Miller v. Frasure

• Decision Date: 16 April 1991
• Docket Number: No. 90-372,90-372
• Citation: 809 P.2d 1257,248 Mont. 132
• Parties: Linda Newman MILLER, Claimant and Respondent, v. Maurine FRASURE, d/b/a O'Haire Motor Inn Restaurant, Employer, and Western Guaranty Fund Services, Defendant and Appellant.
• Court: Montana Supreme Court

Page 1257

809 P.2d 1257

248 Mont. 132

Linda Newman MILLER, Claimant and Respondent, v. Maurine FRASURE, d/b/a O'Haire Motor Inn Restaurant Employer and Western Guaranty Fund Services, Defendant and Appellant.

No. 90-372.

Supreme Court of Montana.

Submitted on Briefs Feb. 21, 1991.

Decided April 16, 1991.

K. Dale Schwanke, Jardine, Stephenson, Blewett & Weaver, Great Falls, for defendant and appellant.

Randall H. Gray, James, Gray & McCafferty, Great Falls, for claimant and respondent.

McDONOUGH, Justice.

This appeal from an order of the Workers' Compensation Court involves an increase in an injured worker's weekly compensation benefits. The defendant insurer, Western Guaranty Fund Services appeals the order of the court awarding claimant Linda Miller an increase in benefits from $80.00 per week to $138.30 per week. The award was based on Miller's claim that she had earned substantially more in tips and had failed to report such tips to her employer and the IRS. The court also awarded her certain attorney's fees and costs. The insurer appeals and the claimant has cross-appealed the attorney's fee award. We affirm.

The insurer raises two issues on appeal:

(1) Did the Workers' Compensation Court err in determining that claimant was entitled to an increased rate of compensation benefits due to tip income she allegedly had earned but failed to report?

(2) Did the Workers' Compensation Court err in awarding the claimant certain attorney's fees and costs?

The claimant raises the following issue on cross-appeal:

(3) Did the Workers' Compensation Court fail to award the claimant an adequate amount of attorney's fees?

The claimant suffered a compensable industrial injury while working as a waitress at her employer's coffee shop on or about July 10, 1984. On July 23, 1984 claimant filed a claim for benefits in which she set forth her gross earnings for the four month period immediately prior to her injury and added the phrase "plus tips not inclu." The insurer initially denied her claim for benefits. The insurer took the position that it had accepted the claim in 1985. The court found that the insurer first accepted the claim in June, 1988 so that benefits paid until then had been paid under a reservation of rights. Although disputed by the parties, for purposes of the attorney fee issue they stipulated that the insurer had accepted liability at least by June of 1988.

In 1983 the claimant had reported $899 in tip income to her employer and in 1984 she reported $512 of tip income to her employer up to the time of her injury. She reported the same amount of tip income in the federal and state tax returns she filed for these years.

On October 4, 1988 the insurer calculated claimant's temporary total disability benefits at $80.00 per week, based upon the four pay periods prior to the date of the injury as reported in her claim for compensation. The claimant subsequently amended her 1984 tax return to show tip income of $2,486.00 and her 1983 tax return to show tip income of $4,425.00.

Based on these amended returns the Workers' Compensation Court found the claimant's actual income in 1984 was $87.44 per week more than the rate used by the defendant to compute her compensation rate. The court recalculated the claimant's compensation rate and concluded that it should be increased by $58.30 per week retroactive to the time of injury. The court also concluded that because a genuine dispute existed between the parties, the claimant was not entitled to a penalty of 20 percent pursuant to Sec. 39-71-2907, MCA, and that the claimant was entitled to recover her attorney's fees and costs.

On appeal the insurer argues that the record lacks substantial evidence to support the finding that the claimant under-reported her tip income and that the doctrines of estoppel and laches bar claimant from relying on previously unreported income to support her claim. The insurer also appeals the award of attorney fees to the claimant, and the claimant has cross-appealed on the ground the attorney's fee award is inadequate.

I. Claimant's Tip Income

Is there substantial evidence in the record to support the finding that the claimant under-reported her tip income?

The claimant testified that she had kept track of her tips for IRS reporting purposes on IRS Form 4070 provided by her employer. She testified that her employer told her that she should report her tip income for each pay period by multiplying the number of hours worked in the pay period by $.60. She further testified that it was her understanding that her employer did not want her to report more than $.60 per hour and she was concerned that if she did report more her job would be in jeopardy. She also testified that following each work shift and after she went home, she counted and recorded each day's actual tip income on her own personal calendar. This calendar was entered into evidence.

The insurer argues that the record of tips the claimant kept on her personal calendar is fabricated. As evidence of this fabrication the insurer first points out that claimant's employer testified that she gave each employee a booklet that included a tip diary in which to record their tips, and this booklet contained removable IRS Forms 4070 to be used for tax reporting. Thus, the insurer argues there was no need for the claimant to record tips on her own personal calendar. Claimant, on the other hand, testified that the tip forms were available at work and the employees simply removed the Forms 4070 when necessary for tax reporting.

Second, the insurer points out that all the tip amounts recorded on claimant's personal calendar are all even dollar amounts for every single day recorded, and argues that this is highly unlikely. The claimant testified that patrons generally tip in even dollar and half dollar amounts, and thus it is a coincidence that the amounts in her 1984 tip record are all even dollars.

Third, the insurer alleges that the tips now claimed by the claimant are extremely high for a coffee shop waitress. The employer's accountant testified that generally 25% of patrons leave no tip at all. He testified that if this were the case with claimant's tables, they would have had to tip her an average of 42% of their purchases to equal the tips she now claims. Assuming that all her patrons tipped, they would have to tip approximately at a rate of 21% of all purchases.

Fourth, the insurer argues that claimant's testimony regarding her employer's "suggestion" that she claim her tips at a rate of $.60 per hour is inconsistent with what she actually reported. The insurer points out that claimant first testified that she was told she "had to" claim $.65 per hour, she later testified that she "could" report at $.65 per hour, and finally she "could" report at $.60 per hour. The insurer also argues that claimant never actually reported $.60 per hour in tips, rather she reported a range of $.40 to $.68 per hour. Claimant on the other hand argues that she was told that she should report tip income for each pay period by multiplying the number of hours worked in that period by $.60. She presented evidence that the tip income she reported to her employer on IRS Form 4070 in fact averaged $.60 per hour throughout 1983 and until her injury in 1984.

Finally, the insurer argues that there was no reason for the employer to tell her employees to report their tip income differently than what the IRS required. The claimant, on the other hand, testified that she was instructed to report her tips at a certain rate and that she believed it would jeopardize her job not to do so. Claimant's expert witness, a CPA, testified that the employer did have a motive for requesting employees to falsify their tip income. He testified that the greater the amount of tips reported by its employees, the greater the unemployment insurance premium would be for the employer. Claimant also presented the deposition testimony of Barbara Stoneberg, a coemployee. Stoneberg testified that she was told by her employer to report tip income at $.60 per hour.

The amended income tax returns filed by the claimant subjected her to approximately $1,700.00 of additional Federal Income and Social Security tax, not including penalty and interest.

In its order the Workers' Compensation Court adopted the hearing examiner's conclusion that the claimant was credible. Our standard for reviewing a decision of the Workers' Compensation Court is to determine if there is substantial evidence to support the findings and conclusions of that court. Where there is substantial evidence to support the Workers' Compensation Court, this Court cannot overturn the decision. Coles v. Seven Eleven Stores (1985), 217 Mont. 343, 347, 704 P.2d 1048, 1050; Hume v. St. Regis Paper Company (1980), 187 Mont. 53, 59, 608 P.2d 1063, 1066.

Substantial evidence is that evidence that a reasonable mind might accept as adequate to support a conclusion; it consists of more than a mere scintilla of evidence but may be somewhat less than a preponderance. Although it may be based on weak and conflicting evidence, in order to rise to the level of substantial evidence it must be greater than trifling of frivolous. Barrett v. Asarco (1990), 799 P.2d 1078, 1080, 47 St.Rep.1980, 1982. Here, although the evidence is conflicting on the issue, it is sufficiently substantial to support the Court's findings and conclusions.

Did the Workers' Compensation Court err in determining that the doctrines of estoppel and laches do not bar the claimant from relying on previously unreported income to support her claim?

This Court set out the elements of equitable estoppel in Sampson v. Broadway Yellow Cab Co. (1987), 226 Mont. 273, 277, 735 P.2d 298, 300:

"(1) there must be conduct, acts, language, or silence amounting to a representation or a concealment of material facts; (2) these facts must be known to the party estopped at the time of his conduct, or at least the...