NO. 90-034 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1991 

TERRY RYLES, <. 

Claimant and Appellant, 

-vsSPRINGHILL RANCH EGGS and STATE 

COMPENSATION INSURANCE FUND, 

Employer and Defendant, ck ~~~~ :i6:,- OF ::., % ?- , ,,L. "*,- z<,jja.,, ., . I ~espondent and Cross-Appellant. . 4 

APPEAL FROM: Workers' Compensation Court 

The Honorable Timothy Reardon, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Mark L. Guenther; Nash, Guenther, Zimmer & Screnar, 

Bozeman, Montana 

For Respondent: 

Thomas E. Martello; Hughes, Kellner, Sullivan & 

Alke, Helena, Montana 

Argued: September 6, 1990 

Submitted: December 6, 1990 

~ecided: February 19, 1991 

Filed: 
Justice John Conway Harrison delivered the Opinion of the Court. 

This is an appeal from the Workers1 Compensation Court of the 

State of Montana. We affirm in part and reverse in part. 

The issues presented by claimant are: 

1. Whether the Workers1 Compensation Court erred in finding 

claimant 30% permanently partially disabled pursuant to 5 39-71- 

706, MCA (1983). 

2. Whether the Workers1 Compensation Court erred in allowing 

defendant credit for permanent partial benefits paid claimant from 

May 23, 1984, through March 5, 1985. 

3. Whether the Workers1 compensation Court erred by denying 

claimant attorney's fees and costs. 

The sole issue presented by defendant is whether the Workers1 

Compensation Court erred in estopping the State Fund from taking 

credit for disability benefits paid from March 6, 1985, through 

December 24, 1987. 

We affirm the Workers1 compensation Court on Issue 1 and on 

the estoppel issue, and reverse on Issues 2 and 3. 

Defendant, State Compensation Insurance Fund (State Fund), was 

claimant's insurer. Claimant, Terry Ryles, lived with his wife, 

Kathy, and their three children in Belgrade, Montana. At the time 

of trial, Terry was 41 years old. 

In 1982, Terry and Kathy purchased Springhill Ranch Eggs 

(Springhill). springhill is a wholesale broker of eggs, selling 

to stores, restaurants and institutions. The couple first operated 
the business as a partnership, but on July 1, 1984, the business 

was changed to a corporation, closely held. The change to a 

corporation made no real difference in the operation and management 

of the business. Terry performed most of the labor, driving, 

delivery and marketing duties, which required of him a fifty to 

sixty hour work week. Kathy did the business's bookkeeping. 

On May 23, 1984, Terry suffered a back injury as a result of 

the repeated use of his back and the heavy labor required by the 

physical aspects of the business. Following his back injury, Terry 

ceased performing heavy labor duties for Springhill. Thereafter, 

he worked roughly ten hours per week performing light sedentary 

work and management activities. On July 27, 1984, Terry filed an 

Employer ' s First Report of Occupational Injury and claim for 

compensation of lost wages due to his back injury. 

During the spring of Terry's injury, Terry and Kathy, 

together, drew $2,500 per month from the income of Springhill. 

From January through June of 1984, Terry's share of net partnership 

earnings was $7,737. 

The State Fund accepted liability for the claim and paid 

biweekly benefits from May 23, 1984, until September 7, 1989. 

Terry's temporary total and permanent partial disability rates are 

each $138.47 per week. 

For 41 weeks from May 23, 1984, through March 5, 1985 (period 

A), Terry's payments were designated as permanent partial benefits. 

On January 29, 1985, surgery was performed to repair the herniated 

disc in Terry's back. The State Fund designated payments for the 
period March 6, 1985, through December 23, 1987 (period B) , as 

temporary total disability benefits. From December 24, 1987, to 

September 7, 1989 (89 weeks) (period C) , payments were again 

designated as permanent partial benefits. In total for periods A 

and C, 130 weeks of the benefits paid to Terry were designated as 

permanent partial benefits. 

At the time of trial, Terry was employed by the U.S. 

Department of Agriculture as a purchasing agent at Montana State 

University in Bozeman, Montana, at an annual salary of $15,111. 

Terry and Kathy still owned Springhill. Terry participated in the 

management decisions of the business, but did not receive a salary. 

Terry filed his petition in the Workers' Compensation Court 

on September 6, 1988. The Workerst Compensation Court heard the 

case and issued its findings of fact and conclusions of law and 

judgment on September 7, 1989, awarding benefits. The court 

concluded that (1) Terry was 30% permanently partially disabled and 

thus entitled to receive 150 weeks (500 weeks x 30%) of benefits. 

(2) Any previously paid permanent partial benefits already paid to 

Terry are to be credited to the 150 weeks owed to him by insurer. 

