Opinion ID: 2242002
Heading Depth: 2
Heading Rank: 2

Heading: Full Faith and Credit is Properly Preserved

Text: As a preliminary matter, NICTD contends that SouthShore waived its right to rely on the Full Faith and Credit Clause by not presenting the Illinois judgment in the Indiana Court of Appeals at the earliest opportunity. For this proposition, NICTD cites several Indiana appellate procedural cases holding that new claims or issues, including constitutional arguments and the defense of res judicata, cannot be presented for the first time in a petition for rehearing. See, e.g., City of Indianapolis v. Wynn, 239 Ind. 567, 159 N.E.2d 572 (1959). SouthShore responds that it did not raise the issue until rehearing because under the procedural posture of this appeal it would have been premature to do so earlier. This case was in the Indiana Court of Appeals on the trial court's grant of SouthShore's motion under Trial Rule 12 to dismiss for lack of subject-matter jurisdiction. The only issue before the Court of Appeals was the validity of that ruling. SouthShore argues that full faith and credit in essence raises the affirmative defense of res judicata, which must be pleaded in the defendant's answer. Ind. Trial Rule 8(C). At the time the Court of Appeals issued its decision, no answer had been filed in the case. Accordingly, SouthShore contends it was not required to present the Illinois trial court ruling to the Indiana Court of Appeals. There are sound reasons for requiring a party to present all known arguments or claims to an appellate court before its decision is rendered. Rehearing opinions exhaust precious judicial resources that could be expended elsewhere. Decisions such as Wynn reflect the emphasis placed on judicial economy in deciding whether to consider an issue for the first time on rehearing. However, none of NICTD's cited cases involved a litigant claiming deprivation of a federal constitutional right due to a surprising and unforeseeable result on appeal. The effect of the Court of Appeals' ruling was to preclude SouthShore from making its arguments on the merits as to the construction of the Agreement, one of which is presumably based on full faith and credit. To be sure, SouthShore could have urged the Illinois judgment as an alternative ground for affirming the Indiana judgment of dismissal. However, we agree with SouthShore that the Court of Appeals' disposing of the appeal on the merits could not have been anticipated and prevented SouthShore from feeling the need to raise its federal constitutional issue at an earlier time. Where a state court acts in an unanticipated way to deprive a party of the opportunity to make an argument or present a valid defense based on the Federal Constitution, the issue is not waived for purposes of review by the Supreme Court of the United States. Herndon v. Georgia, 295 U.S. 441, 443-44, 55 S.Ct. 794, 794-95, 79 L.Ed. 1530 (1935); Brinkerhoff-Faris Trust & Sav. Co. v. Hill, 281 U.S. 673, 677-78, 50 S.Ct. 451, 453, 74 L.Ed. 1107 (1930); Saunders v. Shaw, 244 U.S. 317, 320, 37 S.Ct. 638, 640, 61 L.Ed. 1163 (1917). As Justice Cardozo succinctly summarized in Herndon: The settled doctrine is that when a constitutional privilege or immunity has been denied for the first time by a ruling made upon appeal, a litigant thus surprised may challenge the unexpected ruling by a motion for rehearing, and the challenge will be timely. Herndon, 295 U.S. at 447, 55 S.Ct. at 796 (Cardozo, J., dissenting). This standard is met where the trial court disposed of the case on the basis of subject-matter jurisdiction and the appellate court not only reverses on that issue, but resolves the merits of the dispute without briefing or argument by the parties. Accordingly, this Court should entertain the issue as a matter of Indiana appellate procedure. Finding waiver here could needlessly present an incorrect decision on a matter of federal constitutional law to the Supreme Court of the United States. We are also mindful of the deference to the courts of a sister state that comity suggests even if the Full Faith and Credit Clause does not require it. To the extent SouthShore is responsible for not raising the issue sooner, the Illinois courts are not at fault. The Illinois trial court was the first to enter a judgment enforcing the arbitration award. If we held that SouthShore's full faith and credit argument was waived and ruled in NICTD's favor on the merits, the possibility of inconsistent judgments would arise. Under these circumstances, we decline to find waiver here.