                                 No. 8 6 - 3 3 7
               IN THE SUPREME COURT OF THE STATE OF MONTANA

                                        1987




ELMER SAMPSON,
                   Claimant and Appellant,
       -vs-
BROADWAY YELLOW CAB COMPANY,
              Employer,
       and
STATE COMPENSATION INSURANCE FUND,
                   Defendant and Respondent.



APPEAL FROM:       The Workers' Compensation Court, The Honorable
                   Timothy Reardon, Judge presiding.
COUNSEL OF RECORD:
       For Appellant:
                   Kelly & Halverson, P.C.; Sheehy, Finn           &   Plath;
                   Patrick Sheehy, Billings, Montana
       For Respondent:
                   Crowley Law Firm; Terry G. Spear, Billings, Montana



                                        Submitted:       March 4, 1 9 8 7
                                         Decided:        A p r i l 2 , 1987

Filed: API?   2 1987
               4




                                                     I


                                   &&    4d-u-d
                                        Clerk
Mr. Justice Fred J. Weber delivered the Opinion of the Court.

     Claimant appeals an order of the Workers' Compensation
Court which excluded his previously unreported tip income in
determining his benefit rate and denied his request for a 20
percent penalty against respondents. We affirm in part and
remand in part.
     The issues are:
      1. Should claimant's previously unreported tips be
included in his wages for determining his proper compensation
rate?
     2. Did the Workers' Compensation Court err in denying
claimant a 20 percent statutory penalty?
     Claimant Elmer Sampson injured his back in September
1975, while working for Broadway Yellow Cab Company. After
his injury, Mr. Sampson retained counsel and submitted a
claim for benefits to the Division of Workers' Compensation.
The claim included wage information for five pay periods.
     The State Fund followed its normal procedure of using
the four pay periods immediately prior to the injury in
computing compensation rate. The resulting benefit rate was
not challenged at that time by Mr. Sampson or his first
attorney. The claim for compensation, the first attorney's
letter to the Division, and the Employer's First Report all
stated Mr. Sampson's wages without any reference to tips.
     For several months, Mr. Sampson received temporary total
disability benefits at the rate of $67.64 per week. Then he
received 500 weeks of permanent partial disability benefits
at the same rate, from February 1976 to September 1985. In
September 1985, Mr. Sampson's permanent partial disability
benefits were terminated because the 500-week limit on such
benefits had been reached.    Mr. Sampson then retained his
present counsel.
      A petition for a hearing on reinstatement of benefits
was filed in December 1985. Mr. Sampson requested the Work-
ers' Compensation Court to: (1) reinstate his terminated
benefits; (2) increase his compensation rate to reflect his
tip earnings and his wages from five, instead of four, pay
periods; (3) grant a 20 percent penalty; and ( 4 ) award him
attorney fees.    At the pretrial conference, the respondent
State Fund contended Mr. Sampson was not permanently totally
disabled.    In January 1986, however, it conceded permanent
total disability and has continued to pay benefits since that
time.
      Trial on the remaining issues was held on February 5,
1986.    At trial, Mr. Sampson testified that he received
approximately $40.00 per week in tips. He testified he did
not report this income to the Internal Revenue Service and
that at the time he did not understand that his failure to
report his tips was a violation of the law. He now under-
stands this to be the case. Nevertheless, he admitted that
he still has not filed amended tax returns reporting his
tips.
      The trial court awarded a compensation rate increase of
90 cents per week retroactive to claimant's injury date of
September 2, 1975, based on five pay periods instead of four.
It did not include Mr. Sampson's tip income for determining
the rate, stating that it would not allow claimants to in-
crease their claims by introducing previously unreported
wages. It denied the 20 percent penalty and awarded attorney
fees. Mr. Sampson appeals the exclusion of his tip income
and the denial of the 20 percent penalty.
                               I
      Should claimant's previously unreported tips be included
in his wages for determining his proper compensation rate?
     Ten years after his injury, Mr. Sampson claims for the
first time that he received approximately $40 per week in
tips, which should be included in his wage base. Mr. Sampson
points out that tip income is usually included in computing
workers' compensation benefits.     See 2 Larson, Workmen's
Compensation Law, $ 60.12 (1986).     In denying the request
that this tip income be retroactively calculated into his
wage base, the Workers' Compensation Court stated that:

    Claimant further argues that his tips should have
    been included in the wage rate calculations. The
    sole evidence presented with regard to tips in
    [sic] the testimony of the claimant which he re-
    ported to average $10.00 per day.    "...    [tlhis
    Court will not establish a policy whereby claimants
    will be allowed to increase the defendant's evalua-
    tion of the settlement value by introducing previ-
    ously unreported wages."      [References made to
    workers' compensation cases.]     Claimant is not
    persuasive in his arguments.
On appeal, the respondents argue that Mr. Sampson is equita-
bly estopped from adding his claim for benefits for tip
income at this late date.    They point out that after the
passage of more than 10 years it is impossible to determine
whether the reported tips are accurate.     While it is not
mentioned in the lower court's findings, the undisputed
testimony of Mr. Sampson's employer at Broadway Yellow Cab
was that the cab company kept no records of employees' tips
in 1975. But Mr. Sampson says that equitable estoppel cannot
be considered because it was not raised in the pleadings.
     This Court has refused to consider claims of equitable
estoppel not raised in pleadings filed in district court.
Sun Dial Land Co. v. Gold Creek Ranches (1982), 198 Mont.
247, 645 P.2d 936.   However, in this workers' compensation
case no responsive pleading was filed, or required, as would
be true in district court. The first documents filed by
respondents were a pretrial statement and the pretrial order.
Both documents set out the respondents' contentions that
claimant's benefits were properly calculated and claimant was
paid at the proper statutory rate. There is no suggestion as
to legal theories. The theory of equitable estoppel was set
out in respondents' proposed findings and conclusions. We
conclude that the rule in Sun Dial does not control here,
because of the procedural differences in the lower court.
     While it appears that the basis for the court's decision
was equitable estoppel, the theory is not clearly expressed
in the findings or conclusions. In Sweet v. Colborn School
Supply (1982), 196 Mont. 367, 372-73, 639 P.2d 521, 524, this
Court described the six elements necessary to constitute an
equitable estoppel:

     (1) there must be conduct, acts, language, or
    silence amounting to a representation or a conceal-
    ment of material facts; (2) these facts must be
    known to the party estopped at the time of his
    conduct, or at least the circumstances must be such
    that knowledge of them is necessarily imputed to
    him; (3) the truth concerning these facts must be
    unknown to the other party claiming the benefit of
    the estoppel at the time it was acted upon by him;
     ( 4 ) the conduct must be done with the intention, or
    at least with the expectation, that it will be
    acted upon by the other party, or under the circum-
    stances that it is both natural and probable that
    it will be so acted upon; (5) the conduct must be
    relied upon by the other party, and, thus relying,
    he must be led to act upon it, and (6) he must in
    fact act upon it in such a manner as to change his
    position for the worse. (Cases cited.)
Since these elements require factual determinations, we
remand to the lower court for entry of additional findings
and conclusions consistent with its judgment. Such findings
and conclusions shall address the elements of equitable
estoppel set out in Sweet. The passage of more than 10 years
combined with the inability of Mr. Sampson or his employer to
submit proof on the alleged tips indicates that the doctrine
of equitable estoppel applies.
                             I1
     Did the Workers' Compensation Court err      in denying
claimant a 20 percent statutory penalty?
     The statute at issue is 5 39-71-2907, MCA:

    When payment of compensation has been unreasonably
    delayed or refused by an insurer, either prior or
    subsequent to the issuance of an order by the
    workers' compensation judge granting a claimant
    compensation benefits, the full amount of the
    compensation benefits due a claimant, between the
    time compensation benefits were delayed or refused
    and the date of the order granting a claimant
    compensation benefits, may be increased by the
    workers' compensation judge by 20%  ...
Whether an action is "unreasonable" under this statute is a
question of fact which is subject, on appeal, to the limited
review of the substantial evidence test.      Coles v. Seven
Eleven Stores (Mont. 1985), 704 P.2d 1048, 1052, 42 St.Rep.
1238, 1242. Mr. Sampson contends that a penalty should be
awarded because of the unreasonable failure to pay total
disability benefits from the time he was first injured.
     The only legitimate excuse for delay of proper payment
is the existence of genuine doubt, from a medical or legal
standpoint, that liability exists. Holton v. F. H. Stoltze
Land & Lumber Co. (1981), 195 Mont. 263, 269, 637 P.2d 10,
14.   Mr. Sampson did not request reconsideration of his
designation as permanently partially disabled at any time
from 1975 until September 1985.      After his 500 weeks of
permanent partial benefits were terminated, Mr. Sampson
requested, among other things, a reconsideration of his
benefit designation. Conflicting medical evidence existed as
to what Mr. Sampson's physical and mental condition would
allow him to do.    There was evidence that he was employed
during parts of the period he received workers' compensation,
and there was medical evidence that his problems were caused
by his obesity, not by his industrial accident. The State
Fund did eventually agree to award him permanent total dis-
ability benefits and reinstituted benefits under this
designation.
     Upon a thorough review of the record, we find substan-
tial credible evidence to support the determination of the
Workers' Compensation Court that the respondent did not
unreasonably delay or refuse benefits. The decision of the
lower court on this issue is therefore affirmed.
     This case is remanded to the Workers' Compensation Court
for reconsideration on the tip income issue as herein
required.



We Concur:




                                              .



              Justices


M r . J u s t i c e J o h n C . Sheehy d i d n o t p a r t i c i p a t e .
           IN THE SUPREME COURT OF THE STATE OF MONTANA
                           No. 86-337

YLMER SAMPSON,
          Claimant-Appellant,


E ROADWAY YELLOW CAB COMPANY,
           Employer-Respondent,
     and                                          O R D E R
STATE COMPENSATION INSURANCE FUND,
          Defendant-Respondent.



      The claimant and appellant has petitioned for rehearing
;n this matter. He argues that our opinion appears to allow
an insurer to raise a new affirmative defense at any time,
including after the close of the evidence.     He argues that
this position conflicts with the present practice of the
Workers' Compensation Court.     Upon consideration of this
matter, we conclude that our opiliion dated April 2, 1987, is
not clear on this point. We therefore amend our opinion by
deleting the following language beginning in the fourth line
a t the top of page 5:

    There is no suggestion as to legal theories. The
    theory of equitable estoppel was set out in respon-
    dents' proposed findings and conclusions.           We
    conclude that the rule in - ---- Dial does not control
                              Sun
    here, b<?cause of the proce~il-, differences in the
                                   ral
    lower court.
    We substitute the followi~ic ?->ng~ilge, the same place:
                                           at

    In contrast to pretrial orGers used at district
    court, the precise legal t21eories of the parties
    are not set out, The iCrr7,17scriptof trial demon-
    strates   that   in  .       opening
    respondents made it clear that they would rely on
    !3r.Sampson's failure for over 500 weeks to com-
    plain about his rate of benefits or to claim his
    tip income. The theory of equitable estoppel was
    set out in respondents' proposed findings and
    conclusions. We conclude that the rule in Sun Dial
    is not appropriate in this situation because of the
    procedural differences from District Court and the
    presence of notice to claimant of the basis on
    which his claim would be resisted.
I n all other respec!, the petition for rehearing is denied.
    DATED this   & day
                 , - I,
                  -
                          of April, 1987.   /   4
                                                '
