Citation Nr: 1338603 Decision Date: 11/22/13 Archive Date: 12/06/13 DOCKET NO. 08-20 987 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Waco, Texas THE ISSUE Entitlement to a waiver of overpayment of death pension benefits in the amount of $19,704.00, to include the question of whether the overpayment was properly created. REPRESENTATION Appellant represented by: Texas Veterans Commission WITNESS AT HEARING ON APPEAL Appellant ATTORNEY FOR THE BOARD M. Sorisio, Counsel INTRODUCTION The Veteran served on active duty from March 1973 to July 1985. He died in May 1989. The Appellant is his surviving spouse. This matter is before the Board of Veterans' Appeals (Board) on appeal from a decision of the Portland, Oregon Department of Veterans Affairs (VA) Regional Office (RO) that the Appellant was notified of in January 2008. In March 2008, the Appellant received notice from the Committee on Waivers and Compromises (Committee) at the St. Paul, Minnesota Debt Management Center (DMC) that it was waiving a portion of the original amount of the debt in question. The appeal stems from both of these decisions. In September 2010, the Appellant appeared at a hearing before the undersigned. A transcript of this hearing is of record. In May 2012, the Board remanded the claim for further development of the evidence. FINDINGS OF FACT 1. An overpayment of $19,704.00 was properly created as a result of the Appellant's concurrent receipt of disability benefits from the Social Security Administration (SSA) and VA death pension. 2. There is no indication of fraud, misrepresentation, or bad faith by the Appellant. 3. The Appellant was at fault in the creation of the overpayment because she did not notify VA that she had begun receiving SSA disability benefits. 4. VA was not at fault in the creation of the overpayment. 5. Recovery of the overpayment would not cause the Appellant undue hardship. 6. Recovery of the overpayment would defeat the purpose of paying the Appellant VA dependency and indemnity compensation (DIC) benefits. 7. The failure of the Government to insist upon its right to repayment of the overpayment would result in unjust enrichment of the Appellant, inasmuch as she accepted benefits to which she was not entitled. 8. There is no indication the Appellant relinquished a valuable right or incurred a legal obligation in reliance upon the benefits received. CONCLUSIONS OF LAW 1. An overpayment of VA death pension benefits in the calculated amount of $19,704.00 was properly created. 38 U.S.C.A. §§ 1503, 1541 (West 2002 & Supp. 2013); 38 C.F.R. §§ 3.3, 3.23, 3.271, 3.272 (2013). 2. There is no statutory bar to waiver of recovery of the Appellant's debt resulting from overpayment of death pension benefits in the amount of $19,704.00. 38 U.S.C.A. § 5302 (West 2002); 38 C.F.R. §§ 1.962, 1.963, 1.965 (2013). 3. Recovery of the overpayment of death pension benefits would not be contrary to the principles of equity and good conscience. 38 U.S.C.A. § 5302 (West 2002 & Supp. 2013); 38 C.F.R. §§ 1.962, 1.963, 1.965 (2013). REASONS AND BASES FOR FINDINGS AND CONCLUSIONS I. Duties to Notify and Assist The Veterans Claims Assistance Act of 2000 (VCAA), in part, describes VA's duties to notify and assist claimants in substantiating a claim for VA benefits. In Barger v. Principi, 16 Vet. App. 132 (2002), the United States Court of Appeals for Veterans Claims (Court) held that the VCAA, with its expanded duties, does not apply to cases involving the waiver of recovery of overpayment claims. Therefore, the VCAA and its implementing regulations do not apply in this matter. See Reyes v. Nicholson, 21 Vet. App. 370, 379-80 (2007) (noting that the Court has consistently held that the VCAA notice provisions do not apply to waiver of overpayment claims). The Appellant was provided an opportunity to set forth her contentions during the September 2010 hearing before the undersigned. The United States Court of Appeals for Veterans Claims (Court) has held that the requirements of 38 C.F.R. § 3.103(c)(2) apply to a hearing before the Board and that a Veterans Law Judge has a duty to explain fully the issues and a duty to suggest the submission of evidence that may have been overlooked. Bryant v. Shinseki, 23 Vet. App. 488, 492 (2010). The record reflects that at the September 2010 hearing the undersigned set forth the issue to be discussed at the hearing, focused on the requirements for obtaining a waiver of an overpayment, and sought to identify any further development that was required to help substantiate the claim. Moreover, the undersigned remanded the claim in May 2012 to seek further development based, in part, on testimony provided at the hearing. Neither the Appellant nor her representative has asserted that VA failed to comply with 38 C.F.R. § 3.103(c)(2), nor have they identified any prejudice in the conduct of the hearing. II. Creation of the Overpayment Although the Appellant has not made specific contentions regarding the validity of the remaining underlying debt of $19,704.00, the Board considers the validity of the debt to be part of the issue on appeal, since it was part of the issue perfected. The Court has held that, when the validity of a debt is challenged, a threshold determination must be made on that question prior to a decision on waiver of indebtedness. Schaper v. Derwinski, 1 Vet. App. 430, 437 (1991); 38 U.S.C.A. § 5302, 38 C.F.R. § 1.911(c), VAOPGCPREC 6-98 (Apr. 24, 1998). The Board has reviewed the circumstances leading up to the creation of the overpayment and finds that its creation was valid. The pertinent statutes and regulations require that VA reduce death pension benefits by the amount of a surviving spouse's countable family income. 38 U.S.C.A. § 1541 (West 2002 & Supp. 2013); 38 C.F.R. §§ 3.3, 3.23 (2013). For purposes of determining countable income, payments of any kind from any source shall be counted as income during the 12-month annualization period in which received. 38 U.S.C.A. § 1503 (West 2002 & Supp. 2013); 38 C.F.R. § 3.271 (2013). However, certain types of payments, including welfare, are specifically excluded from countable income for purposes of determining entitlement to pension. 38 U.S.C.A. § 1503 (West 2002 & Supp. 2013); 38 C.F.R. § 3.272 (2013). VA considers Supplemental Security Income (SSI) to be income from welfare and, thus, not countable income. M21-1MR, VA Adjudication Procedures Manual, V.iii.1.B.9.k. In a November 2002 decision, the RO concluded that the Appellant was entitled to receive death pension benefits based in part on the fact that she had no income. This determination was based on the Appellant's indication in her September 2002 claim for death pension benefits that her only income was $545 in SSI and the RO's November 2002 inquiry to the SSA that revealed she was not receiving SSA disability benefits. In December 2007, VA created an overpayment of pension benefits from April 2004 because when it was processing the Appellant's claim for DIC, it determined she had been receiving SSA disability benefits from March 2003 to December 2007. Since SSA disability benefits are not specifically excluded from countable income for pension purposes, VA concluded that Appellant had been receiving an overpayment of pension benefits during that time period. Payment records and calculations of record reflect VA determined that the Appellant received an overpayment in the amount of $32,709.00. A December 2007 letter from the DMC reported that the Appellant's debt had been reduced by $6,092.00, leaving a balance of $26,617.00. This reduction resulted from an amended award of pension benefits from April 2004 to November 2007. The record reflects that $19,704.00 of this debt was recovered by VA from a payment of past due DIC benefits otherwise owed to the Appellant, leaving a balance of $6,913.00. In March 2008, the DMC notified the Appellant that she was entitled to a waiver of the $6,913.00 based on the factors of equity and good conscience. The Board concludes that creation of the overpayment in the current amount of $19,704.00 was proper. The Appellant was receiving death pension benefits based on VA's finding that she had no countable income. That status changed in March 2003 when she began receiving SSA disability benefits. Additionally, the calculated amount of the overpayment appears to correspond with the amount of the excess pension benefits paid by VA. III. Waiver of the Overpayment The Appellant alleges that the overpayment created by her receipt of death pension benefits when she was concurrently receiving unreported SSA disability income should be waived. A. Statutory Bar If there is an indication of fraud, misrepresentation or bad faith in the creation of an overpayment, waiver of the overpayment is automatically precluded, and further analysis is not warranted. 38 U.S.C.A. § 5302 (West 2002); 38 C.F.R. §§ 1.962, 1.963(a), 1.965(b) (2013). The Committee determined that the Appellant had not demonstrated bad faith in creating the overpayment. It is the Board's responsibility to consider the matter of bad faith on a de novo basis. Indeed, the Court has held that the Board must independently address this preliminary consideration before addressing whether waiver would be appropriate under the applicable criteria of 38 C.F.R. § 1.965(a). See Ridings v. Brown, 6 Vet. App. 544 (1994). The term "bad faith" generally describes unfair or deceptive dealing by someone who seeks to gain by such dealing at another's expense. An appellant's conduct in connection with an overpayment 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. See Richards v. Brown, 9 Vet. App. 255 (1996); 38 C.F.R. § 1.965(b) (2013). The Appellant has alleged that she is not responsible for the overpayment of pension benefits, because she never received notification from SSA that her benefits had been changed from SSI to SSA disability. Therefore, since she was unaware of the change in the type of benefits she was receiving she was not able to timely notify VA. The record, however, reflects that in March 2003 the SSA sent to the Appellant at her address of record a letter notifying her of her entitlement to receive SSA disability benefits. The address on this letter is the address the Appellant submitted to VA with her claim for death pension benefits in September 2002 and is the address which she continues to provide as her current address. Therefore, the Board presumes that SSA properly mailed out the notification letter to the Appellant on the date marked on the letter. Marsh v. Nicholson, 19 Vet. App. 381, 385 (2005) (quoting Alaska Airlines, Inc. v. Johnson, 8 F.3d 791, 795 (Fed. Cir. 1993)) ("There is a presumption of regularity that public officers perform their duties 'correctly, fairly, in good faith, and in accordance with law and governing regulations.'"). Courts presume that, "'in the absence of clear evidence to the contrary,'" public officers have "'properly discharged their official duties.'" Ashley v. Derwinski, 2 Vet. App. 62, 64 (1992) (quoting United States v. Chem. Found., Inc., 272 U.S. 1, 14-15 (1926)). The Court has specifically held that a statement by a claimant, standing alone, is not sufficient to rebut the presumption of regularity in government operations. YT v. Brown, 9 Vet. App. 195, 199 (1996); Mindenhall v. Brown, 7 Vet. App. 271, 274 (1994) (citing Ashley v. Derwinski, 2 Vet. App. 62 (1992)). The Appellant has not directly contended that SSA did not send her the notice letter of her benefits change. Rather, she has submitted a July 2008 letter from the United States Postal Service indicating that there is no tracking of regular postal mail and that there is no certain method of determining whether her mail was lost. However, this letter does not specifically provide that her March 2003 letter from the SSA was lost in the mail, but merely talks about lost mail in general. Thus, the presumption of regularity with regards to the sending of the SSA notification letter has not been rebutted and the Appellant has not submitted clear evidence to the contrary. Even with a finding that the presumption of regularity is not rebutted in the SSA's mailing of notice to the Appellant, the failure of the Appellant not to notify VA of the change in the type of her SSA benefits does not rise to the level of being fraud, misrepresentation, or bad faith. The evidence does not reflect that her actions were undertaken to seek an unfair advantage with knowledge of the likely consequences. Hence, there is no statutory bar to waiver of recovery of the overpayment. B. Equity and Good Conscience 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. The phrase equity and good conscience means arriving at a fair decision between the obligor and the Government. In making this determination, consideration will be given to the following elements, which are not intended to be all-inclusive: 1. Fault of the debtor. Whether the actions of the debtor contributed to the creation of the debt. 2. Balancing of faults. Weighing of the fault of the debtor against that 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. Whether failure to make restitution would result in unfair gain to the debtor. 6. Changing position to one's detriment. Whether reliance on VA benefits resulted in relinquishment of a valuable right or the incurrence of a legal obligation. 38 C.F.R. § 1.965(a) (2013). The Board will consider each of these elements in turn. The definition of fault is "the commission or omission of an act that directly results in the creation of the debt." See Veterans Benefits Administration Circular 20-90-5 (Feb. 12, 1990). Fault should initially be considered relative to the degree of control an appellant had over the circumstances leading to the overpayment. If control is established, even to a minor degree, the secondary determination is whether an appellant's actions were those expected of a person exercising a high degree of care, with due regard for the appellant's contractual responsibility to the government. The age, financial experience, and education of the appellant should also be considered in these determinations. A person who is a recipient of VA pension benefits must notify VA of all circumstances that will affect her entitlement to receive the benefit being paid. 38 U.S.C.A. § 1506(3) (West 2002); 38 C.F.R. §§ 3.277, 3.652 (2013). Here, the Appellant did not notify VA of the change in her SSA benefits, which resulted in the overpayment of pension benefits. As noted above, the Appellant has alleged that she never received the March 2003 letter from the SSA notifying her of the change in benefit type. However, the Board has concluded that the presumption of regularity applies to SSA's sending of the notice letter and the Appellant has not presented clear evidence to the contrary. Therefore, the Appellant is at fault in the creation of the overpayment since the evidence shows she was notified of her change in SSA benefits and failed to notify VA of the change. In determining that the Appellant was entitled to a partial waiver of overpayment of $6,913.00, the Committee concluded that the Appellant's fault was mitigated by her health. SSA disability records reflect the Appellant has diagnoses of degenerative joint disease of the right knee and hip, degenerative joint disease and degenerative disc disease of the lumbar spine, asthma, gastroesophageal reflux disease, and hypothyroidism. The Board concludes that the Appellant's health does not mitigate fault on the Appellant's part as there is no indication these disabilities would have prevented her from notifying VA that she was in receipt of SSA disability benefits. The Appellant has alleged that she was unaware of all of the pertinent government regulations, that she had been relying on VA and SSA to assist her in ensuring that her benefits were correct, and that she did not want to hire an attorney to make sure everything was correct. The Supreme Court of the United States has held that everyone dealing with the Government is charged with knowledge of Federal statutes and lawfully promulgated agency regulations. Fed. Crop Ins. Corp. v. Merrill, 332 U.S. 380 (1947); Morris v. Derwinski, 1 Vet. App. 260 (1991) (holding that a veteran's abandonment of his claim for service connection based upon his failure to respond to a request for additional evidence could not be waived or set aside on grounds of alleged ignorance of regulatory requirements). Thus, although the Appellant may not have specifically known the statutes and regulations pertinent to her receipt of benefits, she is necessarily charged with knowledge of those laws. Therefore, the Board concludes that her fault is not mitigated by her allegations of ignorance of the laws and reliance upon VA and SSA. Regarding the balancing of faults, the Board finds that VA was not at fault in creating the overpayment. In June 2005 and May 2007, VA sent the Appellant letters informing her that she needed to notify VA immediately if there was any change in her income or that of her family. These letters specifically state that VA needed to be notified as soon as any SSA benefits were awarded and that if she did not advise VA promptly of any change an overpayment may be created. Additionally, when VA was notified by SSA that the Appellant was receiving SSA disability benefits VA took prompt action to reduce her award and to create an overpayment in her account. Specifically, in September 2007, VA notified the Appellant that it was aware that she was in receipt of SSA disability benefits and that she would be receiving a separate letter regarding the adjustment of her benefits. In November 2007, after receiving notice from SSA in October 2007 of when the Appellant began receiving such disability benefits, VA took action to propose to reduce the Appellant's pension award for the pertinent time period. This reduction was finalized via notification to the Appellant in January 2008. VA notified the Appellant of the amount of her overpayment in December 2007. The Appellant has argued that VA is required to recheck SSA benefits biannually or annually to ensure that a pension recipient does not end up with a large overpayment because of a receipt of SSA disability benefits. However, governing statutes and regulations do not provide for such a requirement. In fact, as noted above, the statutes and regulations specifically place the burden on the individual in receipt of pension benefits to notify VA of any change in income. 