Plaintiff assignee sought review of a judgment of the Superior Court of Los Angeles County (California), which determined that the assignee's breach of contract action against defendant assignor was barred by res judicata.

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The assignor's contract to construct four bungalows was assigned to the assignee. The assignee completely constructed one bungalow, partially constructed another bungalow, and ceased further work under the contract because the assignor failed to make the payments that were required by the contract. The assignee brought a first action to recover the profits that he would have made on the two bungalows and for the depreciation in value of lumber and building materials. Before the first action was tried, the assignee brought another action to foreclose a mechanic's lien for the reasonable value of the labor performed and materials that were furnished in the construction of the same two bungalows. The first action resulted in a verdict for the assignor. The court reversed the judgment of the superior court that barred the assignee's second action on the basis of res judicata. The court held that the first action for lost profits did not bar the assignee's second action for the amounts due for his work and materials. Pursuant to Cal. Civ. Proc. Code § 1908(2), the effect of the first judgment was conclusive only in respect to the matters that were directly adjudged.

Outcome

The court reversed the judgment of the superior court that determined that the assignee's breach of contract action against the assignor was barred by res judicata.