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Bernstein v. Ribicoff

January 8, 1962

BENJAMIN BERNSTEIN, APPELLANT,
v.
ABRAHAM A. RIBICOFF, SECRETARY OF HEALTH, EDUCATION AND WELFARE, APPELLEE.



Author: Mclaughlin

Before BIGGS, Chief Judge, and McLAUGHLIN and FORMAN, Circuit Judges.

McLAUGHLIN, Circuit Judge.

The district court sustained administrative decision requiring refund of Social Security benefits by plaintiff and latter appeals.

Appellant was born on September 15, 1886. He worked as a law clerk in his brother's law office for a number of years. He was admitted to the bar himself in 1950 when he was sixty-four years old. He has practiced law as a self-employed lawyer in Philadelphia since September 1951. During that period he has been an investing partner in a knitting mill. In 1951 he was awarded Social Security benefits of $68.50 a month effective September 1951. By the 1954 amendments to the Act these were increased to $88.50 monthly, effective September 1, 1954. As of the latter date appellant's wife was awarded benefits in the sum of $44.30 a month. Both benefits were paid during 1955 and 1956. These were recomputed in 1957 to total $162.80 monthly, effective July 1956.

Thereafter the Bureau determined appellant had received income from a trade or business in which he had rendered substantial services in excess of $2,080 during each of the years 1955 and 1956 and that he was not entitled to benefits for any month of either of those taxable years except for August 1956 when he was on vacation. Appellant and his wife were found to have been overpaid the sum of $1,593.60 for 1955 and $1,430.80 for 1956.

The Social Security Administration Referee upheld the deductions for 1956 but denied them for 1955. The basis of the latter finding was that since appellant's 1955 net income from his law practice in which he had rendered substantial service in all months was less than $1200*fn1 his benefits were not subject to deduction although he had received income of more than $30,000 that year from his knitting mill interest. The Appeals Council sustained the Referee on his 1956 deductions. Regarding the 1955 benefits, the Council held these properly subject to deductions. Appellant brought that decision to the district court for review under Section 205(g) of the Act (42 U.S.C.A. § 405(g)). Both sides moved for summary judgment. It was conceded that no substantial question of fact existed and that summary judgment procedure should be followed. The questions of law were briefed and argued with reference to appellant alone. The district court in an admirable opinion upheld the deductibility of both taxable years.*fn2 We think the decision sound.

Though appellant's first two points were passed upon by us in Price v. Flemming, 280 F.2d 956 (1960), cert. den. 365 U.S. 817, 81 S. Ct. 698, 5 L. Ed. 2d 695 (1961), we deem it helpful to again discuss them in some detail.

Prior to the 1954 amendments, income derived from "the performance of service by an individual in the exercise of his profession as a * * * lawyer * * *" was not applicable in determining earnings under the Act. 42 U.S.C.A. (1952 ed.) §§ 411, 403(b). In 1954, the Act was amended (42 U.S.C.A. § 403) inter alia to make deductions applicable "* * * from any payment or payments under this title, to which an individual is en-entitled * * *" and charging such individual "* * * with any earnings under the provisions of subsection (e) of this section * * *". Section 403(b) (1). (Emphasis supplied). And 403(e) (4) (B), outlining the method of determining an individual's net earnings from self-employment, was amended to specifically eliminate the application thereto of Section 211(c) (5) which, as above noted, had made earnings of lawyers self-employed in their profession, not applicable in determining earnings from which deductions should be made under the Act.

Appellant urges that the 1954 amendments were intended to operate prospectively. Disclaiming any attack on the constitutionality of the amendments, he contents himself with the assertion that the administrative retroactive interpretation of them is at fault.

As has been already seen, the 1954 amendments specifically apply the new deduction provisions to all future benefit payments irrespective of the date an individual became entitled to benefits. The new deduction provisions which affect our problem are the result of amending (b) (1) and (e) of Section 203. Concerning subsection (b) (1) the Act states that the 1954 amendment "shall be applicable in the case of monthly benefits under title II of the Social Security Act for months in any taxable year (of the individual entitled to such benefits) beginning after December 1954. * * *" 68 Stat. 1077, 42 U.S.C.A. § 403 note. So, by the definitive language of the Act itself the 1954 deduction amendments apply to all monthly benefits payable after January 1, 1955 regardless of their inception. The legislative history completely supports that view. House Report 1698, 83rd Cong. 2nd Sess. p. 70. House Conf.Report 2679, 83rd Cong. 2nd Sess., U.S.C.Cong. and Admin.News, p. 3780. It follows that the administrative finding to this effect is merely the proper acceptance of and adherence to the statute. House Report 1698, supra, p. 21 makes it very clear that the Congressional action was taken in order to end the unfairness of this portion of the Social Security Act which had enabled full benefits to be drawn by individuals working in non-covered employment and self-employment regardless of the amounts received from those sources. The amendment was remedial. It caused all income of an individual to be considered on the question of benefits. It thereby deliberately not only removed an unwitting source of favoritism from the Act respecting individuals qualifying for benefits after January 1, 1955 but stopped any further benefits of this type which emanated from earlier qualification.

As we have indicated the identical question of whether the 1954 amendments affected benefits where the individual has established his eligibility prior to January 1955 was presented in Price v. Flemming, supra. Appellant participated in the appeal to this court of that suit as amicus curiae. Construing the amendments noted above, we there held in effect that while the statute could have been more precise it did make deductions applicable from any payments to which the person was entitled; it charged that person with any earnings under Section 403, Subsection (e) and in determining self-employment net earnings, it dropped the self-employed practice of law from the exclusions to the definition of self-employment thus making earnings from that source available for deductions from benefits. Reexamination of the amendments confirms that view.

Appellant next argues that, what he describes as the administrative interpretation of the 1954 amendments, deprived him of vested property rights, contrary to the Fifth Amendment. He attacks the Price decision as erroneously relying on Flemming v. Nestor, 363 U.S. 603, 80 S. Ct. 1367, 4 L. Ed. 2d 1435 (1960). He repeats the distinctions between the facts in the latter and Price and quotes several portions of both the majority and dissenting opinions, commenting thereon. He fails utterly to mention the opinion's controlling general language characterizing the interest of an employee covered by the Act as "non contractual" (p. 610, 80 S. Ct. p. 1372) and (pp. 610-611, 80 S. Ct. pp. 1372-1373) stating that "To engraft upon the Social Security system a concept of 'accrued property rights' would deprive it of the flexibility and boldness in adjustment to ever-changing conditions which it demands. * * * It was doubtless out of an awareness of the need for such flexibility that Congress included in the original Act, and has since retained, a clause expressly reserving it '[the] right to alter, amend, or repeal any provision' of the Act. § 1104, 49 Stat. 648, 42 U.S.C. § 1304, 42 U.S.C.A. § 1304. That provision makes express what is implicit in the institutional needs of the program. See Analysis of the Social Security System, Hearings before a Subcommittee of the Committee on Ways and Means, House of Representatives, 83d Cong., 1st Sess., pp. 920-921. It was pursuant to that provision that § 202(n) was enacted."

The Court then specifically held:

"We must conclude that a person covered by the Act has not such a right in benefit payments as would make every defeasance of 'accrued' interests violative of the ...


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