38 U.S.C.A. § 1506(3) (West 2002); 38 C.F.R. §§ 3.277, 3.652 (2013). Therefore, the Board concludes that there was no fault on the part of VA in creation of the overpayment. In sum, the Board finds that the Appellant was notified by SSA of the change in her benefits. VA also duly informed her of her obligation to timely report income changes. However, she failed to promptly report her SSA disability benefits which led to the creation of the overpayment in this case. There is no indication of any fault on the part of the VA in the creation of the overpayment, since prompt action was taken to reduce her benefits and create an overpayment upon learning of her SSA income. It is clear that the Appellant's actions, or lack of action, caused the overpayment without any fault on the part of VA. With respect to whether recovery of the overpayment would result in undue financial hardship, a finding of financial hardship is justified if the collection of the indebtedness would deprive the appellant of food, clothing, shelter, or other basic necessities. The Appellant has alleged that she continues to have financial hardship and that she will have difficulty making ends meet without receiving the retroactive payment of $19,704.00. Board Hearing Tr. at 8. A review of the Appellant's most recent February 2013 FSR, however, shows that her monthly income exceeds her monthly expenses by $192.00. Some of her monthly expenses, such as $80 per month for a cell phone and $60 a month for cable, are for items that would not deprive her of food, clothing, shelter, or other basic necessities. The FSR also reflects that $844 of her expenses are for payments to ten creditors for installment contracts and other debts, including installment payments for Sears, Target, Kohl's, and Wal-Mart credit cards. When the amounts due monthly to her creditors are not considered, the Appellant's net monthly income exceeds her expenses by $1,036. As the overpayment of death pension benefits is a valid debt to the Government, there is no reason that the Appellant should not provide the Government with the same consideration that she accords her private creditors. Notably, the Appellant does not need to pay any amount of the remaining balance back to VA since VA has already recovered the balance of $19,704.00 from a payment of past due benefits. Based on these factors, the Board finds that the withholding of the balance of the overpayment does not result in undue financial hardship or deprive the Appellant of the basic necessities of life. The debt owed to VA is of at least equal importance to the Appellant's installment debts and must be repaid. Regarding the element of defeating the purpose of the intended benefit, the $19,704.00 was withheld from a retroactive payment of DIC benefits. The purpose of DIC is to provide supplemental income to surviving spouses of veterans whose death was caused by their service. The record reflects that DIC benefits are a principal source of income for the Appellant, along with her SSA disability benefits. Therefore, recovery of the overpayment would defeat the purpose of the intended benefit. The Board further concludes that failure to make restitution of the overpayment would result in unjust enrichment to the Appellant. In effect, a waiver of this overpayment would allow the Appellant to realize a gain (receipt of additional death pension benefits paid which she was not entitled to based on income limitations) based on her failure to timely notify VA of a change in her countable income. The Board also has considered the factor of whether the Appellant's reliance on the benefits caused her to change her position to her detriment. However, the Appellant never received the retroactive award of benefits of $19,704.00 and there is no evidence of record indicating that the expected receipt of such benefits caused her to relinquish a valuable right or incur a legal obligation. Weighing all the factors considered above based on the entire circumstances of this case, the Board concludes that a preponderance of those factors is against waiver of recovery. The only factor in the Appellant's favor is that the purpose of the withheld benefits has been defeated; however, with all other factors being against her claim, the Board finds that the Government's right to full restitution of the remaining overpayment should not be moderated. Accordingly, the Board finds that recovery of the overpayment of $19,704.00 was not against equity and good conscience, and waiver of recovery of the overpayment is denied. ORDER Entitlement to waiver of overpayment of VA compensation benefits in the amount of $19,704.00 is denied. ____________________________________________ Donnie R. Hachey Acting Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs