State Compensation Ins. Fund v. Chapman

• Decision Date: 22 December 1994
• Docket Number: No. 94-010,94-010
• Parties: STATE COMPENSATION INSURANCE FUND, Petitioner and Respondent, v. Donald E. CHAPMAN, Respondent and Appellant, and Richard J. Pyfer, Respondent and Appellant.
• Court: Montana Supreme Court

Page 407

885 P.2d 407

267 Mont. 484

STATE COMPENSATION INSURANCE FUND, Petitioner and Respondent, v. Donald E. CHAPMAN, Respondent and Appellant, and Richard J. Pyfer, Respondent and Appellant.

No. 94-010.

Supreme Court of Montana.

Submitted Sept. 20, 1994.

Decided Oct. 27, 1994.

Rehearing Denied Dec. 22, 1994.

John C. Doubek (argued), Small, Hatch, Doubek & Pyfer, Helena, for Pyfer.

Donald Chapman, pro se.

Leo S. Ward (argued), Browning, Kaleczyc, Berry & Hoven, Helena, for State Compensation Ins. Fund.

Michael P. Heringer, Brown, Gerbase, Cebull, Fulton, Harman & Ross, Billings, for amicus curiae, Montana Defense Trial Lawyers Ass'n.

James G. Edmiston, III, Billings, for amicus curiae, Montana Trial Lawyers Ass'n.

TRIEWEILER, Justice.

On January 23, 1991, the Workers' Compensation Court for the State of Montana entered judgment for the claimant, Donald E. Chapman, in which it concluded that he was permanently totally disabled and entitled to total disability benefits. As part of that judgment, Richard J. Pyfer, Chapman's attorney, was awarded attorney fees and costs in the amount of $16,927. On July 23, 1992, the State Compensation Mutual Insurance Fund, which was responsible for those benefits, fees, and costs, filed a petition for emergency hearing in the Workers' Compensation Court in which it sought an order terminating Chapman's benefits and requiring reimbursement of those benefits, fees, and costs paid pursuant to the Court's January 23, 1991, judgment. On September 1, 1993, the Workers' Compensation Court found that Chapman had been awarded permanent total disability benefits based on false testimony, and ordered that Chapman reimburse the State Fund. The Workers' Compensation Court also ordered Pyfer to reimburse the State Fund for his attorney fees and costs. Pyfer appeals that part of the decision which orders him to reimburse the State Fund for his attorney fees and costs. We reverse the judgment of the Workers' Compensation Court.

The following issue is dispositive on appeal:

Did the Workers' Compensation Court have authority to set aside its previous judgment and order claimant's attorney to repay attorney fees and costs?

FACTUAL BACKGROUND

Chapman was injured during the course of his employment as a long-haul truck driver on January 14, 1981, when he was involved in a motor vehicle accident. He received serious injuries to his left leg, head, neck, and back.

Due to his injuries, Chapman received total disability benefits from the State Fund On January 23, 1991, the Workers' Compensation Court ordered that Chapman's total disability benefits be reinstated and that his attorney fees and costs be paid, based on Chapman's testimony that he could not work due to injuries received in the accident. By the time of the trial which led to this appeal, the benefits paid by the State Fund pursuant to the 1991 judgment totalled $46,378.90. Pyfer was paid $16,927 for attorney fees and costs.

until they were terminated on September 9, 1988.

The Workers' Compensation Court held a hearing to consider the State Fund's Emergency Petition on December 8 and 9, 1992. In support of its emergency petition, the State Fund offered evidence that during the times Chapman claimed to have been disabled he performed the duties of a long-haul truck driver on a regular basis and earned substantial amounts of money. However, the State Fund offered no evidence that Pyfer was at any time aware of Chapman's work activities.

In fact, in response to discovery requests from Pyfer, the State Fund acknowledged that "it had no claim or assertion of fraud or conspiracy against ... Pyfer" and that it only named Pyfer "as a party respondent ... as a result of a legal question regarding whether he should be obligated to pay back fees which had been paid to him for his representation of Chapman."

In its September 1, 1993, decision, the Workers' Compensation Court concluded that it had jurisdiction to entertain the State Fund's emergency petition pursuant to §§ 39-71-2905 and -2909, MCA; that Chapman is not totally disabled and was not at the time of his previous hearing; and that the benefits previously awarded were based on Chapman's false testimony regarding his physical condition and employment status. As a result, Chapman was ordered to pay back all total disability benefits retroactive to December 1988 when the evidence established he had returned to work. Pyfer was ordered to pay back the amounts he received for attorney fees and costs, in spite of the court's finding that he did nothing improper, and was as misled by Chapman as anyone else.

The Court also took judicial notice that a criminal complaint was filed on July 21, 1992, in which Chapman was charged with theft of workers' compensation benefits, in violation of § 45-6-301(2)(b), MCA. On April 20, 1993, Chapman entered a guilty plea pursuant to North Carolina v. Alford (1970), 400 U.S. 25, 91 S.Ct. 160, 27 L.Ed.2d 162. Chapman was sentenced to ten years at the Montana State Prison, with all prison time suspended on the condition that he pay full restitution to the State Fund, plus an administrative fee, and a surcharge of $20.

DISCUSSION

Did the Workers' Compensation Court have authority to set aside its previous judgment, and order claimant's attorney to repay attorney fees and costs?

The Workers' Compensation Court's conclusion that it had jurisdiction to entertain the State Fund's petition was a conclusion of law. We review conclusions of law to determine if they are correct. Stordalen v. Ricci's Food Farm (1993), 261 Mont. 256, 258, 862 P.2d 393, 394 (citing Martelli v. Anaconda-Deer Lodge County (1993), 258 Mont. 166, 168, 852 P.2d 579, 580).

In this case, the State Fund's petition sought an order setting aside a judgment that had been entered 18 months earlier. In response to Pyfer's appeal, the State Fund argues that there were two sources of the Workers' Compensation Court's authority to do so: (1) specific statutory authorization, and (2) inherent equitable powers.

As statutory authority, the State Fund sets forth §§ 39-71-2905, -2909, -204(2) (1979), MCA, and § 25-11-102, MCA. However, we conclude for the following reasons that none of the statutes relied on provide a basis for setting aside judgments in the Workers' Compensation Court.

Section 39-71-2905, MCA, gives the court initial authority to resolve disputes between the parties regarding disability benefits. That authority was effectively exercised by the court when it entered judgment for Chapman on January 23, 1991. This statute provides no authority for setting aside a judgment entered by the court beyond whatever time period is provided for in the court's rules or other rules of procedure that may be applicable.

Section 39-71-2909, MCA, upon which the Workers' Compensation Court primarily relied, gives the court continuing authority to "review, diminish or increase" an award of benefits based upon a finding that the "disability of the claimant has changed." Here, there was no allegation that the disability of the claimant had changed. In fact, the State Fund alleged, and the court specifically found, that Chapman's condition had not changed but that: "Donald E. Chapman is not permanently totally disabled and was not permanently totally disabled as defined by statute at the time of his initial hearing." (Workers' Compensation Court Conclusion of Law No. 2.)

Section 39-71-2909, MCA, is a "change in condition" statute, and serves a limited purpose as set forth in Larson's, Workman's Compensation Law § 81.32(a) where the author states:

In a change-of-condition reopening proceeding, the issue before the Board is sharply restricted to the question of extent of improvement or worsening of the injury on which the original award was based. If the original award held that there was no connection between the accident and claimant's permanent disability, there is nothing to reopen, and claimant cannot retry the issue of work-connection through the device of a reopening petition. Conversely, when the employee reopens to show increased disability, the insurance carrier cannot raise the basic issue of liability. In short, no matter who brings the reopening proceeding, neither party can raise original issues such as work-connection, employee or employer status, occurrence of a compensable accident, and degree of disability at the time of the first award.

(Emphasis added.)

Section 39-71-204, MCA, had been amended by the time of this trial, and in its present form clearly applies only to the authority of the Department of Labor and Industry. However, the State Fund argues that § 39-71-204, MCA, is substantive, rather than procedural, and therefore, pursuant to Buckman v. Montana Deaconess Hospital (1986), 224 Mont. 318, 321, 730 P.2d 380, 382, the form of the law in effect at the time of Chapman's injury controls. That would be § 39-71-204, MCA (1979), which provides:

(1) Except as provided in subsection (2), the division shall have continuing jurisdiction over all its orders, decisions, and awards and may, at any time, upon notice, and after opportunity to be heard is given to the parties in interest, rescind, alter, or amend any such order, decision, or award made by it upon good cause appearing therefor.

(2) The division or the workers' compensation judge shall not have power to rescind, alter, or amend any final settlement or award of compensation more than 4 years after the same has been approved by the division. Rescinding, altering, or amending a final settlement within the 4-year period shall be by agreement between the claimant and the insurer. If the claimant and the insurer cannot agree, the dispute shall be considered a dispute for...