Chalmers v. Sullivan

• Decision Date: 13 April 1993
• Docket Number: Civ. A. No. 92-1407(WGB).
• Citation: 818 F. Supp. 98
• Parties: Fannie CHALMERS, Plaintiff, v. Hon. Louis W. SULLIVAN, Secretary of Health and Human Services, Defendant.
• Court: U.S. District Court — District of New Jersey

818 F. Supp. 98

Fannie CHALMERS, Plaintiff, v. Hon. Louis W. SULLIVAN, Secretary of Health and Human Services, Defendant.

Civ. A. No. 92-1407(WGB).

United States District Court, D. New Jersey.

April 13, 1993.

Disability Law Clinic, Seton Hall University School of Law by Stuart H. Weiner, Supervising Atty., Newark, NJ, for plaintiff.

Michael Chertoff, U.S. Atty. by Susan S. Steele, Sp. Asst. U.S. Atty., Newark, NJ, for defendant.

OPINION

BASSLER, District Judge:

The plaintiff, Fannie Chalmers, through Omega Parraway, her sister, representative payee and guardian ad litem, brings this action pursuant to sections 205(g) and 1631(c)(3) of the Social Security Act, as amended, 42 U.S.C. §§ 405(g) and 1383(c)(3). Plaintiff seeks judicial review of the final decision of the Secretary of Health and Human Services "Secretary" terminating plaintiff's Supplemental Security Income "SSI" benefits, and requests their retroactive reinstatement. For the following reasons, the Court affirms the Secretary's final decision terminating plaintiff's SSI benefits.

I. BACKGROUND

On April 19, 1978, plaintiff applied for and was awarded SSI benefits based on a psychiatric impairment. J.D. 2.¹ In November of 1989 plaintiff was notified by the Secretary that, effective May 1989, she was no longer eligible to receive these benefits because she had resources in excess of $2,000, and thus failed one of the SSI financial eligibility requirements as set forth in 42 U.S.C. § 1382(a).² Id. The resources upon which the Secretary relied in making this determination have their source in plaintiff's equitable share in the assets of the estate of her deceased father.

Plaintiff's father, John D. Chalmers, Sr., died intestate in September of 1980. The plaintiff and her three siblings were the sole heirs to their father's estate. R. 200³. The only significant assets in his estate were four houses on contiguous lots and a separate 7.5 acre tract of land, all located in North Carolina. The total appraised value of the houses and their lots was $47,000, as of January 1981, and all of the houses and their respective lots were encumbered by a single deed of trust in favor of Gate City Federal Savings and Loan Association "Gate City" in the amount of $23,000. R. 237; J.D. 5. The appraised value of the 7.5 acre tract of land was $3,000 as of January 1981. J.D. 5.

Gate City apparently had, and still has, the power to demand full payment of the outstanding loan balance upon any attempted transfer of the encumbered properties. R. 172-174.⁴ Based on advice of counsel for the estate, to avoid triggering such a demand by Gate City, plaintiff and her three siblings formed a general partnership, the C & P Land Company "C & P", to manage and rent the properties and pay the mortgage. Id. C & P was formed in December of 1981, with the plaintiff and her siblings each conveying their respective one-fourth equitable interests in the encumbered properties to C & P in return for a 25% interest in the partnership. R. 110. Although C & P does not have legal title to the encumbered properties, its books reflect them as assets and the partnership's tax returns claim deductions for depreciation on them. R. 217-220.

In 1983, and again in 1986, the Secretary conducted redeterminations of plaintiff's SSI eligibility. R. 7-8. Despite his awareness of the plaintiff's one-fourth interest in C & P, the Secretary apparently determined that plaintiff continued to be eligible for SSI benefits. In 1989, however, the Secretary again redetermined plaintiff's eligibility status and found that she had excess countable resources which had resulted in an overpayment of benefits and necessitated their termination. R. 8. The Secretary affirmed this redetermination on reconsideration and plaintiff requested a de novo hearing before an administrative law judge "ALJ". R. 97.

In a decision rendered on June 6, 1990, the ALJ found that while plaintiff's one-fourth interest in the real property inherited from her father was not a countable resource, her interest in C & P was countable and exceeded the statutory limit of $2,000. The ALJ also determined that plaintiff had received an overpayment of SSI benefits since May of 1987, but he waived their recovery because plaintiff was not at fault in accepting them, and recovery would defeat the purposes of the Social Security Act. R. 16-17.

The Appeals Council granted plaintiff's request for review of the ALJ's decision on October 18, 1991. In its own decision of January 24, 1992, the Appeals Council essentially adopted the ALJ's findings and conclusions, except that it found that plaintiff's eligibility for SSI benefits had ended as of April 1989 instead of May 1987. R. 6-9. Unlike the ALJ, however, the Appeals Council also concluded that plaintiff's one-fourth interest in the inherited real property was a countable resource. The ALJ had based his decision to exclude plaintiff's real property interest on the undisputed fact that plaintiff is not the sole owner of the real property. From this the ALJ concluded that because plaintiff does not control the property, she has no power to convert it to cash and use the cash for her support and maintenance, as required under 20 C.F.R. § 416.1201(a). R. 15.

The Appeals Council, in contrast, reasoned that plaintiff's equitable interest in the real property is countable because there was no evidence to suggest that plaintiff's mental incapacity had removed her power to partition the property. R. 9. Since this Court finds substantial evidence to support the conclusion, reached by both the ALJ and the Appeals Council, that plaintiff has the legal right to liquidate her partnership interest, it declines to address the diverging conclusions below with regard the countability of plaintiff's interest in the inherited real property.

On March 31, 1992, plaintiff commenced the present action for review of the Appeals Council's decision, which constitutes the final decision of the Secretary.

II. DISCUSSION

In reviewing a final decision of the Secretary, the Court must independently review the Secretary's conclusions of law. See, e.g., Townley v. Heckler, 748 F.2d 109, 112 (1984). If the correct legal standard has been applied by the Secretary, the Court must decide if the Secretary's decision is supported by substantial evidence. Johnson v. Bowen, 817 F.2d 983, 985 (2d Cir.1987). The Court's function in performing this determination is not to substitute its interpretation of the evidence for that of the Secretary. Rutherford v. Schweiker, 685 F.2d 60, 62 (2d Cir.1982), cert. denied, 459 U.S. 1212, 103 S.Ct. 1207, 75 L.Ed.2d 447 (1983). Instead, the Court must affirm the Secretary's findings of fact if they are supported by substantial evidence in the record as a whole. 42 U.S.C. § 405(g); see also Gilliland v. Heckler, 786 F.2d 178, 183 (3d Cir.1986). The United States Supreme Court defines substantial evidence as "more than a mere scintilla" and "such relevant evidence as a reasonable mind might accept as adequate." Richardson v. Perales, 402 U.S. 389, 401, 91 S.Ct. 1420, 1427, 28 L.Ed.2d 842 (1971) (quoting Consolidated Edison Co. v. N.L.R.B., 305 U.S. 197, 229, 59 S.Ct. 206, 217, 83 L.Ed. 126 (1938)).

In this action plaintiff challenges the final decision of the Secretary on two grounds. First, plaintiff takes issue with the Secretary's conclusion that her partnership interest is a countable resource exceeding $2,000, thus preventing her from meeting the financial eligibility requirements for receipt of SSI benefits. Second, plaintiff argues that the Secretary improperly reopened its initial determination of plaintiff's eligibility for these benefits.

A. The Issue of Plaintiff's Partnership Interest as a Countable Resource

Financial eligibility requirements for SSI benefits are set forth at 42 U.S.C. § 1382(a). Under this statute, a disabled individual may receive SSI benefits if his or her income and resources do not exceed certain annual limits. For eligibility beginning January 1, 1989, the limit applicable to plaintiff's resources is $2,000. 42 U.S.C. § 1382(a)(3)(B).⁵

The statute does not define "resources", but merely provides a list of certain items which are excludible in their determination. 42 U.S.C. § 1382b(a). However, pursuant to his authority under 42 U.S.C. § 1302, the Secretary has promulgated regulations that further define resources. See Beatty v. Schweiker, 678 F.2d 359, 361 (1982). More particularly, 20 C.F.R. § 416.1201(a), in pertinent part, defines resources as "any real or personal property interest that an individual ... owns and could convert to cash to be used for his or her support and maintenance." Furthermore, and crucial to the disposition of the instant action, the regulation also provides that "if an individual has the right, authority or power to liquidate the property or his or her share of the property, it is considered a resource." 20 C.F.R. § 416.1201(a)(1) (emphasis added).

The basis of plaintiff's first claim is that the Secretary improperly applied 20 C.F.R. § 1201 to the underlying facts in the record by including her interest in C & P as a countable resource. More specifically, plaintiff contends that "her interest in ... the partnership was beyond her power to liquidate and utilize for her self-support and that, consequently, it may not be treated as a countable resource under the regulations of the SSI program." Plaintiff's Brief at 5 (emphasis added).

Factually, plaintiff bases her claim on evidence in the record which is not disputed by the Secretary. It has been stipulated that plaintiff is severely mentally impaired. J.D. at 2. The record also contains evidence that plaintiff is unable to manage her daily affairs, but instead relies almost exclusively on her sister. R. 35-39. Based on these facts plaintiff argues that, realistically, it would be impossible for her to retain an attorney or follow any other course of action to liquidate her partnership...