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Court of Appeal, Fourth District, Division 2, California.

Joe MERCIER, Petitioner, v. WORKERS' COMPENSATION APPEALS BOARD OF the STATE of California; James McCauley; Marie McCauley dba Rees Rooter, Willfully Uninsured, Uninsured Employers' Fund, Respondents.

No. E017147.

Decided: February 15, 1996

Vance F. Van Kolken, for Petitioner. No appearance for respondent Workers' Compensation Appeals Board of the State of California. John M. Rea, Anthony Mischel, San Francisco, and Johnnie M. MitchellMoreno Valley, for Respondent.


Applicant Joe Mercier seeks review and annulment of an order of the Workers' Compensation Appeals Board (“Board”) denying reconsideration of an order and finding that it lacked jurisdiction to hear this matter due to defective personal service of the Application for Adjudication of Claim on the uninsured employer. We have determined that the Uninsured Employers Fund (“UEF”) waived objection to defective service by its failure to raise such objection at trial or in its first petition for reconsideration. Accordingly, we annul the order.


While working as a plumber for James and Marie McCauley, dba Rees Rooter, on November 11, 1988, Mercier fell from a ladder, sustaining injuries to his head and brain. At the time of the injury, the McCauleys were uninsured.

On March 4, 1991, Mercier served the McCauleys with an Application for Adjudication and Demand Letter. Service was made by serving the McCauleys' daughter at their place of business.

On March 19, 1991, the McCauleys filed a Chapter 7 bankruptcy petition.

On March 26, 1991, the bankruptcy court sent a Notice and Order for Meeting of Creditors to Mercier requesting that creditors not file a Proof of Claim until notified by the court.

On May 28, 1991, UEF was joined in the workers' compensation case.

On July 12, 1991, the bankruptcy court issued an order granting a discharge of the debtor.

A hearing was held in the workers' compensation case on May 12, 1994, at which Mercier and UEF appeared. The Workers' Compensation Judge (WCJ) identified the issues to be determined in the Minutes of Hearing and Summary of Evidence. The question of lack of jurisdiction based on defective personal service of the Application for Adjudication of Claim on the McCauleys was not one of the issues listed.

An award in favor of Mercier was issued August 8, 1994. UEF petitioned for reconsideration contending that the hearing was conducted in violation of the automatic bankruptcy stay provisions of 11 United States Code section 362, subdivision (a). UEF added that it had not been notified by Mercier of any impending bankruptcy and that he had taken no steps to preserve his rights or perfect his claim in the bankruptcy court prior to the discharge.

The WCJ granted the petition and conducted a conference. UEF took the position that Mercier must obtain a modification of the discharge order. Mercier alleges that UEF contended that the bankruptcy court routinely grants orders after discharge permitting the employee to proceed against it. Following the conference, the WCJ set aside the award subject to its being reinstated on further order from the bankruptcy court, indicating “jurisdiction reserved.”

Mercier then petitioned to reinstate the findings and award. He contended that when the bankruptcy court entered its order discharging creditors on July 12, 1991, the automatic stay ceased. Thus, he concluded that the proceedings in this case were not conducted in violation of the automatic stay. Furthermore, he contended it would serve no purpose to reopen the bankruptcy estate to obtain the type of order requested by UEF, i.e. an order that would allow him to proceed against UEF but which would prohibit any enforcement against the discharged debtors, the McCauleys. He did obtain a stipulation from the McCauleys' attorney permitting him to proceed in the workers' compensation action to establish the amount of the claim and seek recovery against UEF. He noted that the employers had filed a Chapter 7 bankruptcy and there was no distribution of assets to any creditor. Therefore, UEF could not recover anything by way of subrogation against the McCauleys. Thus, to require him to request to reopen the bankruptcy case and obtain a modification of the discharge would not benefit UEF.

The WCJ granted Mercier's petition, reinstating the finding and award.

UEF then filed another petition for reconsideration on the grounds that Mercier had failed to obtain a modification of the bankruptcy discharge and also that he had failed to perfect jurisdiction because service on the McCauleys was defective. UEF noted that a condition precedent to its payment is the existence of a valid award against the uninsured employer. Thus, the applicant is required to serve the employer in the same manner prescribed in the Code of Civil Procedure for service of summons. In this case, Mercier had served the McCauleys by substituted service. Although substituted service was permissible, UEF pointed out that there was no declaration by the process server as to the number of attempts made to serve the employer before resorting to substituted service nor was there proof that a copy of the notice of the claim was mailed to the person being served as required under Code of Civil Procedure section 415.20, subdivision (a). UEF also contended that Mercier had failed to serve the Special Notice of Lawsuit as required by Labor Code section 3716, subdivision (d).

Following a hearing, the WCJ concluded that the Board lacked jurisdiction to render an award because of defective service. It was ordered that the earlier “Order Suspending Order Reinstating Findings & Award” was to remain in effect. Mercier's petition for reconsideration was denied.

The WCJ agreed with Mercier that there was no requirement in 1991 that a Special Notice of Lawsuit be served on the uninsured employer, but he concluded that the Board lacked jurisdiction to proceed because service of the Application did not comply with the requirements for substituted service under the Code of Civil Procedure. The WCJ did not address Mercier's contention that UEF had waived any objection to defects in service by failing to raise the issue at trial or in its first petition for reconsideration.

Mercier petitions for a writ of review of the Board's denial of his petition for reconsideration.1


Labor Code section 3716, subdivision (d)2 provides that UEF shall have no liability and may not be joined in any Board proceedings unless the allegedly illegally uninsured employer has either made a general appearance or has been served with an application for adjudication and a special notice of lawsuit. The statute further provides that the application and special notice of lawsuit may be served in the manner provided for service of summons in the Code of Civil Procedure.

Here, Mercier served the McCauleys by way of substituted service. Service was not in technical compliance with the requirements of Code of Civil Procedure section 415.20 although it is beyond dispute that the McCauleys received actual notice of the application. In addition, Mercier failed to serve a special notice of lawsuit.3

However, UEF failed to raise any issue of defective service at the trial.4 We conclude that it had an obligation to do so and that its failure constituted a waiver of any objection. It is well established that defects in service of process can be waived by failing to assert them (Nelson v. Horvath (1970) 4 Cal.App.3d 1, 4; also see generally 2 Witkin, Cal. Procedure, Jurisdiction, §§ 152 et seq., pp. 537 et seq.) and this rule has particular applicability here in light of UEF's function. At the time of the Board decision in Yant v. Snyder & Dickenson, et al. (1982) 47 Cal. Comp. Case 254, the statute did not expressly require the uninsured employer to be served in the manner provided under the Code of Civil Procedure section, but the Board concluded that the injured employer must name the uninsured employer in the proper manner and effect service of his application in the manner required for a default judgment. It is noteworthy in Yant that the UEF was criticized for failure to appear and for raising objections to the service on the uninsured employer only by letter or by a petition for reconsideration after a decision had issued. The Board stated that UEF should ascertain before a noticed hearing occurs whether or not there is a problem with identifying the proper uninsured employer or with service and make known its position to workers' compensation judge and the applicant at the earliest opportunity. “We find nothing inconsistent between UEF's statutory obligations and offering aid to the court by identifying the correct party defendant so a valid award may issue without wasting valuable trial calendar time. Indeed, we find it consistent with UEF's counsel's role as an officer of the court to so aid the court. The legislative objective in creating UEF is to facilitate the payment of compensation to the injured worker who has the misfortune to be hired by an uninsured employer, and we do not expect UEF to conduct itself in any way that will frustrate its legislative purpose.” (47 Cal.Comp.Case at 260-261)

We heartily endorse these sentiments. UEF appeared and fully participated in a trial and a first petition for reconsideration without raising these objections. Although the information regarding service on the McCauleys was available to it at the time of the hearing, it was not until it was faced with the prospect of having to pay an award that it raised an objection based on technical deficiencies. Such conduct to frustrate the legislative purpose will not be countenanced. We conclude that once UEF was joined and appeared in this proceeding it was required to raise any claims regarding defective service under section 3716, subdivision (d).

UEF contends that it cannot waive jurisdiction mandated by the legislature and that it cannot pay an award which is invalid. However, this argument assumes the award is invalid because of the lack of personal jurisdiction. To the contrary, we conclude that the Board did have jurisdiction because UEF waived objections based on defective service.

Furthermore, UEF failed to raise the issue of defective service in its initial petition for reconsideration and could not do so in its subsequent petition. “Thus a petitioner is not entitled to raise new contentions in a second petition for reconsideration with respect to an order, decision, or award that was the subject of a prior petition for reconsideration filed by the petitioner.” (2 Hanna, Cal. Law of Employee Injuries and Workers' Comp. (rev. 2d ed. 1995) § 28.06, p. 28-25.15.)

Because we are reviewing the Board's denial of Mercier's petition for reconsideration, we do not reach the issue of the effect of the McCauleys' bankruptcy.

The order denying reconsideration is annulled and the Board is directed to grant applicant's Mericer's petition for reconsideration and to issue such orders that are consistent with this opinion.


1.  A petition for a writ of review may only be sought from a final order, decision, or award of the Board. (Lab. Code, § 5901.) We believe that the WCJ's order of July 10, 1995 reinstating the previous order which suspended the order reinstating the findings and award involved a determination of a threshold issue, i.e., jurisdiction of the Board. (Safeway Stores, Inc v. Workers' Comp. Appeals Bd. (1980) 104 Cal.App.3d 528, 533.) Accordingly, the Board's subsequent decision on reconsideration of that order is deemed final for purposes of appellate review. (Ibid.; 2 Hanna, Law of Employees' Injuries (rev. 2d ed 1995), § 34.10[2], pp. 34-8.1 et seq.)

2.  All statutory references are to the Labor Code unless otherwise stated.

3.  Contrary to Mercier's assertion and the WCJ's conclusion, the legislation enacted in 1990 became effective on January 1, 1991. (See Stats. 1990, ch. 1990; Cal. Const., art. IV, § 8, subd. (c)(1).)

4.  The parties filed a stipulation that they were prepared to proceed in this matter on the record as filed in this court. UEF then filed its answer to which it attached exhibits which had not previously been filed with this court. One of the exhibits is a form letter date June 6, 1991, from UEF's legal counsel to the Workers' Compensation Judge raising various objections, including the failure to personally serve the employer and improper joinder of UEF due to the failure to serve a special notice of lawsuit under Labor Code section 3716, subdivision (d).Mercier asserts in its reply that he was never served with a copy of this letter.It should be obvious that we are not in a position to resolve factual disputes of this sort. We will ignore these exhibits in light of the parties' prior stipulation. In any event, our resolution of the waiver issue would not be changed by the fact that UEF raised an initial objection to service but chose not to pursue these objections.

HOLLENHORST, Acting Presiding Justice.

MCKINSTER and RICHLI, JJ., concur.

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