Carrasco v. Secretary of Health, Education and Welfare, 79-1148

• Decision Date: 11 June 1980
• Docket Number: No. 79-1148,79-1148
• Parties: Bonifacia CARRASCO, Plaintiff-Appellant, v. SECRETARY OF HEALTH, EDUCATION AND WELFARE, Defendant-Appellee.
• Court: U.S. Court of Appeals — First Circuit

Page 624

628 F.2d 624

Bonifacia CARRASCO, Plaintiff-Appellant, v. SECRETARY OF HEALTH, EDUCATION AND WELFARE, Defendant-Appellee.

No. 79-1148.

United States Court of Appeals, First Circuit.

Argued Feb. 5, 1980.

Decided June 11, 1980.

Jose Enrique Colon Santana, Rio Piedras, P.R., with whom, Luis Amauri Suarez Zayas, Hato Rey, P.R., and Ana Matanzo Vicens, San Juan, P.R., were on brief, for plaintiff-appellant.

Lillie Price, Atty., Baltimore, Md., with whom, Barbara Allen Babcock, Asst. Atty. Gen., Washington, D. C., Julio Morales-Sanchez, U. S. Atty., San Juan, P.R., and Randolph W. Gaines, Chief of Litigation, Baltimore, Md., were on brief, for defendant-appellee.

Before COFFIN, Chief Judge, WISDOM, Senior Circuit Judge ^*, CAMPBELL, Circuit Judge.

WISDOM, Circuit Judge.

This appeal presents the question whether, in the peculiar circumstances of this case, the plaintiff-appellant, Bonaficia Carrasco, is entitled to coverage for disability under the Social Security Act, 42 U.S.C. § 401 et seq., for self-employment income in Puerto Rico, a community property jurisdiction. The Secretary of Health, Education and Welfare (now Health and Human Resources) held that she had not overcome the statutory presumption, stated in 42 U.S.C. § 411(a)(5)(A), that in a community property jurisdiction income from a trade or business (other than one conducted by a partnership) is treated as the husband's income, unless the wife exercises substantially all of the management and control of the business. The plaintiff raises a constitutional attack on the statutory presumption as a gender classification in violation of the equal protection element of the due process clause of the fifth amendment.

The case is further complicated by the Government's mistaken assumption that the business in which the plaintiff was employed, cattle-raising, belonged to Carrasco and her husband, Margaro Acevedo Marcano, and was therefore community property. One of the judges on the panel, during the argument, noted that the cattle were the plaintiff's separate and paraphernal property which she brought into the marriage. She had lived in concubinage with Acevedo for some 20 years before the two were married. Carrasco managed her small cattle-raising business until she became mentally incompetent. Acevedo then took over the care of the herd. The Secretary credited the plaintiff with 19 of the necessary 20 quarters for coverage. She would have been entitled to full coverage if, after her incompetency, the relations between Carrasco and Acevedo with respect to their cattle raising constituted a partnership within the meaning of the Social Security Act either an implied partnership during their concubinage or a partnership by operation of law after marriage. Because the partnership issue had not been briefed, the Court directed the parties to file supplemental briefs.

Although the briefs have been filed, there are of course no findings of fact and conclusions of law relative to the partnership issue. Accordingly, we vacate the judgment and remand the case to the Secretary for proceedings consistent with this opinion.

I.

The hearing before the administrative law judge was short; the plaintiff was obviously mentally incapable of testifying; her husband was not clear as to the date of their marriage and he cast little light on the management of their small cattle business. As well as we can discern them, these are the relevant facts.

In May 1974 Carrasco applied to the Secretary of Health, Education and Welfare for social security disability benefits, alleging that she had been disabled since 1971. These benefits are allowable under 42 U.S.C. § 423(c)(1)(B)(i) to an applicant over 31 years who has had 20 calendar quarters of coverage (self-employment) during the 40 quarters preceding the applicant's disability. Because she managed and controlled the business until she was disabled, the Secretary credited her with 19 quarters, i. e., through the first quarter in 1971.

The plaintiff contends that in 1973, 1974, and 1975 she earned, respectively, $700, $800, and $400 from the sale of her livestock and paid a self-employment tax during those years. Twenty years before, when she first began living with Acevedo, she had four head of cattle. The record does not show the date of marriage, but her husband testified that it was "two or three years" before the administrative hearing on November 6, 1976. That would suggest a date some time in 1973 or 1974. According to her husband, his wife became mentally incompetent about five years before the hearing, as a result of having been struck by one of the cattle. This would place the onset of the plaintiff's incompetency at some time in 1971. There is nothing in the record, however, to show whether the incompetency came about suddenly or was the result of a progressive deterioration of her mind. No doctor testified. Apparently there was an interval between the accident and her husband's taking over her duties. It is undisputed that she had cared for the herd and managed the small business until one day when Acevedo saw her struggling with one of the cattle and thereafter, so he testified, "I would not let her do a thing."

II.

The Secretary has given Carrasco credit for 19 quarters, through the beginning of her illness. Carrasco contends that she should be given credit for additional quarters after she became ill. The period after her disability can be divided into two parts: before her marriage and after her marriage.

A.

Carrasco and Acevedo married in 1973 or 1974. Before the wedding the cattle of course were Carrasco's separate and paraphernal property. The able district judge in this case, however, pointed out that "due to the long extramarital relationship between the two it is quite plausible that as to this livestock plaintiff's husband had (a) vested community property interest." In support of this statement, he cited Caratballo Ramirez v. Acosta, 104 D.P.R. 474 (1974), and Cruz v. Succession of Laundrau Diaz, 97 D.P.R. 563 (1969). We tend to defer to the district judges in Puerto Rico on matters of Puerto Rican law. The cases cited, however, are not applicable because they involved the termination of the community and a claim by one spouse against the community. Such a claim, arising from an extra-marital relationship, is based on unjust enrichment or on services rendered in the absence of an express or implied agreement. ¹

The record is unclear about how the cattle were managed before the marriage. Perhaps on remand the claimant will be able to show, at least from her disability in 1971 until her marriage, that there was an agreement or understanding that Acevedo would furnish management and labor and Carrasco the capital in a sharing arrangement that should be treated as a partnership. It is not improbable that in the early stages of her illness Carrasco and Acevedo had such an express understanding. Carrasco alluded to the existence of some sort of agreement during the course of the administrative law judge hearing. When Acevedo testified that he did all the work, she protested, "Yes, but the cattle is mine." As the district court observed, however, "(t)he record neither refers to or elaborates on (the partnership issue) nor is it argued by the parties on review." If they had a partnership and if it qualifies as a partnership under the Social Security Act, then Carrasco would be eligible for credit for additional quarters of coverage, assuming of course that the partnership had income during this period. There is nothing in the record to show if there were any earnings from the business in 1971 or 1972 before the marriage.

B.

In his original brief, the Secretary stated: "Under the concept of community, plaintiff and her husband are co-owners of the property." Appellee's brief at 8. This is a misstatement of Puerto Rican law. At the time of the marriage the cattle were Carrasco's separate and paraphernal property. "Separate property of the spouse's" is "(t)hat brought to the marriage as his or her own." Civil Code, 1930, § 1299; P.R.Laws Ann. tit. 31, § 3631. After the marriage, the cattle continued to belong to the wife. Only on termination of the marriage would there arise a question as to a claim the husband or the community estate might have against the wife's separate property. The Civil Code of Puerto Rico has a specific provision covering increment to a herd of cattle. "Whenever the property belonging to the husband or to the wife should consist, in whole or in part, of cattle existing at the time of the dissolution of the (conjugal) partnership, the heads of cattle exceeding the number which were brought to the marriage, shall be considered as partnership property." Civil Code, 1930, § 1305; P.R.Laws Ann. tit. 31, § 3645. But, here the marriage was not terminated. The cattle, therefore, remained in the separate estate of the wife; she, in case of divorce, or her separate estate, in case of her death, would owe the increment to the community. ² This is a basic principle of civil law that goes back to Las Siete Partidas.

Although the cattle themselves remained Carrasco's separate property after the marriage, the earnings generated by the cattle business fell into the conjugal partnership. "To the conjugal partnership belong: . . . The fruits, income, or interest collected or accrued during the marriage, coming from the partnership property, or from that which belongs to either one of the spouses." Civil Code, 1930, § 1301; P.R.Laws Ann. tit. 31, § 3641. Any money gained from the sale of the cattle was community income. As such, the government contends, it falls within the following presumption:

If any of the income derived from a trade or business (other than trade or business carried on by a partnership) is community income under community property laws applicable to such income, all of the gross income and deductions attributable to such trade or business shall be treated as the gross...