Citation Nr: 18140279 Decision Date: 10/02/18 Archive Date: 10/02/18 DOCKET NO. 16-23 176 DATE: October 2, 2018 ORDER The claim of entitlement to a waiver of a debt of $42,131.00 incurred for the termination of the Dependency and Indemnity Compensation (DIC) benefits from March 1, 2008, to April 1, 2011, due to the Appellant’s remarriage as invalid is denied. FINDING OF FACT 1. The Appellant was notified in December 2007 that DIC benefits would be discontinued upon remarriage. 2. In June 2008, the Appellant submitted written correspondence notifying VA that she remarried in March 2008. A copy of her marriage certificate was attached to the correspondence. VA failed to take immediate action to terminate the benefits award. 3. In November 2008, the Appellant contacted VA, by phone, to report that she had remarried. She referenced prior notification the change in her marital status, however, she continued to receive benefits payments. 4. In the same call, the Appellant acknowledged that VA representatives previously advised that repayment of the improperly received benefits would be required; however, she denied responsibility for their repayment. 5. In December 2008, an internal note indicated that the cancellation process had begun and confirmation would be forwarded to the Appellant. Despite the aforementioned; the Appellant continued to receive benefits. 6. In December 2013, a VA received Marital Status Questionnaire from the Appellate in which she indicated that she remarried in March 2008 and divorced in March 2011. 7. While married to another individual that was not the Veteran, the appellant was in receipt of $42,131.00 in DIC benefits from March 1, 2008, through April 1, 2011. 8. The evidence shows that the Appellant created this debt by knowingly accepting and/or failing to return DIC benefits to which she was not entitled. 9. Repayment of the overpayment debt would not result in undue hardship to the appellant. 11. Recovery of the overpayment would not defeat the purpose of the VA DIC benefits program and repayment would not be against equity and good conscience. 12. Waiver of the overpayment would result in unjust enrichment to the Appellant, at the expense of the government. CONCLUSION OF LAW The criteria for establishing entitlement to waiver of a debt of $42,131.00 incurred for the termination of the Dependency and Indemnity Compensation (DIC) from March 1, 2008 to April 1, 2011 due to your remarriage have not been met. 38 U.S.C. §§ 101 (3), 103, 5107, 5302 (West 2014); 38 C.F.R. §§ 1.963a, 1.965, 3.5, 3.55 (2018). REASONS AND BASES FOR FINDING AND CONCLUSION The Veteran served on active duty with the United States Navy from August 2003 to November 2005. He passed away in November 2005. The appellant is his surviving spouse. Duty to Assist and to Notify The duties to notify and assist as set forth in the Veterans Claims Assistance Act of 2000 (VCAA) do not apply to cases involving the waiver of recovery of overpayment. Barger v. Principi, 16 Vet. App. 132 (2002). 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). Therefore, appellate review may proceed without prejudice to the Appellant. See Bernard v. Brown, 4 Vet. App. 384 (1993). 1. Entitlement to waiver of a debt of $42,131 incurred for the termination of the Dependency and Indemnity Compensation (DIC) from March 1, 2008, to April 1, 2011, due to your remarriage as valid 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 (2018). The debtor may challenge the validity or amount of the debt owed. See 38 C.F.R. § 1.911 (c)(1) (2018); 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 (West 2014); 38 C.F.R. §§ 1.911 (c)(2), 1.963 (2018). Before addressing whether waiver of recovery of overpayment is warranted, the Board must initially determine whether the overpayment was validly created. A recipient of VA benefits has the responsibility to notify VA of all circumstances that will affect entitlement to receive the rate of the benefit being paid, and such notice must be provided when the recipient acquires knowledge that his or her income, or other circumstances which would affect the entitlement to receive, or the rate of the benefit being paid, have changed. 38 C.F.R. § 3.660 (a)(1) (2018). A beneficiary is charged with knowing the rules governing compensation. Dent v. McDonald, 27 Vet. App. 362, 382 (2015); see also Jordan v. Brown, 10 Vet. App. 171, 174-75 (1997) (holding that even though VA was at fault for continuing to pay the appellant’s DIC benefits after having constructive notice that a remarriage may have occurred, such VA error does not excuse the continued acceptance of DIC payments where the appellant was in receipt of the rules governing such compensation). Knowledge is defined as “[a]n awareness or understanding of a fact or circumstance; a state of mind in which a person has no substantial doubt about the existence of a fact.” Black’s Law Dictionary at 950. A person may have actual or constructive knowledge of a fact, the latter of which is defined as “[k]nowledge 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. Further, actual knowledge is defined as “[d]irect and clear knowledge; [k]knowledge of such information as would lead a reasonable person to inquire further.” Black’s Law Dictionary, 876 (7th ed. 1999). The Court has “held that the appellant [is] responsible for reading the applicable regulations governing DIC compensation … and that any checks received after [the appellant] remarried were to be returned to VA …”. See Dent, 27 Vet. App. at 382 (citing Jordan, 10 Vet. App. 174-75). An overpayment, resulting from an administrative error, will not be classified as VA administrative error or error in judgment, if the error is “based on an act of commission or omission by the beneficiary, or with the beneficiary’s knowledge.” Dent, 27 Vet. App. at 380 (citing 38 U.S.C. § 5112 (b)(9) (West 2014)); see also 38 C.F.R. § 3.500 (b)(1) (2018); VAOPGREC 2-90 (March 20, 1990). A finding of sole administrative error means that the claimant neither had knowledge of nor should have been aware of the erroneous award. 38 U.S.C. § 5112 (b)(9), (10) (West 2014); 38 C.F.R. § 3.500 (b)(2) (2018); Jordan, 10 Vet. App. at 171 (finding that sole administrative error is not present if the payee knew, or should have known, that the payments were erroneous). Further, neither the claimant’s actions nor his or her failure to act must have contributed to payment pursuant to the erroneous award. Id. Thus, a finding of sole administrative error requires not only error on the part of VA, but that the beneficiary is unaware that the payments are erroneous. It is not considered administrative error for VA to continue sending monthly payments after the appellant notified VA of her changed status, and VA’s delay in administratively processing the adjustment to the rate of compensation is also not considered administrative error. Dent, 27 Vet. App. at 384. Recovery of an overpayment may be waived if (1) there is no indication of fraud, misrepresentation, or bad faith, on the part of the person having an interest in obtaining the waiver, and (2) recovery of such indebtedness would be against equity and good conscience. See 38 U.S.C. § 5302 (c) (West 2014); 38 C.F.R. §§ 1.962, 1.963 (2018). In the absence of fraud, misrepresentation, or bad faith, consideration may be given as to whether recovery of the overpayment would be against equity and good conscience. The standard “equity and good conscience” will be applied when the facts and circumstances in a 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) the fault of the debtor; (2) balancing of faults between the debtor and the VA; (3) undue hardship of collection on the debtor; (4) whether collection would defeat the purpose of an existing benefit; (5) whether failure to collect a debt would result in the unjust enrichment of the debtor; and (6) whether the debtor changed positions to his or her detriment in reliance upon a granted VA benefit. 38 U.S.C. § 5302 (West 2014); 38 C.F.R. § 1.965 (a) (2018); see Ridings v. Brown, 6 Vet. App. 544, 546 (1994). In this case, the Veteran passed away in November 2005. His surviving spouse, the appellant, subsequently filed a claim for DIC benefits in December 2005. A VA Form 21-8947 (Compensation and Pension Award), dated December 2005, is associated with the claims file. In a December 2007 correspondence, VA notified the Appellant of the rate of compensation for her grant of DIC benefits and advised her of the obligation to report any change in marital status. The record also reflects that the appellant remarried in March 2008, and she has not disputed this fact. The Appellant notified VA in writing in June 2008 and again by phone in November 2008, to confirm notification of remarriage. A copy of her marriage certificate was included with June 2008. (See June 2008 Written Correspondence, see also November 2008 IRIS Inquiry, January 2014 Notice of Disagreement, May 2016 VA Form 9.) In May 2014, a Decision on Waiver of Indebtedness denied the Appellant’s request for waiver. The decision noted that the Appellant is a widow of a Gulf War Veteran who received DIC benefits. In July 2008, the Appellant notified VA that she remarried in March 2008 and to stop payment. The payments continued; however, there is no evidence that the Appellant returned any of the payments received in error. In December 2008, an IRIS inquiry noted that a request for termination of DIC benefits was submitted. In December 2013, the Appellant submitted a Martial Status Questionnaire reporting her remarriage in March 2008 and divorce in March 2011. In the same month, VA issued an award terminating the Appellant’s DIC benefits effective March 2008 through March 2011 due to remarriage. In January 2014, VA notified the Appellant that her DIC benefits effective March 2008 through March 2011 were terminated due to remarriage and that the payments received during the stated timeframe had resulted in an overpayment. In January 2014, the VA Debt Management Center notified the Appellant that due to the overpayment, she had incurred a debt of $42,131.00. In the same month, the Appellant submitted a request for waiver listing monthly income of $2,594.69 and monthly expenses of $1,837.00. She stated that she has $20.00 in her bank account, $5.00 in cash, and a car valued at $12,000.00. She requested a repayment plan of $200.00. In May 2014, the Committee on Waivers and Compromises denied the Appellant’s request for waiver. It acknowledged that the debt was created because the Appellant remarried in 2008; however, her DIC benefits were not adjusted until December 2013. Although the Committee found some fault on VA as the Appellant’s benefits were not immediately adjusted following notification of remarriage, fault was also found with the Appellant as she was aware that her entitlement