KENNETH D. VALSTAD, Deceased Employee, by NIKKI VALSTAD, Petitioner/Appellant, v. TRANSPORT DESIGNS and NATIONAL AM. INS. CO./ADJUSTING SERVS. UNLIMITED, Employer-Insurer.
WORKERS= COMPENSATION COURT OF APPEALS
MARCH 11, 2003
DEPENDENCY BENEFITS; CREDITS & OFFSETS - CREDIT FOR OVERPAYMENT. Substantial evidence supported the compensation judge=s conclusion that the petitioner did not receive mistaken payment of dependency benefits in good faith within the meaning of Minn. Stat. ' 176.179, and the judge did not err in determining the dates of the employee=s Aincapacitation from earning,@ due to hospitalization, for purposes of determining dependency benefit eligibility. The judge did err, however, in attributing to the petitioner overpayments made to or on behalf of petitioner=s brother, and the judge=s overpayment figure is therefore modified accordingly.
Affirmed in part and modified in part.
Determined by Wilson, J., Rykken, J., and Pederson, J.
Compensation Judge: William R. Johnson.
DEBRA A. WILSON, Judge
The petitioner, Nikki Valstad, appeals from the judge=s finding as to the amount of dependency benefits mistakenly overpaid to her, from the judge=s decision that the benefits were not received in Agood faith,@ and from the judge=s failure to award attorney fees. We affirm in part and modify in part.
On July 7, 1989, Kenneth Valstad died of injuries that he had sustained in a work-related accident the previous month. He was survived by two children: Nikki Valstad, born August 29, 1977, and Shawn Valstad, born November 21, 1979. The children=s mother, Sandra Valstad, was apparently living with but divorced from Kenneth Valstad at the time of his death.
The employer and its workers= compensation carrier paid dependency benefits to Nikki and Shawn for at least some period after Kenneth Valstad=s death. In 1994, a dispute arose over entitlement and calculation of dependency benefits, and the parties entered into a settlement agreement. Pursuant to the terms of the agreement, Nikki and Shawn were paid a lump sum of $31,044.41, less attorney fees, representing underpayment of dependency benefits through February 21, 1994. The agreement further indicated that the employer and insurer would waive certain defenses in any future proceedings, that the Abase dependency benefit@ payable to Shawn and Nikki would be calculated as 63.33% of Kenneth Valstad=s $571.54 weekly wage, and that attorney fees would be withheld from ongoing dependency benefit payments until the children=s then attorney received a total of $13,000 in fees. Sandra Valstad signed the stipulation as Abirth mother and natural guardian@ of Nikki and Shawn Valstad. An award on stipulation was issued on March 17, 1994.
The employer and insurer subsequently paid dependency benefits approximately every four weeks, with the checks made payable to ASandra Valstad, birth mother natural guardian of dependent children, Nikki and Shawn Valstad.@
Although Nikki left high school prior to graduation and was not in school as of August 29, 1995, the date of her 18th birthday, the insurer continued to pay dependency benefits as if Nikki and Shawn were both still in school. However, the insurer=s claims representative contacted Sandra Valstad on several occasions after November 21, 1997, Shawn=s 18th birthday, to secure information about the children=s school attendance so as to determine their eligibility for continued dependency benefits under the terms of Minn. Stat. ' 176.111. The record contains several undated letters from Sandra Valstad regarding the status of her children. For example, in a letter date stamped received by the insurer on May 1, 1998, Sandra indicated that Nikki was attending the University of Minnesota and that Shawn was in adult education classes to obtain a GED, after which he planned to attend a culinary arts program to become a chef. Later, Sandra explained that she had confused Nikki with another daughter who was attending the University and that her confusion had resulted from mental health problems and treatment, including medication and Ashock treatments.@ Nikki in fact never attended the University of Minnesota. In a later letter, date stamped received by the insurer on October 21, 1999, Sandra indicated that Nikki was attending a two-year course at a school called the Academy; however, records indicate that Nikki actually attended the Academy Education Center from September 27, 1999, to December 16, 1999. In her deposition, Sandra testified that her communications with the claims representative were based on what Nikki and Shawn had told her. Eventually, the claims representative requested authorizations to obtain copies of Nikki=s and Shawn=s school records.
Earlier in 1999, from May 8, 1999, to about June 10, 1999, Nikki had been hospitalized for mental health and chemical dependency treatment, following the filing of a petition for civil commitment. The discharge summary from her hospitalization contains diagnoses of methamphetamine and marijuana dependence, alcohol abuse, and a substance-induced psychotic disorder. Treatment records indicate that Nikki=s hospitalization was prompted in part by the fact that she was experiencing auditory hallucinations, probably due to methamphetamine usage; by the time of her discharge, the hallucinations had abated. Nikki continued to receive outpatient psychiatric and chemical dependency treatment following her discharge from the hospital. Records from this treatment indicate that she began a new job in August of 1999. Evidence as to Nikki=s employment status after leaving high school is generally sketchy.
In early April of 2000, Nikki applied for admission to the Minnesota School of Business [MSB], where she began classes on July 5, 2000. In the meantime, on April 24, 2000, the employer and insurer served and filed a Notice of Discontinuance of Dependency Benefits [NOD], indicating that benefits were being discontinued because the insurer had not received formal documentation of Nikki and Shawn=s full-time attendance at school. Nikki at some point wrote to the insurer, asking that her half of the benefits be mailed to her to help her with her school expenses. However, the claims representative later explained that dependency benefits were never reinstated, despite Nikki=s attendance at MSB, because no objection to discontinuance had been filed and because, after the claims representative finally received Nikki=s and Shawn=s school records, it became evident that a large overpayment had been made relative to long periods in which neither Nikki nor Shawn were in school after age 18.
On March 2, 2001, Nikki Valstad filed a petition claiming entitlement to dependency benefits after April 24, 2000, the date of the NOD. The employer and insurer responded by denying that Nikki was currently dependent as defined by statute and by indicating that dependency benefits after Nikki=s 18th birthday had been paid mistakenly and had not been received by Nikki in good faith. Accordingly, the employer and insurer claimed reimbursement for all benefits paid after August 29, 1995.
At the hearing on the claim petition, commenced on May 21, 2002, the employer and insurer clarified that they were not seeking reimbursement for benefits paid prior to November 21, 1997, Shawn=s 18th birthday, because Aat least some benefits would have been payable up till that point.@ In an illustrative exhibit, the employer and insurer indicated that a total of $62,147.33 in dependency benefits had been paid since Shawn=s 18th birthday and that, even assuming Nikki=s entitlement during enrollment in school for various periods and during her alleged incapacitation in the spring of 1999, a net overpayment of $45,477.31 had been made. The employer and insurer did not, however, concede Nikki=s entitlement during all of those periods.
Evidence submitted the first day of hearing included the testimony of Nikki and the insurer=s claims representative, the deposition testimony of Nikki=s mother Sandra, and Nikki=s mental health/chemical dependency treatment and school records. Over the objection of Nikki=s attorney, the judge scheduled a second day of hearing to secure the testimony of Kevin Kelly, also known as Ralph Timothy Stewart, who had married Sandra sometime in 1999. Much of the cross-examination of Kevin Kelly, by Nikki=s attorney, consisted of attempts to impeach Kelly=s credibility by way of references to his criminal record and prior inconsistent statements.
In a decision issued on August 26, 2002, the compensation judge essentially accepted the employer and insurer=s position in its entirety, ruling that the employer and insurer had mistakenly paid dependency benefits not due and owing and that Nikki had not received those benefits in good faith. He therefore ordered Afull reimbursement@ to the employer and insurer, pursuant to Minn. Stat. ' 176.179, of $57,878.01 -- an amount arrived at by taking the total amount of dependency benefits paid by the insurer after Shawn=s 18th birthday and then subtracting certain benefits to which the judge found Nikki entitled by virtue of her incapacitation or status as a full-time student. The judge also awarded Nikki dependency benefits Aduring any period she is a full-time student [at MSB] until she reaches the age of 25,@ but he allowed the employer and insurer to take a 100% credit against the award Auntil such time as the overpayment [of] $57,878.01 is satisfied.@ Nikki Valstad appeals.
STANDARD OF REVIEW
In reviewing cases on appeal, the Workers= Compensation Court of Appeals must determine whether Athe findings of fact and order [are] clearly erroneous and unsupported by substantial evidence in view of the entire record as submitted.@ Minn. Stat. ' 176.421, subd. 1 (1992). Substantial evidence supports the findings if, in the context of the entire record, Athey are supported by evidence that a reasonable mind might accept as adequate.@ Hengemuhle v. Long Prairie Jaycees, 358 N.W.2d 54, 59, 37 W.C.D. 235, 239 (Minn. 1984). Where evidence conflicts or more than one inference may reasonably be drawn from the evidence, the findings are to be affirmed. Id. at 60, 37 W.C.D. at 240. Similarly, A[f]actfindings are clearly erroneous only if the reviewing court on the entire evidence is left with a definite and firm conviction that a mistake has been committed.@ Northern States Power Co. v. Lyon Food Prods., Inc., 304 Minn. 196, 201, 229 N.W.2d 521, 524 (1975). Findings of fact should not be disturbed, even though the reviewing court might disagree with them, Aunless they are clearly erroneous in the sense that they are manifestly contrary to the weight of the evidence or not reasonably supported by the evidence as a whole.@ Id.
Because Sandra Valstad was not married to Kenneth Valstad at the time of his death, Nikki and Shawn were treated as orphans for purposes of dependency benefits, pursuant to Minn. Stat. ' 176.111, subd. 12 (1988), which provides as follows:
Subd. 12. Orphans. If the deceased employee leaves a dependent orphan, there shall be paid 55 percent of the weekly wage at the time of the injury of the deceased, for two or more orphans there shall be paid 66-2/3 percent of the wages.[]
The relevant statutory provisions governing dependency read as follows:
Subdivision 1. Persons wholly dependent, presumption. For the purposes of this chapter the following persons are conclusively presumed to be wholly dependent:
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(b) children under 18 years of age, or a child under the age of 25 years who is regularly attending as a full time student at a high school, college, or university, or regularly attending as a full time student in a course of vocational or technical training.
Subd. 2. Children. Children 18 years of age, or over 18 when physically or mentally incapacitated from earning, are prima facie considered dependent.
Minn. Stat. ' 176.111, subds. 1 and 2 (1988).
In the present case, it is essentially undisputed that the employer and insurer paid a total of $62,147.33 in dependency benefits after Shawn=s 18th birthday on November 21, 1997. Nikki also concedes that at least some of those benefits were mistakenly paid for periods in which she was neither incapacitated from earning nor enrolled in school, as specified by Minn. Stat. ' 176.111. Nikki argues, however, that the compensation judge erred in determining the amount of the overpayment by including benefits paid to or on behalf of Shawn, and in limiting the period of Nikki=s incapacitation to the dates of her hospitalization. We agree that the compensation judge erred in determining the amount of the overpayment.
The $62,147.33 in dependency benefits paid by the insurer after November 21, 1997, was for both Nikki and Shawn. Because Shawn was not a party to these proceedings, his entitlement to benefits was not and could not be determined, but there is simply no basis in law or logic to attribute to Nikki benefits paid to or on behalf of Shawn. As such, the starting figure for purposes of determining the overpayment to Nikki is one-half of the total paid, or $31,073.67.
We are not, however, convinced that the compensation judge erred in finding Nikki entitled to benefits due to Amental incapacitation@ only during the period of her hospitalization, from May 8, 1999, to June 10, 1999. Certainly, Nikki=s treatment records suggest that she was experiencing severe symptoms, including auditory hallucinations, as of her admission to the hospital on May 8, 1999, raising the inference that she may have been Aincapacitated@ as contemplated by statute for at least some period prior to, and perhaps after, her hospitalization. However, the only medical opinion as to incapacitation is contained in a May 9, 2002, report from Dr. Sheila Specker, one of Nikki=s psychiatrists, who described Nikki=s symptoms during her hospitalization as severe enough to qualify her as A>incapacitated= during this late spring - early summer period of time.@ In the absence of other medical opinion evidence on the issue, the judge did not err by failing to extend the period of Nikki=s incapacitation to some necessarily arbitrary point either before or after her hospitalization. We therefore affirm the judge=s decision as to the dates of Nikki=s incapacitation from earning under the terms of Minn. Stat. ' 176.111, subd. 2.
In addition to resolution of the two issues addressed above, further clarification of the judge=s overpayment decision is required. The judge determined that Nikki was entitled to dependency benefits while attending the Academy Education Center ($3,125.16) and while hospitalized ($1,144.16), figures which are undisputed on appeal. He also indicated, in Finding 2, that if Nikki Aattended [MSB] until she reached the age of 25 . . . she would be entitled to approximately $10,489.90@ in dependency benefits during the course of that schooling, and the judge Aawarded@ benefits Awhile [Nikki] is enrolled full time as a student at [MSB] until age 25,@ subject to the insurer=s right to a 100% credit for its overpayment. The judge apparently took the $10,489.90 figure from the employer and insurer=s illustrative overpayment summary. However, that summary assumed Nikki=s attendance at MSB only through March 23, 2001, not through August 29, 2002, her 25th birthday, and Nikki testified that she remained a student at MSB through the May 2002 hearing dates. In other words, the $10,449.90 figure used by the employer and insurer and by the judge excludes more than a year of at least potential dependency benefit eligibility.
The employer and insurer point out in their brief that Nikki was only registered for one class, from which she later withdrew, in the spring of 2001, and we note that Nikki neglected to submit any documentary evidence of further full-time school attendance thereafter. As such, it can be argued that Nikki failed to establish entitlement to dependency benefits after March of 2001. At the same time, the judge expressly determined that Nikki was entitled to dependency benefits, if a full-time student at MSB, through her 25th birthday, August 29, 2002. Therefore, while Nikki may be entitled, by virtue of her attendance at MSB, to more than the $10,449.90 benefit figure assumed by the judge, the exact amount cannot be determined on this record.
A definite decision as to the precise amount of overpayment would have been preferable. However, because school records are not difficult to obtain, and there may in the end be no dispute over the issue, we will not remand the matter for further evidence and calculations. Rather, we modify the judge=s overpayment determination as follows:
Total benefit payment attributable to Nikki after
November 21, 1997 $31,073.67
Less benefits payable during Academy Education
Center attendance ( 3,125.16)
Less benefits payable during hospitalization/incapa-
citation ( 1,144.16)
Less benefits payable during attendance at MSB
through March 23, 2001 ( 10,489.90)
This $16,314.45 figure should then be further reduced by benefits, if any, payable for periods in which Nikki was a full-time student at MSB after March 23, 2001, through August 29, 2002, the date of her 25th birthday. The amount remaining after this last reduction is the total amount of the insurer=s overpayment attributable to Nikki.
2. Bad Faith Receipt
Minn. Stat. ' 176.179 provides as follows:
176.179. Recovery of overpayments
Notwithstanding section 176.521, subdivision 3, or any other provision of this chapter to the contrary, except as provided in this section, no lump sum or weekly payment, or settlement, which is voluntarily paid to an injured employee or the survivors of a deceased employee in apparent or seeming accordance with the provisions of this chapter by an employer or insurer, or is paid pursuant to an order of the workers= compensation division, a compensation judge, or court of appeals relative to a claim by an injured employee or the employee=s survivors, and received in good faith by the employee or the employee=s survivors shall be refunded to the paying employer or insurer in the event that it is subsequently determined that the payment was made under a mistake in fact or law by the employer or insurer. When the payments have been made to a person who is entitled to receive further payments of compensation for the same injury, the mistaken compensation may be taken as a partial credit against future periodic benefits. The credit applied against further payments of temporary total disability, temporary partial disability, permanent partial disability, permanent total disability, retraining benefits, death benefits, or weekly payments of economic recovery or impairment compensation shall not exceed 20 percent of the amount that would otherwise be payable.
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Where the commissioner or compensation judge determines that the mistaken compensation was not received in good faith, the commissioner or compensation judge may order reimbursement of the compensation. For purposes of this section, a payment is not received in good faith if it is obtained through fraud, or if the employee knew that the compensation was paid under mistake of fact or law, and the employee has not refunded the mistaken compensation.[]
The compensation judge in the present case ordered reimbursement of the overpayment based on his conclusion that Nikki did not receive the overpayment in good faith. Nikki appeals, arguing that the Anot in good faith@ finding is unsupported by substantial evidence. In support of this argument, Nikki points out that the insurer=s claims representative was herself mistaken as to the criteria for dependency benefit eligibility and that the overpayment was due in large part to careless claims handling. Nikki also argues that the testimony of Kevin Kelly, Sandra Valstad=s now ex-husband, should have been disregarded as completely lacking in credibility and that the judge erred in limiting counsel=s right to impeach Kelly=s testimony. Finally, Nikki contends that, because the insurer continued to remit payments to Sandra Valstad, rather than to Nikki, even after Nikki attained age 18, at least some of the payments cannot be attributed to Nikki at all. We are not persuaded.
We note initially that we see no reversible error in the compensation judge=s handling of Kevin Kelly=s testimony. The judge was clearly within his authority to allow an additional hearing day to secure that testimony, he allowed a substantial amount of impeachment before limiting counsel=s cross-examination, and much of counsel=s attempted impeachment was simply improper. Finally, as to this issue, we see nothing in the compensation judge=s decision to indicate that he relied to any extent on Kelly=s testimony in making his determination.
We are also unconvinced by the argument that Nikki should not be held responsible for the overpayment because the checks went to Sandra. Testimony as to exactly what was done with the dependency checks is somewhat ambiguous; neither Sandra nor Nikki had good recall about events during the relevant period in which benefits were mistakenly paid. However, both Nikki and Sandra testified that Sandra paid Nikki and Shawn=s rent with the payments and then split the remaining money between them, and Sandra denied ever keeping the money for her own use. Nikki also conceded that her mother had begun giving her one-half of the dependency benefit check by the time she was enrolled in the Academy. There was also some testimony to the contrary, but, based on this evidence, it was not unreasonable for the compensation judge to conclude that Nikki directly received or benefitted from the dependency benefit overpayments. Furthermore, whether or not Nikki actually Aschemed@ with Sandra and Shawn to obtain dependency benefits to which she was not entitled, as the compensation judge implied, Nikki admitted that she knew she had to be in school to be eligible for benefits after her 18th birthday. Her testimony to this effect reasonably supports the conclusion that she Aknew that the compensation was paid under a mistake of fact,@ and it is undisputed that she did Anot [refund] the mistaken compensation.@ This is all that is required to support the judge=s determination that Nikki did not receive the benefits in Agood faith,@ as specified by the statute. See id. The fact that the continued payments might have been due in part to poor oversight by the insurer is not determinative.
Because substantial evidence supports the compensation judge=s conclusion that Nikki did not receive the mistakenly paid benefits in good faith, we affirm the judge=s decision on this issue, subject to our modification as to the amount of the overpayment, as detailed in the preceding section of this decision.
3. Attorney Fees
Nikki=s counsel argues that the judge erred by failing to award attorney fees. We disagree. Given the judge=s order for reimbursement, there was no benefit award from which to calculate a contingent fee. If counsel is seeking an award of fees pursuant to Gruber v. Independent Sch. Dist. #625, 57 W.C.D. 284 (W.C.C.A. 1997), he may file a fee petition to this effect for consideration by the compensation judge. Pending the filing of such a petition, any decision as to his entitlement to fees is premature.
 Nikki had previously received her GED in the spring of 1996.
 According to records from Fairview University Medical Center, Nikki=s commitment was Astayed@ on condition she comply with treatment recommendations.
 There is very little evidence concerning Shawn=s school attendance, presumably because he was not a party to the proceedings. However, it appears, from Sandra=s testimony, that Shawn was seldom in school after his 18th birthday.
 The couple has since divorced. The record indicates that Sandra Valstad, who became Sandra Kelly upon her marriage to Kevin Kelly, is now known as Sandra Clinton, her maiden name.
 However, pursuant to the settlement agreement, dependency benefits were based on 63.66% of Kenneth Valstad=s weekly wage, rather than the 66-2/3% provided by statute.
 As previously indicated, the employer and insurer do not claim the right to a credit or reimbursement for dependency benefits prior to this date.
 The employer and insurer gave no rationale for their use of $62,147.33 as the starting figure in their Aoverpayment summary@ relative to Nikki, and the compensation judge did not explain why he chose to use that figure as well. We would note, as Nikki=s counsel pointed out to the compensation judge, that the insurer itself indicated that Nikki had been entitled to only one-half of the total benefits paid during periods in which she was in school or hospitalized. If Nikki was entitled to only one-half of the benefits paid while in school or incapacitated, she cannot be held responsible for all of the benefits paid during other periods. The insurer cannot have it both ways.
 Nikki=s attorney suggests in his brief that the benefits should not be considered evenly split between Nikki and Shawn, because, pursuant to Minn. Stat. ' 176.111, subd. 12, one orphan is entitled to 55%, not 50% of the deceased employee=s weekly wage. By counsel=s calculations, this somehow reduces the starting figure for the alleged overpayment to $7,250.46. We do not follow counsel=s reasoning, and, in any event, we see no sound basis for attributing some percentage of benefits, other than half, to either Nikki or Shawn under the circumstances.
 If a dispute arises over Nikki=s entitlement to benefits during this period, affecting the ultimate overpayment figure, further litigation may be necessary. Some of the confusion here could have been avoided had the parties submitted more definitive evidence on this and other issues.
 This last paragraph of this provision, concerning reimbursement of benefits not received in good faith, was added to Minn. Stat. ' 176.179 in 1992, after Kenneth Valstad=s death. However, there is no argument that the compensation judge applied the wrong version of the statute.
 For one thing, counsel repeatedly attempted to question Kelly about arrests, rather than convictions.
 By 1999, Nikki and Shawn were living together but Sandra was living elsewhere, with Kelly, apparently.
 And, even with our modification as to the amount of the overpayment, it is questionable whether there will be any net award to Nikki.
 He does not specify the basis for his fee argument in his brief.