author: JUSTICE McDONOUGH JUSTICE HUNT

text:
    IN RE THE MARRIAGE OF MARGARET H. BOHARSKI, Respondent-Petitioner, and GEORGE BOHARSKI, Appellant-Respondent.
    No. 92-055.
    Submitted on Briefs January 7, 1993.
    Rehearing Denied March 18, 1993.
    Decided February 22, 1993.
    50 St.Rep. 161.
    257 Mont. 71.
    847 P.2d 709.

      For Appellant and Respondent: Martin J. Elison, Hardin.
    For Respondent and Petitioner: James C. Bartlett, Hash O’Brien & Bartlett, Kalispell.
   JUSTICE McDONOUGH

delivered the Opinion of the Court.

Appellant George Boharski appeals from the findings of fact, conclusions of law, and decree of dissolution of marriage entered by the District Court of the Eleventh Judicial District, Flathead County. We affirm.

Appellant presented five issues for review by this Court. One has been conceded as not properly before the Court. We frame the balance of the issues as follows:

1. Did the District Court err in its award of maintenance?

2. Did the District Court err in finding appellant in contempt of court and ordering his incarceration for 30 days.

George and Margaret Boharski were married on July 11, 1953. During the course of the marriage the parties had seven children, all of whom have now reached the age of majority. In the fall of 1987, George was diagnosed as being totally and permanently disabled. On October 10, 1989, Margaret filed a petition for dissolution of marriage.

On December 12,1989, during a hearing on a conciliation request, the District Court Judge advised Margaret to have her attorney move the court for temporary maintenance. Margaret’s counsel subsequently moved the court for an order awarding temporary maintenance. On March 29, 1990, the District Court ordered temporary maintenance in the amount of $400 per month, retroactive to October 29, 1989.

George maintained that all of his income was disability income which was exempt and he refused to pay the temporary maintenance. George’s income consisted of monthly social security disability payments of $906, monthly workers’ compensation benefits of $500.40, and monthly union pension disability payments of $363.50 at the time of final decree and slightly less at time of temporary order. George had no other sources of income.

Pursuant to a motion by Margaret, on September 19, 1990, the District Court found George in contempt of court for failing to make the temporary maintenance payments. The District Court ordered George jailed for 40 days, with 10 days suspended.

In this same order, the court also entered a Qualified Domestic Relations Order (QDRO) pursuant to the Retirement Equity Act of 1984, 29 U.S.C. § 1056(d)(3). A QDRO is a method of intercepting payments intended for one spouse and then directing these payments to the other spouse. A QDRO must be made pursuant to the existing state domestic relations laws. 29 U.S.C. § 1056. The QDRO in this case directed that George’s union pension disability benefits be paid directly to Margaret.

Following George’s release from jail, he discharged his attorney and made a request to disqualify the District Court Judge. This request was granted. A second District Court Judge assumed jurisdiction over this matter.

George then moved the District Court to terminate the previous temporary maintenance order. On October 15, 1991, the District Court denied this motion.

Trial in this matter began on December 12, 1991, and the court’s final decree was entered on January 3, 1992. In the findings of fact in the decree of dissolution, the court found the net marital estate to be $12,116 annually, which is the annual value of the workers’ compensation benefits ($7774), and the annual value of the union pension disability payments ($4362).

The District Court awarded all of the workers’ compensation benefits to George. The District Court then awarded the union pension disability benefits to Margaret, with the QDRO to remain in place. Additionally, George was to pay to Margaret the sum of $298.33 per month for 36 months out of income received by him, as an equitable distribution of property and as maintenance. The time period of payment was made to coincide with her eligibility in the future for social security benefits. The court also found that George could make all payments and maintain his lifestyle and maintain his standard of living. George brought this appeal from the District Court’s entry of the decree of dissolution contending that the District Court erred in determining maintenance.

I

Did the District Court err in its award of maintenance?

Upon reviewing a District Court’s award of maintenance, this Court will not reverse the determination of the District Court unless the findings of fact are clearly erroneous. In re Marriage of Eschenbacher (1992), 253 Mont. 139, 831 P.2d 1353, 1355, 49 St. Rep. 393, 394. Upon reviewing conclusions of law relating to the maintenance award, this Court will simply determine whether the lower court’s interpretation of the law was correct. Steer, Inc. v. Dep’t of Revenue (1990), 245 Mont. 470, 474, 803 P.2d 601, 603.

George contends on appeal that the statutory criteria to be applied in determining maintenance awards found at § 40-4-203, MCA, were not satisfied in this case. George argues in the alternative that even if the criteria of § 40-4-203, MCA, were met, that maintenance was still improper in that all of his income was disability income, and therefore, exempt. George argues that the District Court erred in awarding maintenance when his only income was disability income.

It is clear from the record before this Court, and in particular from the findings of fact of the District Court, that the requirements of § 40-4-203, MCA, are satisfied in this case. Margaret is in need of and is entitled to maintenance.

However, the question before the Court is whether George’s union disability income is available for maintenance purposes. The uncontroverted evidence at trial and throughout the entire record of this case is that George’s income from his union pension is disability income. George testified that prior to reaching the age of 65 the only way an individual may obtain any of the monies in the pension fund is by demonstrating a disability. Absent a disability there is no payment from the pension fund prior to age 65. George was 58 years old.

The District Court in this case did not make any factual determination that the payments George receives from the pension fund are not disability payments. However, the District Court ordered these funds be paid to Margaret as maintenance, together with the additional payment of $298.33 per month. The question before the Court is whether an award of maintenance may be ordered from the union disability income. This is a question of law.

Margaret argues that maintenance may be so ordered. Margaret relies on this Court’s decision of In re Marriage of Cooper (1990), 243 Mont. 175, 793 P.2d 810. In Cooper, we stated that disability benefits may be included by the District Court in determining the value of the marital estate. Cooper, 793 P.2d at 812. However, in Cooper the disability benefits were not awarded to the other spouse, they were simply included in the marital estate. Disability benefits can be considered by the District Court in determining an equitable distribution of the marital estate. Unfortunately, in this situation there is no marital estate apart from the various disability payments.

George argues that pursuant to § 25-13-608, MCA, the disability payments are exempt and may not be awarded as maintenance. § 25-13-608, MCA, provides in part that a judgment debtor’s disability or illness benefits are exempt from execution. Margaret counters by arguing that “any reliance on § 25-13-608, MCA, to prevent the District Court from awarding the pension fund, whether it’s retirement or disability income, to Margaret is misplaced.” Margaret argues that § 25-13-608, MCA, is not applicable in this case.

In In re Marriage of Castor (1991), 249 Mont. 495, 817 P.2d 665, this Court referred to § 25-13-608, MCA. In Castor, the husband alleged that his wife had been awarded part of his disability payments. The wife contended that the payments were actually retirement payments and not disability benefits.

This Court began the discussion of this issue by noting that pursuant to § 25-13-608(1)(d), MCA, “[i]f the monthly benefits Mr. Castor is currently receiving qualify as ‘disability’ benefits, such payments are exempt....” Castor, 817 P.2d at 668. In Castor, however, we held that the benefits in question were retirement benefits and could, therefore, be properly awarded to the wife. Deciding the question of whether disability benefits were exempt from maintenance payments under the exemption statute was not necessary and therefore can be considered dicta. The Court is not bound or required to give precedential value to dicta. See Montana Human Rights Division v. City of Billings (1982), 199 Mont. 434, 441, 649 P.2d 1283, 1287.

Are the union disability payments of a former spouse applicable to the payment of maintenance to the other former spouse?

The basis of maintenance is the natural obligation of a spouse to support the other spouse and children. A decree for maintenance therefore is not, strictly speaking, a debt in the strict legal sense of that term, but a judgment calling for the performance of a duty made specific by a decree of the court. See 24 Am.Jur.2d, Divorce and Separation § 531 (1983).

One of the purposes of an exemption from execution statute is to foster and assist in performance of that obligation so as to protect the family and home. The statutory exemption is for the protection of the family of the debtor as much as for the debtor. See Anaconda Fed. Credit Union # 4401 v. West (1971), 157 Mont. 175, 179-80, 483 P.2d 909, 912. It is in the interest of the state to protect the homes of its residents. In re Metcalf’s Estate (1933), 93 Mont. 542, 19 P.2d 905.

The duty of the spouse to support separates court ordered support from a judgment debt so as to allow a violator to be imprisoned for contempt and not be contrary to the constitutional provision relative to imprisonment for debt. 16A Am. Jur.2d Constitutional Law § 622 (1979). George’s obligation is not a debt and therefore he is not a “judgment debtor” granted the exemptions by § 25-13-608, MCA. The purpose of such exemption provision is to foster and enhance the support of a family by protecting money and assets from the grasp of outsiders and not to help one member of the family avoid such member’s obligation to support the other. See In the Matter of M.H. v. J.H. (1978), 93 Misc.2d 1016, 403 N.Y.S.2d 411, 415.

We conclude the union disability payments here in question are subject to meeting maintenance payments and are subject to a qualified domestic relations order in the enforcement thereof.

II

Did the District Court err in finding appellant in contempt of court and ordering his incarceration for 30 days?

Pursuant to § 3-1-523, MCA, contempt of court orders issued by a district court are final and usually unreviewable by this Court except by way of a writ of certiorari or review. However, an exception exists for contempt of court orders made in dissolution of marriage proceedings. In re Marriage of Sessions (1988), 231 Mont. 437, 441, 753 P.2d 1306, 1308; citing In re Marriage of Smith (1984), 212 Mont. 223, 225-26, 686 P.2d 912, 914. Therefore, the contempt of court order in this case is properly before the Court for review.

George argues that since the order directing him to make temporary maintenance payments was incorrect as a matter of law, the subsequent contempt of court order for failing to obey the temporary maintenance order was error. This Court has previously stated that “[t]here is no doubt that a party cannot be guilty of contempt of court for disobeying an order which the court had no authority to make.” State ex rel. Enochs v. District Court (1942), 113 Mont. 227, 233, 123 P.2d 971, 974.

Maintenance not being a debt within the exemption statute, the District Court had the jurisdiction and authority to punish for contempt for failure to obey its maintenance order.

Affirmed.

CHIEF JUSTICE TURNAGE, JUSTICES HARRISON and WEBER concur.

JUSTICE HUNT

dissenting.

I dissent. In reaching the holding announced today, the majority opinion disregards specific exemption provisions in two separate statutes as well as past precedent of this Court. Clearly, the application of the law in this situation leads to an unpleasant result in that there is no other marital property to award to Margaret, but it is clear that under Montana law the pension disability benefits, along with the workers’ compensation benefits, are exempt from maintenance awards.

It is important to recognize that the net marital estate in this case is $ 12,116 annually. This amount is a combination of the annual value of George’s workers’ compensation benefits ($7774), and the annual value of his union pension disability benefits ($4362). Margaret was awarded all of the pension disability benefits, and was awarded an additional $298.33 per month, which by necessity must come from George’s workers’ compensation benefits.

The majority opinion, in determining that George’s pension disability benefits were not exempt, held that the disability benefits exemption statute found at § 25-13-608, MCA, does not apply to maintenance awards. This conclusion is contrary to our prior decision in Castor. In Castor, the issue was whether one spouse’s disability benefits could be awarded to the other spouse in a dissolution proceeding. In Castor, this Court correctly recognized that § 25-13-608, MCA, applied and stated that:

Under § 25-13-608, MCA, although veterans’ and social security benefits are subject to execution if they are levied for child support or spousal maintenance, “disability or illness benefits” are exempt. Section 25-13-608(l)(d), MCA. If the monthly benefits Mr. Castor is currently receiving qualify as “disability” benefits, such payments are exempt from execution.

Castor, 817 P.2d at 668. After determining that disability benefits were exempt, this Court in Castor held that the benefits in question were actually retirement benefits, and could, therefore, be awarded. The majority opinion states that in Castor “[d]eciding the question of whether disability benefits were exempt from maintenance payments under the exemption statute was not necessary and therefore can be considered dicta.” To the contrary, in Castor it was essential that the issue of whether disability benefits were exempt be addressed, and we specifically held that disability benefits are exempt and may not be awarded as maintenance. The statement in Castor referred to in the majority opinion was not mere dicta, but went to the very heart of our analysis and decision. Our application and interpretation of § 25-13-608, MCA, in Castor was correct and should be followed in this case. § 25-13-608, MCA, provides in its entirety that:

(1) A judgment debtor is entitled to exemption from execution of the following:
(a) professionally prescribed health aids for the judgment debtor or a dependent of the judgment debtor;
(b) benefits the judgment debtor has received or is entitled to receive under federal social security or local public assistance legislation, except as provided in subsection (2);
(c) veterans’ benefits, except as provided in subsection (2);
(d) disability or illness benefits',
(e) benefits paid or payable for medical, surgical, or hospital care to the extent they are used or will be used to pay for the care;
(f) maintenance and child support; and
(g) a burial plot for the judgment debtor and his family.
(2) Veterans’ and social security legislation benefits based upon remuneration for employment, as defined in 42 U.S.C. 662(f), are not exempt from execution if the debt for which execution is levied is for:
(a) child support; or
(b) maintenance to be paid to a spouse or former spouse if the spouse or former spouse is the custodial parent of a child for whom child support is owed or owing and the judgment debtor is the parent of the child. [Emphasis added.]

The majority opinion states that an award of maintenance is not a debt, George is not a judgment debtor, and therefore, the disability benefits exemption of § 25-13-608, MCA, does not apply. However, the very language of the statute explicitly provides that a maintenance award against a party is a “debt” and that the party owing the maintenance obligation is a “judgment debtor.” The statute is clear and unambiguous, governs in this case, and should have been followed by the majority.

The statute provides several exceptions to the general rales of exemption. One exception is that certain veterans’ and social security benefits are not exempt from execution for maintenance awards under certain circumstances. The Legislature, while considering the wisdom of permitting certain exceptions, did not provide for an exception in relation to disability benefits and maintenance awards. It is well-settled that:

In the construction of a statute, the office of the judge is simply to ascertain and declare what is in terms or in substance contained therein, not to insert what has been omitted or to omit what has been inserted.

Section 1-2-101, MCA. Additionally, it is a long-standing rale that when interpreting statutes “the intention of the legislature is to be pursued if possible.” § 1-2-102, MCA. The intention of the Legislature is manifest — disability benefits are exempt. Notwithstanding, the majority has created a new exception even though the Legislature chose not to do so.

The majority opinion, citing to 24 Am. Jur.2d Divorce and Separation § 531 (1983), refers to the common law basis for maintenance, i.e., the natural obligation of a spouse to support the other spouse. This same section goes on to state that in relation to enforcement of maintenance awards “the recipient spouse is generally considered a judgment creditor of the obligor spouse to the extent of being entitled to all remedies given by statute to such creditors.” 24 Am.Jur.2d Divorce and Separation § 531 (1983). Likewise, the obligor spouse is a judgment debtor and is entitled to all protection provided by statute. The applicable Montana statute provides protection by exempting from execution all disability benefits of a judgment debtor. Even if the common law regarding maintenance was contrary to § 25-13-608, MCA, the statute governs. § 1-2-103, MCA, provides that:

The rule of the common law that statutes in derogation thereof are to be strictly construed has no application to the statutes of the state of Montana. The statutes establish the law of this state respecting the subjects to which they relate ....

There may be policy arguments in favor of the new exception created by the majority opinion, but if additional exceptions are to be added to § 25-13-608, MCA, the Legislature is the appropriate body to create such new exceptions.

The majority opinion does not discuss the District Court’s award to Margaret of $298.33 per month out of George’s workers’ compensation benefits. § 39-71-743, MCA, provides in part that “[n]o payments under this chapter shall be assignable, subject to attachment or garnishment, or be held liable in any way for debts ....” The disability-type benefits George receives from his workers’ compensation award are exempt and the majority opinion fails to even address this issue.

Finally, since the order directing George to make temporary maintenance payments out of his disability and workers’ compensation benefits was incorrect as a matter of law, the subsequent contempt of court order for failing to obey the temporary maintenance order was error. A party cannot be guilty of contempt for disobeying an order which the court had no authority to make. State ex rel. Enochs v. District Court (1942), 113 Mont. 227, 123 P.2d 971; Phillips v. Loberg (1980), 186 Mont. 331, 607 P.2d 561.

I would reverse.

JUSTICE TRIEWEILER and JUSTICE GRAY concur in the dissent of JUSTICE HUNT.


source: Caselaw Access Project

author: JUSTICE GRAY JUSTICE TRIEWEILER

license: Public Domain

text:
    ROBERT D. FIELD, Petitioner and Appellant, v. SEARS, ROEBUCK & COMPANY, Defendant and Respondent.
    No. 92-051.
    Submitted on Briefs August 6, 1992.
    Decided February 25, 1993.
    50 St.Rep. 166.
    257 Mont. 81.
    847 P.2d 306.

      For Appellant and Petitioner: Geoffrey R. Keller, Matovich, Addy & Keller, Billings.
    For Respondent and Respondent: J. Michael Young and Steven T. Potts, Jardine, Stephenson, Blewett and Weaver, Great Falls.
   JUSTICE GRAY

delivered the Opinion of the Court.

Robert D. Field appeals from the Findings of Fact, Conclusions of Law and Judgment of the Workers’ Compensation Court denying attorney’s fees and costs for pursuit of permanent total disability benefits, and refusing to impose a penalty against Sears, Roebuck & Company. We affirm.

