No. 81-92 IN THE SUPREME COURT OF THE STATE OF MONTANA 1981

JOHN W. KRAUSE, Claimant and Appellant,

-vsSEARS 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

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# "7.7-,,8*+ ClerkMr. 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 62years old and resides with his wife inAugusta,Montana. He had been employed in Great Falls at the Sears warehouse since March 1960 and worked there continuously untilMay 13, 1976,when he injured his lower back while delivering a washing machine to a Sears customer. Sears is enrolled under PlanNo. 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 claimantwas examined by four doctors and underwent amyelography which revealed a herniated intravertebral 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 daughterwas hospitalized for a similar type of lower back surgery, her conditionworsened, 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 recommendedby Dr. Melvin. Sears,however, for the first time, conceded in its opening statementat 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 carwash on a two-acreplot of land inAugustaalready 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 himwith the construction, operation, and maintenance of theproject. Based upon a cursory inquiry and upon information furnishedby the claimant, an appraiser testified that itwas 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 claimantdid not prove by a preponderance of the credible evidence that he had a pressing need for a lump sum settlementor that the project would be in his best interests. The claimant also contends that the trial court committed reversibleerror by allowing Sears to present the appraiser's opinion because he was not qualified as an expertand because he relied solely

on hearsay evidence to reachhis conclusion. The claimant asks this Court to reverse and remand the case for a determination 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 testimonyby an appraiserwho 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 requiredby Rule 702,Mont.R.Evid. We conclude that the courtdid not err by permitting this witness to give opinion testimony. TheWorkers' Compensation Court isnot bound by either common law or the statutory rules of evidence, including the prohibition againsthearsay 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 isworth 

# ...." It is equally clear that the judge recognized that the appraiser's conclusionswere 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 feasibilityof all three projects. "26. 

### Mr. Tredik testified that the dataprepared by 

### the claimant's sonwas not adequate tomake a determination as to the economic feasibility of the projects. "27. Mr. Tredik testified that he viewed property inAugusta,Montana which he thought to be the land upon which the claimantproposed to constructhis projects. It is clear from the evidence thatMr. Tredik was looking at thewrong 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 connected with his appraisal work where he did not look at theparticular parcel of land involved before he provided anopinion." These findings adequately demonstrate that the courtdid not place any undue relianceupon the appraiser's testimony. In addition, there were no conclusions of law expressly orimpliedly 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' CompensationAct are biweekly. Theymay, however, at the discretion of theWorkers' 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 interestwould 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 settlementwill not be reversed on appeal unless the Workers' Compensation Court is shown to have abused its discretion. Willoughby, supra; Utick, supra;Kuehn v. National FarmersUnion Property and Casualty Co. (1974),164Mont. 303, 521 P.2d 921; Kent v. Sievert (1971), 

## 79 158 Mont. 4&&, 489 P.2d 104; Legowik v. Montgomery Ward (1971), 157Mont. 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 timeplanned to handle the physical demands of managing the project himself. He asserts that his wife and

### son are available to assist himwith the physical demands of the project. TheWorkers' Compensation Court is in a better position to familiarize itself with the circumstances surrounding the claimant and to consider his needs and the resultswhich probably will follow the grantor denial of the request. Willoughby, supra, 609 P.2d at 704. The evidence doesnot 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 12miles outside of Augusta and that his firstpriority 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 disabilitybenefits to a claimantwho 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. InUtick,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 amountbiweekly 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 insurancecarrier stated no reason for resisting a lump sum settlementand did notdispute the feasibility of Utick's plan for itsinvestment; and (5) Utick's plan was toinvest the lump sum settlement ina family-owned corporation which was already inexistenceand didnot require the kind of maintenance and repairs that could be expectedwith a mobile home project. In addition, the trialcourt here specifically found that therewas no pressing need for the lump sum settlement. The claimant testified thathe and hiswife could liveon his biweekly compensation benefits of $560 per month and his other income, consistingof federal disabilityincome of $533 per month, rental income of $85 per month from a house he owns inAugusta, stock dividend income of $520 per year, payments of $440 per month under a contract forthe sale of real property, and approximately $50 per month fromAllstate Insurance Co. by virtueof the factthat Searsplaced him on medical retirement. In addition, the claimant received $6,000 incash in 1978 from hisprofit-sharing plan with Sears. The claimant's third contention is that theWorkers' Compensation Court erredby refusing toaward the claimant his attorney fees and costs despite the factthat Sears unsuccessfully attempted toobtain an adjudication that it

was not responsible for thepayment of permanent total disability benefits because the claimant would not submit to back surgery. He argues that sincehe prevailed on the issue of whether the disability ispermanent, he isentitled to

recover his costs and attorneyfeesunder section 39-71-611, MCA

# . Section 39-71-611, MCA, however, isnot the appropriate statute fordetermining whether attorney fees and costs should be awarded in this situation. That section provides that where 

# ".



# . . an insurerdenies liability for a claim forcompensation or terminates compensationbenefits 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 itdid dispute whether the claimant's disability could be considered permanent where he refuses to submit to corrective surgery. According to the court'spretrial order, one of the contested facts of the case was "[wlhether or not the claimant ispermanently totally disabled and if totally disabled,whether or not such disability proximately resulted inwhole or in part from claimant's decision to not undergo surgical treatment." In Polich v. Whalen's O.K. Tire Warehouse (1981), - Mont. -- 

### , 634P.2d 1162, 38 St.Rep. 1572, we held that section 39-71-612,MCA, governed the award of attorney feeswhere the claimantprevailed in a hearing where the issuewas 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 employeror 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 theremay 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 thewitness and the reasonableness of the fees must be approved by the division or theworkers' compensation judge." Thebasic controversy between theparties 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 disabilitywas permanentwas the foundation for that controversy. Because the court concluded that the claimantwas suffering from a permanent total disability,we hold thatunder 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 itdenies the claimant a lump sum settlement,but remand for a determination of and award to the claimant of those reasonable attorney feesand 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 injurywhich has left him permanently and totally disabled.

We Concure



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