Citation Nr: 1319998 Decision Date: 06/20/13 Archive Date: 07/02/13 DOCKET NO. 06-05 436 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in St. Petersburg, Florida THE ISSUES 1. Whether the creation of an overpayment of Department of Veterans Affairs (VA) compensation benefits in the amount of $1,945.84 was proper. 2. Entitlement to waiver of recovery of an overpayment of VA compensation benefits in the amount of $7,162.50, to include the question of whether the overpayment was properly created. REPRESENTATION Appellant represented by: The American Legion WITNESS AT HEARING ON APPEAL Veteran ATTORNEY FOR THE BOARD J. Connolly, Counsel INTRODUCTION The Veteran had active service from December 1987 to May 1989. In May 2004, the St. Petersburg, Florida, Regional Office (RO) notified the Veteran that it had been informed that he was divorced from his spouse D., and proposed to remove D., from his award effective as of August 1, 1991. It informed the Veteran that such action would create an overpayment of compensation benefits which would be collected from him. The RO subsequently implemented the proposed action. In August 2004, the Veteran was informed in writing of an overpayment of VA compensation benefits in the amount of $16,270.84 and his appellate and waiver rights. In October 2004, the Veteran submitted a notice of disagreement (NOD) with the creation of the overpayment of VA compensation benefits in the calculated amount. This matter also comes before the Board of Veterans' Appeals (Board) on appeal from a March 2005 decision of the RO's Committee on Waivers and Compromises (Committee) which recalculated the amount of the overpayment of VA compensation benefits to the Veteran arising from the removal of D., from the Veteran's award as $14,325.00; determined that the VA was partially at fault in the creation of the debt; waived recovery of $7,162.50 and denied waiver of recovery of the remaining $7,162.50 of the overpayment. In April 2005, the Veteran submitted a NOD with the denial of a complete waiver of recovery of the calculated amount of $14,325.00. In another April 2005 letter, he disagreed with the second debt, which totaled of $1,945.84. In January 2006, the RO issued a statement of the case (SOC) to the Veteran and his accredited representative which addressed the issue of waiver of the overpayment of VA compensation benefits in the amount of $7,162.50. In February 2006, the Veteran submitted an Appeal to the Board (VA Form 9). Pursuant to a March 2010 Board remand, the RO issued an SOC as to the matters of the first debt (the one totaling $14,325 which had been partially waived and reduced to $7,162.50) and the second debt (the one totaling $1,945.84) in August 2012. Thereafter, a VA Form 9 was received. In April 2013, the Veteran testified at a Travel Board hearing before the undersigned. At that time, as set forth below, he withdrew his appeal as to the second debt and continued his appeal as to the first debt, disputing the creation and the denial of the waiver of the recovery of the debt. FINDINGS OF FACT 1. On April 17, 2013, at his Travel Board hearing and prior to the promulgation of a decision in the appeal, the Board received notification from the Veteran that a withdrawal of his appeal as to the issue of whether the creation of an overpayment of VA compensation benefits in the amount of $1,945.84 was proper, is requested. 2. The Veteran and D. married in January 1981. 3. The Veteran was awarded additional compensation benefits on the basis of the Veteran's then spouse, D., being a dependent. 4. The Veteran and D. divorced in July 1994. 5. The Veteran and E. married in August 1994. 6. In March 2004, the RO first received information that the Veteran was currently married to E.; thereafter their marriage certificate and the Veteran's divorce papers from his divorce from D. were received. 7. Action was subsequently taken to retroactively reduce the Veteran's compensation benefits to remove D. as his wife effective from the divorce and to add E. as his current spouse, but not until the notification was received. 8. The adjustment to the Veteran's benefits resulted in the creation of an overpayment in the amount of $14,325. 9. In March 2005, a waiver was granted for half of the debt, $7,162.50. 10. Although the Veteran was notified on many occasions of his responsibility to do so, the Veteran did not properly advise VA of changes in his marital status and he was not entitled to additional compensation for D., as a dependent spouse following their divorce; the Veteran also did not advise VA of his marriage to E. for nearly a decade, so since VA had no verified knowledge of her existence, VA was not solely responsible for creation of the overpayment. 11. The creation of the overpayment of VA compensation benefits was not due to the Veteran's fraud, misrepresentation, or bad faith. 12. The Veteran was partially at fault in the creation of the overpayment of the compensation benefits for a spouse for failing to report his divorce from D., even though he married E. shortly thereafter. 13. Recovery of the overpayment in the amount of $7,162.50 would defeat the purpose of the benefit because the Veteran was married to E. for nearly the entire period of the debt. 14. The Veteran was not unjustly enriched in receiving additional compensation benefits, and collection of the overpayment in the amount of $7,162.50 would cause undue hardship to the Veteran. CONCLUSIONS OF LAW 1. The criteria for withdrawal of a Substantive Appeal by the Veteran as to the issue of whether the creation of an overpayment of VA compensation benefits in the amount of $1,945.84 was proper, have been met. 38 U.S.C.A. § 7105(b)(2), (d)(5) (West 2002 & Supp. 2012); 38 C.F.R. §§ 20.202, 20.204 (2012). 2. An overpayment regarding additional compensation for a dependent spouse, in the remaining calculated amount of $7,162.50, was properly created. 38 U.S.C.A. §§ 1115, 5110, 5112 (West 2002 & Supp. 2012); 38 C.F.R. §§ 1.911, 3.204, 3.205, 3.206, 3.401, 3.500, 3.501 (2012). 3. The overpayment of $7,162.50 was not due to fraud, misrepresentation, or bad faith of the Veteran. 38 U.S.C.A. §§ 5107, 5302(c) (West 2002 & Supp. 2012); 38 C.F.R. §§ 1.963, 1.965 (2012). 4. Recovery of the overpayment of VA compensation benefits in the amount of $7,162.50, would be against the principles of equity and good conscience and is, therefore, waived. 38 U.S.C.A. §§ 5107, 5302(a) (West 2002 & Supp. 2012); 38 C.F.R. §§ 1.963, 1.965 (2012). REASONS AND BASES FOR FINDINGS AND CONCLUSIONS Whether the Creation of an Overpayment of VA Compensation Benefits in the Amount of $1,945.84 was Proper Under 38 U.S.C.A. § 7105, the Board may dismiss any appeal which fails to allege specific error of fact or law in the determination being appealed. A Substantive Appeal may be withdrawn in writing at any time before the Board promulgates a decision. 38 C.F.R. § 20.202. Withdrawal may be made by the appellant or by his or her authorized representative. 38 C.F.R. § 20.204. The Veteran has withdrawn his appeal as to the issue of whether the creation of an overpayment of VA compensation benefits in the amount of $1,945.84 was proper, and, hence, there remain no allegations of errors of fact or law for appellate consideration. Accordingly, the Board does not have jurisdiction to review the appeal and it is dismissed. Waiver of Recovery of an Overpayment of VA Compensation Benefits in the Amount of $7,7162.50, to Include the Question of Whether the Overpayment Was Properly Created On November 9, 2000, the President signed into law the Veterans Claims Assistance Act of 2000 (VCAA), Pub. L. No. 106-475, 114 Stat. 2096 (2000). However, the United States Court of Appeals for Veterans Claims (Court) has held that the VCAA is not applicable to cases involving waiver of indebtedness. See Barger v. Principi, 16 Vet. App. 132 (2002). In June 1989, the Veteran applied for VA compensation benefits. He indicated that he was married to D. at that time. In a December 1989 rating decision, service connection was established for several disabilities. In December 1989, the RO requested that the Veteran submit proof of his marriage and he thereafter furnished a copy of his marriage certificate to D. showing that they were married in January 1981. A VA Form 21-686c, Declaration of Marital Status was received which reflected the same information, and also showed that they had a minor daughter. In a November 1990 letter, the RO notified the Veteran that he was awarded additional benefits for his spouse and child and that he should notify VA immediately if there is any change in the number or status of his dependents. He was advised that the failure to do so would result in a creation of an overpayment in his account. He was furnished a VA Form 21-8764 which essentially repeated this information. In July 1991, the Veteran provided another VA form listing his dependents' Social Security numbers. In May 1993, a VA Form 686c was received from the Veteran. He listed a male child's name, but no names under the spouse portion. The child's birth certificate listed E. as the mother and a man other than the Veteran as the father. The next month, the RO sent the Veteran a letter requesting that he clarify his relationship to this child. He was told that the RO had D. as his current spouse. The Veteran did not respond. In August 1995, the Veteran was afforded a VA psychiatric examination to assess one of his service-connected disabilities, dysthymic disorder which is rated as 100 percent disabling. At that time, he reported to the examiner that he divorced his first wife and remarried his current wife last year. In January 1996, the Veteran sent another letter which noted that he was being paid additional benefits for his spouse and child and that he should notify VA immediately if there is any change in the number or status of his dependents. He was advised that the failure to do so would result in a creation of an overpayment in his account. He was again furnished a VA Form 21-8764. In July 1999, a VA Form 21-686c was received from the Veteran. He did not provide information regarding his spouse, but he listed a minor daughter, I., to be added to his compensation award. In July 1999, the Veteran was sent a letter from the RO which provided the information previously furnished in January 1996. In February 2001, another VA Form 21-686c was received in which the Veteran did not provide information regarding his spouse, but he listed a minor son, A., to be added to his compensation award. In March 2001, the Veteran was again told by the RO that he was receiving additional benefits for his spouse and children and that he should notify VA immediately if there is any change in the number or status of his dependents. He was advised that the failure to do so would result in a creation of an overpayment in his account. He was again furnished a VA Form 21-8764. In March 2003, another VA Form 21-686c was received in which the Veteran did not provide information regarding his spouse, but he listed a minor son, A., to be added to his compensation award. In March 2003, the RO sent him another letter, again reminding him to notify VA of changes to his dependency status. The next month, the Veteran added another minor son, A., to his award. In March 2004, E., submitted a letter to the RO in which she indicated that she was the Veteran's wife and the mother of their daughter A., but was separated from the Veteran and was seeking an apportionment. In a May 2004 letter, the Veteran was notified of the claim for an apportionment. He was also advised that VA had received information regarding changes in his dependents. In June 2004, the Veteran submitted a VA Form 21-686c listing his dependents. On that form, he indicated that he and D. divorced in July 1994, but he remarried E. the following month. The RO then took action to retroactively remove D. from the Veteran's award as his spouse effective to their divorce. This action resulted in the creation of an overpayment in the amount of $14,325. The Veteran then submitted copies of his divorce papers and his marriage certificate to E., as well as a financial status report in which he indicated that his monthly expenses basically equaled his monthly income. The Veteran also disputed the creation of the debt, asserting that he was divorced in July 1994, but remarried the next month, so there was no disruption in entitlement to benefits for a spouse. However, in November 2004, the RO informed the Veteran that he needed to report his marriage to E. within one year of the event and since he did not do so, she could not be added to her award prior to the official notification to VA of her status. Thus, the overpayment remained. In October 2004, another financial status report was received from the Veteran which again indicated that his monthly expenses basically equaled his monthly income. In March 2005, the Committee on Waivers and Compromises waived half of the Veteran's debt, or $7,162.50. It was determined that there was no fraud, misrepresentation of a material fact, or bad faith on the Veteran's part in the creation of the debt. However, it was further determined that the Veteran was partially at fault in the creation of the debt. It was also determined that there was some fault on the part of VA since VA failed to follow up when the Veteran submitted the birth certificates of his children which did not list D. as their mother. The Committee found that in viewing the Veteran's financial status, he would not be deprived of the basic necessities of life if required to repay the remaining overpayment. A June 2010 financial status report showed that the Veteran's debts exceeded his income by $93 on a monthly basis. At his Travel Board hearing, the Veteran testified that when he married E., he did report it to VA and gave the information to a VA representative. He related that he was basically married the whole time, but for a very short period of a few weeks between his divorce from D. and marriage to E. the next month, so there was almost no break in his marital status. A claimant who is receiving compensation is required to report to the VA any material change or expected change in income or other circumstance that affects the payment of benefits. 38 C.F.R. § 3.660. 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 C.F.R. § 1.962. An overpayment may arise from virtually any benefits program administered pursuant to VA law, including compensation and dependency. See 38 C.F.R. § 1.956(a). In order for the Board to determine that the overpayment was not properly created, it must be established that the Veteran was legally entitled to the benefits in question or, if there was no legal entitlement, then it must be shown that VA was solely responsible for the Veteran being erroneously paid benefits. Sole administrative error connotes that the Veteran neither had knowledge of nor should have been aware of the erroneous award. Further, neither the Veteran's actions nor his failure to act must have contributed to payment pursuant to the erroneous award. 38 U.S.C.A. § 5112(b)(9), (10); 38 C.F.R. § 3.500(b)(2); Jordan v. Brown, 10 Vet. App. 171 (1997). VA law provides for additional monthly compensation for dependents when a veteran is entitled to disability compensation evaluated as thirty percent or greater. 38 C.F.R. § 3.4(b)(2). The Veteran has been evaluated as 30 percent or more disabled since he was granted service connection; thus, he was eligible for additional benefits based on dependency, provided certain requirements were met. In this regard, the Board observes that VA has various regulations addressing dependency as well as the effective dates for granting and discontinuing such awards. Additional compensation for a new dependent will be effective the latest of the: (1) date of claim; (2) date the dependency arises; (3) effective date of the qualifying disability rating provided evidence of dependency is received within a year of notification of such rating action; or (4) date of commencement of a veteran's award. 38 C.F.R. § 3.401(b). The "date of claim" means the date of a veteran's marriage, if evidence of the event is received within a year of the event; otherwise, the date notice is received of the dependent's existence. 38 C.F.R. § 3.401(b)(1). For divorces on or after October 1, 1982, a dependent spouse will be removed from a compensation award effective the last day of the month in which the divorce occurred. 38 C.F.R. § 3.501(d)(2). Except as provided in paragraph (a)(2) of 38 C.F.R. § 3.204, VA will accept, for the purpose of determining entitlement to benefits under laws administered by VA, the statement of a claimant as proof of marriage or dissolution of marriage, provided that the statement contains: the date (month and year) and place of the event; and the full name and relationship of the other person to the claimant. A claimant must also provide the social security number of any dependent on whose behalf he or she is seeking benefits. 38 C.F.R. § 3.204(a)(1). VA shall require the types of evidence indicated in 38 C.F.R. §§ 3.205 through 3.211 in certain circumstances, including when the claimant's statement conflicts with other evidence of record. 38 C.F.R. § 3.204(a)(2). Proof of marriage and divorce are addressed in 38 C.F.R. §§ 3.205 and 3.206. Although the Veteran asserts that he told a VA representative of his divorce from D. and remarriage to E. in close proximity to those events, there is no documentation of this correspondence in the claims file. Even if the government employee provided incorrect information to the Veteran, such advice given cannot be used to estop the government from denying benefits. See McTighe v. Brown, 7 Vet. App. 29, 30 (1994). Rather, the record shows that there was no official notification to VA made by the Veteran until his spouse E. filed a claim for an apportionment. However, all communication relating to that claim occurred many years after the Veteran's divorce from D. and marriage to E. occurred. The law states that the Veteran has an obligation to timely notify VA of all marriages and divorces. VA advised the Veteran on numerous occasions of his obligation to provide notification regarding any changes in dependency, as noted above, also furnishing him VA Forms 21-8764. On review, the Veteran was not legally entitled to additional benefits for D., as his spouse, following their divorce in July 1994. Certainly, VA was not solely at fault in creating the overpayment due to the repeated notices which were furnished to the Veteran. In addition, the Veteran regularly notified VA of additional dependent children, so there does not seem to be any basis to find that he did not understand the notices. As noted, half of the original debt of $14,325 was waived and is not at issue. With regard to the remaining portion of $7,162.50, it was properly created and is valid. As noted in the March 2005 waiver decision, the Committee on Waivers and Compromises found VA partially at fault for not taking action to correct the Veteran's spousal information. The Committee waived a portion of the debt. The Board has considered the Veteran's argument regarding that portion of the debt that remains, but as discussed above, finds it unpersuasive with respect to the question of validity. The extent to which VA may have been partially at fault for that portion of the overpayment is better addressed under the equitable legal framework pertaining to waiver below. The essential fact for creation is whether the Veteran's first wife, D., was properly removed on a retroactive basis, dating back to their divorce, and whether E. was properly added as of the date of the notification of her existence, as opposed to the date of their marriage. In this case, the Board finds that VA was not properly informed of the remarriage to E. within one year of that event. Thus, the debt was validly created. The Board notes that the Committee considered the facts in this case, and concluded that the Veteran had not demonstrated fraud, willful misrepresentation, or bad faith in the creation of the overpayment now at issue. Notwithstanding this, however, the Board must render an independent determination in this regard. See Ridings v. Brown, 6 Vet. App. 544, 546 (1994). As there appears to be no indication of intent to deceive or to seek unfair advantage by the Veteran, no legal bar to the benefit now sought is present. See 38 C.F.R. § 1.963(a). The sole question remaining is whether it would be against equity and good conscience for VA to require repayment of the instant indebtedness. 38 U.S.C.A. § 5302. The Veteran requested waiver of the debt as recovery would cause undue financial hardship and would defeat the purpose of the benefit. The Committee denied waiver on the basis that recovery would be against the principles of equity and good conscience. The Board disagrees. 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 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 the VA. 38 C.F.R § 1.965(a). The Veteran divorced D. in July 1994. The effective date of a reduction or discontinuance of compensation, dependency and indemnity compensation, or pension by reason of marriage, annulment, divorce, or death of a dependent of a payee shall be the last day of the month in which such marriage, annulment, divorce, or death occurs. 38 U.S.C.A. § 5112(b). Therefore, the Veteran's compensation benefits should have been reduced effective July 31, 1994. The award of additional compensation on account of dependents based on the establishment of a disability rating in the percentage evaluation specified by law for the purpose shall be payable from the effective date of such rating; but only if proof of dependents is received within one year from the date of notification of such rating action. 38 U.S.C.A. § 5110(f). 38 C.F.R. § 3.401(b) provides that an award of additional disability compensation for a dependent is effective from the latest of the following dates: (1) Date of claim. This term means the following, listed in their order of applicability: (i) Date of veteran's marriage ... if the evidence of the event is received within one year of the event; otherwise, (ii) Date notice is received of the dependent's existence, if evidence is received within one year of the VA request. (2) Date dependency arises. (3) Effective date of the qualifying disability rating provided evidence of dependency is received within one year of notification of such rating action. (4) Date of commencement of veteran's award. Regardless of VA regulations concerning effective dates of awards, and except as provided in 38 C.F.R. § 3.31(c) (which does not apply in this case), payment of monetary benefits based on original, reopened, or increased awards of compensation, pension, dependency and indemnity compensation, or a monetary allowance under 38 U.S.C. chapter 18 for an individual who is a child of a Vietnam veteran, may not be made for any period prior to the first day of the calendar month following the month in which the award became effective. 38 C.F.R. § 3.31(a) (2004). The term "increased award" includes an award which is increased because of an added dependent. 38 C.F.R. § 3.31(b). The Veteran married E. in August 1994. Even if he had provided notice of his divorce immediately and of his second marriage immediately, payment of monetary benefits based on A being an added dependent would have been effective September 1, 1994. The Veteran is at fault for the creation of the overpayment because he did not report his divorce and second marriage in a timely manner. However, he did tell a VA examiner of the divorce and he did submit dependent information which should have raised the question sufficiently to the RO to provide a follow up. Thus, there is also VA fault. There is also no evidence of the Veteran changed position to his detriment due to his reliance upon receipt of VA benefits. Compensation benefits for a spouse is a program that is intended to assist veterans with serious disabilities in providing the basic necessities for a spouse. The Veteran was essentially married the whole time, but for an extremely brief period of a couple of weeks. Although the Veteran failed to notify the VA of his second marriage promptly, the Veteran would have received additional compensation for his second wife if he had reported his divorce and second marriage immediately. Therefore, recovery of the overpayment remaining in the amount of $7,162.50 would defeat the purpose of the benefit. Also, the Veteran was not unjustly enriched in receiving additional compensation benefits on basis of a spouse because he was married to E. at that point. In addition, his monthly income and debts are at best equal. Therefore, repaying the debt would create a financial hardship for him. In short, the Board gives more weight to the fact that recovery of the overpayment of the debt would defeat the purpose of the benefit and would create an undue financial hardship and the fact that there was no unjust enrichment than to the other factors as defined in 38 C.F.R. § 1.965(a). Accordingly, recovery of an overpayment of VA compensation benefits in the amount of $7,162.50 would be against the principles of equity and good conscience and is, therefore, waived. 38 U.S.C.A. §§ 5107, 5302(a); 38 C.F.R. §§ 1.962, 1.963, 1.965. ORDER The appeal as to the issue of whether the creation of an overpayment of VA compensation benefits in the amount of $1945.84 was proper, is dismissed. The debt in the amount of $7,7162.50 was properly created. Entitlement to waiver of recovery of an overpayment of VA compensation benefits in the amount of $7,7162.50, is granted. ____________________________________________ K. PARAKKAL Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs