Mullowney v. Hobby, Civ. A. No. 6-54.

• Citation: 134 F. Supp. 419
• Decision Date: 31 May 1955
• Docket Number: Civ. A. No. 6-54.
• Parties: Edmund H. MULLOWNEY, Plaintiff, v. Oveta Culp HOBBY, Secretary of the Department of Health, Education and Welfare, Defendant.
• Court: U.S. District Court — District of Nebraska

134 F. Supp. 419

Edmund H. MULLOWNEY, Plaintiff, v. Oveta Culp HOBBY, Secretary of the Department of Health, Education and Welfare, Defendant.

Civ. A. No. 6-54.

United States District Court D. Nebraska, Lincoln Division.

May 31, 1955.

Thomas M. Davies (Davis, Healey, Davies & Wilson), Lincoln, Neb., for plaintiff.

Donald R. Ross, U. S. Atty., and William C. Spire, Asst. U. S. Atty., Omaha, Neb., for defendant.

DELEHANT, District Judge.

Within the allowance, and jurisdictional grant, of Title 42 U.S.C.A. § 405 (g), the plaintiff brings this action against the defendant in her official capacity. No question is, or upon the record could be, tendered concerning the timeliness of the institution of the suit or the validity of process or its service.

The action arises in this setting. Plaintiff was born January 15, 1875 in Wisconsin. For many years he has resided in Lincoln, Nebraska. He consistently made his federal income tax returns upon the basis of his cash receipts. On November 12, 1952 he filed with Social Security Administration a written application on approved form for Federal old-age and survivors insurance benefits under Title II of the Social Security Act, as amended, 42 U.S.C.A. § 401 et seq. By letter dated June 10, 1953, plaintiff was notified of the denial by the Administrator of his claim. The denial was thus explained in the notice:

"The Social Security Act provides for payment of old-age insurance benefits to a person fully insured. To be fully insured you must have 6 quarters of coverage. In making this determination you are advised that the amounts for January 1, 1951 through November 12, 1952 could not be included because such income represents proceeds from notes acquired prior to 1951 which represented income when acquired. Any amount realized on these notes subsequent thereto would actually be payment of a debt and therefore not net earnings from self-employment within the meaning of the Act."

On August 10, 1953, plaintiff requested hearing before a referee which was granted, and was held on September 15, 1953 at Lincoln. On October 30, 1953 the referee made and entered a decision upon the issue against plaintiff, who, on November 5, 1953 filed with the Office of Appeals Council, Social Security Administration, Department of Health, Education and Welfare, a request for review of the referee's decision. That request for review was denied by Office of Appeals Council on November 24, 1953; by letter of which date, with accompanying copy of the actual denial, plaintiff was notified of such action. This suit followed.

The complaint sets up the foregoing history and prays "that the court reverse the decision of the Department of Health, Education and Welfare, Social Security Administration, and allow plaintiff's application for old-age Insurance Benefits under the provisions of the Social Security Act." The defendant's answer prays for the dismissal of the complaint and the affirmance of the challenged decision. It denies the court's jurisdiction to grant the relief prayed for and cites Title 42 U.S.C.A. § 405(g) as the limitation upon the court's authority; submits the transcript of the record on which the decision was made and the findings and conclusions of the defendant; admits and alleges the proceedings had upon the plaintiff's claim as already outlined and alleges that, to have been a fully insured individual under Social Security Act, the plaintiff must have had a minimum of six quarters of coverage as those terms are defined in said Act; that his services prior to October 18, 1949 were not rendered in "employment" covered by the Act; that his remuneration for such services did not constitute wages within the meaning of the Act; that the amounts reported by plaintiff as self-employment income for 1951 and 1952 did not constitute net earnings from self-employment as that term is defined in Section 211(a) of the Act, but must be treated as return on capital assets acquired in 1949; that the defendant's findings are supported by substantial evidence and are conclusive; and that upon the facts found by the referee and the law the defendant correctly decided that plaintiff was not entitled to the old-age insurance benefits for which he had applied.

By stipulation of the parties, allowed by the court, the action was submitted upon the record tendered with the answer and upon typewritten briefs. Briefs have been delivered and the case is ready for ruling.

The essential findings of the Referee, which, upon denial by the Office of Appeals Council of the request for review, became the defendant's findings are set out in an extended verbatim excerpt from the Referee's decision as a footnote hereto.¹

It is in order, first, to recognize the limitations imposed by statute upon the jurisdiction and scope of inquiry of the court in this case. Title 42 U.S.C.A. § 405(g) authorizes the institution and prosecution of such proceedings for review. It then provides, among other things:

"The court shall have power to enter, upon the pleadings and transcript of the record, a judgment affirming, modifying, or reversing the decision of the Administrator, with or without remanding the cause for a rehearing. The findings of the Administrator as to any fact, if supported by substantial evidence, shall be conclusive".

Both parties freely recognize that the present ruling must be in the nature of a review of the record brought here with the defendant's answer, and that the court is bound by the mandate of the statutory sentence last quoted.

By Title 42 U.S.C.A. § 402(a) (1-3) it is provided that:

"(a) Every individual who —

"(1) is a fully insured individual (as defined in section 414(a) of this title),

"(2) has attained retirement age (as defined in section 416(a) of this title), and

"(3) has filed application for old-age insurance benefits, shall be entitled to an old-age insurance benefit for each month, beginning with the first month after August 1950 in which such individual becomes so entitled to such insurance benefits and ending with the month preceding the month in which he dies. Such individual's old-age insurance benefit for any month shall be equal to his primary insurance amount (as defined in section 415(a) of this title) for such month."

Title 42 U.S.C.A. § 414(a) referred to in Section 402(a) (1), defines a "`fully insured individual'", so far as is presently material, as

"(2) In the case of any individual who did not die prior to September 1, 1950, the term `fully insured individual' means any individual who had not less than —

"(A) one quarter of coverage (whether acquired before or after such day) for each two of the quarters elapsing after 1950, or after the quarter in which he attained the age of twenty-one, whichever is later, and up to but excluding the quarter in which he attained retirement age, or died, whichever first occurred, except that in no case shall an individual be a fully insured individual unless he has at least six quarters of coverage; or

"(B) forty quarters of coverage."

Title 42 U.S.C.A. § 416(a), also referred to, thus defines "Retirement Age":

"(a) The term `retirement age' means age sixty-five."

Title 42 U.S.C.A. § 415(a) follows:

"(a) (1) The primary insurance amount of an individual who attained age twenty-two after 1950 and with respect to whom not less than six of the quarters elapsing after 1950 are quarters of coverage shall be 50 per centum of the first $100 of his average monthly wage plus 15 per centum of the next $200 of such wage; except that if his average monthly wage is less than $50, his primary insurance amount shall be the amount appearing in column II of the following table on the line on which in column I appears his average monthly wage.

                         I                 II
                  Average Monthly   Primary Insurance
                       Wage              Amount
                      $30 or less         $20
                      $31                 $21
                      $32                 $22
                      $33                 $23
                      $34                 $24
                      $35 to $49          $25
                

"(2) The primary insurance amount of an individual who attained age twenty-two prior to 1951 and with respect to whom not less than six of the quarters elapsing after 1950 are quarters of coverage shall be whichever of the following is the larger —

"(A) the amount computed as provided in paragraph (1) of this subsection; or

"(B) the amount determined under subsection (c) of this section.

"(3) The primary insurance amount of any other individual shall be the amount determined under subsection (c) of this section."

Certain terms are statutorily defined or explained in the Act itself. They may now be noted.

The terms "`net earnings from self-employment'" and "`self-employment income'" are defined by the following language from Title 42 U.S.C.A. § 411 (a, b):

"(a) The term `net earnings from self-employment' means the gross income, as computed under chapter 1 of Title 26, derived by an individual from any trade or business carried on by such individual, less the deductions allowed under such chapter which are attributable to such trade or business, plus his distributive share (whether or not distributed) of the ordinary net income or loss, as computed under section 183 of Title 26, from any trade or business carried on by a partnership of which he is a member; * *

* * * * * *

"(b) The term `self-employment income' means the net earnings from self-employment derived by an individual (other than a non-resident alien individual) during any taxable year beginning after 1950; except that such term shall not include —

"(1) That part of the net earnings from self-employment which is in excess of: (A) $3,600, minus (B) the amount of the wages paid to such individual during the taxable year; or

"(2) The net earnings from self-employment, if such net earnings for the taxable year are less than $400." Title 42 U.S.C.A. § 412(a) follows:

"For the purposes of determining average monthly wage and quarters of coverage the amount of

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