Citation Nr: 18145884 Decision Date: 10/30/18 Archive Date: 10/30/18 DOCKET NO. 15-12 152 DATE: October 30, 2018 ORDER Waiver of recovery of overpayment for nonservice-connected pension benefits in the amount of $4,272.00 is denied. FINDINGS OF FACT 1. The nonservice-connected pension benefits debt of $4,272.00 was created due to the RO’s delay in acknowledging the Veteran’s timely reported change in financial status; however, the Veteran continued to accept VA pension payments during that period with knowledge that he was not entitled to the higher amount. 2. The Veteran is not shown to have committed fraud, misrepresentation, or bad faith in the creation of the overpayment; however, the recovery of this payment would not be against the standards of equity and good conscious. CONCLUSION OF LAW The criteria for waiver of recovery of the overpayment of nonservice-connected pension benefits in the amount in the amount of $4,272.00 have not been met. 38 U.S.C. §§ 5107, 5302 (2012); 38 C.F.R. §§ 1.911, 1.963, 1.965 (2017). REASONS AND BASES FOR FINDINGS AND CONCLUSION This matter comes to the Board of Veterans’ Appeals (Board) from a November 2014 decision of the VA Debt Management Center, Committee of Waivers and Compromises, which denied waiver of a debt of $4,272.00 for overpayment of nonservice-connected pension. There has been some question regarding the Veteran’s representation in this case. The Veteran has not executed a VA Form 21-22 (Appointment of Veterans Service Organization as Claimant’s Representative). However, in July 2018, the American Legion submitted a written brief on the Veteran’s behalf. In August and September 2018, the Board sent the Veteran a letter to the address on file requesting that he clarify his representative. However, both letters were returned as undeliverable, with the last marked that the Veteran was no longer at that address. The Board notes that the duty to assist is not always a one-way street and the Veteran is obliged to notify the VA of any updates to his mailing address. Wood v. Derwinski, 1 Vet. App. 190, 193 (1991). As the Veteran has not executed a VA Form 21-22, the Veteran is considered to have proceeded unrepresented. Overpayment Entitlement to waiver of the recovery of an overpayment of VA nonservice-connected pension benefits in the amount of $4,272.00. The Veteran contends that he upheld his responsibility by notifying VA on July 22, 2013, that he received a settlement from a lawsuit on July 12, 2013, in the amount of $64,900. He asserts that VA was at fault for the creation of the debt, as it took until May 21, 2014, for VA to adjust his income. The Veteran also contends that he has a very limited income and he should not be penalized for VA not being able to process a reported change of income in a timely manner. He further argues that the debt should be waived as he was not unjustly enriched by the overpayment and that recoupment would defeat the purpose of his pension. 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; 38 C.F.R. § 1.962. Applicable to pension benefits, the monthly rate of pension payable to a beneficiary shall be computed by reducing the beneficiary’s applicable maximum pension rate by the beneficiary’s countable income, which includes compensation paid by the Social Security Administration (SSA). 38 C.F.R. §§ 3.271(g), 3.273. The preliminary determination in this appeal concerns the validity of the debt. See Schaper v. Derwinski, 1 Vet. App. 430 (1991). A debtor may dispute the amount or existence of a debt, which is a right that may be exercised separately from a request for waiver or at the same time. See 38 C.F.R. § 1.911(c)(1); see also VAOPGCPREC 6-98. The propriety and amount of the overpayment at issue are matters that are integral to a waiver determination. See Schaper, 1 Vet. App. at 434. In order for the Board to determine that an overpayment was not properly created, thereby invalidating the debt, the record must establish the Veteran was legally entitled to the benefits in question or, if he was not legally entitled, then it must be shown that VA was solely responsible for the Veteran being erroneously paid pension benefits. Administrative errors include all administrative decisions of entitlement, whether based upon mistake of fact, misunderstanding of controlling regulations or instructions, or misapplication of law. VAOPGPREC 2-90 (July 17, 1989), 55 Fed. Reg. 27,757 (1990). Sole administrative error connotes the Veteran neither had knowledge of, nor should have been aware of, the erroneous award. Further, neither the Veteran’s actions nor his failure to act must have contributed to payment pursuant to the erroneous award. 38 U.S.C. § 5112(b) (9), (10); 38 C.F.R. § 3.500(b)(2); Jordan v. Brown, 10 Vet. App. 171 (1997) (sole administrative error is not present if the payee knew, or should have known, that the payments were erroneous). An administrative error resulting in an overpayment will not be classified as a 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 v. McDonald, 27 Vet. App. 362, 380 (2015) (citing 38 U.S.C. § 5112(b)(9); see 38 C.F.R. § 3.500(b)(1); VAOGC Prec. 2-90 (Mar. 20, 1990)). 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. VA’s policy that running awards consisting of recurring monthly payments made as a result of VA administrative error do not create overpayments or valid debts and that VA administrative error must be considered even where the initial award or entitlement to benefits itself was not the result of administrative error. A valid debt is created if a veteran had knowledge that his or her compensation benefits would change with changes in their status, and they continued to accept the amount of compensation benefits direct deposited into their bank account. See Dent, 27 Vet. App. at 384. In this case, the Veteran has been awarded nonservice-connected pension benefits. In December 2012, an annual letter was sent to the Veteran informing him that the rate of VA pension depends on total “family” income, which include the payee’s income and that of any dependents. The letter also noted that VA must adjust the payments whenever this income changes and that he must notify VA right away if income is received from any source other than that shown above or any changes in the income shown above. On July 22, 2013, the Veteran submitted written notification of a lawsuit settlement in the amount of $64,900 on July 12, 2013, and asked that his pension be adjusted accordingly and reinstated when the settlement income was no longer considered. In a December 2013 letter, the RO notified the Veteran that his disability pension award was amended based on cost of living adjustments, but did not include the settlement amount in the list of income considered. In June 2014, the RO notified the Veteran that as a result of the change in entitlement to Compensation and Pension benefits, he was paid $4,272.00 more than he was entitled to receive. As noted above, VA had notice of the Veteran’s lawsuit settlement in July 2013. Nonetheless, the Veteran was also aware that the amount of his pension benefits would change; and, to his credit, he took appropriate action to inform VA. Sole administrative error, however, entails no knowledge or fault on the part of the debtor. See Jordan, 10 Vet. App. 171. In addition, the U.S. Court of Appeals for Veterans Claims has held that a valid debt is created if a veteran had knowledge that his or her compensation benefits would change with changes in their status and they continued to accept the amount of compensation benefits direct deposited into their bank account. See Dent, 27 Vet. App. at 384. The elapsed time between VA’s receipt of notice in July 2013 and its response in June 2014 does not change the fact the Veteran had knowledge that he was not entitled to the full amount of nonservice-connected pension benefits that he continued to receive after he received the lawsuit settlement, nor does it mitigate his responsibility. Thus, the Board finds the creation of the overpayment was valid. The Board will now turn to the issue of entitlement to a waiver of the recovery of the $4,272.00 overpayment that was properly created. An overpayment is created when VA determines that a beneficiary or payee has received monetary benefits to which he or she is not entitled. 38 U.S.C. § 5302; 38 C.F.R. § 1.962. An overpayment may arise from virtually any benefits program administered pursuant to VA law, including pension, compensation, dependency and indemnity compensation, education educational assistance benefits and subsistence allowance, insurance benefits, burial and plot allowances, clothing allowance, and automobile or other conveyance and adaptive equipment allowances. 38 C.F.R. § 1.956(a). Recovery of overpayment of any benefits made under laws administered by VA may be waived if there is no indication of fraud, misrepresentation, or bad faith on the part of the person or persons having an interest in obtaining the waiver. 38 U.S.C. § 5302(c); 38 C.F.R. § 1.963(a). If there is no indication of fraud, misrepresentation, or bad faith in the record, the indebtedness shall be waived if the recovery of the overpayment would be against equity and good conscience. 38 U.S.C. § 5301(a); 38 C.F.R. §§ 1.962, 1.965. VA regulations define “bad faith” as unfair or deceptive dealing by one who seeks to gain thereby at another’s expense. Thus, a debtor’s conduct in connection with a debt arising from participation in a VA benefits/services program 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. 38 C.F.R. § 1.965(b). Consideration of equity and good conscience is intended to reach a result that is not unduly favorable or adverse to either the claimant or the Government. It is intended to achieve a result that is fair. 38 C.F.R. § 1.965(a). Six non-exclusive elements are set forth in the regulations that must be addressed to determine whether the facts and circumstances in a particular case dictate that collection of an overpayment would be against equity and good conscience. The six non-exclusive elements consist of: (1) the fault of the debtor; (2) balancing of faults between the debtor and VA; (3) undue hardship of collection on the debtor; (4) a defeat of the purpose of an existing benefit to the veteran; (5) the unjust enrichment of the veteran; and (6) whether the veteran changed positions to his/her detriment in reliance upon a granted VA benefit. 38 U.S.C. § 5302; 38 C.F.R. § 1.965(a). Each of the six elements must be addressed. See Ridings v. Brown, 6 Vet. App. 544, 546 (1994) (holding that VA must address all relevant factors in determining whether to exercise its equitable discretion in a waiver of indebtedness claim). In this case, the Board finds no evidence of fraud, misrepresentation, or bad faith. The Veteran informed VA that he had received a lawsuit settlement within two weeks of receiving the settlement. The remaining consideration is whether recovery of the indebtedness would be against equity and good conscience. As noted above, when considering whether recovery of the debt would be against equity and good conscious consideration is given to the following six elements: (1) fault of debtor, (2) balancing of fault, (3) undue hardship, (4) defeat the purpose of the debt, (5) unjust enrichment, and (6) changing position to one’s detriment. 38 C.F.R. § 1.965(a). After review of the evidence of record, there are elements both in favor of and against granting a waiver of the validly created overpayment. It was the Veteran’s responsibility to report all changes to his income with respect to receiving nonservice-connected pension benefits. The Veteran timely informed VA that he had received a settlement from a lawsuit and the amount he had received. The Veteran’s actions of accepting the same amount as prior to receipt of the settlement, despite his report of his change in income, contributed to the creation of the debt and showed some fault on his behalf. VA was also at fault in the creation of the debt due to the delay of approximately 11 months in processing the Veteran’s timely report of a change in financial situation. There is no indication that the Veteran was notified that he should return the money that he received at the higher amount, and the Veteran fulfilled the legal requirements to report his change in income in an attempt to avoid an overpayment. Thus, the Board finds that VA’s fault carries more weight than the Veteran’s fault in this case. With respect to whether the Veteran would be subjected to undue hardship if the debt were recovered, the Board notes that undue hardship is based on the consideration of whether the collection would deprive the debtor or family of basic necessities. The Veteran had not contended that repayment of the debt would create undue hardship. Rather, he stated that he believed he was entitled to the benefits he received because of his low income and because the RO found that he was not at fault for the creation of the debt. He further stated that while he has money from the settlement, it will not last long. A financial status report submitted in July 2014 shows that the Veteran was unemployed due to age. He reported that his only income was Social Security in the amount of $615.00. He reported assets of $67,000.00 in his bank account. His total monthly expenditures for living expenses was $1,002.00. Based on the foregoing, the Board finds that the evidence does not show that payment of this debt would cause undue hardship. The recovery of benefits would not defeat the purpose of VA pension benefits, which is to provide a subsistence income for a permanently disabled Veteran who is otherwise unable to maintain a basic, minimal income level. While the Veteran’s monthly expenses exceed his income, due to the amount of the Veteran’s reported assets, his ability to provide for the basic necessities would not be seriously impaired. Also for consideration is whether a waiver of overpayment would cause “unjust enrichment” (i.e., whether failure to make restitution would result in unfair gain). In this case, if VA waived the overpayment, the Veteran would keep VA nonservice-connected pension benefits to which he was not legally entitled. Thus, the failure of VA to insist upon its right to repayment of the assessed overpayment would result in unjust enrichment of the Veteran. The last element to be considered is whether reliance on VA benefits resulted in a veteran relinquishing a valuable right or incurring a legal obligation. The Veteran has not claimed that he relinquished any right or incurred any legal obligation or that he relied upon VA to his detriment, nor do the facts show such. Furthermore, the record does not demonstrate any additional factors which should be considered in adjudicating the claim for a waiver of the indebtedness, and the Veteran has not identified any other factors. Considering all of the above, the Board finds that recovery of the debt for over payment of nonservice-connected pension benefits in the amount of $4,272.00 would not be against the standards of equity and good conscience. (continued on next page)   Although it has been shown that VA is more at fault for the creation of the debt, the Veteran is, in part, at fault for creating the overpayment by not returning a portion of his nonservice-connected pension benefits. Furthermore, full recovery of the debt would not defeat the purposes for which the benefits were intended and the Veteran has not shown that recovery of the debt would result in undue hardship. Therefore, a waiver of this debt is denied. 38 C.F.R. §§ 1.962, 1.965. K. PARAKKAL Veterans Law Judge Board of Veterans’ Appeals ATTORNEY FOR THE BOARD S. Owen, Associate Counsel