Champion International Corporation

No. 89-91
IN THE SUPREME COURT OF THE STATE OF MONTANA
CHAMPION INTERNATIONAL CORPORATION,
Petitioner and Respondent,
-vs-
H. L. McCHESNEY,
Respondent and Appellant.
APPEAL FROM: The Workers' Compensation Co-urt,The Honorable
Timothy Reardon, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
H. L. McChesney; McChesney, Grenfell & Ogg, Missoula
Montana
For Respondent:
Bradley J. Luck; Garlington, Lohn & Robinson, Missoula,
Montana
Submitted on briefs: Auq. 10, 1989
Decided: September 21, 1989
0
Filed:
Justice Fred J. Weber delivered the Opinion of the Court.
Mr. McChesney appeals from an order of the Workers'
Compensation Court, ordering him to reimburse Champion Inter-
national Corporation (Champion) for an overpayment of attor-
ney fees. Mr. McChesney appeals this order. We affirm.
The issue presented for our review is restated as
follows:
Did the Workers' Compensation Court err in ordering
repayment of attorney fees to the insurer where claimant
received an overpayment of benefits, and attorney fees were
based on a percentage of benefits received by the claimant?
Mr. McChesney undertook legal representation of a work-
ers' compensation claimant, Mr. Keith Eastman, on October 6,
1982. Mr. Eastman had suffered an injury to his knee on
March 20, 1981, while working for Champion International
Corporation, a self-insured employer under Plan 1 of the
Workers' Compensation Act. Mr. McChesney and Mr. Eastman
signed a fee arrangement whereby Mr. McChesney would receive
33% of benefits in the event the case necessitated a hearing
before the Workers' Compensation Court.
At the time of injury, Champion, the insurer, began
payment of temporary total benefits and medical benefits. In
March 1982 claimant's temporary total benefits were reduced
to permanent partial. This reduction was based partly on
claimant's refusal to have surgery on his knee. Claimant
disputed the reduction and a hearing resulted in a judgment
in claimant's favor on May 7, 1984. This judgment allowed
Mr. McChesney to obtain attorney fees pursuant to 5
39-71-611, MCA, which, according to the fee arrangement, was
a net award of 33% of the benefits. Mr. McChesney was award-
ed a lump sum amount of attorney fees for the back-payment of
temporary total benefits. From the date of the order
forward, Mr. McChesney received one-third the amount of each
biweekly check sent to Mr. Eastman.
At the hearing on May 7, 1984, the medical evidence
indicated that the claimant should have knee surgery; howev-
er, claimant had previously refused to have the surgery. The
judgment of May 7 specifically ordered claimant to submit to
a physical examination to determine whether knee surgery
sho.uld be performed and to notify the court whether he was
willing to have the surgery performed.
At a hearing in July 1984 regarding new medical evi-
dence, claimant agreed to have the knee surgery performed and
to schedule it immediately. The Workers' Compensation Court
ordered payment of total disability benefits until after the
surgery and after consideration of claimant's post-surgery
condition. The order further noted that if claimant did not
have the surgery the insurer was entitled to a credit for
benefits paid after maximum healing.
On August 9, 1984, claimant refused to have knee sur-
gery. A year and a half later the case was reopened by the
insurer. At the hearing on the petition the court found that
claimant had reached maximum healing in January of 1984, but
that his entitlement to total disability benefits ended on
August 9, 1984, the date that he refused to have surgery. In
an order dated April 1, 1987, Mr. Eastman was granted 200
weeks of partial disability payments, offset against the
total disability payments he had received after August 9,
1984. The net result of this order was that the claimant had
been overpaid $7446.00. Mr. Eastman was ordered to repay
this amount to the insurer, Champion.
On October 27, 1988, Champion filed a petition with the
Workers' Compensation Court, seeking to recover the attorney
fees paid to Mr. McChesney, which had been based on the
overpayment to Mr. Eastman of $7446.00. Mr. McChesney had
received checks totalling one-third of this amount, or
$2,479.51. The Workers' Compensation Court ordered Mr.
McChesney to repay this amount to Champion.
Mr. McChesney argues that res judicata bars the Workers'
Compensation Court from ordering repayment at this point. He
contends that the order of April 1, 1987, directing the
claimant to repay benefits, did not mention a repayment of
attorney fees. He contends that the employer should have
asserted the issue of reimbursement of attorney fees at that
point, rather than a year and a half later.
Initially, we conclude that the present action is not
barred by res judicata in that the elements of that defense
are not satisfied. In Phelan v. Lee Blaine Enterprises
(1986), 220 Mont. 296, 299, 716 P.2d 601, 603, w e set out the
elements of res judicata as follows:
(1) the parties or their privies must be the same;
( 2 ) the subject-matter of the action must be the
same; (3) the issues must be the same, and must
relate to the same subject-matter; and (4) the
capacities of the persons must be the same in
reference to the subject-matter and to the issues
between them.
We conclude that the Workers' Compensation Court was
correct in holding that the action is not barred by res
judicata. The subject matter and the issues in the two
actions are not the same. The first suit involved the enti-
tlement to disability benefits and the amount of such bene-
fits. The second suit involved the entitlement to attornev
fees. Different theories and considerations apply to each.
In Phelan, we stated:
[Ulnless it clearly appears that the precise ques-
tion involved in the second case was raised and
determined in the former, the judgment is no bar to
the second action.
Phelan, 716 P.2d at 603. We conclude that the April 1, 1987
order is not a bar to the present action.
We further conclude that the Workers' Compensation Court
was correct in ordering the repayment of attorney fees. Mr.
McChesneyts fees were based solely on a percentage of bene-
fits paid to his client. On May 7, 1984 temporary total
benefits were awarded to Mr. Eastman contingent upon his
agreement to have surgery on his knee. It was specifically
stated in the order that the insurer would be credited any
overpayment if claimant failed to comply. Although Mr.
Eastman represented to the court in July of 1984 that he
would undergo surgery, he never did have the knee surgery
performed. Clearly the insurer was entitled to a credit.
Logically it follows that the attorney fees which were based
on the overpayment must also be returned. While it is unfor-
tunate that claimant did not meet the conditions for his
total disability award, the attorney was aware of the condi-
tions attached to the benefits, and the possibility that some
benefits might have to be reimbursed to the insurer.
The facts of the present case are analogous to
Transamerica Ins. Group. v. Adams (0r.App. 1983), 661 P.2d
937. In that case a workerst compensation claimant settled
with the insurer. The attorney was entitled to 25% of the
settlement, which he received. The settlement however, was
subject to administrative review, and the attorney was aware
of this condition. When the Workerst Compensation Board
invalidated the settlement, both the claimant and the attor-
ney were required to return the amounts each had received.
Similarly, in the present case, Mr. McChesney was aware that
the insurer was due a credit in the event that certain condi-
tions were not met. His fees, based as they were, on bene-
fits received by the claimant, must be reimbursed. We
conclude that the Workers' Compensation Court did not err in
ordering a repayment of attorney fees. We affirm the holding
of the Workers' Compensation Court.