Harmon v. Lute's Construction Co.

BAKES, Justice. Claimant Tommy Harmon appeals a decision of the Industrial Commission denying his request to set aside a lump sum agreement between Harmon and his employer’s surety which had previously been approved by the commission. Harmon contends that the lump sum agreement fails to adequately compensate him for permanent disability suffered as a result of an industrial accident and should be set aside on grounds of fraud. We affirm the commission’s decision denying relief. Claimant was injured in an industrial accident on September 29, 1980, while working as a hole digger for Lutes Construction Company. He sustained injuries to his spine (central disc herniation) when he slipped and was hit in the shoulder by a [292] hydraulic ram. Claimant was treated for his injuries by Dr. Robert J. Porter, an orthopedic surgeon in Twin Falls. Dr. Porter performed surgery to repair the herniated disk on November 4, 1980. Both that surgery and a subsequent exploratory surgery failed to relieve claimant of the pain he suffered following the accident. Claimant remained totally disabled from work following the first surgery, with significant residual pain. Claimant was subsequently enrolled in a physical rehabilitation program in Boise. In October of 1981, Dr. Porter rated claimant impaired to the extent of 20% of the whole man. It was Dr. Porter’s opinion that claimant had stabilized from a physiological point of view and that further medical treatment would not be helpful. Both Dr. Porter and Dr. Robert Burton, a Boise neurologist to whom claimant was referred by Dr. Porter, agreed that there was a “functional” aspect to claimant’s pain and that settlement of claimant’s pending worker’s compensation claim might relieve or reduce claimant’s complaints of pain. Neither doctor felt that further medical treatment was appropriate. Throughout claimant’s treatment and recovery from his injury, claimant was in contact and consulted by agents of employer’s surety. Once it became clear to the surety’s representatives dealing with claimant’s case that he could not return to heavy manual labor, these individuals discussed other employment opportunities with claimant. As a result of such discussions, claimant, in September and October of 1981, expressed an interest in pursuing self employment in a small business and indicated that he would prefer to receive a lump sum settlement of his worker’s compensation claim rather than statutory periodic payments. Claimant desired to have a lump sum settlement in order to provide him with sufficient start-up capital to begin his small business. Pursuant to claimant’s request, employer’s surety prepared a lump sum agreement which awarded claimant approximately $25,000.1 The lump sum agreement was signed on October 20,1981, and submitted to the Industrial Commission for its approval. The commission initially rejected the settlement “on the grounds that they thought that there wasn’t sufficient medical justification to lump the case.” The commission then received a report from one of claimant’s treating physicians indicating that a settlement would be in claimant’s best interests due to the apparent functional overlay to his complaints of pain. After receiving this report, the commission then approved the settlement agreement on November 16,1981. In May of 1983, over a year and a half after the settlement agreement was approved by the commission, claimant sought to have the commission set aside the agreement on grounds of fraud or manifest injustice. The commission denied claimant’s request based on the following conclusion: “Surety’s actions in this case, in entering into a lump sum settlement with Claimant, were consistent with the recommendations of both physicians involved and consistent with Claimant’s own expressed wishes. Nothing in the record indicates that Surety misled Claimant in any manner, or that Surety otherwise committed actual or constructive fraud. Smith v. King, 100 Idaho 331 [597 P.2d 217]; Faw v. Greenwood, 100 Idaho 387 [597 P.2d 1077]; McGhee v. McGhee, 82 Idaho 367 [353 P.2d 760]. At the time the lump sum settlement was entered into, Claimant was totally disabled from work, but both physicians and Claimant agreed that Claimant would most likely be able to participate in light duty self-employment once he had the funds to do so. Surety’s execution of the lump sum settlement at Claimant’s request was not fraudulent, and there is no basis in law for setting it aside at this time.” I Claimant contends on appeal that the commission’s decision is erroneous as a [293] matter of law and without support in the record. We find claimant’s argument to be without merit. The statutory scheme regarding workmen’s compensation in general, and lump sum agreements in particular, is clear and must be given effect. A worker injured in an industrial accident is entitled to compensation for any resulting permanent disability. I.C. § 72-201 et seq. A determination of the degree of disability involves evaluations of both medical and non-medical factors. I.C. §§ 72-425, -430. The medical factors involve an evaluation of the claimant’s permanent impairment pursuant to 1.C. § 72-424. “72-424. Permanent impairment evaluation. — ‘Evaluation (rating) of permanent impairment’ is a medical appraisal of the nature and extent of the injury or disease as it affects an injured employee’s personal efficiency in the activities of daily living, such as self-care, communication, normal living postures, ambulation, elevation, traveling, and nonspecialized activities of bodily members.” The non-medical factors to be considered in making the disability evaluation include “age, sex, education, economic and social environment.” I.C. § 72-425.2 The purpose behind evaluating both medical and non-medical factors and, indeed, behind the award of permanent disability is to determine and “to compensate the claimant for his loss of earning capacity or his reduced ability to engage in gainful activity.” Baldner v. Bennett’s, Inc., 103 Idaho 458, 461, 649 P.2d 1214, 1217 (1982). Once a determination is made regarding the degree of a claimant’s permanent disability, compensation for that disability may be awarded either through periodie payments, I.C. §§ 72-408, -409, or through a single lump sum payment, I.C. § 72-404. The particular method of compensation is left largely to the discretion of the parties, subject to the approval of the Industrial Commission, I.C. §§ 72-404, 72-711. However, once a lump sum compensation agreement is approved by the commission, that agreement becomes an award and is final and may not be reopened or set aside absent allegations and proof of fraud. I.C. § 72-718; Vogt v. Western General Dairies, 110 Idaho 782, 718 P.2d 1220 (1986); Fountain v. T.Y. & Jim Hom, 92 Idaho 928, 453 P.2d 577 (1969). Since, in the present case, the compensation award was made by means of a lump sum agreement, the commission correctly held that Harmon’s allegations of manifest injustice were insufficient, even if proven, to permit the commission to set aside the agreement. Thus, we find claimant’s arguments on appeal that the commission erred in so holding to be without merit. The only grounds sufficient to permit the commission to set aside claimant’s award would be allegations and proof of fraud on the part of employer’s surety in procuring the agreement. In order for claimant to succeed on grounds of fraud he must prove the following elements by clear and convincing evidence: “ ‘(1) a representation; (2) its falsity; (3) its materiality; (4) the speaker’s knowledge of its falsity or ignorance of its truth; (5) his intent that it should be acted on by the person and in the manner reasonably contemplated; (6) the hearer’s ignorance of its falsity; (7) his reliance on the truth; (8) his right to rely thereon; and (9) his consequent and proximate injury.' ” Faw v. Greenwood, 101 Idaho 387, 389, 613 P.2d 1338, 1340 (1980), [294] quoting Mitchell v. Siqueiros, 99 Idaho 396, 401, 582 P.2d 1074, 1079 (1978). The commission, after a full hearing, specifically found, citing Faw v. Greenwood, supra, that claimant failed in his burden of proof: ' “Nothing in the record indicates that Surety misled Claimant in any manner, or that Surety otherwise committed actual or constructive fraud.” As we held in Faw, “ ‘[W]hether fraud has been proven by clear and convincing evidence is for the determination of the trier of fact [and] [o]n appeal that determination will not be reversed where supported by competent, substantial, though conflicting evidence.’ ” Faw v. Greenwood, 101 Idaho at 389, 613 P.2d at 1340, quoting Smith v. King, 100 Idaho 331, 334, 597 P.2d 217, 220 (1979). We have examined the record in the present case and find the commission’s determination supported by substantial competent evidence therein. The record indicates that surety’s agent, Mr. MacMillan, fully explained to claimant his compensation options. He explained the differences between a lump sum agreement and a regular compensation agreement. Claimant was told that under a regular compensation agreement periodic (monthly) payments would be made to compensate him for his disability and that he would be fully covered for any future medical expenses incurred as a result of his disability. He was further told that under a lump sum agreement his rights to future compensation and medical benefits would be foreclosed; the surety's liability for such amounts would be fully discharged upon its payment of the lump sum amount. The undisputed testimony before the commission was to the effect that a lump sum agreement was chosen at claimant’s insistence. From the outset, claimant expressed his desire for a lump sum settlement with each of the four people involved in his case: surety’s rehabilitation nurse, the commission’s two vocational rehabilitation counselors, and, finally, Mr. MacMillan, surety’s claims examiner. Even after the settlement was initially rejected by the commission, claimant still maintained that he wanted the agreement approved. He desired a lump sum payment in order to start his small business.3 Based on the testimony and evidence in the record, we hold the commission’s decision regarding lack of fraud to be supported therein, and we affirm the same. II As an adjunct to his claim of constructive fraud, claimant argues that his lump sum agreement failed to adequately compensate him for his disability because it failed to take into consideration non-medical factors in evaluating the degree of his disability. It would appear that claimant’s argument is along the lines that the agreement, as approved by the commission, did not “adjudicate” disability insofar as non-medical factors are concerned. Therefore, claimant argues, the agreement may be set aside without allegations or proof of fraud. I.C. § 72-718. We likewise find this argument to be without merit. As the proponent of a claim which entitles him to certain benefits, claimant bears the burden of proof in establishing his right to any such entitlement. Claimant bears the burden of proof in showing that the commission improperly denied him such benefits. In the present case, claimant does not even allege that either the surety, in drafting the agreement, or the commission, in approving it, were ignorant of claimant’s “age, sex, education [or] economic and social environment.”4 Indeed, [295] to the extent the agreement awards compensation based on factors other than claimant’s physical impairment, it is strong evidence that non-medical factors were given consideration in evaluating claimant’s disability. In the present case, the settlement agreement gives compensation to claimant apart from that given for his physical impairment. The agreement gives claimant approximately $11,000 for his physical impairment, leaving nearly $7,000 in compensation based on factors other than the medical factor of physical impairment. The agreement denominates this additional compensation as: “CONSIDERATION: Vocational Assistance, 52 wks. @ $132.00.” In his testimony before the commission, Mr. MacMillan explained the purpose for this additional compensation. “[Generally, we would send somebody to school to retrain them. But in [his] case, since [he didn’t] want to go to school or training, we [had] to provide some other means for [his] disability and we [could] provide ... it by paying [him] for what it would cost to send [him] to school.” Thus, the amount given for “vocational assistance” clearly was intended to compensate claimant for disability unrelated to any medical factor. Additionally, the agreement itself in unambiguous language expressly states the intent of the parties (claimant and surety) to settle and discharge “any and all claims of every kind and character” related to claimant’s permanent disability. The determinative language in the lump sum agreement is found in the Fifth, Seventh and Eighth paragraphs: “FIFTH: That a dispute exists between the parties as to the amount of permanent disability. That in order to settle the dispute, the parties have mutually agreed to a Lump Sum Settlement subject to the following terms and conditions: ____ “SEVENTH: Upon the Commission’s Order approving this Agreement and subject to the payment of the settlement by the Employer-Surety, the Employer-Surety shall be and by these presents are, fully, finally and forever discharged and released of and from any and all liability on account of the above alleged injuries. “EIGHTH: Claimant advises the Commission that he is not represented by counsel and he acknowledged that he has carefully read this Agreement and legal instrument in its entirety and understands its contents and has executed the same knowing that this agreement forever concludes and fully and finally disposes of any and all claims of every kind and character he has or may have in the future against the Employer-Surety on account of said injury and that these proceedings are concluded and forever discharged and closed by reason hereof subject only to the Commission’s Order and approval.” It is clear that all claims regarding disability (as affected by both medical and non-medical factors) were fully settled by the agreement and fully adjudicated when the agreement was approved by the Industrial Commission. Therefore, pursuant to I.C. § 72-718, the lump sum agreement may not be modified by the Industrial Commission, absent allegations and proof of fraud by Mr. Harmon.5 Finally, to the extent the lump sum agreement constitutes a valid contract between claimant and surety, it is governed [296] by fundamental contract law principles. In such a light, the essence of Mr. Harmon’s claim is that the Industrial Commission, and subsequently this Court, should reform or modify his contract with employer-surety. However, the lump sum settlement agreement is, as discussed above, an unambiguous and final expression of the parties. Any oral negotiations or agreements taking place prior to entering into the agreement are deemed merged therein and “will not be admitted to contradict the plain terms of the contract.” Ringer v. Rice, 97 Idaho 105, 108, 540 P.2d 290, 293 (1975). Absent allegations and proof of fraud, Mr. Harmon’s attempts to modify the contract, which became binding on the parties once approved by the Industrial Commission, violate the parol evidence rule. “[W]here a contract is clear and unambiguous not involving any absurdities or contradictions, it is the best evidence of the intent of the parties.” National Produce Distributors v. Miles & Meyer, Inc., 75 Idaho 460, 465, 274 P.2d 831, 833 (1954). There is no ambiguity in the lump sum agreement; therefore, the parol evidence rule bars any attempts by Mr. Harmon to modify or contradict the clear terms of the agreement based on preliminary negotiations or discussions with the employer-surety. We affirm the commission’s decision. Costs to respondent; no attorney fees. DONALDSON, C.J., and SHEPARD, J., concur. Footnotes [1] The award included payments already made for total temporary disability benefits, a sum of about $7,500. [2] I.C. § 72-425 was amended subsequent to the time the lump sum agreement was approved by the commission in the present case. The amended version no longer lists the non-medical factors of "age, sex, education, economic and social environment," but instead refers to section 72-430. I.C. § 72-430 states that, in addition to physical disablement (impairment), consideration should be given "to the diminished ability of the afflicted employee to compete in an open labor market within a reasonable geographic area considering all the personal and economic circumstances of the employee and other factors as the commission may deem relevant,” in determining a claimant’s permanent disability above and beyond his impairment rating. In the present case, it makes little difference whether the preamendment or amended version is the applicable statute, since the record supports the finding that both the surety and the commission gave consideration to non-medical factors under either version. [3] Claimant repeatedly expressed his desire to Mr. MacMillan and the vocational rehabilitation counselors assigned to his case by the commission to receive a lump sum in order to buy a bar in Fairfield, Idaho. He needed approximately $20,000 to buy the business and therefore indicated that he preferred a lump sum settlement. [4] In fact, in its order denying claimant’s request to set aside the lump sum agreement, the commission specifically mentioned claimant’s age, level of education, and the working environment to which he had become accustomed. Such references by the commission clearly indicate that it was aware of those non-medical [295] factors affecting claimant’s "ability ... to compete in an open labor market." I.C. § 72-430. [5] It is interesting to note that in both his brief and at oral argument on appeal, counsel for claimant asserts a deficiency in the settlement agreement related almost entirely to medical factors. He argues that the agreement is unjust because claimant "continu[es] to suffer from physical problems related to his back injury, suggesting the likelihood of additional and, perhaps, substantial medical expense.” It is certainly clear that the settlement agreement addressed the medical factors affecting claimant’s disability, i.e., medical factors clearly were adjudicated by the commission in approving the lump sum settlement agreement. Therefore, counsel’s assertion regarding medical factors is of no avail. Such factors were adjudicated and therefore, absent allegations of fraud, may not now be set aside or modified.