Fremont Indem. Co. v. Industrial Com'n of Arizona, 1
| Decision Date | 14 August 1984 |
| Docket Number | CA-IC,No. 1,1 |
| Citation | 697 P.2d 1100,144 Ariz. 350 |
| Parties | FREMONT INDEMNITY COMPANY and The Estes Company, Petitioners, v. The INDUSTRIAL COMMISSION OF ARIZONA, Respondent, Brian Mingin, Respondent Employee. 3005. |
| Court | Arizona Court of Appeals |
The employer and carrier (petitioners) in this workmen's compensation case request review of the decision of the hearing judge awarding the claimant unscheduled permanent partial disability benefits. The central issue on review is whether the hearing officer erred in giving res judicata effect to an out-of-state disability award for a prior injury, and finding it conclusive proof of a pre-existing impairment, for the purpose of unscheduling the claimant's current scheduled injury. We hold that the judge did err, and therefore we set aside the award.
The claimant sustained a work-related knee injury in Arizona in 1980. His claim for benefits was accepted. The carrier subsequently issued a Notice of Permanent Disability Benefits, finding that the claimant had sustained a 15% permanent partial disability to his leg. The claimant protested the notice. At the hearing, the claimant contended that his injury should be unscheduled rather than scheduled, due to the existence of a previous work-related unscheduled injury which he incurred in New Jersey in 1975. 1 The claimant submitted a judgment from the New Jersey Department of Labor and Industry, Division of Workmen's Compensation, which indicated that he had suffered a back injury which resulted in an 11% permanent partial disability. The hearing officer entered his decision finding that the claimant's Arizona knee injury was scheduled. He reasoned that although the New Jersey judgment was res judicata as to a finding of permanent partial disability under the Full Faith and Credit Clause of the United States Constitution, the claimant failed to meet his burden of proving that the prior disability resulted in lost earning capacity at the time of the 1980 Arizona injury. On the claimant's request for review, the hearing officer modified his decision, finding that the claimant had in fact established the causal relation between his prior back injury and lost earning capacity, and the judge therefore awarded unscheduled permanent partial disability benefits pending a loss of earning capacity determination.
The employer and carrier present two arguments on appeal. First, the hearing judge erred in giving the prior New Jersey judgment res judicata effect under the Full Faith and Credit Clause, and therefore the claimant did not meet his burden of proving a prior impairment. Second, the claimant failed to prove that the New Jersey injury resulted in a loss of earning capacity at the time of the Arizona injury.
Before addressing the parties' arguments, we note that the petitioners' res judicata argument is more properly labeled a collateral estoppel argument. This distinction becomes important in deciding whether or not the petitioners are bound by the New Jersey judgment, and if so, to what extent. The term res judicata encompasses the doctrines of merger, bar and collateral estoppel. The First Restatement of Judgments contains a concise summary of these principles.
If a judgment is rendered in favor of the plaintiff, the cause of action upon which the judgment is based is merged in the judgment, and the plaintiff cannot thereafter maintain an action on the original cause of action. If the judgment is rendered in favor of the defendant on the merits, the original cause of action is barred by the judgment. In either case the original cause of action is extinguished by the judgment no matter what issues were raised and litigated in the action, or even if no issues were raised or litigated and judgment was rendered by default.
On the other hand, where the subsequent action is based upon a different cause of action from that upon which the prior action was based, the effect of the judgment is more limited. The judgment is conclusive between the parties in such a case as to questions actually litigated and determined by the judgment. It is not conclusive as to questions which might have been but were not litigated in the original action. This is the doctrine of collateral estoppel.
The doctrine of collateral estoppel is operative where the second action is between the same persons who were parties to the prior action, whether the second action is brought by the plaintiff or by the defendant in the original action. It is operative whether the judgment in the first action is in favor of the plaintiff or of the defendant.
Restatement of Judgments, (1942) § 68, p. 294. 2 The issue in this case is one of collateral estoppel. The current action to unschedule the Arizona injury is a different cause of action from the first proceeding in which the claimant sought benefits for his New Jersey injury. The claimant seeks to use the prior determination of "disability" offensively to preclude the petitioners in this case from litigating the issue of the existence of a pre-existing impairment.
