No. 81-92
IN THE SUPREME COURT OF THE STATE OF MONTANA
1981
JOHN W. KRAUSE,
Claimant and Appellant,
-vs-
SEARS ROEBUCK & COMPANY, Employer,
and
SEARS ROEBUCK & COMPANY,
Defendant and Respondent.
Appeal from: Workers' Compensation Court, The Honorable
William E. Hunt, Judge presiding.
Counsel of Record:
For Appellant:
Regnier & Lewis, Great Falls, Montana
For Respondent :
Jardine, Stephenson, Blewett & Weaver, Great Falls,
Montana
Submitted on Briefs: August 6 , 1981
Decided: February 25, 1982
/
FF-B 2 j ,. b.6-
Filed:
"7.7-,,8*+ Clerk
Mr. Justice Daniel J. Shea delivered the Opinion of the
Court.
The claimant appeals a judgment of the Workers'
Compensation Court in which he was denied the conversion of
permanent total disability benefits into a lump sum award and
denied his attorney fees and costs.
The claimant, John W. Krause, Sr., is presently 62 years
old and resides with his wife in Augusta, Montana. He had been
employed in Great Falls at the Sears warehouse since March 1960
and worked there continuously until May 13, 1976, when he injured
his lower back while delivering a washing machine to a Sears
customer. Sears is enrolled under Plan No. 1 of the Workers'
Compensation Act as a self-insurer. Sears accepted liability
for the claimant's injury and has paid benefits at the temporary
total disability rate of $138.67 per week since the date of the
accident.
After his accident, the claimant was examined by four doctors
and underwent a myelography which revealed a herniated intra-
vertebral disc in the lower back. Sears had the claimant
examined by Dr. Melvin, an orthopedic surgeon, who recommended
that the claimant undergo a type of surgery known as a laminotomy.
The claimant's own physician, Dr. Popnoe, also an eminently
qualified orthopedic surgeon, did not recommend surgery.
Testimony conflicted as to the effectiveness and risks associated
with this type of surgery. The claimant is generally opposed
to surgery because he feels there is a risk that he could be
further crippled by the surgery. He believes his fears are
justified because after his daughter was hospitalized for a
similar type of lower back surgery, her condition worsened,
Before the hearing in the Workers' Compensation Court,
Sears took the position that the claimant was not permanently
totally disabled because he would not submit to the type
of surgery recommended by Dr. Melvin. Sears, however, for
the first time, conceded in its opening statement at the
hearing that the claimant was permanently totally disabled.
The claimant's petition for a lump sum award was based
upon his plan to construct a small mobile home park, laundromat,
and car wash on a two-acre plot of land in Augustaalready owned
by the claimant and his wife. He testified that he could not
engage in any significant physical activity, but that his wife
and son were available to assist him with the construction,
operation, and maintenance of the project. Based upon a
cursory inquiry and upon information furnished by the claimant,
an appraiser testified that it was his conclusion that the
project had only a limited chance for economic success.
The court refused to convert the claimant's disability
benefits into a lump sum award because the claimant did not
prove by a preponderance of the credible evidence that he
had a pressing need for a lump sum settlement or that the
project would be in his best interests. The claimant also
contends that the trial court committed reversible error by
allowing Sears to present the appraiser's opinion because he
was not qualified as an expert and because he relied solely
on hearsay evidence to reach his conclusion. The claimant
asks this Court to reverse and remand the case for a deter-
mination of the amount of the lump sum award and the reasonable
attorney fees and costs to be paid to the claimant.
The claimant's first contention is that the court erred
by admitting opinion testimony by an appraiser who was not
qualified as an expert in the field in which he testified.
He argues that the record is totally devoid of any evidence
which establishes that the appraiser was qualified to provide
expert opinion testimony regarding the feasibility of a
project of this nature, as is required by Rule 702, Mont.R.Evid.
We conclude that the court did not err by permitting this
witness to give opinion testimony. The Workers' Compensation
Court is not bound by either common law or the statutory rules
of evidence, including the prohibition against hearsay evidence.
Section 39-71-2903, MCA. The record reveals that the Workers'
Compensation judge clearly understood his role in admitting
and weighing hearsay evidence. He stated at one point in the
hearing that hearsay evidence would be allowed ". . . for
whatever it is worth . . .." It is equally clear that the
judge recognized that the appraiser's conclusions were based
upon only a cursory investigation. The court stated in its
findings:
"25. Mr. Joe Tredik, an MA1 appraiser and witness
for the defendant, testified he had not done a
complete feasibility study, but based upon a
preliminary inquiry, he questioned the economic
feasibility of all three projects.
"26. Mr. Tredik testified that the data prepared
by the claimant's son was not adequate to make a
determination as to the economic feasibility of
the projects.
"27. Mr. Tredik testified that he viewed property
in Augusta, Montana which he thought to be the land
upon which the claimant proposed to construct his
projects. It is clear from the evidence that Mr.
Tredik was looking at the wrong property at the time
he formed his opinions as to whether the projects
would succeed or fail. Mr. Tredik conceded during
cross examination that he did not know at the time he
was testifying at the trial whether he had even seen
the two acre parcel of land upon which the claimant
proposed to put his projects. Mr. Tredik also
testified that he had never previously performed an
appraisal, a feasibility study or done anything con-
nected with his appraisal work where he did not look
at the particular parcel of land involved before he
provided an opinion."
These findings adequately demonstrate that the court did not
place any undue reliance upon the appraiser's testimony. In
addition, there were no conclusions of law expressly or
impliedly relating to the appraiser's testimony.
The claimant's second contention is that the court
erred by refusing to convert the claimant's permanent total
disability benefits into a lump sum award as authorized by
section 39-71-741, MCA.
The general rule is that disability payments under the
Workers' Compensation Act are biweekly. They may, however,
at the discretion of the Workers' Compensation Division, be
converted into a lump sum settlement. While lump sum settle-
ments are an exception to the general rule, they are not looked
upon with disfavor and should be awarded without hesitancy
where the claimant's interest would be best served. Willoughby
v. Arthur G. McKee & Co. (1980), - Mont . -, 609 P.2d 700,
702, 37 St.Rep. 620; Utick v. Utick (1979), - Mont. I
593 P.2d 739, 741, 36 St.Rep. 799; Laukaitis v. Sisters of
Charity of Leavenworth (1959), 135 Mont. 469, 472-73, 342 P.2d
752, 755. The denial of a lump sum settlement will not be
reversed on appeal unless the Workers' Compensation Court is
shown to have abused its discretion. Willoughby, supra; Utick,
supra; Kuehn v. National Farmers Union Property and Casualty
Co. (1974), 164 Mont. 303, 521 P.2d 921; Kent v. Sievert (1971),
79
158 Mont. 4&&, 489 P.2d 104; Legowik v. Montgomery Ward (1971),
157 Mont. 436, 486 P.2d 867.
The court's conclusions of law reveal that it denied
the request for a lump sum settlement because the claimant,
being permanently totally disabled, was unable to perform
physical tasks in connection with his proposed project. The
claimant argues, however, that the evidence clearly shows that
he at no time planned to handle the physical demands of
managing the project himself. He asserts that his wife and
son are available to assist him with the physical demands
of the project.
The Workers' Compensation Court is in a better position
to familiarize itself with the circumstances surrounding the
claimant and to consider his needs and the results which
probably will follow the grant or denial of the request.
Willoughby, supra, 609 P.2d at 704. The evidence does not
clearly preponderate against the court's findings. The
findings indicate that the court carefully considered the
facts and issues. In particular, the court relied upon
evidence of the claimant's disability, his lack of business
experience, his incomplete consideration of objective data
regarding the project, and the fact that the claimant's son
testified that he lives 12 miles outside of Augusta and that
his first priority during the winter months is to feed his
cattle.
The claimant also argues that in Utick, supra, this Court
has already established a precedent for making a lump sum award
of permanent total disability benefits to a claimant who could
not engage in substantial gainful activity. The claimant,
however, has placed undue reliance on our decision to award
a lump sum settlement in Utick. In Utick, we cautioned that
our decision was based upon the particular circumstances of
that case. Utick is to be distinguished from this case for
the following reasons:
(1) We did not believe that Utick had received fair
treatment in the handling of his claim;
(2) The fixed amount biweekly compensation payments
to Utick had apparently not been kept current;
(3) By awarding a lump sum settlement, we felt that
the on-going disputes between Utick and bhe
Workers' Compensation Division would be ended;
(4) Utick's insurance carrier stated no reason for
resisting a lump sum settlement and did not
d i s p u t e t h e f e a s i b i l i t y of U t i c k ' s p l a n f o r
i t s i n v e s t m e n t ; and
(5) U t i c k ' s p l a n w a s t o i n v e s t t h e lump sum s e t t l e -
ment i n a family-owned c o r p o r a t i o n which was
a l r e a d y i n e x i s t e n c e and d i d n o t r e q u i r e t h e
k i n d o f maintenance and r e p a i r s t h a t c o u l d b e
e x p e c t e d w i t h a mobile home p r o j e c t .
I n a d d i t i o n , t h e t r i a l c o u r t h e r e s p e c i f i c a l l y found
t h a t t h e r e w a s no p r e s s i n g need f o r t h e lump sum s e t t l e m e n t .
The c l a i m a n t t e s t i f i e d t h a t he and h i s w i f e c o u l d l i v e on
h i s biweekly compensation b e n e f i t s of $560 p e r month and h i s
o t h e r income, c o n s i s t i n g of f e d e r a l d i s a b i l i t y income of
$533 p e r month, r e n t a l income of $85 p e r month from a house
h e owns i n Augusta, s t o c k d i v i d e n d income of $520 p e r y e a r ,
payments o f $440 p e r month under a c o n t r a c t f o r t h e s a l e of
r e a l p r o p e r t y , and a p p r o x i m a t e l y $50 p e r month from A l l s t a t e
I n s u r a n c e Co. by v i r t u e o f t h e f a c t t h a t S e a r s p l a c e d him on
medical retirement. I n a d d i t i o n , t h e c l a i m a n t r e c e i v e d $6,000
i n c a s h i n 1978 from h i s p r o f i t - s h a r i n g plan with Sears.
The c l a i m a n t ' s t h i r d c o n t e n t i o n i s t h a t t h e Workers'
Compensation C o u r t e r r e d by r e f u s i n g t o award t h e c l a i m a n t
h i s a t t o r n e y f e e s and c o s t s d e s p i t e t h e f a c t t h a t Sears
u n s u c c e s s f u l l y a t t e m p t e d t o o b t a i n an a d j u d i c a t i o n t h a t i t
was n o t r e s p o n s i b l e f o r t h e payment of permanent t o t a l
d i s a b i l i t y b e n e f i t s b e c a u s e t h e c l a i m a n t would n o t s u b m i t t o
back s u r g e r y . H e a r g u e s t h a t s i n c e he p r e v a i l e d on t h e i s s u e
of whether t h e d i s a b i l i t y i s permanent, h e i s e n t i t l e d t o
r e c o v e r h i s c o s t s and a t t o r n e y f e e s under s e c t i o n 39-71-611,
MCA .
S e c t i o n 39-71-611, MCA, however, i s n o t t h e a p p r o p r i a t e
s t a t u t e f o r d e t e r m i n i n g whether a t t o r n e y f e e s and c o s t s s h o u l d
be awarded i n t h i s s i t u a t i o n . That s e c t i o n provides t h a t
where ". . . an i n s u r e r denies l i a b i l i t y f o r a claim f o r
compensation or terminates compensation benefits and the
claim is later adjudged compensable ... the insurer shall
pay reasonable costs and attorneys' fees . . .." Sears has
neither denied liability for the claim nor terminated benefits,
although it did dispute whether the claimant's disability
could be considered permanent where he refuses to submit to
corrective surgery. According to the court's pretrial order,
one of the contested facts of the case was "[wlhether or not
the claimant is permanently totally disabled and if totally
disabled, whether or not such disability proximately resulted
in whole or in part from claimant's decision to not undergo
surgical treatment."
In Polich v. Whalen's O.K. Tire Warehouse (1981), -
Mont. -- , 634 P.2d 1162, 38 St.Rep. 1572, we held that section
39-71-612, MCA, governed the award of attorney fees where
the claimant prevailed in a hearing where the issue was whether
his benefits should have been converted into a lump sum
settlement. We held that this constituted a controversy which
was the difference between the amount of benefits tendered
and the amount of benefits awarded, and therefore, that
section 39-71-612, MCA, properly applied. Section 39-71-612,
MCA, states:
"(1) If an employer or insurer pays or tenders
payment of compensation under chapter 71 or 72 of
this title, but controversy relates to the amount
of compensation due and the settlement or award is
greater than the amount paid or tendered by the
employer or insurer, a reasonable attorney's fee
as established by the division or the workers'
compensation judge if the case has gone to a hearing,
based solely upon the difference between the amount
settled for or awarded and the amount tendered or
paid, may be awarded in addition to the amount of
compensation.
"(2) When an attorney's fee is awarded against an
employer or insurer under this section there may be
further assessed against the employer or insurer
reasonable costs, fees, and mileage for necessary
witnesses attending a hearing on the claimant's
behalf. Both the necessity for the witness and
the reasonableness of the fees must be approved
by the division or the workers' compensation judge."
The basic controversy between the parties was one dealing
with the difference between the amount of benefits tendered
and the amount of benefits awarded, and the issue of whether
the claimant's disability was permanent was the foundation
for that controversy. Because the court concluded that the
claimant was suffering from a permanent total disability, we
hold that under section 39-71-612, P4CA, the claimant is entitled
to attorney fees and costs in relation only to his proof that
he was permanently totally disabled.
We affirm the judgment of the Workers' Compensation Court
insofar as it denies the claimant a lump sum settlement, but
remand for a determination of and award to the claimant of
those reasonable attorney fees and costs incurred in proving
he was permanently totally disabled. We also order the Workers'
Compensation Court to amend its judgment to include a finding
that the claimant has sustained an injury which has left him
permanently and totally disabled.
We Concure
@ L i -t J tices
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