Citation Nr: 1756978 Decision Date: 12/08/17 Archive Date: 12/15/17 DOCKET NO. 11-15 216A ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in St. Paul, Minnesota THE ISSUE Entitlement to waiver of recovery of an overpayment of VA monetary benefits in the amount of $664.00. REPRESENTATION Veteran represented by: Disabled American Veterans ATTORNEY FOR THE BOARD T. Stephen Eckerman, Counsel INTRODUCTION The Veteran served on active duty from July 1968 to June 1972, from January 1974 to December 1975 and from January 1990 to January 1993. This matter comes before the Board of Veterans' Appeals (Board) on appeal from a January 2010 decision by the Committee on Waivers and Compromises (COWC) of the St. Paul, Minnesota, Regional Office (RO) of the Department of Veterans Affairs (VA), which denied the Veteran's request for a waiver of an overpayment of VA benefits in the amount of $3,006.00. In May 2015, the Board remanded the claim for additional development. FINDINGS OF FACT 1. In September 1972, the Veteran married D.K. 2. In August 1999, the Veteran divorced D.K. 3. In September 2000, the Veteran married B.A. 4. In November 2006, the Veteran divorced B.A.. 5. In July 2007, the Veteran married M.A. 6. The earliest evidence of record of the Veteran notifying VA of his divorce from B.A. is dated in October 2009. 7. In October 2009, the Veteran's VA benefits were reduced to exclude the spousal benefits for B.A. effective December 1, 2006 through October 30, 2009, creating an overpayment in the amount of $3,006.00. 8. From December 1, 2006 through October 30, 2009, the Veteran was in receipt of VA service-connected compensation which included additional benefits for B.A., his former spouse. 9. In September 2015, the RO proposed a partial waiver of $2,342.00 that was agreed to by the Veteran. 10. The overpayment of VA spousal benefits in the amount of $664.00 was properly created. 11. An overpayment of VA compensation benefits in the amount of $664.00 was not due to the Veteran's fraud, misrepresentation or bad faith. 12. The Veteran was at fault in the creation of the indebtedness at issue. 13. The collection of any portion of the debt would not constitute an undue hardship, and would not be against equity and good conscience. CONCLUSION OF LAW The overpayment of VA service-connected compensation benefits based on removal of former spouse, B.A., as a dependent effective December 1, 2006, was properly created, and recovery of this debt would not be against equity and good conscience. 38 U.S.C. §§ 5107, 5302 (2012); 38 C.F.R. §§ 1.963, 1.965 (2017). REASONS AND BASES FOR FINDINGS AND CONCLUSION The Veteran essentially asserts that he is entitled to a waiver of overpayment in the amount of $664.00. The amount in issue represents payment of additional compensation for a dependent spouse (B.A.) between December 1, 2006 and October 30, 2009, following a grant of a partial waiver. Specifically, the $664.00 amounts to the amount of time that the Veteran was not married to either B.A. or M.A., but received additional compensation for a dependent spouse (i.e., December 2006 to June 2007). An overpayment may arise from virtually any benefits program administered pursuant to VA law, including pension, compensation, dependency and indemnity compensation, educational assistance benefits and subsistence allowance, insurance benefits, burial and plot allowances, clothing allowance, and automobile or other conveyance and adaptive equipment allowances. See 38 C.F.R. § 1.956 (a) (2017). 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 U.S.C. § 5302 (2012); 38 C.F.R. § 1.962 (2017). The provisions of 38 U.S.C. § 1115 provide for additional compensation for dependents. The effective date of a reduction of pension or compensation by reason of marriage, annulment or divorce on or after October 1, 1982, 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. § 5112 (b)(2) (2012); 38 C.F.R. § 3.501 (d)(2) (2017). A claimant has the right to dispute the existence and amount of the debt. 38 U.S.C. § 501 (2012); 38 C.F.R. § 1.911 (c) (2017). Under 38 U.S.C. § 5112 (b)(10), the effective date of a reduction or discontinuance of compensation by reason of an erroneous award based solely on administrative error or error in judgment shall be the date of last payment. Stated another way, when an overpayment has been made by reason of an erroneous award based solely on administrative error, the reduction of that award cannot be made retroactive to form an overpayment debt owed to VA from the recipient of the erroneous award. Neither the Veteran's actions nor failure to act must have contributed to payment pursuant to the erroneous award. 38 U.S.C. § 5112 (b); 38 C.F.R. § 3.500 (b)(1); Jordan v. Brown, 10 Vet. App. 171 (1997) (finding that sole administrative error is not present if the payee knew, or should have known, that the payments were erroneous). VA's Office of General Counsel has issued a precedential decision which finds that a reduction or discontinuance of benefits based on an erroneous award will be made in accordance with 38 U.S.C. § 3012 (b) (10) when it is determined that: (1) The beneficiary was not guilty of an act of commission, or omission which, in whole or in part, caused the erroneous award of benefits and had no knowledge thereof; and (2) VA either: (a) committed an administrative error, including an error of fact (e.g., the VA mistakes or overlooks the facts of record or makes a purely clerical error), or (b) committed an error of judgment (e.g., the VA fails to properly interpret, understand and follow existing Department instructions or regulatory or statutory requirements). See VAOPGCPREC 2-90 (July 17, 1989), 55 Fed. Reg. 27757 (1990). Administrative errors include all administrative decisions of entitlement, whether based upon mistake of fact, misunderstanding of controlling regulations or instructions, or misapplication of law. Sole administrative error, however, may be found to occur only in cases where a veteran neither had knowledge of, nor should have been aware of, the erroneous award. Sole administrative error contemplates that neither a veteran's actions nor his/her failure to act contributed to payment pursuant to an erroneous award. 