to DIC benefits concluded upon remarriage. Further, there is no evidence that she returned the payments received in error. Despite notification from the Federal Government and a clear demonstration of understanding the law associated with DIC benefits (as shown by the appellant’s notification to VA that she had in fact remarried and requested to terminate benefits), the appellant continued to keep money and not return any benefits sent to her by the Federal Government in error. Review of the Appellant’s financial status shows that collection of the debt would not impair her ability to provide for her basic necessities. Therefore, no evidence of undue hardship has been revealed. Similarly, as the Appellant was not entitled to DIC benefits after remarriage, failure to make restitution would result in unjust enrichment at the expense of the Government. Thus, collection of the debt would not defeat the purpose of the initial grant of DIC benefits. As discussed above, in its January 2014 decision, the Board determined that the debt in the amount of $42,131.00, which resulted from an overpayment of DIC spousal benefits, was valid. Additionally, as the overpayment did not result solely from VA’s administrative error, the Board further determined that the overpayment was properly created. Therefore, the Board must now address whether waiver of recovery of the overpayment of DIC benefits is warranted. As previously indicated, if there is an indication of fraud, misrepresentation or bad faith in the creation of the overpayment, waiver of the overpayment is automatically precluded, and further analysis is not warranted. See 38 U.S.C. § 5302 (West 2014); 38 C.F.R. §§ 1.962, 1.963(a), 1.965(b) (2018). The Board recognizes that the Committee made no specific determination as to whether the Appellant acted in bad faith in creating the overpayment. It is, however, the Board’s responsibility to consider the matter of bad faith on a de novo basis. 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) (2018). Although the Appellant reported her remarriage in November 2008 and on multiple occasions thereafter, VA failed to terminate or adjust her benefit payments. Nonetheless, benefits were accepted for a number of years without an attempt to return the funds to the Federal Government – despite having demonstrated knowledge that these benefits were not warranted. On review of the record, the Board finds that repayment of the Appellant’s indebtedness would not violate principles of equity and good conscience, and waiver of the overpayment is not warranted. The first two elements for consideration under 38 C.F.R. § 1.965 (a) are the fault of the debtor, and balancing the fault of the debtor and VA. The Board recognizes that VA bore some fault in the creation of the overpayment as the Appellant notified VA of her remarriage in 2008, yet there was a significant delay before the appropriate reduction of monthly compensation benefits was implemented. Nevertheless, as a matter of law, the Appellant was ineligible to receive DIC benefits as she was no longer the unmarried surviving spouse of the Veteran. Review of the record shows that the appellant had constructive notice of her obligation to report her remarriage and that her entitlement to benefits terminated. Although the record reflects that she provided notice of her remarriage on multiple occasions, the appellant failed to return any of the payments she received in error. In a IRIS inquiry, dated November 2008, the appellant acknowledged her subjective belief that restitution was not required as she notified VA, on multiple occasions, that she remarried. In balancing faults, the Board finds that the appellant bore more fault as she had constructive knowledge that her entitlement to benefits had concluded; nonetheless, she failed to return payments received thereafter. As to the element of undue financial hardship, the regulation provides that consideration should be given to whether collection of the indebtedness would deprive the debtor or his/her family of the basic-necessities of life. In this case, the Board finds that no deprivation would result for the appellant’s repayment of the debt. In her request for waiver, the appellant reported monthly income of $2,594.69 and monthly expenses of 1,837.00. Her monthly income exceeds her monthly expenses by $757.69. Therefore, undue hardship would not result from repayment. The Board finds that recovery of the overpayment would not defeat the purpose of VA’s DIC benefits program. Notably, DIC benefits are only available to unmarried surviving spouses. As the appellant received benefits during a period in which she did not meet the above referenced criteria, recovery is the appropriate remedy. Moreover, the record shows that the appellant was unjustly enriched by receipt of benefits to which she was not entitled and she made minimal efforts to remediate the error. In sum, the issue is not a failure to notify VA of a remarriage – rather, the acceptance of funds that were known to be unwarranted. Accordingly, the Board finds that waiver of the $42,131.00 is not warranted as the record does not reflect that recovery is against equity and good conscience. Further, the Appellant’s failure to repay the debt would result in unjust enrichment at the government’s expense. B. MULLINS Veterans Law Judge Board of Veterans’ Appeals ATTORNEY FOR THE BOARD N. Whitaker, Associate Counsel