Pointer v. Shalala, Civ. A. No. 3:92-CV-1468-G.
| Decision Date | 07 December 1993 |
| Docket Number | Civ. A. No. 3:92-CV-1468-G. |
| Citation | 841 F. Supp. 201 |
| Parties | G.M. POINTER, Plaintiff, v. Donna SHALALA, Secretary of Health and Human Services, Defendant. |
| Court | U.S. District Court — Northern District of Texas |
Richard Scott Steinbach, Steinbach & Steinbach, Dallas, TX, for plaintiff.
Rebecca A. Gregory, Asst. U.S. Atty., Gayla Fuller, Chief Counsel, Joanna Tate, Asst. Chief Counsel, Region VI, Dallas, TX, for defendant.
This Social Security benefits case is before the court on cross motions for summary judgment. For the reasons stated below, the motion of the defendant Secretary of Health and Human Services ("Secretary") is granted and the motion of the plaintiff G.M. Pointer ("Pointer") is denied.
In an application for retirement insurance benefits filed on July 31, 1990, Pointer indicated that he was born on June 2, 1926. In a Corporate Questionnaire submitted on April 18, 1990, Pointer stated that he was president and treasurer of Heritage Building Company ("Heritage"), a Subchapter S corporation. He stated that he had earned $3,829.00 per month prior to his retirement but did not earn any salary thereafter. He further stated that his income after retirement consisted of payment on two notes in the amounts of $3,952.50 and $11,071.67 per month respectively, or slightly over $15,000.00 per month in total. The questionnaire also reflected the following facts: that Pointer owned the property where the business was located; that his daughter and son-in-law were vice presidents of the company, both before and after his retirement; that he remained a member of the board of directors after retirement; that he continued to make the major operating decisions and to work four days per week, two hours per day, as he had done before retirement; that no one else assumed his duties after he retired; and that he retained the authority to sign checks on behalf of the corporation and final decision-making authority for the business. Furthermore, in a report of contact dated August 8, 1990, Pointer supplemented these facts by stating that he owned all of the corporate stock and did not plan to relinquish control of the business until it was sold.
On August 22, 1990, the Social Security Administration ("SSA") notified Pointer that his application for retirement benefits was approved but that he would not receive any checks immediately because he continued to work. The SSA valued Pointer's services at $3,829.00 per month, an amount equal to his pre-retirement salary, because Pointer rendered the same services and worked the same hours after April 1990 as he did before April 1990.
Pointer requested reconsideration of the SSA's determination. On November 5, 1990, the SSA Reconsideration Section determined that Pointer was not retired for purposes of receiving retirement benefits. The SSA asserted that it had the authority to question whether Pointer's real earnings were substantially higher than those reported because he retained full control of Heritage and was still performing services for the corporation. The Reconsideration Section concluded that Pointer was still actively running the company and generating income as the primary decision-maker.
Pointer then requested and received a hearing before an administrative law judge ("ALJ"). The hearing was held on May 21, 1991. At the hearing, Pointer waived his right to counsel and testified that Heritage no longer did any building, but collected rent from property owned by him. Pointer stated that his duties as president and treasurer of the company included hiring and firing employees, managing rental properties, and signing checks drawn on the corporate bank account. Pointer testified that his duties did not change after his retirement, although he did not thereafter draw a salary. Pointer asserted that his salary could also be considered a return of capital. Pointer's certified public accountant testified that Heritage had no source of income other than rental income it received from property that Pointer owned.
By a decision dated July 25, 1991, the ALJ found that Pointer was not entitled to receive retirement benefits during any month of 1990 because he had failed to prove that he had retired. The ALJ cited Berger v. Secretary Of Health And Human Services, 835 F.2d 635 (6th Cir.1987), for the proposition that the true value of services rendered is the appropriate test of earnings and that the Secretary can look behind the salary claimed by a family member working in a family business. Looking at the realities of Pointer's employment, the ALJ found that the substance of Pointer's situation was that he could control both the amount and reported character of what he was paid. The ALJ found that Pointer's services were worth the same after retirement as they were before retirement, $3,829.00 per month, because he "continued to work the same hours, perform the same functions and continue as president and treasurer of his company after April, 1990." He therefore concluded that Pointer was not retired within the meaning of the Social Security Act ("Act").
Pointer then filed a request for review with the Appeals Council. His request was denied on May 22, 1991. The Appeals Council noted that Pointer's receipts from Heritage were presumed to be wages, and that Pointer had not carried his burden of proof to show that he was not receiving wages. Therefore, the ALJ's decision became the final decision of the Secretary for purposes of judicial review. Having exhausted his administrative remedies, Pointer appeals to this court under 42 U.S.C. § 405(g).
Judicial review of the ALJ's findings is limited by statute. Bradley v. Bowen, 809 F.2d 1054, 1057 (5th Cir.1987). The court reviews the ALJ's factual findings using the substantial evidence standard. Harper v. Sullivan, 887 F.2d 92, 95 (5th Cir.1989). This court does not reweigh the evidence or retry the issues. Bradley, 809 F.2d at 1057. Substantial evidence is defined as relevant evidence that a reasonable mind would accept as sufficient to support a conclusion. Id. In contrast, the court reviews the ALJ's legal conclusions de novo. Id.
In applying the substantial evidence test to the factual findings, the court can find that substantial evidence is lacking only where there is a conspicuous absence of credible choices or where no contradictory evidence exists. Johnson v. Bowen, 864 F.2d 340, 343-44 (5th Cir.1988) (quoting Hames v. Heckler, 707 F.2d 162, 164 (5th Cir.1983)). However, the standard of review is not a rubber stamp for the Secretary's decision. Cook v. Heckler, 750 F.2d 391, 393 (5th Cir. 1985) (quoting Tome v. Schweiker, 724 F.2d 711, 713 (8th Cir.1984)). The reviewing court does not simply search the record for evidence to support the Secretary's findings. Id. The court must consider the whole record, including those facts which detract from the substantiality of the evidence supporting the findings. Id.
If the reviewing court determines, however, that the evidence supporting the Secretary's decision is substantial, then her findings are conclusive. Oldham v. Schweiker, 660 F.2d 1078, 1083 (5th Cir.1981). Once the court decides that a reasonable person would find the evidence adequate to support the conclusion, it is foreclosed from substituting its own judgment for that of the Secretary. Id. This holds true even if the reviewing court believes that the evidence points toward a wholly different finding. Id.
Claimants age 62 or over who have worked the required number of quarters and who make application to the SSA are eligible for old-age benefits. 42 U.S.C. § 402(a). Deductions are made, however, when a claimant earns more than a specified exempt amount. 20 C.F.R. §§ 404.415, 404.416, 404.430, 404.434 (1993). Earnings beyond this exempt threshold are referred to as excess earnings.
Two types of income are considered as earnings for the purpose of calculating old-age benefits: (1) wages for services rendered for the year, 20 C.R.F. § 404.429(a); and (2) net earnings from self-employment for the taxable year, minus any net loss from self-employment for the same taxable year. 20 C.F.R. § 404.429(b). A claimant who owns a trade or business is not considered to be engaged in self-employment if he or she does not render substantial services to his or her trade or business. 42 U.S.C. § 403(f)(1)(E).
There is a statutory presumption, however, that a claimant has rendered services for wages in excess of the exempt amount and has engaged in self-employment, that is, rendered substantial services to his or her trade or business, until he or she proves otherwise to the satisfaction of the Secretary. 42 U.S.C. § 403(f)(4). Therefore, the burden of proof lies with the claimant to show that money received from an employer was not for services rendered and money received from a trade or business was not in return for substantial services.
Wages are defined as remuneration paid to an employee for employment unless specifically excluded. 20 C.F.R. § 404.1041(a). The Act specifically regards officers of corporations as employees, even if that officer would be self-employed at common law. 42 U.S.C. § 410(j)(1); 20 C.F.R. §§ 404.1006, 404.1007.
Net earnings from self-employment, on the other hand, are defined as the gross income from carrying on a trade or business as figured under the Internal Revenue Code ("Code") less the deductions attributable to that trade or business allowed by the Code. 20 C.F.R. § 404.1080(a)(1). In general, rental income, dividends, and interest are excluded when determining net earnings from self-employment. 20 C.F.R. §§ 404.1082, 404.1083.
The Secretary has the power to examine the substance over form of business transactions and relationships under the Act. Martin v. Sullivan, 894 F.2d 1520, 1532 (11th Cir.1990); Heer v. Secretary of Health and Human Services, 670 F.2d...
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