Citation Nr: 1315460 Decision Date: 05/10/13 Archive Date: 05/15/13 DOCKET NO. 09-29 015 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in New Orleans, Louisiana THE ISSUE Entitlement to a waiver of recovery of an overpayment created during the period from March 1, 2001 to May 31, 2008, to include the validity of the debt. (The issues of service connection for a back disability, a bruised kidney and pneumonitis, to include as a result of exposure to mustard gas and/or CS (O-Chlorobenzalononitrile) tear gas are addressed in a separate decision.) REPRESENTATION Appellant represented by: Disabled American Veterans WITNESS AT HEARING ON APPEAL Appellant ATTORNEY FOR THE BOARD Christine C. Kung, Counsel INTRODUCTION The Veteran, who is the appellant in this case, served on active duty from March 1968 to September 1968. This matter comes on appeal before the Board of Veterans' Appeals (Board) from a March 2009 decision of the Department of Veterans Affairs (VA) Debt Management Center (DMC) in Milwaukee, Wisconsin, which denied a request for waiver of the recovery of an overpayment in the amount of $44,782.00. Jurisdiction of the claim was transferred to the Regional Office (RO) in New Orleans, Louisiana. During the pendency of this appeal, in July 2010, the RO adjusted the Veteran's benefits for the period from period March 1, 2001 through May 31, 2008 based on receipt of additional evidence. This action generated an award in the amount of $40,147.00 which was applied directly to the Veteran's debt. The Board finds, therefore, that remaining amount of the overpayment at issue, created during the period from March 1, 2001 to May 31, 2008 is $4,635.00. For the purposes of clarification, the Board has recharacterized the issues of whether the decision to resume non-service connected pension to include the earnings of the Veteran's spouse as part of his income during the time he was married and residing with her for the period March 1, 2001 through May 31, 2008 was proper under the law, and whether the decision to deduct all retroactive benefits and future benefits to apply to the debt was proper as one issue of entitlement to a waiver of recovery of an overpayment created during the period from March 1, 2001 to May 31, 2008, to include the validity of the debt. The Board notes that the manner in which recovery of a debt is made, to include the withholding of VA benefits, is a matter within the jurisdiction of the Pension Management Center or Financial Division, and not the Board. Moreover, because the RO awarded the Veteran partial benefits in the amount of $40,147.00 in July 2010, and because the Board is granting waiver of recovery of the remaining overpayment in the amount of $4,635.00 created during the period from March 1, 2001 to May 31, 2008, the Board finds that the question of whether to decision to deduct retroactive benefits and future benefits to apply to this debt was proper has been rendered moot. The record shows that the Veteran had a previously existing debt, in the amount of $31, 957.00, which the Board finds is not at issue in the present case. The Veteran was previously in receipt of nonservice-connected (NSC) pension benefits from December 1986 to February 1989; the benefits were terminated because his maximum annual pension rate exceeded the income limitation. In February 1993, the Veteran received notice from the DMC that an overpayment in the amount of $31, 957.00 had been created. The VA denied pension benefits by letter dated in August 1994. The DMC denied a request for waiver of recovery of an overpayment in the amount of $31, 957.00 in February 2006 and March 2006 decisions. The Veteran submitted a timely notice of disagreement to the February 2006 and March 2006 decisions and issued a statement of the case in July 2006; however, a substantive appeal was not filed, nor has the RO taken any action to indicate that such a filing has been waived. Cf. Percy v. Shinseki, 23 Vet. App. 37, 45 (2009) (holding that the filing of a timely substantive appeal may be waived, and that, where the RO takes actions to indicate that such filing has been waived (for instance by certifying the appeal), the Board has jurisdiction to decide the appeal). Therefore, the issue of entitlement to recovery of an overpayment in the amount of $31, 957.00 is not on appeal before the Board. The Veteran testified at a Board videoconference hearing in February 2013. The hearing transcript is of record. Please note this appeal has been advanced on the Board's docket pursuant to 38 C.F.R. § 20.900(c) (2012). 38 U.S.C.A. § 7107(a)(2) (West 2002). FINDINGS OF FACT 1. In August 2001, the Veteran was awarded NSC pension benefits effective February 27, 2001. 2. In November 2008, the Veteran was informed that if he did not submit eligibility verification reports for the period from March 2001 to December 2008 within 60 days of that letter, VA proposed to stop his monthly benefits effective March 1, 2001. The Veteran did not submit the requested information and the award of VA pension benefits were accordingly reduced, creating an overpayment in the amount of in the amount of $44,782.00. 3. Based on revised income information received for the Veteran and his spouse for the period from March 1, 2001 through May 31, 2008, in July 2010, the RO adjusted the Veteran's benefits generating an award in the amount of $40,147.00 which was applied directly to the Veteran's debt. This action reduced the overpayment amount to $4,635.00. 4. The overpayment of VA pension benefits in the amount of $4,635.00 was properly created. 5. The overpayment was not the result of fraud, misrepresentation or bad faith on the part of the Veteran. 6. The Veteran was at fault in the creation of the overpayment, and there is no fault on the part of VA in its creation. 7. The Veteran's income, with consideration of the cost of life's basic necessities, is not sufficient to permit repayment of the balance of the indebtedness without financial hardship. 8. The failure of the Government to insist upon its right to repayment of the assessed overpayment would result in unjust enrichment of the Veteran. 9. The Veteran has not relinquished a valuable right or incurred any legal obligations resulting from reliance on VA benefits. 10. Recovery of the overpayment would defeat the purpose of the VA Pension program. CONCLUSIONS OF LAW 1. The overpayment of nonservice-connected pension benefits in the adjusted amount of $4,635.00 was properly created. 38 U.S.C.A. §1521 (West 2002 & Supp. 2011); 38 C.F.R. §§ 3.23, 3.103, 3.105, 3.271, 3.272, 3.273, 3.660 (2012). 2. The requirements for waiver of recovery of the overpayment of VA nonservice-connected pension benefits, in the amount of $4,635.00, are met. 38 U.S.C.A. § 5302 (West 2002); 38 C.F.R. §§ 1.963, 1.965 (2012). REASONS AND BASES FOR FINDINGS AND CONCLUSIONS Due Process - Waiver of Recovery of an Overpayment The VCAA is inapplicable to the claim for waiver of recovery of an overpayment. See Barger v. Principi, 16 Vet. App. 132 (2002). In Barger, the United States Court of Appeals for Veterans Claims (CAVC) held that the VCAA, with its expanded duties, is not applicable to cases involving the waiver of recovery of overpayment claims, noting that the statute at issue in such cases is found in Chapter 53, Title 38, United States Code, and that the provisions of the VCAA are relevant to a different Chapter (i.e. Chapter 51). Therefore, the VCAA is not for application in this matter. The Board finds that general due process concerns have been satisfied in connection with the appeal for a waiver. See 38 C.F.R. § 3.103 (2012). Prior to reducing benefits by reason of information received concerning income, VA is required to comply with pertinent VA regulations concerning due process. Specifically, VA must create a proposal for the reduction that sets forth all material facts and reasons, notify the beneficiary at his or her latest address of record of the contemplated action, and furnish detailed reasons thereof. The beneficiary must be given 60 days for the presentation of additional evidence to show that compensation payments should be continued at the present level. An exception to this due process requirement is if the reduction is based solely on factual and unambiguous information or statements as to income, net worth, or dependency or marital status that the beneficiary provided to VA in writing or orally, with knowledge or notice that such information would be used to calculate benefit amounts. 38 C.F.R. §§ 3.103(b)(3)(i), 3.105(h) (2012). In the present case, the RO complied with the procedures set forth above and notified the Veteran of the proposed termination of pension benefits, effective March 2001. In a May 2007 letter, the RO informed the Veteran that information regarding his spouse's income was not received, that as a result, they proposed to stop his monthly benefits effective March 2001, that this adjustment would result in an overpayment of benefits, and that he would be notified of the exact amount of the overpayment. In November 2008, the Veteran was informed that if he did not submit eligibility verification reports for the period from March 2001 to December 2008 within 60 days of that letter, VA proposed to stop his monthly benefits effective March 1, 2001. In November 2008, the Veteran was informed that he had an overpayment in debt in the amount of $68,989.00. The Board notes that this balance included both a prior outstanding debt in the amount of $31,957.00 and the overpayment created from March 2001 to December 2008 in the amount of $44,782.00. The Veteran appealed the RO's decision with regard to the overpayment in December 2008. In March 2009, the Committee on Waivers and Compromises informed the Veteran that a waiver of the debt in the amount of $44,782.00 was denied. An April 2011 statement of the case explained to the Veteran the bases for denial of the claim, and afforded him the opportunity to present information and evidence in support of his claim, and during a February 2013 videoconference hearing, to assist the Veteran, the undersigned helped to direct the Veteran's testimony to discuss income reported from March 1, 2001 to May 31, 2008 and to address the Veteran's current financial situation as it pertains to the waiver claim. Waiver of Recovery of an Overpayment Law and Analysis A veteran who meets wartime service requirements and who is permanently and totally disabled due to disability not the result of willful misconduct is entitled to a rate of pension set by law, reduced by the amount of his countable income. 38 U.S.C.A. § 1521 (West 2002); 38 C.F.R. § 3.23 (2012). Countable income consists of payments of any kind from any source received during a 12-month annualization period (e.g., a year), unless specifically excluded. 38 C.F.R. § 3.271 (2012). It also includes income of a veteran's spouse and/or child(ren) regardless of whether dependency has been established for VA pension purposes. See 38 C.F.R. § 3.23(d)(4) (2012). For purposes of determining entitlement, nonrecurring income (i.e., income received on a one-time basis) will be counted for a full 12-month annualization period following receipt of the income. 38 C.F.R. § 3.271(a)(3). Basic entitlement exists only if, among other things, the Veteran's countable income is not in excess of the maximum annual pension rate specified by law. 38 U.S.C.A. § 1521(a). If basic entitlement is met, the monthly rate of pension shall be computed by reducing the maximum annual pension rate by the countable income on the effective date of entitlement and dividing the remainder by twelve. 38 C.F.R. § 3.273(a) (2012). Whenever there is a change in a beneficiary's amount of countable income the monthly rate of pension payable shall be computed by reducing the applicable maximum annual pension rate by the new amount of countable income on the effective date of the change in the amount of income and dividing the remainder by twelve. 38 C.F.R. § 3.273(b)(2). The effective date of any reduction or discontinuance required because of an increase in income shall be the end of the month in which the increase occurred. See 38 C.F.R. § 3.660(a)(2) (2012). Any indebtedness of a veteran can be waived only when the following factors are determined to exist: 1) there is no indication of fraud, misrepresentation, or bad faith on the part of the person or persons having an interest in obtaining the waiver; and, 2) collection of such indebtedness would be against equity and good conscience. 38 U.S.C.A. § 5302(c); 38 C.F.R. § 1.963(a) (2012). Thus, a finding of fraud, misrepresentation, or bad faith precludes a grant of a waiver of recovery of the overpayment. The controlling legal criteria provide that the standard of "equity and good conscience" will be applied when the facts and circumstances in a particular case indicate the need for reasonableness and moderation in the exercise of the Government's rights. 38 C.F.R. § 1.965(a) (2012). 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 obligor and the U. S. Government. In making this determination, consideration will be given to the following elements, which are not intended to be all inclusive: (1) Fault of debtor. Where actions of the debtor contribute to the creation of the debt. (2) Balancing of faults. Weighing the fault of the debtor against the VA's fault. (3) Undue hardship. Whether collection would deprive the debtor or his or her 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 an 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 U.S.C.A. § 5302(c); 38 C.F.R. § 1.965(a) (2012). The Board finds that the overpayment of VA NSC pension benefits in the amount of $4,635.00 was properly created. Pursuant to an August 2001 rating decision, the Veteran was granted NSC pension benefits from February 27, 2001 based on a reported annual income of $6864.00 from social security, and $0.00 in income reported for the Veteran's spouse. In a May 2007 letter, the Pension Management Center requested information from the Veteran regarding family income, stating that they did not know the date that his spouse started working or the amount she earns, and as a result, proposed to stop his monthly benefit effective March 1, 2001. In November 2008, the Veteran was informed that if he did not submit eligibility verification reports for the period from March 2001 to December 2008 within 60 days of that letter, VA proposed to stop his monthly benefits effective March 1, 2001. In November 2008, the Veteran was informed that he an overpayment in debt in the amount of $68,989.00. This balance included both a prior outstanding debt in the amount of $31, 957.00 and the overpayment at issue, created from March 2001 to December 2008 in the amount of $44,782.00. In July 2010, the RO adjusted the Veteran's benefits for the period from March 1, 2001 through May 31, 2008 based on receipt of additional evidence. This action generated an award in the amount of $40,147.00 which was applied directly to the Veteran's debt. The Board finds, therefore, that remaining amount of the overpayment at issue, created during the period from March 1, 2001 to May 31, 2008 is $4,635.00. The Board finds that the RO properly counted the income of the Veteran's spouse for the period from March 1, 2001 to May 31, 2008 in calculating VA pension benefits, and the Board finds that the amount was properly calculated based on an SSA statement for the Veteran's wife showing her income from March 1, 2001 to May 31, 2008 and the Veteran's SSA benefits. The July 2010 letter informing the Veteran of his adjusted pension benefits listed the amount of SSA benefits and wages used in determining the Veteran's rate of pension from March 1, 2001 to May 31, 2008. Wages for the Veteran's spouse were reported to be $2139.00 in 2001, $0.00 from 2002 to 2005, $1105.00 in 2006, $3240.00 in 2007, and $5300.00 in 2008. The Board finds that wages used in determining the Veteran's rate are consistent with income reported in a November 2009 SSA statement for the Veteran's spouse, and tends to be consistent with the Veteran's assertion that his spouse was not working prior to 2006 (with the exception of income reported in 2001). As the Veteran was previously paid pension benefits from March 1, 2001 through November 2008, the creation of an overpayment of VA pension benefits in the amount of $4,635.00 was valid. The Board finds that the overpayment was not the result of fraud, misrepresentation, or bad faith on the part of the Veteran. In May 2006 and July 2006 statements associated with a prior claim for the waiver of recovery of an overpayment, the Veteran mentioned income earned by his wife. In May 2007 and November 2008 letters, the Pension Management Center requested income information from the Veteran for his spouse; however, no response was received. In January 2009, the Veteran submitted an updated financial status report along with earnings statements for his wife dated from 2006 to 2008. In a July 2009 correspondence, the Veteran indicated that he believed that he had faxed the requested income information in December 2008. In a separate July 2009 correspondence, the Veteran reported that his wife did not start working until 2006 and that she was making only $35.00 to $100.00 per month. Based on the Veteran's lay statements and his later attempts to submit the requested income evidence, the Board finds that while the Veteran did not submit his spouse's income information in a timely manner, he was not fully aware that he would be in receipt of an overpayment in VA pension based on the part-time income received. Accordingly, the Board finds no fraud, misrepresentation or bad faith on the part of the Veteran in the creation of the overpayment. As the evidence does not establish fraud, misrepresentation, or bad faith on the part of the Veteran, the Board will next determine if a waiver of recovery of the VA indebtedness is warranted on the basis of equity and good conscience under 38 U.S.C.A. § 5302(a); 38 C.F.R. §§ 1.963(a), 1.965(a) (2012). For the reasons discussed below, the Board finds that repayment of the Veteran's indebtedness would violate principles of equity and good conscience. The Board finds that the Veteran was at fault in the creation of his indebtedness due to failure to report a change in his spouse's income. A September 2001 award letter for VA improved pension informed of the various types of income counted in calculating VA pension benefits, and in March 2006 and July 2006 statements submitted in support of a prior request for waiver of an overpayment, the Veteran demonstrated actual knowledge of the fact that spousal income was counted in calculating pension benefits. The Board finds, therefore, that a reasonable person in the Veteran's situation would have known that the failure to report his spouse's income could result in the creation of an overpayment in benefits. The Board finds that, because the overpayment of VA pension benefits was properly created based on the calculation of the later reported spousal income, VA was not at fault in the creation of the Veteran's indebtedness. The first two elements for consideration under 38 C.F.R. § 1.965(a) are the fault of the debtor, and balancing the fault of the debtor and VA. As previously noted, there is no fault on the part of VA in the reduction of the VA NSC pension benefits based on the Veteran's change in income. Assuming the Veteran was not aware of the overpayment of benefits, his action in accepting VA pension benefits during the time his spouse was working still contributed to the creation of the overpayment. In November 2008, the Veteran was informed of the reduction of his award and he was informed that he may be held responsible for the overpayment of benefits. He was later informed in November 2008 of the amount of the overpayment debt. The Board finds that the Veteran's failure to return the amount of the overpayment lies solely with the Veteran, despite any inability to pay such debt, and this represents the greater degree of fault in balancing the actions between the Veteran and VA. The Board finds that that repayment of the debt would deprive the Veteran of the basic necessities of life. As to the element of undue financial hardship, the regulation provides that consideration should be given to whether collection of the indebtedness would deprive the debtor or his family of the basic necessities. The Veteran's most recent December 2008 Financial Status Report shows that he had a total monthly net income of $660.00 from Social Security; and total monthly expenses of $1365.00, to include rent payments, food, utilities and heat, vehicle insurance, and $220.00 in other debt. Installment contracts and other debts were stated to include vehicle loans and overdue medical bills. Assets were comprised of two vehicles with a net worth of $5500.00; however, the Veteran also indicated that vehicle loans were taken out to reorganize his debt. The Board notes that after taking care of basic necessities such as shelter and food, the Veteran is expected to accord a debt to VA the same regard given to any other debt. The Board finds, however, that the Veteran had a negative resulting monthly balance in 2008, even when considering only the cost of rent, food, utilities, and heat which amount to approximately $1000.00 a month. The Board finds that the Veteran's financial situation has not improved. The Veteran reported that being separated from his wife in 2008. SSA records show that the Veteran was receiving approximately $698.00 a month from Social Security in 2009 and the Veteran reported in a November 2009 Eligibility Verification Report that he received $540.00 a month in VA pension. The Veteran reported in June 2009 that his rent had increased to $350.00 a month and that he paid $400.00 toward utilities including phone, water, and electricity. In a January 2012 medical expense report, the Veteran identified approximately $500.00 in medical expenses incurred in 2011. A December 2012 VA Pension award letter shows that the Veteran was receiving $273.00 a month in VA pension effective December 2012 and that he was receiving $765.00 a month from Social Security. The Board finds that effective December 2012, the Veteran received approximately $1083.00 a month in income from Social Security and VA pension benefits; however, the record indicates that costs for basic necessities such as rent, food, utilities, and heat had increased from the $1000.00 a month reported in December 2008, and the Veteran has identified additional costs incurred due to necessary medical expenses. The Veteran testified in February 2013 that he was living in a trailer but was at risk of being homeless. The Board finds that the Veteran's testimony and report of expenses noted above are credible as the evidence provided tends to be consistent with prior income statements that are of record. Given the Veteran's age, income potential, and assets, the Board finds that the collection of the $4,635.00 debt at issue would deprive him of the basic necessities of life. With regard to the other elements pertaining to the principles of equity and good conscience as set forth by 38 C.F.R. § 1.965(a), the Board finds that because the Veteran was in receipt of VA pension benefits to which he was not entitled, he was unjustly enriched by the amount of the overpayment. The failure of the Government to insist upon its right to repayment of the assessed overpayment would, therefore, result in unjust enrichment of the Veteran. The Board finds that there is no evidence showing that the Veteran relinquished a valuable right or incurred any legal obligations resulting from reliance on VA benefits. The Board finds that, however, that recovery of the overpayment would defeat the purpose of the VA pension program. In that regard, the award and disbursement of VA NSC pension benefits for the period from March 1, 2001 to May 31, 2008, was made for the support of the Veteran because he is totally disabled due nonservice-connected disabilities. Thus, the collection of the debt would defeat the purpose of the benefits, which is to compensate and ensure the health and welfare of disabled Veterans. The Board finds that the recovery of the overpayment would be against the principles of equity and good conscience. See 38 C.F.R. §§ 1.963, 1.965 (2012). For these reasons, the Board finds that a waiver of recovery of the overpayment of VA education benefits in the amount of $4,635.00 is warranted. In light of the Board's decision to grant a waiver, the question of whether the decision to deduct all retroactive benefits and future benefits to apply to the debt at issue was proper is now moot. Accordingly, the Veteran's claim as it relates to this issue is dismissed as a matter of law. See Sabonis v. Brown, 6 Vet. App. 426 (1994). ORDER Waiver of recovery of an overpayment of nonservice-connected pension benefits in the amount of $4,635.00 is granted. ____________________________________________ K. J. ALIBRANDO Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs