Opinion
CIVIL ACTION NO. SA-00-CA-1195 EP (NN).
March 29, 2002
MEMORANDUM ORDER AND DECISION
A. Introduction
The plaintiff, Adela Miranda, is an indigent 59 year old Hispanic widow, who had been receiving Supplemental Security Income ("SSI") benefits under Title XVI of the Social Security Act, 42 U.S.C. § 1382c(a)(3), for some time as a result of her disability. She is illiterate and speaks only Spanish. When a decline in her health required that she vacate her single wide mobile home in June of 1997, the Social Security Administration ("SSA") immediately stopped SSI payments. SSA's action was premised on its determination that the valuation of the mobile home and lot on which it stood exceeded the resource limit for eligibility to these benefits under the Act. Plaintiff contested this determination through the administrative channels, arguing that this asset was not available to her because it could not be converted to cash for the use of her support and maintenance. From the initial to the reconsideration stages of her claim through the ALJ's decision, affirmed by the Appeals Council and made the final decision of the Commissioner, the SSA denied plaintiff relief.
Having exhausted her administrative remedies, plaintiff instituted this action pursuant to 42 U.S.C. § 405 (g), for review of the Commissioner's decision denying her claim for SSI benefits. Through the filing of this lawsuit, plaintiff only seeks payment for the benefits lost as a result of the Commissioner's decision affirming the SSA decision to discontinue the benefits, effective July 1, 1997. In that regard, plaintiff has filed a motion for summary judgment and a supporting brief, asking the court to reverse the Commissioner's decision because it was not supported by substantial evidence and was contrary to applicable law, and render judgment in favor of plaintiff. Alternatively, plaintiff requests that this case be remanded to the Commissioner for a rehearing.
The record reflects that subsequent to the Commissioner's decision made the basis of this appeal, plaintiff conveyed her interest in the property to a relative, and as a result, her SSI benefits were reinstated. Currently, she continues to receive SSI benefits. Docket Entry 15, at 3; and Transcript, at 5-6.
Docket Entries 14 and 15.
Docket Entry 1, at 5.
The defendant has filed a brief in support of the Commissioner's decision, arguing that it is based on substantial evidence, and as such, it should be affirmed. While this court may agree with defendant that the factual findings made by the ALJ are supported by substantial evidence, the court nevertheless finds that the ALJ erred in his application of the relevant statutory and regulatory provisions to the particular factual circumstances present in plaintiffs case. The court's reasons are set out below.
Docket Entry 19. Plaintiff has filed a reply brief to defendant's response. Docket Entry 23.
B. Applicable Statutory and Regulatory Framework
The Commissioner's SSI program, 42 U.S.C. § 1381 et seq ., provides non-medical cash assistance to aged, blind or disabled persons. Under the statute, an aged, blind or disabled person is eligible for SSI if either his or her monthly income or overall available resources do not exceed certain maximum amounts set forth in the statute and regulations. In 1997, the year plaintiff was denied eligibility, the maximum amount of resources a disabled individual not residing with a spouse could have was $2,000.00. If the Department of Health and Human Services ("HHS") determines that either of an individual's available resources or monthly income exceed the prescribed limits, he or she is ineligible for SSI benefits.
See 42 U.S.C. § 1382 and 20 C.F.R. § 416 subparts D and K (setting forth criteria for income benefits) and 20 C.F.R. § 416.1205 (resource limits).
See 42 U.S.C. § 1382 (a)(1)(B)(ii) and 20 C.F.R. § 416.1205. This eligibility amount has been in effect since 1989. Transcript, at 15.
See Frerks v. Shalala 848 F. Supp. 340, 344 (E.D.N.Y. 1994).
The statute does not define the terms "income" or "resource." Instead, the definition of these terms is provided in the regulations promulgated under the statute. With respect to the definition of a "resource," 42 C.F.R. § 410.1201 discusses resources generally, and gives the following definition:
(a) Resources; defined. [R]esources means cash or other liquid assets or any real or personal property that an individual . . . owns and could convert to cash to be used for his or her support and maintenance.
(1) If the individual has the right, authority or power to liquidate the property or his or her share of the property, it is considered a resource. If a property right cannot be liquidated, the property will not be considered a resource of the individual . . .
42 C.F.R. § 416.1201 (a)(1) (Emphasis added).
The regulations goes on to specifically define "liquid" and "nonliquid" resources that an individual owns or could convert to cash in order to use for his or her support and maintenance:
(b) Liquid Resources. Liquid resources are cash or other property which can be converted to cash within 20 days. . . . Examples of resources that are ordinarily liquid are stocks, bonds, mutual fund shares, promissory notes, mortgages, life insurance policies, financial institution accounts (including savings, checking, and time deposits, also known as certificates of deposit) and similar items. Liquid resources, other than cash, are evaluated according to the individual's equity in the resources . . . .
(c) Nonliquid Resources. (1) Nonliquid resources are property which is not cash and cannot be converted to cash within 20 days Examples of resources that are ordinarily nonliquid are loan agreements, household goods, automobiles, trucks, tractors, boats, machinery, livestock, building and land. Nonliquid resources are evaluated according to their equity value except as otherwise provided [. . .].
(2) For purposes of this Subpart . . . the `equity value' of an item is defined as:
(i) The price that item can reasonably be expected to sell for on the open market in the particular geographic area involved; minus
42 C.F.R. § 410.1201 (b) and (c).
With these regulations in mind, the court will proceed to discuss the procedural and factual background for the Commissioner's denial of SSI benefits for the period in question.
C. Procedural and Factual Background of the Case
According to the pleadings, which include the Administrative Transcript of the SSI benefits eligibility determination, in the later 1980's, plaintiff and her adult son, Javier Miranda, began paying a mortgage loan on a 1972 single wide mobile home and the small lot on which it has been parked ever since. The property is located at Lot 174 River Bend Subdivision, Unit 1 in New Braunfels, Texas.
Transcript, at 43, 49 and 72.
Id. at 42.
Around that same time, the SSA determined plaintiff was disabled as a result of increasing complications from diabetes, and she was awarded SSI benefits. Despite her physical condition, plaintiff managed to live in the mobile home along with another one of her sons Marco Antonio, who helped her in her daily activities. Marco Antonio continued to live with plaintiff until June of 1997, when he and his wife decided to move with his mother-in-law, who was ill with breathing problems. By that time, plaintiffs physical condition had deteriorated to the point that it was no longer feasible for her to live in the mobile home, much less alone. She was no longer able to walk, was confined to a wheelchair, needed constant help with her daily physical needs and required dialysis treatments three times a week. Her situation was further complicated by the fact that the mobile home trailer had fallen into a state of serious disrepair, had no accessible ramp for her wheelchair, and the interior of the unit was not wide enough to accommodate her wheelchair use. For those reasons, she decided to vacate the mobile home in June of 1997 and move in with another one of her sons and his family. She has not returned to the trailer since she moved out in 1997. The trailer has remained unoccupied and is no longer habitable.
Docket Entry 15, at 2.
Transcript, at 69.
Docket Entry 15, at 2; and Transcript, at 52.
Transcript, at 44, 59 and 68-69.
Id. at 69.
Id. at 15, 70, and 82-83.
After she left her mobile home, HHS notified the plaintiff that her SSI benefits (of approximately $500.00/per month) were being terminated, beginning July 1, 1997, because the uninhabited mobile home and lot were considered an available resource, the value of which exceeded the resource limit to maintain SSI eligibility. According to the statute, when a recipient of SSI benefits leaves her home, and does not intend to return, the value of the home may be considered a resource by the SSA, and if the recipient's resources exceed $2,000.00, she loses eligibility.
Docket Entry 15, at 3.
The HHS made its determination based on county tax records which appraised the value of the property at $16,100.00. A comparative market analysis, conducted later in the case, indicated that the property had a fair market value $14,700.00. The record shows that plaintiff and her son Javier, have an undivided interest in the thirty year old single mobile home trailer subject to a total mortgage loan balance of $6,612.44. Plaintiff has been unable to sell her half property interest because Javier and his wife, who has an apparent community property interest in Javier's ownership of the property, refused to sell their interest. While Texas law provides for a forced partition of the property, plaintiff contends the fees involved in such a judicial proceeding are substantial (approximately between $2,000.00-$4,000.00), particularly for plaintiff whose only source of income is her SSI benefits. Further, plaintiff argues the costs of the partition proceedings in her case would have consumed the equity share that she has in the property, rendering the asset worthless.
Id. at 43.
Id. at 16. Id. at 67.
On reconsideration, the SSA upheld the HHS' decision to discontinue SSI payments to plaintiff. At the plaintiffs request, a rehearing de novo was held before an ALJ on September 1, 1998, at which plaintiff appeared represented by a paralegal from the Texas Rural Legal Aid, Inc. The ALJ affirmed the termination of plaintiffs SSI benefits on November 13, 1998. The ALJ found that an undivided half interest in an uninhabitable mobile home and single lot was "zero" because the property could not be sold without the cooperation of the joint owner, and the costs of the partition exceeded plaintiffs interest in the property. The ALJ, nevertheless, decided that if a sale can be forced under state law, even if the costs incurred in that sale surpassed the value of the property, plaintiffs interest constituted a countable resource under the SAA regulations. In determining the value of the resource, the ALJ considered the remaining balance of the mortgage loan as an allowable encumbrance reducing the value accordingly. However, he declined to consider the costs of the partition action and forced sale.
Subsequently, an attorney from the Texas Rural Aid, Maria Norma Martinez, was appointed as plaintiffs representative. Id. at 56.
Transcript, at 16.
Id. at 17-18,
Id. at 17.
Plaintiff requested review of the ALJ's decision to the Appeals Council on December 9, 1998. When the Appeals Council denied plaintiffs request for review on August 25, 2000, the decision of the ALJ became the final decision of the Commissioner.
Id., at 5-6.
D. Issue Presented
Whether substantial evidence of record supports the ALJ's determination that plaintiff has countable resources which exceed the eligibility limits set forth by the Act for SSI recipients.
E. Standard of Review
The court may set aside the Commissioner's determination only if it is based upon legal error, or is not supported by substantial evidence in the record as a whole. Substantial evidence is defined as what a reasonable mind might accept as adequate to support a conclusion. Such evidence is more than a scintilla, but less than a preponderance of the evidence. If the Commissioner used improper legal standards to evaluate the evidence, his position is not to be upheld on appeal. "Indeed, [courts] will uphold the Secretary's interpretation of the regulations `unless it is plainly erroneous or inconsistent with the regulations[s].'"F. Analysis
The crucial flaw in the ALJ's reasoning is his failure to consider the entirety of the definition of "resources" found in the regulations, specifically 20 C.F.R. § 416.1201 (a). According to this provision, the term "resources" is defined as "cash or other liquid assets or any real or personal property that an individual . . . owns and could convert to cash to be used for his or her support and maintenance." Further, § 416.1201(a)(1) provides that: "[i]f a property right cannot be liquidated, the property will not be considered a resource of the individual." Thus, the primary question is whether the property at issue in this case, i.e ., plaintiff's half ownership of the trailer and small lot, was available to the plaintiff to convert to cash for the use of her support and maintenance. Had the ALJ applied the entirety of the definition of "resources" as provided in the regulations to his factual findings, he would have answered the question in the negative. That is, because plaintiffs half interest in the property cannot be liquidated and cash realized available for her support and maintenance, the asset cannot be considered a "resource" rendering plaintiff ineligible for benefits.The court notes that the underlying purpose behind the statutory and regulatory scheme is to ensure that, when determining an individual's SSI eligibility, any assets and other funds readily available to that person for support and maintenance should be applied towards those purposes before the state must intervene to provide minimal financial support to that person.
See e.g., Whaley v. Schweiker, 663 F.2d 871 (9th Cir. 1981) (the purpose of SSI is to assure recipient's income is maintained at the minimum level necessary for the recipient to subsist); Singer v. Secretary of Health and Human Services, 566 F. Supp. 204 (S.D.N.Y. 1983) (the purpose of SSI is not to provide financial security to recipient but income that is actually needed, and the resource limitation bears a rational relationship to that purpose); H.R. Rep. No. No. 231, 92d Cong., 2d Sess. (1972), reprinted in 1972 U.S.C.C.A.N. 4898, 5132-33 (purposes of providing SSI assistance is to complement other sources of income where other sources fail to keep individual from falling below poverty line).
In the instant case, the ALJ made the following factual finding:
[t]he equity in the subject property, as defined in 20 C.F.R. § 416.1201 (c)(2), is $8,087.56 (the $14,700 price the property can reasonably be expected to sell for on the open market in the area involved, minus encumbrances of loan and escrow balance of $6,612.44). The claimant's half interest in the property [. . .] is $4,043.78, in excess of the $2,000 resource limit. It is clear the claimant's fractional interest in the property cannot be sold, as shown by the refusal of local banks and realty companies to make a loan or listing on it. However, in accordance with case law and Social Security Rulings [. . .], if a sale can be done, even forced, the claimant's part ownership is a resource. The claimant's representative notes forcing a partition would cost up to $4,000, puffing the value of the claimant's interest in the property below the $2,000 limit. However, the Commissioner's Regulations and Social Security Rulings do not provide consideration of this.
Transcript, at 16.
This Finding acknowledged three critical pieces of evidence in support of plaintiffs case: (1) that plaintiffs' half interest in the property cannot be sold; (2) that the only way a sale can be accomplished under the factual circumstances of this case is through a forced partition sale; and that (3) the procedure to petition for a partition of the property could cost up to $4,000.00. After acknowledging these facts, the court is at a loss to understand how the ALJ could have reasonably concluded that plaintiffs interest in the property, which basically has no value, is a "resource" that could be converted to cash to be used for her support and maintenance.
As the undisputed sworn testimony of attorney Rolando Rios reflects, if plaintiff would have come to him to initiate the partition proceedings in state court, he would have asked her for a retainer of $3,000.00 against fees and for expenses of $1,500.00 to begin the litigation. Rios stated that under some circumstances he may take an interest in the property if the individual cannot pay for his retainer and expenses up front. But, in situations such as the one faced by plaintiff, where the costs of the partition proceedings would be at or in excess of the value of the property, Rios would have informed her that after the partition, she stood the chance of having no value in her property. Rios then opined: "absent some compelling reason, it would probably be unethical to begin a suit to divide property if I knew that it was likely that I would own the property after the litigation and the client stood a real chance of gaining nothing." Nowhere in the ALJ's decision does he consider this evidence; he stopped short in his analysis of the evidence when he failed to consider attorney Rios' testimony. This testimony highlights the reality of plaintiffs circumstances and the lack of options she had concerning the selling of her property interest, even if such a sale was allowed by law.
See Transcript, at 61.
Id.
Id.
Id.
Without addressing plaintiffs argument that she does not have the "power" to force a sale because she does not have the assets to initiate the partition action, clearly the end result of such a proceeding is to leave her with no cash for her support and maintenance. The ALJ acknowledged this, but held that the regulations did not allow him to consider this reality. This court disagrees. The regulations, and in particular, § 416.1201(a), require consideration of whether the property is convertible to cash available for plaintiffs support.
The court in Chalmers v. Shalala, the sole case relied upon by the ALJ, held that plaintiffs one quarter property interest with a right to partition was a "resource" under the regulations because she had the right to liquidate her interest in order to apply the proceeds toward her support. Chalmers is inapposite to the instant case. In Chalmers, plaintiff clearly would have realized cash after a forced sale took place. Specifically, the court considered plaintiffs argument that conversion of the property to cash was an impossibility because plaintiff did not have the mental capacity to pursue a partition and sale. The court rejected that argument, observing that plaintiff had participated with her attorneys on other legal matters despite her incompetency. The court in Chalmers was also undoubtedly affected by what it perceived as plaintiffs disingenuous motives to not go forward with sale ( i.e ., to maintain her tax shelters) in rejecting her arguments. Such is not the situation in the instant case. Contrary to plaintiff Chalmers, who had property with value exceeding the costs of the partition disposition, plaintiffs property in this case had no value beyond the costs of disposition.
23 F.3d 752 (3rd Cir. 1994).
Id. at 754.
Further, while the plaintiff in Chalmers argues that it was not "sensible" or "advantageous" to partition the property because of the lawyers' fees and costs will consume its net worth, in that case it was clear that lawyers' fees and costs would not have consumed the assets.Id. at 755. While the court in Chalmers stated that "lawyers' fees and costs are not a consideration allowed for in the [SSA] regulations," that statement is viewed by this court as dicta, clearly directed to plaintiffs situation in that case.
Defendant argues that when valuing the property, the ALJ was correct in only considering the mortgage lien, placing plaintiffs share of the asset at $4,043.78; that only the mortgage lien qualifies as an "encumbrance" under 20 C.F.R. § 416.1201 (c). Defendant's interpretation ignores the obvious purpose of the regulation — to exclude from eligibility those persons who have cash assets that could be converted "to cash to be used for support and maintenance." It would be inconsistent with the purposes of the Act for an otherwise eligible SSI recipient to be rendered ineligible if the sale of a resource would fail to result in cash available for her support. Defendant's reading also ignores the entirety of the definition of "resource":
Curiously, the applicable regulations do not define the term "encumbrance."
Resources means cash or other . . . real or personal property than an individual . . . owns and could convert to cash to be sued for his or her support and maintenance.
42 C.F.R. § 410.1201 (a) (emphasis added).
Based on the foregoing, the court finds that the Commissioner's decision did not apply the correct legal standard found in the statute and regulation. That is, the ALJ failed to consider whether plaintiffs half-property interest met the regulatory definition of "resource," and particularly, whether said asset was available to her to convert to cash to be used for her support and maintenance. Accordingly, the Court finds that the ALJ failed to correctly apply the regulation to the facts in this case.
See State of New York ex rel. Holland v. Sullivan, 927 F.2d 57, 59 (2d Cir. 1991) ("When a rule sets forth specific criteria . . . the Secretary's determination must contain an application of the criteria to the particular facts of the case.").
G. Remand for an Award of Benefits
The court has discretion to remand a case either for additional evidence and findings, or to award benefits. A court may direct an award of benefits where the record has been fully developed and where further administrative proceedings would serve no useful purpose.Courts have, for instance, credited evidence and remanded for an award of benefits where (1) the ALJ has failed to provide legally sufficient reasons for rejecting such evidence, (2) there are no outstanding issues that must be resolved before a determination of disability (or SSI eligibility as in this case) can be made, and (3) it is clear from the record that the ALJ would be required to find the claimant disabled were such evidence credited.
Id. (citations omitted).
In this case, there are no outstanding issues to preclude this court for making a determination that plaintiff did not have a countable resource which exceeded the eligibility limits set forth by the Act for SSI recipients when SSA stopped her benefits on July 1, 1997. The record is fully developed and, considering the erroneous interpretation of the regulation by the ALJ to the factual circumstances presented in this case, a finding of SSI eligibility is warranted. Plaintiffs claim, limited to benefits lost, dates back five years from her SSI eligibility determination, and additional proceedings would only delay her receipt of benefits owed. Therefore, this court renders judgment that plaintiff was eligible to continue receiving SSI benefits throughout the relevant time period. Accordingly, this case is reversed and remanded to the Commissioner for an award of benefits consistent with this Order.
H. Conclusion
Based on the discussion above, the court hereby REVERSES the Commissioner's decision and GRANTS plaintiffs motion to REMAND . This cause is REMANDED to the Commissioner for the sole purpose of awarding benefits owed to plaintiff for the relevant time period made the basis of this claim.
IT IS HEREBY ORDERED that the Commissioner's decision is REVERSED because it is not based on substantial evidence and is not a correct application of the relevant legal standards.
IT IS FINALLY ORDERED that plaintiff's motion for summary judgment, or alternatively, to remand (Docket Entry 14) is GRANTED in all respects and this cause of action is DISMISSED WITH PREJUDICE .