Citation Nr: 0814559 Decision Date: 05/02/08 Archive Date: 05/12/08 DOCKET NO. 06-10 578 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in San Juan, the Commonwealth of Puerto Rico THE ISSUE Entitlement to waiver of recovery of an overpayment of disability compensation benefits in the calculated amount of $ 5,023.20. REPRESENTATION Appellant represented by: Puerto Rico Public Advocate for Veterans Affairs ATTORNEY FOR THE BOARD Linda E. Mosakowski, Associate Counsel INTRODUCTION The veteran served on active duty from May 1977 to May 1980. This matter comes to the Board of Veterans' Appeals (Board) on appeal from an April 2005 decision by the Department of Veterans Affairs (VA) Regional Office (RO) Committee on Waivers and Compromises (Committee) in San Juan, the Commonwealth of Puerto Rico, that denied the veteran's request for a waiver of recovery of an overpayment in the calculated amount of $ 5,023.20. In February 2005, the veteran submitted a VA Form 21-4138 expressing disagreement with the amount of a retroactive benefits payment in the amount of $12,768 that was sent to him. He asked for an accounting of that amount. In April 2005, the RO wrote a brief letter to the veteran explaining that from the amount due to him (which was identified as $44,444) was subtracted the amount previously paid to him (which was identified as $31,676) to reach the amount of the payment sent to him (which was identified as $12,768). The RO advised him that if he needed an explanation of month by month by year of the calculations, he was required to request a statement from the Support Service division (finance) of benefits due and paid. The veteran's request of such an accounting was received in May 2005. The claims file does not reflect that such an accounting has been sent to the veteran. The matter is referred to the RO for appropriate action. FINDINGS OF FACT 1. An overpayment of disability compensation benefits in the amount of $5,023 occurred because the veteran received additional disability benefits due to his daughter's school attendance for the same period of time that his daughter received Chapter 35 educational assistance benefits. 2. The veteran is not at fault for the creation of the overpayment. 3. The appellant did not relinquish a valuable right or incur a legal obligation in reliance on the overpayment of death pension benefits. 4. Recovery of the overpayment would not defeat the purpose for which the additional amounts of disability compensation benefits on behalf of a child's school attendance were intended. 5. Recovery of the amount overpaid would not deprive the appellant or any family member of basic necessities. 6. Failure to make restitution would result in unfair gain to the appellant. CONCLUSION OF LAW Recovery of the overpayment of disability compensation benefits, in the amount of $ 5,023.20, does not violate the standard of equity and good conscience. 38 U.S.C.A. §§ 3562, 5107, 5302, 5314 (West 2002); 38 C.F.R. §§ 1.963, 1.965, 3.4, 3.57, 3.102, 3.667, 20.3023 (2007). REASONS AND BASES FOR FINDINGS AND CONCLUSION Duties to notify and to assist The provisions of the Veterans Claims Assistance Act of 2000 governing VA's duties to notify and to assist a claimant concerning the evidence needed to substantiate a claim for VA benefits do not apply to waiver claims. Barger v. Principi, 16 Vet. App. 132 (2002). The statute governing waiver claims, however, has its own notice provisions. 38 U.S.C.A. § 5302. In a waiver claim, the payee must be notified of his right to apply for a waiver and be provided with a description of the procedures for submitting the application. It is not entirely clear that the proper notice was given to the veteran here. In November 2003, the RO sent the veteran a notice of the amount of the overpayment. The November 2003 notice letter indicates that a document (Notice of Rights and Obligations) was enclosed that advised him of his right to request a waiver of recovery of the overpayment. An enclosure that explains the application procedures for requesting a waiver is usually sent with a notice of overpayment. But here, the form number of that notice was not identified and the enclosure is not in the claims folder, so the record does not establish that proper notice was given. The veteran does not raise any notice issues in his waiver claim. In any event, even if he were not notified of the procedures for how to file a waiver claim, since he filed a timely request for a waiver in November 2003 that complied with those procedures, and since his claim is being adjudicated, the purpose of those notice procedures has been fulfilled. The veteran thus could not have been prejudiced by any notice flaws, and the appeal can now be decided by the Board. Validity of the debt Before June 2002, the veteran's disability compensation benefit payments included additional amounts based on his having three dependents: his wife, his daughter, and his son. 38 C.F.R. § 3.4(b)(2) (an additional amount of compensation may be payable for a child where the veteran is entitled to compensation based on disability evaluated at 30 percent or more disabling). The veteran's daughter had reached age 18 in April 2001, but because at the time (August 2001) she began attending college she was less than 26 years old, for purposes of calculating the amount of his disability compensation benefit payments, he was entitled to an additional amount based on her school attendance. 38 C.F.R. § 3.57(a)(a)(iii) (the term "child" means an unmarried person who is a legitimate child who, after reaching 18 years of age and until completion of education, is pursing a course of instruction at an educational institution approved by VA). In June 2002, the RO granted the veteran a total rating for compensation purposes due to individual unemployability, effective as of July 1, 2001. As relevant here, there were two consequences of that determination of a total rating due to individual unemployability. First, the veteran was provided with a retroactive disability compensation payment for the period from July 1, 2001, until June 2002. According to the June 2002 letter sent to the veteran, that payment included additional amounts based on his daughter's school attendance. And the monthly payments thereafter (at the 100 percent rate) also included additional amounts based on his daughter's school attendance. Another result of the total rating was that the veteran's children became eligible for certain educational assistance benefits under Chapter 35 of Title 38 of the United States Code. Although the application for those benefits with respect to his daughter's education expenses is not included in the claims folder, in January 2003, those Chapter 35 educational benefits were approved with an effective date of July 1, 2001. The veteran's daughter was thereafter provided with a retroactive payment for those benefits. But if a veteran's child receives Chapter 35 educational assistance benefits, the additional disability compensation benefits to the veteran on the basis of that child's school attendance are prohibited. 38 U.S.C.A. § 3562 (the commencement of a program of education benefits under Chapter 35 shall be a bar to additional amounts of compensation because of such a person); 38 C.F.R. §§ 20.3023(a)(1) (if a child elects educational assistance benefits under Chapter 35, is a bar to additional compensation on account of the child based on school attendance after age 18); 3.667(f)(1) (compensation may not be authorized after a child has elected to receive educational assistance under Chapter 35). In August 2003, the RO notified the veteran that because he was receiving Chapter 35 educational assistance benefits with respect to his daughter, the RO was proposing that he no longer receive an additional amount in his disability compensation benefit payments with respect to her school attendance. In October 2003, although the veteran continued to receive disability compensation benefit payments at the rate of 100 percent, the RO reduced the additional disability compensation benefit payments to reflect only two dependents because the RO removed the veteran's daughter as his dependent. The veteran was also informed that he had been overpaid his disability compensation benefits for the period since August 13, 2001, and he would be notified shortly of the exact amount of that overpayment. In November 2003, the veteran was notified that the amount of the overpayment of his disability compensation benefits was $5,023.20 and that he was required to pay that debt to VA. The veteran has not challenged the validity of the debt. Instead, he has requested that recovery of the overpayment be waived. As discussed below, the requirements for such a waiver have not been met on the basis of the evidence of record. Waiver of recovery of the overpayment Recovery of the overpayment of any VA benefits must be waived if: (1) the application for relief is filed in a timely manner; (2) there is no indication of fraud, misrepresentation, or bad faith on the part of the person having an interest in the waiver; and (3) recovery of the indebtedness from the payee who received such benefits would be against equity and good conscience. 38 U.S.C.A. § 5302(a), (c). An application for waiver generally is timely if it is made within 180 days from the date of VA's notification to the payee of the indebtedness. 38 U.S.C.A. § 5302(a); 38 C.F.R. § 1.963(b)(2). Here, the veteran was notified of the overpayment indebtedness in November 2003 and he filed his application for a waiver two weeks later. Thus, the veteran's application was timely filed. As for the second requirement, the statute prohibits a waiver if there is an indication of fraud, misrepresentation, or bad faith on the part of the appellant. 38 U.S.C.A. § 5302(c). Actual fraudulent intent need not be shown if conduct is undertaken with intent to seek an unfair advantage, with knowledge of the likely consequences, and the result of that conduct is a loss to the government. 38 C.F.R. § 1.965(b)(1). Moreover, a waiver is not warranted if a material fact is misrepresented, or there is unfair dealing or deceptive dealing. 38 C.F.R. § 1.965(b)(1). Here, there is no evidence whatsoever of fraud, misrepresentation, or bad faith on the veteran's part. The second requirement for a waiver has thus been met. 38 U.S.C.A. § 5302(c). As for the third requirement, the "equity and good conscience" standard is applied when the facts and circumstances in a particular case indicate a need for reasonableness and moderation in the exercise of the Government's rights. 38 C.F.R. § 1.965(a). It means arriving at a fair decision between the obligor (the veteran) and the Government. 38 C.F.R. § 1.965(a). In making such a decision, the following factors (which are not an all- inclusive list) must be considered: (1) fault of the debtor; (2) balancing of faults; (3) changing position to one's detriment; (4) defeat of the purpose for which benefits were intended; (5) undue hardship; and (6) unjust enrichment. 38 C.F.R. § 1.965(a) (order of factors changed to facilitate following discussion). The veteran asserts that the recovery of the overpayment should be waived on the basis that it was not his fault it was created and at the time he sought the waiver, he was unable to pay the debt. The veteran was not at fault for the creation of the overpayment. Most of the overpayment relates to a retroactive compensation benefits payment that was made before the veteran's daughter even applied for Chapter 35 educational assistance benefits and which, at the time, he was entitled to receive. Thus, he is not at fault for the creation of the overpayment debt. VA bears some fault for the creation of the overpayment. When notified that a Chapter 35 educational assistance benefit had been awarded to the veteran's daughter, it took an additional six months before the RO determined that there was an overlap of benefits. Thus, the total amount of the overpayment was larger than it would have been had that determination been made quicker. With respect to the second factor (the balancing of faults), the veteran bears no fault and the Government bears some fault for the creation of the overpayment. The veteran does not claim that he changed his position to his detriment in reliance on the overpaid amount. Nor does the record indicate that he did so. Thus, the third factor does not provide a basis for waiving the recovery of the overpayment. Nor would the recovery of the overpayment defeat the purpose of providing additional disability compensation benefits to a veteran on the basis of his child attending school. After a child turns 18, a veteran who has at least a 30 percent disability rating may receive additional benefits while that child is in school to help provide for the education of the child. 38 C.F.R. §§ 3.4(b)(2), 3.57(a)(1)(iii). That same purpose is met by the payment of Chapter 35 educational assistance benefits (which provides a larger benefit). Since the Chapter 35 educational assistance benefit payments have been paid, the purpose of the additional dependency amounts will have been met even though the overpayment is recovered. Thus, the fourth requirement provides no basis for waiving recovery of the overpayment. The veteran asserts that recovering the overpayment will result in undue hardship. The standard to be used for this factor is whether the veteran and his family would be deprived of basic necessities by recovery of the debt. 38 C.F.R. § 1.965(a)(3). The record does not establish that the regulatory standard has been met. To be sure, according to the financial information that the veteran provided in November 2003, his expenses exceeded his income by $ 25 per month at that time. But since he submitted that financial report, as a result of the RO's January 2005 rating decision granting an earlier effective date for the 50 percent disability rating for his service-connected psychiatric disability, the veteran was awarded a retroactive disability compensation benefits payment of $ 12,768. He has produced no evidence that his expenses increased or that his Social Security income has been reduced. He does not assert that his family is deprived of basic necessities by recovery of the debt. He has provided no details about why recovery of the overpayment would result in undue hardship. To the contrary, even when he submitted his November 2003 financial report, he asserted that he was willing to pay $ 100 per month against the debt. On appeal, the veteran argues that since he could not pay the overpayment at the time he filed his request for a waiver of the recovery of the overpayment, he should be granted a waiver. But there is no legal provision that requires that the factor of undue hardship is be determined solely on the basis of the veteran's circumstances as of the date the waiver is requested. Evidence of the veteran's financial position during the entire period of the pendency of his claim is relevant. See Smith v. Derwinski, 1 Vet. App. 267, 280 (1991) (in evaluating the undue hardship factor, the Board correctly considered not only the initial financial position but a subsequent one that showed the claimant's financial position had worsened). Since the veteran's financial position improved as a result of the subsequent retroactive award, no undue hardship would result from recovery of the debt. And, indeed, in this case, the debt has already been recovered because an offset for the amount of the unpaid debt was made against the veteran's retroactive award. The veteran complains that collecting the debt in that way was illegal. He provides no argument to support his claim. In this, the veteran is mistaken. The law requires VA to collect outstanding debts by use of offsets. 38 U.S.C.A. § 5314(a) (the Secretary shall deduct the amount of a person's indebtedness arising from a VA program from future benefits payments). When the offset was completed, had that action produced undue hardship, the veteran could have submitted the evidence of his inability to provide basic necessities for himself and his family. As noted above, he has not even asserted that such a hardship resulted, let alone produced evidence of it. Instead, he complains that he received less than expected. That is not the standard by which undue hardship is measured. As for the last factor, the veteran would be unjustly enriched if the recovery of the overpayment were waived. The debt is valid and his financial position has improved so that repayment of the overpayment has not resulted in undue hardship. The record reveals no equitable reason why retaining the overpayment would be just. When there is an approximate balance of positive and negative evidence about a claim, reasonable doubt should be resolved in the claimant's favor. 38 U.S.C.A. § 5107(b); 38 C.F.R. § 3.102. The veteran's main argument is that because he was not at fault in the creation of the debt, he should not have to repay it. The veteran is correct that his lack of fault balanced against VA's fault in creating the debt are evidence in favor of waiver. And the Board has considered that evidence in reaching a decision. But on this record, the Board assigns more weight to the fact that the veteran had the ability to repay the debt without any resulting undue hardship, and that to permit him to keep the overpayment would result in his unjust enrichment because there are no equitable circumstances appearing in the record that would make retention of the overpayment anything other than unfair gain. The Government must exercise reasonableness and moderation in its exercise of its rights. 38 C.F.R. § 1.965(a). But there is nothing in this record to establish that recovery of the overpayment would be against equity and good conscience. 38 U.S.C.A. § 5302(a). As a result, the request for waiver must be denied. ORDER Waiver of recovery of the overpayment of disability compensation benefits in the amount of $ 5,023.20 is denied. ____________________________________________ P. M. DILORENZO Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs