SSR 65-24c: SECTIONS 204(a) and (b). -- OVERPAYMENT -- RECOVERY OR ADJUSTMENT -- "DEFEAT THE PURPOSE OF TITLE II" -- "AGAINST EQUITY AND GOOD CONSCIENCE"

20 CFR 404.502, 404.506, 404.508, and 404.509

SSR 65-24c

GETTINGER v. CELEBREZZE, 218 F.Supp. 161 (S.D.N.Y. 1963). Affirmed

on decision below, 330 F.2d 959 (2d Cir., 1964).

FEINBERG, D. J.

Plaintiff, a banquet waiter, has brought this action to review a final

decision of the Secretary of Health, Education and Welfare that denied

payment to plaintiff of amounts previously recovered from him by the

Social Security Administration ("SSA"). The recovery was made because

plaintiff failed to report his full 1958 earnings to the SSA, and he

consequently received excessive social security benefits in that year. In

accordance with 42 U.S.C. § 405(g), defendant has filed a certificate copy

of the transcript of the record, including the evidence upon which the

findings and decision complained of are based. Defendant now moves for

judgment on the pleadings under Rule 12(c) Fed. R.Civ. P., 28 U.S.C. After

examination of the record, defendant's motion is granted, ant the decision

of the Secretary is affirmed.

In 1958, plaintiff earned $1,235 in wages and $1,336 in tips from his

employment as a waiter, all of which he reported on his income tax

return. [1] In that year, he also

received $70.50 per month in social security benefits. * * * The Social

Security laws ("the Act") [2] at

the time provided that a person otherwise entitled to benefits would lose

them for a particular month if he earned over $1,200 for the whole year

and was charged with earnings in that month of an amount specified in the

Social Security Regulations. [3] In 1959, plaintiff reported to SSA as earnings for 1958 only the wages

portion of his remuneration, and he therefore was chargeable with earnings

over the specified amount for only one month of 1958. * * * SSA

subsequently determined that plaintiff's tips were also

earnings

e year

and was charged with earnings in that month of an amount specified in the

Social Security Regulations. [3] In 1959, plaintiff reported to SSA as earnings for 1958 only the wages

portion of his remuneration, and he therefore was chargeable with earnings

over the specified amount for only one month of 1958. * * * SSA

subsequently determined that plaintiff's tips were also

earnings. [4] With tips included

as earnings, plaintiff was chargeable with earnings over the specified

amount in each month of 1958, and SSA therefore determined that the 1958

benefits paid to him should not have been paid. * * * SSA also determined

that plaintiff was without fault in his reporting to SSA and his receipt

of 1958 benefits because he mistakenly believed that tips were not

earnings for SSA purposes. * * * SSA recovered these overpayments by

withholding from April 1961 to March 1962 $40 per month of plaintiff's $80

per month [5] social security

benefits admittedly due him.

The issue raised on review is whether the recovery by SSA of overpayments

of plaintiff either (1) "defeats the purpose" of the Act, or (2) is

"against equity and good conscience," since the Act provides that when the

recipient is without fault, "there shall be no . . . recovery [of

overpayments] by the United States" in either of those two instances. 42

U.S.C. § 404(b). Social Security Regulations at the time of plaintiff's

hearing before the Hearing Examiner defined these statutory concepts as

follows:

of the Act, or (2) is

"against equity and good conscience," since the Act provides that when the

recipient is without fault, "there shall be no . . . recovery [of

overpayments] by the United States" in either of those two instances. 42

U.S.C. § 404(b). Social Security Regulations at the time of plaintiff's

hearing before the Hearing Examiner defined these statutory concepts as

follows:

As to whether recovery by SSA would defeat the purposes of the Act, the

record shows that plaintiff originally estimated his monthly expenses as

approximately $204. * * * Although plaintiff later raised his estimate to

approximately $363, * * * the original determination of the SSA relied

upon the $204 amount. * * * Plaintiff's income was $2,571 in 1958 ($215

per month)(, and $3,033 in 1959 ($253 per month), both exclusive of

benefits. * * * Plaintiff indicated that he sometimes received

unemployment benefits when he was not working, but he did not specify any

amount. * * * He estimated that his 1960 income would be higher than his

1959 income, and he estimated that his 1961 income would be about $253 per

month. * * * He also had a $2,000 savings account at the time the

overpayments were recovered. * * * The Examiner found that the evidence

before him did not establish that recovery of the overpayments defeated

the purposes of the Act. [7] Under the applicable standard of

review, [8] I cannot say that

there is not substantial evidence to support this finding or the

conclusion implicit in it that, at the time of the deductions by SSA,

plaintiff was not largely or solely dependent on SSA benefits for the

necessities of life.

efore him did not establish that recovery of the overpayments defeated

the purposes of the Act. [7] Under the applicable standard of

review, [8] I cannot say that

there is not substantial evidence to support this finding or the

conclusion implicit in it that, at the time of the deductions by SSA,

plaintiff was not largely or solely dependent on SSA benefits for the

necessities of life.

As to whether recovery by SSA would be against equity and good

conscience, plaintiff first contends that the deduction of $40 per month

from his benefits, commencing in April 1961, required him to relinquish

the valuable right of being free to choose whether to do "little or no

work" at his advanced age. [9] This argument is actually another way of urging that plaintiff was

dependent upon the $40 per month benefits being deducted so that the

deduction compelled him to go to work. However, this contention is

inconsistent with the factual conclusion of the Examiner, discussed above,

that recovery of the overpayments did not defeat the purposes of the Act.

It should be noted that the evidence in the record indicates that

plaintiff voluntarily worked up to March 1961, prior to any formal notice

from SSA that any deductions would be made from his monthly benefits.

Plaintiff introduced no evidence at all before the Examiner to establish

that his economic circumstances caused him to work, commencing with April

1961, because of the deduction of $40 a month. In vies of the evidence in

the record as to plaintiff's economic situation, plaintiff's argument on

this point is not well

taken. [10]

hat any deductions would be made from his monthly benefits.

Plaintiff introduced no evidence at all before the Examiner to establish

that his economic circumstances caused him to work, commencing with April

1961, because of the deduction of $40 a month. In vies of the evidence in

the record as to plaintiff's economic situation, plaintiff's argument on

this point is not well

taken. [10]

Plaintiff's next contention is that, commencing in December 1961, when

(according to the

complaint) [11] he was unable

to find employment because of his advanced age, he was unable to maintain

himself on the reduced social security benefits and was obliged to borrow

from relatives as well as draw money from a personal burial fund. This,

according to plaintiff, was a change of position for the worse within the

meaning of the Regulation quoted above. This appears to be an incorrect

construction of the Regulation and the law, which require a change of

position for the worse either "by reason of the overpayment" or in

reliance on action or inaction by

SSA. [12] In this case,

overpayments were concededly made in 1958, and plaintiff has made no

allegation that he changed his position in any way because of those

overpayments. [13] Moreover,

plaintiff has not alleged that he has done anything in reliance on any

action or inaction of SSA. He has alleged that, as a result of SSA

deductions in 1961 and 1962, he was compelled to take certain action, such

as borrowing money. However, I do not believe that this is reliance upon

SSA action or inaction which estops SSA from recovering overpayments.

Therefore, plaintiff's position that SSA cannot recover the overpayments

is not well taken.

ance on any

action or inaction of SSA. He has alleged that, as a result of SSA

deductions in 1961 and 1962, he was compelled to take certain action, such

as borrowing money. However, I do not believe that this is reliance upon

SSA action or inaction which estops SSA from recovering overpayments.

Therefore, plaintiff's position that SSA cannot recover the overpayments

is not well taken.

Ruling against social security claimants in these cases is disquieting

because the amounts involved are small, the circumstances of claimants

usually engender sympathy, and frequently they are without counsel in the

administrative proceeding. [14] However, under the applicable law and standard of review, defendant's

motion for judgment on the pleadings should be granted. So ordered.

[1] The court's footnote

references to the Transcript of Record filed by the Secretary have been

omitted. Other numbered footnotes herein are those of the court. Footnotes

designated by letter have been added. [Ed.]

[2] 42 U.S.C.A. §§ 1301-1370.

(Amended in 1962 to extend to § 1400.)

[3] 42 U.S.C. §§ 403(b)(1),

403(c); 20 C.F.R. § 403.503(a)(1) (1961). The statute was amended in 1960

to increase allowable earnings. 42 U.S.C. § 403(f) [formerly §403(e)].

[4] * * * see 20 C.F.R. §

404.1027(k)(3) (1961).

[5] By 1961, plaintiff's monthly

benefits had been raised from $70.50 to $80.00 per month. * * *

[a] Amended effective September 4, 1963, to read as follows:

§ 404.508 Defeat the purpose of Title II. -- "Defeat the purpose of Title

II," for purposes of this subpart, means defeat the purpose of benefits

under this title, i.e., to deprive a person of income required for

ordinary and necessary living expenses. This depends upon whether the

person has an income or financial resources sufficient for more than

ordinary and necessary needs, or is dependent upon all of his current

benefits for such needs. [Ed.]

[6] Amended effective February

8, 1962, to read as follows:

purpose of benefits

under this title, i.e., to deprive a person of income required for

ordinary and necessary living expenses. This depends upon whether the

person has an income or financial resources sufficient for more than

ordinary and necessary needs, or is dependent upon all of his current

benefits for such needs. [Ed.]

[6] Amended effective February

8, 1962, to read as follows:

§ 404.509 "Against equity and good conscience"; defined. -- August equity

and good conscience" means that adjustment or recovery of an overpayment

will be considered inequitable if the individual (regardless of his

financial circumstances) has, by reason of the overpayment relinquished a

valuable right (illustrated by examples (1) and (2) below) or changed his

position for the worse (illustrated by examples (3) and (4) below).

[Examples (1)-)4) are not pertinent to this decision. -- Ed]

[7] * * * The crucial findings

of the Examiner were:

"The evidence, however, does not establish that recovery would cause

hardship to the claimant nor that it would be against equity and good

conscience or defeat the purposes of Title II of the Social Security Act.

It is noted that claimant's financial questionnaire reports monthly income

considerably in excess of his expenditures."

[8] 42 U.S.C. § 405(g); Kerner v. Flemming , 283 F.2d 916 (2 Cir. 1960); Adams v.

Flemming , 276 F.2d 901 (2 Cir. 1960).

[9] Complaint, para. 7.

aimant nor that it would be against equity and good

conscience or defeat the purposes of Title II of the Social Security Act.

It is noted that claimant's financial questionnaire reports monthly income

considerably in excess of his expenditures."

[8] 42 U.S.C. § 405(g); Kerner v. Flemming , 283 F.2d 916 (2 Cir. 1960); Adams v.

Flemming , 276 F.2d 901 (2 Cir. 1960).

[9] Complaint, para. 7.

[10] This case is clearly

distinguishable from the situation in Kilby v. Ribicoff, 198 F.Supp. 184

(E.D. Pa. 1961), where the action of SSA in withholding benefits compelled

plaintiff to go to work and earn money which was later held by SSA to

disqualify her from benefits wrongfully withheld in the first place. In Kilby, the Court held that this was "against equity and good

conscience." Id. at 187. In that case, it was clear on the facts

that plaintiff was dependent upon the benefits, and that SSA, in effect,

required plaintiff to do something which it then used as a defense to her

claim, clearly inequitable under any circumstances.

[11] Para. 7.

[12] The Regulation quoted in

the text (at p. 4 above) has recently been amended to provide further

examples of the meaning of change of position "for the worse." 20 C.F.F.

404.509 (1962).

[13] Id., Examples 3,

4.

[14] Although claimant here

did not have counsel at the hearing before the Hearing Examiner, the

Request for Review was apparently drafted by someone with legal training.

* * * In this Court, claimant has been represented by the Legal Aid

Society of New York.