Steinmetz v. State, Doc Star Academy
| Citation | 756 N.W.2d 392,2008 SD 87 |
| Decision Date | 03 September 2008 |
| Docket Number | No. 24680.,24680. |
| Parties | Lewis F. STEINMETZ, Appellant, v. STATE of South Dakota, DOC STAR ACADEMY, and State of South Dakota, Bureau of Personnel, Appellees. |
| Court | Supreme Court of South Dakota |
Wm. Jason Groves of Groves Law Office, Rapid City, South Dakota, Attorney for appellant.
Timothy Engel of May, Adam, Gerdes & Thompson, LLP, Pierre, South Dakota, Attorneys for appellees.
[¶ 1.] Lewis Steinmetz (Steinmetz) appeals an order of the circuit court affirming the decision of the South Dakota Department of Labor, Division of Labor and Management (Department) refusing to award workers' compensation benefits on a lump sum basis and rejecting his proposed method of calculating the present value of his benefits. We affirm.
[¶ 2.] Steinmetz was injured while employed by the South Dakota Department of Corrections (Employer). Steinmetz filed a petition for permanent total disability benefits and requested a lump sum award pursuant to SDCL 62-7-6. Steinmetz and Employer entered into a stipulation in which Employer admitted that Steinmetz was permanently and totally disabled pursuant to SDCL 62-4-7 as a result of his work-related injury. Employer also agreed that Steinmetz was entitled to the payment of his attorney's fees and costs in a lump sum. The stipulation provided that Steinmetz's right to request a lump sum pursuant to SDCL 62-7-6 was not impaired by the stipulation.
[¶ 3.] Pursuant to ARSD 47:03:01:07, the Department calculated the present value of Steinmetz's future benefits as $269,897.91. Steinmetz employed the services of Dr. Ralph Brown (Dr. Brown) and Donald Frankenfeld (Frankenfeld) to opine as to the present value of his future workers' compensation benefits. Both Dr. Brown and Frankenfeld calculated the equivalent lump sum amount in an amount significantly in excess of the Department's calculation.1
[¶ 4.] The parties agreed to submit the case to the Department on stipulated facts. Steinmetz proffered Dr. Brown's and Frankenfeld's calculations along with a report from Don Herrmann (Herrmann) proposing structured settlement investments for Steinmetz's life, 10 years certain plus life, and 20 years certain plus life. The parties also stipulated to the admission of a report which concluded that if Steinmetz was awarded a lump sum in the amounts calculated by Dr. Brown or Frankenfeld, and if that lump sum, after payment of attorney's fees and costs, was invested as proposed by Herrmann, there would be no offset of Social Security Disability benefits.
[¶ 5.] The Department denied Steinmetz's motion for a lump sum award of workers' compensation benefits and rejected Steinmetz's method of calculating the present value of his benefits. The Department concluded that the method of calculation set forth in ARSD 47:03:01:07 was valid. Steinmetz appealed to the circuit court. The circuit court affirmed the Department's decision. Steinmetz appeals.
[¶ 6.] This case presents questions of fact, questions of law, and mixed questions of law and fact. "Questions of fact are subject to clearly erroneous review." Enger v. FMC, 2000 SD 48, ¶ 6, 609 N.W.2d 132, 134. "A decision is clearly erroneous if, after reviewing the entire record, the reviewing court is left with a definite and firm conviction that a mistake has been made." Id. (citing Sopko v. C & R Transfer Co., Inc., 1998 SD 8, ¶ 6, 575 N.W.2d 225, 228). "Questions of law and mixed questions of law and fact, on the other hand, are subject to different standards." Id. ¶ 7, 609 N.W.2d at 134. "Questions of law are subject to de novo review; no deference is given to an agency's conclusions of law." Id. (citing Thomas v. Custer State Hospital, 511 N.W.2d 576, 579 (S.D.1994)). "When the issue involves a question of mixed law and fact requiring the application of a legal standard, the Court will treat the issue as a question of law subject to de novo review." Id. (citing Permann v. Dep't of Labor, 411 N.W.2d 113, 119 (S.D.1987)). The determination of whether a lump sum award of benefits should be granted under SDCL 62-7-6 is a mixed question of law and fact and is freely reviewable on appeal. Id., ¶ 10, 609 N.W.2d at 134.
[¶ 7.] Whether the Department erred in denying Steinmetz's request for a total lump sum payment of benefits.
[¶ 8.] "The allowance of a lump-sum award is the exception and not the general rule." Id. ¶ 11, 609 N.W.2d at 135 (quoting Wulff v. Swanson, 69 S.D. 539, 543, 12 N.W.2d 553, 555 (1944)). The rationale behind this policy has been explained in prior cases:
Since compensation is a segment of a total income insurance system, it ordinarily does its share of the job only if it can be depended on to supply periodic income benefits replacing a portion of lost earnings. If a ... totally disabled worker gives up these reliable periodic payments in exchange for a large sum of cash immediately in hand, experience has shown that in many cases the lump sum is soon dissipated and the workman is right back where he would have been if workmen's compensation had never existed.
Id. ¶ 11, 609 N.W.2d at 135 (quoting 8 Larson's Workers' Compensation Law, § 82.71 (1999)).
[¶ 9.] "The beginning point of any consideration of the justifiability of lump-summing in a particular case is the standard set by the statute." 8 Larson's Workers' Compensation Law, § 132.07[2][a] (2007). SDCL 62-7-6 allows lump sum awards under certain circumstances. It provides:
An employer or employee who desires to have any unpaid compensation paid in a lump sum may petition the Department of Labor asking that the compensation be paid in that manner. If, upon proper notice to interested parties and proper showing before the department, it appears in the best interests of the employee that the compensation be paid in lump sum, the secretary of labor may order the commutation of the compensation to an equivalent lump-sum amount. That amount shall equal the total sum of the probable future payments capitalized at their present value on the basis of interest calculated at a rate per year set by the department with annual rests in accordance with rules promulgated pursuant to chapter 1-26. If there is an admission or adjudication of permanent total disability the secretary may order payment of all or part of the unpaid compensation in a lump sum under the following circumstances:
(1) If the employee has exceptional financial need that arose as a result of reduced income due to the injury; or
(2) If necessary to pay the attorney's fees, costs and expenses approved by the department under § 62-7-36.
If a partial lump sum payment is made, the amount of the weekly benefit shall be reduced by the same percentage that the partial lump sum bears to the total lump sum computation. The remaining weekly benefit is subject to the cost of living allowance provided by § 62-4-7. Any compensation due to beneficiaries under § 62-4-12 to 62-4-22, inclusive, may not be paid in a lump sum, except for the remarriage lump sum provided in § 62-4-12.
SDCL 62-7-6 (emphasis added).
[¶ 10.] "Our statute authorizing a lump-sum payment clearly sets out the circumstances under which such a payment can be made." Thomas, 511 N.W.2d at 580. "First, it must be in the `best interests of the employee.'" Id. "Our prior decisions confirm that the primary emphasis must be placed on providing an injured worker with a reliable stream of income to replace lost wages and benefits." Id. See also Caldwell v. John Morrell & Co., 489 N.W.2d 353 (S.D.1992); Wulff, 69 S.D. 539, 12 N.W.2d at 553. "Second, in the case of a worker who has been permanently and totally disabled ... a lump sum may be ordered if the worker has an `exceptional financial need that arose as a result of reduced income due to the injury.'" Thomas, 511 N.W.2d at 580 (quoting SDCL 62-7-6(1)). "Third, a lump sum may be ordered, in the case of a permanent total disability, when necessary to pay the attorney's fees, costs and expenses." Id. (citing SDCL 62-7-6(2); SDCL 62-7-36). The Department found that Steinmetz established that a lump sum award would be in his best interest. However, Steinmetz failed to establish that he had "exceptional financial need that arose as a result of reduced income due to the injury."
[¶ 11.] Prior to 1993 the South Dakota Legislature restricted lump sum awards to those situations in which it was in the claimant's "best interests."2 "This Court has identified four factors for defining these `best interests:'
1. Age, education, mental and physical condition, and actual life expectancy.
2. Family circumstances, living arrangements, and responsibilities to dependents.
3. Financial condition, including all sources of income, debts and living expenses.
4. Reasonableness of plan for investing the lump sum proceeds and ability to manage invested funds or arrangement for management by others."
Enger, 2000 SD 48, ¶ 13, 609 N.W.2d at 135 (quoting Thomas, 511 N.W.2d at 580). However, the legislature amended SDCL 62-7-6 in 1993. 1993 SD Laws ch. 379, § 4. The restriction on filing a petition for a lump sum payment in "complete disability" cases during the first six months following injury was replaced with the current language which provides that in cases of permanent total disability a lump sum may be ordered upon a showing by claimant of "exceptional financial need that arose as a result of reduced income due to the injury" or to pay attorney fees. SDCL 62-7-6.
[¶ 12.] "`The first and most important rule of statutory construction is to determine and give effect to the intention of the legislature.'" Nelson v. School Bd. of Hill City School Dist. No. 51-2 of Pennington County, 459 N.W.2d 451, 454 (S.D. 1990) (quoting Watertown Independent School Dist. No. 1 v. Thyen, 83 S.D. 309, 314, 159 N.W.2d 122, 125 (1968)). "`The law must be so construed as to give effect to all of its provisions,...
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