Therefore, since State Fund had already paid permanent partial 

benefits to Terry for periods A and C totalling 130 weeks, State 

Fund owes him only 20 weeks of benefits at $138.47 per week. (3) 

State Fund is estopped from taking credit for previously paid 

temporary total disability benefits (for period B) by claiming the 

benefits should have been characterized as permanent partial. (4) 

Terry is entitled to an award of reasonable costs and attorney's 
fees pursuant to 5 39-71-612, MCA. Terry's attorney's fees and 

costs were denied after a hearing held on December 4, 1989. From 

this judgment and the order denying attorney's fees, both Terry and 

defendant appeal. 

I. 

Did the Workers1 Compensation Court err in finding Terry 30% 

permanently partially disabled pursuant to § 39-71-706, MCA (1983)? 

Terry contends that the Workers1 Compensation Court should 

have found him 50% permanently partially disabled rather than 30%. 

The basis for this contention is Terry's evidence that the manager 

of a competing egg business earns $30,000 per year. Such a finding 

would entitle Terry to 250 weeks (50% x 500 weeks) of permanent 

partial benefits rather than 150 weeks (30% x 500 weeks). 

At issue is the proper test to determine the degree of 

permanent partial disability. The factors this Court must consider 

in determining disability under 5 39-71-706, MCA, include the 

claimant's age, education, work history, pain and disability, 

actual wage loss and loss of future earning capacity. Holton v. 

F. H. Stoltze Land & Lumber Co. (1981), 195 Mont. 263, 266, 637 

P.2d 10, 12. This Court has emphasized that the primary factor in 

calculating an award is "earning capacity impairment. If the 

court can make a determination of the claimant's earning capacity 

impairment, it is not necessary for the court to consider any other 

factors. If the court can determine that a claimant's earning 

capacity has been impaired to a certain degree, then that is the 

figure to be used in computing his benefits. Hafer v. Anaconda 
Aluminum Company (1984), 211 Mont. 345, 353, 684 P.2d 1114, 1118. 

When reviewing a decision by the Workers1 Compensation Court, 

this Court's function is to determine whether substantial evidence 

exists to support the Workers1 Compensation Court's findings of 

fact and conclusions of law. Coles v. Seven Eleven Stores (1985), 

217 Mont. 343, 347, 704 P.2d 1048, 1050. 

The court, in Conclusion No. 4, assigned to Terry a 30% 

permanent partial disability rating pursuant to § 39-71-706, MCA. 

The court carefully set forth the criteria it considered in 

arriving at this permanent partial disability percentage: 

In considering an award for future loss of earning 

capacity, the Court must consider Claimant's age, 

education, work history and his physical condition post 

injury. Given the seriousness of his back injury, there 

is little argument that Claimant can not do heavy labor 

work. However, Claimant is a well educated person. He 

has finished high school and has attended college, though 

he did not complete a college degree. He served as a 

U.S. Navy aviation electrician. His non-formal education 

is significantly enhanced by his work history, which 

includes being a loan officer in a bank. Presently he 

works as a purchasing agent for the U.S. Department of 

Agriculture, earning slightly over $15,000 per year. 

At the time of his injury, Claimant's reported 

earnings for purposes of Workers1 Compensation was 

$900/month or less than $11,000 per year. Though that 

amount is artificially limited by a statutory maximum 

(Section 39-71-118, MCA), the tax returns for the 

business demonstrates similar earnings for the Claimant. 

Taking all factors into account and recognizing the fact 

that mathematical certainty is virtually impossible to 

find, the Court concludes that a 30% disability rating 

is appropriate. 

After a careful review of the record, we hold that the 30% figure 

is sufficiently supported therein. We affirm the Workers' 

Compensation Court on this issue. 
Did the Workers1 Compensation Court err by allowing defendant 

credit for payments paid to claimant from May 23, 1984, through 

March 5, 1985 (period A) ? 

State Fund characterized the benefits it paid to Terry for 

period A as permanent partial disability payments. Permanent 

partial disability payments may not exceed 500 weeks pursuant to 

5 39-71-703, MCA (1983), and would be deducted from Terry's 

eventual permanent disability award. Terry argues that his 

benefits for period A should be characterized as temporary total 

disability payments which are unlimited in duration according to 

5 39-71-706, MCA (1983), and which would have no effect on his 

eventual permanent disability award. 

The court determined that Terry was not entitled to temporary 

total disability benefits for period A because of wages he received 

during this period. Terry takes exception to this strict reading 

of the statute. 

Temporary total disability was defined at the time as: 

[A] condition resulting from an injury as defined in this 

chapter that results in total loss of wages and exists 

until the injured worker is as far restored as the 

permanent character of the injuries will permit. 

Disability shall be supported by a preponderance of 

medical evidence. (Emphasis added.) 

Section 39-71-116 (19) , MCA (1983) . 

On the other hand, the statute defining permanent partial 

disability stated: 

[A] condition resulting from injury as defined in this 

chapter that results in the actual loss of earnings or 

earning capability less than total that exists after the 
injured worker is as far restored as the permanent 

character of the injuries will permit. Disability shall 

be supported by a preponderance of medical evidence. 

(Emphasis added.) 

Section 39-71-116 (12) , MCA (1983) . 

Under the foregoing statutes, the payments made to Terry for 

period A, immediately following his report of injury, could not 

have been permanent partial disability benefits because he had not 

reached maximum healinq. Yet, that is what the State Fund suggests 

by designating his payments as permanent partial for period A. 

Likewise, because as a proprietor, or as a corporate officer, some 

of his income is designated as profits or as wages, he did not come 

under the definition of temporary total disability because his 

injury did not result in his total loss of wages. 

One possible conclusion is that because he did not fit the 

definition of either permanent partial disability or temporary 

total disability, Terry was not entitled to any workers' 

compensation benefits at all for period A. However, the State Fund 

did not so argue. We conclude that it is precluded from so 

arguing. In her deposition, Eleanor Bowen, the Policy Services 

section supervisor for the State Fund, stated that, following 

discussions with Springhill bookkeeper Kathy Ryles, the State Fund 

credited Springhill for all premiums for workers1 compensation paid 

for Terry from at least July 1984 through 1987. We hold that this 

operates as an admission on the part of the State Fund that Terry 

was entitled to workers1 compensation benefits for period A. 

Moreover, the determination that premium payments were not due for 

this period was based on a conclusion on the part of the State Fund 

8 
that Terry was not earning wages during period A. We further hold 

that the State Fund is estopped from denying liability for 

temporary total disability benefits during period A. 

In its judgment, the Workers1 Compensation Court found Terry 

to be 30% permanently partially disabled and thus entitled to 

receive 150 weeks of benefits. Against that, the court allowed 

credit to the State Fund for 130 weeks of payments for the periods 

A and C. We vacate this part of the Workers1 Compensation Court's 

order. We hold that the benefits paid to Terry from May 23, 1984, 

through March 5, 1985, a period of 41 weeks, should have been 

designated as temporary total rather than permanent partial 

benefits and should not have been deducted from Terry's total of 

150 weeks of permanent partial benefits. On remand, the Workers' 

Compensation Court is directed to enter judgment in conformity with 

this holding. 

111. 

Did the court err in denying Terry attorney's fees? 

Under 5 39-71-612, MCA (1983) , successful claimants are 

entitled to attorney's fees and costs when an insurer acknowledges 

liability but disputes the amount of compensation due the claimant. 

This is the situation in this case. However, the court here denied 

attorney's fees under § 39-71-612, MCA (1983), when it decided that 

the State Fund could take credit for the payments from May 23, 

1984, through March 5, 1985. Since we have decided that State Fund 

should not have been allowed to take this credit, Terry may be 

entitled to attorney's fees and costs pursuant to 5 39-71-612, MCA 
(1983), the law in effect at the time of his injury. We therefore 

reverse and remand this cause to the Workers1 Compensation Court 

for proceedings and entry of judgment in conformity with this 

Opinion on the issue of attorney's fees and costs. 

IV. 

Did the Workers' Compensation Court err in estopping the State 

Fund from taking credit for disability benefits paid from March 6, 

1985, through December 24, 1987? 

State Fund, in its brief, attacked the Workers' Compensation 

Court's findings regarding each element of estoppel as set forth 

in Lindblom v. Employers' Liability Assur. Corporation (1930), 88 

Mont. 488, 295 P. 1007. The Workers' compensation Court found the 

following facts to satisfy the first four elements of estoppel: 

Terry was informed by State Fund that the benefits he received 

were for temporary total disability; Terry was never advised that 

the benefits were anything but temporary total and he had no reason 

to know since the dollar amount of each benefit was the same. 

Furthermore, Terry never tried to hide the fact that he received 

salary from Springhill; this salary was reported to State Fund; 

Kathy Ryles, bookkeeper, requested specific guidance from State 

Fund (but received none) as to correct reporting of Terry's 

earnings and simultaneous receipt of temporary total disability 

benefits. 

The fifth and sixth elements of estoppel require a showing 

that Terry relied on State Fund's representations to his detriment. 

The Workers' Compensation Court satisfied these elements with its 
finding that Terry would be harmed if the temporary total benefits 

were reclassified as permanent partial because permanent partial 

benefits may not exceed 500 weeks (9 39-71-703, MCA (1983)) whereas 

temporary total benefits are unlimited. 

There is substantial evidence in the record to support the 

Workers' Compensation Court on the issue of estoppel. We affirm 

the Workers' Compensation Court on the estoppel issue. 

Affirmed in part, reversed in part, and remanded to the 

Workerst Compensation Court. 

We concur: