Emlen v. Social Security Board , 148 F.2d 927 ( 1945 )

BIGGS, Circuit Judge

(dissenting).

Regulations No. 2, Section 402.13, defines “wages paid” but the interpretation of the Regulation by the court below is erroneous. The Social Security Board has the power and the duty to interpret the regulations promulgated by it and .to base its administrative practices upon such interpretations. Cf. Norwegian Nitrogen Products Co. v. United States, 288 U.S. 294, 325, 53 S.Ct. 350, 77 L.Ed. 796; Fawcus Machine Co. v. United States, 282 U.S. 375, 51 S.Ct. 144, 75 L.Ed. 397; and National Labor Relations Board v. J. S. Popper, Inc., 3 Cir., 113 F.2d 602, 603-604. In the case at bar the Board has found that there was, in the. language of the Regulation cited, a “ * * * substantial limitation or restriction as to the time or manner of payment or condition upon which payment is made * *

Whether or not there is such a substantial limitation or restriction is a question of fact, analogous to the • fact question not infrequently presented in tax litigation as to whether a dividend has become subject to a taxpayer’s demand. See Avery v. Commissioner of Internal Revenue, 292 U.S. 210, 214, 54 S.Ct. 674, 78 L.Ed. 1216. Section 205(g) of the Social Security Act as amended, 42 U.S.C.A. § 405(g), provides that “The findings of the Board as to any fact, if supported by substantial evidence, shall be conclusive * * The ruling of the Supreme Court in Gray v. Powell, 314 U.S. 402, 62 S.Ct. 326, 86 L.Ed. 301, seems persuasive. In the cited case, in determining the validity of a ruling of the Director of the Bituminous Coal Division of the Department of the Interior, Mr. Justice Reed stated, 314 U.S. 402, at page 411, 62 S.Ct. 326, at page 332, “In a matter left specifically by Congress to the determination of an administrative body * * * the function of review placed upon the courts * * * is fully performed when they determine that there has been a fair hearing, with notice and an opportunity to present the circumstances and arguments to the decisive body, and an application of the statute in a just and reasoned manner.”

• In my opinion in the case at bar the-Board applied the pertinent provisions of statute and regulations in a just and reasoned manner. The heart of the learned District Judge’s conclusion to the contrary lies in the following quotation from his opinion: “I think it plain that the test of whether there was a substantial limitation or restriction upon the availability of the funds must be sought outside of Mr. Emlen’s own mind and motives.” [54 F.Supp. 498, 499] The opinion of the court below and that of the majority of this court treat as the decisive consideration the fact that Emlen as chief executive officer and sole custodian of the corporation’s funds had the power to pay himself. Under the circumstances of the case at bar I can see no reason why the substantial limitation or restriction upon the availability of the funds must be sought outside of Emlen’s own mind and motives. As chief executive officer of the corporation he had to decide whether or not the corporation should pay him. As head of the corporation he may have concluded that if he collected the salary due him he might wreck the enterprise or defraud creditors.' Such an inference as to Emlen’s motives justifiably was drawn by the Board. Emlen’s obligations to his corporation and his corporation’s obligations to him were in sharp conflict. The limitation or restriction was sufficiently substantial to prevent him from making payment to himself. The fallacy of the majority view is apparent if Emlen’s duty as the chief executive officer and sole custodian of the bank account of his corporation is distinguished from the corporation’s obligation to him as a creditor.

For these reasons I must dissent respectfully from the views expressed by the majority.