We restate the issues on appeal as follows:

1. Did the Workers’ Compensation Court err in denying claimant’s request for attorney’s fees and costs for pursuit of permanent total disability benefits?

2. Did the Workers’ Compensation Court err by failing to impose a penalty for unreasonable delay in conceding permanent total disability?

On December 22,1980, claimant Robert D. Field was injured while driving a repair truck for Sears, Roebuck & Company (Sears), his employer. Sears paid temporary total disability benefits from the date of the accident until claimant returned to work.

Claimant’s employment with Sears terminated on July 19, 1984. At that time, claimant requested reinstatement of temporary total disability benefits. Sears refused. On March 13, 1985, Sears offered claimant $15,000 as a full and final compromise settlement. Claimant rejected this offer and demanded that Sears place him on temporary total disability retroactive to July, 1984. Sears agreed to make the payments under a reservation of rights.

On March 1, 1991, claimant requested that Sears formally accept his claim as a claim for permanent total disability. Sears responded that it was not prepared to concede permanent total disability and requested additional vocational testing. The results of that testing were received on June 5. On June 18, Sears asked claimant to make a settlement offer; claimant responded on July 10 with a demand for $15,000, $72,000 in attorney’s fees and an annuity paying $700 per month for twenty years.

Nine days later, on July 19, claimant filed a petition for hearing with the Workers’ Compensation Court on the issues of permanent total disability; a lump sum advance for home repairs, vehicle replacement and debts; attorney’s fees; and penalty. Sears responded, in part, by denying that claimant was permanently totally disabled. At the pretrial conference on August 22, Sears continued to deny permanent total disability benefits; the hearing was set for September 23. Sears conceded permanent total disability on August 29 and filed an amended response reflecting the concession. The hearing was continued to, and held on, October 7, 1991.

The Workers’ Compensation Court heard testimony regarding the lump sum advance and the events leading to Sears’ concession of the permanent total disability issue. The Workers’ Compensation Court awarded claimant a lump sum conversion and attorney’s fees relative to the lump sum issue. It denied attorney’s fees and costs for claimant’s pursuit of permanent total disability benefits under § 39-71-612, MCA (1979), and declined to award a penalty for unreasonable delay under § 39-71-2907, MCA (1979).

Did the Workers’ Compensation Court err in denying claimant’s request for attorney’s fees and costs for pursuit of permanent total disability benefits?

In its Conclusions of Law, the Workers’ Compensation Court determined that claimant was not entitled to attorney’s fees and costs for pursuit of permanent total disability benefits under Section 39-71-612, MCA (1979). § 39-71-612, MCA (1979), provides:

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.

Although the legislature has amended § 39-71-612, MCA, since 1979, we determine whether a claimant is entitled to attorney’s fees under the statute in effect on the date of injury. Hilbig v. Central Glass Co. (1991), 249 Mont. 396, 399, 816 P.2d 1037, 1039.

The Workers’ Compensation Court determined that this case was factually similar to Lasar v. E.H. Oftedal & Sons (1986), 222 Mont. 251, 721 P.2d 352, and applied the Lasar reasoning in concluding that claimant was not entitled to attorney’s fees and costs based on pursuit of permanent total disability benefits under § 39-71-612, MCA (1979). The Workers’ Compensation Court correctly applied Lasar.

In Lasar, we stated that the attorney fee statute at issue, identical to that before us, requires a claimant to satisfy two conditions before recovering attorney’s fees: (1) the amount of compensation must be in controversy; and (2) the amount awarded must exceed the amount paid or tendered. Lasar, 222 Mont. at 253, 721 P.2d at 354. In Lasar, the insurer conceded permanent total disability approximately three weeks prior to trial. We concluded that “[s]ince the insurer agreed on the amount of compensation due, no controversy existed at trial and the amount awarded was the same as that agreed upon as due.” Lasar, 222 Mont. at 253,721 P.2d at 354. Like the insurer in Lasar, Sears conceded claimant’s permanent total disability and corresponding compensation due approximately three weeks prior to the original trial date (and five weeks before the hearing actually occurred). Neither the extent of claimant’s disability nor the amount of compensation due him for that disability was in issue at any time thereafter or when claimant’s petition proceeded to hearing. Therefore, claimant failed to satisfy the first condition to attorney’s fees required by §39-71-612, MCA (1979), and Lasar, that the amount of compensation be in controversy.

Claimant offered several theories to show that the amount awarded exceeded the amount paid or tendered — the second condition required by § 39-71-612, MCA (1979), and Lasar. Claimant contended he was entitled to attorney’s fees based on the difference between the $15,000 settlement offer and the permanent total disability. Alternatively, claimant contended he was entitled to attorney’s fees based on the difference between “permanent partial disability” he alleges Sears paid between June 5 and August 29 and the permanent total disability. Because claimant fails to meet the first condition of § 39-71-612, MCA (1979), we do not address the second condition.

Claimant attempts to distinguish Lasar by focusing on the interval of time between discovery of the information on which concession subsequently was based and actual concession of the issue. In Lasar, the insurer conceded benefits within two weeks of deposing claimant. Here, Sears had all the information it later relied on to concede total permanent disability benefits on June 5, when it obtained the results of the vocational testing; it conceded the issue on August 29. According to claimant, this is the pivotal time period which distinguishes the present case from Lasar.

It is true that, here, Sears had possession of the information upon which it ultimately conceded the permanent total disability issue longer than the insurer in Lasar. The time period between completion of discovery upon which concession was made and the concession itself was not the basis of our decision in Lasar, however. We focused in Lasar on the three week period remaining after the concession and before trial and on the fact that the concession occurred before additional discovery or new documentation on the conceded issue was undertaken. The facts which formed the basis for our decision in Lasar are similar to those in the case before us; if anything, the facts before us are more compelling. Here, the concession occurred some five weeks before the hearing and no discovery was undertaken by either party on the permanent total disability issue between June 5 and Sears’ concession on August 29. Subsequent to Lasar, we have reiterated that there must be a controversy concerning disability that is later judged compensable before attorney’s fees can be awarded under § 39-71-612, MCA. Komeotis v. Williamson Fencing (1988), 232 Mont. 340, 345, 756 P.2d 1153, 1156. As in Lasar, the insurer in Komeotis conceded disability benefits prior to the hearing. We affirmed the Workers’ Compensation Court’s denial of attorney’s fees because disability benefits did not remain at issue for adjudication by the court.

Claimant relies on Krause v. Sears Roebuck & Company (1982), 197 Mont. 102, 641 P.2d 458, for the proposition that attorney’s fees properly are awarded absent an adjudication of permanent total disability. Claimant misreads Krause.

In Krause, claimant was receiving temporary total disability benefits from Sears. He petitioned the Workers’ Compensation Court for permanent total disability benefits converted into a lump sum award. Sears denied permanent total disability. Discovery was completed on all issues and the case proceeded to hearing. Only after the hearing had begun did Sears concede permanent total disability. Notwithstanding the concession, claimant presented proof on his permanent total disability in conjunction with his lump sum conversion request. The disability issue having remained in controversy into the adjudication phase of the proceedings and proof having been submitted on the issue, the Workers’ Compensation Court entered a conclusion of law on claimant’s permanent total disability. It denied the lump sum conversion, relying on evidence of claimant’s disability which would prevent him from making a success of the project for which the lump sum was sought. It also refused to award attorney’s fees on the disability issue. Claimant appealed the denial of attorney’s fees, contending that he prevailed on the issue.

We held on appeal that, because the court concluded that the claimant was suffering from a permanent total disability, he was entitled to attorney’s fees under § 39-71-612, MCA, in relation to his proof that he was permanently totally disabled. While our holding was not explicit, it was premised on the Workers’ Compensation Court’s reliance on claimant’s proof and its conclusion that claimant was permanently totally disabled; the issue was, in fact, adjudicated.

Here, Sears conceded permanent total disability benefits three weeks before the original hearing date and some five weeks before the actual hearing. Neither discovery nor proof was required on the issue. No controversy over claimant’s disability or corresponding compensation was adjudicated at the hearing. Thus, the facts which formed the basis for our decision in Krause are not present here. We hold that the Workers’ Compensation Court did not err in denying claimant’s request for attorney’s fees on the permanent total disability issue.

Did the Workers’ Compensation Court err by failing to impose a penalty for delay in conceding permanent total disability?

The Workers’ Compensation Court refused to impose a penalty against Sears for unreasonable delay under § 39-71-2907, MCA (1979), which provides:

Increase in award for unreasonable delay or refusal to pay. When payment of compensation has been unreasonably delayed or refused by an insurer, either prior or subsequent to the issuance of an order by the workers’ compensation judge granting a claimant compensation benefits, the full amount of the compensation benefits due a claimant, between the time compensation benefits were delayed or refused and the date of the order granting a claimant compensation benefits, may be increased by the workers’ compensation judge by 20% ....

