The opinion of the court was delivered by: Sprizzo, District Judge.
MEMORANDUM OPINION AND ORDER
Plaintiff Esmeralda Cruz ("Cruz") brings the instant action
against Kenneth Apfel, the Commissioner of Social Security
("Commissioner"), seeking review of the Commissioner's decision
finding Cruz to be ineligible for Supplemental Security Income
("SSI") benefits. Both parties move for judgment on the pleadings
pursuant to Rule 12(c) of the Federal Rules of Civil Procedure.
For the reasons set forth below,
the Court denies Cruz's motion and grants the Commissioner's
Cruz's mother, Gloria Ortiz ("Ortiz"), filed an application for
SSI benefits on behalf of Cruz as her minor child on May 23,
1985.*fn1 See Notice of Award, October 13, 1992, Plaintiff's
Memorandum in Support of Motion for Judgment on the Pleadings,
Exhibit A ("Notice") at p. 1. Seven years later, Ortiz received a
notice from the SSA informing her that, pursuant to the decision
of the United States Supreme Court in Sullivan v. Zebley,
493 U.S. 521, 110 S.Ct. 885, 107 L.Ed.2d 967 (1990), the SSA would
grant her request for benefits retroactive to May 23, 1985.*fn2
See Notice at p. 1. The notice informed Cruz that she would
receive a lump-sum payment in the amount of $29,429.57, paid to
Ortiz as representative payee for Cruz, who was then still a
minor. See id. In addition, Cruz would receive monthly SSI
benefit payments, conditioned upon, inter alia, her continued
financial need as measured by her "countable resources." See
The notice explained that, under the applicable SSA
regulations, countable resources are defined as cash, other
liquid assets, or any property the SSI recipient owns and could
convert to cash to be used for maintenance and support, including
the Zebley lump sum award to be made to Cruz. See id. at p.
2. While the retroactive payment would not be considered a
countable resource for the first six months after payment, if, as
of May 1, 1993, Cruz's countable resources exceeded $2,000.00,
she would no longer be eligible for SSI benefits. See id. The
notice suggested that Ortiz consider setting up a trust to
shelter Cruz's assets because, under "certain conditions," the
SSA would not consider trust assets to be countable resources.
See id. The notice also suggested Ortiz retain legal counsel
for Cruz and read an enclosed pamphlet, "If You Get SSI Through
The Zebley Court Case . . . What You Need To Know," which
provided general information on trusts and how to retain legal
counsel. See id.; Defendant's Memorandum in Opposition to
Motion for Judgment on the Pleadings, Exhibit A.
Ortiz sought legal advice from Bronx Legal Services on creating
a trust to shield her lump-sum Zebley payment. See Complaint
¶ 3. In a letter dated November 11, 1992, a Bronx Legal Services
attorney recommended to Ortiz that she deposit the lump-sum
payment in an Uniform Gifts to Minors Act trust account ("UGMA
trust account") for Cruz and assured Ortiz that funds deposited
in an UGMA trust account would not be considered a countable
resource by the SSA. See id. ¶ 3. The attorney also recommended
that she seek confirmation from her local SSA office that an UGMA
trust account would adequately shield the deposited funds. See
id. ¶ 5.
Initially, on October 30, 1992, $24,077.30 was deposited in a
bank account in the name of "Gloria Ortiz I/T/F/ Esmeralda Cruz."
See Administrative Record ("Admin.Rec."), pp. 35-45. Then on
December 18, 1992, $18,000.00 was deposited in another account
under the name "Gloria Ortiz as Custodian for Esmeralda Cruz,
U.T.N.U.G.T.A." See id. This account was closed on November 16,
1993, and the entire balance, $18,524.51, was deposited into an
account in the name "Gloria Ortiz I/T/F Esmeralda Cruz." See
id. Finally, $18,556.51 was deposited on December 16, 1993, into
an account with the name "Gloria Ortiz as Custodian for Esmeralda
Cruz U/T/N/Y/U/G/T/M/A." See id.
In November 1993, the SSA requested financial information from
Ortiz to determine
Cruz's continued eligibility for SSI benefits. See Admin.Rec.,
pp. 22-26. After submitting the requested information, Ortiz
received a notice dated December 23, 1993, stating that Cruz had
ceased to be eligible for SSI benefits as of May 1, 1993, the end
of the six-month grace period for her Zebley lump sum award,
because her countable resources exceeded $2,000.00 on that date.
See Complaint ¶ 6. Ortiz's request for reconsideration of this
decision was denied in a letter from the SSA dated May 2, 1994.
See id. ¶ 8. Cruz then requested a hearing. On May 25, 1995,
the administrative law judge assigned to hear her case issued a
decision in which he ruled that the lump-sum payment to Cruz
could not form the corpus of a valid UGMA trust and that Cruz had
thus failed to shield effectively her Zebley award. See id. ¶
10. The Appeals Council denied Cruz's request for review. See
Complaint, ¶ 12.
Cruz filed the Complaint in this action on October 29, 1996.
Thereafter, Cruz brought the instant motion for judgment on the
pleadings, and the Commissioner filed a cross-motion for judgment
on the pleadings. See Notice of Cross-Motion, dated February
27, 1998. In support of her motion, Cruz argues that Ortiz
created an effective UGMA trust account for the benefit of Cruz.
In the alternative, she argues that the Commissioner is estopped
from finding that Cruz's UGMA trust account is a countable
resource because the SSA failed to respond to Cruz's alleged
request for advice from her local SSA office. The Commissioner
argues that Ortiz did not create an effective trust because she
did not make a valid gift to Cruz. Thus, the Commissioner argues,
Cruz's Zebley award is a countable resource that renders her
ineligible for SSI benefits.
Rule 12(c) of the Federal Rules of Civil Procedure directs that
judgment on the pleadings "is appropriate where the material
facts are undisputed and where a judgment on the merits is
possible merely by considering the contents of the pleadings."
Sellers v. M.C. Floor Crafters, 842 F.2d 639, 642 (2d Cir.
1988). On review of the findings of the Commissioner, the Court
treats as conclusive any finding of fact supported by substantial
evidence. See 42 U.S.C. § 405(g); 42 U.S.C. § 1383(c)(3);
Richardson v. Perales, 402 U.S. 389, 401, 91 S.Ct. 1420, 28
L.Ed.2d 842 (1971). The Court may set aside the decision of the
Commissioner only if the decision rests upon legal error or is
not supported by substantial evidence. See Balsamo v. Chater,
142 F.3d 75, 79 (2d Cir. 1998).
SSI is a federal program established by Title XVI of the Social
Security Act, 42 U.S.C. § 1381 et seq. The purpose of the
program is to assure a minimal income for eligible individuals
whose income and resources are insufficient to enable them to
maintain a standard of living at the federal minimum level. See
20 C.F.R. § 416.110. During the period relevant to this action,
in order to be eligible for SSI benefits, a recipient could not
have resources worth in excess of $2,000.00. See
42 U.S.C. § 1382(a)(3); 20 C.F.R. § 416.1205. Included within the resources
considered by the SSA are cash, other liquid assets, and any
property the individual owns and could convert to cash to be used
for maintenance and support. See 20 C.F.R. § 416.1201. As an
exception to this rule, retroactive SSI payments are excluded
from the recipient's countable resources for six months following
receipt. See 20 C.F.R. § 416.1233(a).
After six months, the SSA allows SSI recipients to shelter
funds from retroactive benefit payments so that these funds will
not be included in the recipients' countable resources.
Retroactive benefit payments are considered sheltered if the
funds are unavailable to the SSI recipient to be spent for
ordinary living expenses. See 20 C.F.R. § 416.1201(a)(1). Such
sheltered funds will not ...