38 U.S.C. § 5112 (b)(10); 38 C.F.R. § 3.500 (b)(2); Jordan, 10 Vet. App. 171. The relevant facts of this case are as follows: A certificate of marriage, received by VA in February 1993, shows that the Veteran married D.K. in September 1972. In September 1994, the RO granted service connection for several disabilities. The Veteran's combined evaluation was 40 percent. This meant that the Veteran was eligible for additional compensation for dependents, in this case, a spouse. See 38 U.S.C. §§ 1115, 1135 (2012); see also Sharp v. Shinseki, 23 Vet. App. 267, 272 (2009) (entitlement to additional compensation for dependents is implicitly raised whenever a veteran has a rating of at least 30 percent; a veteran only needed to submit updated information about his dependents to receive it). In February 1995, the Veteran filed a "Declaration of Status of Dependence" (VA Form 21-686c) in which he reported that he was married to D.K. In October 1996, the RO notified the Veteran that he was being paid additional compensation for a dependent spouse. The notification letter states, "You must tell us immediately if there is any change in the status of your dependents. Failure to tell VA immediately of a dependency change will result in an overpayment which must be repaid." See also July 2002 notification letters. A divorce decree, received in August 2003, indicates that the Veteran divorced D.K. in August 1999. A certificate of marriage, received by VA in August 2003, shows that the Veteran married B.A. in September 2000. In December 2007, and December 2008, the Veteran was notified of an increase in his compensation. The notification letters state, "Please advise us immediately if you return to active military service or if your address or marital status changes. If you are receiving additional benefits for dependents, notify us immediately of any change in status." A VA Form 21-686c, received on October 16, 2009, shows that the Veteran indicated that he divorced B.A. on May 2, 2006, and that he had married M.A. in September 2007. A report of general information (VA Form 21-0820), dated October 20, 2009, shows that the Veteran reported that he divorced B.A. in November 2006, and that he married M.A. in July 2007. A report of general information (VA Form 21-0820), dated October 28, 2009, shows that the Veteran reported that he married M.A. on July 20, 2007. In October 2009, the RO notified that it proposed to reduce his benefits as he had been paid too much. He was notified that this would result in an overpayment of benefits, which would be addressed in a separate notice. In November 2009, the Debt Management Center notified the Veteran that an overpayment of $3,006.00 had been created, and that it would recoup this amount via withholding that would begin on February 1, 2010. In December 2009, the Veteran requested a waiver of the overpayment. In January 2010, the Committee on Waivers and Compromises (Committee) denied the Veteran's request for a waiver of recovery of the overpayment, which it was determined was for the period from December 1, 2006 to October 30, 2009, and that it amounted to $3,006.00. The Committee determined that there was no fraud, no misrepresentation of a material fact, and no showing of bad faith on the Veteran's part. However, the Veteran was determined to be at fault in creation of the overpayment because he should have informed VA of his divorce from when it occurred in 2006. The Veteran's monthly income exceeded his monthly expenses by $1,800.00 a month. It was expected that some of that income would be used to reduce the indebtedness. Financial hardship was not shown. There was unjust enrichment, and failure to repay the debt would result in an unfair gain. In May 2015, the Board remanded the claim for additional development. Specifically, the Board directed that the RO adjudicate the issue of whether the underlying debt of $3,006.00 is valid and properly created, and stated that if the overpayment was found to be valid and properly created, the RO should ask the Veteran to complete an updated financial status report (VA Form 5655), with any necessary documentation. Thereafter, the RO was directed to readjudicate the issue of the Veteran's entitlement to a waiver of overpayment of VA benefits in the amount of $3,006.00, and to issue a statement of the case if the claim was denied. A report of general information (VA Form 21-0820), dated in August 2015, shows that the Veteran was advised of the following: "the Board of Veterans Appeals (BVA) decided the full debt was not a valid debt. BVA decided that the valid debt portion of the debt covers the seven months he was single (divorced from [B.A.] but not yet married to [M.A.] but paid as a veteran with a dependent wife." The Veteran was entitled to portion of the funds. A partial waiver was proposed, denying $664.00, and waiving $2,342.00, which would be refunded to him. The Veteran agreed with the partial waiver. The Veteran was further requested to complete and return a VA Form 5655 (Financial Status Report) for the waiver decision, and to send a written statement advising VA that the waiver decision satisfies his appeal and that he wished to drop the appeal. The Board notes that the RO's characterization of its remand in this document is inaccurate, as the Board did not "decide[d] that the valid debt portion of the debt covers the seven months he was single." In November 2015, a statement of the case was issued. There is no record to show that the Veteran ever submitted a written statement advising VA that the waiver decision satisfies his appeal and that he wished to drop the appeal, or an updated financial status report. See also statement of accredited representative in appealed case (VA Form 646), dated in December 2015 (acknowledging that a Financial Status Report had not been submitted). The issue of the validity of the debt is a threshold determination that must be made, in the first instance, prior to a decision on a request for waiver of the overpayment. See Schaper v. Derwinski, 1 Vet. App. 430 (1991). Notices sent to the Veteran clearly notified him of his responsibility to immediately report any change in the status of his dependents. For VA compensation purposes, notice means written notice sent to a claimant or payee at his or her latest address of record. 38 C.F.R. § 3.1 (q). VA law also provides that persons dealing with the government are charged with knowledge of federal statutes and lawfully promulgated agency regulations "regardless of actual knowledge of what is in the [r]ebullitions or of the hardship resulting from innocent ignorance." See Morris v Derwinski, 1 Vet. App. 260, 265 (1991) (citing Fed. Crop Ins. Corp. v. Merrill, 332 U.S. 380 (1947); see also Dent v. McDonald, 27 Vet. App. 362, 382 (2015) (a beneficiary is charged with knowing the rules governing compensation). VA's compensation and pension system is inherently reliant on the accuracy of information provided by claimants. Thus, the Board finds that there is no plausible argument in support of any asserted failure to notify the Veteran of his responsibility to immediately report any change in the status of his dependents. Furthermore, the overpayment created is not shown to be the result of sole administrative error. In order for an overpayment to be the result of sole administrative error, and for the Veteran to consequently not be liable for the debt, the Veteran must not have known, or should not have known, that the benefits in issue were erroneous. A finding of sole administrative error requires not only error on the part of VA, but that the beneficiary be unaware that the payments are erroneous. 38 U.S.C. § 5112 (b)(9), (10); 38 C.F.R. § 3.500 (b)(2); Jordan, 10 Vet. App. 171. In this case, the Veteran is shown to have received notice that he must immediately inform VA of any change in the status of his dependents. He is not shown to have notified VA of his divorce to B.A. prior to October 2009. There is no argument that he was eligible to receive benefits based on a dependent spouse after December 2006 and prior to July 2007. He should have known that, absent providing notice of his divorce to B.A. to VA, his receipt of benefits based on that dependent spouse (B.A.) was erroneous. In view of the finding that the overpayment was not the result of sole administrative error on the part of VA, the Board finds that the RO's decision to recoup the debt was proper, as the debt was a valid debt to VA. The earliest evidence that the Veteran notified VA of his divorce to B.A. is dated in October 2009. The law clearly states that upon a divorce, a veteran's payment of additional compensation for a dependent spouse will be reduced effective the last day of the month in which such divorce occurred. 38 C.F.R. § 3.501 (d)(2). Thus, he should not have continued to receive additional compensation benefits for his dependent spouse (B.A.) after November 30, 2006, the last day of the month he was divorced. See 38 U.S.C. § 5112 (b)(2); 38 C.F.R. § 3.501. The amount of the overpayment was determined to be $3,006.00, which was calculated on the amount of additional compensation benefits the Veteran received beginning December 1, 2006, the first day following the month of his divorce, in November 2006, in accordance with 38 C.F.R. § 3.501, and continuing through October 30, 2009. See January 2010 Decision on Waiver of Indebtedness (notifying the Veteran of an overpayment of $3,0006.00). The RO subsequently waived that portion of the overpayment during which time the Veteran was married to M.A., beginning in July 2007. Therefore, the RO's attempt to recover $664.00 was proper, and the claim must be denied. Accordingly, there is no basis to conclude that the Veteran's actions did not overwhelmingly contribute to the creation of the debt. No fault can be attributed to the VA with respect to the creation of the debt. The remaining issue is whether the Veteran is entitled to waiver of recovery of the overpayment of disability benefits in the amount of $664.00. The Committee concluded that the Veteran had not demonstrated fraud, misrepresentation, or bad faith in the creation of the overpayment now at issue. Notwithstanding this, however, the Board must render an independent determination on this issue. See Ridings v. Brown, 6 Vet. App. 544, 546 (1994). A party who is receiving VA benefits must notify VA of any material change or expected change in income that would affect entitlement to receive, or the rate, of the benefit being paid. The notice must be made when the recipient acquires knowledge that he will begin to receive additional income. 38 C.F.R. § 3.660 (a) (1) (2017). Overpayments created by retroactive discontinuance of an award are subject to recovery if recovery is not waived. Waiver of repayment of indebtedness is statutorily precluded if there is any indication of fraud, misrepresentation of a material fact, or bad faith on the part of the person having an interest in obtaining a waiver. 38 U.S.C. § 5302 (c); 38 C.F.R. § 1.965 (b). See Ridings v. Brown, 6 Vet. App. 544, 546 (1994) (citing 38 C.F.R. § 1.965 ). If the debtor's conduct is deemed not to have constituted fraud, misrepresentation of a material fact, or bad faith, the request for waiver will be evaluated pursuant to the principles of equity and good conscience found in 38 C.F.R. § 1.965 (a). 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). Based on a review of the claims file and having considered the contentions of the Veteran, it is clear that the Veteran was at fault in the creation of the debt because of his failure to notify VA of changes in his marital status in a timely manner. No fault can be attributed to the VA with respect to the creation of the debt. The Board must next consider whether reliance on 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 had relinquished a valuable right or incurred a legal obligation in reliance on his VA benefits. Another factor to be considered is whether recovery of the overpayment would defeat the purpose for which the benefits are intended. The Board finds that recovery of the debt would not nullify the objective for which benefits were intended. The purpose of additional compensation for dependents is to provide financial assistance to a beneficiary with a spouse, but during the period he was without a spouse, he was not supporting a dependent spouse. As the Veteran received VA compensation based on a failure to report a change in the number of his dependents, he received benefits to which he was not entitled. Without the benefit of accurate and timely information, the VA is unable to determine whether a veteran meets the eligibility criteria. Therefore, the Board finds that to recover the overpayment of such benefits does not nullify the objective of the payment, as the Veteran did not provide the information which was required to determine his entitlement to the benefits received. In addition, failure to make restitution would result in the Veteran's unjust enrichment by virtue of the fact that he has retained money to which he was not legally entitled. However, the Board must also consider whether recovery of the debt would result in financial hardship to the Veteran. In December 2009, the Veteran submitted a Financial Status Report (VA Form 5655). In that report, the Veteran indicated that he had $1,379.54 in monthly salary, $1,336.00 per month in Social Security Administration benefits, and $1,218.44 per month in retirement (Navy). He indicated that his spouse had no income. He reported that he had $1,828.96 per month in expenses, to include monthly expenses of approximately $400.00 for food, $207.65 for utilities and heat, $965.00 for rent, $151.47 for insurance, $120.05 in taxes, and $99.84 for telephone. He indicated that he had no real estate assets, $25 cash on hand, $900.00 in a checking account, and two cars made in 1981 and 2005, respectively. He reported debts of $388.21 per month (for a truck payment). He indicated that he had a total net monthly income of 3,695.95, and monthly expenses of $1,828.96. The issue is whether the recovery of the overpayment deprives a veteran-debtor of basic necessities and thereby results in undue hardship. See 38 C.F.R. § 1.965 (a)(3). The Board finds that the withholding of part of the monthly compensation to which he is currently entitled does not cause him any undue hardship. The Veteran's most recent financial status report shows that his monthly income currently exceeds his expenses by over $ 1,800.00 a month. Given the foregoing, a realistic projection of the Veteran's foreseeable future financial status is that he would be able to pay a modest amount per month toward the overpayment indebtedness. In this regard, normally, debts to VA are paid off within a 5 year (60 month) period. With prudent budgeting, it is apparent that collection of the overpayment would not deprive him of at least some of the basic necessities of life. The Board therefore finds that undue financial hardship would not be incurred by the Veteran. Accordingly, the Veteran's request for a waiver of his overpayment debt must be denied. As a final matter, on November 9, 2000, the President signed into law the Veterans Claims Assistance Act of 2000 (VCAA), which redefined VA's duty to notify and to assist claimants for VA benefits. See 38 U.S.C. §§ 5100, 5102, 5103, 5103A, 5107, 5126 (2012); 38 C.F.R. §§ 3.102, 3.156, 3.159, and 3.326 (2017). However, the United States Court of Appeals for Veterans Claims (Court) has held that the notice and duty-to-assist provisions of the VCAA do not apply to claims for waiver of recovery of overpayments. Barger v. Principi, 16 Vet. App. 132 (2002). ORDER A waiver of overpayment in the amount of $664.00 is denied. ____________________________________________ MATTHEW W. BLACKWELDER Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs