Reil v. State Compensation Mutual Insurance Fund

No. 92-027
IN THE SUPREME COURT OF THE STATE OF MONTANA
1992

KENNETH REIL,
Petitioner, Appellant
and Cross-Respondent,

STATE COMPENSATION MUTUAL
INSURANCE FUND,
Defendant, Respondent
and Cross-Appellant.

APPEAL FROM: The Workers1 Compensation Court,
The Honorable Timothy Reardon, Judge presiding.

COUNSEL OF RECORD:
For Appellant:
Lloyd E. Hartford, Attorney at Law, Billings,
Montana
For Respondent:
Charles G. Adams, Legal Counsel, State Compensation
Insurance Fund, Helena, Montana

Submitted on Briefs: June 4, 1992
Decided: August 18, 1992
Filed:
Justice Fred J. Weber delivered the Opinion of the Court.

Kenneth Reil, claimant, appeals from a judgment by the
Workers' Compensation Court ordering him to reimburse the insurer
for all benefits and attorney fees. The State Compensation Mutual
Insurance Fund (State Fund) filed a cross-appeal from the Workers1
Compensation Court order denying its motion to join an additional
party defendant. We affirm.
The parties raise the following issues for our review:
1. Is the State Fund entitled to restitution of all
compensation and medical benefits paid pursuant to a judgment of
the Workers' Compensation Court which was subsequently reversed on
appeal?
2. Is the claimant entitled to an award of attorney fees and
costs?
3. Did the Workers' Compensation Court improperly deny
joinder of claimant's attorney as a third party defendant?
On March 20, 1987, the Workers1 Compensation Court (WCC) ruled
that Mr. Reil was entitled to benefits under Montana's Workers'
Compensation Act for injuries suffered while employed at Billings
Processors, Inc. The State Fund appealed the judgment of the WCC
to this Court on April 23, 1987. On July 21, 1987, pending a final
decision on appeal, we issued an interim order denying the stay of
execution of judgment and ordered the State Fund to pay all
benefits accrued by the claimant pursuant to the WCC's judgment.
The State Fund paid Mr. Reil approximately $13,750 in benefits, of
which $3,000 was retained by Mr. Reil's counsel for costs and
2
attorney fees.
On December 3, 1987, this Court reversed the judgment of the
WCC finding that Mr. Reil failed to provide his employer with
timely notice of his injury. Reil v. Billings Processors, Inc.
(1987), 229 Mont. 305, 746 P.2d 617. Subsequently, the State Fund
sought reimbursement for the amount paid to the claimant and his
attorney in compliance with this Court's order of July 21, 1987.
In a declaratory action, the WCC denied joinder of Mr. Reilis
counsel as a third party defendant and ruled that restitution was
proper. The WCC ordered Mr. Reil to reimburse the State Fund for
all compensation benefits and medical expenses received.
I
Is the State Fund entitled to restitution of all compensation
benefits and medical expenses paid pursuant to a judgment of the
Workersq Compensation Court which was subsequently reversed on
appeal?
Mr. Reil contends the WCC improperly ordered restitution. He
claims that restitution is a common law remedy which is not
applicable under Montanais Workers Compensation Act. Mr. Reil
further contends that the Act, as of his date of injury, precluded
the application of common law remedies to cases involving workerst
compensation claims. Finally, Mr. Reil argues that the State Fund
cannot recoup these benefits under the Act when the Act, which is
the exclusive remedy for injured workers as well as the insurer,
does not provide for restitution as a remedy.
The State Fund claims that § 39-71-411, MCA (1985), did not
provide that the Act would be an exclusive remedy for insurers.
Further, it contends that even if the Act was exclusive, Mr. Reil's
injury was not covered under the Act. Thus, the exclusivity
provisions of 5 39-71-411, MCA (1985), do not apply.
The WCC concluded that Mr. Reil could not take refuge under
the Act where he had no entitlement under the Act as a result of
his failure to give timely notice of his injury to his employer.
In ordering restitution the WCC stated:
The [Workers' Compensation Court's] original judgment for
the claimant was reversed on appeal. The effect of the
reversal was a determination that claimant had no
entitlement to benefits under the Act and never had such
an entitlement. [Mr. Reil's] claim was void at the
outset. The fact that the sums were paid pursuant to a
trial court ruling does not vest the claimant with an
entitlement that never existed.
This Court has held that it will uphold the result reached by
the Workers' Compensation Court if that result was correct,
regardless of the reasons given for the conclusion. Rath v. St.
Labre Indian School (1991), 249 Mont. 433, 439, 816 P.2d 1061,
1064. As above set forth, the WCC concluded that the claimant had
no entitlement to benefits and never had such an entitlement and
that his claim was void at the outset. That reasoning is not
totally correct. The employee here worked for an employer where
there was coverage under the Act. As a result, his claim was not
void at the outset. Had he filed his claim on time, it could have
become a valid claim. It became a non-compensable claim because
the claimant failed to provide timely notice as required under the
Act. While we do not agree with all of the foregoing statements of
the WCC, we do agree with the conclusion that the exclusivity
provisions of the Act do not preclude restitution.
Claimant argues that § 39-71-411, MCA (19851, provides the
exclusivity which prohibits restitution. In pertinent part § 39-

71-411, MCA (1985), provides:

For all employments covered under the Workers'
Compensation Act ... the provisions of this chapter are
exclusive. Except as provided in part 5 of this chapter
for uninsured employers and except as otherwise provided
in the Workers' Compensation Act, an employer is not
subject to any liability whatever for the death of or
personal injury to an employee covered by the Workers'
Compensation Act or for any claims for contribution or
indemnity asserted by a third person from whom damages
are sought on account of such injuries or death. ...
It is true that the foregoing section mentions that the provisions
of this Chapter are exclusive. However, the section is addressed

to the elimination by the Act of employer liability for death or
personal injury to an employee covered by the Act or f o r claims for
contribution or indemnity asserted by a third person because of
such injuries or death. We conclude this section has no specific
application in the present controversy.
With regard to notice of injury, 5 39-71-603, MCA f1985),

provides in pertinent part:
No claim to recover benefits under the Workers9
Compensation Act . . . may be considered compensable
unless, within 60 days after the occurrence of the
accident which is claimed to have caused the injury,
notice of the time and place where the accident occurred
and the nature of the injury is given to the employer or
the employer's insurer. ...
As above-mentioned, this Court reversed the judgment of the WCC
because the claimant failed to provide his employer with timely
notice of injury. As a result, we may properly state that under
the above section, the claim could not ''be considered compensable"
because of the failure to give notice.
With regard to the liability of insurers, !
j 39-71-407, MCA
(1985), provides:
Every insurer is liable for the payment of compensation,
in the manner and to the extent hereinafter provided, to
an employee of an employer it insures who receives an
injury arising out of and in the course of his
employment. ...
The facts of this case establish that the insurer was not liable
for payment of compensation as a result of the failure to give the
required notice. These are the only sections which we find
applicable to the facts of this case. There is no section in the
Act which makes specific reference to restitution.
In Hanson v. Hansen (1958), 134 Mont. 290, 295, 329 P.2d 791,
793, this Court quoted Restatement, Restitution, Chapter 3, section
74 at page 302, which states:
"A person who has conferred a benefit upon another
in compliance with a judgment . . . is entitled to
restitution if the judgment is reversed or set aside,
unless restitution would be inequitable or the parties
contract that payment is to be final; if the judgment is
modified, there is a right to restitution of the excess."
The Court applied these provisions in awarding restitution.
Applying the foregoing to the present case, we conclude that
judgment was entered against State Fund: that pursuant to the
judgment State Fund conferred a benefit by paying claimant; that
the judgment was reversed by this Court; and that no facts have
been presented by the claimant to indicate that restitution would
be inequitable. We therefore conclude that restitution is proper.
In Waggoner v. Glacier Colony of Hutterites (1957), 131 Mont. 525,
312 P.2d 117, this Court concluded that a party has the right to
recover assets lost by enforcement of a judgment subsequently
reversed on appeal. There we stated that: "The right to recover
what one has lost by enforcement of a judgment subsequently
reversed is well established."
We conclude that the order of the WCC is consistent with
existing Montana law including Waasoner and Hanson and that
restitution is equitable. The State Fund is entitled to
restitution where the judgment of the WCC conferring the benefit
was reversed.
Claimant cites case law from other jurisdictions which have
precluded the State from recouping benefits erroneously paid to
injured workers. We do not find such case law to be controlling.
As stated above, this Court required the State Fund to pay all
benefits accrued by the claimant prior to the entering of its
opinion on the appeal. If restitution were now denied to the State
Fund, it would effectively eliminate such orders to pay benefits
pending appeal.
We hold that the WCC properly ordered the claimant to pay
restitution to the State Fund for compensation and medical benefits
paid pursuant to a judgment of the WCC which was subsequently
reversed on appeal.
II
Is the claimant entitled to an award of attorney fees and
costs?
Here we are affirming the judgment of the lower court. Thus,
Mr. Reil is not entitled to either attorney fees or costs under $ 5
39-71-611 and 39-71-612, MCA.

Did the Workers' Compensation Court improperly deny joinder of
claimant's attorney as a third party defendant?
As required by this Court's order of July 21, 1987, the State
Fund paid benefits of approximately $13,000 to Mr. Reil and his
attorney. After reversal on appeal, the WCC specifically directed
both the claimant and his counsel to reimburse the State Fund,
stating as follows in its judgment dated November 13, 1991:
2. Claimant and his counsel are directed to
reimburse SCMIF for all benefits and attorney's fees
received pursuant to this Court's ruling which was
reversed on appeal by the Montana Supreme Court.
The WCC ruling is consistent with Champion Int'l. Corp. v.
McChesney (1987), 239 Mont. 287, 779 P.2d 527, in which this Court
held that the State Fund was entitled to a repayment of attorney
fees based upon benefits received by a claimant.
Prior to the entry of the above judgment on November 13, 1991,
State Fund presented a motion to name claimant's attorney of record
as a defendant. The basis for the motion was the contention that
Mr. Hartford, as attorney for the claimant, was personally liable
to State Fund for attorney fees and costs received. In denying the
motion to join claimant's attorney as an additional defendant, the
WCC stated in its order of September 13, 1991:
Neither party has cited any authority which would
convince the Court that naming Hartford a party defendant
is either required or appropriate. Any interest Hartford
has personally is totally incidental and derivative of
the benefits received by the claimant. If the underlying
issue in the pending petition relative to the
reimbursement of benefits paid favors the insurer, any
 derived benefits would be subject to the same
disposition.
The Court can see no conflict of interest between
Reil and Hartford's interest in the present matter.
On appeal no authority has been cited which requires the addition
of the attorney as a party to this cause. In view of the above
quoted judgment provision which requires "claimant and his counsel11
to reimburse State Fund for "all benefits and attorney's fees
received,*Ithere appears no necessity forthe discretionary joinder
of the attorney as a party under ARM 24.5.308.
We affirm the denial of joinder of claimant's attorney by the
Workers1 Compensation Court.
Affirmed.

We Concur: fl

Justices
Justice Karla M. Gray, dissenting.

I respectfully dissent from the opinion of the majority. We
were bound, by the absence of a stay provision in the Workers*
Compensation Act, to deny the State Fund's request for a stay
pending appeal. in this case in 1987. In my view, we also are bound
by the Act's lack of a reimbursement or restitution provision
covering the situation before us to reverse the Workers'
Compensation Court's decision requiring restitution. The Workerst
Compensation Act is a legislatively-created substitute for common
law rights and remedies regarding work place injuries. It does not
contain a right to restitution in the event of a judgment reversed
on appeal and it is wrong for this Court to create such a right.
Our role is to ascertain and declare what is contained in statutes;
we are not to insert what has been omitted. Section 1-2-101, MCA.
This is particularly so when we address an area of the law which
is, in its entirety, a statutory creation. I do not disagree that
there are arguments to be made for allowing restitution in these
circumstances. And I recognize that there are equities to be

weighed in fashioning an appropriate resolution to the dilemma
faced by both claimants and insurers in situations such as these,
But these are matters within the domain of the legislature, not
this Court.
In addressing the restitution issue, it is important to note
what has occurred regarding stays of Workers' Compensation Court
judgments pending appeal since this Court's proper denial of a stay
in this very case in 2987 based on an absence of statutory
authority. In direct response to that decision, House Bill 154 was
introduced in the 1989 Legislature; it provided for stays of
workers' compensation decisions under essentially the same terms as
are available in appeals from district court decisions. House Bill
154 was enacted as Chapter 74, Laws of 1989, and is codified as 5
39-71-2910, MCA. It is my view that this is the proper means and
method with which to address the issue of restitution and that the
legislature is the proper forum to resolve the question.
Section 39-71-610, MCA (1985), also is instructive with regard
to the restitution/reimbursement issue. That section specifically
authorizes reimbursement by a claimant where an insurer has
terminated benefits, that termination is disputed, the division has
ordered continuation of benefits and, subsequent to a hearing, it
is held that the insurer was not liable for the ordered payments.
In that situation, the legislature specifically provided for
reimbursement. It did not do so in the substantially similar
situation before us where payment of certain benefits was disputed,
payment was required via the Workerst Compensation Courtts order,
and this Court subsequently held that the insurer was not liable
for the payments. It is my view that, in judicially creating an
additional remedy where the legislature has not done so, this Court
has overstepped its role. This is particularly true since 5 39-71-
104, MCA (1985), requiring liberal construction of the Act, was
consistently interpreted by this Court to mandate liberal
construction in favor of claimants. Hunter v. Gibson Products of
Billings (1986), 224 Mont. 481, 484, 730 P.2d 1139, 1141; Sorum v.
Reider (19831, 205 Mont. 98, 108, 666 P.2d 1221, 1226.
1 have found no reported case in any jurisdiction in which, in
a workersf compensation setting, a court has judicially created a
right to receive, and a corresponding obligation to pay,
restitution for benefits properly paid but reversed on appeal.
While many courts have denied recoupment, restitution or
reimbursement for overpayments at various stages of workers'
compensation proceedings,' the following cases address the precise
issue before us.
In Ransier v. State Industrial Insurance System, the worker
received a lump sum award for a knee injury which was reduced on
appeal. SIIS, Nevada's equivalent to our State Fund, initiated a
recoupment action for the overage and the worker asserted the
absence of statutory authority. In holding against recoupment of
funds properly paid pending appeal and later found unwarranted, the
Supreme Court of Nevada stated:
"Chapter 616 of the Nevada Revised Statutes sets
forth a comprehensive system for the compensation of
industrial injuries. Because the system is uniquely
legislative in nature, and alters the common law rights
and liabilities of both employees and employers, we have
previously refused to disturb the delicate balance
created by the legislature by implying provisions not
expressly included in the legislative scheme."
Ransier v. State Industrial Insurance System (Nev. 1988), 766 P.2d
274, 276; citing Weaver v. SIIS (Nev. 1988), 756 P.2d 1195.
The Kansas case of Tompkins v. George Rinner Construction Co.
(Kan. 1966), 409 P.2d 1001, is also on point. The carrier appealed
an award of compensation and obtained a reversal. It then sought
to "recover back" the payments made pending appeal. Interestingly,
the carrier asserted the same arguments on lack of entitlement--

'
See, e.g., Matter of Johner (Wyo. 1982), 643 P.2d 932;
Williams v. State Accident Ins. Fund (Or. 1977), 572 P.2d 658.
unjust enrichment, "justice," and general restitution principles
related to payments made pursuant to judgment when the judgment is
later reversed--as are asserted by the State Fund here. Holding
that restitution was not available, the Supreme Court of Kansas
stated:
The workmen's compensation act establishes a
procedure of its own covering every phase of the right to
compensation and of the procedure for obtaining and
enforcing it, which procedure is complete and exclusive
in itself [citing cases].

It is logical to assume the legislature anticipated that
some cases would be reversed by this court on the ground-
-as here--that an accidental injury did not arise "out
oft1the employment and therefore compensation is to be
denied--but it failed to enact any tlrecovery backtt
provision.

When the compensation case itself was here on the
merits our decision, above, was that the fatal accidental
injury did not arise "out of1'the employment--therefore
compensation was to be denied. From a purely
wlegalisticll standpoint it can, of course, logically be
argued that under that decision claimant was entitled to
no compensation in the first place--and therefore it is
somewhat llshockinglt say that she should now be
to
permitted to retain the payments made to her. We
believe, however, the matter does not end there, and that
in view of the provisions of the compensation act general
rules relating to urestitutionll have no application and
that "recovery backw is not to be permitted. Nowhere in
the act is there any provision authorizing a gfrecovery
back1'. If the anomalous situation presented here is to
be corrected it is within the power of the legislature to
do so.
Tompkins, 409 P.2d at 1003-1004.
Finally, in a case nearly identical to ours, where a
compensation award was reversed because the claimant had failed to
satisfy the statutory notice requirement, the Supreme Judicial
Court of Maine refused to create a right to restitution not
contained in its statutory workers' compensation program. That
court stated:
To attempt to resolve this question by engrafting
upon the statutory scheme judicially created doctrines of
restitution would involve us in the establishment of
broad social policy in a field of law created by the
legislature in response to legislative dissatisfaction
with judicial solutions to the problems of compensation
for workers injured in industrial accidents. ...
[W]e
are asked to establish policy in this uniquely statutory
field when the legislature has deliberately elected to
remain silent. In the absence of an express legislative
command or a clear indication of legislative intention,
we leave the parties where the legislature left them.
American Mutual Ins. Co. v. Murray (Me. 1980), 420 A.2d 251, 252.

I do not suggest that these cases are controlling on this
Court. It is my view, however, that they represent the correct
approach to the issue before us and the result which this Court
should reach. I would reverse the decision of the Workers'
Compensation Court

Justice R. C. McDonough joins in the foregoing dissent of Justice
Karla M. Gray.
Justice William E. Hunt, Sr., dissenting.
I dissent. This is the second time this case has been before
this Court. Mr. Justice Sheehy dissented in the first case, and I
joined in that dissent because the evidence was such that the
Workers8 compensation Court in that case should have been upheld
for the reasons as set forth by Mr. Justice Sheehy that on
"disputed evidence, and the usual standards of review applied to
such findings, the duty of this Court is to sustain the decision of
the Workers8 Compensation Court, and not set it aside on the
dubious authority of a 1917 California case." Reil v. Billings
Processors, Inc. (1987), 229 Mont. 305, 316, 746 P.2d 617, 624. In
that case, the majority acted as finders of fact and law.
In this case, they do not agree with the reasoning of the
Workerst Compensation Court, but they uphold the conclusion that
the worker has to repay the carrier for benefits he received under
the order of the Workers' Compensation Court. It is a tortuous
road that this Court has traveled that seems to have reached the
end result that the worker in this case, who claims he gave notice
to an employer who says he did not, must repay benefits to which
the majority of this Court agrees he would have been entitled to if
he had sat down and wrote the notice, rather than allowing it to be
disputed.
The majority opinion relies on this Court's decision in Hansen
v. Hansen (1958), 134 Mont. 290, 329 P.2d 791. Tn Hansen, this
Court stated that restitution is proper in these situations 88unless
restitution would be inequitable ... .I8 Hansen, 329 P.2d at 793.

15
The Workers' Compensation Court initially found claimant had
suffered a compensable injury. This Court reversed, not on the
basis that claimant had not suffered an injury, but on the basis of
an unnecessarily strict interpretation of the notice provision in
§ 39-71-603, MCA. In light of the circumstances of this case,
requiring the injured worker, at this late date, to make
restitution to the insurer for all compensation and medical
benefits paid cannot be equity. This is simply a case of an
insurance company receiving a windfall for benefits it should have
paid to a genuinely injured worker who has been denied his benefits
through a technicality. This is not equity.