Lee v. Commissioner Social Security Administration

UNITED STATES DISTRICT COURT

DISTRICT OF OREGON

PORTLAND DIVISION

MICHAEL L.,1

Plaintiff,

Case No. 3:18-cv-01115-YY

v.

OPINION AND ORDER

NANCY A. BERRYHILL, Acting

Commissioner of Social Security,

Defendant.

YOU, Magistrate Judge:

Michael L. (“plaintiff”) seeks judicial review of the final decision by the Commissioner

of Social Security (“Commissioner”) reducing his Title XVI Social Security Income (“SSI”)

benefits under the Social Security Act (“Act”). This court has jurisdiction to review the

Commissioner’s decision pursuant to 42 U.S.C. §§ 405(g) and 1383(c)(3). The Commissioner’s

decision is not supported by substantial evidence; therefore, it is REVERSED and REMANDED

for immediate recalculation and payment of benefits.

1 In the interest of privacy, this opinion uses only the first name and the initial of the last name of

the non-governmental party or parties in this case. Where applicable, this opinion uses the same

designation for a non-governmental party’s immediate family member(s).

PROCEDURAL HISTORY

Plaintiff filed an application for SSI on October 9, 2015, alleging disability beginning

July 8, 2013. Tr. 13. On May 7, 2016, the agency determined that plaintiff was disabled

beginning August 14, 2015. Tr. 38. On June 27, 2016, plaintiff was notified that based on

income he received in the form of in-kind support from August 2015 through June 2016, his

payment amount was being reduced. Tr. 13. Plaintiff requested reconsideration, and on August

30, 2016, plaintiff was notified that he was entitled to SSI benefits beginning June 2013, but his

payment amount was being reduced for in-kind support he received from June 2013 through

August 2016.2 Tr. 78-79, Plaintiff then filed a written request for a hearing. Tr. 13.

A hearing was held before an Administrative Law Judge (“ALJ”) on February 9, 2017, at

which plaintiff testified. Tr. 119-33. On March 9, 2017, the ALJ issued a decision finding that

the reduction for in-kind support was accurate and correct. Tr. 13-16. After the Appeals Council

denied his request for review, plaintiff filed a complaint in this court. Tr. 2-4. The ALJ’s

decision is therefore the Commissioner’s final decision subject to review by this court. 20

C.F.R. § 422.210.

STANDARD OF REVIEW

The reviewing court must affirm the Commissioner’s decision if it is based on proper

legal standards and the findings are supported by substantial evidence in the record. 42 U.S.C.

§ 405(g); Lewis v. Astrue, 498 F.3d 909, 911 (9th Cir. 2007). The court must weigh the evidence

that supports and detracts from the ALJ’s conclusion and “‘may not affirm simply by isolating a

specific quantum of supporting evidence.’” Garrison v. Colvin, 759 F.3d 995, 1009-10 (9th Cir.

2 It is not clear from the record why plaintiff was entitled to begin receiving benefits as of June

2013, when he alleged his disability began in July 2013. It is also not clear why the reduction for

in-kind support was initially scheduled to cease in June 2016, but was changed to August 2016.

2014) (quoting Lingenfelter v. Astrue, 504 F.3d 1028, 1035 (9th Cir. 2007)). The court may not

substitute its judgment for that of the Commissioner when the evidence can reasonably support

either affirming or reversing the decision. Parra v. Astrue, 481 F.3d 742, 746 (9th Cir. 2007).

Instead, where the evidence is susceptible to more than one rational interpretation, the

Commissioner’s decision must be upheld if it is “supported by inferences reasonably drawn from

the record.” Tommasetti v. Astrue, 533 F.3d 1035, 1038 (9th Cir. 2008) (citation omitted); see

also Lingenfelter, 504 F.3d at 1035.

DISCUSSION

Plaintiff contends the ALJ erred in concluding that the in-kind support he received from

his mother did not constituted a bona fide loan. Tr. 14. The Social Security Act provides that a

disabled individual who does not have an eligible spouse and whose income does not exceed the

SSI income threshold shall be eligible to receive SSI. 42 U.S.C. § 1382(a)(1)(A). The term

“income” means both earned and unearned income, and includes support and maintenance

furnished in cash or in kind. 42 U.S.C. § 1382a(a); 20 C.F.R. § 416.1120, et seq.

Money borrowed pursuant to a bona fide loan does not count as income. 20 C.F.R.

§ 416.1103(f); SSR 92-8p. A bona fide loan is “an advance from lender to borrower that the

borrower must repay, with or without interest.” SSR 92-8p at *2. “When money or an in-kind

advance in lieu of cash is given and accepted based on any understanding other than that it is to

be repaid by the receiver, there is no loan involved for SSI purposes.” Id. at *3. A bona fide

loan agreement may be oral or written, but must be “recognized as enforceable under State

law.” Id. at *2.

The Agency’s Program Operations Manual System (“POMS”) specifies that a bona fide

loan must meet five criteria: (1) it must be enforceable under state law; (2) it must have been in

effect at the time of the transaction; (3) it must acknowledge the obligation to repay; (4) it must

establish a plan for repayment; and (5) repayment must be feasible. POMS SI 00835.482,

available at https://secure.ssa.gov/apps10/poms.nsf/lnx/0500835482. If a loan meets these

criteria, it is not treated as income for the purposes of SSI eligibility. The claimant bears the

burden of demonstrating that the agreement constitutes a bona fide loan. SSR 92-8p.

Here, according to affidavits submitted by plaintiff and his mother, plaintiff has been

residing with his mother in her home since 2007 and pays her $550 per month for rent and his

share of the utilities. Tr. 53; Tr 55. Plaintiff stopped paying rent in February 2010 following a

motor vehicle accident that caused him to stop working.3 Id. Plaintiff’s mother allowed plaintiff

to remain in the home on the condition that he paid her back rent payments as soon as he was

able to. Id. Between February 2010 and June 2016, plaintiff accumulated a total debt in back

rent of $41,800. Id. Upon being awarded SSI benefits, plaintiff paid his mother $2,500,4 leaving

a balance of $39,300. Id. Plaintiff “intend[s] to pay the full $550.00/month going forward out of

[his] monthly SSI payments.” Tr. 54. He also intends to pay toward the loan with any additional

SSI back payments he receives, as well as “pay some amount of the remainder of [his] SSI every

month . . . to chip away at whatever remained of [his] debt. . . .” Tr. 53-54. At the hearing,

plaintiff testified that he gives his mother his entire SSI monthly benefit check. Tr. 128. Plaintiff

explained that his mother borrowed money to support them while he was waiting for SSI

benefits, and that “she needs to be paid back the money instead of being in debt.” Id.

3 At the hearing, plaintiff explained that was in a head-on collision, due to a seizure and wasn’t

able to work.” Tr. 128.

4 It appears plaintiff was awarded $3,298.52 in back SSI payments for September 2015 through

May 2016, Tr. 39, and $12,990.78 for June 2013 through August 2015, Tr. 84. However, back

SSI payments are not paid in a lump sum but must be disbursed in installments. Tr. 39. Plaintiff

received his first installment of $2,199.00 in June 2016. Id.

A field officer conducted an investigation regarding whether the agreement between

plaintiff and his mother qualified as a bona fide loan. The field officer concluded that the loan

was enforceable under state law, the agreement was in effect at the time of transaction, and there

was an acknowledgement of the obligation to repay. Tr. 37. However, the field officer

concluded that there was no plan for repayment and the repayment plan was not feasible. Id.

The ALJ concluded there was no bona fide loan. Tr. 14. The ALJ did not take issue with

the field officer’s findings that the loan was in effect at the time of the transaction and

enforceable under state law. While the ALJ never explicitly disputed the field officer’s finding

that there was an acknowledgement of the obligation to repay, he apparently rejected it, finding

instead that there “was no unconditional obligation for repayment at the time the in-kind support

and maintenance was provided.” Tr. 15.

The ALJ found there “was no unconditional obligation for repayment” because both

plaintiff and his mother reported that he would pay her back when he was approved for benefits.

Tr. 15. The ALJ, however, conflates the ability to repay with the obligation to repay. The

POMS describe the “acknowledgement of an obligation to repay” as follows:

A loan is an advance from a lender that the borrower must repay, with or

without interest. For us to consider the [in-kind support and maintenance

(“ISM”)] as a bona fide loan, the ISM must be given and accepted based on the

understanding that it is to be repaid by the borrower.

The obligation to repay must be:

• acknowledged by both the lender and the borrower; and

• unconditional.

POMS SI 00835.482.B.3. Here, the fact that plaintiff was temporarily unable to pay did not

discharge his obligation to repay. In fact, in their affidavits, both plaintiff and his mother

avowed that they each understood plaintiff would continue to owe his mother whether or not he

was awarded SSI benefits. Tr. 53, 55.

