Citation Nr: 0523123 Decision Date: 08/23/05 Archive Date: 09/09/05 DOCKET NO. 00-24 563 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in St. Petersburg, Florida THE ISSUES 1. Whether an overpayment of $7,932 of disability compensation benefits was properly created. 2. Entitlement to a waiver of recovery of an overpayment of disability compensation benefits in the amount of $7,932. (The issue of entitlement to service connection for a bladder condition is the subject of a separate appellate decision.) REPRESENTATION Appellant represented by: Paralyzed Veterans of America, Inc. ATTORNEY FOR THE BOARD Saramae M. Kreitlow, Associate Counsel INTRODUCTION The veteran had active military service from November 1967 to July 1968. This matter comes before the Board of Veterans' Appeals (Board) on appeal from rating decisions issued in August 2000 and October 2000 by the Department of Veterans Affairs (VA) Regional Office (RO) in St. Petersburg, Florida, which denied waiver of recovery of overpayments of $3,696 and $4,236, respectively. Notices of Disagreement were received in September 2000 and December 2000, respectively. Statements of the Case were issued in October 2000 and February 2001, respectively. Timely appeals were received in December 2000 and March 2001, respectively. In October 2001, the Board remanded the veteran's appeals for further development and procedural compliance in notifying the veteran of the pertinent laws and regulations relating to his claims. In July 2003, the RO issued a Statement of the Case as to the validity of the overpayment. In November 2004, a Supplemental Statement of the Case was issued, and the veteran's appeals have been returned to the Board for final consideration. FINDINGS OF FACT 1. A November 1998 rating decision granted the veteran entitlement to total disability compensation based upon individual unemployability, and his dependents were found entitled to Dependents' Educational Assistance (DEA). 2. During the relevant period, the veteran had two children above the age of 18 who attended school for whom he received additional monthly VA compensation. 3. The overpayments at issue, $3,696 and $4,236, were created as a result of the veteran receiving additional VA compensation while his children were receiving DEA (Dependents Educational Assistance) under 38 U.S.C.A. Chapter 35, and are technically valid 4. Recovery of the overpayments in the amount of $7,932 from the veteran would be against equity and good conscience. CONCLUSIONS OF LAW A waiver of recovery of two overpayments of compensation benefits in the total amount of $7,932 is warranted. 38 U.S.C.A. § 5302 (West 2002); 38 C.F.R. §§ 1.962, 1.963(a), 1.965(a) (2004). REASONS AND BASES FOR FINDINGS AND CONCLUSIONS The veteran is service connected for multiple disabilities. In November 1998, the RO determined he is totally disabled due to his service-connected disabilities and granted him a 100 percent disability rating due to individual unemployability (TDIU) effective on October 20, 1997. Prior to October 20, 1997, the veteran's two children, a boy and a girl who are twins, turned age 18. In March 1996, the veteran filed a VA Form 21-674 for each child, advising VA that both children were about to turn age 18 and would be attending school after their 18th birthday. In April 1996, the RO notified the veteran of amendments made to his disability compensation award, specifically stating that his compensation included additional benefits for his spouse and children. The letter also indicated that payments would be continued for his daughter, based on school attendance, until September 1, 2000, and for his son, based on school attendance, until July 1, 2000. In the November 1998 rating decision that granted the veteran TDIU, the RO also established eligibility to Dependents' Educational Assistance (DEA) under 38 U.S.C.A. Chapter 35 effective October 20, 1997. The cover letter dated November 13, 1998, advised the veteran that his spouse and children were eligible for DEA, and indicated that the pamphlet, "Summary of Education Benefits," was enclosed explaining the program. The RO also sent a letter setting forth the veteran's amended disability compensation award, indicating that included were additional benefits for his spouse and children and setting forth the period that payments for his children would continue based on school attendance. The DEA files for the veteran's children have been associated with the claims file as directed in the Board's October 2001 remand. The files indicate that the RO in Atlanta, Georgia, handled their DEA claims. The file on the veteran's son does not include the application for DEA benefits or the initial grant of those benefits. The veteran's claims folder, however, includes a VA Form 22-8945 Education Award dated May 20, 1999, which shows that his son was awarded DEA benefits commencing August 24, 1998. The daughter's file contains an application for DEA benefits filed in February 1999. In March 1999, the Atlanta RO sent the daughter a certificate of eligibility. A VA Form 22- 8945, Education Award, was issued on May 18, 1999, granting the veteran's daughter DEA benefits commencing on August 27, 1998. The Atlanta RO notified the St. Petersburg RO in June 1999 that it awarded DEA benefits to the veteran's children. In December 1999, the St. Petersburg RO notified the veteran that it received information that his son started receiving DEA benefits on August 24, 1998, and advising him that it planned to reduce his monthly payments effective that date. The letter also advised him that such reduction would result in an overpayment of benefits received by the veteran, and that he had 60 days to respond and submit new evidence as to why the reduction should not be made. In response the veteran filed a claim for waiver of recovery of the overpayment in April 2000. In May 2000 the RO notified the veteran of the reduction to his monthly compensation due to removal of his son as a dependent as of August 24, 1998, and advised him that this action resulted in an overpayment. In August 2000, the RO denied the veteran's claim for a waiver of recovery of the overpayment, which the RO calculated to be $3,696. In denying the waiver request, the RO found that the veteran was at fault for the creation of the overpayment because he received benefits that he knew or should have known he was not entitled to receive, and that he would be unjustly enriched if he did not pay back the overpayment. The veteran appealed that denial to the Board. Also in May 2000, the RO notified the veteran that it had received information that his daughter was receiving DEA benefits, and advising him that it intended to reduce his monthly compensation accordingly as of August 27, 1998. Again the veteran was given 60 days before the reduction to submit evidence. In August 2000 the RO notified the veteran that it had removed his daughter as a dependent and reduced his award effective August 27, 1998, creating an overpayment that the veteran would have to repay. The veteran filed a claim for waiver of recovery of the overpayment, calculated to be $4,236, in September 2000, which the RO denied in October 2000 for the same reasons as the previous denial. The veteran appealed that denial to the Board. For ease of consideration, the Board has combined these two appeals and will handle them as one. The veteran has argued that the indebtedness is not valid, or, alternatively, that a waiver should be granted. Validity of Overpayment Chapter 35 of Title 28 of the United Stated Code provides for educational assistance to the dependents of a veteran if that veteran has a total disability permanent in nature resulting from a service-connected disability. 38 U.S.C.A. § 3501()(1)(A)(ii). The commencement of a program of education or special restorative training under Chapter 35 shall be a bar to subsequent payments of compensation, dependency and indemnity compensation (DIC), or pension; or to increased rates, or additional amounts, of compensation, DIC, or pension. 38 U.S.C.A. § 3562. See also 38 C.F.R. § 3.667(f) (Pension, compensation or DIC may not be authorized after a child has elected to receive educational assistance under 38 U.S.C. Chapter 35 (see § 3.707 and § 21.3023 of this chapter).). The conditions applicable to the bar to payment of compensation for a child concurrently with educational assistance allowance under Chapter 35 are set forth in 38 C.F.R. § 21.3023. 38 C.F.R. § 3.707(a). A child who is eligible for educational assistance and who is also eligible for pension, compensation or DIC must elect whether he or she will receive educational assistance or compensation. An election of educational assistance either before or after the age of 18 years is a bar to subsequent payment, increased rates, or additional amounts of pension, compensation or DIC on account of the child, based on school attendance on or after the age of 18 years. 38 C.F.R. § 21.3023. The veteran's children elected to receive DEA benefits when they filed their applications. At the same time, the veteran was receiving monthly compensation payments, including additional amounts for his wife and children. The overpayments are, therefore, technically valid. Waiver of Recovery of Overpayment Waiver of repayment of indebtedness is statutorily precluded if there is any indication of fraud, misrepresentation of a material fact, or bad faith on the part of the person having an interest in obtaining a waiver. 38 U.S.C.A. § 5302(c); 38 C.F.R. § 1.965(b). See Ridings v. Brown, 6 Vet. App. 544, 546 (1994). "There is no all-embracing definition of 'fraud' and the existence or lack of fraud is a case-specific conclusion based on all facts in each instance." VAOPGCPREC 4-85. The Committee determined that no fraud, misrepresentation, or bad faith is involved in this case, and the Board agrees. The veteran has earnestly asserted that he was told that his children applying for DEA benefits would not affect his award. There certainly is no evidence presented to suggest that his actions were fraudulent, or that he has misrepresented anything, or that he has been seeking this waiver in bad faith. If there is no indication of fraud, misrepresentation, or bad faith, as in this case, recovery of overpayment of benefits is prohibited if the Secretary determines that recovery would be against equity and good conscience. 38 U.S.C.A. § 5302(a); 38 C.F.R. § 1.962. Recovery of the overpayment shall be waived if it is determined that recovery of the indebtedness would be against equity and good conscience. 38 C.F.R. § 1.963(a). The phrase "equity and good conscience" means arriving at a fair decision between the obligor and the Government. In making this determination, consideration will be given to the following elements, which are not intended to be all inclusive: (1) Fault of the debtor. Where actions of the debtor contribute to the creation of the debt. (2) Balancing of faults. Weighing fault of debtor against VA's fault. (3) Undue hardship. Whether collection would deprive debtor or family of basic necessities. (4) Defeat the purpose. Whether the withholding of benefits or recovery would nullify the objective for which the benefits were intended. (5) Unjust enrichment. Failure to make restitution would result in unfair gain to the debtor. (6) Changing position to one's detriment. Reliance on VA benefits results in relinquishment of a valuable right or incurrence of a legal obligation. 38 C.F.R. § 1.965. These six non-exclusive elements each must be addressed to determine whether the facts and circumstances in a particular case dictate that collection of an overpayment would be against equity and good conscience. Id; see also Ridings v. Brown, 6 Vet. App. 544, 546 (1994). The first and second elements pertain to the fault of the debtor versus the fault of VA. In considering the evidence of record, the Board finds that greater weight must be placed on the balancing of faults in this case. The veteran has essentially argued that VA was at fault with regard to the duplicate payments. In this case, unlike the RO, the Board finds that the veteran bears essentially little or no fault in the creation of the overpayment of compensation. Moreover, because of the chronology of events and action by VA in this case, he cannot be held accountable for the overpayments at issue. The record shows that in May 1999, VA awarded DEA benefits to the veteran's two children retroactive to August 1998. The Board finds that, in this case, the veteran should not be held responsible for a debt created by action of a VA office in authorizing a dependent's retroactive educational assistance award for the same period of time in which the veteran was already receiving additional dependency compensation for that dependent. There was no attempt to offset the DEA award or to minimize or avoid the creation of the debt by VA. The record does not show that the veteran was ever notified of the retroactive award of DEA benefits, or that such an award would create an overpayment and giving him and his children the option to receive benefits prospectively. It appears that the veteran only learned of the DEA benefit awards and the overpayments when he was informed of the erroneous payment of duplicate benefits in VA's December 1999 and May 2000 letters. The Board also notes that, despite having been notified by the Atlanta RO within one month after the award of DEA benefits to the veteran's children, the St. Petersburg RO did not take any action until December 1999, when it notified the veteran by letter of a potential overpayment, but only as to the compensation received for his son. It did not actually reduce his award, however, until May 2000, 11 months after it was notified of the DEA award. As for his daughter's DEA award, the RO did not notify the veteran until May 2000 of the potential overpayment, and did not reduce his award until August 2000, 14 months after being notified of her DEA award. It is reasonable for the veteran to assume that VA would make the proper adjustments to his compensation in a timely fashion, particularly since VA had done so in the past. The Board finds, however, that VA did not act in a timely fashion so to minimize the overpayment of compensation benefits to the veteran. In addition, the veteran argues that he sought the advice of a counselor from either his representative or VA (he has stated both), and that he was told that the statement on the DEA application relating to the prohibition of receipt of future payments of compensation, pension or DIC applies only to his children, not to him. No matter who the veteran obtained the advice from, it is clear that the veteran did not understand that, by his children receiving DEA benefits, he was relinquishing the portion of his monthly compensation that he received for them. Thus, the Board finds that VA is primarily at fault in the creation of the overpayments at issue. Concerning the third element, "undue hardship," the Board notes that, during the pendency of this appeal, the veteran paid off the overpayments in their entirety. Although he alleged undue hardship, he has not presented any evidence showing that repayment actually caused him any undue financial hardship. Concerning the fourth element, given that the veteran's children were being paid Chapter 35 benefits, the recovery of the overpayment would not defeat the purpose of paying benefits by nullifying the objective for which the benefits were intended, namely, payment of additional compensation on the basis of the children's educational pursuits. The fifth element involves "unjust enrichment," i.e., the concept that failure to make restitution would result in unfair gain to the debtor. As detailed in the discussion above, the Board finds that the fault for creation of the overpayment essentially lies with VA. Therefore, the receipt of VA benefits by the veteran did not constitute an unfair gain to the veteran. Finally, concerning the sixth element, the veteran has not claimed, nor does the evidence show, that he incurred a legal obligation or changed his position to his detriment in reliance upon the receipt of VA benefits. The facts and circumstances of this case indicate a need for reasonableness and moderation in the exercise of the Government's rights. Particularly in light of the evidence with regard to the first, second and fifth elements under 38 C.F.R. § 1.965, the Board finds that recovery of the overpayments from the veteran would be against equity and good conscience. Accordingly, a waiver is warranted. In light of the result here (a full grant of the claim for waiver of recovery of overpayment), the Board finds that a detailed discussion of the Veterans Claims Assistance Act of 2000 is unnecessary. ORDER The overpayment of $7,932 of disability compensation benefits was properly created. Waiver of recovery of an overpayment of disability compensation benefits in the amount of $7,932 is granted. ____________________________________________ MICHAEL E. KILCOYNE Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs