Citation Nr: 1122012 Decision Date: 06/07/11 Archive Date: 06/20/11 DOCKET NO. 06-21 591A ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Hartford, Connecticut THE ISSUE Whether the discontinuance of the 100 percent disability rating for schizophrenia, schizo-affective type, prior to February 3, 2005, was proper. REPRESENTATION Veteran represented by: Lawrence W. Andrea, Attorney at Law ATTORNEY FOR THE BOARD Patrick J. Costello, Counsel INTRODUCTION The Veteran (also referred to herein as 'the appellant') served on active duty from October 1976 to June 1978. This matter comes before the Board of Veterans' Appeals (Board) on appeal from a February 2006 rating decision issued by the Department of Veterans Affairs (VA), Regional Office (RO), in Hartford, Connecticut. Following a review of the claim, the Board, in July 2009, remanded the claim to the RO via the Appeals Management Center (AMC), in Washington, D.C. The claim has since been returned to the Board for review. FINDINGS OF FACT 1. The appellant was granted a 100 percent disability rating for schizophrenia, effective June 10, 1978. 2. The RO discontinued the 100 percent disability rating on July 10, 1980, based on the Veteran's failure to report for a medical examination. 3. The appellant was not provided with due process concerning his appellate rights with respect to the discontinuance of the rating. 4. The RO restored the 100 percent disability rating effective February 3, 2005. 5. In a January 2006 Advisory Opinion, the Director of Compensation and Pension (Director) determined that the appellant's 100 percent rating, which was effective June 10, 1978, was a protected rating pursuant to 38 C.F.R. § 3.951(b). CONCLUSION OF LAW The discontinuation of the appellant's 100 percent disability rating for schizophrenia, schizo-affective type, was not warranted and the requirements for restoration of benefits effective June 10, 1978, onward have been met. 38 U.S.C.A. §§ 110, 5107(a) (West 2002 & Supp. 2010); 38 C.F.R. §§ 3.102, 3.105 (1972), (2010); 38 C.F.R. § 3.951(b) (2010); Salgado v. Brown, 4 Vet. App. 316 (1993). REASONS AND BASES FOR FINDINGS AND CONCLUSION The appellant has come before the Board asking that a date prior to February 3, 2005, be used for the computation and payment of disability compensation at the 100 percent rate for a service-connected disability of schizophrenia, schizo-affective type. In essence, he has asked that his 100 percent disability rating, which was initially effective as of June 10, 1978, be reinstated back to the date it was discontinued, July 10, 1980. The RO and the AMC have denied the appellant's claim, and it is thus before the Board for adjudication. In October 1976, the appellant entered active duty in the US Army. While stationed at Fort Leonard Wood Army Base (Missouri) and Fort Riley Army Base (Kansas), the appellant began decompensating and was hospitalized on three occasions. Subsequent to the third hospitalization, the appellant was given a diagnosis of schizo-affective schizophrenia and transferred to Walter Reed Army Medical Center. This occurred in March 1978. He was treated with lithium carbonate and stelazine, and he stabilized. His case was then forwarded to the hospital Medical Board with a recommendation that the appellant be found unfit for further military duty under the provisions of Paragraph 3-29, AR 40-501. It was recommended that the appellant be discharged to a VA treating facility for inpatient psychotherapy for a period of "at least 6 months to 1 year". After reviewing the pertinent medical data, a Physical Evaluation Board recommended that the appellant be discharged. That paperwork was forwarded to the Army Reserve Personnel Center (ARPERCEN), which then made the following determination: You are relieved from assigned and duty because of physical disability incurred while entitled to basic pay and under conditions which permit your placement on the Temporary Disability Retired List (TDRL). The effective date of the retirement was determined to be June 9, 1978. He was placed on TDRL June 10, 1978. He was then transferred directly from Walter Reed to his local VA Medical Center, which was the West Haven Veterans Hospital, in West Haven, Connecticut. Nevertheless, within ten days of his retirement, he submitted a claim for VA compensation benefits. He was granted service connection for schizophrenia, schizo-affective type, by way of a rating decision dated in July 1978. The effective date was established as the date after his retirement, June 10, 1978. The appellant was awarded a 100 percent disability rating. In granting that disability rating, the RO used the information that was contained on the VA Hospital Summary of June 1978. The rating decision further established that this was a pre-stabilization rating. The Veteran was to be re-examined in February 1979 at which time an appropriate adjustment in his award would be made. See VA Form 21-6796, July 10, 1978. Notice of the rating action was provided by form letter in July 1978. The appellant was informed that his compensation would be in the amount of $754.00 (US dollars) and that the evaluation was "temporary" and would be reviewed in February 1979. The notice letter used was a Form Letter (FL) 21-826a. This letter also informed the Veteran that his request for a waiver of his service retired pay had been forwarded to his service department for action. He was further informed that his VA compensation would be paid beginning on the effective date of the reduction of his service retired pay. The letter did not list any enclosures. The Board notes that the letter wrongly informed that the Veteran's waiver, meaning his election of VA compensation in lieu of his service retired pay, was forwarded to his service department. The Veteran did not make any election as to whether to receive VA compensation or service retired pay because it appears he was not given the option. As will be discussed infra, the Veteran was provided with the incorrect form letter. The RO failed to schedule the Veteran for the follow-up examination in February 1979. The next pertinent item of record is a Report of Contact, dated May 9, 1980. The writer noted that a VA Form 21-523, Disallowance Disability or Death Claim, filed on the left side of the claims folder, provided for the Veteran to be sent a FL-21-826 and a VA Form 21-651. (VA Form 21-651, Election of Compensation or Pension in Lieu of Retired Pay or Waiver of Retired Pay to Secure Compensation or Pension From Veterans Administration (38 U.S.C. 3104(a) - 3105)). The Report noted that the Veteran was sent a FL 21-826a that provided him with erroneous information and prevented him from electing VA disability compensation instead of his retired pay. Finally, it was noted that the Veteran was to be re-examined in February 1979 but this was not done. The Report was annotated on May 16, 1980, to show that the Veteran was sent a VA 21-651. In other words, on the Report of Contact, VA personnel readily admitted that the VA had not only not sent the appellant the correct election form but it also failed to provide him a psychiatric examination as it stated that it would. The Board notes that VA FL 21-826 provides the recipient with information that their claim for compensation has been disallowed because they are in receipt of service retired pay. The recipient is informed that they cannot receive both forms of payment. The letter instructs that a waiver of a portion of the service retired pay can be submitted. The letter shows that a VA Form 21-651 is included as an enclosure. A completed VA Form 21-651 was date stamped as received at the RO on May 22, 1980. The Veteran reported that he elected to his receive VA disability compensation instead of his service retired pay. There is no evidence in the claims folder that any action was taken in regard to the Veteran's election of May 1980. In other words, even though the appellant completed and sent back the VA Form 21-651 to the "Veterans Administration, 450 Main Street, Hartford, CT 06103", the RO did not effectuate the election. The RO wrote to the Veteran on June 11, 1980, to inform him that he would be scheduled for a VA examination. The letter contained a notice to the Veteran, on the reverse side, that a failure to report for the examination could result in unfavorable action on his claim. There is a second Report of Contact (VA Form 119), dated June 17, 1980, that is of record. The contents of this Report are confusing. The Report notes that the Veteran was going to be out of the state from June 28, 1980, to August 7, 1980. It goes on to note that the Veteran received no notice of a compensation examination before payments were terminated. Finally, it was requested that an examination be scheduled before June 28, 1980, to resume pay. The Board has reviewed the claims folder and cannot find evidence of the Veteran being paid disability compensation pay prior to this time. He had been in receipt of education benefits. Thus, while the appellant was awarded a 100 percent disability rating, effective June 10, 1978, he was not receiving VA compensation benefits because he was purportedly receiving military retirement benefits in the amount of $264.00 (US dollars) per month. There is a VA Form 21-2507, Request For Physical Examination, of record that is dated June 11, 1980. Block 10a of the form shows that it was received either on June 13, 1980, or June 16, 1980, as the earlier date is lined out. The form also shows in Block 10b that an examination was scheduled for July 9, 1980. The examination is reported as cancelled in Block 10c. The form is date stamped as received at the RO on July 9, 1980. The RO wrote to the Veteran on July 10, 1980. The letter informed the Veteran that his claim was denied because he did not report for his scheduled examination. He was further informed that no further action would be taken unless he informed the RO of his willingness to report for an examination by signing a statement on the letter and returning it to the RO. His examination would then be rescheduled and his claim reconsidered upon completion of his examination. There is no indication that the Veteran responded to the RO's letter. There is no indication that the letter was returned as undeliverable. However, the Board would also point out that the letter was sent to the appellant at the time that he said that he would be out of the state (June 28, 1980, to August 7, 1980). Also of record, dated July 10, 1980, is a VA Form 3230, Reference Slip. The form was completed by an individual in the Compensation Unit of the RO. On the form, it states that the appellant had requested that his VA psychiatric examination be rescheduled for the "latter part of August" 1980. The RO received notice that the Veteran was removed from the TDRL and discharged from service, effective September 30, 1980, from ARPERCEN and the Army Finance and Accounting Center in September and October 1980. In the letter from ARPERCEN, the letter specifically stated that the appellant was "removed from the Temporary Disability Retired List" and that he was "entitled to severance pay." The Chief of Medical Administration Service of the West Haven Medical Center wrote to the Finance and Accounting Center, of the Department of the Army, in September 1980. The individual informed the Finance and Accounting Center that the Medical Center had not had contact with the appellant since December 1978, and that "VA policy prohibits the release of personal information", such as an address of the appellant. In November 1980, the RO requested of the Department of Defense additional information concerning any severance pay that the appellant may have received. DoD, or MG J. C. Pennington, of AGUZ-PSE-AVS, RCPAC, wrote back to the RO informing the RO that the information needed would be located at the Finance and Accounting Center - the very office and place that the VA Medical Center had informed that it could not provide any information on the appellant. The next communication from the Veteran was received on February 3, 2005. He was seeking entitlement to service connection for tinnitus. The February 2005 claim resulted in a review of the Veteran's claims folder. The RO submitted a request for an advisory opinion from the Director in August 2005. The request involved whether the Veteran's 100 percent rating, assigned in June 1978, was protected under the United States Court of Appeals for Veterans Claims (Court), decision in Salgado v. Brown, 4 Vet. App. 316 (1993). The request provided factual background that noted the grant of service connection in 1978 and intended examination of February 1979. The developments of May 1980 were discussed. It was noted that the Veteran was sent a VA Form 21-651 but the request for an advisory opinion from the Director, Compensation and Pension Service fails to acknowledge that the Veteran actually and timely returned VA Form 21-651 with an election to receive VA compensation. The request also noted the developments surrounding the VA examination. It was acknowledged that the Veteran had advised the RO of his dates of availability and that he would not be able to attend his examination scheduled for July 9, 1980. It was further noted that he requested that his examination be rescheduled. The RO noted that the Veteran's claim was denied on July 10, 1980, for failure to report for the examination. It was admitted by VA that no attempt was made to reschedule the examination. The RO also erroneously reported that the Veteran never elected compensation in lieu of retired pay. Finally, it was noted that the Veteran did not respond to the letter of July 10, 1980. The request noted that the holding in Salgado suggested that the 100 percent disability rating was protected; however, the RO was uncertain whether the Veteran's failure to respond to the July 10, 1980, letter had any bearing on the issue. The request acknowledged that the letter of July 10, 1980, was "inappropriate" given the information reported on June 17, 1980, about the Veteran's availability. The Director then issued an advisory opinion in January 2006. In essence, the only question decided was that the Veteran's 100 percent rating was protected, meaning that it remained in effect from June 10, 1978. The opinion reviewed the history of the Veteran's disability in service and the grant of service connection in 1978. It also noted that the 100 percent rating assigned in July 1978 was a pre-stabilization rating and that an examination was to take place in February 1979. The opinion observed that the Veteran's VA Form 21-651, was received by the RO on May 22, 1980. There was a further recitation of the facts regarding the notice of an examination, and the notice of availability by the Veteran. The opinion also noted that the Veteran's claim was denied for failure to report for his examination. The opinion determined that the denial of the claim for failure to report for an examination was erroneous because the Veteran had notified the RO he would be out of town for the specified period. The opinion further stated that the exception to the holding in Salgado was: if a Veteran failed, without adequate reason, to report for a VA examination, then his rating would not be protected. The opinion indicated that the evidence of record demonstrated that the Veteran had adequate reason for not reporting for the scheduled examination. Accordingly, the 100 percent rating for service-connected schizophrenia, schizo-affective type, was protected and, in essence, should never have been discontinued. The RO then issued the rating decision on appeal in February 2006. The RO determined, contrary to the opinion of the Director that the Veteran's claim was rightfully denied in July 1980 when he failed to report for his examination. As the Veteran did not respond to the letter of July 10, 1980, his claim was considered to be abandoned. The RO insinuated that since the claim was abandoned, VA was not obligated to pay the appellant monthly compensation benefits. The Veteran, through his representative, disagreed with the decision in April 2006. It was contended that an effective date of June 10, 1980, was proper. It appears that the representative meant to say that a date of June 10, 1978, the original date of service connection, was the proper date. The RO issued a statement of the case (SOC) in June 2006. The reasons and bases were more expanded than those of the rating decision. However, the basis for denial remained the same - the Veteran failed to report for his scheduled examination and did not respond to the notice within a year. His next claim was submitted in February 2005. As the Veteran had "abandoned" his claim, his effective date was the date of the next claim. The SOC acknowledged the Veteran's submission of the VA Form 21-651 (the election form) in May 1980 but did not address the impact of that submission. The SOC also concluded that the Veteran had adequate reason for failure to report for his examination. This was, in fact, the basis for finding that his 100 percent disability rating was protected. This finding was reached by the Director in the advisory opinion in addition to the admission by the RO in the SOC. The Veteran submitted a statement in July 2006 wherein he questioned why he was not given the opportunity to elect to receive VA disability compensation at the time his claim was originally decided. He also challenged the denial of his claim on the basis of being abandoned. He cited to the statements of record that acknowledged that he had adequate reason to not report for his examination. He noted that he had asked that his examination be re-scheduled. Following a review of the claim, the Board, as previously noted, remanded the claim for the purpose of obtaining additional information. The information in question included the obtaining of the regulations in effect in 1978 and 1980 that were applicable to the appellant's case. A review of the evidence obtained includes the wording for abandoned claims, discontinued claims, retroactive benefits, and failure to report for VA examinations. The case was then returned to the Huntington RO, acting as the AMC, which then issued a supplemental statement of the case (SSOC) in June 2010. The Reasons and Bases of the SSOC, in pertinent part, reads as follows: . . . Because the law prior to the enactment of the Veterans' Benefits Amendments of 1989 did not required the Regional Office (RO) to set forth in detail the factual bases for its decision, nor provide in depth discussion of applicable law, the failure to do so was not clear and unmistakable legal error at the time of such decisions, and the rating board was presumed to have made the requisite findings under a presumption of validity. In reviewing your claim and appeal, it does not appear that an earlier effective [date] is in order, as it does appear you abandoned any claim when you did not respond to VA letter dated July 10, 1980, informing you that your claim had been denied because you did not report for your scheduled examination. You were asked to sign and return the letter if you wanted your examination rescheduled. You were advised that your claim would be reconsidered once you expressed that you would appear for a VA examination. There was no response to this letter, and in fact, there was no other communication from you until February 3, 2005, when you submitted a claim for compensation for tinnitus. You claim for earlier effective date prior to February 3, 2005, for the payment of compensation for schizophrenia, rated as 100 percent disabling is denied. The claim has since been returned to the Board for appellate consideration and review. The Board finds that VA has complied with the notice and duty to assist provisions of the law for the decision reached in this case, and that, in view of the outcome discussed below, any possible deficiencies have not prejudiced the outcome. 38 U.S.C.A. §§ 5103, 5103A (West 2002 & Supp. 2010); 38 C.F.R. § 3.159 (2010). As previously stated, the appellant and his representative have contended that the 100 percent disability rating that was assigned on June 10, 1978, for his schizophrenia should not have been discontinued. They have averred that the RO erred when it did not offset his TDRL retirement pay against his VA compensation pay. They have maintained that the RO erred when, despite receiving notification requesting a different examination date, the RO recklessly and negligently stopped all compensation benefits from being awarded to the appellant. Moreover, they have insinuated that the RO failed in its duty to the appellant to notify him after DoD informed VA that the appellant was no longer receiving retirement pay from DoD and thus eligible to receive all VA compensation benefits. It has further been suggested that the RO erred when it provided faulty information to the appellant about any elections he might make with respect to his retirement pay versus VA compensation monies, and it erred when it considered the appellant's claim as being abandoned even though it was the VA's responsibility to notify the appellant of any future medical examinations. As an initial matter, the Board finds that the 100 percent rating assigned on June 10, 1978, is protected within the meaning of 38 U.S.C.A. § 110 (West 2002). Although the Veteran did not receive any VA monetary benefits between June 10, 1978, and February 3, 2005, the Court's decision in Salgado, supra, now makes clear that the protection afforded by section 110 applies when a rating is in effect for 20 years, whether or not the Veteran elects to receive a VA monetary award. The Board also finds that the protection afforded by section 110 should be applied retroactively in this case, i.e., prior to the date of the Court's March 3, 1993, decision in Salgado. Although decisions of the Court that invalidate VA's interpretation of a statute or regulation are not accorded retroactive effect in relation to prior final adjudications, such decisions are given retroactive effect as they relate to claims that are open and pending when the decision is issued. See VAOPGCPREC 9-94 (March 25, 1994). See also Smith v. West, 11 Vet. App. 134 (1998); Berger v. Brown, 10 Vet. App. 166, 170 (1997). Because the record in the case suggests that, at the very least, there may have been a claim that remained open and pending when the Salgado decision was issued, the appellant is entitled to have the rule of Salgado applied to his case retroactively. Specifically, the Board finds that the question as to whether the appellant would accept DoD retirement benefits versus VA compensation benefits remained unadjudicated and undecided, especially given the fact that the RO failed to effectuate the appellant's election of benefits as previously noted. In addition, if VA's action discontinuing compensation is construed as an adjudicative determination terminating the appellant's award, the RO was under a duty to properly notify the appellant of that discontinuation, along with all of the appellant rights that stem from such a discontinuation, and since it failed to do so, the discontinuance remained unadjudicated and open. Thus, the Board finds that the 100 percent rating assigned effective June 10, 1978, is protected, and that the rule of protection articulated in Salgado applies retroactively to the time of the initial claim for benefits. The Board further notes that the appellant was initially rated pursuant to 38 C.F.R. § 4.28 (1978) following his discharge from service. Pre-stabilization ratings are for assignment in the immediate post-discharge period. By statute, this rating continues for a twelve-month period following discharge from service. Review of the pre-stabilization rating is to be accomplished not earlier than six months or more than twelve months following discharge. The regulation further requires that in those pre-stabilization ratings in which following examination reduction in evaluation is found to be warranted, the provisions of 38 C.F.R. § 3.105(e) are to be applied with notice to the Veteran of the proposed reduction in evaluation with detailed reasons therefor will be given to the beneficiary along with an opportunity to respond to the proposed rating action. 38 C.F.R. § 4.28. See also 38 C.F.R. § 3.103(e) (1972) [Due Process - procedural and appellate rights with regard to disability and death benefits and related relief. Notification of decisions.] In this case, as discussed, the rating initially assigned as a pre-stabilization rating in June 1978 was continued for at least two years. The record indicates that the appellant attempted to opt to receive disability compensation for his psychiatric disorder rather that retired pay. Unfortunately, the RO did not act on the appellant's request. Moreover, after the appellant timely notified the RO that he was unavailable for the scheduled examination in 1979, there is no indication in the record that the RO attempted to reschedule the appellant for another examination in accordance with the provisions of 38 C.F.R. § 4.28. Instead, the RO notified the appellant that it was discontinuing his benefits. The RO did so without giving him any due process requirements as required by 38 C.F.R. § 3.103 (1972). Based on these facts, the Board finds that the RO's action of July 10, 1980, that discontinued the appellant's disability rating was contrary to the criteria set forth in applicable regulations. The appellant's nonreceipt of monies does not waive the notice requirement of the statute, which includes appropriate notice and an opportunity to respond. Where a rating reduction, or discontinuance, is undertaken without observance of applicable regulations, as here, it is void ab initio and must be set aside. Brown v. Brown, 5 Vet. App. 413, 422 (1993). Therefore, since the rating discontinuance was not in accordance with specified procedures and governing case law, the 100 percent disability evaluation must be restored. The next question the Board must address is what rating is restored. By regulation, the 100 percent pre-stabilization rating was effective for only a twelve month period. Thereafter, it was to be reviewed and a rating based upon residuals was to be assigned. 38 C.F.R. § 4.28. Thus, the Board finds that the pre-stabilization rating had a "temporal element" and ended after the initial twelve-month period. Rossiello v. Principi, 3 Vet. App. 430, 433 (1992). The appellant, however, was entitled to be rated on residuals. The RO did not change the 100 percent evaluation, and did not change the 100 percent evaluation when it re-established the evaluation in 2005. Thus, the RO effectively continued the 100 percent rating as the rating on the residuals. Accordingly, the rating restored is not the pre-stabilization rating, which ended by regulation within twelve months, but the rating on residuals. Since no action was taken to reduce this rating within 20 years from the date of the award, that rating is restored to June 10, 1978. 38 U.S.C.A. § 110 (West 2002); 38 C.F.R. § 3.951 (2010). ORDER Restoration of a 100 percent rating for schizophrenia, effective June 10, 1978, is granted, subject to the governing regulations pertaining to the payment of monetary benefits. ____________________________________________ A. JAEGER Acting Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs