Citation Nr: 1805692 Decision Date: 01/29/18 Archive Date: 02/07/18 DOCKET NO. 13-00 156A ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Boston, Massachusetts THE ISSUES 1. Whether the $5,962.80 debt for overpayment of benefits was validly created. 2. Entitlement to a waiver of recovery of overpayment of benefits in the amount of $5,962.80. REPRESENTATION Veteran represented by: Disabled American Veterans WITNESS AT HEARING ON APPEAL Veteran ATTORNEY FOR THE BOARD M.H. Stubbs, Counsel INTRODUCTION The Veteran served in the U.S. Air Force from August 1968 to December 1970. This matter comes before the Board of Veterans' Appeals (Board) from an April 2012 decision issued by the Department of Veterans Affairs (VA) Committee on Waivers and Compromises at the Regional Office (RO) in Philadelphia, Pennsylvania. As the Veteran requested a hearing and review of the debt, the claim was transferred to the RO in Boston, Massachusetts. In May 2015, the Veteran testified before a Veterans Law Judge (VLJ) during a Board hearing at his local RO. A transcript of the hearing is contained in the record. The VLJ who presided over the May 2015 hearing is no longer with the Board. The Veteran was informed of this and offered the option of being scheduled for an additional Board hearing. In October 2017, the Veteran declined a second Board hearing. This claim was previously before the Board in July 2015. The claim was remanded so that the AOJ could address the issue of the validity of the debt in the first instance, the Veteran could submit additional financial information, and the request for a waiver could be readjudicated. These steps have been completed, and the claims have been returned to the Board. FINDINGS OF FACT 1. The Veteran received dependency compensation payments for his son "J" concurrent with his son's award of Chapter 35 DEA (Dependents' Educational Assistance) benefits for the period from April 19, 2003 to October 1, 2005. 2. The erroneous award of continued dependency compensation after Chapter 35 DEA benefits were ranted was made by VA, but with the Veteran's constructive knowledge of the error. 3. The overpayment resulting from the retroactive grant of Chapter 35 DEA benefits back to April 19, 2003, which required a corresponding retroactive discontinuance of dependency compensation benefits for the Veteran's son "J" for the same retroactive period, was not due to an erroneous award. 4. The award of dependency compensation concurrent with Chapter 35 DEA benefits was not due to fraud, misrepresentation, or bad faith on the part of the Veteran. 5. Recovery of the overpayment would be against equity and good conscience, as the Veteran's fault was negligible, while VA's fault in the creation and of the overpayment by not timely discontinuing dependency compensation payments greatly outweighs any fault that may be attributed to him. He has credibly testified that he had no knowledge of the prohibition on concurrent Chapter 35 and dependency compensation, and did not even know from what date his son received Chapter 35 benefits. CONCLUSIONS OF LAW 1. The debt resulting from an overpayment of benefits due to the award of compensation based on dependents' educational assistance concurrent with DEA benefits under Chapter 35 for the Veteran's son "J" from April 19, 2003 to October 1, 2005 was properly created. 38 U.S.C. §§ 1115, 1135, 3562, 5112 (West 2012); 38 C.F.R. §§ 3.500, 3.503, 3.660, 3.667, 3.707, 21.3023 (2016). 2. The criteria for waiver of recovery of the $5,962.80 debt resulting from an overpayment of dependency compensation benefits for the Veteran's son "J" are satisfied. 38 U.S.C. § 5302; 38 C.F.R. §§ 1.962, 1.963, 1.965. REASONS AND BASES FOR FINDINGS AND CONCLUSIONS Duties to Notify and Assist The Veterans Claims Assistance Act of 2000 (VCAA), Pub. L. No. 106-475, 114 Stat. 2096 (2000) (codified as amended at 38 U.S.C. § 5100, 5102, 5103, 5103A, 5107, sets forth VA's duties to notify and assist claimants in substantiating claims for VA benefits. See 38 C.F.R. §§ 3.102, 3.156(a), 3.159, 3.326(a). The VCAA does not apply to cases involving the validity of a debt, which are not claims for benefits. See Reyes v. Nicholson, 21 Vet. App. 370, 379-80 (2007) Lueras v. Principi, 18 Vet. App. 435, 438 (2004); Barger v. Principi, 15 Vet. App. 132 (2002). Thus, the provisions of the VCAA do not apply in this matter. Moreover, the Veteran's waiver request has been granted, as discussed below. Validity and Waiver of Debt The claims on appeal are a result of the Veteran's request for a waiver of debt resulting from an overpayment of dependency compensation he received for his son "J" concurrent with the award of Chapter 35 DEA benefits for "J" from April 19, 2003 to October 1, 2005. Although initially the claim on appeal was only for a waiver of this debt, during his 2015 Board hearing it was clear that the Veteran was also appealing the validity of the debt. The Veteran argued that the was not aware that there was a bar to receiving additional dependency benefits and his son receiving Chapter 35 benefits. Specifically, he argued that if there was an overpayment resulting from the award of Chapter 35 benefits concurrent with dependency compensation on behalf of his son "J," it was the fault of VA as both benefits were paid by VA. VA's delay in taking the action of removing one of the benefits resulted in a larger overpayment than would have occurred if it had acted as soon as the Chapter 35 benefits request was allowed. The Veteran does not dispute that he received dependency benefits for son "J" at the same time as "J" received Chapter 35 benefits. Rather, he argues that the concurrent award was the fault of VA, and thus either the debt is not valid or a waiver should be granted. An overpayment is created when VA determines that a beneficiary or payee has received benefit payments in excess of the amount due or to which such beneficiary or payee is entitled. 38 C.F.R. § 1.962. The debtor may challenge the validity or amount of the debt owed. See 38 C.F.R. § 1.911 (c)(1); see also VAOPGCPREC 6-98; Schaper v. Derwinski, 1 Vet. App. 430, 437 (1991). The debtor may also apply for a waiver of any debt found to be valid. See 38 U.S.C. § 5302; 38 C.F.R. §§ 1.911 (c)(2), 1.963. This appeal encompasses both the validity of the debt and whether a waiver is warranted. See Bernard v. Brown, 4 Vet. App. 384, 392 (1993). The AOJ (agency of original jurisdiction) has adjudicated both issues. Following the 2015 Board remand, in February 2016, the RO determined the Veteran's debt was valid. Although the appellate process initially only addressed waiver of the debt, following the RO's address of the validity of the debt, the Board may proceed with appellate review. For the following reasons, the Board finds that although the debt was valid, a waiver of recoupment of the debt is warranted under the standard of equity and good conscience. Validity There is no dispute that the Veteran was not entitled to dependency compensation on behalf of "J" concurrent with "J's" award of Chapter 35 DEA benefits. In this regard, as relevant to this appeal, dependency compensation may be paid to a Veteran on behalf of a dependent child from that child's 18th birthday based upon school attendance if certain criteria are satisfied. See 38 U.S.C. § 1115, 1135; 38 C.F.R. § 3.667. A child of a Veteran may be eligible for dependents' educational assistance (DEA) benefits under Chapter 35 if certain criteria are satisfied. 38 38 U.S.C. §§ 3501, 3510, 3512; 38 C.F.R. §§ 3.807 (a) , 21.3021, 21.3030, 21.3040, 21.3041. However, the payment of both dependency compensation based on educational assistance under 38 C.F.R. § 3.667, and educational assistance under Chapter 35 for the same child, constituted a duplication of benefits that is strictly prohibited. 38 U.S.C. § 3562 (providing that the commencement of a program of education benefits under Chapter 35 shall be a bar to additional amounts of compensation because of such a person); 38 C.F.R. §§ 3.667 (f) (providing that compensation may not be authorized after a child has elected to receive educational assistance under Chapter 35); § 21.3023 (providing that a child's election of educational assistance benefits under Chapter 35 is a bar to additional compensation on account of the child based on school attendance after age 18). A March 2004 rating decision granted an increased 70 percent rating for the Veteran's service-connected schizophrenia, and granted entitlement to total disability based on individual unemployability (TDIU), both effective April 19, 2003. The March 2004 rating decision noted that Basic Eligibility for DEA benefits would also be effective April 19, 2003. A March 16, 2004 letter provided notice of his increased rating and that he was being paid additional compensation for dependents who were in school or below the age of eighteen. See 38 U.S.C. § 1115; 38 C.F.R. §§ 3.57, 3.667. The letter also indicated that his dependents may be eligible for DEA benefits. A pamphlet explaining the DEA benefits program was attached to the notice; however, a copy of the pamphlet is not in the VA record. The information available in the pamphlet and application that were provided in 2005 are not known to this Board member. The current VA Form 22-5940 was updated in December 2016, and does include that by receiving Chapter 35 benefits, a child may not be claimed as a dependent in a compensation claim. The April 12, 2004 email with an attached "CH35 Eligibility Information Request" regarding "J" noted his eligibility as a child of the Veteran, and an effective date of the rating of April 19, 2003. The form in the email does not appear to have been filled out by the Veteran or "J" but by a VA employee. The claims file does not contain the form filled out by "J". The Veteran testified at his hearing that his son filled out the paperwork to request DEA benefits, and he was unsure of the date his son filed for benefits, but that it was shortly after his grant of TDIU and notice of benefits. The record also includes reports of school attendance filled out by the Veteran for "J" in April 2003, April 2005, and April 2006. In December 2005, the Veteran contacted his congressman regarding "J's" dependent status for the months of November and December 2005. The Veteran noted that he thought his son was still considered a dependent because he continued to attend university, and would not graduate until May 2006. He noted that his dependency pay for his son, "J", had stopped in October 2005. He stated he contacted VA and he was simply told they were "working on it," but he did not know why he stopped receiving dependency benefits. VA responded to the Congressman that the Veteran had stopped receiving dependency benefits for "J" because "J" had been receiving Chapter 35 benefits since April 19, 2003, and there was a bar against receiving both benefits concurrently. A couple days after the Congressman sent his December 2005 letter, the Boston RO notified the Veteran that there had been an overpayment of benefits due to his son receiving Chapter 35 benefits while being claimed as a dependent. The letter indicated the concurrent payments had lasted from April 19, 2003 to October 3, 2005, when "J" was removed from the Veteran's dependency award. There is no question that the Veteran was not entitled to receive dependency compensation for his son "J" at the same time that he was receiving Chapter 35 DEA benefits. See 38 U.S.C. § 3562; 38 C.F.R. §§ 3.667 (f), 3.707, 21.3023. Thus, the remaining issue is whether the creation of the overpayment and resultant debt was valid based on the proper effective date of the discontinuance of dependency compensation benefits respecting "J." Here, this hinges on whether the overpayment could be ascribed solely to VA error. "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." Erickson v. West, 13 Vet. App. 495, 499 (2000). Here, the erroneous award of additional dependency compensation for "J" after he began receiving Chapter 35 DEA benefits cannot be ascribed solely to VA error in the narrow sense contemplated by 38 C.F.R. § 3.500(b). If fault for an overpayment cannot "clearly be ascribed to the beneficiary," VA's policy is to assume that fault and not create a debt against the beneficiary. Dent v. McDonald, 27 Vet. App. 362, 380 (2015) (holding, in relevant part, that § 3.500(b)(2) requires "administrative error to be assessed not only as to errors in an initial award of benefits but also as to errors affecting a running ward that consists of recurring payments.") However, when both VA and the beneficiary are partially at fault, the debt based on the effective date of reduction or discontinuance of benefits is properly created. See Jordan v. Brown, 10 Vet. App. 171, 174 (1997). The erroneous award of dependency compensation on behalf of the Veteran's son "J" based on school attendance clearly cannot be attributed to any act of commission or omission on the Veteran's part that would have led to the error. The Veteran did not misrepresent any facts when he submitted claims for dependency for "J". Although he continued to report his school attendance to the RO after 2003 to establish continued entitlement to dependency compensation on his account, this was not an act of "commission" in the sense contemplated by 38 C.F.R. § 3.500 (b)(1), when the Veteran was not aware of the bar to duplicate benefits, and when the RO had every reason to know of his son's receipt of DEA benefits and discontinue the dependency compensation benefits notwithstanding these reports. Moreover, the erroneous dependency compensation was not based on these reports, which merely showed "J's" continued enrollment in school and which made no reference to Chapter 35 benefits, but rather was based on the previously established entitlement to dependency compensation prior to the Chapter 35 award. There was also no act of omission on the Veteran's part. In this regard, a VA beneficiary must notify VA of any circumstances that would affect entitlement to benefits, including a change in dependency status. 38 C.F.R. § 3.660 (a)(1). However, there is nothing in the record indicating that the Veteran was informed at any point that he must notify the RO of his son's Chapter 35 award, and he has provided very credible testimony that he had no knowledge that this award was a bar to concurrent dependency compensation. Thus, it is not apparent how he could know of a duty to inform the RO of the Chapter 35 award as a "circumstance" affecting entitlement to benefits. By contrast, VA is charged with knowledge of its own award, even if the branch responsible for administrating compensation and pension benefits is separate from the branch administering education benefits. The Veteran's representative argued during his 2015 hearing that this "One VA" meant that the fault of the concurrent awards was "solely administrative." Thus, the Veteran had every reason to assume that VA would know of its own award, or at least to assume that one branch of VA would timely communicate the grant of that award to the other branch so that benefits could be properly coordinated. While there are many circumstances that VA might not know of unless notified by the Veteran, an award of Chapter 35 benefits is not one of them. As a matter of official VA procedure through the Adjudication Procedures Manual, the RO was supposed to have been properly notified of this award by the RPO (regional processing office); the erroneous continuation of dependency compensation cannot be ascribed to any act of commission or omission on the part of the Veteran. See VBA Manual M21-1, III.iii.6.B.3.a. Although the erroneous award was not the "fault" of the Veteran, in law, he is charged with having "constructive knowledge" that he was being paid a benefit for which he was not entitled. "Constructive knowledge" is a legal term for knowledge a person should have, or can be relied on to have. As noted above, the effective date provisions of 38 C.F.R. § 3.500(b)(1) also apply when an erroneous award is made "with the payee's knowledge." With regard to this provision, the U.S. Court of Appeals for Veterans Claims (Court) has noted that "[a] person may have actual or constructive knowledge of a fact," and observed that the latter is defined as "knowledge that one using reasonable care or diligence should have, and therefore that is attributed by law to a given person." Dent, 27 Vet. App. at 380 (quoting VAOPGCPREC 2-90 (March 1990)). Further, the U.S. Supreme Court 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); cf. 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). Given the above, and the notice provided in the pamphlet on DEA benefits, the Veteran is charged with having constructive knowledge that he was not entitled to dependency compensation for "J" while "J" was receiving Chapter 35 DEA benefits. As the Veteran is charged with knowledge of the erroneous compensation payments and his responsibility not to claim "J" as a dependent for compensation purposes, the creation of the debt cannot be considered solely administrative error or error in judgment on the part of VA under 38 C.F.R. § 3.500 (b)(2). Therefore, the debt is valid to the extent it represents dependency compensation payments issued to the Veteran after Chapter 35 benefits were awarded. See 38 C.F.R. § 3.500 (b)(1); see also Jordan, 10 Vet. App. at 174 (when both VA and the beneficiary are partially at fault, the debt is valid). The Board notes that the overpayment in this case, and in many others like it, would be easily ameliorated by providing clear, specific notice of the consequence of a retroactive grant of Chapter 35 benefits in advance, including the amount of overpayment that would be owed, so that the Veteran and DEA beneficiary could make a more informed decision in choosing an appropriate effective date of DEA benefits. It is also not clear if the Veteran was given notice that his son applied for DEA benefits, or that he was provided notice that DEA benefits were provided to his son. Such notice could have included his need to inform VA of any erroneous ongoing dependent benefits for "J." Essentially, clear notice from VA regarding the interplay of benefits, and VA following their own procedures to inform the RO of the need to stop dependency benefits could have stopped the overpayments (in total or, at least, in a more timely manner). Waiver of debt The Board next turns to the issue of whether collection of the debt would be against equity and good conscience, and finds that a waiver of the entire amount of debt on appeal is warranted under this standard. See 38 U.S.C. § 5302; 38 C.F.R. §§ 1.962, 1.963, 1.965. Initially, the Board notes that although this overpayment occurred between 2003 and 2005, and the Veteran was informed of the creation of a debt in 2005, VA did not collect on the debt until 2012. A December 2011 letter informed him of his debt, and noted that it was for the period from April 19, 2003 to October 1, 2005. Additionally, the Board notes that during this appeal period the Veteran was also charged with a more than $8,000 debt, which after review from VA ended up being an accounting error related to paying his prior attorney. As that debt was levied at the same time the current debt was on appeal, it made for a rather confusing process for the Veteran and his current representative. 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. 38 C.F.R. § 1.965 (a). The decision reached should not be unduly favorable or adverse to either side. Id. The phrase equity and good conscience means arriving at a fair decision between the obligor and the government. Id. In making this determination of whether recovery would be against equity and good conscience, consideration will be given to the following elements, which are not intended to be all inclusive: (1) fault of the debtor; (2) balancing of faults between debtor and VA; (3) undue hardship; (4) whether collection would defeat the purpose of the benefit; (5) unjust enrichment; and (6) whether the debtor changed position to his own detriment through reliance on the benefit. Id.; see Ridings v. Brown, 6 Vet. App. 544, 546 (1994). A waiver of recovery of an overpayment or the collection of any indebtedness under the standard of equity and good conscience is prohibited where any one of the following is found to exist: (1) fraud, (2) misrepresentation, or (3) bad faith. 38 U.S.C. § 5302; 38 C.F.R. §§ 1.963 (a), 1.962(b), 1.965(b). Consequently, before the Board may determine whether waiver is warranted, there must be a threshold finding as to whether fraud, misrepresentation, or bad faith on the Veteran's part led to the creation of the debt. In this case, there is no indication of fraud, misrepresentation, or bad faith on the Veteran's part. Therefore, waiver of indebtedness is not precluded. See 38 U.S.C. § 5302; 38 C.F.R. §§ 1.963, 1.965. The Board finds that recoupment of any portion of the debt would be against the standard of equity and good conscience. The first factor requires consideration of the fault of the debtor, which is defined as actions of the debtor that contribute to the creation of the debt. 38 C.F.R. § 1.965 (a). The Veteran's fault was negligible. While he may have had constructive notice of the law barring concurrent Chapter 35 DEA benefits and dependency compensation for the same child, he has provided credible testimony that he was unaware of this law and thus unaware that he was not entitled to continued dependency compensation on behalf of "J." Moreover, as discussed above, he was never properly notified that he must not continue to claim his "J" as a dependent for increased compensation purposes, and must return any erroneous awards of dependency compensation made on his behalf. Indeed, the Veteran did not do anything that contributed to creation of the debt other than submit reports of school attendance for "J," one of which was submitted prior to the grant of Chapter 35 benefits (April 2003), and the second was submitted within the same week of "J's" application for Chapter 35 benefits (April 2004). The RO should have been on notice that dependency compensation was no longer warranted and timely discontinued payments without regard to these school reports. Indeed, if it were not for the Veteran's imputed or constructive knowledge of the bar to duplicate benefits, the debt would not be considered valid in the first place given the fact that it was a result of VA's administrative error unrelated to any commission or omission of the Veteran. The second factor, balancing of faults, entails the weighing of fault of the debtor against VA's fault. Id. As discussed above, the onus was on VA to know of its own award of Chapter 35 benefits, including by proper communication of the award by the RPO that granted it to the RO having jurisdiction of the claims file in accordance with official VA procedure, and then to immediately discontinue dependency compensation for "J" and notify the Veteran of any amount of overpayment stemming from the retroactive grant. It was also by far easier for VA to discontinue the dependency compensation payments rather than for the Veteran to learn of them and try to return them, especially as he had no knowledge of the bar to dual benefits in the first place. Thus, when balancing the faults between the debtor and VA, the Board finds that the Veteran's fault was negligible, while VA's fault in the creation of the overpayment was considerable and inexcusable. It thus greatly outweighs any fault that may be attributed to the Veteran. These first two factors overwhelm all the others. In this regard, the Board finds that the factors set forth in 38 C.F.R. § 1.965(a) need not be viewed in a vacuum, but in relation to each other. One or more factors may increase or decrease in weight depending on the findings pertaining to other factors. In this case, given the fact that VA's fault in the creation of the debt greatly outweighs that of the Veteran, which was negligible or nonexistent, factors such as undue hardship, whether collection would defeat the purpose of the benefit, unjust enrichment, and relying on VA benefits to one's detriment, which do not generally favor the Veteran, cannot alter the conclusion that collection of the debt would be against equity and good conscience in this case. As noted above, these factors are not all inclusive. The Board finds that another consideration is that the debt amounted to a considerable sum, over $5,000.00, which was suddenly sprung on the Veteran due to the RO's failure to timely discontinue dependency compensation benefits. Although it may not deprive the Veteran or his family of basic necessities to collect the debt, it would nevertheless be against equity and good conscience for the Veteran to have to repay a large debt the creation of which was almost entirely the fault of VA, and which he has indicated could at least put a financial strain on him. Similarly, "enrichment" occurred only because the Veteran received a slightly higher amount of monthly compensation for several years to which he was not entitled, which cumulatively ran into thousands of dollars due to VA's failure to act in a timely manner. Indeed, it may be that the burden placed on the Veteran in recouping the debt is more unjust than his "enrichment" under these circumstances. Accordingly, a waiver of the entire amount of overpayment created by payments of dependency compensation on behalf of the Veteran's son "J" from April 19, 2003 through October 1, 2005 is granted. See 38 C.F.R. § 1.965. ORDER The debt resulting from an overpayment of benefits due to the award of dependency compensation on behalf of the Veteran's son "J" from April 19, 2003 to October 1, 2005, concurrent with Chapter 35 DEA benefits, is valid. A waiver of the entire amount of overpayment, $5,962.80, is granted. ____________________________________________ G.A. Wasik Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs