United States District Court, E.D. Virginia, Norfolk Division
REPORT AND RECOMMENDATION
LAWRENCE R. LEONARD, Magistrate Judge.
Cornelius Townsend, Jr. ("Mr. Townsend") filed a complaint pursuant to 42 U.S.C. § 405(g) seeking judicial review of the final decision of the Defendant, the Acting Commissioner of the Social Security Administration ("Commissioner" or "Defendant"), denying Mr. Townsend's claim for Supplemental Security Income ("SSI") between August 1, 2005 and June 2007, pursuant to Title XVI of the Social Security Act. Both parties have filed Motions for Summary Judgment, ECF Nos. 14, 16, which are now ready for recommended disposition. This action was referred to the undersigned United States Magistrate Judge pursuant to 28 U.S.C. §§ 636(b)(l)(B)-(C), Federal Rule of Civil Procedure 72(b), Eastern District of Virginia Local Civil Rule 72, and the April 2, 2002, Standing Order on Assignment of Certain Matters to United States Magistrate Judges. For the following reasons, the undersigned RECOMMENDS that Mr. Townsend's Motion for Summary Judgment, ECF No. 14, be DENIED; the Defendant's Motion for Summary Judgment, ECF No. 16, be GRANTED; and the final decision of the Commissioner be AFFIRMED, and that this matter be DISMISSED WITH PREJUDICE.
I. PROCEDURAL BACKGROUND
Mr. Townsend filed an application for SSI on July 28, 2005,  alleging a disability onset date of April 30, 2002. R. 46. The claim was initially denied on October 20, 2005, R. 40, and denied again upon reconsideration on May 18, 2006, R. 41. Thereafter, Mr. Townsend filed a request for a hearing before an administrative law judge ("ALJ"), which was held on April 5, 2007. R. 82, 599. In an opinion dated June 5, 2007, the ALJ found Mr. Townsend disabled as of December 4, 2004,  pursuant to 20 C.F.R. 416.920(a) and Section 1614(a)(3)(A) of the Social Security Act. R. 46-54.
By letter dated October 2, 2007, the Commissioner made an initial determination that Mr. Townsend was ineligible for SSI payments until July 2007. R. 58. The Commissioner's decision found that Mr. Townsend had excess resources in the amount of $63, 708.37 from a piece of property in Northampton County, Virginia ("Property"). R. 58-62. Accordingly, Mr. Townsend's resources exceeded the $2, 000 resource limit over the relevant time period. R. 36. Thereafter, upon reconsideration, Mr. Townsend was again denied SSI payments. R. 76. Mr. Townsend subsequently requested a hearing before an ALJ to review the Commissioner's initial decision. R. 82.
After initial and supplemental hearings, the ALJ found, in an opinion dated January 9, 2010, that Mr. Townsend was ineligible for SSI payments prior to July 2007. R. 58-62. The ALJ determined that because "[t]here was no legal instrument... demonstrating that there was a legal obligation by the claimant to repay any of the money received from proceeds" from the sale of the Property, Mr. Townsend "had the right to liquidate the Property" and could have "kept the money for himself in his capacity as the sole shareholder." R. 61-62. Mr. Townsend filed a request for an appeal, R. 89-90, and the Appeals Council ultimately granted his request, R. 71.
In an order dated January 27, 2012, the Appeals Council vacated the ALJ's January 9, 2010 decision and remanded to the ALJ. R. 71-73. The Appeals Council ordered the ALJ to enter additional documents into the record and to make findings as to whether Mr. Townsend owned the Property or merely acted as shareholder; the ALJ was also directed to consider corporate records, tax returns, Mr. Townsend's personal income tax records, and books and records that corporations and trustees keep in the ordinary course of business. R. 72-73. In addition, the Appeals Council directed the ALJ to consider the statute of frauds and piercing the corporate veil when making its determination. R. 73. Finally, the Appeals Council ordered the ALJ to make findings regarding whether Mr. Townsend had excess resources until July 2007 by considering, among other issues, whether any resources were excludable as essential to the means of self-support under 42 U.S.C. § 1382b. R. 73.
On remand, the ALJ again found that Mr. Townsend was ineligible for SSI prior to July 2007, in an opinion dated June 14, 2013. R. 35-39. Mr. Townsend sought review of the decision, which was denied by the Appeals Council. R. 12-15. Therefore, the June 14, 2013 decision is the final decision of the Commissioner for purposes of this review. Because both parties have filed Motions for Summary Judgment, the dispute is now ripe for adjudication.
II. FACTUAL BACKGROUND
On December 19, 2001, C & T Restaurant, Incorporated ("C & T Restaurant"), a Virginia corporation, purchased the Property for $45, 000. R. 211. Mr. Townsend testified at the January 10, 2013 hearing that his brothers had formed the corporation, R. 566, and that he did not own the corporation; rather, according to a March 11, 2013 letter, his family merely placed it in his name, R. 184. Mr. Townsend also testified that the original sale was handled by Mr. Townsend's brothers, Winston and Larry Townsend. R. 568. According to testimony from Ms. Angela Sheppard at the November 24, 2009 hearing, Mr. Townsend's friends and families ("alleged contributors") "all agreed to chip in some money to purchase the building." R. 579. The building, she added, was titled in the name of the corporation. Id. Additionally, she testified that Mr. Townsend did not contribute any money to the purchase of the Property. R. 579. Conversely, according to Mr. Townsend's attorney who later handled the resale, "Mr. Townsend bought the property with the intention of operating a restaurant and bar." R. 199 (emphasis added). Notably, copies of the paperwork and other incorporation documents were not retained by Mr. Townsend's brothers or the attorney who handled the real estate sale, R. 187, 550, 568-99, and the Virginia State Corporation Commission destroyed the records upon dissolution of the corporation. R. 187.
Mr. Townsend's family and friends who allegedly contributed money to the purchase of the Property submitted letters to the Commissioner dated May 15 to 20, 2009, at least eight years following the purchase of the Property, stating that they provided monies over a period of five years towards the purchase and upkeep of the Property. R. 219-227 (the "contributor letters").According to these letters and a letter written by Mr. Townsend to the ALJ, R. 228, each alleged contributor considered Mr. Townsend to have "acted solely as trustee of the property in question" and as a "caretaker." R. 219-27, 567-68. Moreover, in a letter dated May 18, 2009, from the attorney who handled the sale of the Property, the attorney stated he "believe[d] that [Mr. Townsend's] family lent [Mr. Townsend] money to get started, " although he was not involved in the lending. R. 199.
Mr. Townsend, being "the most responsible family member" nearest to the Property, R. 228, cleaned, swept, and checked in on the building. R. 568. Mr. Townsend, however, was never paid money for this service, other than "a few dollars" to check in on the Property. R. 567-68. The building ultimately burnt down in March of 2003, R. 37, 579, and, as the insurance had lapsed, was never rebuilt. R. 579-80. The Property sat idle and the corporation was automatically dissolved on April 30, 2003, under Virginia Code § 13.1-752(A) for failure to either submit its annual report or pay its annual registration fee in a timely manner. R. 37, 214. Mr. Townsend held the Property from April 30, 2003 until its sale in June 2007. R. 188. According to Ms. Sheppard's testimony, the "investors [and not Mr. Townsend] decided to sell" the Property after the building was destroyed. R. 580.
On June 25, 2007, Mr. Townsend, on behalf of C & T Restaurant executed a deed selling the Property from C & T Restaurant to a buyer for $65, 000. R. 214-16. The notarized deed referred to Mr. Townsend as the grantor who was the "sole director of C & T Restaurant" and "trustee in liquidation of C & T Restaurant" pursuant to Virginia Code § 13.1-752 for the "purpose of winding up the affairs" of the corporation. R. 215-16. In addition to the notarized deed, Mr. Townsend executed a Consent and Declaration on June 25, 2007, as part of the deed of the sale of the Property. R. 216-17. The Consent and Declaration, in relevant part, professed that:
I, CORNELIUS L. TOWNSEND, JR. do hereby certify that at the time of the termination and dissolution of C & T RESTAURANT, INCORPORATED on April 30, 2003, the only stockholder of record and the only shareholder having any interest in C & T RESTAURANT, INCORPORATED was CORNELIUS L. TOWNSEND, JR.
This statement is executed by the undersigned as the sole stockholder and as the sole investor of C & T RESTAURANT, INCORPORATED.... I, the undersigned, hereby consent to the execution of this deed by the one Director, CORNELIUS L. TOWNSEND, JR., who was the sole director when the corporation was terminated on April 30, 2003, acting in my behalf ...