[Federal Register Volume 60, Number 151 (Monday, August 7, 1995)]
[Notices]
[Pages 40222-40224]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-19366]



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SOCIAL SECURITY ADMINISTRATION
[Social Security Ruling SSR 95-4c]


Supplemental Security Income--Termination of Benefits Due to 
Excess Resources

AGENCY: Social Security Administration.

ACTION: Notice of Social Security Ruling.

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SUMMARY: In accordance with 20 CFR 422.406(b)(1), the Commissioner of 
Social Security gives notice of Social Security Ruling 95-4c. This 
Ruling is based on a decision by the U.S. Court of Appeals for the 
Third Circuit in Chalmers v. Shalala, 23 F.3d 752 (3rd Cir. 1994), 
which upheld the Secretary's decision and found that the claimant's 
equitable interest in real property was a countable resource as set out 
in the Social Security regulations. Despite her mental impairment, the 
Court of Appeals found that the claimant had the power to liquidate her 
equitable interest and apply the proceeds toward her support. 
Consequently, because her equitable interest in the real property was 
valued above the resources limit set by the supplemental security 
income program, the claimant's benefits were properly terminated.

EFFECTIVE DATE: August 7, 1995.

FOR FURTHER INFORMATION CONTACT: Joanne K. Castello, Division of 
Regulations and Rulings, Social Security Administration, 6401 Security 
Boulevard, Baltimore, MD 21235, (410) 965-1711.

SUPPLEMENTARY INFORMATION: Although we are not required to do so 
pursuant to 5 U.S.C. 552(a)(1) and (a)(2), we are publishing this 
Social Security Ruling in accordance with 20 CFR 422.406(b)(1).
    Social Security Rulings make available to the public precedential 
decisions relating to the Federal old-age, survivors, disability, 
supplemental security income, and black lung benefits programs. Social 
Security Rulings may be based on case decisions made at all 
administrative levels of adjudication, Federal court decisions, 
Commissioner's decisions, opinions of the Office of the General 
Counsel, and other policy interpretations of the law and regulations.
    Although Social Security Rulings do not have the force and effect 
of the law or regulations, they are binding on all components of the 
Social Security Administration, in accordance with 20 CFR 
422.406(b)(1), and are to be relied upon as precedents in adjudicating 
cases.
    If this Social Security Ruling is later superseded, modified, or 
rescinded, we will publish a notice in the Federal Register to that 
effect.


[[Page 40223]]

(Catalog of Federal Domestic Assistance, Program 96.006 Supplemental 
Security Income)

    Dated: July 27, 1995.
Shirley S. Chater,
Commissioner of Social Security.
Sections 1611(a)(3)(B) and 1613 of the Social Security Act (42 U.S.C. 
1382(a)(3)(B) and 1382b) Supplemental Security Income--Termination of 
Benefits Due to Excess Resources

Chalmers v. Shalala, 23 F.3d 752 (3rd Cir. 1994)

20 CFR 416.1201(a)-(c)

    The claimant had been receiving supplemental security income 
(SSI) benefits based on disability because of schizophrenia since 
April 1978. In September 1980, she jointly inherited property with 
her siblings and subsequently formed a partnership with them to 
manage the property, valued above the countable resources limit 
allowed by the SSI program.
    In November 1989, the Secretary of Health and Human Services 
notified the claimant that her SSI benefits were being terminated 
because she owned countable resources in excess of the $2,000 limit 
applicable to an individual.
    The claimant requested a hearing and the administrative law 
judge (ALJ) found that the claimant's interest in the property was 
not a resource because she was not its sole owner and, therefore, 
could not convert the property to cash for her own support and 
maintenance. However, the ALJ held that the claimant's interest in 
the partnership was a resource because she had the power to dispose 
of her interest in the partnership and apply the proceeds toward her 
support. On review, the Appeals Council concluded that the claimant 
``has not shown that the power to partition is forfeited based on 
the mental capacity to exercise the right to partition. Therefore, 
the claimant's share of the land or partnership is countable.''
    The claimant filed a civil action challenging the Secretary's 
termination of benefits. The district court, without reaching the 
question of whether Chalmers' equitable interest in the property was 
a resource, held that her interest in the partnership was a resource 
under the Secretary's regulations because she had the legal right to 
liquidate it. On appeal, the U.S. Court of Appeals for the Third 
Circuit, agreeing with the Secretary, held that the regulatory 
requirement contained in 20 CFR 416.1201(a) that an individual have 
the ``power'' to liquidate property in order for it to be considered 
a resource, means the legal authority to do so. Thus, the claimant's 
alleged mental impairment that purportedly would result in a lack of 
actual power to make decisions regarding the liquidation of the 
property she owned was irrelevant to the determination whether that 
property was her resource. Further, because the claimant could 
dissolve the partnership and regain her equitable interest in the 
real property, which could thereafter be liquidated and applied to 
her support, her interest in the real property was a resource.

Sloviter, Chief Judge

I

    This is an appeal from an order of the district court affirming a 
decision of the Secretary of Health and Human Services to terminate the 
Supplemental Security Income (SSI) benefits that appellant Fannie 
Chalmers had been receiving since April, 1978. Because Chalmers is 
schizophrenic, she has been unable to care for herself and lives with 
her sister. In September, 1980, Chalmers's father died intestate, and 
she and her three siblings jointly inherited four houses on contiguous 
parcels of land in Eden, North Carolina, appraised at $47,000, which 
were encumbered by a lien in the amount of $23,000.1 They also 
inherited a 7.5 acre parcel of unimproved land in a different county in 
North Carolina worth $3,000.

    \1\ The Administrative Law Judge and the Appeals Council refer 
to the value as $49,000. The difference is not significant for our 
purpose. The estate also contained personal property but it was ``of 
nominal value.''
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    Chalmers's three siblings desire to keep the Eden properties 
because they wish to retire there ultimately. Chalmers's brief contends 
that because of her illness it is impossible to ascribe to her any 
intentions with respect to the property. At the suggestion of their 
North Carolina counsel, Chalmers and her siblings formed a partnership, 
C & P Land Company, to manage the properties and pay the mortgage from 
the rents collected. In order not to trigger the outstanding debt, they 
did not change the title to the properties which is in the name of 
Chalmers's father.
    Each of the four siblings, including Chalmers, signed an agreement 
conveying his or her one-quarter equitable interest in the properties 
to the partnership in return for a legal interest in the partnership. 
The agreement provides that all four partners will share equally in the 
profits and losses and, significant for the issue on appeal, that the 
partnership may be dissolved at any time by any of the partners, which 
shall result in the liquidation of the partnership.
    C & P Land Company depreciates the rental properties for income tax 
purposes, and, pursuant to the partnership agreement, these deductions 
are allocated to each partner. A 1981 letter from the attorney to 
Chalmers's sister states: ``I doubt * * * that you will receive much as 
income from the property. The major advantage to you will be the 
depreciation for tax purposes. The property is a tax shelter for you.''

II

    Subchapter \2\ XVI of the Social Security Act provides for payments 
to disabled persons of limited income and resources, subject to certain 
eligibility requirements. Cannuni v. Schweiker, 740 F.2d 260, 263 (3d 
Cir.1984) (citing 42 U.S.C. Sec. 1382b(a)). The limit applicable to 
Chalmers's resources is $2,000. 42 U.S.C. Sec. 1382(a)(3)(B) (1988). 
The statute does not define ``resources,'' but the Secretary has 
promulgated regulations providing that:

    \2\ The court is referring to Title XVI of the Social Security 
Act. [Ed. Note.]
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    (a) Resources; defined. For purposes of this subpart L, resources 
means cash or other liquid assets or any real or personal property that 
an individual (or spouse, if any) 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 (or 
spouse).
* * * * *
    (b) Liquid resources. Liquid resources are cash or other property 
which can be converted to cash within 20 days * * *
    (c) Nonliquid resources. (1) Nonliquid resources are property which 
is not cash and which cannot be converted to cash within 20 days. * * * 
Examples of resources that are ordinarily nonliquid are * * * buildings 
and land.

20 C.F.R. 416.1201(a)-(c) (1993) (emphasis added).
    Chalmers was notified by the Secretary in November 1989 that her 
SSI benefits were being terminated because she owned resources in 
excess of the limit of $2,000, i.e, the property she had inherited from 
her father. Chalmers requested a hearing and the matter came before an 
administrative law judge (ALJ). The ALJ found that Chalmers's interest 
in the property was not a resource because she was not its sole owner 
and therefore could not convert the property to cash for her own 
support and maintenance. However, the ALJ held that Chalmers's interest 
in the C & P partnership was a resource because she had the power to 
dispose of her interest in the partnership. On review, the Appeals 
Council concluded that Chalmers ``has not shown that the power to 
partition is forfeited based on the mental capacity to exercise the 
right to partition. Therefore the claimant's share of the land or 
partnership is countable.'' 

[[Page 40224]]

    Chalmers filed an action in district court for review of the 
Secretary's decision. The court held that Chalmers's interest in the C 
& P partnership was a resource under the regulations because she had 
the legal right to liquidate it. The district court did not reach the 
question whether Chalmer's equitable interest in the property was a 
resource, although it said that ``it would appear that [it], too, is a 
`nonliquid resource' under the Secretary's regulation.'' Chalmers v. 
Sullivan, 818 F.Supp. 98, 102-103 (D.N.J.1993). Chalmers appeals.
    We accord considerable deference to the Secretary's interpretation 
of the SSI statute and its regulations. Beatty v. Schweiker, 678 F.2d 
359, 360 (3d Cir.1982). ``Indeed, we will uphold the Secretary's 
interpretation of the regulations `unless it is plainly erroneous or 
inconsistent with the regulation[s].' '' Id. (quoting Bowles v. 
Seminole Rock & Sand Co., 325 U.S. 410, 414, 65 S.Ct. 1215, 1217, 89 
L.Ed. 1700 (1945)).
    Chalmers concedes on appeal, as indeed she must under the facts, 
that: ``She had the right to terminate the partnership, C & P Land 
Company. She could have legally sold or otherwise conveyed her \1/4\ 
interest in the real estate, subject to the rights of her siblings, as 
cotenants. She even had the legal right to bring an action to partition 
the property as suggested by the Social Security Appeals Council.''
    She argues, however, that although she has the ``right'' to 
liquidate her interests, her disability renders her without the 
requisite ``power'' to do so. This argument misconstrues the meaning of 
the word ``power'' as used in the regulations. It means not only ``a 
mental or physical ability or aptitude,'' as Chalmers argues, but also 
``legal authority,'' as the Secretary implicitly uses the word. See 
Webster's Third New International Dictionary 1778-79 (1964). We do not 
believe that the word ``power'' was used in the regulations as limited 
to ``mental or physical ability.'' Moreover, it is likely that many 
disabled individuals receiving SSI benefits lack the mental or physical 
ability to manage their own resources, and such an interpretation would 
render the provision meaningless. Thus, we cannot say that the 
Secretary's interpretation of ``power'' as ``legal authority'' is 
plainly erroneous, for it is indeed the more sensible construction.
    Chalmers argues further that we should interpret the regulatory 
language ``right, authority or power'' in the conjunctive instead of 
the disjunctive. We see no basis to construe the disjunctive ``or'' in 
any way other than its plain meaning, see Herron v. Heckler, 576 
F.Supp. 218, 222-23 n.-2 (N.D.Cal.1983) (declining to construe ``and'' 
as ``or'' in other SSI regulations), which is the construction adopted 
by HHS. The cases relied upon by appellant's counsel are simply 
inapposite.\3\

    \3\ For example, in De Sylva v. Ballentine, 351 U.S. 570, 573-
74, 76 S.Ct. 974, 976, 100 L.Ed. 1415 (1956), the Court read the 
``or'' in the conjunctive, but the statute in question, the 1909 
Copyright Act, was ``hardly unambiguous'' and the legislative 
history of the statute suggested that the use of ``or'' may have 
been a matter of ``careless usage.''
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    We turn next to the question whether Chalmers's interest in the 
property is a resource for SSI purposes. The principal definition 
section of the regulation explicitly states that ``resources means * * 
* real * * * property.'' 20 C.F.R. Sec. 416.1201(a) (1993). Similarly, 
20 C.F.R. 416.1201(a)(1) also refers to property, providing that ``[i]f 
the individual has the right, authority or power to liquidate the 
property, or his share of the property,'' it is defined as a resource. 
Chalmers concedes that she can sell ``her \1/4\ interest in the real 
estate'' and can also ``bring an action to partition the property.'' We 
therefore conclude that the fact that Chalmers had the legal right to 
liquidate her interest in the inherited property qualifies it as a 
resource under the Secretary's regulations.\4\

    \4\ Also, the definition of nonliquid resources explicitly 
refers to ``property'' and, as the district court noted, offers 
``buildings and land'' as examples of such resources. 20 C.F.R. 
Sec. 416.1201(c) (1993). See Chalmers, 818 F.Supp. at 102.
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    In essence Chalmers argues that it is not ``sensible'' or 
``advantageous'' to partition the property because lawyer's fees and 
costs will consume its net worth. Although that is not an unreasonable 
position, it is not one that finds support in the regulation. Thus, we 
are not free to read into the statute or the regulation a requirement 
that is not there.
    Our conclusion is buttressed by legislative history regarding the 
definition of resources. The House Report to the Social Security Act 
provides that:

    Property not used in the operations of a trade or business and 
which does not provide a reasonable return should clearly be 
included as resources. Assets such as buildings or land not used as 
the individual's abode (which is excluded as described above) which 
are not readily convertible to cash must be disposed of within a 
time limit prescribed by the Secretary of Health, Education, and 
Welfare.

    H.R.Rep. No. 231, 92nd Cong., 2d Sess., reprinted in 1972 
U.S.C.C.A.N. 4989, 5140. We find this history dispositive. The property 
at issue is not used in the operations of a trade or business or as the 
individual's abode, and it does not provide a reasonable return. On the 
contrary, its ``major advantage'' is ``as a tax shelter.'' Congress 
clearly intended that such ``buildings and land'' ``must be disposed 
of'' ``if they were not readily convertible to cash.''
    Although we are sympathetic to Chalmers's disability, the record 
does not establish unequivocally that she cannot effectuate her legal 
rights. An affidavit filed by her psychiatrist states that it would be 
``impossible for Ms. Chalmers to retain one attorney and participate in 
and discuss legal matters,'' but it is also a matter of record that 
Chalmers has been represented by an attorney at each stage of these 
proceedings and that she signed the partnership agreement to form the C 
& P Land Company.
    Finally, Chalmers's reliance on Cannuni v. Schweiker, 740 F.2d at 
264 (3d Cir.1984), is misplaced. In Cannuni, we were asked whether a 
multiple-party bank account and certificates of deposit were resources 
sufficient to disqualify a disabled son for SSI benefits. Because we 
determined that the claimant did not have the legal right to withdraw 
the funds for his own support, we held that the property could not be 
considered resources for SSI purposes. Unlike the claimant in Cannuni, 
Chalmers has the right to liquidate her interest in order to apply the 
proceeds toward her support. While we recognize the difficulty she may 
have in exercising her rights, we cannot accept her argument that she 
need not do so because ``there are many situations in which the 
exercise of all of one's legal rights is not the most sensible and 
advantageous course.'' For all of the foregoing reasons, the order of 
the district court will be affirmed.

[FR Doc. 95-19366 Filed 8-4-95; 8:45 am]
BILLING CODE 4190-29-P