The opinion of the court was delivered by: SWEET
This is an action in which the plaintiffs, Rhonda and Wilhemina Watson, seek to recover certain disability benefits paid for their benefit by Joseph Califano, The Secretary of Health Education and Welfare ("the Secretary"), to their father, James Watson, as their representative payee. Plaintiffs have moved, pursuant to Rule 56, Fed.R.Civ.P., for summary judgment. Defendant has cross-moved, pursuant to Rule 12(c), Fed.R.Civ.P., for judgment on the pleadings.
Plaintiffs Rhonda and Wilhemina Watson are the minor children of Ella Watson and James Watson. On July 7, 1971, James Watson filed an application for Social Security disability insurance benefits. He was found eligible as of June, 1971. Three weeks later, on July 28, 1971, James Watson filed an application for benefits for his children John, Donald, Rhonda, and Wilhemina, and a granddaughter, Wendy Cruse. He also applied to be appointed the representative payee for the children. On his application, James Watson stated that his wife had left home, that he was not in custody of his children, but that he was visiting them daily.
Neither Wilhemina Watson, nor Rhonda Watson, the plaintiffs, nor their mother Ella Watson knew that James Watson had filed an application for himself or his children. They also did not know of their potential or actual eligibility for Social Security benefits until April, 1976.
Plaintiffs and their siblings were found eligible for Social Security benefits on their father's account as of June, 1971. James Watson was appointed representative payee to receive benefits on their behalf, and received benefits as the representative payee from October, 1971 until April, 1976. During that period of time, Mr. Watson did not have custody of the plaintiffs and they never received any of the benefits paid out in their behalf on the account of James Watson.
During the entire period from October, 1971 to April, 1976, the defendant Secretary never requested an accounting from James Watson concerning his use of the benefits paid to him as representative payee for his children. In fact, the Secretary never investigated in any way Watson's use of the funds paid to him as representative payee until after Ella Watson's application in April, 1976.
This result obtained because in 1971, the Secretary suspended the Claims Manual procedures for requiring annual accountings of representative payees in an effort to reduce work load. The suspension of the accounting system was effected through temporary Claims Manual transmittals and was never published in the Federal Register or the Social Security Rulings. The suspension of accounting lasted, in some form, throughout the period relevant to this law suit, that is October, 1971 to April, 1976. During that time the accounting system was totally suspended and all supervision of representative payees (except certain institutions) was cut off.
Plaintiffs assert that the jurisdiction of this court is based on 42 U.S.C. § 405(g). Although this section confers jurisdiction, it does not waive sovereign immunity or confer a substantive right. DeLao v. Califano, 560 F.2d 1384, 1390 (9th Cir. 1977); Johnson v. Mathews, 539 F.2d 1111, 1123 (8th Cir. 1976). To recover the monies allegedly improperly paid to James Watson, there must be a statute, which when read together with § 405(g), creates a "substantive right to recover money damages from the United States." See United States v. Testan, 424 U.S. 392, 398, 96 S. Ct. 948, 953, 47 L. Ed. 2d 114 (1976).
Alternatively, plaintiffs must show that the Secretary's conduct creates an exception to the sovereign immunity doctrine because it was (1) beyond his statutory powers or (2) performed pursuant to an unconstitutional statute or in an unconstitutional manner. Dugan v. Rank, 372 U.S. 609, 621-22, 83 S. Ct. 999, 1006-07, 10 L. Ed. 2d 15 (1963).
Plaintiffs rely on 42 U.S.C. § 402(j)(1) to recover the benefits due during the twelve month period prior to their mother's application in April, 1976. That section provides that:
. . . an individual who would have been entitled to a benefit . . . had he filed application therefor prior to the end of such month shall be entitled to such benefit for such month if he files application therefor prior to the end of the twelfth month immediately succeeding such month. Any benefit under this subchapter for a month prior to the month in which the application is filed shall be reduced, to any extent that may be necessary, so that it will not render erroneous any benefit which, before the filing of such application, the Secretary has certified for payment for such prior month.
The purpose of the provision for reducing benefits is "(to) eliminate unnecessary work in adjusting payments which were correct when made . . . ." 1946 U.S.Code Cong.Serv. pp. 1510, 1542 (emphasis added). Therefore, if it can be shown that the payments during that period were incorrect when made, plaintiffs may recover under this section.
Plaintiffs assert a separate statutory claim based upon the prior application made on their behalf by James Watson in an attempt to recover benefits paid since 1971. They rely on 42 U.S.C. § 404(a)(2) which provides:
(a) Whenever the Secretary finds that more or less than the correct amount of payment has been made to any person under this subchapter, proper adjustment or recovery shall be made under ...