No. 90-214
IN THE SUPREME COURT OF THE STATE OF MONTANA
1990
MORGAN HARTFIELD,
Claimant and Appellant,
-vs-
CITY OF BILLINGS,
Employer,
and
STATE COMPENSATION INSURANCE FUND,
Defendant and Respondent.
APPEAL FROM: Workerst Compensation Court; The Honorable Timothy
Reardon, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
James M. Regnier, Esq., Regnier, Lewis & Boland,
P.C., Great Falls, Montana
For Respondent:
William 0. Bronson, Esq. , James, Gray & McCaf ferty,
Great Falls, Montana
Submitted on Briefs: August 3 0 , 1990
Decided: October 25, 1990
Filed: 0
Justice John Conway Harrison delivered the Opinion of the Court.
The claimant, Morgan Hartfield, brought this action in
Workers1 Compensation Court to reopen his full and final compromise
settlement with the State Compensation Mutual Insurance Fund,
approved on March 25, 1982. In its order of March 27, 1990, the
Workers1 Compensation Court rejected Hartfield's claims that the
settlement should be set aside because of constructive fraud, lack
of consideration, or unilateral mistake of law, and found for the
defendants. From this judgment, Hartfield appeals. We affirm.
Appellant presents the following issues:
1. Did the Workers1 Compensation Court err in refusing to set
aside the settlement agreement between Hartfield and the State Fund
on the ground of constructive fraud?
2. Did the Workers1 Compensation Court err in refusing to set
aside the settlement agreement on the basis of unilateral mistake?
3. id the Workerst compensation Court err in failing to
determine the settlement agreement void for lack of consideration?
4. Did the Workerst Compensation Court err in finding that
Hartfield's petition to reopen his settlement agreement with the
State Fund was barred by the applicable statute of limitations?
On January 14, 1981, Morgan Hartfield injured his neck in the
course of his employment with the City of ~illings an assistant
as
building maintenance supervisor. Prior to the 1981 injury,
Hartfield had suffered other neck injuries and had undergone two
cervical fusions. Hartfield had negotiated an earlier settlement
agreement with the State Compensation Mutual Insurance Fund (State
Fund) in the amount of $6,500 for a 1977 injury.
Because of Hartfield's injury, his physician, Dr. John Dorr,
an orthopedic surgeon, concluded that Hartfield should not return
to work. At the request of the State Fund, Dr. Dorr later
estimated that Hartfield's permanent physical impairment was 20 per
cent of the whole body, at least 10 percent attributable to his
1981 accident.
Hartfield applied for and received social security disability
benefits. Hartfield, a retired Air Force Chief Master Sergeant
having served on active duty for 27 years prior to his employment
with the City of Billings, also received service retirement
benefits. In November 1981 the State Fund responded to Mr.
Hartfield's application for benefits by awarding him approximately
$4,000 in retroactive benefits and informed him that he would
continue to receive $166.36 per week in temporary total disability
benefits. Since the weekly benefit was offset by Hartfield's
social security benefits, he actually received $107.46 per week.
In February 1982, a field representative of the State Fund,
Timothy Tindall, met with Hartfield in his home to discuss the
settlement award. Hartfield, who was not represented by an
attorney, signed the ''Petition for Full and Final Compromise
Settlement of Total Disability Benefits," a preprinted form. The
agreement became final when approved by the Workers1 Compensation
Court in March 1982.
The agreement recited that the claimant ''appears to be totally
disabled from finding regular employment of any kind in the normal
labor market. Hartfield agreed to accept $21,000, payable in
monthly installments of $405.99 for 60 months. As stated in the
agreement, the $21,000 represented approximately 191 weeks of total
disability benefits ''after the rate has been reduced as a result
of the offset taken against the claimant's social security
benefits." The payments included interest, bringing the total
settlement amount to approximately $24,300. Hartfield continued
to receive social security disability benefits until he reached
retirement age.
Prior to his injury, Hartfield had read a pamphlet indicating
that workers' compensation benefits could be paid to the claimant
until his death. Under the law in effect at the time of
Hartfield's injury, he could be paid total permanent disability
benefits 'Ifor the duration1' of his disability. Section 39-71-
702(1), MCA (1979). Hartfield claimed that he had asked Tindall
about receiving benefits beyond retirement age and that ~indall
informed him that benefits ceased at age 65. Hartfield further
asserted that he did not know that after signing the settlement
agreement his monthly payments would be less than he was currently
receiving monthly.
In December 1986 Hartfield read a news article about a
workers1 compensation case involving an insured who had terminated
workers1 compensation benefits when the claimant reached retirement
age. In the case, this Court held that a totally disabled
individual was entitled to permanent partial disability benefits
after reaching the age of 65. See Hunter v. Gibson Products of
Billings (1986), 224 Mont. 481, 730 P.2d 1139. According to
Hartfield1s testimony, th& article motivated him in January 1987
to consult an attorney in regard to his settlement agreement with
the State Fund. This action was then filed.
Did the Workers1 Compensation Court err in refusing to set
aside the settlement agreement between Hartfield and the State Fund
on the ground of constructive fraud?
Hartfield argues that the circumstances surrounding his
signing of the settlement agreement amounted to constructive fraud
because Tindall misrepresented facts concerning workers1
compensation benefits. Specifically, Hartfield alleges the
following: (1) he was told that he would not be entitled to receive
any benefits after age 65; (2) the settlement sum of $21,000 was
inadequate for an individual who was totally disabled; (3) the
monthly sum was less than he had received prior to the settlement;
(4) the settlement was not negotiated; and (5) Tindall did not
inform him that he had a right to consult an attorney prior to
signing the agreement.
According to 5 28-2-406, MCA, constructive fraud consists in:
(1) any breach of duty which, without an
actually fraudulent intent, gains an advantage
to the person in fault or anyone claiming
under him by misleading another to his
prejudice or t c ~ the prejudice of anyone
claiming under him; or (2) any such act or
omission as the law especially declares to be
fraudulent, without respect to actual fraud.
A plaintiff must plead and prove the following elements of fraud:
1. A representation;
2. Falsity of the representation;
3. Materiality of the misrepresentation;
4. Speaker's knowledge of the falsity of the
representation or ignorance of its truth;
5. Speaker's intent that it be relied upon;
6. The hearer's ignorance of the falsity of
the representation;
7. The hearer's reliance on the representa-
tion;
8. The hearer's right to rely on the
representation; and
9. Consequent and proximate injury caused by
the reliance.
Wiberg v. 17 Bar, Inc. (MoII~.
1990), 788 P.2d 292, 295, 47 St.Rep.
429, 433. Constructive fraud requires a showing of all these
elements, except the fifth one, the ''speaker's intent that the
representation be relied upon." Under the statute, an intent to
deceive is not necessary to prove constructive fraud. Section 26-
2-406, MCA; Batten v. Watts Cycle and Marine, Inc. (Mont. 1989),
783 P.2d 378, 381, 46 St.Rep. 1984, 1987.
The Workers1 Compensation Court found insufficient evidence
to support Hartfield's claim that Tindall erroneously informed him
about receiving workers1 compensation benefits past age 65. This
Court will not substitute its judgment for that of the Workers'
Compensation Court concerning the credibility of witnesses or the
weight given their testimony. Houtchens v. State Employment
Security Division (1988), 232 Mont. 99, 102, 754 P.2d 824, 826.
The record shows that Tindall and Hartfield had met twice
before February 17, 1982, when the settlement agreement was signed.
The next day Tindall wrote a memorandum noting that the settlement
agreement had been fully discussed:
A petition for Full and Final Compromise
Settlement for total disability was read by
the claimant. The claimant and I then
discussed the petition in full.
In the memorandum Tindall describes the details of the settlement
agreement, including Hartfield's Air Force retirement benefits, his
social security disability benefits, and the fact that he is still
entitled to medical and hospital benefits relating to his injury.
He then concludes:
[Tlhis settlement will enable the claimant to
budget and arrange his livelihood until he can
receive regular Social Security Retirement.
Although Hartfield's retirement income was a consideration in
deciding the terms of the settlement, Tindall testified that Itat
no time did I mean to imply then, prior to that time or now that
a person would have their benefits terminated just because they
reached age 65." Tindall further testified that in discussing the
agreement with Hartfield, he could not have confused which law
applied to Hartfield's injury I1becauseit is cast in stone that the
statutes that we are to use on an individual claim are the statutes
that are in effect on the date of injury.''
In his testimony, Hartfield claimed that Tindall had been
llemphaticll
that benefits would cease at age 65. However, Hartf ield
admitted that he had a difficult time remembering the events
surrounding the signing of the settlement agreement, and could not
recall his two contacts with Tindall prior to the signing of the
settlement agreement.
The trier of fact is the exclusive judge of a witness'
credibility. Section 26-1-302, MCA; Emick v. Koch (1987), 227
Mont. 365, 368, 739 P.2d 947, 949. In addition to observing the
demeanor of the witness, the trier of fact can take into account
the witness1 capacity to recollect events, his inconsistent
statements, and other evidence contradicting the witness1
testimony. Section 26-1-302, MCA. In this case, we find that the
Workers1 Compensation Court had reason to discredit Hartfield1s
testimony.
Furthermore, the plaintiff must present more than his own
opinion as evidence of fraudulent conduct. Batten, 783 P.2d at
381, 46 St.Rep. at 1987. Hartfield cites an inadequate settlement
sum and lower monthly payments as proof that he would not have
agreed to them unless he believed that he could not receive
benefits beyond age 65. However, the settlement was advantageous
to Hartfield in many respects. The fact that Hartfield may not
have received a maximum lifetime payout is not enough for a finding
of constructive fraud.
Hartfield makes much of the fact that monthly payments under
the settlement agreement were less than the monthly amounts he was
receiving at the time of the settlement in temporary total
disability benefits. However, Hartfield knew how much he was
receiving before the contract was signed, as well as the amount of
each monthly payment under the settlement agreement. A party is
presumed to know the contents of a contract and to assent to those
terms. Quinn v. Briggs (1977), 172 Mont. 468, 476, 565 P.2d 297,
301. A party asserting fraud "is put on inquiry notice of the
other party's misdeeds, and must exercise ordinary diligence to
discover the facts constituting the fraud." Holman v. Hansen
(1989), 237 Mont. 198, 202, 773 P.2d 1200, 1203; but see Jenkins
v. Hillard (1982), 199 Mont. 1, 7-8, 647 P.2d 354, 358 (holding
that opportunity to inspect real estate premises is not a defense
to plausible misrepresentations). At the time of the agreement
Hartfield could have discovered the difference in the amount of
monthly payments.
Hartfield claims that the State Fund should have advised him
that he could have an attorney and that he could negotiate the
settlement amount. The party must show that the circumstances
concerning the acts of fraud were such that he could not have
discovered the fraud at the time. Mobley v. Hall (1983), 202 Mont.
The record indicates that at the time of the agreement
Hartfield was at least aware that an issue existed regarding
benefits continuing past retirement age. The court concluded that
Hartfield was an "intelligent, articulate man, well aware of the
significance of a sound economic future for himself and his
family." Hartfield had served 27 years in the Air Force and had
negotiated a settlement once before with the State Fund. We
conclude that in itself failure to inform Hartfield of his right
to seek an attorney or his right to negotiate the settlement sum
does not constitute or contribute to constructive fraud. We hold
that Hartfield did not meet his burden of showing that the State
Fund had misrepresented facts surrounding the settlement agreement.
Did the Workers' Compensation Court err in refusing to set
aside the settlement agreement on the ground of unilateral mistake?
Hartfield alleges that he entered into the settlement
agreement under the mistaken belief that the law had changed and
that he could not receive workers' compensation benefits beyond the
age of 65.
Consent to the contract is lacking if the parties enter into
the contract through mistake. Weldele v. Medley Development
(1987), 227 Mont. 257, 260, 738 P.2d 1281, 1283. According to 5
28-2-410(2), MCA, unilateral mistake arises from Iramisapprehension
of the law by one party of which the others are aware at the time
of contracting but which they do not rectify." In order for
unilateral mistake to operate as a rescission of the contract, the
plaintiff must show that the defendant knew of the other party's
misapprehension of the law. Quinn, 172 Mont. at 478, 565 P.2d at
302. As noted above, the Workers1 Compensation Court determined
that Hartfield failed to prove any misrepresentation of the law by
Tindall. In addition, Hartfield has not shown that Tindall was
aware that Hartfield misunderstood the law. Therefore, we find
that Hartfield's claim of unilateral mistake is unsupported by the
facts.
Did the Workers' Compensation Court err in failing to
determine the settlement agreement void for lack of consideration?
Hartfield contends that under the terms of the settlement
contract, he was not afforded any consideration because he received
$60 less per month than he had been receiving from bi-weekly
temporary total disability benefits and because he could have
collected those benefits for the rest of his life.
Sufficient consideration is essential to the existence of a
contract. section 28-2-102(4), MCA. Consideration is defined by
5 28-2-801, MCA, as:
Any benefit conferred or agreed to be
conferred upon the promisor by any other
person, to which the promisor is not lawfully
entitled, or any prejudice suffered or agreed
to be suffered by such person, other than such
as he is at the time of consent lawfully bound
to suffer, as an inducement to the promisor .
written contracts are presumptive evidence of consideration.
Section 28-2-804, MCA. The burden of showing a lack of
consideration lies with the party seeking to invalidate the
contract. Section 28-2-805, MCA.
Hartfield failed to overcome the presumption that the written
contract was evidence of consideration. Besides the $21,000, in
reaching the settlement Hartfield avoided the possibility for
adjustment of his claim and, if necessary, litigation of his
disability status. Hartfield argues that the settlement agreement
gave him total disability status. However, the contract only
states that the claimant "appears to be totally disabled.!!
Moreover, the settlement agreement states that "a controversy
exists between the claimant and insurer over the amount and
duration of compensation benefits." Had Hartfield not signed the
agreement, litigation of his disability status, which controlled
the duration and amount he would eventually receive, was a
possibility.
The agreement conferred other benefits on Hartfield as well.
Prior to signing the agreement, in the event of his death, workers1
compensation payments would have ceased. section 39-71-726, MCA
(1979). Under the settlement agreement, benefits would have
continued to be paid to his estate after his death. In addition,
Hartfield was still entitled to receive medical and hospital
benefits. We affirm the Workers1 compensation Court's conclusion
that $21,000 constituted good and valuable consideration even
though it may not have represented the maximum amount that
Hartfield could have received.
When reviewing decisions of the Workers1 Compensation Court,
our function is confined to determining whether the court's
judgment is supported by substantial credible evidence. Houtchens,
232 Mont. at 102, 754 P.2d at 826. We hold that the refusal of
the court to set aside the settlement agreement on the grounds of
constructive fraud, unilateral mistake of law, or lack of
consideration is supported by substantial evidence.
The Workers1 Compensation Court also found that the claims of
constructive fraud and mistake were barred by the two-year statute
of limitations which provides that the statute is tolled until the
"discovery by the aggrieved party of the facts constituting the
fraud or mistake." Section 27-2-203, MCA. Hartfield claims that
he discovered the fraud or mistake in December 1986 when he read
the newspaper account of the Hunter case, stating that claimants
could receive benefits after reaching age 65.
Since we agree with the courtlsdecision that Hartfield failed
to establish either constructive fraud or unilateral mistake of
law, we need not further address whether the statute of limitations
was tolled.
The judgment of the Workers1 Compensation Court is affirmed.
We concur:
"chief Justice
Justices
13
Justice John C. Sheehy, dissenting:
I dissent. It is not necessary to discuss such legal quanta
as constructive fraud, unilateral mistake, consideration or any
other variant of contract or limitations law. It is only necessary
to consider here an injured worker who, innocently or not, was
induced to trade a $54,750 asset for $21,000. The very purpose of
the Workers' Compensation Act is ignored here by the majority:
that purpose to restore in some measure to the worker the losses
he sustains from injuries in industry without requiring litigation,
all in return for the worker giving up his common law rights of
action against his employer. That is the consideration we should
regard, and then insist that the worker be protected in that end.
It is simple folly to accept that an injured worker, unskilled
in law, is on an equal contractual footing with an agent of the
Fund in a discussion of settlement, a settlement initiated by the
Fund, holding out visions of sugar plums to the worker to give up
his full rights. This is dirty business, and I will not condone
it. - unjust agreement.
I would reverse and set aside the-.
Justice William E. Hunt, Sr.:
I concur in the dissent of Justice Sheehy.
Justice