Chaney Building Co. v. City of Tucson
In Chaney Building Co. v. City of Tucson, 148 Ariz. 571, 716 P.2d 28 (1986), the Arizona Supreme Court explained the meaning of the requirement that an issue be "actually litigated":
"When an issue is properly raised by the pleadings or otherwise, and is submitted for determination, and is determined, the issue is actually litigated." Id. at 573, 716 P.2d at 30.
It then concluded that a stipulated dismissal of an action does not have preclusive effect unless the dismissal manifests the parties' intent that it be "binding as to certain factual issues." Id.
The court in Chaney relied on a comment in the Restatement (Second) of Judgments, which provides that, "in the case of a judgment entered by confession, consent, or default, none of the issues is actually litigated." Restatement (Second) of Judgments 27 cmt. e (1982).
The Restatement details the reasoning for the "actually litigated" requirement:
There are many reasons why a party may choose not to raise an issue, or to contest an assertion, in a particular action. . . . The interests of conserving judicial resources, of maintaining consistency, and of avoiding oppression or harassment of the adverse party are less compelling when the issue on which preclusion is sought has not actually been litigated before. And if preclusive effect were given to issues not litigated, the result might serve to discourage compromise, to decrease the likelihood that the issues in an action would be narrowed by stipulation, and thus intensify litigation. Id.
The Court primarily addressed the contention that a stipulated dismissal in favor of one defendant should be given preclusive effect as it related to a co-defendant contending that the dismissed defendant was wholly or partially at fault.
In considering the argument that the stipulated judgment was entitled to res judicata effect, the court considered whether this dismissal acted as a resolution "on the merits." 148 Ariz. at 573, 716 P.2d at 30.
Importantly, the court, citing section 27 of the Restatement (Second) of Judgments, held that a stipulated or "consent" judgment "may be conclusive, with respect to one or more issues, if the parties have entered an agreement manifesting such intention." Id.
In that case, the issues involving the dismissed party were not "actually litigated," and the stipulated order of dismissal apparently did not include a finding concerning the negligence or lack of negligence of the dismissed party.
Accordingly, the "manifestation of intent" required under the Restatement was lacking, and the court refused to extend collateral estoppel effect in favor of the remaining defendant:
If the parties to this action had intended the Kulseth dismissal to be binding as to certain factual issues, and if their intention was reflected in the dismissal, we would enforce the intent of the parties and collateral estoppel would apply. Id.