Despite the uncontroverted statements in these affidavits, the ALJ concluded that the

affidavits “clearly suggest a conditional obligation to repay.” Tr. 15. The ALJ focused on a

statement by plaintiff that his mother agreed to let him stay in her home “on the condition” that

he pay her back.5 Tr. 15 (citing Tr. 53). While plaintiff’s affidavit contains the word

“condition,” the ALJ misconstrues its use. The condition was not that plaintiff would pay his

mother back only if he received SSI benefits, as the ALJ implies; rather, the condition was that

plaintiff could continue living in her mobile home if he agreed to pay her back as soon as he had

the means. Tr. 53.

The ALJ also found that the loan appeared to be conditional because, when the field

investigator asked plaintiff when the loan would be repaid, plaintiff responded when his “mother

is dead.” Tr. 15 (citing Tr. 57). However, plaintiff made that statement in June 2016, at a time

when his debt was increasing and he had no means to pay it down. Tr. 57. Plaintiff’s benefits

had just been reduced from $733 per month to $488 per month, which was not enough to pay his

$550 rent, let alone repay his mother.6 Tr. 96. While perhaps indelicate, plaintiff’s statement

accurately described the circumstances in existence at the time.

The ALJ further relied on the fact that plaintiff’s mother stated she was not going to kick

plaintiff out of the house due to his inability to pay. Tr. 15 (citing Tr. 37). Again, the ALJ

conflates the ability to pay with the obligation to pay. The fact that plaintiff’s mother was not

going to throw plaintiff out on the street does not negate his obligation to repay the loan.

5 Plaintiff attested: “My mother agreed to let me stay, on the condition that I pay her back the

rent payments I could not make as soon as I was able to.” Tr. 53.

6 Plaintiff’s benefits were subsequently increased back to the full $733 in September 2016. Tr.

125.

In the POMS, the Commissioner provides hypothetical examples for each of the five

elements required to establish a bona fide loan. Example 3 relates to the obligation to repay and

is instructive in this case:

Ms. Smith applies for SSI in April 2010. She alleges that her brother provides her

with food and shelter as a loan. When interviewed by the CR,7 Ms. Smith and her

brother both state that she must repay the loan of food and shelter whether or not

Ms. Smith is found eligible for SSI. In this case, the CR determines that an

obligation to repay exists because both parties confirmed that the obligation to

repay is not contingent on whether Ms. Smith’s financial circumstances improve.

POMS SI 00835.482.B.3 (emphasis in original) (footnote added). While not binding, the POMS

and the examples contained therein constitute persuasive authority. Warre v. Comm’r of Soc.

Sec. Admin., 439 F.3d 1001, 1005 (9th Cir. 2006) (“The POMS does not have the force of law,

but it is persuasive authority.”); Evans v. Berryhill, 6:16-cv-01692-SB, 2017 WL 3238236, at *7

(D. Or. Jul. 31, 2017) (relying on examples in the POMS). Here, consistent with Example 3, the

sworn statements of both plaintiff and his mother reflect that the obligation to pay was not

contingent on plaintiff’s receipt of benefits. Thus, the ALJ erred in concluding that there was no

acknowledgement of the obligation to repay.

Regarding the fourth factor, the ALJ found that “there was no clear plan or schedule for

repayment.” Tr. 15. Plaintiff reported that he “intended to pay the full $550.00/month going

forward out of my monthly SSI payments,” and that he “intended to pay some amount of the

remainder of my SSI every month to my mother to chip away at whatever remained of my debt

after my back payments were made.” Tr. 54. The ALJ concluded that plaintiff’s “statement that

he would pay his mother back only to some future unspecific date when he was able to do so

7 “The claims representative (CR) in the field office (FO) adjudicates title XVI claims and

posteligibility (PE) actions[.]” POMS GN 03930.030 available at

https://secure.ssa.gov/apps10/poms.nsf/lnx/0203930030.

does not meet the agency’s requirements that there be a clear plan or schedule for repayment.”

Tr. 15.

However, the POMS expressly states that anticipated SSI income can be used to establish

a payment plan. POMS SI 00835.482.B.4 (“IMPORTANT: Anticipated income such as Title

II, Title XVI, Veterans benefits, etc., may be used to establish a plan for a feasible repayment of

the loan.”) (emphasis in original). The POMS also states that the “repayment plan or schedule

should state the value of the food or shelter, or both, that is being borrowed and the terms of

repayment (e.g., how much will be repaid per week or per month, etc.).” Id. Here, plaintiff

identified the “total debt,” i.e., the “value of the food or shelter,” as $41,800. Tr. 53. Plaintiff

further testified that gave his mother the entirety of each of his SSI checks, i.e., $733. Tr. 128.

As such, plaintiff’s monthly repayment amount is $183 per month (plaintiff’s monthly SSI

payment of $733 minus plaintiff’s ongoing rent and utility expenses of $550). Tr. 99. Therefore,

the loan agreement includes a plan for repayment.

The Commissioner argues that there is no plan for repayment because there has never

been any agreement as to when plaintiff would start repaying the loan. Def. Br. 4, ECF #15.

However, it is clear that a repayment plan based on anticipated income would, by its nature,

result in an unspecified date for beginning repayment. And the POMS makes clear that

anticipated income may be used to establish a repayment plan. Therefore, the fact that plaintiff

and his mother agreed to a repayment plan that would begin upon his receipt of anticipated SSI

income is not a proper basis for determining there was no repayment plan.

The ALJ did not address the fifth factor, i.e., whether the plan is feasible. However, the

field officer found the plan is not feasible, Tr. 37, and the ALJ found that the field officer’s

findings were proper. Tr. 14.

Regarding the fifth factor, the POMS explains that the “case facts must show that the

individual can repay the loan using his or her own resources and income.” POMS SI

00835.482.B.5. Example 1 describes a feasible loan repayment plan based on anticipated

benefits, which mirrors the circumstances of plaintiff’s case:

Mr. Thomas applies for SSI disability benefits and the facts of his case are:

• 05/10/2010 - Mr. Thomas applies for SSI disability benefits. He alleges that

his brother provides him with food and shelter as a loan.

• During the interview, Mr. Thomas and his brother both state that the loan of

food and shelter must be repaid whether or not Mr. Thomas is found eligible for

SSI.

• Prior to completing the SSI application Mr. Thomas states if approved he

hopes to use his SSI benefits to repay the loan.

The CR determines that:

• the obligation to repay was established because both parties confirmed that

repayment was not dependent on whether Mr. Thomas’s financial situation

improved, and

• the repayment plan is feasible because Mr. Thomas intends to use anticipated

SSI benefits to pay back the loan.

Id. This example, which aligns with the facts of plaintiff’s case, demonstrates that plaintiff’s

repayment plan is feasible.

The POMS also indicates that the factors to be considered in determining feasibility

include the amount of the loan, the individual’s income, and the individual’s monthly living

expenses. Id. Example 2 applies those factors and describes a situation in which repayment

would not be feasible:

Mr. Applewhite applies for SSI in January 2010 and alleges that he has no income

or resources. He lives with his sister, who provides him with food and shelter with

a value (pro rata share) of $825 per month. He alleges that he has a loan of ISM

agreement with his sister. The repayment plan states that Mr. Applewhite will

repay the loan by:

• making monthly payments of $20 from his anticipated monthly $674 SSI

check. . .

The CR correctly determines:

• Mr. Applewhite’s repayment plan is not feasible because his SSI check amount

is not sufficient to pay his pro rata share of current household operating expenses

($825)

Id. In Example 2, the claimant’s SSI income is not sufficient to pay his current expenses—rather

than paying down the debt, the claimant is incurring further debt. That is not the case here—

plaintiff is receiving $733 in benefits per month and his rent and utilities are only $550. Based

on the rate that plaintiff is repaying the loan, at $183 per month, it will take him more than 17

years to satisfy the debt.8 Nevertheless, there is nothing in the POMS indicating repayment of a

loan is not feasible because it will take 17 years to repay. A 17-year repayment plan for a debt is

no less feasible than a 15- or 30-year mortgage.

Moreover, it is arguable that any in-kind support plaintiff received from his mother is

relevant only for the period that he was eligible for SSI benefits beginning in June 2013. Tr. 78-

79. Plaintiff’s debt to his mother started accruing as of February 2010, Tr. 53, and he accrued 40

months of debt—equaling $22,000—prior to being eligible for SSI benefits. Arguably, the court

should consider only the remaining $17,300, which constitutes the in-kind support plaintiff

received after being eligible for SSI benefits. Plaintiff would be able to pay back $17,300 in less

than eight years.9 In any event, whether the court factors in the pre-existing debt or not, neither

an eight-year nor a 17-year repayment plan is infeasible due to the length of time required for

repayment.

8 $39,300 / $183 per month = 210 months.

9 $17,300 / $183 per month = 92 months.

In sum, plaintiff met his burden of establishing the existence of a bona fide loan, and the

ALJ erred in concluding otherwise.

CONCLUSION

The decision of the Commissioner is REVERSED and REMANDED for immediate

recalculation and payment of benefits.

DATED August 23, 2019.

/s/ Youlee Yim You

Youlee Yim You

United States Magistrate Judge