Harper v. Flemming, 8245.

• Decision Date: 25 March 1961
• Docket Number: No. 8245.,8245.
• Citation: 288 F.2d 61
• Parties: Nannie D. HARPER, Appellee. v. Arthur S. FLEMMING, Secretary of the Department of Health, Education and Welfare, Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

288 F.2d 61 (1961)

Nannie D. HARPER, Appellee. v. Arthur S. FLEMMING, Secretary of the Department of Health, Education and Welfare, Appellant.

No. 8245.

United States Court of Appeals Fourth Circuit.

Argued January 18, 1961.

Decided March 25, 1961.

Irvin B. Tucker, Jr., Asst. U. S. Atty., Raleigh, N. C. (Julian T. Gaskill, U. S. Atty., Raleigh, N. C., on brief), for appellant.

Francis E. Winslow, Rocky Mount, N. C. (Battle, Winslow, Merrell, Scott & Wiley, Rocky Mount, N. C., on brief), for appellee.

Before SOBELOFF, Chief Judge, and SOPER and BOREMAN, Circuit Judges.

SOBELOFF, Chief Judge.

Coverage under the Social Security Act is in issue here. The appellant, an aged woman owning a farm which was leased out on shares, was denied old age benefits by the Bureau of Old-Age and Survivors Insurance in the Department of Health, Education and Welfare. Denial was on the ground that, although she had paid social security taxes for the requisite number of quarters, she was ineligible because the income upon which the taxes were computed was not derived from the type of self-employment covered by the law. The answer depends upon the correct reading of the federal statute.

Under Section 211 of the Social Security Act, as amended in 1956 by 42 U.S.C.A. § 411,¹ "earnings from self-employment" on which a farm owner may base his eligibility for old age benefits must reflect his "material participation" in "the production or the managment of the production" on his farm. Nannie D. Harper, the farm owner, applied for old age insurance benefits on November 4, 1957, but her claim was rejected on the stated ground that her earnings were not derived from her "material participation" in the management of the farm. The management activities were performed by the Trust Department of the Planters National Bank & Trust Company of Rocky Mount, North Carolina, as her agent, pursuant to an agreement, and the resulting income was for that reason held not creditable to her for social security purposes.

After pursuing, to no avail, all the administrative remedies provided, the plaintiff brought her action for review in the United States District Court for the Eastern District of North Carolina. The District Judge, disagreeing with the administrative officials, determined not only that the bank had "materially participated in the management of the production of crops on plaintiff's farm" but that such activity of the bank, "acting as agent for the plaintiff, inured to her benefit as `material participation by the owner' within the meaning of 42 U.S.C.A. § 411(a) (1) (A) and (B)." 185 F.Supp. 16 Judgment was accordingly entered in favor of the plaintiff, and the Secretary of Health, Education and Welfare here appeals.

It is not disputed that plaintiff assumed almost all the costs of production except the cost of labor. She supplied the sharecroppers with one half of the fertilizers, seeds, plants, pesticides and fuel for curing tobacco, as well as providing all the tools, equipment, livestock, feed, machinery repairs, and veterinarians' fees. Also not disputed, on the other hand, is the fact that it was the bank that actually supervised the work of the sharecroppers by periodically advising and consulting with them both in selecting land for planting and in deciding the proper time for cultivating and harvesting. The bank's representatives made inspection trips on the average of eight times a month during the growing season, marketed the crops, and kept the accounts.

At the bar of this court it is not questioned that the bank's activities, performed as claimant's agent, are properly to be regarded as "material participation" in the management of plaintiff's farm. It is argued, however, that such vicarious participation does not satisfy the provisions of the statute, which, the Secretary insists, requires personal participation by the claimant.

The argument is based on the following line of reasoning. The underlying principle of the social security program is said to provide benefits to the elderly in partial replacement of earnings lost because of advanced age. Accordingly, we are urged to read the term "material participation" in light of an assumed Congressional purpose to extend old age benefits only to those individual farm owners who are able to establish that prior to reaching the retirement age they directly and in person performed work either of a managerial or a physical character. Since the plaintiff's contribution to the income producing enterprise is the use of her land along with the bank's services, the Secretary would treat her income as merely investment or rental income which is not to be considered for social security taxes or benefits under the Act. The contention is that since her income from the farm does not depend on her personal exertions the plaintiff's advanced age probably will not impair her earning capacity — an optimistic forecast, dependent on unknown and unforeseeable factors, which future events may or may not validate.

This argument takes too restrictive a view of the scheme underlying the social security legislation. Particularly, it does not take into account the legislative history which produced the specific provisions of the statute immediately involved, the social purpose or the text of these provisions.

Although it is true that prior to 1954 self-employed farmers were excluded from coverage under the Social Security Act, the amendment of that year specifically extended coverage to self-employed farm operators. The 1956 Amendment, with which we are presently concerned, expanded coverage a step further, by including farm owners who materially participate "in the production or the management of the production" of...