No. 94-315
IN THE SUPREME COURT OF THE STATE OF MONTANA
1995
PATRICIA SULLIVAN,
Petitioner and Appellant,
-vs-
AETNA LIFE & CASUALTY,
Defendant/Insurer and
Respondent,
ST. JAMES COMMUNITY HOSPITAL,
Employer.
APPEAL FROM: Workers' Compensation Court, State of Montana
The Honorable Mike McCarter, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Bernard J. "Ben" Everett; Knight, Dahood,
McLean, Everett & Dayton, Anaconda, Montana
For Respondent:
Brendon J. Rohan; Poor, Roth & Robinson,
Butte, Montana
Submitted on Briefs: February 9, 1995
Decided: April 12, 1995
Filed:
Justice W. William Leaphart delivered the Opinion of the Court.
Patricia Sullivan (Sullivan) appeals from the April 21, 1994
order of the Workers' Compensation Court denying her petition for
a lump sum advance against permanent partial disability benefits
that would otherwise be available to her at age 65. We affirm.
Sullivan injured her neck on October 5, 1983 in the course and
scope of her employment for St. James Community Hospital. St.
James and its insurer, Aetna Life and Casualty (Aetna) accepted
liability for her industrial accident and do not challenge that she
is permanently totally disabled. Aetna has continuously paid
Sullivan total disability benefits. Despite numerous surgeries,
she continues to suffer severe pain in her neck, arms, and hands
and severe headaches.
Sullivan seeks a lump sum advance against permanent partial
disability benefits which she would otherwise begin receiving upon
conversion of her social security benefits to retirement benefits.
See 5 39-71-710, MCA (1985). Sullivan seeks $41,582.29 to pay for:
(1) bank loans taken out for a motor home and to repay her mother
for mortgage payments; (2) a credit card debt; and (3) repair of
two motor vehicles. The sum requested does not include $10,000
Aetna recently paid to Sullivan to pay off a loan from her mother
and two credit card debts. Sullivan's monthly income is $1,662.56,
consisting of $732 from social security benefits and $930.56 from
workers' compensation benefits. Her annual income, which is tax
free, is $19,950.72.
Sullivan reported monthly expenses of $2,035.05. This amount
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includes, among other expenses, $466.07 for her motor home loan,
$245.81 for insurance, maintenance, and registration of her
vehicles, $130 for a bank loan taken out to repay her mother for a
prior loan, and $100 for a credit card debt.
Sullivan lives with her parents, ages 76 and 84, and is a
part-owner of the house. In recent years, she has paid for new
water pipes, new windows and doors, and aluminum siding for the
house. Sullivan testified that because her mother cooks and takes
care of her, she pays $175 a month rent to her parents. She also
testified that she pays one-half of the household expenses but
later conceded that some monthly expenditures reported were
actually total household costs rather than just her share.
In 1989, Sullivan purchased a motor home for $40,000, which
she testified she uses in the summer "to escape to the country,"
and occasionally to sleep or read in while it is parked at home.
She pays approximately $523 per month to finance, register, and
insure the vehicle. The Workers' Compensation Court noted that
this amounts to over 26% of her current monthly expenditures. She
testified she has not sold the motor home because she cannot "get
value out of it" and that she cannot rent one because of insurance.
She provided no support for these claims and on cross-examination
conceded that she in fact has not even tried to sell the motor
home.
Testimony at trial indicated that Sullivan received a personal
injury settlement in 1990. However, she claimed she did not know
the amount of the settlement, although respondent's counsel
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suggested it was approximately $40,000. Sullivan could not recall
the amount she received after attorney's fees and was confused as
to how she had spent the money. She initially testified that she
used the money to pay off a vehicle loan but on cross-examination
stated that her mother had paid that loan.
Sullivan testified that she has difficulty handling her money.
The Workers' Compensation Court found that Sullivan does not have
a good understanding of her own financial affairs, concluding that
she has had numerous opportunities to reduce her monthly expenses,
including selling her motor home, paying only her share of
household living expenses, and repairing and maintaining only one
vehicle. The Workers' Compensation Court further considered that
Sullivan is only 48 years old and concluded that her ability to
support herself in the future could be jeopardized if she received
a lump sum payment. Concluding that Sullivan did not establish by
a preponderance of credible evidence that the lump sum advance
requested was in her best interest, the Workers' Compensation Court
denied her request. This appeal followed.
The sole issue on appeal is whether the Workers' Compensation
Court erred when it concluded'that a lump sum advance is not in
Sullivan's best interest.
Standard of Review
Workers' Compensation Court decisions denying lump sum
settlements will not be interfered with on appeal unless there is
an abuse of discretion. Byrd v. Ramsey Engineering (1985), 217
Mont. 18, 21-22, 701 P.2d 1385, 1387; Kent v. Sievert (1971), 158
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Mont. 79, 81, 489 P.2d 104, 105. The Workers' Compensation Court's
findings are presumed to be correct and will be affirmed if
supported by substantial evidence. Byrd, 701 P.2d at 1387.
Sullivan has the burden of proving that the lump sum conversion is
in her best interest. Stanley Structures v. Scribner (1992), 253
Mont. 236, 241, 833 P.2d 166, 169.
Discussion
Many of our prior decisions have listed three elements
(outstanding debt, pressing need, and best interest of the
claimant, his family, and the general public) to be considered when
evaluating lump sum settlements. The focus, however, has always
been on the best interest component. See, e.g., Stanley
Structures, 833 P.2d 166; Byrd, 701 P.2d 1385. While outstanding
indebtedness is a factor identified by this Court, both
indebtedness and pressing need have, in fact, been secondary
factors with best interest being the primary criterion.
As early as 1929, this Court established that for industrial
accident claims, periodic payments should be the rule and lump sum
settlements should be the exception. Landeen v. Toole County
Refining Co. (1929), 85 Mont. 41, 47, 277 P. 615, 617. In
Willoughby v. Arthur G. McKee & Co. (1980), 187 Mont. 253, 257, 609
P.2d 700, 702, the Court recognized that lump sum settlements are
granted where there is outstanding indebtedness, pressing need, or
where the best interests of the claimant, his family, and the
general public will be served. In Willoughby, this Court elevated
the best interest standard over the other two criteria:
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"The criteria determinative of the advisability of
conversion to a total or partial lump sum award have
generally been held to be I. . . the best interests of
the claimant, his family and for the best interests of
the public . . . .' Kustudia v. Ind. Act. Brd. [19531,
127 Mont. 115, 123, 258 P.2d 965, 969. See also Legowik
v. Montgomery Ward [19711, 157 Mont. 436, 486 P.2d 867.
The existence of a 'pressing need' and/or 'outstanding
indebtedness' has likewise been held to be relevant
criterion." [Citation omitted.]
Willoughby, 609 P.2d at 702.
In Byrd, which considered the petitioner's debts, this Court
acknowledged the best interest rule established in Willoughby but
further stated:
The [Willoughby] court goes on to say:
Lump sum settlements are only granted where there is
"outstanding indebtedness,' "pressing need," or where
"the best interests of the claimant, his family and the
general public will be served."
Byrd, 701 P.2d at 1387. The Byrd Court then went on to include all
three factors in its review, rather than just best interest. In
Crittendon v. Terri's Restaurant (1991), 247 Mont. 293, 295, 806
P.2d 534, 536, the Court restated the three-part test from
Willoughby but further stated:
[wlhile the presumption is in favor of periodic payments,
where the best interests of the parties will be served by
lump sum conversions, "they should be awarded without
hesitancy . . .I' [Citation omitted. I
The Court analyzed the facts of that case primarily in terms of the
best interest test but it also considered pressing need.
In Stanley Structures, our most recent decision on this issue,
the claimant had petitioned for a lump sum payment to pay off
debts. Even though the claimant's outstanding indebtedness was at
issue, the Court listed all three factors to be considered for lump
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sum settlements and then based its decision on the best interest
standard. Stanley Structures, 833 P.2d at 169. The Court affirmed
the denial of the lump sum request, stating that:
[aln additional lump sum would benefit [the claimant1 by
reducing his monthly expenses at the present time.
However, the fact that [the claimant's] debts exceed his
income does not require conversion of [his] weekly
benefits into a lump sum settlement. Ruple v. Bob
Peterson Logging Co. (1984), 209 Mont. 276, 281, 679 P.2d
1252, 1254.
Stanley Structures, 833 P.2d at 169. This analysis demonstrates
that the mere fact that the claimant has outstanding indebtedness
is not sufficient grounds for lump sum settlement.
These cases indicate that the claimant's best interest is the
primary factor to be considered when evaluating lump sum
settlements. Where appropriate, courts should also consider
outstanding indebtedness and pressing need but these are to be
components of the best interest analysis. Considering that debt is
a significant part of our society, including home mortgage, credit
card, medical expenses, and student or farm loans, it is
unrealistic to conclude that outstanding debt alone is sufficient
grounds to grant a lump sum settlement. Were that the case, most
claimants could get lump sum settlements on demand. This would be
contrary to the express policy that regular payments are the rule
rather than the exception. Landeen, 277 P. at 617. Similarly,
pressing need, considered alone, is particularly subjective and
ignores the consequences of granting a lump sum settlement. The
best interest test embraces all factors, including outstanding debt
and pressing need.
The dissent suggests that the majority of this Court along
with the trial court patronized Sullivan by passing judgment as to
her "best interests." This criticism is based upon a misconception
of the role of this Court. The majority has not made an
independent determination as to what is in Sullivan's best
interest. Rather, we sit in review of the decision of the Workers'
Compensation Court. In affirming the Workers' Compensation Court,
we have not made an independent, de novo determination of
Sullivan's best interests. We have merely reviewed the conclusions
of the Workers' Compensation Court and have decided that that court
did not abuse its discretion.
In accusing the courts of being patronizing and judgmental,
the dissent assumes that lump sum advances are available, if not as
a right then certainly as a matter of mathematics; i.e., to anyone
whose debts exceed his/her income. This, of course, is not the
law. Stanley Structures, 833 P.2d at 169. This Court and the
trial court are operating under legal precedent which requires that
lump sum advances are the exception and are available only upon a
showing, by the claimant, that such an advance is in the best
interests of the claimant. Krause v. Sears Roebuck & Co. (19821,
197 Mont. 102, 106-07, 641 P.Zd 458, 460-61. If the Court were
addressing the issue of whether the "best interests" test should be
retained, the comments in the dissent might have some relevance.
That issue, however, is not before the Court. Everyone, Sullivan
and dissenters included, agrees that the trial court was required
to resolve this petition for a lump sum advance by application of
the best interests standard. So long as that remains the standard,
it serves little purpose to accuse the judiciary of being
judgmental. The best interests standard, by its very nature,
requires the Workers' Compensation Court to exercise its
discretion--that is, to use its judgment.
Despite the protestations in the dissent, it is not the
function of this Court to substitute its judgment for that of the
trial court. This Court will not reverse the Workers' Compensation
Court's determination of best interests unless it appears that the
court has abused its discretion. Given the facts presented to the
Workers' Compensation Court and given that court's observations as
to Sullivan's lack of credibility and lack of money managing
abilities, we see no basis for concluding that the court abused its
discretion.
The facts of this case are distinguishable from those cases
where we held it was an abuse of discretion to deny the claimant's
lump sum award. See, e.g., Utick v. Utick (1979), 181 Mont. 351,
593 P.Zd 739 (claimant treated unfairly and presented detailed
investment plan); Byrd, 701 P.2d 1385 (claimant would lose house
without lump sum). In the instant case, the Workers' Compensation
Court considered that Sullivan's motor home consumed over 26% of
her income, that she maintained two other vehicles, maintained more
than her share of household expenses, and that she has difficulty
managing her money. The court concluded that Sullivan failed to
sufficiently demonstrate that all of her monthly expenses are for
her own personal maintenance or that she cannot make ends meet if
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she properly manages her money and pays only her share of household
expenses. In light of the above analysis and the substantial
evidence supporting the Workers' Compensation Court's findings and
conclusions, we hold that the Workers' Compensation Court did not
abuse its discretion. Affirmed.
We concur.
Justices
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Justice Terry N. Trieweiler dissenting.
I dissent from the majority opinion. I would reverse the
Workers' Compensation Court's denial of claimant's petition to
convert a portion of her biweekly disability benefits to a lump
SUtl. Based on the uncontroverted evidence, I conclude that it was
clearly in her best interest that she do so.
Patricia Sullivan was 48 years old at the time of the trial
court's decision, and according to the court's findings, is
entitled to total disability benefits for an additional 17 years at
the rate of $930.56 a month. She sought to convert a portion of
her future disability benefits in the amount of $41,582.29 to a
lump sum to pay debts for which she currently makes monthly
payments in the amount of $696.44.
Advancing the necessary amount would only require a reduction
of her total disability benefits in the amount of $205.46 per
month. In other words, by converting a portion of her future
disability benefits to a lump sum, paying it to her at the present
time, and allowing her to pay off her current debts, she could
realize a positive improvement in her current cash flow equal to
$490.98 per month.
Section 39-71-741, MCA (1983), which was in effect at the time
of claimant's injury, authorized a conversion of future disability
benefits to a lump sum when requested by the claimant. We have
previously held that where the insurer denies conversion of those
benefits to a lump sum, the standard by which the courts should
resolve the dispute between the parties is as follows:
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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 settlements 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.
Krause v. SearsRoebuck& Co. (1982), 197 Mont. 102, 106, 641 P.2d 458,
460 (citing Willoughbyv.ArthurG. McKee &Co. (1980), 187 Mont. 253, 256,
609 P.2d 700, 702).
The Workers' Compensation Court, and the majority of this
Court, have concluded that it is not in the claimant's best
interest to use the benefits to which she is entitled in a form
that would enable her to improve her cash flow and provide her with
disposable income that she does not currently have. This
conclusion makes no sense to me. The simple mathematics of the
problem presented to us requires that we conclude otherwise.
In spite of the obvious conclusion that having nearly $500
extra cash a month to spend would be in anyone's best interest, the
Workers' Compensation Court denied claimant's request based on its
subjective opinion that Patricia spends a disproportionate amount
of her income on a motor home, that she does not really need two
vehicles, that she is paying a disproportionate share of household
expenses, and that she has difficulty managing her money. The
majority, in their opinion, approve of the Workers' Compensation
Court's reasoning.
In reality, the evidence was that claimant's motor home is her
only means of recreation and is important to the mental health and
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well-being of a totally disabled person who has no other escape
from a very restricted lifestyle. She cannot sell the motor home
for enough to pay off the balance of the purchase price, even if
she agreed with those more fortunate people who have decided that
it is not necessary for her to own it.
While the fact that claimant owns two vehicles may sound
excessive, one vehicle is a pickup truck which has been driven for
89,000 miles. The other is a van, which has been operated for
56,000 miles. Both are in bad shape and need substantial engine
work. However, both are otherwise paid for and having them
repaired is cheaper than the alternative of trying to finance a new
vehicle.
Patricia is hardly deserving of this Court's, or the trial
court's, criticism for trying to share household expenses with her
76-year-old mother and 84-year-old father, both of whom are retired
and limited to social security income, and one of whom has
substantial medical expenses for severe health problems. The world
would be a better place if others were as conscientious. Neither
is there any evidence in the record that Patricia's living expenses
would be less if she left her mother and father's home and had to
live independently.
Finally, it seems to me unduly judgmental to criticize someone
as being a poor money manager when, due to her limited income, her
inability to enjoy life as most people do, and her willingness to
assist her elderly parents with certain basic necessities of life,
her average monthly expenses exceed her average monthly income.
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Furthermore, even if the trial court was correct in its finding
that Patricia is not a good money manager, it should not be
inferred from that finding that the money, if advanced, would not
be spent to reduce her debts. Through her attorney, she offered to
have the remaining advances, like the previous advances, made
jointly payable to her and her creditors to assure that the money
was spent on the purpose for which it was sought.
The role of the courts in resolving disputes which arise under
§ 39-71-741, MCA (1983), is to simply conclude, based on the
evidence (usually the mathematics) presented, whether it is in the
claimant's best interest that he or she receive disability benefits
in one form, as opposed to another. A claimant should not be
required to prove that all of his or her expenses, or all of the
purposes for which he or she has incurred debt, meet with the trial
court's approval, based upon the trial judge's value system. The
simple fact in this case is that Patricia Sullivan incurred debts
for understandable purposes which now require that she make monthly
payments which she is unable to make in combination with her other
monthly living expenses. However, even if that was not the case,
she has proven that by converting a portion of her future
disability benefits to a lump sum and paying off those debts, the
expenses she would eliminate are more than three times the amount
of the income she would lose. I conclude that this fact alone was
sufficient to establish that conversion of her disability benefits
to a lump sum for the purposes set forth in her petition was in her
best interest.
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Furthermore, contrary to the suggestion in the majority
opinion, there is no misperception by the dissenting justices of
this Court's role. This Court's role is to determine whether the
Workers' Compensation Court abused its discretion when it denied
the claimant an opportunity to use her benefits in a way that would
enable her to live within her income when she clearly cannot do so
otherwise. This Court's role is not to use the old "scope of
review" dodge (which is applied selectively at best in this Court)
to avoid applying a relatively simple "best interest" standard to
the undisputed facts.
Neither do those who join in the dissent need an explanation
of the role that precedent plays in this Court's decisions. The
dissent is based on this Court's precedent. It clearly provides
that lump sum conversions "should be awarded without hesitancy
where the claimant's best interest would be best served." The only
people who could claim that simple mathematics are not sufficient
to divine the claimant's "best interests" in this case are people
who have never had to struggle to make ends meet on disability
checks.
If there was no abuse of discretion in this case, I cannot
imagine a set of circumstances where one could be found.
As a final observation, I find it ironic that Patricia
Sullivan's desire to convert some of her future disability benefits
to a lump sum has caused Aetna Life and Casualty such great concern
for her best interests.
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The insurer now cares about whether she is paying an unfair
proportion of her family's living expenses, whether she really
needs two vehicles, or whether one would suffice, whether she would
be better off renting a motor home, rather than owning one, and
whether her family members couldn't do more for her personal care
without being reimbursed for their time. One would think that
these are normally issues best left to the individual, especially
when all she is asking for is her own money in a different form.
However, according to Aetna, the trial court, and this Court,
Patricia Sullivan is no longer qualified to make those decisions by
virtue of being the recipient of workers' compensation disability
benefits. She, like many other injured workers, is surely damned
by the pervasive and patronizing concern for her "best interest"
that has been demonstrated by her insurer and this State's courts.
If only the insurers and self-insured employers in this State
would show as much concern for an injured worker's best interests
when it was time to accept responsibility for claims and pay
disability benefits and medical expenses in a timely fashion, we
certainly could reduce the amount of litigation in this area of the
law.
However, judging by the number of disputes over disability,
medical, death, and other workers' compensation benefits which have
been submitted to this Court over the years, and the results of
those disputes, this overriding concern for the best interests of
injured workers is selective and infrequent at best.
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For these reasons, I dissent from the majority opinion. I
would reverse the judgment of the Workers' Compensation Court; I
would award attorney fees and costs to the claimant; and I would
impose the statutory penalty for the unreasonable denial of
Patricia Sullivan's benefits.
Justice William E. Hunt, Sr., joins in the foregoing dissent.
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