
    Glenn GAUTHIER, Plaintiff-Appellee, v. GENERAL ACCIDENT FIRE & LIFE ASSURANCE CORP., et al., Defendants-Appellants.
    No. 88-1179.
    Court of Appeal of Louisiana, Third Circuit.
    March 14, 1990.
    Rehearing Denied April 23, 1990.
    
      Norris J. Greenhouse, Marksville, for plaintiff-appellee.
    Sutherland & Juge, Denis P. Juge, Jeffrey C. Napolitano, New Orleans, for defendants-appellants.
    Before DOUCET, LABORDE and KNOLL, JJ.
   DOUCET, Judge.

This appeal arises out of a suit by the plaintiff, Glenn Gauthier, to overturn a worker’s compensation settlement.

In May 1982, the plaintiff, Glenn Gauthier, injured his foot while in the course and scope of his employment with INAMCO, Inc. Suit was filed naming INAMCO, Inc. and its insurer, General Accident Fire & Life Assurance Corp. as defendant, and a trial was held. On August 31, 1984, judgment was rendered finding Mr. Gauthier to be permanently and totally disabled. In January 1987, an agreement was entered into whereby the plaintiff accepted $29,000 in settlement of all claims he had against the defendants. The settlement was approved by the trial court.

In December 1987, the plaintiff filed this suit to receive additional worker’s compensation benefits in lieu of the January 1987 settlement. After a trial on the merits, the trial court rendered judgment in favor of the plaintiff, awarding to him additional worker’s compensation benefits pursuant to LSA-R.S. 23:1274. The trial court’s judgment was based on a finding that the settlement entered into by the parties in January 1987 was a lump sum settlement, discounted at a rate greater than 8% per annum in violation of the provisions of La. R.S. 23:1274(A). The court, however, found all parties to be in good faith. As a result, the court refused to assess penalties. The defendants have appealed the trial court’s judgment alleging that the settlement was not a lump sum settlement but a compromise of a disputed claim and therefore, not improper. Plaintiff has answered the appeal urging that the trial court erred in refusing to assess penalties under La.R.S. 23:1274(B).

A compromise of a worker’s compensation claim is distinguishable from a lump sum settlement by the fact that a compromise may be made only where a bona fide dispute exists, and where it is made primarily to avoid or end litigation. Smith v. Intracoastal Truck Lines, 486 So.2d 834 (La.App. 1st Cir.1986); Fontenot v. Goldenstern Pipe & Supply Co., 50 So.2d 484 (La.App. 1st Cir.1951); Dufrene v. Aetna Casualty & Surety Co., 298 So.2d 724 (La.1974).

In this case any dispute which existed prior to the trial was laid to rest by the judgment of August 31,1984. Any dispute upon which a compromise might be based must have arisen in the time between the judgment and the entry of the settlement.

The trial court found as a matter of fact that no dispute existed at the time of settlement. This finding is entitled to great weight and may not be disturbed in the absence of manifest error. Our review of the record reveals no evidence of a change in the plaintiff’s circumstances arising after the August 1984 judgment out of which a dispute could arise. In fact, the testimony of all the doctors reveals that the plaintiff’s physical condition at the time of the trial on plaintiff’s claim for additional benefits had not changed substantially from what it was at the time of the original, trial on the merits of the worker’s compensation claim in August 1984. Accordingly, we find no manifest error in the trial court's finding that no bona fide dispute existed at the time of settlement. As a result the trial court correctly found that the parties entered a lump sum settlement discounted at a rate greater than 8% per annum in violation of La.R.S. 23:1274(A).

La.R.S. 23:1274(B) states that:

“If a lump sum settlement is made without the approval of the director or a proper court, or at a discount greater than eight percent per annum, even if approved by the director or a proper court, the employer shall be liable for compensation at one and one-half times the rate fixed by this Chapter....”

However, this provision has not been strictly applied by the courts of this state. The provision has been found not to be mandatory and has been applied only where the parties to the settlement were not in good faith. Puchner v. Employers’ Liability Assur. Corp., 198 La. 921, 5 So.2d 288 (1941); Fontenot v. Goldenstern Pipe & Supply Co., supra. Upon careful review we find no evidence to contradict the trial court’s finding that all parties to the January 1987 settlement were in good faith. Therefore, the trial court correctly refused to invoke the penalty provision of La.R.S. 23:1274(B).

Accordingly, the judgment of the trial court is affirmed.

AFFIRMED.

LABORDE, J., concurs in the result.

KNOLL, J., concurs in part and dissents in part’and assigns written reasons.

KNOLL, Judge,

concurring in part and dissenting in part.

I agree with the majority that no bona fide dispute existed at the time of the settlement, therefore, the parties entered into a lump sum settlement discounted at a rate greater than 8% per annum, in violation of LSA-R.S. 23:1274(A).

For the following reasons, I respectfully dissent from the majority which denies plaintiff the penalty. LSA-R.S. 23:1274(A) is a mandatory statute “... shall not be discounted at a greater rate than eight percent per annum.” (Emphasis added.) It is well established that the term shall is mandatory. LSA-R.S. 1:3. In my view, the award of the penalty at one and one-half times the rate is not determined upon the good or bad faith of the parties to the settlement. The test is clearly set forth in LSA-R.S. 23:1274(B) and is mandatory, i.e., the penalty is imposed if the settlement is discounted at greater than 8%. Smith v. Intracoastal Truck Lines, 486 So.2d 834 (La.App. 1st Cir.1986). Smith is a case that is identical to the issue presented herein. In commenting on the Smith case, Johnson noted: “A word to the wise should be sufficient: beware the improperly discounted lump sum settlement.” H. Johnson, 14 Louisiana Civil Law Treatise, Worker’s Compensation, Sec. 387 at page 132 (2d ed. Supp.1990).

It is interesting to note that the two cases relied upon by the majority are not followed. In “shepardizing” Puchner v. Employers’ Liability Assur. Corporation, 198 La. 921, 5 So.2d 288 (1941), it shows that the Louisiana Supreme Court has not followed Puchner for the proposition that the penalty is determined upon good or bad faith. Puchner was a four to three decision on a second rehearing on this identical issue and for the limited holding of the following, 5 So.2d at page 297:

“We have, therefore, concluded to amend our decree so as to eliminate the penalty on account of the defendant being mislead [sic] by the confusion caused by the various decisions aforementioned.”

It is my view of this holding in Puchner by the Louisiana Supreme Court that it would not interpret Puchner in future jurisprudence to mean the penalty was based upon a good or bad faith test, but rather the penalty was mandatory if the settlement is discounted at greater than 8%. Puchner is not cited by the Louisiana Supreme Court in subsequent cases to determine if the penalty is applicable.

Concerning the second case relied upon by the majority, Fontenot v. Goldenstern Pipe & Supply Co., 50 So.2d 484 (La.App. 1st Cir.1951), this is a First Circuit case. Our brethren of the First Circuit in effect reversed itself since the Fontenot case. Now, as can be seen from the Smith case, the First Circuit recognizes that LSA-R.S. 23:1274(B) is mandatory and imposes the penalty if the settlement is discounted at greater than 8%.

Since the statute is mandatory and the authorities relied upon by the majority is not the present state of the law, I further find that denying plaintiff the penalty constitutes an error of law.

Moreover, to deny plaintiff the penalty is, in my view, against the spirit of the Worker’s Compensation Act. “[T]he primary object of the Act is to provide an injured employee with funds to subsist during his disability until he is able to return to work ... The manifest purpose of the statute intends weekly benefits and not lump sum payments.” Puchner, supra, at page 295.  