Citation Nr: 1136616 Decision Date: 09/29/11 Archive Date: 10/11/11 DOCKET NO. 08-32 184 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Chicago, Illinois THE ISSUE Entitlement to a waiver of recovery of an overpayment of Department of Veterans Affairs disability benefits in the amount of $7,708.20. ATTORNEY FOR THE BOARD M. Scott Walker, Counsel INTRODUCTION The Veteran served on active duty from December 1985 to September 1989, April 1993 to April 1996, and October 2003 to February 2005. This matter comes to the Board of Veterans' Appeals (Board) on appeal from a July 2005 decision of the Department of Veterans Affairs (VA) Committee on Waiver and Compromises (Committee) in Chicago, Illinois, that denied entitlement to a waiver of the recovery of an overpayment of VA disability benefits in the amount of $7,708.20. Pursuant to a statement dated January 2006, the Veteran was scheduled for a hearing before a Veterans Law Judge in September 2011. The Veteran failed to report for his scheduled hearing. The request is deemed withdrawn. See 38 C.F.R. § 20.704(d) (2010). FINDINGS OF FACT 1. The Veteran's indebtedness in the amount of $7,708.20 was validly created. 2. The Veteran is not shown to have committed fraud, misrepresentation, or bad faith in the creation of the overpayment. 3. VA provided VA disability benefit payments while the Veteran was collecting active duty pay; any VA fault in the creation of this debt is outweighed by the fault of the Veteran. 4. A waiver of repayment of this debt would result in unfair enrichment to the Veteran; recovery of this overpayment will not subject him to undue hardship sufficient to warrant a waiver of the debt. 5. Recovery of the amount of the remaining debt in the calculated amount of $7,708.20 would not be against equity and good conscience. CONCLUSION OF LAW The criteria for waiver of recovery of an overpayment of VA disability compensation benefits in the amount of $7,708.20 have not been met. 38 U.S.C.A. § 5302 (West 2002); 38 C.F.R. §§ 1.956, 1.962, 1.963, 1.965 (2010). REASONS AND BASES FOR FINDINGS AND CONCLUSION I. Veterans Claims Assistance Act of 2000 (VCAA) In November 2000, the Veterans Claims Assistance Act of 2000 (VCAA) was signed into law. See 38 U.S.C.A. §§ 5100, 5102, 5103, 5103A, 5106, 5107, 5126 (West 2002 & Supp. 2010); 38 C.F.R. §§ 3.102, 3.156(a), 3.159, 3.326 (2010). The VCAA and its implementing regulations include, upon the submission of a substantially complete application for benefits, an enhanced duty on the part of VA to notify a claimant of the information and evidence needed to substantiate a claim, as well as the duty to notify the claimant of what evidence will be obtained by whom. 38 U.S.C.A. § 5103(a); 38 C.F.R. § 3.159(b). In addition, they define the obligation of VA with respect to its duty to assist a claimant in obtaining evidence. 38 U.S.C.A. § 5103A; 38 C.F.R. § 3.159(c). Notably, the VCAA does not apply to the issue at hand. See Barger v. Principi, 16 Vet. App. 132 (2002); see generally Smith (Claudus) v. Gober, 14 Vet. App. 227, 230 (2000). The statute governing waiver claims, however, has its own notice provisions. 38 U.S.C.A. § 5302 (West 2002). In a waiver of overpayment claim, the payee must be notified of his right to dispute the debt and request a waiver of the debt with a description of the procedures for submitting the application. The Veteran was sent proper notice of the overpayment debt in December 2004. Accordingly, the notice provisions with regard to this appeal have been met. II. Waiver of recovery of an overpayment Validity of the Debt The preliminary issue of the validity of a debt is a threshold determination that must be made prior to a decision on a request for waiver of the indebtedness. See Schaper v. Derwinski, 1 Vet. App. 430 (1991). An overpayment is created when VA determines that a beneficiary or payee has received monetary benefits to which he or she is not entitled. See 38 U.S.C.A. § 5302; 38 C.F.R. § 1.962 (2010). An overpayment may arise from virtually any benefits program administered pursuant to VA law, including pension, compensation, dependency and indemnity compensation, educational assistance benefits and subsistence allowance, insurance benefits, burial and plot allowances, clothing allowance, and automobile or other conveyance and adaptive equipment allowances. See 38 C.F.R. § 1.956(a) (2010). In this case, the Veteran has been in receipt of VA disability compensation from April 21, 1996 to the present. However, during this period, the Veteran has served on active duty (October 1, 2003 - February 11, 2005). The Board notes that VA compensation benefits shall not be paid during any period for which a veteran received active service pay. Active service includes active duty, active duty for training, or inactive duty for training. See 38 C.F.R. § 3.654(a) (2010); see also 38 C.F.R. §§ 3.700, 3.654(b) (2010) It was determined that the amount owed by the Veteran was $7,708.20. See Letter from the Debt Management Center, February 13, 2005. Here, the Veteran has failed to demonstrate that he was not on active duty during the period in question for which he also received VA disability benefits, or that VA disability payments were not actually received. Accordingly, the Board concludes the overpayment in question is a valid debt because the Veteran received benefits to which he was not entitled. See 38 U.S.C.A. § 5112(b)(2); 38 C.F.R. §§ 3.501, 3.652(a) (2010). Waiver of Overpayment The Veteran seeks waiver of recovery of an overpayment of VA disability benefits in the amount of $7,708.20. The Veteran asserts that he is not at fault in the creation of this debt, and that collection of this debt would result in undue hardship. While the Board has determined that the debt in question is valid, there shall be no recovery of overpayment of VA benefits if it is determined that recovery would be against equity and good conscience. See 38 U.S.C.A. § 5302(a); 38 C.F.R. § 1.962 (2010). The standard "equity and good conscience" will be 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. The decision reached should not be unduly favorable or adverse to either side. The phrase "equity and good conscience" means arriving at a fair decision between the Veteran and the Government. The Veteran requested a waiver of the recovery of the debt at issue. He completed a January 2006 Financial Status Report (FSR) which showed a deficit of $490 per month, resulting from an income of $1,732, minus monthly expenses totaling $2,223. He indicated that his assets consisted of $4,550 in cash, as well as a 1998 Ford Ranger worth $6,000. The Veteran reported employment with Caterpillar, Inc. The Veteran's request for a waiver of the overpayment was referred to the Committee. In July 2005, the Committee considered the Veteran's claim for a waiver. The Committee made a specific determination that there was no fraud, misrepresentation, or bad faith on the Veteran's part with respect to the creation of the overpayment at issue. However, the Committee further determined that recovery of the overpayment of VA nonservice-connected pension benefits in the amount of $7,708.20 would not be against equity and good conscience. In cases where there is no fraud, misrepresentation, or bad faith on the Veteran's part with respect to the creation of the overpayment at issue, and, therefore, waiver is not precluded pursuant to 38 U.S.C.A. § 5302(a), in order to dispose of the matter on appeal, the Board must determine whether recovery of the indebtedness would be against equity and good conscience, thereby permitting waiver under 38 U.S.C.A. § 5302(a) and 38 C.F.R. §§ 1.963(a), 1.965(a) (2010). The pertinent regulation in this case provides that the standard of "equity and good conscience" will be 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. See 38 C.F.R. § 1.965(a) (2010). In making this determination, consideration is given to the following elements, which are not intended to be all-inclusive: (1) fault of the debtor (where actions of the debtors contribute to the creation of the debt); (2) balancing of faults (weighing fault of the debtor vs. the fault of VA); (3) undue Hardship (whether collection would deprive the debtor or family of basic necessities); (4) defeat the purpose (whether withholding of benefits or recovery would nullify the objective for which benefits were intended); (5) unjust enrichment (failure to make restitution would result in unfair gain to the debtor); and (6) changing position to one's detriment (reliance on VA benefits results in relinquishment of a valuable right or incurrence of a legal obligation). See 38 C.F.R. § 1.965 (2010). In the evaluation of whether equity and good conscience necessitates a favorable waiver decision, the Board must consider all the specifically enumerated elements applicable to a particular case. See Ridings v. Brown, 6 Vet. App. 544, 546 (1994); Cullen v. Brown, 5 Vet. App. 510, 512 (1993). If warranted, the Board may waive a portion of the debt. See Jordan v. Brown, 10 Vet. App. 171 (1997). When, in fully weighing and balancing each equitable factor, there is an approximate balance of positive and negative evidence as to any material issue, VA shall give the Veteran the benefit of the doubt. See 38 U.S.C.A. § 5107(b). See also Dela Cruz v. Principi, 15 Vet. App. 143, 148-49 (2001). In July 2005, the Committee denied the Veteran's request for a waiver of the indebtedness created by the overpayment of VA disability benefits, finding that these overpaid funds increased the Veteran's assets, creating a financial gain at Government expense. The Committee also found that repayment of this debt would not defeat the purpose of the benefit was intended for. Change of position was not considered. In consideration of the standards of equity and good conscious, the Committee determined that these principles outweighed any claimed financial hardship. The Board finds that the facts of this case do not reveal fraud, misrepresentation, or bad faith on the Veteran's part in the creation of the overpayment in question. However, having established the lack of fraud, misrepresentation, or bad faith, the Board must now proceed to the question of whether the collection of the overpayment would be against "equity and good conscience." See 38 U.S.C.A. § 5302(a); 38 C.F.R. § 1.963(a) (2010). As mentioned, pursuant to 38 C.F.R. § 1.965, the standard of equity and good conscience will be 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. See 38 C.F.R. § 1.965(a). The first and second elements pertain to the fault of the debtor versus the fault of VA. The responsibility in the creation of the overpayment of benefits rests with the Veteran, inasmuch as it was due to his failure to submit timely notice of his return to active duty status, beginning October 1, 2003. Thus, the Board finds that the Veteran bears primary fault in the creation of the overpayment at issue. With respect to the third element, whether the Veteran would be subjected to undue hardship if the debt were recovered, the Veteran's January 2006 FSR showed a deficit of $490 per month, resulting from a combined income of $1,732, minus monthly expenses totaling $2,223. However, in arriving at this amount, the Veteran took into account $450 per month that is owed for real estate taxes, which is offset by $4,450 in a personal bank account designated by the Veteran to pay those taxes. When the amount due monthly to his credit card is not considered, $120, the Veteran's net monthly income actually exceed his monthly expenses by $80. As the overpayment of pension benefits is a valid debt to the U.S. Government, there is no reason that the Veteran should not accord the Government the same consideration that he accords his other creditor. The Board acknowledges the limited income of the Veteran. However, financial hardship alone is not sufficient to constitute undue hardship for VA purposes. Undue hardship is defined as depriving the debtor or his family of basic necessities. 38 C.F.R. § 1.965(a)(3). Basic necessities constitute food, clothing, and shelter, and the Board finds that to require the Veteran to repay the overpayment in this case would not deprive him of basic necessities for VA purposes. Accordingly, while the Board is sympathetic to any financial difficulty the Veteran may incur as a result of repayment of this debt, this factor alone is not sufficient to warrant a waiver of an otherwise valid debt. The fourth element of equity and good conscience also fails to support the waiver of overpayment in this case. Again, the fourth element to be addressed is whether recovery of the overpayment would defeat the purpose for which the benefits were intended. Here, VA awarded VA disability benefits to which the Veteran is entitled during the period(s) of time when he is not serving on active duty. See 38 C.F.R. § 3.654(a) (2010). As the Veteran has not submitted any evidence to demonstrate that he was not on active duty from October 1, 2003 until notice of active duty status was received on June 3, 2004, the reduction of this benefit would not defeat the purpose for which the benefit was intended, as the benefit was never intended for veterans receiving active duty pay. Also for consideration is whether a waiver of overpayment would cause "unjust enrichment." Put another way, the Board must contemplate whether failure to make restitution would result in unfair gain. Here, the Veteran clearly received assistance to which he was not entitled. The Veteran received from VA a total of $7,708.20 during a period of active duty, which is not permitted by law. In the absence of any evidence that the Veteran did not serve on active duty during the period in question, the Board cannot conclude that the monies given to the Veteran did not provide an unfair gain during that time. Accordingly, the Veteran would be unjustly enriched by waiver of the overpayment in this case. The sixth element to be considered is whether reliance on VA benefits resulted in the Veteran relinquishing a valuable right or incurring a legal obligation. The Veteran has not claimed that he relinquished any right or incurred any legal obligation or that he relied upon VA to his detriment, nor is there any evidence of such. Thus, this sixth element does not support the Veteran's request for a waiver of overpayment. The record does not demonstrate any additional factors which should be considered in adjudicating the Veteran's claim for a waiver of the indebtedness, nor has the Veteran identified any such factors. After weighing all of the enumerated factors, the Board finds that total recovery of the overpayment does not violate the principles of equity and good conscience. As discussed above, the Veteran is significantly at fault for creating the overpayment. In balancing the fault based on the circumstances in this case, the Veteran's fault was more significant. While the Veteran's FSR of record demonstrates little to no monthly expendable income, it has not been shown that recovery of the debt in reasonable monthly installments creates an undue hardship sufficient to warrant a waiver of the debt, or defeats the purpose of his VA benefits. In addition, waiver of the debt would result in his unjust enrichment and there is no evidence of detrimental reliance on his part. In reaching the above conclusions, the Board has considered the Veteran's statements in support of his application for a waiver of recovery of an overpayment. He claimed that his entry into active duty in October 2003 was involuntary. However, this is not at issue, as the Veteran received active duty pay at that time. Further, his statements have not established financial hardship or demonstrated fault on the part of VA with respect to the overpayment. Again, principles of equity and good conscience do not preclude recovery of the overpayment here. As the preponderance of the evidence is against his claim, the "benefit-of-the-doubt" rule does not apply and the claim must be denied. See 38 U.S.C.A. § 5107(b) (West 2002); 38 C.F.R. § 3.102, 4.3; Gilbert v. Derwinski, 1 Vet. App. 49, 50 (1990). ORDER The appeal for a waiver of the recovery of an overpayment of VA disability benefits in the amount of $7,708.20 is denied. ____________________________________________ S. L. Kennedy Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs