No. 88-583
IN THE SUPREME COURT OF THE STATE OF MONTANA
1989
JAMES P. HEDEGAARD,
Claimant and Appellant,
-vs-
KNIFE RIVER COAL MINING CO.,
Employer,
and
STATE COMPENSATION INSURANCE FUND,
Defendant and Respondent.
APPEAL FROM: The Workers' Compensation Court, The Honorable ~imothy
Reardon, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Lloyd E. Hartford, ~illings,Montana
For Respondent:
~atriciaBell; Crowley Law Firm, ~illings,Montana
, . Submitted on Briefs: ~ p r i l27, 1989
Decided: July 25, 1989
Filed:
Mr. Justice John Conway Harrison delivered the Opinion of the
Court.
Claimant James P. Hedegaard appeals from the workers'
Compensation Court's limited conversion of his biweekly
benefits to a lump sum award. We affirm in part, reverse in
part and remand for proceedings consistent with this opinion.
Claimant is permanently totally disabled as the result
of a back injury he suffered in 1980 and for which he has
been receiving biweekly disability benefits. In May of 1986,
claimant petitioned the Workers' Compensation Court for a
partial lump sum award of $9,181.27 to enable him to pay off
the loan on his 1984 Ford LTD. Before the petition was
heard, the 1984 Ford was repossessed.
Claimant and his wife were left without reliable
transportation when their 1980 Ford Pinto was destroyed by
fire. In December, 1987, claimant financed the purchase of a
new Buick automobile for approximately $12,900.
Additionally, during this time claimant retained new counsel.
Claimant's new attorney failed to amend the petition request
of $9,181.27 for an amount sufficient to pay off the new
Buick. During the hearing, the Workers' Compensation Court
refused to allow any amendment of the $9,181.27 petition
request. However, the court concluded that the claimant was
entitled to a lump sum award for the purchase of the 1987
Buick:
[Finding of Fact]
8. If the claimant is not awarded
the requested lump sum, the 1987 Buick
will be repossessed. Claimant and his
wife need reliable transportation.
.. .
[Conclusion of Law]
2. Claimant is entitled to receive
an advance on his compensation in the
amount of $9,181.27. The insurer may
recover the advance by reducing his
weekly compensation by $20.00 per week.
Claimant requested attorney's fees based upon an hourly
fee of $225 multiplied by 171.05 hours which his attorney
claims were spent in pursuit of the lump sum award,
notwithstanding that his attorney missed at least three
deadlines for exchanging exhibits, preparing a final pretrial
order and following the court's orders relative to the issues
to be tried. The court denied the request of $38,486.25 in
attorney's fees and awarded an attorney fee based upon the
33% contingent fee agreement.
Claimant presents the following issues for our review:
1. Did the Workers' Compensation Court abuse its
discretion by awarding a partial lump sum advance of
$9,181.27, rather than the $12,900 needed to pay off the 1987
Buick?
2. Did the Workers' Compensation Court abuse its
discretion by granting respondent a weekly recoupment of $20
per week from the claimant's disability benefits?
3. Did the Workers' Compensation Court abuse its
discretion by refusing to award attorney's fees without
considering the documentation at an evidentiary hearing?
Issue No. 1
Did the court abuse its discretion by refusing to award
sufficient funds to pay off the 1987 Buick? We conclude it
did. The amount awarded, $9,181.27, was initially requested
by claimant's original counsel to pay off the 1984 Ford LTD
which was subsequently repossessed. This sum originally
included $1,836.25 in attorney's fees.
Claimant financed the purchase of a new automobile for
an amount the court concluded was not unreasonable. The
court also concluded claimant was entitled to a lump sum
award because the claimant needed reliable transportation.
Additionally, the court awarded the full $9,181.27 for the
purchase of the automobile, and made a separate award of
attorney's fees, even though the court earlier refused to
allow any amendment of the petition request.
While we recognize the court's need to require
adherence to pretrial orders, the facts of this case do not
justify a denial of funds sufficient to pay off the
automobile loan. This purpose of the lump sum request was
known to the respondent since May of 1986, and no prejudice
would have resulted had the court allowed the claimant to
amend his petition. Additionally, the court did amend the
petition, without objection by respondent, when it awarded
the full $9,181.27 toward payment of the automobile loan.
The parties agree that, under these facts, the "best
interest" of the claimant test determines whether the lump
sum award is proper. In light of the court's determination
that the claimant's best interests dictate that he is
entitled to a lump sum award to pay off his automobile loan,
we conclude it was unreasonable and an abuse of discretion to
limit the award to an amount which is insufficient to meet
that need.
Issue No. 2
Did the Workers' Compensation Court abuse its
discretion in granting respondent a weekly recoupment of $20
per week from the claimant's disability benefits?
Claimant argues the insurer is only entitled to recoup
advances at the distal end of the claim or at the time of
full and final settlement. We disagree.
The Workers' Compensation Court concluded the insurer
should be able to recover the advance through a reduction of
the biweekly payments. This same conclusion was reached
earlier by the Workers' Compensation Court in Lecher v.
Montana Physician's Service and Fireman's Fund, WWC No.
8503-2956, Volume VI, No. 325 (filed August 21, 1985). There
the court reasoned at Conclusion of Law No. 5:
It is not sufficient for a claimant
to simply request a lump sum with credit
to the defendant from the distal end of
the claimant's entitlement. There may be
factual situations in the past and in the
future where that is an appropriate Court
ordered award. However, most claimants
are already on an extremely tight budget
and simply planning on having a greatly
reduced income or no income at some point
in the distant future is not debt
management nor is it a plan. Generally,
claimant should anticipate a biweekly
repayment to the defendant over their
estimated lifetime entitlement.
A claimant is not entitled to double recovery of both a
lump sum advance and the biweekly payments. Since a lump sum
advance is merely the whole or partial conversion of a
claimant's biweekly payments, the insurer is entitled to
recover the advance. Additionally, the Workers' Compensation
Judge considered the claimant's best interests, including his
present and future income, and concluded the lump sum
advance, offset by a $20 per week recoupment would meet the
claimant's best interests. The Workers' Compensation Court,
quoted Willoughby v. Arthur G. McKee and Co. (19801, 187
Mont. 253, 257, 609 P.2d 700, 702:
"The criteria determinative of the
advisability of conversion to a total or
partial lump sum award have generally
been held to be ' ... the best
interests of the claimant, his family and
for the best interests of the
public. .. ' [Citations omitted.] The
existence of a 'pressing need' and/or
'outstanding indebtedness' has likewise
been held to be relevant criterion. ..
[Citation omitted.]"
We conclude the court's decision was supported by
substantial evidence and did not constitute an abuse of
discretion when it allowed the insurer a weekly recoupment of
the lump sum advance prior to a final settlement.
Issue No. 3
Did the Workers' Compensation Court abuse its
discretion by refusing to award attorney's fees without
considering the documentation at an evidentiary hearing?
On November 3, 1988, the court entered its findings of
fact, conclusions of law, and judgment in which it awarded
claimant reasonable costs and attorney's fees pursuant to
§ 39-71-612, MCA. The order read in part:
If the defendant or the claimant
believes the amount due the claimant's
attorney is unreasonable, then each has
30 days from the date of this Order to
file a Motion for Evidentiary Hearing
Regarding Reasonableness of Attorney Fees
Thus, unless counsel can convince the
Court otherwise, we are inclined to award
the 33 percent contingency fee ...
On November 23, 1988, claimant's attorney filed a
Memorandum of Time and Costs in which he requested $38,486.25
in attorney's fees and $993.50 in costs, but he did not
request an evidentiary hearing. Respondent filed an
objection to the Memorandum and requested an evidentiary
hearing. On December 8, 1988, the court awarded attorney's
fees based upon the contingency fee agreement and stated that
the claimant had not convinced him that any greater fee
should be awarded.
Claimant now argues the court abused its discretion
because it did not hold an evidentiary hearing on the
requested attorney fees. Claimant relies on our recent
decision in Honey v. Stoltze Land and Lumber Co. (Mont.
1989), 769 P.2d 42, 46 St.Rep. 202, as requiring an
evidentiary hearing before attorney's fees above the
contingency agreement may be denied. We disagree.
The requested attorney's fees in Honey were denied by
the Workers' Compensation Court, without any consideration,
simply because the attorney did not request an evidentiary
hearing. We reversed because we concluded the claimant's
attorney was not required to request an evidentiary hearing
before the court could consider the evidence under the Wight
guidelines. Wight v. Hughes Livestock Co., Inc. (1983), 204
Mont. 98, 664 P. 2d 303. In the present case, however, the
evidence was considered and the court determined the
requested fees were unreasonable. There was no abuse of
discretion in denying the requested attorney's fees.
Affirmed in part, reversed in part and remanded for
proceedings consistent with this opinion.
I.
We concur: /,Istice