No. 94-315

IN THE SUPREME COURT OF THE STATE OF MONTANA

1995

PATRICIA SULLIVAN,

Petitioner and Appellant,

-vsAETNA 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

Filed:

Submitted on Briefs: February 9, 1995

Decided: April 12, 1995
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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