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Michael L. v. Berryhill

United States District Court, D. Oregon, Portland Division

August 23, 2019

MICHAEL L., [1] Plaintiff,
NANCY A. BERRYHILL, Acting Commissioner of Social Security, Defendant.


          Youlee Yim You United States Magistrate Judge

         Michael L. (“plaintiff”) seeks judicial review of the final decision by the Commissioner of Social Security (“Commissioner”) reducing his Title XVI Social Security Income (“SSI”) benefits under the Social Security Act (“Act”). This court has jurisdiction to review the Commissioner's decision pursuant to 42 U.S.C. §§ 405(g) and 1383(c)(3). The Commissioner's decision is not supported by substantial evidence; therefore, it is REVERSED and REMANDED for immediate recalculation and payment of benefits.


         Plaintiff filed an application for SSI on October 9, 2015, alleging disability beginning July 8, 2013. Tr. 13. On May 7, 2016, the agency determined that plaintiff was disabled beginning August 14, 2015. Tr. 38. On June 27, 2016, plaintiff was notified that based on income he received in the form of in-kind support from August 2015 through June 2016, his payment amount was being reduced. Tr. 13. Plaintiff requested reconsideration, and on August 30, 2016, plaintiff was notified that he was entitled to SSI benefits beginning June 2013, but his payment amount was being reduced for in-kind support he received from June 2013 through August 2016.[2] Tr. 78-79, Plaintiff then filed a written request for a hearing. Tr. 13.

         A hearing was held before an Administrative Law Judge (“ALJ”) on February 9, 2017, at which plaintiff testified. Tr. 119-33. On March 9, 2017, the ALJ issued a decision finding that the reduction for in-kind support was accurate and correct. Tr. 13-16. After the Appeals Council denied his request for review, plaintiff filed a complaint in this court. Tr. 2-4. The ALJ's decision is therefore the Commissioner's final decision subject to review by this court. 20 C.F.R. § 422.210.


         The reviewing court must affirm the Commissioner's decision if it is based on proper legal standards and the findings are supported by substantial evidence in the record. 42 U.S.C. § 405(g); Lewis v. Astrue, 498 F.3d 909, 911 (9th Cir. 2007). The court must weigh the evidence that supports and detracts from the ALJ's conclusion and “‘may not affirm simply by isolating a specific quantum of supporting evidence.'” Garrison v. Colvin, 759 F.3d 995, 1009-10 (9th Cir. 2014) (quoting Lingenfelter v. Astrue, 504 F.3d 1028, 1035 (9th Cir. 2007)). The court may not substitute its judgment for that of the Commissioner when the evidence can reasonably support either affirming or reversing the decision. Parra v. Astrue, 481 F.3d 742, 746 (9th Cir. 2007). Instead, where the evidence is susceptible to more than one rational interpretation, the Commissioner's decision must be upheld if it is “supported by inferences reasonably drawn from the record.” Tommasetti v. Astrue, 533 F.3d 1035, 1038 (9th Cir. 2008) (citation omitted); see also Lingenfelter, 504 F.3d at 1035.


         Plaintiff contends the ALJ erred in concluding that the in-kind support he received from his mother did not constituted a bona fide loan. Tr. 14. The Social Security Act provides that a disabled individual who does not have an eligible spouse and whose income does not exceed the SSI income threshold shall be eligible to receive SSI. 42 U.S.C. § 1382(a)(1)(A). The term “income” means both earned and unearned income, and includes support and maintenance furnished in cash or in kind. 42 U.S.C. § 1382a(a); 20 C.F.R. § 416.1120, et seq.

         Money borrowed pursuant to a bona fide loan does not count as income. 20 C.F.R. § 416.1103(f); SSR 92-8p. A bona fide loan is “an advance from lender to borrower that the borrower must repay, with or without interest.” SSR 92-8p at *2. “When money or an in-kind advance in lieu of cash is given and accepted based on any understanding other than that it is to be repaid by the receiver, there is no loan involved for SSI purposes.” Id. at *3. A bona fide loan agreement may be oral or written, but must be “recognized as enforceable under State law.” Id. at *2.

         The Agency's Program Operations Manual System (“POMS”) specifies that a bona fide loan must meet five criteria: (1) it must be enforceable under state law; (2) it must have been in effect at the time of the transaction; (3) it must acknowledge the obligation to repay; (4) it must establish a plan for repayment; and (5) repayment must be feasible. POMS SI 00835.482, available at If a loan meets these criteria, it is not treated as income for the purposes of SSI eligibility. The claimant bears the burden of demonstrating that the agreement constitutes a bona fide loan. SSR 92-8p.

         Here, according to affidavits submitted by plaintiff and his mother, plaintiff has been residing with his mother in her home since 2007 and pays her $550 per month for rent and his share of the utilities. Tr. 53; Tr 55. Plaintiff stopped paying rent in February 2010 following a motor vehicle accident that caused him to stop working.[3] Id. Plaintiffs mother allowed plaintiff to remain in the home on the condition that he paid her back rent payments as soon as he was able to. Id. Between February 2010 and June 2016, plaintiff accumulated a total debt in back rent of $41, 800. Id. Upon being awarded SSI benefits, plaintiff paid his mother $2, 500, [4] leaving a balance of $39, 300. Id. Plaintiff “intend[s] to pay the full $550.00/month going forward out of [his] monthly SSI payments.” Tr. 54. He also intends to pay toward the loan with any additional SSI back payments he receives, as well as “pay some amount of the remainder of [his] SSI every month . . . to chip away at whatever remained of [his] debt. . . .” Tr. 53-54. At the hearing, plaintiff testified that he gives his mother his entire SSI monthly benefit check. Tr. 128. Plaintiff explained that his mother borrowed money to support them while he was waiting for SSI benefits, and that “she needs to be paid back the money instead of being in debt.” Id.

         A field officer conducted an investigation regarding whether the agreement between plaintiff and his mother qualified as a bona fide loan. The field officer concluded that the loan was enforceable under state law, the agreement was in effect at the time of transaction, and there was an acknowledgement of the obligation to repay. Tr. 37. However, the field officer concluded that there was no plan for repayment and the repayment plan was not feasible. Id.

         The ALJ concluded there was no bona fide loan. Tr. 14. The ALJ did not take issue with the field officer's findings that the loan was in effect at the time of the transaction and enforceable under state law. While the ALJ never explicitly disputed the field officer's finding that there was an acknowledgement of the obligation to repay, he apparently rejected it, finding instead that there “was no unconditional obligation for repayment at the time the in-kind support and maintenance was provided.” Tr. 15.

         The ALJ found there “was no unconditional obligation for repayment” because both plaintiff and his mother reported that he would pay her back when he was approved for benefits.

         Tr. 15. The ALJ, however, conflates the ability to repay with the obligation to repay. The POMS describe the “acknowledgement of an obligation to repay” as follows:

A loan is an advance from a lender that the borrower must repay, with or without interest. For us to consider the [in-kind support and maintenance (“ISM”)] as a bona fide loan, the ISM must be given and accepted based on ...

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