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July 25, 1980

FRANCES KATZ, Plaintiff, against PATRICIA ROBERTS HARRIS, Secretary of Health & Human Services, Defendant.

The opinion of the court was delivered by: CONNER


In this action, plaintiff challenges the determinations of the Secretary of the Department of Health and Human Services ("Secretary") that she was not entitled to receive Supplemental Security Income ("SSI") payments during the period October 1975 to September 1977; that by receiving SSI payments during this period plaintiff was overpaid in the amount of such benefits; and that she must repay overpayments made during most of the months prior to April 1977 and in each of the months from April 1977 to September 1977. Review is sought pursuant to 42 U.S.C. §§ 1383(c)(3) and 405(g).


 Plaintiff Frances Katz is a seventy-three-year-old woman who lives on the Lower East Side of Manhattan with her thirty-three-year-old daughter, Natalie Katz. Her daughter suffers from Downs Syndrome and requires constant care, which plaintiff provides.

 Both plaintiff and her daughter began receiving SSI as of the program's effective date, January 1, 1974, due to their automatic conversion from the New York State program for Aid to the Aged, Blind and Disabled ("AABD"). 42 U.S.C. §§ 1381-1385 (1970). The Social Security Administration designated plaintiff representative payee for her daughter.

 The central issue in this action is whether plaintiff's accumulated savings from October 1975 to September 1977 disentitled her from receiving SSI benefits between those two dates. During that time, plaintiff maintained several bank accounts consisting of funds accumulated entirely from savings of SSI benefits. In addition to savings accounts in her name, plaintiff maintained two fiduciary accounts consisting of savings from her daughter's SSI benefits: between May and August 1976, a trust account totalling approximately $ 600; and from mid-May 1977 to September 1977, an account in plaintiff's name as representative payee for her daughter, also totalling approximately $ 600. In addition, plaintiff owned a pre-paid, pre-need burial contract which was revocable for a refund of $ 700 for her daughter's benefit.

 On August 2, 1976, plaintiff showed her bank books to employees of the Social Security Administration ("SSA"). Although the SSA's notes of that meeting do not reflect plaintiff's total savings on that date, it appears from bank statements which she later submitted that she then had savings of $ 2,381.40. On August 2, plaintiff signed the following statement:

"The money in the bank is for both me and Natalie which I use for our household expenses and other needs. I will also have the bank account for Natalie corrected to read according to the Social Security requirements.

 Statement of Claimant, Administrative Record ("AR") at 97. In a Report of Contact dated August 2 or 4, 1976, the caseworker noted that plaintiff had agreed to submit additional bank statements and that:

"It was also explained to (plaintiff) that she had more than the allowable for an individual in resources when she first became an SSI recipient. Thus the possibility of an (overpayment) exists.
"She was also advised to correct the Bank acct. she has in trust for her daughter, Natalie Katz. The correct procedure was given her to take to the bank. She was informed that if the acct. was not corrected the checks would be suspended until she corrects the acct.
"She agreed to get Bank statement and the correct Bank acct. for Natalie."

 At her administrative hearing, plaintiff testified that she had received an instruction sheet from SSA concerning the proper procedures for depositing her daughter's benefits in a savings account and further, that she had submitted that sheet to her bank, pursuant to SSA's instructions.

 On August 25, 1976, plaintiff withdrew the existing balance of the trust account to pay a cumulative utilities bill and other household expenses.

 In a statement filed with SSA on March 22, 1977, plaintiff claimed resources of.$ 2,496.49; in an April 25, 1977 statement, she indicated that she had resources of $ 2,436.26.

 On April 27, 1977, SSA sent plaintiff a Notice Of Planned Action, informing her of a proposed June 1, 1977 termination of benefits due to her excess resources. Also on April 27, plaintiff established a savings account in her name as representative payee for her daughter. From May to September 1977, plaintiff's savings averaged $ 1,600 to $ 2,200.

 Administrative Proceedings

 The Administrative Law Judge ("ALJ") ruled that plaintiff had been overpaid during the period of April 1976 to September 1977 because during that period her resources from savings were in excess of the amount allowable under SSI regulations.

 The ALJ noted that the regulations allow each SSI recipient to retain up to $ 1,500 in resources, including savings. In this case, however, he allowed plaintiff $ 3,000 in resources between December 1975 and April 1977:

"It would seem to be equitable to apply the figure of $ 3,000 as the resources limit for both the claimant and her daughter, Natalie, prior to April, 1977, when the claimant established an account for the claimant as representative payee for Natalie. From April, 1977 to October, 1977 the $ 1500 limit would apply to the claimant. The $ 3000 limit is being applied prior to April, 1977 because from December, 1975 to April, 1977 there was a commingling of the Supplemental Security Income payments received by the claimant and Natalie, so it would be next to impossible to tell what part of these commingled funds belonged to which recipient of Supplemental Security Income."

 The regulations make no provision for treating a mother and daughter as a "savings unit" in this manner but the ALJ believed that in this case plaintiff's close relationship with her daughter dictated this result. The ALJ stated that:

"While it is true that we have been concerned only with the claim of Frances Katz, this claim cannot be considered in complete isolation because of the relationship between the claimant and her disabled daughter, Natalie Katz, who is also a Supplemental Security Income recipient, with her mother, Frances Katz, acting as her representative payee. Natalie Katz accompanied her mother to the hearing, and sat on the floor, refusing a chair. Although she did not speak during the entire hearing, it was apparent that the daughter, Natalie, is severely retarded. Natalie has required constant care by her mother since she was born. So when one considers the claimant's age, her limited education, and years of doing little more than taking care of her disabled daughter, it is understandable why the claimant was lumping together her Supplemental Security Income and the Supplemental Security Income received by her on behalf of Natalie, because the claimant had to pay all the bills for both of them, with any excess being deposited in one of the bank accounts.
"It appears from the summary of accounts (Exhibit No. 53) that the total of the savings accounts exceeded $ 3,000 every month for the period April August, 1976 and for the period January, February, and March, 1977. The total of the claimant's savings accounts exceeded $ 1500 for each month during the period April September, 1977. For the eight months' period when the $ 3000 limit applied, the claimant was overpaid $ 1839.20 (8 X 229.90) and during the 6 months' period when the $ 1500 limit applied to only the total of the claimant's accounts, the claimant was overpaid $ 1379.40, making a total overpayment of $ 3218.60."

 The ALJ found that plaintiff was not without fault as to the overpayment of $ 3,218.60, in that she knew, or should have known, "what her responsibilities were with reference to the requirement that she report to the Social Security Administration when her resources exceeded the applicable amount." The ALJ stated that:

"However, the evidence indicates that numerous conferences were held between the personnel at the local district office of the Social Security Administration and the claimant, during which it was explained to the claimant just what her responsibilities were in her individual case, and as representative payee for her daughter, Natalie. This evidence of conferences and the coherent, relevant testimony given by the claimant during the hearing creates a presumption that the claimant was able to comprehend the necessity of reporting resources in ...

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