Peed v. Cleland

• Decision Date: 03 June 1981
• Docket Number: Civ. A. No. M-80-2551.
• Parties: Michael PEED, Plaintiff, v. Max CLELAND, etc., Defendant.
• Court: U.S. District Court — District of Maryland

516 F. Supp. 469

Michael PEED, Plaintiff, v. Max CLELAND, etc., Defendant.

Civ. A. No. M-80-2551.

United States District Court, D. Maryland.

June 3, 1981.

Dennis W. Carroll and Stephanie Klein, Legal Aid Bureau, Inc., Baltimore, Md., for plaintiff.

Thomas S. Martin, Acting Asst. Atty. Gen., Washington, D. C., Paul R. Kramer, Deputy U. S. Atty., Baltimore, Md., Sandra M. Schraibman and Richard E. Greenberg, U. S. Dept. of Justice, Washington, D. C., for defendant.

MEMORANDUM AND ORDER

JAMES R. MILLER, Jr., District Judge.

In this action the plaintiff Michael Peed seeks to challenge the manner in which the Veterans' Administration (VA) calculates monthly VA pensions. Presently pending before the court is a motion to dismiss filed on behalf of the defendant, along with a cross-motion for summary judgment filed by the plaintiff.

I. Factual Background

The plaintiff Michael Peed served on active duty in the United States Marine Corps from November, 1945 to November, 1948, and from February, 1949 to August, 1954. While in the Marines, Mr. Peed received an accidental gunshot wound in his left hand, which resulted in his being placed on the temporarily disabled/retired list on September 1, 1954. On August 1, 1958, Mr. Peed was permanently retired due to disability. When he was discharged from active duty in August, 1954, he was determined to be suffering from a 30% service-connected disability. As a result, Mr. Peed was entitled to receive retirement pay from the Marines pursuant to 10 U.S.C. §§ 1201 and 1401.

On June 2, 1957, Mr. Peed suffered a diving accident which resulted in nearly total paralysis. From the time of the accident until the present, Mr. Peed has been confined to a wheelchair and is permanently housebound. After the accident, the VA determined that Mr. Peed was totally and permanently disabled. Consequently, Mr. Peed was eligible pursuant to 38 U.S.C. § 521, for a disability pension, including an allowance for "aid and attendance" since he was housebound.

In order for Mr. Peed to receive a VA pension, he was required, pursuant to 38 U.S.C. § 3104, to waive the military retirement pay to which he was otherwise entitled. On March 1, 1958, Mr. Peed executed a waiver of his military retirement pay and began receiving pension benefits in an amount calculated without consideration of the amount of the retirement benefits which he had waived.

On June 13, 1973, Mr. Peed was advised by the VA that his pension benefits were to be reduced, effective September 1, 1973, due to recent amendments to VA regulations codified at 38 CFR §§ 3.261 and 3.262. Under these amended regulations, the amount of Mr. Peed's military retirement pay was to be considered as income in computing the amount of his pension, even though Mr. Peed had waived his retirement pay in order to be eligible to receive his pension. Mr. Peed protested this reduction in benefits and eventually appealed to the Board of Veterans' Appeals. On December 14, 1973, the Board of Veterans' Appeals held that the reduction in Mr. Peed's pension was legally justified. Since that time Mr. Peed has tried in various ways to obtain assistance in appealing the VA policy. On September 19, 1980, he filed the present action.

II. Analysis of Current Statutory Provisions

The VA pension program was designed to provide income to eligible veterans in an amount determined according to financial need. As a part of this scheme of benefits, 38 U.S.C. § 521 provides pension benefits to income eligible veterans who served in the military service for 90 days or more during a period of war, who were discharged under honorable conditions, and who are disabled due to non-service connected injuries. Since the amount of pension is based upon need, any other source of income to the veteran will reduce the amount of his or her monthly pension benefits.

In determining the amount of pension benefits to be received by a veteran, the VA first computes the individual's annual income in order to determine financial need. In computing annual income, Congress has provided, subject to certain enumerated exceptions which are inapplicable in the present case, that:

"All payments of any kind or from any source (including salary, retirement or annuity payments, or similar income, which has been waived, irrespective of whether the waiver was made pursuant to statute, contract, or otherwise) shall be included..."

38 U.S.C. § 503. The current regulations which implement this section specify that retirement pay received from the armed forces is to be included in calculating gross income, 38 CFR § 3.261(15). This is true even if those benefits have been waived. 38 CFR § 3.262(h).

Eligibility for military retirement pay is determined in two manners. Veterans who served for a period of twenty years or more are entitled to retirement pay based solely on their length of service. See 10 U.S.C. § 3911 et seq. (Army); 10 U.S.C. § 6321 et seq. (Navy and Marine Corps); 10 U.S.C. § 8911 et seq. In addition, veterans who were discharged from the armed services due to a service connected disability are entitled to retirement pay. In the latter case, the amount is determined either by multiplying the percentage of disability by the veteran's basic military pay or by multiplying the veteran's total years of service by his basic military pay. See 10 U.S.C. §§ 1201 and 1401.

Until recently, Congress specifically precluded the simultaneous receipt of both retirement pay and pension benefits from the VA. 38 U.S.C. § 3104¹. If a veteran were eligible for both types of benefits, then that individual would have to choose between the two. Thus, if the amount of a veteran's pension would exceed his retirement pay, then in order to receive pension benefits the veteran would have to waive his right to retirement pay.

In 1978, Congress enacted the Veterans' and Survivors' Pension Improvement Act ("the Improvement Act"), Pub.L.No. 95-588, 92 Stat. 2500 (1978). Prior to the Improvement Act, pension benefits were computed under a system with an annual income limitation and a sliding scale of benefits dependent upon a veteran's total annual income. Pensions received under the Improvement Act, or so-called "improved pensions" are computed by establishing a basic level of income support and providing a pension in an amount equal to the difference between the veteran's income and the income level of support established by Congress. The Improvement Act contains a grandfather clause which allows veterans who were receiving benefits prior to the Act to elect to receive either the pension as previously computed, the so-called "section 306 pension," or the improved pension. The grandfather clause further provides that "Any person eligible to make an election. ... who does not make such an election shall continue to receive pension at the monthly rate being paid to such person on December 31, 1978 ..." 38 U.S.C. § 521 note. Thus, any pensioner receiving benefits prior to the 1978 amendment can continue to receive pension benefits under the terms and conditions of the prior program so long as he or she remains eligible.² See H.Rep.No.95-1768, 95th Cong., 2d Sess. 30-31 (1978), reprinted in 1978 U.S.Code Cong. & Ad.News 5583, 5702, 5716. Therefore, any veteran receiving a Section 306 pension is still required to waive any eligibility for retirement pay in order to receive pension benefits. In any such case, the amount of retirement pay waived is, under the applicable regulations, still considered as annual income to the veteran in computing the amount of pension benefits to be awarded.

On October 7, 1980, Congress amended 38 U.S.C. § 3104 to allow a veteran to receive both pension and retirement pay so long as the amount of retirement pay received is included as annual income in computing the amount of pension benefits to be awarded. Pub.L.No. 96-385, § 503(a), 94 Stat. 1534 (1980). Thus veterans now receiving improved pensions may additionally receive retirement pay, as long as the amount is considered as annual income in computing the proper amount of pension benefits available.

III. Analysis of the Parties' Claims

The plaintiff's cause of action in this case is based, in essence, on two alternative legal theories. Initially, the plaintiff contends that the regulations implemented by the VA in 1972, as set forth in 38 CFR §§ 3.261 and 3.262, effective September 1, 1973, were contrary to the statutory intent of Congress in enacting 38 CFR § 503. Specifically, the plaintiff argues that Congress did not intend that military retirement pay, which a veteran, by statute, must waive in order to be eligible to receive a pension, be considered as income to the veteran and therefore reduce his pension. Alternatively, the plaintiff argues that if the court finds that the regulations comport with the statutory intent, then 38 U.S.C. § 503 is unconstitutional in that it violates the plaintiff's Fifth Amendment rights to equal protection and due process.

A. Are the Regulations, as set forth in 38 CFR §§ 3.261 and 3.262, Contrary to the Statutory Mandate of 38 U.S.C. § 503?

In reviewing the administrative regulations in the present case, the court is guided by the principle that "courts should defer to an agency's construction of its statutory mandate, particularly when that construction accords with well-established congressional goals." Board of Governors v. First Lincolnwood Corp., 439 U.S. 234, 251, 99 S.Ct. 505, 515, 58 L.Ed.2d 484 (1978) (citing Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 381, 89 S.Ct. 1794, 1801, 23 L.Ed.2d 371 (1969); Commissioner v. Sternberger's Estate, 348 U.S. 187, 199, 75 S.Ct. 229, 235, 99 L.Ed. 246 (1955). In determining whether an administrative regulation is consistent with the statutory mandate, the reviewing court must sustain the regulation "so long as it is reasonably related to the purposes of the enabling legislation."³ Mourning v. Family Publications Service, Inc., 411 U.S. 356, 369, ...