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 

/ FF-B 2 j ,. b.6- Filed: 

"7.7-,,8*+ Clerk 
Mr. 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 62 years 

old and resides with his wife in Augusta, Montana. He had been 

employed in Great Falls at the Sears warehouse since March 1960 

and worked there continuously until May 13, 1976, when he injured 

his lower back while delivering a washing machine to a Sears 

customer. Sears is enrolled under Plan No. 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 claimant was examined by four doctors 

and underwent a myelography 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 daughter was hospitalized for a 

similar type of lower back surgery, her condition worsened, 

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 recommended by Dr. Melvin. Sears, however, for 

the first time, conceded in its opening statement at 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 car wash on a two-acre plot of land in Augustaalready 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 him with the construction, 

operation, and maintenance of the project. Based upon a 

cursory inquiry and upon information furnished by the claimant, 

an appraiser testified that it was 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 claimant did not 

prove by a preponderance of the credible evidence that he 

had a pressing need for a lump sum settlement or that the 

project would be in his best interests. The claimant also 

contends that the trial court committed reversible error by 

allowing Sears to present the appraiser's opinion because he 

was not qualified as an expert and because he relied solely 

on hearsay evidence to reach his 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 testimony by an appraiser who 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 required by Rule 702, Mont.R.Evid. 

We conclude that the court did not err by permitting this 

witness to give opinion testimony. The Workers' Compensation 

Court is not bound by either common law or the statutory rules 

of evidence, including the prohibition against hearsay 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 is worth . . .." It is equally clear that the 

judge recognized that the appraiser's conclusions were 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 

feasibility of all three projects. 

"26. Mr. Tredik testified that the data prepared 

by the claimant's son was not adequate to make a 

determination as to the economic feasibility of 

the projects. 

"27. Mr. Tredik testified that he viewed property 

in Augusta, Montana which he thought to be the land 

upon which the claimant proposed to construct his 

projects. It is clear from the evidence that Mr. 

Tredik was looking at the wrong 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 the particular parcel of land involved before he 

provided an opinion." 

These findings adequately demonstrate that the court did not 

place any undue reliance upon the appraiser's testimony. In 

addition, there were no conclusions of law expressly or 
impliedly 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' 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. 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 settlement will not be 

reversed on appeal unless the Workers' Compensation Court is 

shown to have abused its discretion. Willoughby, supra; Utick, 

supra; Kuehn v. National Farmers Union Property and Casualty 

Co. (1974), 164 Mont. 303, 521 P.2d 921; Kent v. Sievert (1971), 

79 

158 Mont. 4&&, 489 P.2d 104; Legowik v. Montgomery Ward (1971), 

157 Mont. 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 time planned to handle the physical demands of 

managing the project himself. He asserts that his wife and 
son are available to assist him with the physical demands 

of the project. 

The Workers' Compensation Court is in a better position 

to familiarize itself with the circumstances surrounding the 

claimant and to consider his needs and the results which 

probably will follow the grant or denial of the request. 

Willoughby, supra, 609 P.2d at 704. The evidence does not 

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 12 miles outside of Augusta and that 

his first priority 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 disability benefits to a claimant who 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. In Utick, 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 amount biweekly 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 insurance carrier stated no reason for 

resisting a lump sum settlement and did not 
dispute the feasibility of Utick's plan for 

its investment; and 

(5) Utick's plan was to invest the lump sum settlement in a family-owned corporation which was 

already in existence and did not require the 

kind of maintenance and repairs that could be 

expected with a mobile home project. 

In addition, the trial court here specifically found 

that there was no pressing need for the lump sum settlement. 

The claimant testified that he and his wife could live on 

his biweekly compensation benefits of $560 per month and his 

other income, consisting of federal disability income of 

$533 per month, rental income of $85 per month from a house 

he owns in Augusta, stock dividend income of $520 per year, 

payments of $440 per month under a contract for the sale of 

real property, and approximately $50 per month from Allstate 

Insurance Co. by virtue of the fact that Sears placed him on 

medical retirement. In addition, the claimant received $6,000 

in cash in 1978 from his profit-sharing plan with Sears. 

The claimant's third contention is that the Workers' 

Compensation Court erred by refusing to award the claimant 

his attorney fees and costs despite the fact that Sears 

unsuccessfully attempted to obtain an adjudication that it 

was not responsible for the payment of permanent total 

disability benefits because the claimant would not submit to 

back surgery. He argues that since he prevailed on the issue 

of whether the disability is permanent, he is entitled to 

recover his costs and attorney fees under section 39-71-611, 

MCA . 

Section 39-71-611, MCA, however, is not the appropriate 

statute for determining whether attorney fees and costs should 

be awarded in this situation. That section provides that 

where ". . . an insurer denies liability for a claim for 
compensation or terminates compensation benefits 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 it did dispute whether the claimant's disability 

could be considered permanent where he refuses to submit to 

corrective surgery. According to the court's pretrial order, 

one of the contested facts of the case was "[wlhether or not 

the claimant is permanently totally disabled and if totally 

disabled, whether or not such disability proximately resulted 

in whole or in part from claimant's decision to not undergo 

surgical treatment." 

In Polich v. Whalen's O.K. Tire Warehouse (1981), - 

Mont. -- , 634 P.2d 1162, 38 St.Rep. 1572, we held that section 

39-71-612, MCA, governed the award of attorney fees where 

the claimant prevailed in a hearing where the issue was 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 

employer or 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 there may 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 the witness and 

the reasonableness of the fees must be approved 

by the division or the workers' compensation judge." 

The basic controversy between the parties 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 disability was permanent was the foundation 

for that controversy. Because the court concluded that the 

claimant was suffering from a permanent total disability, we 

hold that under 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 it denies the claimant a lump sum settlement, but 

remand for a determination of and award to the claimant of 

those reasonable attorney fees and 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 injury which has left him 

permanently and totally disabled. 

We Concure 

@Lit J tices - 

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