Phelan v. Lee Blaine Enterprises

• Decision Date: 28 April 1986
• Docket Number: No. 85-290,85-290
• Citation: 716 P.2d 601,220 Mont. 296
• Parties: Anna Marie PHELAN, Claimant and Appellant, v. LEE BLAINE ENTERPRISES, Employer, and St. Paul Mercury Insurance Company, Defendant and Respondent.
• Court: Montana Supreme Court

Page 601

716 P.2d 601

220 Mont. 296

Anna Marie PHELAN, Claimant and Appellant, v. LEE BLAINE ENTERPRISES, Employer and St. Paul Mercury Insurance Company, Defendant and Respondent.

No. 85-290.

Supreme Court of Montana.

Submitted on Briefs Oct. 31, 1985.

Decided Feb. 27, 1986.

Rehearing Denied April 28, 1986.

Keefer, Roybal, Hanson, Stacey & Jarussi, Gene R. Jarussi, Billings, for claimant and appellant.

Lucas & Monaghan, Thomas Monaghan, Miles City, for defendant and respondent.

HARRISON, Justice.

The claimant, Anna Phelan, a twenty-four year old female, filed a Petition for Hearing before the Workers' Compensation Court asking the court to set aside a final settlement entered into August 1981 on the grounds that the parties to the settlement were suffering from a mutual mistake of fact. The court barred claimant's petition as res judicata and this appeal followed.

We reverse the judgement of the Workers' Compensation Court barring claimant's petition, and remand this matter to the court with directions to hear the petition on its merits.

The present action arises out of a case which was previously before the Workers' Compensation Court. The prior case was entitled Phelan v. Big Bear Stores, Inc. et. al. It was assigned docket number 1432 and court file number 1281-102. The decision of the Workers' Compensation Court was issued on March 21, 1984. For brevities sake this prior case will hereinafter be referred to as "Phelan I."

In Phelan I, the Workers' Compensation Court was faced with a complex factual situation and some novel questions of law.

On October 30, 1980, claimant suffered a back injury while employed by Lee Blaine Enterprises who was insured by St. Paul Mercury Insurance Company ("St. Paul"). The claimant underwent back surgery, and by July 7, 1981, was judged by her treating physician to have reached a stationary state. The physician rendered an impairment rating of 25%, and in August 1981, claimant entered into a final settlement of her claim. She received 125 weeks of permanent partial disability benefits, less some overpayments, for a total net settlement of $9,556.43. It is this final settlement which is the subject of the current appeal.

In June 1981 (prior to the final settlement mentioned above), the claimant was employed by a second employer who was insured by Glacier General Insurance Company. While employed by the second employer, the claimant experienced a sexual incident which she considered to be a sexual assault. She did not work from the date of the incident (June 29, 1981) until September 1, 1981.

In September 1981, the claimant was employed by a third employer which was insured by the State Compensation Insurance Fund. While employed by this third employer, the claimant suffered an industrial accident.

In general, the court in Phelan I was asked to determine the following issues: First, was the amount received by the claimant in her final settlement arising out of the October 30, 1980, injury sufficient in light of her disability? Second, was the sexual incident which occurred in June of 1981 a compensable injury under the Workers' Compensation Act? Third, what was the nature and extent of claimant's current disability, if any, and her entitlement to benefits, if any?

On March 21, 1984, the Workers' Compensation Court entered its judgment. Succinctly stated, the court's judgment was that the sexual incident did constitute a compensable injury, and that the claimant was currently (as of the date of the judgment) entitled to temporary total disability benefits by reason of the injury which occurred in September 1981 while employed by the third employer. In addition, these temporary total disability benefits were ordered to continue until the disability ceased as a result of that injury. The court also found that claimant may be entitled to additional benefits at "some later date." No party to that first case requested a rehearing or appealed the court's judgment.

It is important to note for the purposes of the current appeal that the court's judgment in Phelan I dealt only with the claimant's current disability status and her current entitlement to disability benefits. The record indicates there was no ruling on the issue of whether the final settlement (entered into in 1981) arising out of her October 30, 1980, injury was sufficient in light of the claimant's disability as of the date of the settlement.

On October 8, 1984, claimant filed a Petition for Hearing seeking to set aside the final settlement entered into in August 1981 between herself and St. Paul. The claimant asked to have the settlement set aside on the grounds that the parties to the settlement were suffering from a mutual mistake of fact at the time the settlement was entered into. The relief requested by the claimant was denied by the court on the grounds of res judicata. Specifically, the court ruled that claimant had raised basically the same issue in Phelan I (the first issue mentioned above) as she had raised in her current petition. The court found that although the language of these two issues were not identical, both framed the same issue: whether the claimant is entitled to reopen her final settlement agreement of August 1981. The court found it had already ruled on this issue and consequently barred her current petition as res judicata.

The claimant raises the following issue for review by this Court:

(1) Did the Workers' Compensation Court err in applying the doctrine of res judicata to deny claimant's request that her final settlement of August 1981 be set aside?

The doctrine of res judicata is designed to prevent "relitigation of that which has been finally adjudicated." S-W Company v. John Wight, Inc. (1978), 179 Mont. 392, 404-5, 587 P.2d 348, 355. The criteria used to determine whether an issue is barred by res judicata were set forth by this Court in Smith v. County of Musselshell (1970), 155 Mont. 376, 378, 472 P.2d 878, 880, as follows:

These criteria are: (1) the parties or their privies must be the same; (2) the subject-matter of the action must be the same; (3) the issues must be the same, and must relate to the same subject-matter; and (4) the capacities of the persons must be the same in reference to the subject-matter and to the issues between them.

Of the four criteria set out in Smith, the parties agree the important one in the present case is criteria (3) which is the identity of the issues. The rule regarding the identity of the issues is simple. If the issues in the second case were not raised and determined in the first case, then the judgment of the first case does not bar the second action. Specifically, this Court has held:

[U]nless it clearly appears that the precise question involved in the second case was raised and determined in the former, the judgment is no bar to the second action.

Brannon v. Lewis and Clark County (1963), 143 Mont. 200, 207, 387 P.2d 706, 710-711.

Applying the above standards to the instant case, we hold the Workers' Compensation Court erred in denying claimant's petition to set aside the final settlement on the grounds of res judicata.

First, the issues in Phelan I and the present case are not the same. In Phelan I the issue before the Workers' Compensation Court which was similar to the main issue in the present case was issue number 3:

3. Whether claimant's final settlement arising out of her injury on October 30, 1980, is sufficient, and, if not, the total amount of compensation to be awarded to her as a result of the disability that she suffered from her industrial accident of October 30, 1980.

The record indicates issue number 3 in Phelan I was based on a case decided by this Court in November 1981, three months after the parties entered into the final settlement which is the center of the present dispute.

In November 1981, this Court decided Holton v. F.H. Stoltze Land and Lumber Company (1981), 195 Mont. 263, 637 P.2d 10. In Holton this Court ruled that a carrier had a duty to pay without delay undisputed benefits. This undisputed amount was to be paid without requiring a claimant to enter into a settlement. Holton, 637 P.2d at 13, 14.

In light of Holton, the record indicates claimant presented issue number 3 (quoted above) to the Workers' Compensation Court in Phelan I. It was claimant's position in Phelan I that the settlement should be reopened because claimant had settled her case (and thus given up a valuable right) in exchange for an amount equal to the undisputed liability. Under Holton, the claimant argued, that amount should have been paid without requiring any settlement. Specifically, it was claimant's contention in Phelan I (as set out in the pre-trial order) that:

The settlement with St. Paul Mercury Insurance Co. on September 17, 1981, was on a Final basis (i.e., could be reopened within four years) and was based on an impairment rating of 25% given by Dr. Maurice Smith. However, the Montana Supreme Court in Holton v. F.H. Stoltze Land & Lumber Co., 38 St.Rptr., 1835, 637 P2d 10 (1981) held that an injured worker is entitled to be paid the impairment rating absolutely and in all events, with no strings attached. Thus, claimant is entitled to be paid 125 weeks (500 x 25%) at her...