Citation NR: 9740331 Decision Date: 12/04/97 Archive Date: 12/12/97 DOCKET NO. 95-38 613 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Atlanta, Georgia THE ISSUES 1. Entitlement to payment of benefits for dependents, subsequent to January 1, 1982. 2. Entitlement to a waiver or recovery of a debt stemming from the overpayment of dependent benefits. REPRESENTATION Appellant represented by: The American Legion WITNESS AT HEARING ON APPEAL Appellant ATTORNEY FOR THE BOARD H. Roberts, Associate Counsel INTRODUCTION The veteran served on active duty from March 1973 to March 1979. The veteran had fourteen years, five months, and seven days of prior service. This appeal arises before the Board of Veterans’ Appeals (Board) from a December 1992 adjudication officer’s letter from the Atlanta, Georgia, Regional Office (RO) of the Department of Veterans Affairs (VA), which reduced the veteran’s benefits based on the removal of a spouse as a dependent. The issue on appeal was subsequently expanded to include the removal of the veteran’s spouse as a dependent effective January 1, 1982. This appeal also arises before the Board from a June 1994 decision on waiver of indebtedness by the Committee on Waivers and Compromises (Committee), which denied a waiver of the veteran’s overpayment indebtedness. CONTENTIONS OF APPELLANT ON APPEAL The veteran contends that his spouse should have been added as a dependent between August [redacted] 1984 and July [redacted] 1987, or that he was otherwise entitled to benefits for a dependents subsequent to January 1, 1982. He also contends that his overpayment indebtedness is not the result of misrepresentation, fraud, bad faith, or lack of good faith and that he had stated to the VA that he had been divorced in a Vocational Rehabilitation application, at an examination and when hospitalized . He further contends that a waiver of recovery of the debt created by overpayment of dependent’s benefits should be granted in equity and good conscience. DECISION OF THE BOARD The Board, in accordance with the provisions of 38 U.S.C.A. § 7104 (West 1991 & Supp. 1997), has reviewed and considered all of the evidence and material of record in the veteran's claims file. Based on its review of the relevant evidence in this matter, and for the following reasons and bases, it is the decision of the Board that entitlement to benefit payments for dependents was not warranted subsequent to January 1, 1982. It is also the decision of the Board that the evidence warrants a partial waiver of recovery of a debt stemming from an overpayment of dependent benefits in the amount which was paid for a dependent spouse from August [redacted] 1984, to July [redacted] 1987, in equity and good conscience; but that it is not contrary to equity and good conscience to deny a waiver of recovery of the debt otherwise accrued. FINDINGS OF FACT 1. All evidence necessary for an equitable disposition of the veteran’s claims has been developed. 2. The evidence indicates that the veteran divorced [redacted] on December [redacted] 1981, and that she was not living with the veteran as of that date. 3. The evidence shows that the veteran married [redacted] on August [redacted] 1984, and divorced her on July [redacted] 1987, however, VA did not receive notice of that marriage until December 15, 1992. 4. The veteran’s failure to notify VA of his divorces does not rise to the level of fraud, misrepresentation, bad faith, or lack of good faith. 5. Equity and good conscience warrants a waiver of recovery of the amount which was paid for a dependent spouse from August [redacted] 1984, to July [redacted] 1987; however, it is not contrary to equity and good conscience to deny a waiver of recovery of the debt otherwise accrued. CONCLUSIONS OF LAW 1. The veteran’s benefits were properly reduced, based upon the removal of a dependent spouse, effective January 1, 1982, and no benefits for dependents were warranted from August 17, 1984, to July [redacted] 1987. 38 U.S.C.A. §§ 1115, 5107 (West 1991); 38 C.F.R. §§ 3.401, 3.501 (1996). 2. Equity and good conscience warrant a waiver of recovery of the amount which was paid for a dependent spouse from August 17, 1984, to July [redacted] 1987, although it is not contrary to equity and good conscience to deny a waiver of recovery of the overpayment indebtedness otherwise accrued. 38 U.S.C.A. §§ 5107, 5302 (West 1991 & Supp. 1997); 38 C.F.R. §§ 1.962, 1.965 (1996). REASONS AND BASES FOR FINDINGS AND CONCLUSIONS I. Entitlement to payment of benefits for dependents, subsequent to January 1, 1982. The veteran contends that his spouse should have been added as a dependent between August 17, 1984 and July [redacted] 1987, or that he was otherwise entitled to benefits for dependents subsequent to January 1, 1982. After a review of the record, the Board finds that the veteran’s contentions are not supported by the evidence, and his claim is denied. The veteran established entitlement to service-connected compensation payments by means of a May 1979 rating decision, which granted a combined rating of 30 percent. The veteran submitted evidence which showed that he was married, and received additional compensation by reason of a dependent spouse. The veteran’s level of compensation fluctuated, eventually resulting in the assignment of a 100 percent service-connected rating. An August 1992 letter from VA requested that the veteran provide the Social Security Number of his spouse, [redacted]. The veteran responded that he was no longer married to [redacted], and that she and the children had moved on or about November 1981. He submitted evidence showing that he had divorced [redacted] on December [redacted] 1981. He also submitted evidence which showed that he had married another wife, [redacted], on August 17, 1984, and had divorced [redacted] on July [redacted] 1987. The payment of benefits for dependents was terminated effective January 1, 1982, the first day after which is was shown that the veteran was no longer married to [redacted]. The veteran has appealed that determination, and the failure to pay dependent benefits for a dependent spouse for the period for which he was married to [redacted], as well as for her children for the period for which he was married to [redacted]. The pertinent statute provides that any veteran entitled to compensation pursuant to 38 U.S.C. § 1114, and whose disability is rated not less than 30 percent, shall be entitled to additional compensation for dependents in amounts prescribed, and typically adjusted annually. Rates are provided for a veteran with a spouse and no children; for a veteran with a spouse and children; and for a veteran with children and no spouse. 38 U.S.C.A. § 1115 (West 1991 & Supp. 1997). The pertinent regulation provides that the effective date of discontinuance of compensation for a dependent spouse, where the divorce prior to October 1, 1982, is the last day of the calendar year in which the divorce occurred. 38 C.F.R. § 3.501(d) (1996). The evidence indicates that the veteran divorced [redacted] on December [redacted] 1981, and that she was no longer living with him at that time. The Board finds that the RO properly terminated the allowance for a dependent spouse effective January 1, 1982. The regulations also provide that additional compensation for dependents will be effective the earliest of (1) the date of claim, which means the date of marriage, birth or adoption of child if claim received in one year, or the date notice is received of dependent’s existence if received within one year of a VA request; or (2) the date dependency arises, or (3) the date of the qualifying disability rating provided evidence of dependency is received within one year of the notification of such rating. 38 C.F.R. § 3.401(b) (1996). Although the veteran has submitted evidence which shows that he was married to [redacted] from August [redacted] 1984, to July [redacted] 1987, that evidence was not received by VA until December 15, 1992. The Board finds therefore, that the effective date of any increase by reason of the dependency of [redacted] and her children would be no earlier than December 15, 1992, at which point the veteran was already divorced from [redacted], thus no entitlement to dependency benefits existed. Therefore, the Board finds that no dependent benefits were warranted for [redacted] or for her children, as VA did not receive notice that the veteran had the dependents within one year of the date their dependency arose, or during their dependency. Accordingly, the Board finds that the veteran was not entitled to payment of benefits for a dependent spouse, or for other dependents, subsequent to January 1, 1982. 38 U.S.C.A. §§ 1115, 5107 (West 1991); 38 C.F.R. §§ 3.401, 3.501 (1996). II. Entitlement to a waiver or recovery of a debt stemming from the overpayment of dependent benefits. The veteran contends that his overpayment indebtedness is not the result of misrepresentation, fraud, bad faith, or lack of good faith. He further contends that a waiver of recovery of the debt created by overpayment of dependent’s benefits should be granted in equity and good conscience. After a review of the record, the Board finds that the veteran’s indebtedness is not the result of misrepresentation or bad faith, however, the Board also finds that equity and good conscience warrant a waiver of recovery of the amount which was paid for a dependent spouse from August [redacted] 1984, to July [redacted] 1987. In addition, the Board finds that it is not contrary to equity and good conscience to deny a waiver of recovery of the overpayment indebtedness otherwise accrued. The provisions of 38 U.S.C.A. § 5302(c) (West 1991 & Supp. 1997), prohibit the waiver of a debt where “there exists in connection with the claim for such waiver an indication of fraud, misrepresentation, or bad faith on the part of the person or persons having an interest in obtaining [the] waiver.” Similarly, 38 C.F.R. § 1.965(b) (1996), precludes waiver upon a finding of (1) fraud or misrepresentation of a material fact, (2) bad faith, or (3) lack of good faith. A debtor’s conduct is deemed to constitute bad faith “if such conduct, although not undertaken with actual fraudulent intent, is undertaken with intent to seek an unfair advantage, with knowledge of the likely consequences, and results in a loss to the government.” A debtor exhibits lack of good faith where the debtor’s conduct shows an “absence of an honest intention to abstain from taking unfair advantage of the…Government.” The Board also notes that any misrepresentation of material fact must be “more than non- willful or mere inadvertence.” 38 C.F.R. § 1.962(b) (1996). If the debtor’s conduct is deemed not to have constituted “fraud,” “misrepresentation of a material fact,” “bad faith,” or “lack of good faith,” the request for waiver will be evaluated pursuant to the principles of equity and good conscience found in 38 C.F.R. § 1.965(a) (1996). In applying the “equity and good conscience” standard to a case, the factors to be considered by the adjudicator are: (1) whether actions of the debtor contributed to the creation of the debt, (2) whether collection would deprive the debtor or the debtor’s family of basic necessities, (3) whether recovery of the debt would nullify the objective for which benefits were intended, (4) whether failure to make restitution would result in unfair gain to the debtor, and (5) whether the debtor has changed position to his detriment due to his reliance upon the receipt of VA benefits. Additionally, the adjudicator must conduct a “balancing of the faults,” weighing the fault of the debtor against any fault attributable to VA. 38 C.F.R. § 1.965(a) (1996). The evidence in this case shows that the veteran was receiving service-connected disability payments, which varied in amount. At the time that the veteran established entitlement to service-connected disability payments, he informed VA that he was married to [redacted]. An August 1992 letter requested that the veteran provide that Social Security Number for his wife, [redacted]. The veteran responded that he was no longer married to [redacted]. He submitted a divorce decree showing that he was divorced from [redacted] on December [redacted] 1981. He further submitted evidence which showed that he had married [redacted] on August [redacted] 1984, subsequent to his divorce from [redacted], and that he had divorced [redacted] on July [redacted] 1987. A November 6, 1992 letter informed the veteran that his benefits for a dependent spouse would be removed and result in a reduction of his benefits. A December 1992 letter reduced his benefits to terminate payment for a dependent spouse, effective November 1, 1992. An April 1993 letter terminated the veteran’s benefits by reason of his dependent spouse effective January 1, 1982, the date on which the veteran was no longer entitled to benefit payments for a spouse. That termination resulted in an overpayment in the amount of $11,095.63. The overpayment represented the dependent benefits paid to the veteran by reason of his spouse, [redacted], after January 1, 1982, the effective date of the reduction of his benefits to remove dependent spouse benefits. The veteran requested a waiver of recovery of the indebtedness. The June 1994 Committee decision on waiver of indebtedness did not find fraud, misrepresentation of a material fact, or bad faith. The Committee did find that the veteran was at fault in the creation of the overpayment as he failed to inform VA of his divorce, which he was informed, and should have known was essential to the determination of the payment of benefits. The Committee also determined that collection of the overpayment would not work an unreasonable hardship or be contrary to equity and good conscience. Therefore, the Committee denied the veteran’s request for waiver of recovery of overpayment. The Board concurs with the Committee finding that the veteran’s failure to inform VA of his divorce was not clearly fraudulent, and that fraud, misrepresentation, bad faith, and lack of good faith, are not established based upon the evidence of record. The veteran did not affirmatively misrepresent material facts or any information, he merely failed to provide requested information. In this regard, a July 1982 VA examination report notes that the veteran was divorced as reportedly does a Vocational Rehabilitation application, so it does not appear that the veteran intentionally attempted to deceive VA by failing to inform VA of his divorce. However, the fact is that, aside from incidentally mentioning that he was no longer married, the veteran did not explicitly notify the VA, and it is not contended otherwise. While the veteran does bear a large degree of fault in the creation of the overpayment, the Board finds that the veteran’s conduct was above that contemplated by fraud, misrepresentation, bad faith, or lack of good faith, and his request for waiver will be evaluated pursuant to the principles of equity and good conscience. The veteran was clearly informed of the need to inform VA of any changes in his marital or dependency status. The veteran had been in receipt of service-connected compensation benefits from VA from a May 1979 rating decision, and had received numerous letters which informed him: “Included are additional benefits for your spouse and children. Any change in the number or status of your dependents must be reported promptly to the VA.” The Board finds that the was experienced in the process of receiving VA compensation and had requested increases on multiple occasions, thus he was in regular contact with VA. However, the veteran failed to inform VA of his divorce. Therefore, the Board finds that the actions of the debtor in failing to report his divorce contributed substantially to the creation of the debt. Had the veteran timely informed VA of his divorce, the debt would not have been created. The Board finds that collection of this debt would not deprive the veteran of the basic necessities. The veteran has submitted a May 1993 VA Form 20-5655, Financial Status Report. Therein, he provided information showing that his total monthly expenses were $1,653.94 per month. He reported that his monthly net income was $2,496.00 per month. The Board notes that the veteran’s income exceeds his expenses by $843.94 per month. The veteran also reported on the Financial Status Report that he owned furniture and household goods with a value of $3,000.00, a 1992 Pontiac Grand Prix with a value of $12,685.00, and that he had $99.91 in cash on hand and in the bank. Thus, the Board finds that recovery of the indebtedness would not deprive the veteran of basic necessities. The Board further finds that the evidence does not show that the veteran has changed his position to his detriment in reliance upon the receipt of VA benefits. The Board also finds that the recovery of the debt would not nullify the objective for which benefits were intended. The dependent benefits are paid to a veteran who is receiving service-connected compensation in order to assist him in financially supporting his dependents. For the majority of the time in which the overpayment was created, the veteran did not have a dependent spouse, and thus the purpose of the payments was not defeated. However, the Board notes that the veteran would have been eligible for benefits based upon a dependent spouse for the time he was married to [redacted], between August [redacted] 1984, and July [redacted] 1987, had he properly informed VA of his dependent’s status. Moreover, the Board concludes that a grant of a full waiver would result in unfair gain to the debtor. To waive $11,095.63 which has been overpaid to the veteran, and to which he has not shown he is entitled, would clearly result in an unfair gain to the veteran and would be contrary to equity and good conscience. However, the Board notes that had the veteran properly kept VA informed of his dependency status, and the dates of his marriages and divorces, he would have been eligible for dependent’s compensation based upon a dependent spouse from August [redacted] 1984, to July [redacted] 1987. Therefore, as the veteran’s representative has argued, there can be no unjust enrichment during that period, as the veteran was receiving benefits for which he would have been entitled had he properly informed VA. While the veteran’s failure to inform VA of his divorce does not rise to the level of fraud, misrepresentation, bad faith, or lack of good faith, the veteran is substantially at fault in the creation of this overpayment. The Board finds that the veteran does bear the largest degree of fault, and perhaps sole responsibility, in creation of the debt. In view of the foregoing, the Board finds in equity and good conscience that the veteran’s claim of entitlement to waiver of recovery of a the full amount of overpayment indebtedness of $11,095.63 must be denied. In making this decision, the Board relies specifically on the veteran’s high degree of fault in the creation of the overpayment, and on the fact that the evidence does not show that the veteran would be deprived of the basic necessities of life. However, in equity and good conscience, the Board finds that the evidence warrants a partial grant of waiver of recovery in the amount which was paid for a dependent spouse from August [redacted] 1984, to July [redacted] 1987. The Board finds that justice dictates that those benefits not be recovered, as the veteran would have been entitled to those benefits had he properly informed VA of his remarriage and subsequent divorce. The Board has further taken into account the veteran’s claims that his personal life was disturbed by his alcohol dependence, and the fact that the veteran would not be unjustly enriched if a partial waiver were granted. The Board wishes to stress the severe nature of the veteran’s failure to inform VA of any changes in his dependents. The veteran’s allegation that he did not pay attention to the details of his benefits does not relieve him of the responsibility of prompt reporting. The veteran’s failure to inform VA was a serious error of omission, and he should be especially careful to keep VA properly informed of any and all changes in the number and status of any dependents in the future. However, in this case, despite the seriousness of the veteran’s omission, and although he is not legally entitled to the dependent benefits for a dependent spouse for the time he was married to [redacted], the Board feels that a waiver of recover is warranted in equity and good conscience. Accordingly, the Board finds that entitlement to a partial waiver of recovery of a debt stemming from an overpayment of dependent benefits is warranted in equity and good conscience in the amount which was paid for a dependent spouse from August [redacted] 1984, to July [redacted] 1987, but that it is not contrary to equity and good conscience to deny a waiver of recovery for the overpayment indebtedness otherwise accrued. 38 U.S.C.A. §§ 5107, 5302 (West 1991 & Supp. 1997); 38 C.F.R. §§ 1.962, 1.965 (1996). ORDER Entitlement to benefit payments for a dependent spouse were not warranted subsequent to January 1, 1982, and that claim is denied. Entitlement to a partial waiver of recovery of a debt stemming from an overpayment of dependent benefits is granted in the amount which was paid for a dependent spouse from August [redacted] 1984, to July [redacted] 1987, but is entitlement to a waiver of recovery is denied for the overpayment indebtedness otherwise accrued. (CONTINUED ON NEXT PAGE) M. W. GREENSTREET Member, Board of Veterans' Appeals NOTICE OF APPELLATE RIGHTS: Under 38 U.S.C.A. § 7266 (West 1991 & Supp. 1997), a decision of the Board of Veterans' Appeals granting less than the complete benefit, or benefits, sought on appeal is appealable to the United States Court of Veterans Appeals within 120 days from the date of mailing of notice of the decision, provided that a Notice of Disagreement concerning an issue which was before the Board was filed with the agency of original jurisdiction on or after November 18, 1988. Veterans' Judicial Review Act, Pub. L. No. 100-687, § 402, 102 Stat. 4105, 4122 (1988). The date which appears on the face of this decision constitutes the date of mailing and the copy of this decision which you have received is your notice of the action taken on your appeal by the Board of Veterans' Appeals. - 2 -