SUPERIOR Court Associate Judge Joseph N. Camacho found that the creditor claim of the NMI Settlement Fund against the Estate of Fernando Cepeda Benavente was brought two years after a 60-day deadline.
As such, the claim is time-barred by 8 CMC Section 2924(a)(1) and Rule 11 of the NMI Rules of Probate, the judge said, denying the claim.
Background
Benavente retired from CNMI government service as an employee of the fire division on Dec. 15, 1991, and received retirement benefits.
On May 7, 2012, the NMI Settlement Fund — which was at the time the NMI Retirement Fund —sent an adverse decision letter to Benavente, notifying him that an audit of his account revealed that he had improperly received an overpayment of benefits. This overpayment of benefits totaled $23,433.52 and was due to an error in including overtime and compensatory time in the computation of benefits as service credit instead of vesting service credit.
Under 1 CMC Section 8390(a), the NMI Settlement Fund said it is entitled to recover the overpaid amounts through an appropriate adjustment to future payments until the overpaid amount is fully settled.
The Settlement Fund added that 1 CMC Section 8390(b) limits recovery from future payments to a maximum deduction of 50% of Benavente’s pension.
The Settlement Fund said it would deduct 50% of Benavente’s semi-monthly pension, beginning on June 15, 2012 and continuing until the overpayment was fully paid.
The Settlement Fund advised Benavente that he had the right to appeal this adverse decision within 30 days of the date of the Settlement Fund’s May 7, 2012 letter. Benavente did not appeal this adverse decision.
About a month later, on June 21, 2012, the Settlement Fund sent a second letter to Benavente, notifying him of a temporary stay of the adjustment of his benefits, as many other retirees affected by the same audit had requested a stay pending appeal.
This second letter further stated that the Settlement Fund would keep him advised of proceedings.
The Settlement Fund sent out this same letter to all members who had received the May 7, 2012 adverse decision letter, regardless of whether those members had filed an appeal or not noted the court.
The Settlement Fund was aware that Benavente had not filed an appeal, and that the stay should have only applied to members who had filed appeals of their adverse decisions
On July 9, 2015, the Settlement Fund sent a third letter to Benavente, notifying him that a stay of enforcement was still in effect pending the appointment of a hearing officer.
The Settlement Fund sent three letters to Benavente using his mailing address on file.
On Oct. 14, 2014, the Settlement Fund accepted an Internal Revenue Service W40 form and a Power of Attorney from Benavente’s wife, Lorna S. Benavente.
Fernando Cepeda Benavente died on Sept. 2, 2015.
Unaware
Shortly after he passed away, Mrs. Benavente went in person to the Settlement Fund office and submitted her application for survivor’s annuity, including a copy of her husband’s certificate.
The Settlement Fund approved her application and began issuing payments to her.
Mrs. Benavente was unaware of any overpayment or payment adjustment.
Mrs. Benavente later testified that she and her husband discussed their financial affairs prior to his death.
She said in the last years of Mr. Benavente’s life when he was not in good health, Mrs. Benavente collected and took care of his mail. While Mrs. Benavente was aware of the communication from the Settlement Fund to her husband, she was not aware of any overpayment issue.
Mrs. Benavente also said that she was not advised or informed of any overpayment issue when she went in person to submit her application, or when her application for survivor’s annuity was approved.
On Aug. 23, 2016, the decedent’s son, John Albert Benavente, filed a petition to probate the Estate of Fernando Cepeda Benavente.
John Benavente was appointed the estate administrator on Oct. 3, 2016. He then published, in the newspapers, a Notice to Creditors regarding a 60-day deadline to file claims on Sept. 1, 2016, and again on Sept. 8, 2016.
He did not send a notice regarding the probate to the Settlement Fund, but he notified Bank of Guam as a known creditor of the estate.
Adverse decision
The estate administrator conferred with his mother, Mrs. Benavente, gathered information about the estate and reviewed any mail involving his father.
The estate administrator did not receive any information from Mrs. Benavente or any correspondence from the Settlement Fund during this time regarding overpayment or any indication that the Settlement Fund was a creditor of his father’s estate.
Two years later after the notice to creditors was published, on Sept. 6, 2018, the Settlement Fund sent an adverse decision letter to Mrs. Benavente, informing her that the Fund had audited her husband’s file and had discovered an overpayment of survivor’s annuity benefits to Mrs. Benavente in the amount of $2,279.34 for the period of Sept. 1, 2015 through Aug. 31, 2018 and sought to recover that amount from her in accordance with 1 CMC Section 8390(a).
This adverse decision letter explained that the benefits of her husband “were improperly adjusted to include accumulated overtime/compensatory…hours as service credit contrary to 1 CMC [Section] 8333,” and while the statute was repealed by P.L. 13-60 on Dec. 5, 2003, Section 8333 was applicable at the time of Fernando C. Benavente’s retirement.
This adverse decision letter further stated that 1 CMC Section 8390(a) requires the Settlement Fund to recover overpaid amounts, but the letter does not specify how this overpaid amount will be collected.
Mrs. Benavente appealed this adverse decision.
As of the issuance of this court order, her appeal is still pending before the Settlement Fund and a final decision has yet to be issued.
In any case, Mrs. Benavente continued to receive monthly payments from the Settlement Fund as of the date of her testimony at the evidentiary hearing.
On Sept. 7, 2018, the NMI Settlement Fund filed its claim in the Estate of Benavente to recover overpayment of retirement benefits in the amount of $11,561.59, namely the amount of overpayment for the last six years preceding the date it filed its claim.
The Settlement Fund, represented by attorney Nicole M. Torres-Ripple, argued that the estate failed to provide actual notice to the Settlement Fund as a known or reasonably ascertainable creditor in accordance with Rule 11 of the NMI Rules of Probate; and therefore, its claim is not time-barred.
The estate, represented by attorney Charity Hodson, said the Settlement Fund is not a known or reasonably ascertainable creditor, and therefore its claim is forever barred because it was brought long after the 60-day time limit provided under 8 CMC Section 2924(a)(1) and under Rule 11 of the NMI Rules of Probate had elapsed.
A pension fund
Judge Camacho, in his 15-page ruling, said Settlement Fund is a pension fund: it is not generally a creditor, nor is it a banking institution.
“A review of [Fernando] Benavente’s monthly bank statements and records would indicate that he received his full pension regularly. Since the 50% reduction of future payments was temporarily stayed and that stay remained in effect for the remainder of Benavente’s lifetime, the estate administrator would not be able to see any reduction in pension payments in Benavente’s monthly bank statements, and Mrs. Benavente, when managing her husband’s finances, would not have seen any difference in his pension.”
Judge Camacho said, the first letter, dated May 7, 2012, indicated that adjustments would automatically be made to Fernando Benavente’s pension payments unless he filed an appeal.
A month later, the second letter, a Notice of Temporary Stay, dated June 21, 2012, stated that any adjustment to Mr. Benavente’s pension payments was temporarily stayed.
And two years later, the third letter from the Settlement Fund, dated July 9, 2015, did not reference any claim against Benavente, but instead refers to the Notice of Temporary Stay on the decision to adjust his benefits, dated June 21, 2012, the judge said.
The third letter of July 9, 2015 also assured Benavente that a stay remained in effect.
As a whole
“Taken as a whole a reasonably diligent estate administrator would not identify the NMI Settlement Fund as a creditor of Benavente,” Judge Camacho said.
Moreover, the Settlement Fund approved Mrs. Benavente’s application to receive survivor’s annuity and began issuing payments to her shortly after Mr. Benavente died in 2015, at a time when the Settlement Fund was already aware of the overpayment to Benavente, the judge said.
Mrs. Benavente testified that the Settlement Fund did not advise her of any overpayment issue when she went in person to submit her application for survivor’s annuity, or when her application was approved.
Instead, Mrs. Benavente received an adverse decision letter from the Settlement Fund on Sept. 6, 2018, three years later, the judge said.
The court noted that this letter to Mrs. Benavente was sent two years after the publication of the Notice to Creditors on Sept. 1, 2016 and on Sept. 8, 2016.
The court finds that neither Mrs. Benavente nor the estate administrator were aware of any overpayment issue at the time the probate case was opened, or at the time the Notice to Creditors was published.
For reasons stated, the judge finds that the Settlement Fund was not a known or reasonably ascertainable creditor for the purposes of the requirement of personal delivery or direct mail notice under Rule 11 of the Rules of Probate. NMI R. PROB. 11.
“Reasonably diligent efforts would not have unearthed the NMI Settlement Fund as a creditor as there was no reduction of 50% in pension payments during [Fernando] Benavente’s lifetime, or to Mrs. Benavente’s survivor’s annuity until Sept. 6, 2018, three years after Benavente’s death and two years after the publication of Notice to Creditors in September 2016. Benavente received his full pension from the NMI Settlement Fund during his lifetime without deduction. Considering all the facts and evidence presented, the court finds that the NMI Settlement Fund was not a known or reasonably ascertainable creditor,” Judge Camacho said.
