                               NO.    90-034

            IN THE SUPREME COURT OF THE STATE OF MONTANA
                                     1991



TERRY RYLES,                                           <.




            Claimant and Appellant,
     -vs-
SPRINGHILL RANCH EGGS and STATE
COMPENSATION INSURANCE FUND,
                                              ck~~~~ OF ,
            Employer and Defendant,
                 ~espondentand Cross-Appellant.
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APPEAL FROM:     Workers' Compensation Court
                 The Honorable Timothy Reardon, Judge presiding.


COUNSEL OF RECORD:
            For Appellant:
                 Mark L. Guenther; Nash, Guenther, Zimmer                 &   Screnar,
                 Bozeman, Montana
            For Respondent:
                 Thomas E. Martello; Hughes, Kellner, Sullivan                                    &
                 Alke, Helena, Montana


                                            Argued:   September 6 , 1990
                                      Submitted:      December 6, 1990
                                        ~ecided: February 19, 1991
Filed:
Justice John Conway Harrison delivered the Opinion of the Court.


     This is an appeal from the Workers1 Compensation Court of the
State of Montana.    We affirm in part and reverse in part.
     The issues presented by claimant are:
     1.   Whether the Workers1 Compensation Court erred in finding
claimant 30% permanently partially disabled pursuant to 5 39-71-
706, MCA (1983).
     2. Whether the Workers1 Compensation Court erred in allowing

defendant credit for permanent partial benefits paid claimant from
May 23, 1984, through March 5, 1985.
     3.   Whether the Workers1 compensation Court erred by denying
claimant attorney's fees and costs.
     The sole issue presented by defendant is whether the Workers1
Compensation Court erred in estopping the State Fund from taking
credit for disability benefits paid from March 6, 1985, through
December 24, 1987.
     We affirm the Workers1 compensation Court on Issue 1 and on
the estoppel issue, and reverse on Issues 2 and 3.
     Defendant, State Compensation Insurance Fund (State Fund), was

claimant's insurer.    Claimant, Terry Ryles, lived with his wife,
Kathy, and their three children in Belgrade, Montana.   At the time
of trial, Terry was 41 years old.
     In 1982, Terry and Kathy purchased Springhill Ranch Eggs
(Springhill).   springhill is a wholesale broker of eggs, selling
to stores, restaurants and institutions. The couple first operated
the business as a partnership, but on July 1, 1984, the business
was changed to a corporation, closely held.        The change to a
corporation made no real difference in the operation and management
of the business.    Terry performed most of the labor, driving,
delivery and marketing duties, which required of him a fifty to
sixty hour work week.    Kathy did the business's bookkeeping.
     On May 23, 1984, Terry suffered a back injury as a result of
the repeated use of his back and the heavy labor required by the
physical aspects of the business. Following his back injury, Terry
ceased performing heavy labor duties for Springhill.     Thereafter,
he worked roughly ten hours per week performing light sedentary
work and management activities.     On July 27, 1984, Terry filed an
Employer ' s First Report of Occupational Injury and claim for
compensation of lost wages due to his back injury.
     During the    spring   of   Terry's injury, Terry   and   Kathy,
together, drew $2,500 per month from the income of Springhill.
From January through June of 1984, Terry's share of net partnership
earnings was $7,737.
     The State Fund accepted liability for the claim and paid
biweekly benefits from May 23, 1984, until September 7, 1989.
Terry's temporary total and permanent partial disability rates are
each $138.47 per week.
     For 41 weeks from May 23, 1984, through March 5, 1985 (period
A), Terry's payments were designated as permanent partial benefits.
On January 29, 1985, surgery was performed to repair the herniated
disc in Terry's back.    The State Fund designated payments for the
period March 6, 1985, through December 23, 1987 (period B) , as
temporary total disability benefits.   From December 24, 1987, to
September 7, 1989   (89 weeks)   (period C) , payments were again
designated as permanent partial benefits.   In total for periods A
and C, 130 weeks of the benefits paid to Terry were designated as
permanent partial benefits.
     At   the time of trial, Terry was employed by       the U.S.
Department of Agriculture as a purchasing agent at Montana State
University in Bozeman, Montana, at an annual salary of $15,111.
Terry and Kathy still owned Springhill. Terry participated in the
management decisions of the business, but did not receive a salary.
     Terry filed his petition in the Workers' Compensation Court
on September 6, 1988.   The Workerst Compensation Court heard the
case and issued its findings of fact and conclusions of law and
judgment on September 7, 1989, awarding benefits.        The court
concluded that (1) Terry was 30% permanently partially disabled and
thus entitled to receive 150 weeks (500 weeks x 30%) of benefits.

(2) Any previously paid permanent partial benefits already paid to

Terry are to be credited to the 150 weeks owed to him by insurer.
Therefore, since State Fund had already paid permanent partial
benefits to Terry for periods A and C totalling 130 weeks, State
Fund owes him only 20 weeks of benefits at $138.47 per week.    (3)
State Fund is estopped from taking credit for previously paid
temporary total disability benefits (for period B) by claiming the
benefits should have been characterized as permanent partial.   (4)
Terry is entitled to an award of reasonable costs and attorney's
fees pursuant to 5 39-71-612, MCA.      Terry's attorney's fees and
costs were denied after a hearing held on December 4, 1989.       From
this judgment and the order denying attorney's fees, both Terry and
defendant appeal.
                                  I.
     Did the Workers1 Compensation Court err in finding Terry 30%
permanently partially disabled pursuant to   §   39-71-706, MCA (1983)?
     Terry contends that the Workers1 Compensation Court should
have found him 50% permanently partially disabled rather than 30%.
The basis for this contention is Terry's evidence that the manager
of a competing egg business earns $30,000 per year. Such a finding
would entitle Terry to 250 weeks (50% x 500 weeks) of permanent
partial benefits rather than 150 weeks (30% x 500 weeks).
     At issue is the proper test to determine the degree of
permanent partial disability. The factors this Court must consider
in determining disability under 5      39-71-706, MCA, include the
claimant's age, education, work history, pain and disability,
actual wage loss and loss of future earning capacity.        Holton v.
F. H. Stoltze Land   &   Lumber Co. (1981), 195 Mont. 263, 266, 637
P.2d 10, 12. This Court has emphasized that the primary factor in
calculating an award is "earning capacity impairment.           If the
court can make a determination of the claimant's earning capacity
impairment, it is not necessary for the court to consider any other
factors.   If the court can determine that a claimant's earning
capacity has been impaired to a certain degree, then that is the
figure to be used in computing his benefits.        Hafer v. Anaconda
Aluminum Company (1984), 211 Mont. 345, 353, 684 P.2d 1114, 1118.

      When reviewing a decision by the Workers1 Compensation Court,
this Court's function is to determine whether substantial evidence
exists to support the Workers1 Compensation Court's findings of
fact and conclusions of law.    Coles v. Seven Eleven Stores (1985),
217 Mont. 343, 347, 704 P.2d 1048, 1050.
      The court, in Conclusion No. 4, assigned to Terry a 30%
permanent partial disability rating pursuant to    §   39-71-706, MCA.
The court carefully set forth the criteria it considered in
arriving at this permanent partial disability percentage:
           In considering an award for future loss of earning
      capacity, the Court must consider Claimant's age,
      education, work history and his physical condition post
      injury. Given the seriousness of his back injury, there
      is little argument that Claimant can not do heavy labor
      work. However, Claimant is a well educated person. He
      has finished high school and has attended college, though
      he did not complete a college degree. He served as a
      U.S. Navy aviation electrician. His non-formal education
      is significantly enhanced by his work history, which
      includes being a loan officer in a bank. Presently he
      works as a purchasing agent for the U.S. Department of
      Agriculture, earning slightly over $15,000 per year.
           At the time of his injury, Claimant's reported
      earnings for purposes of Workers1 Compensation was
      $900/month or less than $11,000 per year. Though that
      amount is artificially limited by a statutory maximum
      (Section 39-71-118, MCA), the tax returns for the
      business demonstrates similar earnings for the Claimant.
      Taking all factors into account and recognizing the fact
      that mathematical certainty is virtually impossible to
      find, the Court concludes that a 30% disability rating
      is appropriate.
After a careful review of the record, we hold that the 30% figure
is   sufficiently   supported   therein.   We   affirm   the   Workers'
Compensation Court on this issue.
     Did the Workers1 Compensation Court err by allowing defendant
credit for payments paid to claimant from May 23, 1984, through
March 5, 1985 (period A) ?

     State Fund characterized the benefits it paid to Terry for
period A as permanent partial disability payments.        Permanent
partial disability payments may not exceed 500 weeks pursuant to
5 39-71-703, MCA     (1983), and would be   deducted   from Terry's
eventual permanent disability award.        Terry   argues that his
benefits for period A should be characterized as temporary total
disability payments which are unlimited in duration according to
5 39-71-706, MCA (1983), and which would have no effect on his
eventual permanent disability award.

     The court determined that Terry was not entitled to temporary
total disability benefits for period A because of wages he received
during this period.   Terry takes exception to this strict reading
of the statute.

     Temporary total disability was defined at the time as:
     [A] condition resulting from an injury as defined in this
     chapter that results in total loss of wages and exists
     until the injured worker is as far restored as the
     permanent character of the injuries will permit.
     Disability shall be supported by a preponderance of
     medical evidence. (Emphasis added.)
Section 39-71-116 (19), MCA (1983).
     On the other hand, the statute defining permanent partial
disability stated:

     [A] condition resulting from injury as defined in this
     chapter that results in the actual loss of earnings or
     earning capability less than total that exists after the
        injured worker is as far restored as the permanent
        character of the injuries will permit. Disability shall
        be supported by a preponderance of medical evidence.
        (Emphasis added.)
Section 39-71-116 (12), MCA (1983).
        Under the foregoing statutes, the payments made to Terry for
period A, immediately following his report of injury, could not
have been permanent partial disability benefits because he had not
reached maximum healinq. Yet, that is what the State Fund suggests
by designating his payments as permanent partial for period A.
Likewise, because as a proprietor, or as a corporate officer, some
of his income is designated as profits or as wages, he did not come
under the definition of temporary total disability because his
injury did not result in his total loss of wages.
     One possible conclusion is that because he did not fit the
definition of either permanent partial disability or temporary
total     disability,   Terry   was   not   entitled   to   any   workers'
compensation benefits at all for period A.      However, the State Fund
did not so argue.        We conclude that it is precluded from so
arguing.     In her deposition, Eleanor Bowen, the Policy Services
section supervisor for the State Fund, stated that, following

discussions with Springhill bookkeeper Kathy Ryles, the State Fund
credited Springhill for all premiums for workers1 compensation paid
for Terry from at least July 1984 through 1987.        We hold that this
operates as an admission on the part of the State Fund that Terry
was entitled to workers1 compensation benefits for period A.

Moreover, the determination that premium payments were not due for
this period was based on a conclusion on the part of the State Fund

                                      8
that Terry was not earning wages during period A.        We further hold
that the State Fund         is estopped   from denying     liability   for
temporary total disability benefits during period A.
     In its judgment, the Workers1 Compensation Court found Terry

to be 30% permanently partially disabled and thus entitled to
receive 150 weeks of benefits.         Against that, the court allowed
credit to the State Fund for 130 weeks of payments for the periods
A and C.   We vacate this part of the Workers1 Compensation Court's
order.   We hold that the benefits paid to Terry from May 23, 1984,
through March 5, 1985, a period of 41 weeks, should have been
designated   as    temporary   total   rather   than   permanent   partial
benefits and should not have been deducted from Terry's total of
150 weeks of permanent partial benefits.        On remand, the Workers'
Compensation Court is directed to enter judgment in conformity with
this holding.

                                   111.
     Did the court err in denying Terry attorney's fees?
     Under   5    39-71-612, MCA    (1983), successful claimants are
entitled to attorney's fees and costs when an insurer acknowledges
liability but disputes the amount of compensation due the claimant.
This is the situation in this case. However, the court here denied
attorney's fees under   §   39-71-612, MCA (1983), when it decided that
the State Fund could take credit for the payments from May 23,
1984, through March 5, 1985. Since we have decided that State Fund
should not have been allowed to take this credit, Terry may be
entitled to attorney's fees and costs pursuant to 5 39-71-612, MCA
(1983), the law in effect at the time of his injury.    We therefore
reverse and remand this cause to the Workers1 Compensation Court
for proceedings and entry of judgment in conformity with this

Opinion on the issue of attorney's fees and costs.
                                 IV.

       Did the Workers' Compensation Court err in estopping the State
Fund from taking credit for disability benefits paid from March 6,
1985, through December 24, 1987?
       State Fund, in its brief, attacked the Workers' Compensation
Court's findings regarding each element of estoppel as set forth
in Lindblom v. Employers' Liability Assur. Corporation (1930), 88
Mont. 488, 295 P. 1007.    The Workers' compensation Court found the
following facts to satisfy the first four elements of estoppel:
       Terry was informed by State Fund that the benefits he received
were for temporary total disability; Terry was never advised that
the benefits were anything but temporary total and he had no reason
to know since the dollar amount of each benefit was the same.
Furthermore, Terry never tried to hide the fact that he received
salary from Springhill; this salary was reported to State Fund;
Kathy Ryles, bookkeeper, requested specific guidance from State
Fund   (but received none) as to correct reporting of Terry's
earnings and simultaneous receipt of temporary total disability
benefits.
       The fifth and sixth elements of estoppel require a showing
that Terry relied on State Fund's representations to his detriment.
The Workers' Compensation Court satisfied these elements with its
finding that Terry would be harmed if the temporary total benefits
were reclassified as permanent partial because permanent partial
benefits may not exceed 500 weeks (9 39-71-703, MCA (1983)) whereas
temporary total benefits are unlimited.
     There is substantial evidence in the record to support the
Workers' Compensation Court on the issue of estoppel.    We affirm
the Workers' Compensation Court on the estoppel issue.
     Affirmed in part, reversed in part, and remanded to the
Workerst Compensation Court.



We concur:
