Hoffman v. Ribicoff

• Decision Date: 06 August 1962
• Docket Number: No. 16821.,16821.
• Citation: 305 F.2d 1
• Parties: Ivan M. HOFFMAN, Appellant, v. Abraham A. RIBICOFF, Secretary of Health, Education and Welfare, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

305 F.2d 1 (1962)

Ivan M. HOFFMAN, Appellant, v. Abraham A. RIBICOFF, Secretary of Health, Education and Welfare, Appellee.

No. 16821.

United States Court of Appeals Eighth Circuit.

June 30, 1962.

Rehearing Denied August 6, 1962.

James A. Stemmler, of Stemmler & Stemmler, St. Louis, Mo., for appellant.

John G. Laughlin, Atty., Dept. of Justice, Washington, D. C., for appellee. William H. Orrick, Jr., Asst. Atty. Gen., Washington, D. C., and D. Jeff Lance, U. S. Atty., St. Louis, Mo., with him on the brief.

Before VOGEL, BLACKMUN and RIDGE, Circuit Judges.

RIDGE, Circuit Judge.

The principal question in this appeal is whether the appellant, who had an insured status under the Social Security Act (42 U.S.C.A. § 402(a)), was entitled to a recalculation of his old-age insurance benefits on the basis of claimed self-employment income derived in the year 1956 from leased farm land. The Appeals Council in the Social Security Administration (20 C.F.R. 403.710(e)) ruled that such income did not constitute "self-employment income" as defined in Section 211(a) (1) of the Act (42 U.S. C.A. § 411 (a) (1)) because appellant had not factually established that he materially participated "in the production or the management of the production of * * * agricultural * * * commodities, under an arrangement which provided for such participation." Appellant sought judicial review of that decision in the District Court as provided in Section 205(g) of the Act. (42 U.S.C.A. § 405(g)). On motion for summary judgment, the District Court affirmed the Secretary's administrative decision. We review that decision "in the same manner as a judgment in other civil actions" under Section 405(g) supra, and 28 U.S.C.A. § 1291.

The record before us establishes that appellant is fully insured under the provisions of the Social Security Act and has been receiving benefits on the basis of reported wages from his being employed by other persons. In 1957, he filed an income tax return and reported earnings, in part from self-employment during 1956, and paid self-employment taxes thereon. Thereafter, he made application in due form for recalculation of benefits which he claimed were due him under the Act based on self-employment earnings. The Bureau of Old-Age and Survivors Insurance notified appellant that self-employed earnings claimed in connection with two farms owned by him had been excluded as a basis for determining the amount of benefits which might be paid him under the Act.¹ Being dissatisfied with that determination, appellant requested a hearing before a Referee. Such a hearing was held and appellant personally appeared and adduced what evidence he had in support of his claim for added benefits. Thereafter, the Referee made findings of fact and on the basis thereof concluded that appellant had self-employment income in 1956 amounting to $2,645.27. The Appeals Council, on its own motion, reviewed the decision of the Referee and denied appellant's claim for additional benefits on the basis of self-employment income.² In doing so, the Appeals Council stated: "The statement of evidentiary facts by the referee are adopted and incorporated herein but the inferences, findings and conclusion based on such facts are not adopted."³ Thereupon, the Appeals Council proceeded to make its own inferences and conclusions from the evidentiary facts as stated by the Referee. In so doing the Appeals Council noted that Section 211(a) (1) supra, provides that rental from farm land and from personal property leased with the land were not applicable as self-employment income, unless it is established that:

"(A) Such income is derived under an arrangement, between the owner or tenant and another individual, which provides that such other individual shall produce agricultural * * * commodities (including livestock * * *) on such land, and that there shall be material participation by the owner or tenant in the production or the management of the production of such agricultural * * * commodities, and

"(B) there is material participation by the owner or tenant with respect to any such agricultural * * commodity." (Emphases are those of the Appeals Council.)

In connection with its interpretation of the "material participation" provision contained in Section 211(a) (1) supra, the Appeals Council noted that Senate Report No. 2133 (U.S.Cong. & Adm. News, 84 Cong.2d Session 1956, p. 3915) in pertinent part states:

"Under both the committee-approved bill and the House bill, the present exclusion from self-employment earnings of rentals from real estate would not apply to income derived by an owner or tenant of a farm from its operation by another individual if there is material participation by the owner or tenant in the farm production under an arrangement which provides for such participation. The bill thus would extend coverage under old-age and survivors insurance to certain farmers who, though not covered under the present law, have income from work and therefore are exposed to the type of income loss against which the program is designed to afford protection.

"Under this amendment it is contemplated that the owner or tenant of land which is used in connection with the production of agricultural or horticultural commodities must participate to a material degree in the management decisions or physical work relating to such production in order for the income derived therefrom to be classified as `net earnings from self-employment.\' The committee is of the opinion that in any case in which the owner or tenant establishes the fact that he periodically advises or consults with such other individual as to the production of the commodities and also establishes the fact that he periodically inspects the production activities on the land he will have presented strong evidence of the existence of the degree of participation contemplated by the amendment.

"If the owner or tenant also establishes the fact that he furnished a substantial portion of the machinery, implements, and livestock used in the production of the commodies or that he furnishes, or advances or assumes financial responsibility for, a substantial part of the expense (other than labor expense) involved in the production of the commodities, the committee feels that he will have established the existence of the degree of participation contemplated by the amendment." (Emphases by Appeals Council.)

After taking notice of that legislative history, the Appeals Council proceeded to apply the concrete factual situation in the case at bar to the general statutory provisions of Section 211(a) (1), as follows:

"In the application of the above legislation to the facts as stated by the referee, it can be readily seen that the claimant\'s activities are primarily identified with his investment, rather than with the production. The Appeals Council is of the opinion that claimant\'s activities, set forth in paragraphs numbered one through eleven of the referee\'s decision, primarily involve management decisions relating to the improvement and maintenance of the farms rather than to the production. The claimant visits the farms approximately once each year, provides for the tenants a map and chart of the various tracts and the crops to be planted, the position and removal of fences in determining such tracts, the location of terraces and exclusion of certain land to minimize erosion, the engagement of the services of Mr. Denney who relays certain information and requests by the tenants — which according to the record reflect matters primarily involving repair, maintenance and improvement — and collects and utilizes information from the universities and colleges, admittedly beneficial, but not directly related to the production. All of these, including the charts, provide a means through which the claimant is able to practice up to date methods, which over the years, will result in an investment accrual. However, the landlord-claimant is merely exercising a right that flows from an ordinary farm lease in the selection of plots and crops, the designation of land to be untilled, and from general activity which by the long-range view enhances his investment. The management making decisions that must be established to constitute material participation are much more closely related to the actual operation of the farm in connection with the actual production of the commodities than is existent here.

"The Appeals Council finds that the claimant did not materially participate in the production or management of production of agricultural commodities under an arrangement which provided for such participation. Accordingly, the Appeals Council finds that the claimant does not have self-employment income from his alleged material participation in connection with his farms, such income being excepted under section 211(a) (1) of the Act as rentals from real estate. The claimant is therefore not entitled to an increase in his benefits on the basis of his application filed July 31, 1957, or to the establishment of any self-employment income on the basis of alleged material participation."

Section 205(g) of the Social Security Act provides that the "findings of the Secretary as to any fact, if supported by substantial evidence, shall be conclusive." Such finality attaches not only to the findings of the Secretary "but also to the inferences and conclusions drawn from the facts." Sherrick v. Ribicoff, 300 F.2d 494 (7 Cir. 1962). Neither the District Court in the first instance nor this Court on appeal is free to substitute its findings of fact or inferences therefrom for that of the Secretary. Gainey v. Flemming, 279 F.2d 56 (10 Cir. 1960). And it should be kept in mind that "where either one of two inferences may reasonably be drawn from undisputed facts, the inference adopted by the (Secretary) whose duty it is to draw the inference from which (he) is to formulate (his) judgment may not be disturbed." (Par. added.) (Northwest...