Citation Nr: 1628215 Decision Date: 07/14/16 Archive Date: 07/28/16 DOCKET NO. 09-03 318A ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Houston, Texas THE ISSUE Entitlement to waiver of recovery of an overpayment debt of nonservice-connected pension benefits in the amount of $ 4,593.00. (The following issues will be addressed in a separate decision under a different docket number issued simultaneously herewith: whether new and material evidence has been received to reopen a previously denied claim of entitlement to service connection for a thoracolumbar back disability; entitlement to service connection for a thoracolumbar back disability; entitlement to an initial disability rating greater than 10 percent for generalized anxiety disorder; entitlement to a total disability rating based on individual unemployability (TDIU) due to service-connected disabilities; whether new and material evidence has been received to reopen a previously denied claim of entitlement to service connection for tinnitus; whether new and material evidence has been received to reopen a previously denied claim of entitlement to service connection for bilateral pes planus; whether new and material evidence has been received to reopen a previously denied claim of entitlement to service connection for a bilateral knee disability; and, whether new and material evidence has been received to reopen a previously denied claim of entitlement to service connection for depressive disorder.) REPRESENTATION Veteran represented by: Disabled American Veterans WITNESS AT HEARING ON APPEAL The Veteran ATTORNEY FOR THE BOARD J. J. Tang, Associate Counsel INTRODUCTION The Veteran served on active duty in the U.S. Air Force from February 1972 to February 1976, and he received decorations including the National Defense Service Medal, the Air Force Medal 900-3, and the Air Force Good Conduct Medal. This case comes before the Board of Veterans' Appeals (Board) on appeal from a May 2008 Decision on Waiver of Indebtedness issued by a Department of Veterans Affairs (VA) Regional Office (RO), which denied entitlement to waiver of recovery of the debt based on a determination that the Veteran's request for waiver of the $ 14,477.00 debt was not timely submitted. In an August 2009 supplemental statement of the case, the RO found that the request for waiver was timely submitted and granted entitlement to a waiver of recovery of the amount of debt that had not yet been recouped, which was $ 9,884.00. Thus, the amount of debt on appeal for waiver is $ 4,593.00, which is the amount that VA had already collected from the Veteran by withholding his VA pension benefits. In November 2015, the issue on appeal was remanded by the Board to afford the Veteran a hearing before the Board. All documents on the Virtual VA paperless claims processing system and the Veterans Benefits Management System have been reviewed, including a copy of the transcript of the March 2016 Board hearing presided over by the undersigned Veterans Law Judge. FINDINGS OF FACT 1. There is no evidence of fraud, misrepresentation, or bad faith on the Veteran's part in the creation of the debt. 2. The Veteran was at fault in the creation of the overpayment of pension benefits in that he failed to promptly inform VA as to changes in his income; VA was not at fault in the creation of the overpayment of pension benefits; thus, the Veteran's fault outweighs VA's; VA's failure to insist upon its right to repayment would result in unjust enrichment of the Veteran; and, VA's collection of the debt caused the Veteran undue hardship, in that he was deprived of a sufficient amount of monthly income to afford basic necessities. 3. The undue hardship caused by VA's collection of the debt outweighs the Veteran's fault and the Veteran's unjust enrichment, and collection of the debt therefore goes against the principles of equity and good conscience. CONCLUSION OF LAW The criteria for entitlement to waiver of recovery of an overpayment debt of nonservice-connected pension benefits in the amount of $ 4,593.00 have been met. 38 U.S.C.A. § 5302 (West 2015); 38 C.F.R. §§ 1.962, 1.963, 1.965 (2015). REASONS AND BASES FOR FINDINGS AND CONCLUSION The duties to notify and assist do not apply in this case. 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 Board notes that the validity of the debt itself is not in dispute. In this case, the Veteran contends that waiver of the overpayment debt of nonservice-connected pension benefits in the amount of $ 4,593.00 is warranted. After creation of the overpayment debt in the amount of $ 14,477.00, VA began withholding the Veteran's VA pension benefits to recoup the amount of overpayment debt. See May 2008 VA letter. As noted above, in an August 2009 supplemental statement of the case, the RO granted entitlement to a waiver of the amount of debt that had not yet been recouped, which was $ 9,884.00, and the RO determined that the amount of debt that was already recouped will not be refunded. However, if collection of a debt is waived, any portion of debt previously collected by VA will be refunded. 38 C.F.R. § 1.967(a) (2015). Therefore, the Board will consider whether the amount of overpayment debt that was already collected, or $ 4,593.00, is warranted. First, there is a statutory bar to waiver of recovery of the overpayment when there is an indication of fraud, misrepresentation or bad faith in the creation of an overpayment. See 38 U.S.C.A. § 5302; 38 C.F.R. §§ 1.962 , 1.963(a), 1.965(b). A Veteran'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). Here, the Veteran was awarded Social Security Administration (SSA) disability benefits on appeal with the SSA, he received a retroactive payment of SSA disability benefits, and he reported that he believed that the retroactive payment belonged to him. See February 2009 Form 9; September 2002 VA letter. Given this statement, and because the Veteran's debt was created due to his failure to notify VA regarding his retroactive award of SSA disability benefits, and not due to an active misrepresentation of his prospective monthly income, the Board finds that it was not the Veteran's intent to seek an unfair advantage. Accordingly, there is no statutory bar to waiver of recovery of the overpayment. Second, there is a bar to waiver of recovery of the overpayment when collection of the debt would violate the standard of "equity and good conscience." 38 C.F.R. § 1.965(a). This standard is applied when the circumstances indicate a need for reasonableness and moderation in the exercise of the Government's rights. The decision reached should not be unduly favorable or adverse to either side. The phrase equity and good conscience means arriving at a fair decision between the Veteran and the Government. In making this determination, consideration will be given to the following elements: (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, and (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) (this is not intended to be an all-inclusive list). Here, there is no indication that withholding recovery of the debt would nullify the objective of the VA pension benefits or that the Veteran's reliance of VA pension benefits resulted in relinquishment of a valuable right or incurrence of a legal obligation. Thus, these elements do not apply. The Board will now consider the applicable elements below. Regarding unjust enrichment, VA's failure to collect this debt would result in an unfair gain to the Veteran, in that he was receiving VA pension benefits during the time period on appeal that he would not have received had he notified VA as to his SSA disability benefits award. Regarding fault of the Veteran, the Board finds that the evidence shows that the Veteran was at fault in the creation of the debt, in that he failed to promptly notify VA as to his award of retroactive SSA disability benefits. Particularly, prior to the creation of the overpayment debt, the Veteran had demonstrated actual knowledge that any change in income, specifically to include the receipt of SSA disability benefits, must be reported to VA and that such changes income would affect his pension benefits. See November 1997 correspondence from SSA (submitted by the Veteran and informing the Veteran that payments for his prior award of SSA disability benefits would end in December 1997); November 1997 Veteran statement to VA (notifying VA as to the November 1997 SSA correspondence and requesting that VA reinstate his full VA pension amount at the earliest possible date); May 2000 Veteran statement to VA (notifying VA that his wife has not received SSA benefits since October 1999 and requesting that VA adjust his VA pension benefits accordingly; attaching a letter confirming the same from the SSA). Further, prior to the creation of the debt, VA recurrently provided notice to the Veteran that the amount of pension he receives is dependent in part on the amount of SSA disability benefits he receives. See e.g., May 1998 VA letter; June 2000 VA letter; see also April 2000 VA letter to the Veteran (notifying Veteran that he should notify VA if the amount of SSA benefits awarded to his household is not correct, to include the amount of SSA benefits VA found are awarded to his wife). The Board also notes a prior VA decision on Waiver of Indebtedness dated October 2000, of which the Veteran received notice in November 2000, in which VA granted a waiver of a prior debt of VA pension benefits that was created because a prior similar occasion in which the Veteran failed to report his receipt of SSA benefits. Based on the Veteran's demonstrated actual knowledge that a change in amount of SSA disability benefits would affect his pension benefits, given his prior prompt notifications to VA regarding changes in his income, and given that the Veteran had notice that a failure to promptly notify VA as to the receipt of SSA benefits would result in the creation of an overpayment debt, the Board finds that the Veteran is at fault in the creation of this debt. VA is not at fault in this case as it provided the Veteran with multiple letters notifying the Veteran as to the effect of receipt of SSA benefits on his VA pension benefits and promptly notified the Veteran as to the creation of the debt after receiving notice from the SSA as to the Veteran's award of SSA disability benefits. See September 2002 VA letter. Further, the burden is on the individual in receipt of pension benefits to notify VA of any change in income. See 38 U.S.C.A. § 1506(3). Thus, on balancing of faults, the Veteran's fault in this case outweighs VA's. Regarding undue hardship, the Board finds that VA's collection of the debt deprived the Veteran of sufficient monthly income to afford basic necessities. During the entire relevant period during which VA was withholding the Veteran's pension benefits in order to recoup the overpayment debt, the Veteran was unemployed and the only monthly income he was entitled to receive was his SSA disability benefits and his VA pension benefits (excluding the period during which his pension benefits were terminated from January 1, 2002 to November 1, 2007). See September 2002 and January 2008 VA letters (notifying Veteran as to the termination and reinstatement of his VA pension benefits); December 2008 Form 5655 (showing SSA monthly payments as the Veteran's only monthly income). During the time VA was collecting the Veteran's debt, the Veteran was separated from his wife and therefore did not receive any of her income. See January 2007 VA psychiatry note (Veteran reported that he separated from his wife four months ago). Overall, during the period that VA was recouping his debt, the total monthly income the Veteran was receiving exceeded his average monthly expenses for basic necessities such as his rent/ mortgage payment, food, utilities and heat, clothing, telephone, gas/ water, car insurance, and transportation. In a January 2008 Financial Status Report, VA Form 5655, the Veteran reported that his only income was from Social Security in the amount of $750 a month. He reported monthly expenses of $1,095 for rent, food, utilities and auto insurance. In a December 2008 Financial Status Report, VA Form 5655, he reported $863 from Social Security and VA benefits and indicated that his total monthly expenses were $1, 360 for rent, food, utilities, clothing, gas and auto insurance. In a May 2008 statement, the Veteran indicated that his monthly bills are more than his SSA benefits and he is in danger of becoming homeless. In March 2016, the Veteran testified that during the period of time that VA was withholding his VA pension benefits to recover his overpayment debt, he had little income to live off of and was struggling with his financial management. The Board finds it significant that the Veteran's family was helping him with his bills during this period and that without that assistance, he reported he would be homeless. See December 2008 Form 5655. Thus, the Board finds that VA's collection of the debt caused the Veteran undue hardship, in that he was deprived of a sufficient amount of monthly income to afford basic necessities. On weighing the above elements, the Board finds that the Veteran's fault in the case and the Veteran's unfair gain if the debt was not collected are outweighed by the level of undue hardship that resulted from VA's recovery of the debt. Thus, collection of the debt goes against the principles of equity and good conscience. Accordingly, waiver of the overpayment debt of nonservice-connected pension benefits in the amount of $ 4,593.00 is warranted. ORDER Entitlement to waiver of recovery of an overpayment debt of nonservice-connected pension benefits in the amount of $ 4,593.00 is granted. ______________________________________________ K. J. Alibrando Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs