Dane Brown, t/a, etc v. Dane B Brown ( 2003 )

COURT OF APPEALS OF VIRGINIA
Present: Chief Judge Fitzpatrick, Judges Benton and Kelsey
Argued at Richmond, Virginia
DANE BROWN, T/A DANE BROWN ELECTRICAL AND
PRINCETON INSURANCE COMPANY
OPINION BY
v. Record No. 1598-02-2 JUDGE JAMES W. BENTON, JR.
MARCH 11, 2003
DANE B. BROWN
FROM THE VIRGINIA WORKERS' COMPENSATION COMMISSION
S. Vernon Priddy III (Cecil H. Creasey, Jr.;
Sands Anderson Marks & Miller, on brief), for
appellants.
Craig B. Davis (Emroch & Kilduff, on brief),
for appellee.
The sole issue raised by this appeal is whether the
commission erred by calculating an average weekly wage using the
sole proprietor's profit and loss statements for the fifty-two
weeks immediately preceding the injury rather than Schedule C
from the sole proprietor's prior year's tax return. We hold
that the commission did not err, and we affirm the award.
I.
Dane Brown filed an application for benefits alleging an
injury by accident. At the evidentiary hearing, Brown testified
that he is a sole proprietor doing business as Dane Brown
Electrical and has elected coverage under the Act. In his
business, Brown performs standard electrical contracting
services; he sells and installs stand-by automatic generators;
and he provides estimates for electrical generators to his
clients and to other electrical contractors' clients. On April
9, 2001, Brown visited the office of an electrical contractor
and obtained the name of a customer who needed an estimate for a
generator. Brown was en route to see that customer when a
vehicle hit the rear of his automobile. Brown sustained neck
and back injuries and received emergency treatment. He has not
been released for employment.
Brown testified that he had cervical spine surgery on
February 5, 2001 that was unrelated to this claim. Prior to the
February surgery, Brown was in pain and could not perform the
duties of his job as well as normal, but he continued to work
because he "had to do it, . . . had to make a living." After
the February surgery, Brown did not work for approximately eight
weeks. Before the accident on April 9, 2001, however, Brown had
been released to return to his employment and had been working
two weeks.
Brown's wife testified by deposition that the business
operates from an office in their home. Brown's wife is not an
employee of the business; she is, however, its bookkeeper and
prepares the taxes for the business. Brown's wife testified
that she regularly uses a computer-based accounting program when
she writes checks, pays bills, makes invoices, and does other
accounting functions. When she prepares the income tax returns
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for the business, she uses the computer-based accounting program
and a computer-based income tax preparation program; she
"plug[s] what's in [the] Quicken [accounting program] into the
Turbo Tax [program] and it does the taxes."
Brown's wife testified that Schedule C from the business's
income tax returns for the year 2000 showed gross receipts of
$186,820 and a net profit of $4,174. That tax period ended
December 31, 2000, four months before Brown's injury. At the
request of Brown's attorney, she used the computer programs to
prepare profit and loss statements for the fifty-two weeks
preceding Brown's injury. Brown's wife prepared two profit and
loss statements -- one for the electrical contracting work and
another for the generator estimates and sales aspect of the
business. The statements showed gross receipts of $231,714
between April 8, 2000 and April 8, 2001 and a net income of
$35,996.27 for this same period. A substantial portion of the
net income was attributable to the generator aspect of the
business.
The deputy commissioner ruled that Brown proved he suffered
a compensable injury by accident and that he has been totally
disabled since the day of the accident. In determining Brown's
average weekly wage, the deputy commissioner found that the tax
return was not the most accurate account of Brown's net earnings
for the statutory period. The deputy commissioner noted the
significant difference between the net profits reported on
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Schedule C for the year 2000 and reported on the profit and loss
statements. The deputy commissioner found, however, that in
preparing those documents Brown's wife had, in each instance,
"merely taken the database which she kept on a contemporaneous
basis using the computer software and used the software to
produce these figures including the tax returns." In addition,
the deputy commissioner found that because the figures were
"essentially computer generated," Brown's wife did not
artificially change the figures to enhance Brown's claim. The
deputy commissioner credited her explanation that the net profit
shown on Schedule C was lower than the actual profit, in part,
because Schedule C required her to use a mileage deduction for
business mileage, as opposed to actual mileage, and because it
included an allowance for the business use of the home. In view
of that testimony, the deputy commissioner found that the net
profit shown on the profit and loss statements should be reduced
by the home office expenses and used the prior year's
calculation of the home office expenses to reduce the net profit
shown on the profit and loss statements. The deputy
commissioner found that Brown had net earnings of $32,586.27
from his business for the fifty-two weeks preceding the accident
and determined that Brown's pre-injury average weekly wage was
$626.66.
Upon review, the commission affirmed these findings and
specifically noted that the Schedule C covered a different
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fifty-two week period than the profit and loss statements. The
commission found that using Schedule C as the basis for
computing the average weekly wage would deprive Brown of the
benefit of the increase in his earnings from the business
through April 9, 2001.
II.
The employer and the insurer contend the commission relied
upon an incorrect source in computing Brown's average weekly
wage. They argue that "case law and the evidence in this matter
required the commission to accept the Schedule C from Brown's
2000 tax return." We disagree.
In pertinent part, Code § 65.2-101 defines "average weekly
wage" as follows:
1.a. The earnings of the injured employee
in the employment in which he was working at
the time of the injury during the period of
fifty-two weeks immediately preceding the
date of the injury, divided by fifty-two
. . . .
b. When for exceptional reasons the
foregoing would be unfair either to the
employer or employee, such other method of
computing average weekly wages may be
resorted to as will most nearly approximate
the amount which the injured employee would
be earning were it not for the injury.
The commission must be "guided by [this] statute in determining
average weekly wage." Dominion Assocs. Group, Inc. v. Queen, 17
Va. App. 764, 766, 441 S.E.2d 45, 46 (1994).
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"The reason for calculating the average weekly wage is to
approximate the economic loss suffered by an employee . . . when
there is a loss of earning capacity because of a work related
injury." Bosworth v. 7-Up Distrib. Co., 4 Va. App. 161, 163,
355 S.E.2d 339, 340 (1987). The commission's duty is "to make
the best possible estimate of future impairments of earning from
the evidence adduced at the hearing, and to determine the
average weekly wage." Pilot Freight Carriers, Inc. v. Reeves, 1
Va. App. 435, 441, 339 S.E.2d 570, 573 (1986). This issue
presents "a question of fact to be determined by the Commission
which, if based on credible evidence, will not be disturbed on
appeal." Id.It is undisputed that the Schedule C tax form does not
correspond to the fifty-two week period immediately preceding
the date of Brown's compensable injury and that the profit and
loss statements do. Our decisions in Smith v. Smith, 32
Va. App. 242, 527 S.E.2d 463 (2000), or Meredith Constr. Co. v.
Holcombe, 21 Va. App. 537, 466 S.E.2d 108 (1996), do not require
the commission to choose the Schedule C over the profit and loss
statements as the basis for computing the average weekly wage.
As we held in Smith, "Holcombe stands for the proposition that
net taxable income may be an appropriate method for determining
the income of a sole proprietor . . . . However, Holcombe does
not require that only this method may be used." Smith, 32
Va. App. at 252, 527 S.E.2d at 468 (emphasis added).
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The commission agreed with the deputy commissioner's
finding "that the tax return in this case was not 'necessarily
the most accurate account of [Brown's] net earnings from his
business" and, thus, not the proper foundation for determining
Brown's average weekly wage. In particular, the commission
found as follows:
We agree with the Deputy Commissioner
that the primary difference between the
employer's [profit and loss] statement[s]
and the Year 2000 Schedule C appears to be
that they cover different periods, and
reflect different gross incomes. If the
commission were to rely upon the Schedule C,
it would be basing the pre-injury average
weekly wage only upon the employer's gross
receipts, and [Brown's] earnings from
January 1, 2000 to December 31, 2000. This
would deprive [Brown] of the benefit of an
increase in his earnings from the business
between January 1, 2001 and the date of the
accident on April 9, 2001. This is a
significant difference, considering that the
employer had gross receipts of $186,820.00
for tax year 2000, but had gross receipts of
$231,714.51 for the fifty-two week period
between April 8, 2000 and April 8, 2001.
These findings are supported by credible evidence.
The employer does not contend that "exceptional reasons"
exist to deviate from the preferred statutory methodology. See
Code § 65.2-101 (subpart b. of the "average weekly wage"
definition). Instead, the employer argues that the record
contained no explanation of "the source of the heightened gross
receipts for the 12-month period covered by [the profit and loss
statements] as opposed to the calendar year 2000 tax return."
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The employer points to evidence that Brown had surgery in
February 2001 and was away from his work for several weeks.
The record clearly establishes, however, that the
commission accepted Brown's evidence about his finances and
bookkeeping. Brown's wife testified that she maintains the
accounts of the business using a computer-based program and also
prepared the business's tax returns using a computer-based tax
program that synthesizes the information from the accounting
program. She testified that she used these same programs to
generate profit and loss statements for the business which
covered the fifty-two weeks immediately preceding the date of
the injury.
The commission considered these matters and found as
follows:
While we recognize that [Brown] was
incapacitated for some of the period between
January 1, 2001 and April 9, 2001, [Brown]
testified that he continued to work at full
capacity until his surgery, and returned to
full work duties weeks before the accident
in this case. The testimony of [Brown] and
his wife attributed the income during the
period of his work for the employer, and the
insurer has not offered compelling evidence
to the contrary.
These findings are supported by credible evidence.
The deputy commissioner and the commission also found that
the profit and loss statements were reflective of the statutory
period at issue and, when adjusted to reflect the business use
of the residence, were a more accurate representation of the
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business's earnings during this period. Brown's wife's
testimony and the documents support these findings, and they
also support the commission's finding that no adjustment was
needed for the car and truck expense because it was calculated
in the profit and loss statements.
Accordingly, we hold that the commission did not err in
finding that the profit and loss statements more accurately
reflected Brown's earnings during the fifty-two weeks at issue
and that credible evidence supports the commission's use of
those statements as the basis for its calculation of Brown's
average weekly wage. We, therefore, affirm the award.
Affirmed.
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