LARRY LUNDEEN, Employee/Appellant, v. INDEPENDENT SCH. DIST. #191 and WESTERN NAT. MUT. INS. CO., Employer-Insurer.
WORKERS= COMPENSATION COURT OF APPEALS
NOVEMBER 2, 2005
WAGES - SELF-EMPLOYMENT. Where it was supported by expert accounting opinion, where much of the employee=s position was based on speculative projection of income that he might receive upon future sale of his land, where essentially all evidence submitted by the employee pertained to work in which his wife also played an important part, and where it was reasonable to conclude that any arguable cash flow advantage that might be attributable to the employee=s various tax deductions was negated by the costs of new equipment purchased during the years reviewed, the compensation judge=s conclusion that the employee=s self-employment in a second-job dairy operation in which he had reported no profit for tax purposes for the past six years was not a basis for an increased date of injury weekly wage was not clearly erroneous and unsupported by substantial evidence.
Determined by: Pederson, J., Wilson, J., and Rykken, J.
Compensation Judge: William R. Johnson
Attorneys: Raymond. R. Peterson, McCoy, Peterson & Jorstad, Minneapolis, MN, for the Appellant. Krista L. Twesme, Aafedt, Forde, Gray, Monson & Hager, Minneapolis, MN, for the Respondents.
WILLIAM R. PEDERSON, Judge
The employee appeals from the compensation judge's determination of the employee=s weekly wage on the date of injury. We affirm.
On February 23, 2000, Larry Lundeen injured his left shoulder in the course of his employment as a head custodian with Independent School District #191. An MRI scan on April 14, 2000, revealed a complete tear of the supraspinatus tendon, and on May 25, 2000, he underwent rotator cuff repair surgery performed by orthopedic surgeon Dr. Julie Samson. On September 1, 2000, Mr. Lundeen sustained an injury also to his right shoulder, again in the course of his work with Independent School District #191. Mr. Lundeen [the employee] was forty-six years old on that date and was earning at his custodian job a weekly wage of $688.97. An MRI scan of the shoulder on December 27, 2000, revealed a small full-thickness tear of the distal supraspinatus tendon, and Independent School District #191 [the employer] and its insurer admitted liability for the injury and commenced payment of benefits. The employee subsequently had surgery on the injured right shoulder on May 24, 2001, also performed by Dr. Samson. The employee=s pain continued post surgery, and a follow-up MRI scan of the shoulder on July 10, 2001, was read to reveal extensive abnormal signals at the supraspinatus tendon compatible with a partial thickness tearing, but no definite full-thickness tear was apparent. The employee=s pain continued, however, and another MRI scan of the shoulder on May 10, 2002, though inconclusive, revealed a likelihood that what were previously evident as partial tendon tears had increased to full-thickness tears. On June 4, 2002, the employee underwent open revision rotator cuff repair, performed by orthopedic surgeon Dr. T. Bradley Edwards.
For about twenty-two years prior to his September 2000 work injury, concurrent with the employee=s work for the employer, the employee and his wife had owned and operated a dairy farm, typically feeding, milking, and otherwise managing between fifty and sixty head of cattle. Subsequent to his June 2002 surgery on his right shoulder, the employee was never again quite able to raise his right arm above his head, and his operation of the farm became more difficult. Eventually the employee was forced to sell the milk-production part of his farming business, due in important part to his inability to assist any longer in the Apulling@ of calves that is apparently an essential role of a dairy farmer in his animals= birthing processes. Subsequent to selling his milk cattle, however, the employee evidently continues to buy and raise calves for resale, and he retains and continues to live on the sixty acres of land on which he had operated his business.
On May 10, 2003, Dr. Edwards rated the employee=s right-shoulder-related permanent partial disability at 6% of the whole body, for a full thickness chronic rotator cuff tear, pursuant to Minnesota Rules 5223.0450, subpart 3A. Less than a month later, however, on June 3, 2003, Dr. Edwards revised that rating, rating the employee=s disability at 17% of the whole body, including also additional ratings for loss of range of motion pursuant to subparts 4A(1)(b) and 4B(1)(c) of that same rule. Dr. Edwards noted also in that report that this rating was in addition to the employee=s left-shoulder-related rating of 15% of the whole body, issued earlier by Dr. Samson.
On January 8, 2004, the employee filed a claim petition, alleging, in addition to entitlement to compensation for a 17% whole-body permanent impairment, entitlement to reimbursement for underpayment of temporary total disability benefits from May 24 to August 5, 2001, and from June 7 to July 19, 2002, together with temporary partial disability benefits continuing from July 20, 2002, related to the employee=s right-shoulder work injury on September 1, 2000. The claims were based on an alleged average weekly wage of $2,100.00, the latter apparently alleged to reflect both the employee=s date-of-injury wage with the employer and the value of the employee=s date-of-injury self-employment as a dairy farmer.
On January 28, 2005, certified public accountant and former attorney with the Internal Revenue Service, Mark Pridgeon, issued a report to counsel for the employer and insurer, in response to her request for his opinion as to whether any income could properly be imputed to the employee=s pre-injury average weekly wage as a result of the employee=s farming activities. Mr. Pridgeon=s review was based on the employee=s tax returns for 1998 through 2003 and apparently a description by the employer and insurer=s attorney of certain deposition testimony by the employee. Mr. Pridgeon concluded that no amounts of income could properly be so imputed. In his report, Mr. Pridgeon explained in part that all six of the employee=s tax returns at issue reflected losses from the employee=s farming activity in varying amounts--losses for tax purposes that in Mr. Pridgeon=s opinion reflected actual losses on a cash flow basis as well. Mr. Pridgeon explained that any positive cash flow result consequent to tax deductions for operating losses or capital depreciation over the course of the six years at issue would ultimately be more than negatedBand the operating and depreciation losses far exceededBby the cost of new equipment purchases over the course of those same six years.
On February 2, 2005, tax accountant James Jensen, who has prepared the employee and his wife=s joint tax returns since 1987, testified by deposition as to the annual net cash flow advantage to the employee and his wife consequent to their dairy farming operation over the six-year period from 1998 to 2003. In his testimony, Mr. Jensen acknowledged that Schedule F of the employee=s tax returns for those six years reported annual losses ranging from $12,242 to $49,644 and that the net tax return results over those same years were still losses ranging from $9,167 to $29,961 even after adding back certain capital profits such as profits from cattle sales. Mr. Jensen testified also, however, that the employee and his wife=s net cash flow over those same six years consequent to their farming operation was a positive number ranging from $3,106.00 to $16,761.00, after adding back (1) approximate tax savings due to deductions for losses, (2) depreciation adjustments, (3) mortgage interest adjustments, (4) real estate tax adjustments, and (5) insurance and utility adjustments. Mr. Jensen acknowledged that the employee=s wife provided services to the employee=s farm operation and that he had no way of determining what cash flow results might be attributable to her work as opposed to the employee=s. Finally, Mr. Jensen testified also that the land on which the employee and his wife operated their farming business over the six years at issue might have realized an approximate increase in value ranging from $8,632 to $15,167, after deducting for land holding costs, and that this increase in property value, which might theoretically never be taxed if the property is inherited, Ais why people farm.@
The matter came on for hearing on February 3, 2005. In his eventual findings and order, the compensation judge identified the employee=s average weekly wage on the date of injury as the sole issue for his determination, and neither party has contested that assertion on appeal. At hearing, the employee claimed a date-of-injury weekly wage of $971.32, which would include both the $688.97 that he was being paid per week by the employer and $282.35 that he contended was the weekly value of his self-employment as a farmer. The employee arrived at the latter figure by adding together Mr. Jensen=s calculation of the net increase to the employee and his wife=s cash flow as a result of their farm operation in the year 2000 and Mr. Jensen=s estimation of the net increase in the value of their farm land in that same year, and then dividing the sum by fifty-two weeks. Evidence submitted by the employee in support of his position included the deposition testimony of Mr. Jensen and the employee=s own testimony, which included an acknowledgment that his wife played at least an accounting role in the dairy business, which she was part owner of. In support of their contrary position, the employer and insurer offered live testimony by Mr. Pridgeon, who essentially reiterated opinions that he had expressed in his report of January 28, 2005, noting also that tax laws do not recognize or realize a profit from a land investment until the land is actually sold. By findings and order filed April 18, 2005, the compensation judge concluded that the employee had no profit from his farming operation, and on that basis, in keeping with this court=s reasoning in Gorman v. Cambridge Nursing Care Center, slip op. (W.C.C.A. Nov. 2, 1988), the judge denied the employee=s claim for benefits based on any income from his farming operation. The employee 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.
The compensation judge found that the employee had no profit from farming and therefore denied the employee=s claim for benefits based on a weekly wage that included a farming income. The employee contends that this conclusion is clearly erroneous and unsupported by substantial evidence, characterizing the judge=s decision as a determination Athat the 70 + hours [the employee] worked raising cattle and the crops to support them essentially had no monetary value.@ He argues that the judge Afailed to keep in mind that the overarching objective of pre-injury wage determination is to >arrive at a fair approximation of [the employee=s] probably future earning power which has been impaired or destroyed because of the injury.=@ Quoting Bradley v. Vic=s Welding, 405 N.W.2d 243, 245-46, 39 W.C.D. 921, 924 (Minn. 1987), quoting Knotz v. Viking Carpet, 361 N.W.2d 872, 874 (Minn. 1985), quoting Sawczuk v. Special School Dist. No. 1, 312 N.W.2d 435, 437-38 (Minn. 1981). He argues that, while his farming operation was showing no taxable profit on the date of his injury, the operation resulted in an increased cash flow to the employee, not only as a result of income tax deductions that the employee was able to take consequent to his losses but also as a result of depreciation on his capital investments and ultimate growth in the business as an investment, to be realized upon future sales. We are not persuaded.
The compensation judge cited this court=s decision in Gorman v. Cambridge Nursing Care Center, slip op. (W.C.C.A. Nov. 2, 1988), as instructing his conclusion. In Gorman, as in the present case, the employee=s tax records reflected a negative income from second-job farming self-employment in all of the years reviewed, and the compensation judge in that case, as in the present case, concluded that no weekly wage could therefore be attributed to that second job. This court affirmed that decision. Simply referencing the equitable principle established in Sawczuk and Knotz as cited above, and without distinguishing his own circumstances from the circumstances in Gorman, the employee argues that Athe Compensation Judge mistakenly concluded that he could use no other means of calculating [the employee=s] weekly wage besides that set forth in the statute and pursuant to the Court=s factual affirmance in Gorman.@ We see no indication in the judge=s decision that he felt so constrained. Indeed, the judge=s lengthy and detailed analysis in Finding 2 and in his memorandum clearly indicates that he carefully considered the details of the employee=s theory of a higher wage, via the reasoning set forth in the expert testimony of Mr. Jensen, and that he opted instead to accept the expert opinion of Mr. Pridgeon. As we have indicated many times, a trier of fact's choice between experts whose testimony conflicts is usually upheld unless the facts assumed by the expert in rendering his opinion are not supported by the evidence. Nord v. City of Cook, 360 N.W.2d 337, 342-43, 37 W.C.D. 364, 372-73 (Minn. 1985). In this case, there is no evidence that Mr. Pridgeon=s opinion was based on any false factual premises.
Nor do we find the judge=s decision otherwise unreasonable. Contrary to the employee=s suggestion, the compensation judge made no determination that the employee=s work was essentially of no monetary value. The judge=s conclusion was that the employee had no demonstrable income or wage as a result of his farming operation. Moreover, much of the employee=s position was based on his only very speculative and conjectural projection of income that he might receive upon future sale of his land. Even aside from tax law=s Arealization requirement@ as testified to by Mr. Pridgeon, it was not unreasonable for the compensation judge to conclude that the employee did not prove his case in this regard by sufficiently definite evidence. Further, essentially all of the evidence submitted by the employee regarding the alleged financial benefits of his farming work pertained to work in which the employee=s wife evidently played an important part, without any expert testimony or other evidence as to the portion of any alleged financial gain that might be attributable to the employee=s own work--again a reasonable basis for concluding that the employee did not furnish evidence sufficient to prove his claim. Nor would it have been unreasonable for the judge to conclude in the end, in keeping with the opinion of Mr. Pridgeon, that any arguable cash flow advantage that might be attributable to the employee=s various depreciation and other tax deductions was more than negated by the costs of new equipment during the years reviewed. Had any of the six years of tax records reviewed demonstrated an actual cash profit to the employee as a direct result of his farming efforts, as was the basis for a weekly wage adjustment in Kroyer v. Pure Price, slip op. (W.C.C.A. Feb. 28, 2001), the employee might have had more of a case before the judge. But none of the employee=s records showed any such profit, and it was reasonable for the judge here to conclude in his memorandum that A[t]herefore, Kroyer gives us no guidance.@
Because it is supported by expert opinion and is not otherwise unreasonable, we affirm the compensation judge=s decision that the employee is not entitled to an increased weekly wage on the basis of his self-employment at his farming operation. See Nord, 360 N.W.2d at 342-43, 37 W.C.D. at 372-73; Hengemuhle, 358 N.W.2d at 59, 37 W.C.D. at 239.
 There was an assertion at hearing, by both parties, that the employer and insurer were contesting also the employee=s claim that the sale of his farming operation was necessitated by his work injury, thereby establishing a basis for his temporary partial disability benefits claim for loss of income related to his dairy business. The judge appears to have concluded that that issue was moot in light of his ultimate decision on the weekly wage issue, and no party has appealed from that implicit conclusion.