Rhoads v. Folsom, 12118.

• Decision Date: 21 February 1958
• Docket Number: No. 12118.,12118.
• Parties: Alton J. RHOADS, Executor of the Estate of John A. Rhoads, and Lola Rhoads, Plaintiffs-Appellees, v. Marion B. FOLSOM, Secretary of Health, Education and Welfare of the United States of America, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

252 F.2d 377 (1958)

Alton J. RHOADS, Executor of the Estate of John A. Rhoads, and Lola Rhoads, Plaintiffs-Appellees, v. Marion B. FOLSOM, Secretary of Health, Education and Welfare of the United States of America, Defendant-Appellant.

No. 12118.

United States Court of Appeals Seventh Circuit.

February 21, 1958.

George Cochran Doub, Asst. Atty. Gen., Robert S. Green, Attorney, Civil Division, U. S. Department of Justice, Washington, D. C., R. Tieken, U. S. Atty., Chicago, Ill., Melvin Richter, Attorney, Department of Justice, Washington, D. C., for appellant.

Charles A. Thomas, Rockford, Ill., for appellees.

Before DUFFY, Chief Judge, and MAJOR and HASTINGS, Circuit Judges.

MAJOR, Circuit Judge.

This appeal is from an order of the District Court reversing a decision of the Referee of the Social Security Administration. The principal question for decision is whether the findings of the Referee are supported by substantial evidence, as provided by Section 205(g) of the Social Security Act (42 U.S.C.A. Sec. 405(g)). The appellant contends that the Referee's findings are substantially supported and that the order of the District Court was, therefore, in error. Appellees contend to the contrary.

John A. Rhoads and Lola Rhoads, his wife, filed application for Old Age and Wife's Insurance benefits, which was allowed. Payments were received by them, beginning January 1953 and continuing until February 1955, when they were suspended by the Bureau for the reason that it was determined that Mr. Rhoads, commencing May 1953, had received wages of more than $75 per month, first from the Ogle Lumber Company and later from the Oregon Lumber Company.

Prior to January 1955, Sec. 203(b) (1) of the Social Security Act provided in substance that any individual under the age of 75 was not entitled to benefits for any month in which he rendered services for wages of more than $75.00. Section 203(b) (2) provided that under such circumstances the wife was not entitled to benefits paid upon her husband's wage record. Upon notification of the Bureau's determination, Mr. and Mrs. Rhoads asked for and were given a hearing before a Referee, who found that benefits had been improperly paid to both of them under the provisions of the Social Security Act. After a review by the Appeals Council of the Social Security Administration, John and Lola Rhoads brought suit in the District Court, contending that the Referee's decision was not supported by substantial evidence and should be reversed. (Subsequent to commencement of suit, John Rhoads died, and Alton J. Rhoads, as Executor, was substituted as party-plaintiff.)

The record shows that for some twenty-five years prior to 1953, John A. Rhoads had been the manager of Midwest Lumber Company in Oregon, Illinois. The retirement age of 65, as provided by the Social Security Act, was reached by Mr. and Mrs. Rhoads in the summer of 1952. Sometime prior to January 1953, Mr. Rhoads went to the home office of the lumber company in Dubuque, Iowa, and arranged to be relieved of his duties as manager at the close of that year. During this conference it was agreed that Mr. Rhoads would stay on as manager until the first of 1953. It was further decided that Mr. and Mrs. Rhoads would be employed by the lumber company, and for their services each would receive the sum of $75 per month. This conference was followed by one in Oregon, Illinois, between Mr. Rhoads and Mr. Daniels, who was the assistant secretary-treasurer of the company, at which time it was agreed that John and Lola Rhoads each be put on the payroll of the lumber company at a salary of $75 a month, their work to begin January 1, 1953. It was further agreed that Mrs. Rhoads was to take her orders from Mr. Rhoads. This arrangement was continued until May 1, 1953, when for personal reasons they discontinued their work for this company.

Immediately thereafter, Mr. and Mrs. Rhoads were employed by the Ogle Lumber Company, also of Oregon, Illinois, under the same arrangement as they had with Midwest. The Ogle Lumber Company was owned by Mervin Rhoads, a son of Mr. and Mrs. Rhoads, and one Mongan. Mervin Rhoads was in charge of the actual operation of the company. Mr. and Mrs. Rhoads were placed on the payroll of Ogle at a salary of $75 per month each. Each received checks in the amount of $75 during the periods of their employment with the lumber companies, which were deposited by each in separate bank accounts and spent as each saw fit. Neither had any control of or interest in the bank account of the other.

The record discloses beyond any dispute that Mrs. Rhoads, as well as her husband, rendered valuable services to each of the lumber companies. Mrs. Rhoads possessed skill as an interior decorator and assisted customers in the selection of materials and in the decoration of their homes. Mr. and Mrs. Rhoads had decorated their own home, which was often shown to prospective customers. The Referee's order is based upon the finding or conclusion that Mrs. Rhoads was not an employee. As already shown, the...