Claimant argues that Sears had all the information it used to concede permanent total disability benefits on June 5, when it received the results of the vocational testing. Thus, according to claimant, its delay in conceding the issue until August 29 was unreasonable.

Unreasonable delay is a question of fact to be determined by the trier of fact; we will not reverse the Workers’ Compensation Court’s decision on awarding a penalty if the decision is supported by substantial, credible evidence. Jaenish v. Super 8 Motel (1991), 248 Mont. 383, 389-90, 812 P.2d 1241, 1243. In addition, the penalty statute requires unreasonable delay or refusal in payment of compensation prior or subsequent to an order granting compensation benefits.

The Workers’ Compensation Court found that Sears opened negotiations toward final resolution shortly after it obtained the vocational test results on June 5. Claimant made a settlement demand on July 10, and filed his petition for hearing on July 19. Sears conceded claimant’s permanent total disability on August 29, 1991. Substantial evidence exists to support the Workers’ Compensation Court’s determination that the facts of this case do not warrant a penalty under Section 39-71-2907, MCA (1979). Furthermore, compensation was being paid throughout the period from June 5 to August 29; no delay or refusal in payment, as required by the statute to support a penalty award, occurred. Additionally, no award of permanent total disability benefits was made by order of the Workers’ Compensation Court that would serve as a basis for a penalty under §39-71-2907, MCA (1979). We hold that the Workers’ Compensation Court did not err in refusing to award a penalty pursuant to § 39-71-2907, MCA (1979).

Affirmed.

CHIEF JUSTICE TURNAGE, JUSTICES HARRISON, McDONOUGH, and WEBER concur.

JUSTICE TRIEWEILER

dissenting.

I dissent from the opinion of the majority.

In Lasar v. E. H. Oftedal & Sons (1986), 222 Mont. 251, 721 P.2d 352, and again in Komeotis v. Williamson Fencing (1988), 232 Mont. 340, 756 P.2d 1153, this Court blatantly ignored the plain language of Section 39-71-612, MCA (1979), to conclude that a court award of benefits is a condition to an award of attorney fees. In this case, the majority blindly follows its prior decisions without any analysis of the plain terms of the attorney fee statute.

Section 612 does not simply provide that when the court’s award is greater than the amount offered, the claimant is entitled to an attorney fee. It clearly provides that when the ultimate settlement is greater than the amount originally offered, the claimant is entitled to recover his attorney fees which were incurred to pursue his claim for the full amount of his benefits. That section states:

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. [Emphasis added.]

Section 39-71-612(1), MCA (1979).

In this case, claimant demanded that he be paid permanent total disability benefits on March 1, 1991. That demand was rejected by defendant on April 4,1991. Claimant filed his petition for permanent total disability benefits on July 19, 1991, and in its answer dated August 7, 1991, defendant denied that claimant was permanently totally disabled. Defendant continued in that denial as late as the pretrial conference on August 22, 1991. Therefore, according to our prior case law, there was a controversy over the amount of compensation due.

We held, in Krause v. Sears Roebuck & Company (1982), 197 Mont. 102, 641 P.2d 458, that:

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 § 39-71-612, MCA, the claimant is entitled to attorney fees and costs in relation only to his proof that he was permanently totally disabled.

Krause, 641 P.2d at 462.

In other words, we have previously held that when the controversy is whether claimant is permanently or temporarily disabled, that is a controversy relating “to the amount of compensation due” within the contemplation of § 39-71-612, MCA(1979). As of August 22,1991, there was such a controversy in this case.

On August 29, 1991, that issue was settled when defendant conceded that claimant was permanently totally disabled. On that date, then, there was a settlement for benefits greater in value than the benefits that had been previously tendered, and according to the plain language of § 39-71-612, MCA (1979), claimant was entitled to an award of attorney fees that were incurred to recover the full amount of his benefits.

The majority opinion completely ignores the language in the attorney fee statute which provides that when a settlement is greater than the amount originally offered, claimant is entitled to recover an attorney fee. This Court ignored that language in the Lasar case; it ignored it in the Komeotis case; and like an ostrich with its head buried in the sand, the majority continues to ignore that language in this case for the apparent reason that its erroneous precedent is more important than the plain language of the statute.

I would reverse this Court’s decisions in Lasar and Komeotis and reverse the trial court’s refusal to grant attorney fees in this case.

I would also reverse the Workers’ Compensation Court’s refusal to award the statutory penalty to claimant pursuant to § 39-71-2907, MCA (1979). That statute provides that when payment of compensation has been unreasonably delayed or refused by an insurer, a penalty equal to 20 percent of those benefits may be awarded. In this case, the insurer’s conduct was unreasonable in two respects.

According to the testimony of claimant’s claims representative who handled this claim, she had all of the vocational and medical information with which to make an evaluation of claimant’s disability by June 5,1991. Cathy Andersen testified that she had a medical report concluding that claimant was unable to work in any capacity as early as April 19,1991. She acknowledged that she had vocational evaluations and psychological reports by June 5,1991, which indicated that claimant has the equivalency of a sixth grade education, that he has a learning disability, and that he was not a candidate for retraining. Furthermore, she admitted that she received no additional medical or vocational information from that date until Sears conceded permanent total disability on August 29, 1991. And yet, defendant’s attorney continued to take the position in his answer to claimant’s petition, and again at the time of the pretrial conference, that claimant was not permanently totally disabled. Obviously, defendant continued to deny liability for the full extent of claimant’s disability, even though it was fully aware of claimant’s condition, in order to strengthen its bargaining position for purposes of settling claimant’s claim. In doing so, I conclude that it acted unreasonably.

Furthermore, defendant acted unreasonably when, without any basis in fact, it refused to convert a portion of claimant’s future disability benefits to a lump sum pursuant to § 39-71-741, MCA. This is apparent from the following finding entered by the trial court:

Defendant has designated Cathy Andersen as its claims adjuster in Montana relative to this case. However, Andersen testified that she was not privy to petitioner’s affidavit regarding a lump sum, nor had she seen petitioner’s discovery responses, nor had she read petitioner’s deposition. Hence, she knew of no reasons why petitioner’s lump sum request had not been granted, and she had absolutely no information as to whether payment of the lump sum request was in petitioner’s best interest. Moreover, Andersen had no explanation regarding Sears’ refusal to concede permanent total disability until three weeks before the original trial setting. It was apparent at trial that only defense counsel and an adjuster in Linwood, Washington, were making the decisions and denying petitioner’s requests. Andersen had little, if any, authority regarding petitioner’s file. [Emphasis added.]

As pointed out by the Workers’ Compensation Court, 24.29.804(1) ARM, provides as follows:

Every insurer is required to designate at least one adjuster, maintaining an office in Montana, which shall pay compensation when due and which shall have authority to settle claims.

The adjuster for defendant who had the responsibility to pay compensation which was due with regard to this claim was Cathy Andersen, and yet, defendant’s attorney did not even provide her with the information that formed the basis for claimant’s claim. There is no way she could have acted reasonably. The fact that she did not is evident by the last minute concession regarding the nature of claimant’s disability and the Workers’ Compensation Court’s decision to convert a part of claimant’s disability benefits to a lump sum, in spite of defendant’s refusal to do so.

Insurers who force claimants to incur the expenses of litigation and who clog Montana’s Workers’ Compensation Court because of this kind of conduct are the exact parties for whom § 39-71-2907, MCA, was intended.

In this decision, this Court has ignored the plain language of the Workers’ Compensation Court in two respects. It has refused to award attorney fees, and it has refused to impose the statutory penalty when both were clearly warranted.

Apparently, the principles of “strict construction” about which “conservative” jurists so proudly pound their chests, don’t apply to the statutory rights of injured workers.

For these reasons, I dissent from both conclusions in the majority opinion.

JUSTICE HUNT concurs in the foregoing dissent of JUSTICE TRIEWEILER.


author: JUSTICE WEBER JUSTICE TRIEWEILER

text:
    PERRY HOFFERBER, Claimant and Appellant, v. PLAGO MINING, INC., Employer, and INDUSTRIAL INDEMNITY COMPANY, Defendant and Respondent.
    No. 92-104.
    Submitted on Briefs August 6, 1992.
    Decided February 25, 1993.
    50 St.Rep. 171.
    257 Mont. 91.
    848 P.2d 468.
    For Appellant: Andrew J. Utick, Utick & Grosfield, Helena.
    For Respondent: Thomas A Marra, Marra, Wenz, Johnson & Hopkins, P.C., Great Falls.
   JUSTICE WEBER

delivered the Opinion of the Court.

Claimant, Perry Hofferber, appeals from a judgment in the Workers’ Compensation Court, State of Montana, Helena, Montana denying him temporary total disability benefits.

The sole issue for our review is whether the Workers’ Compensation Court erred in refusing to grant Hofferber temporary total disability benefits for the period between February 14, 1991, when his doctor advised him that his knee required further surgery, and January 14, 1992, the date of his most recent knee surgery.

On October 13, 1980, Perry Hofferber (Hofferber) suffered an industrial injury to his right knee arising out of and in the course of his employment with Plago Mining, Inc., in Lewis and Clark County, Montana. Plago Mining, Inc. was insured by Industrial Indemnity Company (Industrial), the defendant in this case.

Industrial accepted liability for Hofferber’s initial injury and paid benefits from the time of the injury through April 8, 1981. Dr. Carpenter, a Helena orthopedic surgeon, performed surgery on January 7, 1981, to remove a popliteal cyst from Hofierber’s right knee. On April 8,1981, Dr. Carpenter released Hofferber to return to work, as he felt Hofferber had reached a medically stable condition and had attained maximum healing at that time.

From April 1981 to July 1985, Hofferber worked as a self-employed carpenter. Although he had continued to have problems with his knee, as a self-employed carpenter, he could take breaks and days off if necessary because of the pain. On July 24, 1985, Hofferber began seeing Dr. Humberger in Bozeman. Dr. Humberger performed arthroscopic surgery on the right knee on September 12, 1985. Dr. Humberger’s opinion was that the problems Hofferber experienced which resulted in the second surgery in 1985 were a direct result of the original 1980 injury.

Hofferber began attending Montana State University in Bozeman in the fall of 1985 and continued to do so through the time of the trial. In the fall of 1990, he again began to experience problems with his right knee. Because Dr. Humberger was then out of the country, his office referred Hofferber to Dr. Lowell Anderson, who examined him in February of 1991. After performing some diagnostic tests, Dr. Anderson recommended further arthroscopic surgery. Hofferber did not have surgery at that time. He continued to attend MSU. Dr. Anderson testified that the surgery would have kept Hofferber from attending school for only one or two days. Hofferber finally had the knee surgery performed in January 1992, after the Workers’ Compensation Court’s December 6,1991 decision entitling Hofferber to medical benefits based on the original 1980 injury.

Hofferber received temporary total disability benefits from the date of his injury in October 1980 until he reached maximum healing in April 1981. An April 1,1991 decision of the Workers’ Compensation Court awarded him temporary total disability benefits for the period of time between September 12,1985 and May 12,1986, the period of recovery from the second surgery. The Workers’ Compensation Court’s December 6, 1991 judgment entitles Hofferber to receive temporary total disability benefits for the period of time from the date of the January 1992 surgery until the date of maximum healing following that surgery.

I.

Did the Workers’ Compensation Comb err in refusing to grant Hofferber temporary total disability benefits retroactively from the date he was advised to have a third surgery to the actual date of the surgery?

Hofferber contends that he should receive temporary total disability benefits not only for the time from the third surgery to maximum healing, but also retroactively from the date of that surgery, January 14, 1992, back to February 14, 1991, the date Dr. Anderson first recommended the surgery. He contends that he meets the definition of temporary total disability as of February 14, 1991 until he reaches the end of his healing period following surgery. The applicable statute in effect at the time of Hofferber’s injury reads as follows:

“Temporary total disability” means 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.
Section 39-71-116(19), MCA (1983).

This statute requires two things: (1) that the injury result in total wage loss, and (2) that the injured worker is not as far restored as the permanent character of his injuries permits. Clearly, as the Workers’ Compensation Comb found, Hofferber’s condition was not “as far restored as the permanent character of the injuries” would permit at the time he sought medical treatment in February of 1991. This second factor is not relevant to our discussion here.

Hofferber contends that he meets the first prong of the statutory definition merely by earning no wages from February 14,1991 to the time of trial before the Workers’ Compensation Court. Industrial contends that Hofferber, not the insurer, must prove that he suffered a total loss of wages and that he was unable to work. Hofferber, on the other hand, argues that the surgery had to be postponed until after the trial because the insurer refused to pay medical expenses and, therefore, that he had to wait until the Workers’ Compensation Court ruled on the issue. He claims that the doctors refused to treat him without cash payment in advance and that he could not afford to pay for the surgical procedures in advance.

Hofferber cites Linton v. City of Great Falls (1988), 230 Mont. 122, 749 P.2d 55, to support his argument that he need not show a loss of earning capacity, as opposed to loss of wages, in order to receive temporary total disability benefits based on Section 39-71-116(19), MCA. In Linton, we held that a claimant whose injury caused him to actually lose wages because of his inability to return to work could receive such benefits. Linton, 749 P.2d at 61. Such is not the case here. Despite Hofferber’s argument that he was not working in February 1991, he presented insufficient medical or other evidence to establish that he was unable to work. His choice not to work was purely voluntary because he decided instead to continue his college education. Under these circumstances, Section 39-71-116(19), MCA, requires the claimant to prove by a preponderance of the evidence that he is unable to work.

When a claimant is voluntarily out of the job market attending college, it is not sufficient to show that he earned no wages. Thus, the Workers’ Compensation Court’s denial of temporary total disability benefits based upon Homme v. Rauenhorst Corp. (1987), 227 Mont. 495, 740 P.2d 1110, is not error. The claimant in Homme sought temporary total disability benefits following his healing period and restoration to a condition “as far as the permanent character of his injury” would permit. Throughout the applicable time period, he attended college. We concluded that he could not receive benefits while he was in college being retrained because he “had a normal labor market” in which to search for a job, even though he could not work at the same job that he had prior to his injury. Homme, 740 P.2d at 1114. In this case, Hofferber did not meet the statutory requirements because he attended college and failed to prove that he was unable to work or that his training was part of a rehabilitation program.

We conclude that the Workers’ Compensation Court did not err when it refused to allow retroactive temporary total disability benefits from February 14, 1991 to January 14, 1992.

We affirm.

CHIEF JUSTICE TURNAGE, JUSTICES HARRISON and GRAY concur.

JUSTICE TRIEWEILER

dissenting.

I dissent from the opinion of the majority.

When Perry Hofferber could no longer tolerate the pain and impairment in his knee, he saw Dr. Lowell M. Anderson on February 14, 1991. Dr. Anderson observed significant discomfort and swelling, limited range of motion, pain with movement to the knee, and a recent increase in claimant’s symptoms. He formed the opinion that a large popliteal cyst had formed on the posterior side of claimant’s knee and that the cyst had resulted from internal irregularity in the knee joint.

Doctor Anderson recommended that claimant undergo arthroscopic surgery to treat the problems he had diagnosed and suggested that he return to Dr. Frank Humberger who had previously performed arthroscopic surgery on the claimant in 1985. Everyone agrees that at that point claimant’s healing period had not ended.

The problem for claimant was that defendant still had not paid for the 1985 surgery (even though it was subsequently ordered to do so by the Workers’ Compensation Court); claimant had been put on a pay-as-you-go basis by Dr. Humberger’s office manager; and claimant was unable to afford the surgery.

In fact, claimant’s outstanding bill for Humberger’s services in relation to the 1985 surgery had been turned over to a collection agency and was not paid by defendant until the Workers’ Compensation Court entered judgment in April 1991 requiring defendant to pay that bill.

Claimant had to file another petition in the Workers’ Compensation Court to compel defendant to accept responsibility for this surgical procedure.

It was the decision of the Workers’ Compensation Court in this case that claimant would be entitled to temporary total disability benefits following surgery until he reached the end of his healing period, but not before surgery, even though surgery was delayed due solely to the conduct of defendant. This Court has affirmed that judgment. However, the arbitrary point selected for the beginning of temporary total disability status makes no sense.

The testimony in this case was that claimant would be unable to attend classes for at least two days following the arthroscopic surgery. However, the testimony from claimant’s previous trial, which was made part of the record in this case, was that his healing period would last for six months to a year from the date of this kind of surgery. Certainly, neither the trial court nor the majority contend that during that entire six to twelve months claimant would be less able to work than he was in February 1991 when his need for surgery was determined.

I also disagree that the medical evidence was insufficient to establish that claimant was unable to return to his former occupation as a carpenter. And according to this Court’s previous decision in Linton v. City of Great Falls (1988), 230 Mont. 122, 749 P.2d 55, it was not necessary for claimant to establish that he had no earning capacity in order to qualify for temporary total disability benefits.

In Linton, the claimant also failed to demonstrate a total loss of wages and presented no evidence to demonstrate that he was completely unable to perform any kind of gainful employment. In fact, the undisputed evidence was that there were jobs he could perform, even though his healing period had not ended. On appeal, that claimant contended that the trial court had erred by requiring him to show a total loss of earning capacity in order to qualify for temporary total disability benefits under Section 39-73-116(19), MCA. We agreed and reversed the trial court’s judgment for the reason that there was substantial evidence to show that claimant could not return to his former occupation. We held that:

The trial court concluded that the claimant must demonstrate an inability to “perform other jobs” before being entitled to temporary total benefits and awarded claimant permanent partial disability benefits under Section 39-71-116(12), MCA (1983).
We cannot agree. The applicable statute is Section 39-71-116(19), MCA (1983), which defines temporary total disability.
Claimant is suffering from a condition resulting from an injury that has resulted in the total loss of his wages and, as the evidence shows, he is not yet as far restored as the permanent character of the injuries will permit. Linton cannot work because of the inability to tolerate the pain that accompanies the use of his injured shoulder....
As the facts are before this Court, the award of permanent partial benefits to claimant is in error as a matter of law. Temporary total benefits should be reinstated as of the date of Linton’s termination from work.

Linton, 749 P.2d at 61.

The only requirements established in Linton to qualify for temporary total disability benefits are that the worker was unable to return to his former occupation and that his healing period had not ended. With this decision, we now add an additional element so that the emphasis in determination of temporary total disability is no longer the claimant’s physical condition or health, but rather what he is capable of earning. This decision will force injured workers to obtain employment before they are physically ready to do so, in many cases aggravating their condition and creating more significant long-term consequences than would be necessary if they were allowed to heal adequately before returning to the work force.

The majority affirmed the Workers’ Compensation Court’s denial of temporary total benefits based upon our decision in Homme v. Rauenhorst Corporation (1987), 227 Mont. 495, 740 P.2d 1110. However, there is nothing about Homme which is similar to the facts in this case. Unlike the claimant in this case, Homme had reached maximum healing. He did qualify for retraining at the expense of the Department of Social and Rehabilitation Services. However, the counselor from that agency testified that even without retraining he would qualify for some forms of employment. There was undisputed testimony that his healing period had ended, and that he had a normal labor market. In this case, the undisputed testimony is just the opposite. It is conceded that by February 14, 1991, it had been medically established that this claimant’s healing period had not ended. It can be logically deduced from the examining physician’s description of his physical condition that he could not perform the types of physical labor he had performed in the past without further aggravating his condition and there was no evidence offered by defendant to establish that claimant had any residual or normal labor market other than the occupations he had previously performed.

There are sound reasons for placing greater emphasis on a worker’s physical condition than his earning capacity when analyzing temporary total disability, as opposed to permanent total disability. While it may be true that after the healing period has ended it is important for workers to test their capacity and endurance and perform to the greatest extent possible, just the opposite is true during a worker’s healing period.

It is important that employees who have been injured and whose healing period has not ended be allowed to fully recover from their injury before pursuing employment, regardless of whether they are technically capable of performing some limited activities which could constitute gainful employment.

The historical purpose of treating temporary total disability benefits differently from permanent disability benefits, has been that workers should be given every opportunity to obtain adequate treatment and heal to the fullest extent without competition from economic pressures. With the increased emphasis that this opinion places on earning capacity, rather than the degree to which a worker has physically healed, that worthy purpose has been jeopardized.

Had the claimant gone from the doctor’s office on February 14 to the surgical suite on February 15, 1991, neither the trial court nor the majority would have any difficulty concluding that he was temporarily totally disabled from that point in time, with or without evidence of his job market. Neither would the majority have any difficulty concluding that claimant’s disability status should continue for the six to twelve months of healing following that surgical procedure. However, the reality of the situation is that within two days of that surgical procedure, his physical condition would, in all probability, have been better than the physical condition in which he found himself from February 14, 1991, to January 14, 1992, when he was finally financially able to have the surgery performed. The only reason that the surgery was postponed was because he was financially unable to pay for it. The only reason he was unable to pay for it was because of the insurer’s unwillingness to accept responsibility until it had been ordered to in a second trial court decision over the very same knee injury.

This decision arbitrarily and unreasonably penalizes claimant for defendant’s misconduct.

For these reasons, I dissent. I would reverse the judgment of the Workers’ Compensation Court and award claimant temporary total disability benefits retroactive to February 14, 1991.


author: JUSTICE WEBER

text:
    CITY OF BILLINGS, a Montana municipal corporation, Plaintiff, Counterdefendant and Respondent, v. JEAN HUNT; HELEN KELLER; MAX H. HEFFNER; ELEANOR M. HEFFNER; C.M. HEFFNER, JR.; AMELIA O. HEFFNER; INTERNAL REVENUE SERVICE; UNITED STATES OF AMERICA and DEPARTMENT OF REVENUE STATE OF MONTANA, Defendants, DENNIS J. RUE CO., INC., a/k/a DENNIS J. RUE, INC.; ANGIE JUROVICH, THOMAS L. FERGUSON, TRUSTEE; GARY KAINU; PATRICIA I. KAINU; EDWARD S. MARTYR, a/k/a E.S. MARTYR; BETTY MARTYR; ABBY FERGUSON, TRUSTEE; DONALD L. FERGUSON; THOMAS L. FERGUSON; JOHN EDWARD FERGUSON; KELLIE ANN FERGUSON; MYRNA A. CLARK; THE ABBY FERGUSON TRUST; THE ABBY FERGUSON IRREVOCABLE TRUST; UNIVEST, INC.; and ROBERT P. LIVENGOOD, Defendants, Counterclaimants and Appellants.
    No. 92-158.
    Submitted December 15, 1992.
    Decided February 25, 1993.
    50 St.Rep. 175.
    257 Mont. 99.
    847 P.2d 715.

      For Appellant: Mark D. Parker, Parker Law Firm, Billings.
    For Respondent: Kenneth D. Peterson, Peterson & Schofield, Billings.
   JUSTICE WEBER

delivered the Opinion of the Court.

This is an appeal from an order of the Thirteenth Judicial District Court, Yellowstone County, refusing to award interest to appellants under § 70-30-302(2), MCA, pursuant to a condemnation proceeding taking vacant, undeveloped land. We reverse.

Appellants present the following issues for review:

1. Did the District Court err in refusing to award interest under § 70-30-302, MCA, when the City of Billings condemned vacant, undeveloped land?

2. Did the District Court err in awarding out-of-state witness travel expenses?

The appellants are the contract purchasers of real property legally described as Certificate of Survey 1805 consisting of 12.216 acres in Yellowstone County, Montana. The subject land is located on the “rims” south of Highway 318 at the southeast end of Logan International Airport in Billings, Montana. The parties stipulated that the highest and best use of the land was for professional offices.

In 1986, the City of Billings (City) offered to purchase all 12.216 acres of Certificate of Survey 1805 for $293,200. The landowners rejected the City’s offer. On September 17, 1987, the City began condemnation proceedings under its power of eminent domain and served summonses on defendants in September 1987.

On February 29, 1988, the City moved for a preliminary condemnation order which was subsequently issued by the District Court on May 4,1988. In August 1989, after a Condemnation Commissioner’s Hearing as required by § 70-30-301, MCA, the Condemnation Commissioners reported that the current fair market value of the property was $320,500. After a trial in February 1992 on the issue of fair market value, a jury found that the fair market value as of September 21, 1987 was $200,000.

The jury’s award did not include interest prior to the judgment date. Although appellants had requested a jury instruction which would have included interest from the date of summons as part of the condemnation award, the verdict form used at the trial did not include interest and the District Court did not instruct the jury to include interest. Appellants seasonably objected to the jury instruction, thereby preserving that question for appeal.

L

Did the District Court err in refusing to award interest under § 70-30-302(2), MCA, when the City of Billings condemned vacant, undeveloped land?

The Fifth Amendment to the United States Constitution prohibits governmental entities from taking private property for public use under the power of eminent domain without paying “just compensation.” Similarly, Article II, § 29 of the Montana Constitution prohibits the taking or damaging of private property for public use “without just compensation to the full extent of the loss having been first made to or paid into court for the owner.”

“Just compensation” may include interest. Interest has been regarded as a substitute for computing appreciation of land value between the time of taking and the date of payment. See United States v. 156.81 Acres of Land (9th Cir. 1982), 671 F.2d 336, 339, cert. denied, 459 U.S. 1086, 103 S.Ct. 569, 74 L.Ed.2d 931 (1982). § 70-30-302, MCA, provides:

Assessing compensation — date and measure — interest. (1) For the purpose of assessing compensation, the right thereto shall be deemed to have accrued at the date of the service of the summons, and its current fair market value as of that date shall be the measure of compensation for all property to be actually taken and the basis of depreciation in the current fair market value of property not actually taken but injuriously affected ....
(2) If an order be made letting the plaintiff into possession, as provided in 70-30-311, the full amount finally awarded shall draw interest at the rate of 10% per annum from the date of the service of the summons to the earlier of the following dates:
(a) the date on which the right to appeal to the Montana supreme court expires or, if appeal is filed, to the date of final decision by the supreme court; or
(b) the date on which the property owner withdraws from court the full amount finally awarded.
(5) No improvements put upon the property subsequent to the date of the service of summons shall be included in the assessment of compensation or depreciation in current fair market value, nor shall the same be used as the basis of computing such compensation or depreciation.

Under Section 70-30-302(2), MCA, if the City had been let into possession of the property, interest would have been awarded from the date of service of summons. Here, the District Court’s Judgment putting the City in possession was dated March 10, 1992. The appellants received no interest from the date of summons in September 1987 to March 10, 1992.

The subject land is vacant and unimproved with its primary value prior to condemnation as investment property. Appellants’ plan to develop the land for professional office buildings was foreclosed in September 1987 when they were served with summonses in this proceeding. Although appellants could have improved the land, §70-30-302(5), MCA, would have prevented them from receiving compensation for any improvements to the land after the date of summons. While Section 70-30-302, MCA, does deprive the owner of compensation for improvements added to the land, the land can still be used for other purposes such as growing of crops, recreation, or parking, should that be the source of income.

It is the general rule that a taking does not occur until: (1) legal title vests in the condemnor, (2) the condemnor enters into actual possession, or (3) the condemnor takes constructive possession either by causing damage to property or by depriving the owner of full beneficial use of his land. Stewart & Grindle, Inc. v. State (Alaska 1974), 524 P.2d 1242. The Alaska court noted in that case that Alaska’s statutory scheme deprived the owner of both investment potential and the possibility of future development the moment a condemnation action commences. Stewart & Grindle, Inc., 524 P.2d at 1247. Section 70-30-302, MCA, essentially identical to the Alaska statute, does the same thing.

The owner, however, remains responsible for expenses incidental to legal ownership. State v. Nordstrom (N. J. 1969), 253 A.2d 163. This includes mortgage payments, tort liability and the like. For example, Section 70-30-314, MCA, specifically postpones the condemnor’s responsibility for noxious weed control. In Montana, not all incidents of ownership remain with the owner; property taxes become the responsibility of the condemnor. Section 70-30-315, MCA. In Stewart & Grindle, Inc., 524 P.2d at 1247, the Alaska court reasoned:

... If as a matter of constitutional law the property owner is entitled to interest from the moment the State takes legal possession, he should, a fortiori, receive interest where he has been deprived of all the economic advantages of legal ownership but is relieved of none of the liabilities.

In Nordstrom, a case which allowed interest from the date the proceeding began, the court declined to set forth a firm rule and stated its desire to proceed on a case-by-case basis when dealing with unimproved property. Nordstrom, 253 A.2d at 165. The Alaska court rejected this approach because it could not conceive of an instance in which owners of unimproved property would not be entitled to interest from the date of the suit (with appropriate set-offs for rents and profits). Stewart & Grindle, Inc., 524 P.2d at 1249, n.24.

We disagree with the Alaska court’s assessment that interest should be paid from the date of service of summons in all cases where vacant and unimproved land is held for investment with a view toward ultimate development. Like the Nordstrom court, we conclude that it is advisable to proceed on a case-by-case basis in considering the awarding of interest on condemnations.

In Manke v. Airport Authority of Washoe County (Nev. 1985), 710 P.2d 80, the Nevada Supreme Court reversed a district court order refusing to award interest to owners of vacant and unimproved land located near an airport and held for investment. The Nevada statute, like those in Alaska and Montana, foreclosed development of the condemned property after the date of the service of summons. The facts in the case before us are strikingly similar to those in Manke, where the respondent’s objective in condemning appellants’ property was to create a clear zone surrounding the airport. Significantly, the court said

Our holding that a taking occurred in this case on the date of the service of summons is buttressed by the fact that the burden placed upon appellants by the service of summons directly corresponds to a benefit conferred upon respondent. ... Because development of appellant’s property was frozen on the date of the service of summons, respondent’s objective in condemning appellants’ property was accomplished on that date. (Citations omitted)

Manke, 710 P.2d at 82.

The same is true here. Appellants could not develop the property after the date of summons; the City of Billings achieved its objective on the date of summons. We agree with the reasoning in Manke and Nordstrom, which held that where owners of vacant and unimproved land are deprived of all economically viable use of their property, a taking occurs at the inception of the eminent domain proceedings. See also United States v. 156.81 Acres of Land, 671 F.2d at 340 (condemnation order that denied the landowners any economically viable use of their land was a taking as of the date the condemnation began and interest was appropriate in such circumstances).

In Nordstrom, the court stated that rents, profits and beneficial use are to be applied in abatement and that interest should not run on monies deposited with the court. Nordstrom, 253 A.2d at 167. We adopt the following statement from Nordstrom:

The awarding of interest does not lend itself to rigid guidelines, but rather is best considered on a case-by-case basis in order to determine compensation which is “just.” One of the critical variables in every case is the use to which the land is being put by the condemnees. There would be good cause to abate interest if the condemnees were left undisturbed in their enjoyment of the property by the condemnation proceeding, or if they continue to receive undiminished rents and profits from the use of the land up to the time the State takes possession. On the other hand, where the condemnation proceedings restrict the profitable use or enjoyment of the property, interest ordinarily should be allowed.

Nordstrom, 253 A.2d at 165-66.

Our standard of review for a district court’s conclusions of law is whether they are correct. Steer, Inc. v. Dept. of Revenue (1990), 245 Mont. 470, 803 P.2d 601. We conclude that the landowners in this case were deprived of all economically viable use of their vacant and unimproved property. As a result we conclude that the court erred in refusing to award interest.

We hold that the landowners in this case were deprived of all economically viable use of their vacant, unimproved property and that they are entitled to interest from the date of service of summons.

II.

Did the District Court err in awarding out-of-state witness travel expenses?

The District Court awarded $436.50 for travel costs for Veri Brady. Appellants contend that this amount was improperly awarded because the City did not request travel for Veri Brady outside the state of Montana and because the law provides that costs are not allowable for travel outside the state. Appellants rely on Chilcott v. Rea (1916), 52 Mont. 134, 155 P. 1114; and Bullard v. Zimmerman (1930), 88 Mont. 271, 292 P. 730. Both Chilcott and Bullard held that mileage costs for witnesses were limited to expenses for travel within the state of Montana. The statute providing for allowable costs has remained unchanged since the dates of those decisions, except for its heading. Section 25-10-201, MCA, provides in pertinent part:

Costs generally allowable. A party to whom costs are awarded in an action is entitled to include in his bill of costs his necessary disbursements, as follows:
(1) the legal fees of witnesses, including mileage, or referees and other officers ...

As noted, Chilcott and Bullard allowed mileage expense to travel within the state of Montana. In referring to prior interpretations of § 25-10-201, MCA, the District Court concluded that § 26-2-501(b), MCA, allowed mileage past the state line. § 26-2-501(b) provides in pertinent part:

(b) for mileage in traveling to the place of trial or hearing, each way, for each mile, a mileage allowance as provided in 2-18-503.

Nothing in § 26-2-501(b) provides for recovery of mileage costs for travel outside the state of Montana. We conclude that the District Court incorrectly applied the law in its calculation of costs.

We hold the District Court erred in awarding out-of-state witness travel expenses.

We reverse and remand the case to the District Court with instructions to modify its judgment of condemnation to include interest from the date of service of summonses and to reconsider its award of costs consistent with this opinion.

CHIEF JUSTICE TURNAGE, JUSTICES GRAY, TRIEWEILER, HUNT, HARRISON and McDONOUGH concur.


author: JUSTICE HARRISON JUSTICE TRIEWEILER

text:
    FARMERS UNION MUTUAL INSURANCE, Plaintiff and Respondent, v. RON KIENENBERGER, PATTI KIENENBERGER, JARET KIENENBERGER, AND J.L., Defendants and Appellants.
    No. 92-180.
    Submitted on Briefs November 24, 1992.
    Decided February 25, 1993.
    50 St.Rep. 179.
    257 Mont. 107.
    847 P.2d 1360.

      For Appellants: Patrick F. Flaherty, Great Falls (Kienenberger); John E. Seidlitz, Jr., Great Falls (J.L.).
    For Respondent: William J. Gregoire, Smith, Walsh, Clarke & Gregoire, Great Falls.
   JUSTICE HARRISON

delivered the Opinion of the Court.

This is an appeal from the District Court of the Eighth Judicial District, County of Cascade, State of Montana, the Honorable John M. McCarvel presiding. The Kienenbergers and J.L. appeal from an order granting the respondent, Farmers Union Mutual Insurance (Farmers Union) summary judgment on the basis that it owed no duty to defend or indemnify its insured, Ron Kienenberger, in the underlying action. We affirm.

The underlying action arose in January 1991, when Ron Kienenberger’s son Jaret, age 13, raped J.L., age 28. In the ensuing criminal proceedings, Jaret pled guilty to sexual intercourse without consent. J.L. then sued Jaret’s parents on a theory of negligent supervision. She alleged in her complaint that the Kienenbergers owed a duty to her and to others to provide appropriate supervision to their child, Jaret Kienenberger, and that they had negligently supervised his upbringing “to the point where it was reasonably foreseeable that he would be a danger to himself and to third parties.” The District Court dismissed J.L.’s action in April, 1992, on the Kienenbergers’ motion, and J.L. appealed. Her appeal has not been decided.

The case before the Court is a declaratory judgment action instituted in District Court in October 1991 by Farmers Union. Farmers Union sought an order that it owed no duty to its policy holder, Ron Kienenberger, even though it had retained counsel for the Kienenbergers in J.L.’s action. The District Court held that under Ron Kienenberger’s Farm and Ranch Liability Policy, Farmers Union was not obligated either to indemnify or to defend the Kienenbergers against J.L.’s claim for damages.

The dispositive issue on appeal is whether the District Court erred in finding that Kienenbergers’ insurance policy precluded coverage because J.L.’s injuries were not caused by an “occurrence” as defined in the policy. Appellants also question whether the District Court erred in finding that coverage was precluded by a clause in the policy that expressly excluded injuries caused by sexual molestation. We do not decide this issue because we affirm the District Court on the first issue. Appellants also raise another issue: whether negligent supervision by Jaret Kienenberger’s parents is an “occurrence” for which Farmers Union was obligated to provide coverage. The District Court did not address this issue and we will not decide it here.

The policy provided that Farmers Union would pay damages for bodily injury or property damage caused by an “occurrence,” defined as “an accident... neither expected nor intended from the standpoint of the insured” (emphasis added). An intentional act cannot be an “occurrence” because it is not an accident and because it is intended or expected by the insured. Therefore, injuries caused by an insured person’s intentional act are not covered. New Hampshire Insurance Group v. Strecker (1990), 244 Mont. 478, 481, 798 P.2d 130, 132.

It is undisputed that as a member of Ron Kienenberger’s household Jaret was an insured, and that Jaret’s sexual assault of J.L. was intentional. Summary judgment is proper when the record discloses no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Rule 56(c), M.R.Civ.R; also see Truck Insurance Exchange v. Waller (1992), 252 Mont. 328, 331, 828 P.2d 1384, 1386, 49 St.Rep. 318, 319. Since it is undisputed that J.L.’s injuries were caused by an insured person’s intentional act, and the insurance contract clearly and unambiguously excludes coverage for intentional torts, Farmers Union is entitled to summary judgment as a matter of law.

AFFIRMED.

CHIEF JUSTICE TURNAGE, JUSTICES GRAY, McDONOUGH and WEBER concur.

JUSTICE TRIEWEILER

concurring in part and dissenting in part.

I concur with the result of the majority opinion because I conclude that Jaret’s conduct constituted sexual molestation and that damages for such conduct were specifically excluded by the terms of the policy.

I dissent from the majority’s conclusion that J.L.’s injuries were not an occurrence within the meaning of the policy.

J.L.’s claim against the parents is not based upon intentional conduct by the parents. It is based upon their alleged negligent failure to supervise their son, Jaret. Therefore, the authority relied upon by the majority is not on point and should not control the disposition of this case.

In New Hampshire Insurance Group v. Strecker (1990), 244 Mont. 478, 798 P.2d 130, the insured sought coverage for his own sexual assault and molestation of his daughter. We held that under those circumstances his conduct was not an “occurrence” within the meaning of the policy because it was not an accident and because the consequences of his conduct were intended.

In this case, even though the Kienenbergers are accused of negligently failing to supervise their son, there is no allegation, nor is it reasonable to conclude that by their negligent conduct they ever intended that their son would sexually assault J.L. or any other person. The circumstances in this case are much more similar to, and therefore, controlled by our decision in Lindsay Drilling and Contracting v. United States Fidelity and Guaranty Company (1984), 208 Mont. 91, 676 P.2d 203. In that case, the plaintiff claimed that among other things, Lindsay negligently allowed its employees to interfere with samples taken from drilled test holes at the site of mining claims. USF&G insured Lindsay, and like the insurer in this case, sought a declaratory judgment to the effect that the conduct of its insured which was complained of did not fall within the risks covered by its policy of insurance. In that case, USF&G relied on the same definition of “occurrence” that is found in the policy that we construe in this case and contended that since intentional conduct was the basis for the plaintiff’s complaint, there was no occurrence within the meaning of the policy. We disagreed and held as follows:

A covered occurrence, as defined in the policy, is one whose consequences were neither expected nor intended by the insured. In Northwestern National Casualty Co. v. Phalen (1979), 182 Mont. 448, 597 P.2d 720, we held that an insurance policy with the same definition of “occurrence” covered an intentional act whose consequences were neither expected nor intended. Here, the counterclaim alleges in part that Lindsay negligently allowed bystanders to tamper with the core samples. This scenario does not include intended or expected consequences. Therefore, the counterclaim sets forth a covered “occurrence” as defined in the policy, if bodily injury or property damage resulted. [Emphasis added.]

Lindsay, 676 P.2d at 205.

Likewise, in this case, J.L.’s claim accuses Ron and Patti Kienenberger of negligent conduct which assumes that the consequences complained of were never intended nor expected by those insureds. She does not allege on appeal that the Kienenbergers’ son, Jaret, is a covered insured based on his intentional conduct.

The distinction that the majority is unable to make was made clearly by the U.S. District Court for the Southern District of Florida in United States Fidelity and Guaranty Company v. Toward (S.D. Fla 1990), 734 F. Supp. 465. In that case, James and Rosario Toward operated a school and were insured in that business by USF&G. The parents of some students alleged that certain teachers at the school had molested their children while they were pupils at the school. They filed lawsuits alleging molestation. They named the Towards as defendants, and alleged that they had negligently hired and then negligently supervised employees at their school.

A complaint for declaratory judgment was filed by USF&G to the effect that it had no duty to defend the Towards, based upon the same definition of “occurrence” that exists in this policy and that was found in the Lindsay policy. The district court disagreed and held that:

The last part of the definition — “which results in bodily injury... neither expected nor intended from the standpoint of the insured” — also supports a finding of a duty to defend. This language is applicable to the case here because the accident, the acts of negligent supervision in hiring, could be the legal and proximate cause of the injuries of the molested children.

Toward, 734 F. Supp. at 467.

In the Toward case, the insurer also sought to rely on prior case law similar to the Strecker decision relied upon by the majority in this case. In Landis v. Allstate Insurance Company (Fla. 1989), 546 So. 2d 1051, coverage was excluded for an act of child molestation. However, the Federal District Court for Florida distinguished Landis for the following reasons:

However, this case (Landis) does not support the plaintiff’s (USF&G) attenuated reasoning. First, the Florida Supreme Court was considering a homeowner’s policy, not an explicit “public liability policy” covering a school explicitly. Furthermore, the Landis court, in pertinent part, interpreted an intentional tort exclusionary clause in an insurance policy. The insured was sued for his acts of child molestation. The issue was whether, under the contract language, a child molester can commit his misconduct without intending to injure the child. Indeed, the clause in the case at bar regarding a “bodily injury... neither expected nor intended from the standpoint of the insured” is applicable to the Landis analysis. The supreme court merely held that an insured child molester intends, as a matter of law, to harm the child.
This holding is not at issue here. The state [sic] plaintiffs, taking their allegations as true, do not seek to recover from insured molesters. The allegations are that the named defendants allowed other parties to molest the children. [Underlining emphasis added.]

Toward, 734 F. Supp. at 468.

Likewise, plaintiff in the underlying tort action in this case does not seek to recover from the parents for their intentional conduct. The basis of her effort to recover against them is that they negligently allowed their son to commit a violent offense against plaintiff. These facts are clearly distinguishable from the facts in the Strecker decision. These facts are controlled by our decision in Lindsay.

I would reverse the District Court’s conclusion that Farmers had no duty to defend nor indemnify its insureds, Ron and Patti Kienenberger, based upon the definition of “occurrence” within their insurance policy.

I do conclude, however, that coverage was excluded under the terms of Farmers’ policy based on the “sexual molestation” clause which excluded coverage for bodily injury arising out of sexual molestation. Although there are no decisions in Montana which specifically define sexual molestation, and even though it is not defined within the terms of the policy, it is clear from the use of that language what kinds of injury were intended to be excluded. Molest means to annoy, disturb, or persecute, especially with hostile intent or injurious effect. It is often defined as an annoying sexual advance. Webster’s New Collegiate Dictionary 764 (1984).

Therefore, I conclude that the damages sustained by J.L. as a result of Jaret’s conduct were excluded from coverage in Farmers’ policy with the Kienenbergers.

For these reasons, I concur with the result of the majority opinion, although I disagree with its rationale.

JUSTICE HUNT concurs in the foregoing concurrence and dissent of JUSTICE TRIEWEILER.