The employer and carrier argue that they are not bound by the New Jersey judgment under the doctrine of res judicata because they were not parties to that judgment. They also contend that the judgment is not admissible to conclusively prove the matters decided therein, and therefore the claimant could not use the judgment to meet his burden of proving a previous impairment in order to unschedule his Arizona injury. The claimant contends that the New Jersey adjudication was a proceeding in rem, as it fixed his status as "permanently, partially disabled," and therefore it is binding upon the world. He urges us, without citation, to analogize this situation to marriage, which is an in rem proceeding.
As an initial consideration, we don't doubt that to the extent the Full Faith and Credit Clause 3 applies to this case, we should give the New Jersey judgment the same res judicata effect which the judgment would be accorded in New Jersey. See Tarnoff v. Jones, 17 Ariz.App. 240, 497 P.2d 60 (1972). However, the issue in this case is not the enforcement of the New Jersey judgment as between the parties to that judgment; this case is not concerned with Full Faith and Credit. The issue is, in Arizona, what effect does a prior judgment for an unscheduled industrial injury have in a claimant's attempt to unschedule a subsequent scheduled injury?
In order to resolve this question, we must determine whether a workmen's compensation proceeding is in rem or in personam. We hold that a workmen's compensation proceeding is a matter in personam.
A judgment in personam imposes a personal liability or obligation on one person in favor of another. A judgment in rem affects the interests of all persons in designated property.
Mims v. Valley National Bank, 14 Ariz.App. 190, 194, 481 P.2d 876, 880 (1971), quoting Hanson v. Denckla, 357 U.S. 235, 246, n. 12, 78 S.Ct. 1228, 1235, 2 L.Ed.2d 1283 (1958). The New Jersey award for compensation which finds an 11% permanent partial disability is not a judgment which purports to fix the rights of all interested parties in a particular piece of property or res. The purpose of the proceeding is to determine whether or not an employer will be liable for compensating the employee for injuries sustained. See, 1 A. Larson, Workmen's Compensation Law, § 1-1.20, p. 1-5. This concept is exemplified by Art. 18 § 8 of the Arizona Constitution, which states in pertinent part,
The Legislature shall enact a Workmen's Compensation Law ... by which compensation shall be required to be paid to any such workman, in case of his injury ..., by his employer ...
See also, Mutual Benefit Health and Accident Assoc. v. Neale, 43 Ariz. 532, 33 P.2d 604 (1934). An award directing payment of compensation benefits imposes personal liability upon the employer. The status of the claimant as "disabled" or not, although a material issue, is incidental to the purpose of the proceeding.
Having decided that a workmen's compensation proceeding is a matter in personam, the next issue is whether the prior New Jersey award is binding on the petitioners in this case. It is undisputed that the petitioners in this case were not parties to the New Jersey judgment. Non-parties to an in personam proceeding, which culminates in an award holding the New Jersey employer liable for compensation benefits, can not be conclusively bound by such an award. See Hansberry v. Lee, 311 U.S. 32, 61 S.Ct. 115, 85 L.Ed. 22 (1940). In Hansberry, the United States Supreme Court stated:
It is a principle of general application in Anglo-American jurisprudence that one is not bound by judgment in personam in a litigation in which he is not designated as a party or to which he has not been made a party by service of process.
311 U.S. at 40, 61 S.Ct. at 117 (citations omitted).
The Restatement (Second) of Judgments, (1982) § 34, states, in pertinent part:
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(3) A person who is not a party to an action is not bound by or entitled to the benefits of the rules of res judicata, except as stated in §§ 30-32 [judgments in rem] and in this Chapter.
See also, 3 A. Larson, The Law of Workmen's Compensation, § 79.72(a) (). The reasoning behind this rule is that due process requires that a party must have litigated or had an opportunity to litigate the former action in a court of competent jurisdiction before res judicata principles will bind him to that judgment. Lauderdale v. Industrial Commission, 60 Ariz. 443, ...
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Fremont Indem. Co. v. Industrial Com'n of Arizona, 17799-PR
...a workers' compensation award made to respondent (claimant) by the Industrial Commission of Arizona. Fremont Indemnity Co. v. Industrial Commission 144 Ariz. 350, 697 P.2d 1100 [1984]. We have jurisdiction pursuant to Art. 6, § 5(3) of the Arizona Constitution, A.R.S. § 120.24 and Rule 23, ......