IN THE SUPREME COURT OF THE STATE OF MONTANA
R. GAIL HERNANDEZ,
Claimant and Appellant,
-vsLELAND JENSEM, d/b/a ACME PRESS,
Employer,
and
STATE COMPENSATION INSURANCE FUND,
Defendant and Respondent.
APPEAL FROM: The Workers' Compensation Court, The Honorabl-e ~ i m o t h y
Reardon, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
James Park Taylor; Geiszler, Taylor, Newcomer & Mc~lain,
Missoula, Montana
For Respondent:
Oliver H. Goe, Helena, Montana
Submitted on Briefs: Jan. 5 , 1 9 8 9
Decided: February 22, 1989
Filed:
J Clerk
Mr. Justice R. C. McDonough delivered the Opinion of the
Court.
This appeal from the Montana Workers' Compensation Court
concerns the court's denial of a request to lump sum
benefits. Claimant, R. Gail Hernandez, petitioned to lump
sum the majority of her entitlement alleging that financial
hardship had created a pressing need for more household
income. By placing the lump sum of benefits in various types
of mutual funds and one real estate limited partnership,
Hernandez hoped to increase her income by drawing a monthly
rate of return from the investments. She also proposed that
a portion of the lump sum benefits be used to establish funds
generating a rate of return for her children's post secondary
education, emergencies, protection from inflation, and a down
payment for the purchase of a house. The increase in income
from her various investments would in part be used to make
house payments. The lower court held that the proposal
failed to overcome the presumption in the Montana Workers'
Compensation Act against lump summing benefits. We affirm.
Hernandez's monthly income from bi-weekly payments
totals $ 5 7 9 . 0 0 . Hernandez also receives food stamps and
lives in federally subsidized housing. Her food stamp
entitlement fluctuates between $ 1 5 0 . 0 0 and $ 1 9 0 . 0 0 per month,
and monthly rent for her four bedroom apartment totals $ 1 0 4 .
Hernandez does not qualify for Aid to Families with Dependent
Children or Social Security Disability benefits. Her
attorney will begin collecting a portion of her benefits each
month to pay her agreed attorney fees. Hernandez's husband
lives in Peru and contributes little to the family income.
Hernandez attempts to support five children and her
sister-in-law using her benefits. The family income places
the household well below the federal poverty line.
The Fund also contends Hernandez exaggerated her budget
needs for medical expenses, and failed to pursue available
programs for help in meeting her medical needs. The Fund
also argues that the decision of the lower court may he
justified by the negative impacts of Hernandez's plan.
Hernandez's rent subsidy and food stamps would likely
decrease with an increase in income. The Fund further
asserts that an award of a lump sum to provide for
educational expenses for Hernandez's children fails to
overcome the presumption favoring periodic benefit payments.
There exists a high probability that in inflationary
times the rate of return from investments purchased with a
discounted lump sum of benefits will exceed the income
generated by bi-weekly payments. 3 A. Larsen, The Law of
Workmen's Compensation S 82.72 (d) (1988). However, Montana
law requires more than a showing of increased income through
a feasible investment plan. LaVe v. School District No. 2
(1986), 713 P.2d 546, 548,
43 St.Rep. 165, 168. Otherwise,
bi-weekly benefits would become the exception and lump sums
the rule. LaVe,
713 P.2d at 548.
In passing on any lump sum proposal, the lower court
must consider the best interests of the claimant, the
claimant's family, and the public. Komeotis v. Williamson
Fencing (Mont. 1988), 756 P. 1153, 1155-56,
45 St.Rep. 1098,
1101. In weighing these interests, the presumption favors
bi-weekly payments. Komeotis, 756 P.2d at 1156. This Court
affords the lower court with wide discretion in reviewing
lump sum decisions because the lower court occupies the best
position to familiarize itself with the needs of the claimant
and the results which would probably follow granting or
denying the petition for a lump sum. Komeotis, 756 F.7d at
1156.
Evidence in the record established that lack of funds
adversely affects Hernandez and her family. Hernandez must
borrow money to provide for adequate medical care. Her
eldest son works to provide money to attend college
part-time. Hernandez testified she could not afford to
provide high school graduation expenses for her eldest
daughter.
Hernandez also testified to housing problems due to low
income. Her third story apartment is too small and makes
coming and going difficult because she suffers from a bad
back. Hernandez believes that some of her neighbors exert a
bad influence on her children. She has investigated the
feasibility of obtaining better housing using the proposed
fund for making a down payment on a home. However, she
revealed no definite plan for obtaining the financing needed
to complete a home purchase.
Hernandez contends on appeal that she demonstrated that
a lump sum entitlement satisfied a pressing need and served
her best interest. Thus, according to Hernandez, the lower
court erred in denying her request. Hernandez also contends
that the lower court's decision is not supported b7 !
substantial evidence, and that the lower court denied her
equal protection of the laws through its erroneous reasoning.
The State Compensation Insurance Fund (Fund) responds
that Hernandez failed to make a showing sufficient to
overcome the presumption favoring bi-weekly payments. For
example, the Fund contends that evidence in the record
demonstrates Hernandez exaggerated her financial problems.
The Fund points out that Hernandez pays $20.00 per month for
cable T.V., spends another $50.00 per month renting video
tapes, and has already received lump sums to provide for
medical debts and future medical expenses.
In this case, an investment plan accompanies a strong
showing of financial need. However, the increase in income
would probably be accompanied by loss of subsidies. The
proposed investment plan has an element of risk. The house
purchase plan necessitates a large debt which will further
increase the claimant's expenses. The lower court considered
the advantages and disadvantages of the plan and decided the
presumption against lump summing controlled. Under these
circumstances, we hold that the lower court acted within its
discretion and that substantial evidence supports its
decision.
Claimant's equal protection argument also fails.
Hernandez contends that the lower court's decision rests on
the classification of individuals. According to Hernandez,
under the lower court's reasoning, individuals with business
acumen may receive lump sum benefits, and individuals without
business acumen may not. Hernandez argues that this
classification improperly infringes on the "fundamental"
right to receive workers' compensation benefits.
First, a review of the decision of the Workers'
Compensation Court reveals that the decision rested on the
particular facts of this case. Most importantly, the 1.ower
court considered the interests of Hernandez, her familv, and.
the public. The lower court concluded that in light of the
particular facts of this case, the legal presumption favorinq
bi-weekly benefits controlled. Thus, there exists no issue
here on whether or not a classification based on possession
of business acumen may survive equal protection analysis.
AFFIRMED.
@PBP~ Justice
We Concur:
u Justices
Mr. Justice Fred J. Weber did not participate in this matter.
Mr. Justice John C. Sheehy, dissenting:
Under this incredible Opinion, it is the decision of the
Court that it is better to keep this woman on public
assistance and food stamps than to invest the monies - which
to
- - entitled to give her an adequate living income.
she is
Dear reader, look at the background of exploitation and
carelessness that we sanction in the Workers' Compensation
system.
On September 21, 1984, R. Gail Hernandez suffered an
injury arising out of her employment with Acme Press in
Missoula County. The Fund, as the insurer, accepted
liability for her injury and has paid her weekly disability
benefits from April 22, 1985 through the present. In her
employment with Acme, she was receiving on-the-job training
but in the ten months she worked there, her pay never
increased from $5.00 an hour for a 40 hour week. She learned
no skill while on the job, her employment having confined her
to menial tasks in the printing shop.
Following her injury, her condition gradually
deterioriated so that she was unable to continue her work
with Acme. She reached maximum healing in the fall of 1986.
The Compensation Fund refused to acknowledge that she was
permanently totally disabled. She requested a determination
of her permanent disability from the Workers' Compensation
Court, as well as a lump sum distribution of a portion of her
Workers' Compensation benefits. On September 22, 1987, a
pretrial conference before the Workers' Compensation Court
was held. There the Fund denied that she was permanently
totally disabled and denied that it should pay any amount to
the appellant in a lump sum. Three days before the trial.,
however, which took place on November 2, 1987, the Fund
finally admitted that her disability was permanent and total.
For the dispute as to her permanent disability, she has
received no attorney fees as far as I can determine. Her
monthly benefits of $579.00 per month are apparently now
reduced by 25% because of her attorney fees to the sum of
$434.25 per month. Why the Fund should not bear the attorney
fees, I am unable to determine from the record.
At the time of the hearing, Mrs. Hernandez was a 41 year
old married female. She is a high school graduate and an
honorably discharged veteran who served in the United States
Navy. She is married, hut her husband lives in Peru, and
does not send support on any regular basis. She has four
children, ages 20, 18, 7 and 6, all of them live with her in
federally-subsidized housing. She is their sole support and
also the sole support for her sister-in-law and her
sister-in-law's infant baby.
The children have dental problems, and a daughter is
having medical problems involving fainting and stomachaches,
but all dental and health care must be postponed because she
is unable to provide medical insurance for herself or her
children nor can she afford the deductible for Medicaid.
Her oldest son is 20 years old. He is presently
attending the University of Montana on a part-time basis and
is working part-time. All of the income which he earns goes
toward his education and he cannot afford to go to school on
a full-time basis. The oldest daughter is 18, and hopes to
go either to a trade school or to college but she has no
funds with which to pursue her education beyond high school.
The position of the Fund is that she ought to go out and
borrow the money.
This family's income places it at 53% of the poverty
l e v e l established for a family of that size. Janet L . Finn,
a licensed social worker testified in detail about the
problems that face low income families. Extended poverty
leads to feelings of hopelessness and helplessness with
little opportunity for future progress because the focus has
to be on day-to-day survival. Such families experience a
high drop-out rate in high school, are more likely to face
educational difficulties in school and are also more likely
to suffer from health problems. The apartment in which this
family lives is a third floor apartment, with no elevator, in
a neighborhood where frequent vandalism occurs.
The Workers1 Compensation Court found that her lifetime
benefits entitlement if she lived through her life expectancy
is $246,050.99, less $23,651.82 which she has received in the
past. Before the Workers1 Compensation Court, she requested
a lump sum advance of $170,065.00, of which $123,065.00 would
be used to fund a monthly income for her of $1,500.00. There
were other proposals for a downpayment on a modest home, a
reserve fund, a minimal education fund for the children and
protection against inflation. Two expert witnesses testified
that the money could be invested and provide such benefits if
the request were granted by the court.
Even deducting the amounts objected to by the Fund in
this cause, her monthly budget approximates $600.00 per
month, which obviously she is unable to meet with the income
now provided her from her compensation benefits.
Why did the Workers1 Compensation Court refuse her
request which might give her at least an approach to the
federal poverty income level? It said:
The lump sum requested by the claimant not only
seeks to ensure her of an income that she enjoyed
prior to her injury, but in fact will increase her
earnings by 50 percent and double her budget. The
proposal of claimant here does not merely seek to
allow her to sustain herself financially or return
her to her asset situation as prior to her injury,
but will completely alter her economic status above
that which she was enjoying at the time of her
injury.
If this claimant had not been injured in the course of
her employment, if that employment had not given her a
degenerative disc condition at several levels, if she had not
traded her lifetime working ability for the paltry benefits
of the Workers' Compensation system, the foregoing statement
of the Court might he tolerated. Her injury denied her every
possibility of ever improving her situation and reduced her
to grinding poverty. When she presents a plan that could
offer some relief, she is denied because she might improve
her income from a menial job and because of the policy of the
Court and of the legislature respecting "passive income."
As I dictate this dissent, three-month treasury bills
backed by the United States Government are yielding 8.5%
interest per year. Two-year notes are yielding approximately
9% per year. By simply taking $100,000.00 of her
entitlements and placing it under supervised investment in
government securities, her present income could easily be
doubled, and the whole principal saved. In the guise of
preserving the "best interests of the claimant", this Court,
hemmed in by prior caselaw that cannot logically he supported
is actually adverse to her best interests.
Years ago, when much of the cash of the state was
languishing around the country in no-interest bank accounts,
it was decided to take advantage of investment of these
monies through the Board of Investments. I suggest that
section 39-71-2324, in cases such as this,
allows funds to be transferred to the Board of Investments,
supervised by that Board, and used to produce income from
investments which would relieve the payments due from the
fund. I see no legal reason why we could not order, in the
best interests of this claimant, that the Fund itself invest
these monies on behalf of this claimant to provide her a
living income.
Things have come to a pretty pass when this Court
decides that it is better to keep a person on food stamps and
public assistance than to relieve her situation through the
proper use of her benefits. There is a hollow echo of Marie
Antoinette in this Opinion: L e t A e m eat foodstamps.
Mr. Justice William E. Hunt, Sr., specially concurring:
I concur in the result reached by the majority here for
the reasons that it has long been the policy (albeit a policy
without a purpose) for the State of Montana to refuse its
injured workers a lump sum that can be invested for their
benefit. The proposals set forth in the dissent of Mr.
Justice Sheehy are well worth consideration by the
legislature.
The plight of this claimant demonstrates that being an
injured worker in Montana is no big financial deal. To those
who assume that there is rocking chair money in Workers'
Compensation benefits, I recommend reading the facts of this
case.
'L
'
Justice
