluded claim preclusion applied because the homeowners
included or should have included the issue of radiating cracks in
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the arbitration. (Id. at p. 756.) The worsening of the cracks did
not change the analysis. (Id. at p. 757.) There were “no
successive breaches.” (Id. at p. 758.) The court wrote, “The
Thibodeaus were aware of the cracks and complained about them
long before the arbitration. And the driveway continued to
deteriorate during the pendency of the arbitration. The driveway
was, in fact, within the scope of the arbitration; it is mentioned
several times in the arbitration award. We can conceive of no
logical reason why the arbitration should encompass the chunks
but not the cracks.” (Id. at p. 756, italics added.) The first suit—
the arbitration—thus barred the second.
Here, the claimed harm is the same because both lawsuits
are about the same primary right: the owner’s right to be free of
harm from the company’s materials or labor. The first suit found
the company’s installation did not harm the owner. The company
has not performed new work since that single installation. There
is no new breach. The owner litigated problems with the
company’s workmanship in the first suit, which resolved the
issue.
Following Thibodeau, changed conditions or new facts are
not, by themselves, enough. New leaks are pertinent only if the
owner asserts they are from a cause the owner did not know about
and could not have known about in its first lawsuit. The
complaint does not make this allegation. The opposition to
summary judgment does not mention some new or latent cause.
“We can conceive of no logical reason” why the first suit
should encompass the first leaks but not the later ones.
(Thibodeau, supra, 4 Cal.App.4th at p. 756.) That is, whatever
physical cause accounted for the first leaks apparently is still at
work, but the first suit settled the liability for that physical
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cause. The second suit simply tried to relitigate a resolution the
owner disliked and would prefer to escape. Claim preclusion bars
this repetitive attack on finality.
Indeed, the owner has disclaimed the need to demonstrate
a new or latent cause. As we have recounted, the owner believed
the company was responsible for leaks, “whatever the cause.”
The owner asserted it could sue for each leak, “even if the cause
of all of the leaks is the overall poor job done by [the company] in
installation in 2012.” That is incorrect. The second suit is barred
because it is about the same allegedly poor installation the owner
litigated in its first suit.
The owner cites cases about changed conditions and facts,
but none involves a worsening condition of the same physical
installation.
Neil Norman, Ltd. v. William Kasper & Co. (1983) 149
Cal.App.3d 942 (Neil Norman) was a case about the timing of two
different shipments. In Neil Norman, the subject of the first
lawsuit was a manufacturer’s late shipments and defects in one
lot of wool sweaters. Claim preclusion did not bar a later suit
about defects in a lot of acrylic sweaters the plaintiff received
only after it dismissed the first lawsuit. (Id. at pp. 946–948.) We
distinguish Neil Norman just as the Thibodeau opinion did: Neil
Norman “could not have known of defects in the acrylic sweaters
when he filed the first suit and . . . still did not know of such
defects when he dismissed the first suit with prejudice. This
situation is quite different from the case at hand, in which the
[owner] knew of the [leaks], watched them worsen, and
complained about them long before the [first suit].” (Thibodeau,
supra, 4 Cal.App.4th at p. 757; see Neil Norman, supra, 149
Cal.App.3d at p. 947.) The second and newly-arrived defective lot
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in Neil Norman was a new cause of action and a different breach.
This case, however, is about the same roof, the same job, and the
same type of defect. Neil Norman’s logic does not apply.
The case Allied Fire Protection v. Diede Construction, Inc.
(2005) 127 Cal.App.4th 150, 153 is distinguishable because it
involved two different claims: one contractual, one for fraud.
The defendant’s fraud caused the plaintiff not to discover facts to
support its second claim until after the plaintiff filed the first
lawsuit. (Id. at p. 157.) There is nothing like that here.
To this point, our analysis has followed California’s
reigning doctrine. Our “long-standing approach to res judicata”
is the “primary right” theory. (Mycogen Corp. v. Monsanto Co.
(2002) 28 Cal.4th 888, 904, 909 & fn. 13 (Mycogen).)
The owner, however, asks us to reject this primary rights
approach and invites us to analyze this case using the
transactional approach of the Restatement Second of Judgments.
We accept the owner’s invitation because California courts
routinely turn to the Restatement Second of Judgments for
guidance. (E.g., DKN, supra, 61 Cal.4th at pp. 822, 828–829.)
The Supreme Court in Mycogen wrote: “Amici curiae urge this
court to abandon the primary right theory and adopt the
transactional approach of the Restatement Second of Judgments.
As the result in this case would be the same under either theory,
we decline to reconsider our long-standing approach to res
judicata.” (Mycogen, supra, 28 Cal.4th at p. 909, fn. 13.) This
statement implies the Supreme Court indeed had analyzed the
case under the transactional approach and had determined this
second path led to the same destination. We follow this lead to
see whether the transactional approach is a useful complement to
the historic and governing primary rights approach.
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What is the “the transactional approach of the Restatement
Second of Judgments”? (Mycogen, supra, 28 Cal.4th at p. 909, fn.
13.) For a case like this one, the following Restatement Second
rules apply.
“A valid and final personal judgment rendered in favor of
the defendant bars another action by the plaintiff on the same
claim.” (Rest.2d Judgments, § 19.)
The decisive rules here are these: “(1) When a valid and
final judgment rendered in an action extinguishes the plaintiff's
claim . . . , the claim extinguished includes all rights of the
plaintiff to remedies against the defendant with respect to all or
any part of the transaction, or series of connected transactions,
out of which the action arose. [¶] (2) What factual grouping
constitutes a ‘transaction’, and what groupings constitute a
‘series’, are to be determined pragmatically, giving weight to such
considerations as whether the facts are related in time, space,
origin, or motivation, whether they form a convenient trial unit,
and whether their treatment as a unit conforms to the parties’
expectations or business understanding or usage.” (Rest.2d
Judgments, § 24, italics added.)
“A mere shift in the evidence offered to support a ground
held unproved in a prior action will not suffice to make a new
claim avoiding the preclusive effect of the judgment.” (Rest.2d
Judgments, § 25, com. b, italics added.)
Analysis under the Restatement Second of Judgments
supports affirmance. The “transaction” here was the contract
about the roof. The owner does not propose some alternative
definition of the “transaction.” The owner’s argument hinges on
the new leaks, which is a “mere shift in the evidence.” (Rest.2d
Judgments, § 25, com. b.) Alone, this shift does not save this case
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from claim preclusion. The owner does not assert some different
and previously undiscovered physical cause as the reason for the
new leaks. Under the transactional approach, then, the result is
the same as the primary rights approach: the owner loses.
Our Supreme Court has written “the primary right theory
is notoriously uncertain in application. ‘Despite the flat
acceptance of the . . . theory . . . by California decisions, the
meaning of ‘cause of action’ remains elusive and subject to
frequent dispute and misconception.’ ” (Baral v. Schnitt (2016) 1
Cal.5th 376, 395 [quoting 4 Witkin, Cal. Procedure (5th ed. 2008)
Pleading, § 35, p. 100]; see also Axelrad, The Primary Rights
Theory of Claim Preclusion, L.A. Daily J. (Dec. 1, 2022) p. 5 col.
4–6 [referring to the “elastic quality of the primary rights theory”
and citing authorities].)
These comments echo observations in the Restatement
Second of Judgments. (See Rest.2d Judgments, § 24, com. a
[“There was difficulty in knowing which rights were primary and
what was their extent . . . .”].)
The esteemed Judge Curtis Karnow pointedly has
developed this theme. His trenchant and broad-gauged attack on
the unpredictability and incoherence of the primary rights theory
concludes “no one really knows what it means in practice.”
(Karnow, Primary Rights (2018) 28 S. Cal. Interdisc. L.J. 45, 46.)
Karnow traces the primary rights theory to its root, identifies its
central weaknesses, and catalogs its persistent and severe critics,
from Holmes to contemporary scholars. (Id. at p. 51 & pp. 47–
49.) Karnow muses the “cracks perhaps presag[e] its demise.”
(Id. at p. 46.)
Any demise of Supreme Court law may be announced, of
course, only by the Supreme Court. Lower courts may simply
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follow our Supreme Court’s practice of using the Restatement
Second’s transactional method as a useful complement to check
results from the reigning primary rights theory. This
complementary analysis buttresses the conclusion that the first
judgment bars this second suit.
Because the company wins on claim preclusion, we do not
address its other arguments for affirmance.
DISPOSITION
The judgment is affirmed. We award costs to Western
Waterproofing Company, Inc.
WILEY, J.
We concur:
STRATTON, P. J.
HARUTUNIAN, J.*
*Judge of the San Diego Superior Court, assigned by the Chief
Justice pursuant to article VI, section 6 of the California
Constitution.
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