Citation Nr: 18138215 Decision Date: 09/25/18 Archive Date: 09/25/18 DOCKET NO. 15-19 928A DATE: September 25, 2018 ORDER Waiver of overpayment of spousal dependency benefits following the Veteran’s divorce, in the amount of $4,852, is granted. FINDINGS OF FACT 1. The Veteran and his wife divorced in March 2012. 2. The Veteran notified VA of his impending divorce in August 2011, that the divorce had occurred in May 2012, September 2013, and August 2014. 3. The VA took no action to remove the Veteran’s spousal dependency allowance until November 2014, thereby causing an overpayment calculated in the amount of $4,852. 4. It would be against the standard of equity and good conscience to require the Veteran to repay this overpayment debt. CONCLUSION OF LAW The criteria for waiver of overpayment in the amount of $4,852 have been met. 38 U.S.C. § 5301, 5302; 38 C.F.R. §§ 1.962, 1,963, 1.965. REASONS AND BASES FOR FINDINGS AND CONCLUSION The Veteran served on active duty from November 1985 to March 1991, when he was transferred to the Temporary Disabled Retired List. The Veteran and his former wife were married in April 1986. Following his discharge from service, the VA granted service connection for various disabilities related to impairment sustained during an automobile accident during service. The combined disability rating was 50 percent. The June 1991 notification letter informing him of this grant also requested that he submit a copy of his marriage certificate. He did so and an August 1991 letter from VA informed him that his compensation benefits had been increased to encompass a spousal dependency benefit. His combined disability rating was later increased to 100 percent plus special monthly compensation. In August 2011 the Veteran wrote the VA to inform that 1) he was filing for divorce, 2) he had a new address, and 3) he had a new bank account. The RO made the changes requested regarding the new address and the new bank account. However, the RO attempted to call the Veteran about the divorce situation in January 2012. The report of this unsuccessful phone call reads, “Unable to reach claimant. If he calls tell him that I cannot remove spouse from award unless he has a divorce decree.” Later the same month, the RO wrote the Veteran, acknowledging his statement that he was separated. The relevant part of the letter informed him, “We will consider that you remain separated as of July 26, 2011. Your compensation payment will continue unchanged. Please let us know if and when you are divorced. Please note: the court papers have to be filed before the divorce is final. The date filed is the date of the divorce.” The letter included a standard pre-printed form containing information about how he could appeal the decision if he wished to do so. In May 2012, the Veteran again wrote the VA, to inform that he had divorced his wife in March 2012. He specified, “I wish the VA to remove her from my VA benefits.” It appears that the VA took no action in response to this letter. The Veteran wrote again in September 2013, this time submitting a “Declaration of Status of Dependents” Form, on which he noted that he had married his wife in April 1985 and divorced in July 2011. In an accompanying statement, he wrote, “I am letting the VA know that I am divorce and I reported this to the VA in May 2012. I am still getting paid as a married Veteran…” Again, the VA took no action in response to this letter. In August 2014, the Veteran submitted a copy of his divorce decree, showing that they were divorced in March 2012. He also resubmitted copies of his May 2012 request, and noted that the VA was still paying him as married Veteran. In November 2014, the VA removed the Veteran’s former wife from his VA award and recalculated his payment amounts since the March 2012 divorce. A letter notified him that this action would result in an overpayment, which he would have to repay. The VA’s Debt Management Center calculated the amount of the debt as $4,852, and notified the Veteran the same month. The Veteran filed a timely request for a waiver of the debt in February 2015, asserting that he had notified the VA of his divorce and that he had not misled or deceived the VA in any way with regard to the spousal dependency allowance. The Committee on Waivers and Compromises (COWC) denied the waiver in March 2015, on the basis that the Veteran had been asked for a copy of his divorce decree, but had not submitted it until August 2014. In the Veteran’s notice of disagreement and again in his substantive appeal, he correctly pointed out that he had not been specifically asked for a copy of his divorce decree, and that he would have submitted it if he had been asked. He asserted that he bore no fault in the creation of the debt and also that the VA should remember he suffers from post-traumatic stress disorder and traumatic brain injury in its analysis of his waiver request. The preliminary issue of the validity of a debt is a threshold determination that must be made in a benefits overpayment debt collection matter. Schaper v. Derwinski, 1 Vet. App. 430 (1991). 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. Regarding the issue of the validity of the debt, an additional amount of compensation may be payable for a spouse, child, and/or dependent parent where a veteran is entitled to compensation based on disability evaluated as 30 percent or more disabling. 38 C.F.R. § 3.4 (b)(2). An effective date of the award of any benefit or any increase therein by reason of marriage shall be effective from the latest of the following dates: (1) date of claim, meaning the following, listed in their order of applicability: (i) date of veteran’s marriage, or birth of his or her child, or, adoption of a child, if the evidence of the event is received within 1 year of the event; otherwise; (ii) date notice is received of the dependent’s existence, if evidence is received within 1 year of VA’s request; (2) date dependency arises; (3) effective date of the qualifying disability rating provided evidence of dependency is received within 1 year of notification of such rating action; or (4) date of commencement of veteran’s award. 38 C.F.R. § 3.401(b). If a veteran and his or her spouse divorce, the veteran’s VA compensation award is reduced by the amount that was being paid on behalf of the dependent spouse. The effective date of discontinuance of the spousal compensation allowance, for divorce or annulment, is the last day of the month in which the divorce or annulment occurred. 38 U.S.C. § 5112(b)(2); 38 C.F.R. § 3.501(d)(2). In this case, the Veteran was paid a spousal dependency allowance for twenty-eight months after his divorce, before the VA finally stopped paying the spousal allowance. Thus, the Veteran received money to which he was not entitled. He has not challenged the calculation of the debt in the amount of $4,852. 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 Committee on Waivers and Compromise found no evidence of fraud, misrepresentation, or bad faith. The Board agrees with this determination. The remaining consideration is whether recovery of the indebtedness would be against equity and good conscience. The first element is the fault of debtor. In this case, the Board perceives very little fault on the part of the Veteran in the creation of the debt. He notified the VA prior to his divorce and again two months after the divorce. He again wrote the VA in September 2013; the fact that he misremembered the date of his wedding and his divorce does not alter the fact that he reached out to VA at that point. He tried a third time in August 2014, submitting the copy of the divorce degree at that time. With regard to the second element, balancing the faults, the Board finds that the fault is evenly balanced. The VA attempted to phone the Veteran about the need to submit the divorce decree, and they were unable to reach him. The Veteran holds some fault for not submitting his actual divorce decree. Nonetheless, the Veteran continued to attempt to notify VA of his divorce by letters in May 2012 and again in September 2013, with no response whatsoever. Thus, it is clear that the Veteran did not understand the need for the actual divorce certificate which could have been clarified by VA. The third element is whether repaying the debt would cause undue hardship to the Veteran or his family by depriving them of basic necessities. Review of the financial statements submitted by the Veteran shows that he reports greater monthly income than expenses. The statements appear to be minimal, however, and possibly incomplete, as he reports very few expenses. Other evidence contained in the claims file indicates that during the time period at issue he had at least one child in college, presumably with associated expenses, and another child in high school. The evidence does not establish, however, any undue financial hardship involved in repaying this debt. It appears, in fact, that the debt has already been recouped from the Veteran’s monthly VA compensation payments. The Veteran has not contended that recoupment caused hardship; rather he is contending it is unfair to recoup the debt, as he believes he had no fault in creating the debt. Regarding a different kind of hardship, his VA medical records reflect that he was hospitalized on two separate occasions in 2016 for suicidal ideation; thus, supporting his plea that VA should consider his mental health as well in this analysis. Regarding whether recovery of the overpayment would defeat the purpose for which the benefits were intended, VA awarded benefits at the rate which included an additional spousal dependent. For the time period extending from April 2012 (when he was divorced) through August 2014 (when VA implemented the reduction), he was without said dependent. As such, recovery of the overpayment would not defeat the purpose for which the benefit was intended. This is because the Veteran was not eligible to receive the benefit paid to him for a dependent spouse as he was no longer married. Also for consideration is whether a waiver of overpayment would cause unjust enrichment; whether failure to make restitution would result in unfair gain to the Veteran. As we have established, the Veteran was not married and thus not eligible to receive the spousal allowance. However, he attempted on multiple occasions to tell the VA that he was not married and that he knew he should not be receiving the spousal allowance. Thus, it can hardly be said that the resulting gain is unfair; when the Veteran made reasonable and conscientious attempts to notify VA of his changed situation. The last element to be considered is whether reliance on VA benefits resulted in the 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. The only other relevant factor to be considered is the one identified by the Veteran, that he was struggling with significant depression, PTSD and traumatic brain injury residuals at the time. Although the Board does not find these impairments to rise to the level of a finding of diminished capacity, as he seems to argue, we cannot ignore these factors, especially in light of the medical evidence showing these impairments are so significant as to have contributed to suicidal ideation on at least two occasions. Diminished capacity is not shown, because he responsibly reminded the VA on three occasions, that his divorce had finalized, prior to any action on the part of the VA. In accord with the foregoing, the Board finds that recovery of this overpayment violates the principles of equity and good conscience. In this analysis, the element of VA’s fault in the creation of the overpayment is so overwhelming that the other elements pale in comparison. After initially notifying the VA that he was about to be divorced, the Veteran notified VA two months after the divorce was final. He then provided two more notifications before VA took any action. Indeed, if the VA had responded to the Veteran’s second notice, the whole matter could have been cleared up within two or three months of the divorce being final. Instead of this reasonable administrative scenario, the VA ignored the Veteran and the situation for a period of twenty-eight months, thereby allowing the overpayment to grow to an amount in excess of $4000. The Board notes that this inaction hardly constitutes good stewardship of taxpayer dollars. We hold that waiver of the overpayment calculated in the amount of $4,852 is warranted. T. MAINELLI Veterans Law Judge Board of Veterans’ Appeals ATTORNEY FOR THE BOARD Heather J. Harter