Opinion
Civil Action 3:98 CV 737
April 6, 2000
MEMORANDUM OPINION
Plaintiff Donald Meyer appeals the final decision of the Commissioner of Social Security (Commissioner) to reduce his Supplemental Security Income (SSI) benefit based on a finding that Plaintiff received unearned income in-kind that triggered the one-third reduction rule under 20 C.F.R. § 416.1131 (b). The case is before the United States Magistrate Judge by consent of the parties. Both parties have filed Motions for Summary Judgment. Jurisdiction is appropriate pursuant to 42 U.S.C. § 405 (g). For the reasons discussed below, it is hereby ORDERED that the Plaintiffs Motion for Summary Judgment is DENIED, the Defendant's Motion for Summary Judgment is GRANTED, and the final decision of the Commissioner is AFFIRMED.
Procedural History
Mr. Meyer was awarded SSI benefits on March 22, 1995. On January 18, 1996, the Social Security Administration (SSA) notified Mr. Meyer that his payments would be reduced because: (1) he was receiving $281.50 per month in income from his employment-related pension; (2) he received a special one-time pension payment of $1,900 in May of 1995; and (3) he was receiving in-kind income of food and shelter by living in his daughter's home. (R. 39-42). On March 15, 1996, Mr. Meyer timely filed a Request for Reconsideration as to the one-third reduction rule. (R. 47). Reconsideration was denied on April 22, 1996. (R. 53). Mr. Meyer then requested a hearing which was held on January 7, 1997 before Administrative Law Judge F. Michael Ahern (ALJ) (R. 69, 26-38). On March 26, 1997, the ALJ issued a decision affirming the application of the one-third reduction rule to Mr. Meyer's benefits. The ALJ's decision was rendered the final decision of the Commissioner when the Appeals Council denied Mr. Meyer's request for review on October 2, 1998. (R. 3).
On November 25, 1998, Mr. Meyer filed a Complaint for Judicial Review in the United States District Court for the Eastern District of Virginia, Richmond Division, pursuant to 42 U.S.C. § 1383(c)(3). On June 15, 1999, the parties consented to the jurisdiction of the United States Magistrate Judge. The parties filed cross motions for summary judgment that are the subject of this opinion and order.
Statement of Facts
The undisputed facts show that Mr. Meyer was awarded 551 with an onset date of May 19, 1993. (R. 84). Mr. Meyer has lived in the home of his daughter Renay Horricks since the date of onset of his disability. (R. 37). Also living in the Horricks household at the same time were Mrs. Horricks' husband and her two children. (R. 57). The monthly household expenses were $2,145.46 for the mortgage, $600.00 for food, and $300.00 for utilities. (R. 65, 67). In January of 1996, Mr. Meyer was awarded SSI benefits and received a payment retroactive to the onset date of his disability. (R. 43).
On March 11, 1996, shortly after Mr. Meyer received the retroactive SSI payment, he paid $6,500.00 to Renay Horricks. (R. 50). From February of 1996 through January of 1997 (the date of the ALJ hearing and conclusion of the evidence on the record), Mr. Meyer paid a total of $200.00 per month to Mrs. Horricks. (R. 50, 78-80).
Mr. Meyer and Mrs. Horricks both claim that the rent was set at $200.00 per month, and that the $6,500.00 payment was applied retroactively for rent Mr. Meyer accrued as a loan from Mrs. Horricks to enable him to live in her household until he received SSI. (R. 30-32, 51-52, 64, 67).
Standard of Review
Plaintiff is seeking review of the final administrative decision of the Commissioner of Social Security. The standard of review as set forth at § 205(g) of the Social Security Act (Act), § 42 U.S.C. 405(g), provides for review of the record of the administrative proceedings to determine whether there is substantial evidence in the record to support the Commissioners finding. See Hays v. Sullivan, 907 F.2d 1453, 1456 (4th Cir. 1990). Substantial evidence in the Social Security context "consists of more than a mere scintilla of evidence but may be somewhat less than a preponderance." Stewart v. Apfel, 182 F.3d 909, 1999 WL 485862, at *3 (4th Cir. July 12, 1999) ( quoting Shively v. Heckler, 739 F.2d 987, 989 (4th Cir. 1984)). Furthermore, according to the Supreme Court, substantial evidence "does not mean a large or significant amount of evidence, but rather such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Pierce v. Underwood, 487 U.S. 552, 555 (1988).
When this Court reviews an agency's own construction of a statute it administers, the Court will give due deference to the agency's interpretations and corresponding regulations. The agency's interpretation must be affirmed unless it is shown to be arbitrary, capricious or manifestly contrary to the statute. See Chevron. U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 844 (1984).
The Court does not undertake a de novo review of the Commissioner's final decision. See Blalock v. Richardson, 483 F.2d 773, 775 (4th Cir. 1972). The Court may not determine the weight of the evidence nor substitute its judgment for the Commissioner's so long as substantial evidence was present for the Commissioner's decision. See Hays v. Sullivan, 907 F.2d at 1456. If substantial evidence exists, the decision must be affirmed even if the Court disagrees with the decision. See Blalock v. Richardson, 483 F.2d at 775.
Analysis
Mr. Meyer claims the ALJ erred in finding that the one-third reduction rule applied to him. Mr. Meyer complains that the ALJ's decision was unsupported by substantial evidence on the record and that the ALJ erroneously applied the law. Mr. Meyer argues that because he paid rent for his shelter, bought most of his own food, and derived no actual economic benefit from his living arrangement, he did not receive in-kind support and therefore the one-third reduction rule does not apply.
The one-third reduction rule applies to income in-kind .
An SSI recipient is paid monthly an amount known as the Federal Benefit Rate (FBR). 20 C.F.R. § 416.410. The amount of a recipient's monthly FBR is reduced when he receives earned or unearned income. 20 C.F.R. § 416.1100. For instance, if a recipient engages in work for which he is paid, his FBR is commensurately reduced. 20 C.F.R. § 416.1101 (a)-(b). In this case, the SSA found that Mr. Meyer received different types of unearned income which, under the regulations, is all income that a recipient may receive in cash or in-kind. 20 C.F.R. § 416.1120. Unearned income includes, but is not limited to, annuities, pensions, alimony, support payments, dividends, interest, certain royalties, rents, death benefits, prizes, awards, gifts, inheritance, and support and maintenance in-kind. 20 C.F.R. § 416.1121 (a)-(h). In this case, SSA found and the evidence shows that Mr. Meyer was receiving unearned income and was living in the household of another.
During the years in issue, the FBR was $434.00 in 1993, $446.00 in 1994, $ 458.00 in 1995, and $470.00 in 1996. (R. 15-16); 20 C.F.R. § 416.410. For the months in which Mr. Meyer received SSI benefits in each of those years, and after a reduction of $1,900 from a one time pension payout, his monthly FBR was commensurately reduced by the amount he was receiving from his pension — $281.50.
As an example, in 1996 when the FBR was $470.00, Mr. Meyer's monthly payment was reduced by the same amount he received from his pension. (R. 16). Because he was living in the household of his daughter, SSA determined it had to apply the one-third reduction rule. (R. 19-20). In 1996, application of the one-third rule meant a reduction of $156.66. (R. 16). For Mr. Meyer, the practical impact was that his FBR was reduced to $31.84. Mr. Meyer's actual income for the month, his pension and SSI payment combined, totaled $313.34.
On January 18, 1996, SSA sent to Mr. Meyer a "Notice of Change in Payment" that indicated how his payments were to be adjusted for different time periods beginning in May of 1993. (R. 39). The figure actually calculated to be Mr. Meyer's SSI benefit for January of 1996 and continuing was $51.84, which may be in error although it is not alleged. There is a $20.00 general income exclusion for SSI benefits analyzed under the presumed value rule which may have been added to the $31.84.
The type of unearned income at issue in this case is support and maintenance in-kind which is defined as "food, clothing, or shelter furnished to you. Our rules for valuing this income depend on your living arrangement. We use one rule if you are living in the household of a person who provides you with both food and shelter. We use different rules for other situations where you receive food, clothing or shelter." 20 C.F.R. § 416.1121 (h).
Because Mr. Meyer lives in the home of his daughter, the analysis turns on the rules that apply to SSI recipients who live in the household of a person who provides both food and shelter, which is found at 20 C.F.R. § 416.1130 (b)-(c), 416.1131-1133. Certain unearned income is not counted by SSA, including certain types of support and maintenance described in 20 C.F.R. § 416.1157. 20 C.F.R. § 416.1124(c)(10). Some things that may appear to be in-kind or cash income are not actually counted as income if they cannot be used as food, clothing or shelter. 20 C.F.R. § 416.1103. Money borrowed by an SSI recipient, or money that is paid to a recipient as repayment of a loan, is not considered income. 20 C.F.R. § 416.1103 (f). In this case, Mr. Meyer claims that although his residence is in the personal household of his daughter, he pays rent at $200.00 per month and buys most of his own food.
If an SSI recipient receives in-kind income in the form of food and shelter by living in another person's household, the one-third reduction rule applies in frill or not at all. 20 C.F.R. § 416.1131. A household is a personal place of residence such as the family home of Mr. Meyer's daughter. 20 C.F.R. § 416.1132 (a)-(b). Mr. Meyer argues that because he paid rent and bought most of his own food he was not receiving a benefit of in-kind income and the one-third reduction rule should not apply at all. SSA regulations provide that an individual is not receiving in-kind support and maintenance in the form of room or rent if he is paying an amount charged under a business arrangement at the current market value. 20 C.F.R. § 416.1130 (b). The ALJ found that Mr. Meyer was receiving both shelter and food and that there was no enforceable agreement between Mr. Meyer and Mrs. Horricks. In this case, there is no evidence on the record as to the current market value. Even so, the ALJ determined that lacking an enforceable agreement, no business arrangement existed between Mr. Meyer and Mrs. Horricks. The analysis thus focuses primarily on the rules for an SSI recipient who lives in the household of another and receives in-kind support and maintenance.
The evidence on the record shows a cashiers check in the amount of $6,500.00 was paid by Mr. Meyer to Mrs. Horricks on March 10, 1996.
If an SSI recipient is liable to the landlord for payment of any part of the rental charges, he is not living in another's household. 20 C.F.R. § 416.1132(c)(2). For instance, if an SSI recipient is a co-maker on a loan or lease, he has a liability to the owner or landlord. Mr. Meyer has stated that he rents the place (room and bathroom) where he lives and that he is related to the landlord. (R. 63). In his Plaintiffs Memorandum in Support of Motion for Judgment, Mr. Meyer states that his oral agreement to pay his daughter $200.00 per month constitutes a rental liability thereby proscribing application of the one-third reduction rule. If a person is liable to a landlord for any part of the rental charges, he is living in his own household. POMS SI 00835.120. However, a landlord and his tenants cannot be members of the same household. The definition of household turns on whether the recipient lives in the household of another and is provided with food and shelter. Mr. Meyer was living in the household of another who provided him with food and shelter and had an obligation to pay for a share of the household expenses. Where this is the case, in order to avoid the one-third reduction rule, the SSA must determine whether Mr. Meyer was paying his pro rata share. 20 C.F.R. § 1133(a).
But see Mr. Meyer's statement of May 19, 1996, where he answered "no" to the question, "Do you (or your spouse) rent the place where you live?" (R. 57). An SSA Report of Contact by Carolyn Osborn noted that Mr. Meyer stated he "has no rental liability or home ownership." (R. 71). It is an inherently ambiguous question. Does the question refer to the home owned by his daughter (clearly that is not rented) or, does the question refer to the bedroom and bathroom for which Mr. Meyer was paying $200.00 a month on May 19, 1996. The record was not clarified in any event.
If an SSI recipient pays his pro rata share toward household operating expenses, then he is not deemed to receive in-kind support and maintenance. 20 C.F.R. § 416.1133 (b). The pro rata share is calculated by dividing the average monthly household expenses by the number of household members, regardless of age. 20 C.F.R. § 416.1133 (b). In this case, the monthly household expenses were $3045.46, making Mr. Meyer's pro rata share $609.09 in a household of five. (R. 67).
At different points in the record, differing amounts are used, including in the ALJ's findings where he states that the pro rata share is one-fifth of $2496.15, or $499.23. Although the ALJ cites exhibits 7-9, it is clear that exhibits 8 and 9 show that the monthly household expenses were $3045.46. (R. 15, 65, 67).
The ALJ found that Mr. Meyer has resided in his daughter's household since becoming eligible for SSI in 1993. The ALJ found that Mr. Meyer's FBR was properly reduced by one-third as well as by the amount of his pension. The ALJ found that although Mr. Meyer paid his daughter $200 per month for food and shelter, because Mr. Meyer's monthly payment was less than his pro rata share of household expenses, the one-third reduction rule applies. The ALJ also found that Mr. Meyer's oral agreement with his daughter was unenforceable under state law. Since the agreement was deemed unenforceable, the ALJ concluded that it did not operate as accumulation of loan in order to shield it from consideration as income.
"Food and shelter" is coterminous with "support and maintenance" for purposes of determining whether the one-third reduction rule applies. 20 C.F.R. § 416.1130.
Substantial evidence on the record
The evidence on the record shows that Mr. Meyer lived with his daughter for at least half of the month of May, 1993 through January, 1996 — the period under review of the ALJ. Mr. Meyer produced un-rebutted proof of payment of $200 per month for 37-1/2 months based on receipts, his testimony at the hearing, and the written testimonial of Mrs. Horricks.
Virginia law aunlicable to oral contracts related to a loan of food and shelter
Without an analysis or discussion of state law, the ALJ improperly determined that the oral agreement to repay rent as an accrued loan was unenforceable under state law. The unrebutted testimony of Mr. Meyer (R. 36-37) indicates that the food and shelter extended to him from May 1993 through January 1996 was to be a loan pending the resolution of Mr. Meyer's SSI application. Furthermore, it is undisputed that payment was made to Mrs. Horricks in the sum of $6,500.00 for that time period. Thereafter, the evidence on the record also shows by way of receipts that Mr. Meyer paid $200.00 to Mrs. Horricks on a monthly basis. See generally Ceguerra v. Secretary, 933 F.2d 735 (9th Cir. 1991).
In Virginia, an oral agreement is enforceable when the terms are clear, definite and certain at the time the agreement was made. Parker, v. Murphy, 152 V. 173, 146 S.E. 254, 257 (1929). In this case, the plaintiff alleges that the terms were clear and definite at the time the agreement was made. The only evidence on the record is that Mr. Meyer promised to pay Mrs. Horricks $200 for every month he lived with her when he received his SSI payment. The SSA argues that because the plaintiff had no certain expectation that he would receive SSI payments, the promise of uncertain future benefits creates an infirmity to a binding agreement because the offer and acceptance are not accompanied by valuable consideration. Bangor-Punta Operations, Inc. v. Atlantic Leasing, Ltd., 215 Va. 180, 183, 207 S.E.2d 858, 860 (1974). The law does not require a certainty that the SSI benefits be awarded to Mr. Meyer. In only requires that if SSI benefits were to be awarded to Mr. Meyer, he would have to pay Mrs. Horricks.
In Virginia, a contract is enforceable and valid even if it is contingent on the occurrence of some later event such as, in this case, the payment of SSI benefits. Where the occurrence of a future event is one of the terms decided upon by the parties to the agreement, an enforceable contract exists. See Parker v. Murphy, 152 Va. at 185, 146 S.F. at 258 (holding an agreement that was made to sell real property at a future time, if and when the landowner decided to sell, at a price to be determined by the landowner at that time, was held to be a valid contract.) Despite the absence of a date and price certain at the inception of the contract, it provided a mode for determining both terms, therefore it was neither unenforceable or uncertain. The ultimate award of SSI benefits and the immediate $6,500.00 payment from Mr. Meyer to Mrs. Horricks only serves to harmonize the terms upon which they had earlier agreed. See Runion v. Helvestime, 256 Va. 1, 11, 501 S.E.2d 411, 415 (1998) (the court held that "subsequent occurrences can make enforceable an otherwise unenforceable contract, provided the rights of innocent parties without notice have not intervened.") See generally Allen v. Sullivan, 2 Nat. Disability Law Rep. ¶ 192 (D. Kan. Dec. 13, 1991) (holding that where an oral agreement had no fixed payment amount and was contingent on the award of SSI benefits, an enforceable agreement existed under Missouri law when the parties later agreed to a fixed amount and the SSI recipient paid the householder an amount to repay a loan of room and board.)
The plaintiff seems to be concerned that absent a written agreement there may be some violation of the Statute of Frauds which requires leases for a year or more to be evidenced by a writing. Plaintiffs Memorandum in Support of Motion for Judgment at 8. The Statute of Frauds is not at issue in this case. Virginia law provides that residential tenancies are to be month to month unless rent is paid weekly or another term is fixed. Va. Code Ann. § 55-248.7(D) (Michie 1950).
The determination of whether there was an enforceable agreement to pay rent is not one of credibility when the only evidence on the record shows that there was an agreement and that its terms were met. Stroup v. Apfel, No. 96-1722, 2000 U.S. App. Lexis 2750, at *10-11, 17 (4th Cir. Feb. 24, 2000) (in vacating and remanding the final decision of the Commissioner as affirmed by the district court, under the standards set forth for judicial review, the Court of Appeals criticized the ALJ's failure to make findings based on substantial evidence on the record and his application of incorrect legal standards.) It is also unnecessary to discuss whether the ALJ applied the SSA regulations properly in determining whether or not a loan was accumulating because the ALJ failed to properly apply or even discuss Virginia law pursuant to its own regulations and SSR 92-8p. See Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. at 844 (1984). The Court finds that the ALJ's determination that Mr. Meyer did not accumulate a loan was not based on substantial evidence on the record and was a result of erroneous application of the law.
ALJ properly concluded Plaintiff was being provided food and shelter
Even though Mr. Meyer was accumulating a loan, the analysis does not end. See SSR 92-8p ¶ 1 (interpreting SSA policy that an advance of food and shelter "can represent a loan of the pro rata share of household operating expenses" which necessarily requires a determination of the pro rata share.) While Mr. Meyer was accumulating a loan to pay his share of the household expenses, the evidence on the record shows that Mr. Meyer and his daughter both made statements in writing to the effect that the $200.00 monthly payment was to pay for food and shelter. (R. 63-66, R.67-68). Mr. Meyer made other statements that indicated he paid his own expenses, including food. (R. 30, 64). The question of whether or not the SSI recipient is provided both food and shelter by the householder is an "all or nothing" proposition under the SSA regulations. See POMS SI 00835.625 ¶ B. If the recipient does anything other than buy all his own food, pay a discreet amount for food, or eat all his meals away from the house, he is receiving in-kind support and maintenance and is liable under the one-third reduction rule. Id. 20 C.F.R. § 416.1121 (h), 416.1130. There is substantial evidence on the record that supports the ALJ's determination that the $200.00 monthly payment was for both food and shelter and therefore Mr. Meyer was receiving what the SSA considers support and maintenance under its regulations. Even if Mr. Meyer buys some or most of his food and pays for his own personal expenses, he cannot overcome the substantial evidence on the record that establishes that he was living in the household of another, receiving both food and shelter, and not paying his pro rata share. Such an analysis in which the ALJ properly made a credibility determination in the face of competing evidence and contradictory statements by the plaintiff satisfies the applicable standard.
SSR92-8p, incorporating the holding in Ceguerra v. Secretary, states that "an advance of food or shelter can represent a loan of the pro rata share of household operating expenses. This applies to any commercial or non-commercial loan (between relatives, friends or others) that is recognized as enforceable under State law."
Application of the One-Third Reduction Rule was Proper
Mr. Meyer's complaint strives to overcome categorizing his living arrangement as "living in the household of another," not only to avoid the one-third reduction rule, but also to be able to apply the Court's ruling in Ragsdale v. Apfel, No. Civ. A. 3:97CV 100 (E.D.Va. Mar. 30. 1998) (Payne, J.). Under the so-called presumed value rule, however, the SSA argues that Ragsdale is clearly distinguishable from this case because it "dealt with a rental subsidy under the Presumed Value Rule."Defendant's Memorandum in Support of Motion for Summary Judgment at ll; see also 20 C.F.R. § 416.1140-1141.
The cases are indeed distinguishable but only because Mr. Meyer cannot overcome the ALJ's proper decision that he was receiving in-kind income by living in his daughter's household and not meeting his pro rata share. The practical result of Mr. Meyer's pension and his living arrangement with his daughter is that his FBR is reduced on a monthly basis by almost 90%. Under the rules, Mr. Meyer can never meet his pro rata share of the household expenses. Even if Mr. Meyer's FBR were not reduced by one-third, he would still not be able to meet the pro rata amount attributable to him. Because Mr. Meyer cannot shift the analysis to the presumed value rule, he cannot directly benefit from the Ragsdale precedent. However, the reasoning in Ragsdale should constitute a persuasive message that the issue demands attention.
It is at least illogical to think that a disabled person, such as Mr. Meyer, receiving the FBR and renting a room in a relative's home is capable of meeting the pro rata expenses where pro rata share of the monthly household expenses far exceed the FBR. As in this case, there may be two or more other healthy wage-earners making all the decisions, including the type of mortgage they can afford, the amount of energy they use, and the amount they will spend on food. In this case, Mr. Meyer is a disabled family member making a reasonable contribution to the household expenses according to the amount available to him on a monthly basis. Mr. Meyer derives no actual economic benefit from the living arrangement with his daughter. See generally Ruppert v. Bowen, 871 F.2d 1172, 1180 (2d Cir. 1989) (where SSI recipients "spend a very large percentage of their cash benefits on rent . . . they do not have the purchasing power to secure other basic need and thus do not receive the `actual economic benefit' from below-market rents . . .").
Apparently, the lesson to be learned from the present administrative scheme is that if one wants, or is required by necessity, to assist or care for a disabled relative, he better be sure to live in modest surroundings. He doesn't want it too comfortable, be it for his own sake or that of the loved one.
Similarly, in criticizing the SSA's restrictive interpretation of what qualifies as a loan, the district court in Ruppert explained that SSI recipients such as Mr. Meyer "do not live in a socioeconomic vacuum, but rather generally reside in an environment consisting primarily of other poor people; relatives and friends who might be willing to supply loans to SSI recipients, therefore, will often have more accessible to them in-kind good such as some extra foodstuffs or clothing or a small space for the recipient to live in . . ." Ruppert v. Secretary, 671 F. Supp. 151, 167-168 (E.D.N.Y. 1987), aff'd in part, rev'd in part, remanded sub nom.Ruppert v. Bowen, 871 F.2d 1172. Although this statement was made to illustrate how loans of goods can accumulate just as cash, the court emphasized how strict interpretation of these SSA rules operate as a penalty on poor SSI recipients in the real world. In this case, we see that Mrs. Horricks and her family have large monthly expenses and have been generous in providing Mr. Meyer reasonable rent for his accommodations. Unfortunately, both Mrs. Horricks and her father are penalized as a result.
In any event, while it is obvious that the application of the one-third reduction rule to an SSI recipient who does not receive an actual economic benefit from his living arrangement is analogous to the SSI recipient who is analyzed under the presumed value rule, the Court is not able to make that determination under the case law by which it is bound at this time.
Conclusion
For the foregoing reasons, Plaintiffs Motion for Summary Judgment is DENTED, the Defendant's Motion for Summary Judgment be GRANTED, the decision of the Commissioner is AFFIRMED and this case is DISMISSED.