Citation Nr: 1323139 Decision Date: 07/19/13 Archive Date: 07/24/13 DOCKET NO. 12-08 057A ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Manila, the Republic of the Philippines THE ISSUE Entitlement to a waiver of recovery of the overpayment of VA disability compensation in the amount of $10,373.00. (The issues of entitlement to an effective date earlier than February 12, 2010, for the grant of service connection for restrictive lung disease secondary to discoid atelectasis and fibrosis; earlier than February 12, 2010, for the grant of basic eligibility for Chapter 35 Dependents' Educational Assistance benefits; and earlier than November 1, 2010, for the grant of a dependency allowance for a spouse are discussed in a separate decision.) WITNESSES AT HEARING ON APPEAL Veteran, Spouse, and Daughter ATTORNEY FOR THE BOARD David S. Ames, Counsel INTRODUCTION The Veteran served on active duty from July 1967 to October 1987. This matter comes properly before the Board of Veterans' Appeals (Board) on appeal from a rating decision by the Department of Veterans Affairs (VA) Regional Office in Manila, the Republic of the Philippines (RO). 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. The Veteran was in receipt of additional compensation based on a dependent father from at least November 1, 1994, to December 31, 2010. 2. The Veteran's dependent father died on July [redacted], 1999. 3. The Veteran informed VA that his father had died in December 2010. 4. The erroneous payment was primarily the fault of the Veteran. 5. Recovery of the assessed overpayment would not deprive the Veteran of the ability to provide for basic necessities. 6. Waiver of the assessed overpayment would unjustly enrich the Veteran. 7. The Veteran's assets and income, with consideration of the cost of life's basic necessities, are sufficient to permit repayment of the amount of the overpayment indebtedness of $10,373.00 without resulting in excessive financial difficulty or depriving the Veteran of basic necessities, and collection of the indebtedness would not defeat the purposes of the award of VA benefits, or otherwise be inequitable. 8. There is no indication that the Veteran relinquished a valuable right or incurred a legal obligation in reliance upon the benefits received. CONCLUSIONS OF LAW 1. The overpayment of VA benefits in the original amount of $10,373.00 was validly created. 38 U.S.C.A. §§ 1115, 5107 (West 2002 & Supp. 2012); 38 C.F.R. § 3.4(b)(2) (2012). 2. The recovery of the overpayment of VA disability compensation benefits in the amount of $10,373.00 is not against equity and good conscience and, therefore, recovery is not waived. 38 U.S.C.A. §§ 5107, 5302(a) (West 2002 & Supp. 2012); 38 C.F.R. § 1.963(a), 1.965(a) (2012). REASONS AND BASES FOR FINDINGS AND CONCLUSIONS 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. Schaper v. Derwinski, 1 Vet. App. 430 (1991). Where the validity of a debt is challenged that issue must be developed before the issue of entitlement to waiver of the debt can be considered. VAOGCPREC 6-98 (1998), 63 Fed. Reg. 31264 (1998). Veterans having a service-connected condition rated 30 percent or more may be entitled to additional compensation for a spouse, dependent parents, or unmarried children under 18 (or under 23 if attending an approved school) or when prior to age 18 the child has become permanently incapable of self-support because of mental or physical defect. 38 U.S.C.A. § 1115 (West 2002); 38 C.F.R. § 3.4(b)(2) (2012). The evidence of record shows that the Veteran was being paid additional benefits based on his dependent father. The evidence of record does not clearly state when the Veteran's father was first added as a dependent, but dependency is noted in the Veteran's claims file at least as far back as November 1, 1994. In December 2010, the Veteran submitted a declaration of status of dependents form so that his dependent spouse could be added to his benefits. In conjunction with that form, the Veteran also submitted a certificate of death, which stated that his father had passed away on July 17, 1999. Accordingly, the evidence of record shows that the Veteran was receiving additional benefits for his dependent father for over 11 years after his father's death. The evidence of record also includes multiple documents informing the Veteran that it was his responsibility to notify VA in the event that the status of his dependents changed, and that failure to notify VA of that information could result in an overpayment which he would be required to repay. Such statements were specifically made in letters to the Veteran dated in February 1989, October 1994, March 1995, December 1997, February 2008, August 2008, April 2010, and September 2010. The Veteran does not dispute those findings in any way. While the Veteran claims that he should have also been awarded additional benefits for a dependent spouse during the same period, that argument is simply a disagreement as to the effective date for the addition of his spouse as a dependent and does not actually represent any kind of dispute as to validity of the overpayment which resulted from the situation with his dependent father. In addition, the Veteran's claim of entitlement to an effective date earlier than November 1, 2010, for the grant of a dependency allowance for a spouse is being remanded. Therefore, the Board finds that the Veteran was paid VA benefits in excess of the amount to which he was entitled. The Veteran failed to adequately report or correct inaccurate income information regarding his dependents, despite notice that reporting was required. Therefore, the Board finds that an overpayment in the amount of $10,373.00 was validly created. Having found that the debt was validly created, the Board must address whether a waiver of recovery of an overpayment may be granted. The Veteran requested a waiver of recovery of the overpayment of benefits within 180 days of receiving notification of the indebtedness. Therefore, he filed a timely application for waiver of the overpayment. 38 U.S.C.A. § 5302(a) (West 2002); 38 C.F.R. § 1.963(b)(2) (2012). Recovery of overpayments of any benefits made under the laws administered by VA shall be waived if 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 if the recovery of the indebtedness from the payee who received such benefits would be against equity and good conscience. 38 U.S.C.A. § 5302 (West 2002); 38 C.F.R. §§ 1.962, 1.963(a), 1.965 (2012). The phrase equity and good conscience means arriving at a fair decision between the obligor and the government. 38 C.F.R. § 1.965 (2012). In making the determination, consideration will be given to the following elements, which are not intended to be all inclusive: (1) Fault of the debtor. Where actions of the debtor contribute to the creation of the debt. (2) Balancing of faults. Weighing fault of debtor against Department of Veterans Affairs fault. (3) Undue hardship. Whether collection would deprive debtor or family of basic necessities. (4) Defeat the purpose. Whether the withholding of benefits or recovery would nullify the objective for which the benefits were intended. (5) Unjust enrichment. Failure to make restitution would result in unfair gain to the debtor. (6) Changing position to one's detriment. Reliance on Department of Veterans Affairs benefits results in relinquishment of a valuable right or incurrence of a legal obligation. 38 C.F.R. § 1.965 (2012). However, there cannot be any indication of fraud, misrepresentation, or bad faith on the part of the person seeking the waiver. 38 U.S.C.A. § 5302(c) (West 2002); 38 C.F.R. § 1.963 (2012). Any misrepresentation must be more than non-willful or mere inadvertence. 38 C.F.R. § 1.962(b) (2012). The term bad faith generally describes unfair or deceptive dealing by one who seeks to gain thereby at another's expense. Thus, a debtor's conduct in connection with a debt arising from participation in a VA benefits or services program exhibits bad faith if such conduct, although not undertaken with actual fraudulent intent, is undertaken with intent to seek an unfair advantage, with knowledge of the likely consequences, and results in a loss to the government. 38 C.F.R. § 1.965(b)(2) (2012). Lack of good faith is an absence of an honest intention to abstain from undertaking unfair advantage of the holder or the government. 38 C.F.R. § 1.965(b)(2) (2012). 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. The decision reached should not be unduly favorable or adverse to either side. 38 C.F.R. § 1.965(a) (2012); Ridings v. Brown, 6 Vet. App. 544 (1994). In January 2012, the Committee on Waivers and Compromises determined that, in this case, there was no evidence of any fraud, misrepresentation, or bad faith on the part of the Veteran. The Board agrees with that finding. The facts of this case demonstrate that the Veteran was overpaid as a result of his failure to inform VA that his father had passed away. However, there is no evidence of record that this failure was intentional, as opposed to inadvertent. As there is no evidence that the Veteran intended to deceive VA or seek unfair advantage, the Board finds no evidence of fraud, misrepresentation, or bad faith on the part of the Veteran in the creation of this overpayment. There are therefore no mandatory bars to waiver in this case. The question before the Board then is whether recovery of the overpayment would be against equity and good conscience. 38 C.F.R. § 1.965(a) (2012); Ridings v. Brown, 6 Vet. App. 544 (1994). In determining whether the recovery of the overpayment would be against equity and good conscience, the first consideration is whether the Veteran was at fault in the creation of the overpayment. In this case, the Board finds that the erroneous payment was primarily the fault of the Veteran. The Veteran was specifically and repeatedly informed by VA prior to and after his father's death that it was his responsibility to inform VA if there was a change in the status of his dependents, and that failure to inform VA of such a change could result in an overpayment that he would be required to repay. The Board acknowledges that some subsequent letters from VA simply stated that the Veteran was being paid for a single dependent, without stating who the dependent was, thus lending credence to the Veteran's claim that he believed he was being paid for his dependent spouse. However, the evidence of record shows that the Veteran was specifically informed that the single dependent was his father in letters dated in August 2008, April 2010, and September 2010, yet the Veteran did not inform VA that his father had passed away until December 2010. In addition, the fact remains that the Veteran applied for VA benefits for his dependent father and then failed to inform VA that his father had passed away for many years. Therefore, the Board finds that the Veteran's fault in the creation of the overpayment weighs against a finding that recovery of the overpayment would be against equity and good conscience. The next question for consideration is whether collection of the debt would cause the Veteran undue financial hardship. The Board finds that it would not. The evidence of record shows that the Veteran owes $10,373.00. In a January 2011 financial status report, the Veteran reported that he was capable of paying $500.00 per month towards his debt. In subsequent statements, the Veteran has specifically requested that he be allowed to repay his debt in that fashion. There is no evidence of record that the Veteran is incapable of repaying the outstanding balance without endangering his ability to provide for basic necessities. Indeed, the Veteran's request to be allowed to pay $500.00 per month towards his debt constitutes strong evidence that he is capable of making such payments without significant hardship. The Board notes that the Veteran is receiving VA compensation at the 100 percent rate. Therefore, the Board finds that the collection of the debt would not cause the Veteran undue financial hardship. That weighs against a finding that recovery of the overpayment would be against equity and good conscience. The next question for consideration is whether the recovery of the overpayment would defeat the purpose for which the benefits were intended. In this case, the purpose of VA compensation benefits would not be defeated as the Veteran was not entitled to the additional compensation which was awarded. The dependent for whom the additional compensation was paid was deceased during the time that compensation was paid. The Board also finds that failure to make restitution would unfairly enrich the Veteran because he received monetary benefits to which he was not entitled. VA paid the Veteran an amount in excess of that to which he was entitled as a result of the Veteran's own failure to inform VA of his father's death. There is no evidence that the Veteran attempted to inform VA of this fact for over 11 years, including over two years after he was specifically informed that he was still receiving benefits for his dependent father in August 2008. Under those circumstances, to allow the Veteran to retain the overpaid compensation would constitute unjust enrichment. Finally, the Board must consider whether reliance on the benefits resulted in relinquishment of a valuable right or the incurrence of a legal obligation. The Veteran has not contended, nor does the evidence show, that he relinquished a valuable right or incurred a legal obligation in reliance on VA's erroneously paying compensation to which he was not legally entitled. Nor does the record reveal other factors which make recovery of the overpayment inequitable. In sum, the Board finds that the principles of equity and good conscience would not be violated if VA were to recover the overpayment in question. The Veteran has been found to be at fault in the creation of the debt, and the retention of the overpayment would unfairly enrich the Veteran. Moreover, repayment of the debt would not deprive the Veteran of the ability to provide for basic necessities of life, nor would recovery of the overpayment defeat the purpose for which the benefits were intended. Lastly, the Veteran has not relinquished a valuable right or incurred a legal obligation in reliance on the overpayment of his VA benefits. Accordingly, a waiver of recovery of the overpayment of VA compensation benefits is not warranted. As the preponderance of the evidence is against the claim, the claim must be denied. 38 U.S.C.A. § 5107(b) (West 2002); Gilbert v. Derwinski, 1 Vet. App. 49 (1990). With respect to VA's duties to notify and assist the Veteran with his claim, the provisions of law and regulations which set forth notice and assistance requirements on the part of VA in the adjudication of certain claims, are not applicable to claims involving the validity of creations of overpayment or requests for waiver of recovery of overpayments. Lueras v. Principi, 18 Vet. App. 435 (2004); Barger v. Principi, 16 Vet. App. 132 (2002). ORDER A debt was validly created by the overpayment of VA benefits in the original amount of $10,373.00. Waiver of the recovery of the overpayment of VA benefits in the amount of $10,373.00 is denied. ____________________________________________ Harvey P. Roberts Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs