Citation Nr: 20034067 Decision Date: 05/15/20 Archive Date: 05/15/20 DOCKET NO. 17-28 203 DATE: May 15, 2020 ORDER The termination of disability compensation based on dependency benefits beginning on June 1, 2015, was proper and the overpayment of $972.42 for the period from June 2015 through November 2015 was properly created; however, the resulting overpayment of $2,269.96, for the period from December 2015 to February 2017 was not properly created, and to that extent, the appeal is granted. FINDINGS OF FACT 1. The Veteran's spouse, S.B., was added as a dependent to the Veteran's compensation benefits effective July 1982. 2. In February 2017, the Veteran informed VA of the death of his spouse in May 2015. 3. The Veteran received $972.42 for the period from June 2015 to November 2015 when he was unmarried. 4. The Veteran received $2,269.96 in dependency compensation for the period from December 2015 to February 2017 when he was married. 5. In December 2015, the Veteran notified VA that his first wife, S.B., had died and changed his VA life insurance beneficiary to his second wife, L.B., which constitutes constructive notice to VA. 6. The retroactive reduction in compensation benefits is due, at least in part, to the Veteran's failure to timely notify VA of the change in dependency status that generated an overpayment debt in the amount of $972.42 for the period from June 2015 to November 2015. 7. The Veteran knew, or should have known, that compensation benefit payments from June 2015 to November 2015 were erroneous. 8. The overpayment debt for the period from June 2015 to November 2015 is not a result of sole administrative error. 9. The overpayment debt for the period from December 2015 to February 2017 is a result of sole administrative error. CONCLUSION OF LAW The termination of disability compensation based on dependency benefits beginning on June 1, 2015, was proper and the overpayment of $972.42 for the period from June 2015 through November 2015 was properly created; however, the resulting overpayment of $2,269.96, for the period from December 2015 to February 2017 was not properly created, as it was based solely upon VA administrative error. 38 U.S.C. §§ 5110, 5112; 38 C.F.R. §§ 3.4, 3.500, 3.501. REASONS AND BASES FOR FINDING AND CONCLUSION The Veteran served on active duty from October 1959 to November 1980. This matter comes before the Board of Veterans' Appeals (Board) on appeal from a May 2017 determination by the Department of Veterans Affairs (VA) Regional Office in Montgomery, Alabama, which determined that the debt created by overpayment of pension benefits in the amount of $3,242,38 was proper. In April 2019, the Veteran testified at a Board of Veterans' Appeals (Board) hearing before the undersigned. A transcript of the hearing is associated with the record. The Veteran's overpayment debt is due to the retroactive removal of his spouse from his VA compensation benefits due to her death in May 2015. See 38 C.F.R. § 3.4(b)(2). Historically, the Veteran has been in receipt of disability compensation benefits for various service-connected disabilities. Notification letters addressing his service-connected disabilities explained that he was receiving additional compensation benefits for his spouse, that his payments could be affected by a change in marital status, and that he was to promptly advise VA in the event of such changes. In February 2017, the Veteran informed VA that his spouse had died and submitted her May 2015 death certificate. In a February 2017 VA notification letter, the Veteran was advised that his wife was removed from his compensation benefits and that an overpayment debt was created due to the retroactive adjustment from June 2015 to December 2015, when the Veteran married L.B. The February 2017 first demand letter by the Debt Management Center (DMC) assessed a debt of $3,242,38. 1. Whether the overpayment debt of Department of Veterans Affairs (VA) disability compensation benefits in the amount of $3,242.38 resulting from a change in dependency status due to the removal of the Veteran's spouse was proper. The Veteran contests the validity of the debt that was created as a result of payment of additional compensation for his spouse, S.B., which VA has concluded the Veteran was not eligible to receive, due to his failure to notify VA of the death of his spouse in May 2015, until February 2017. The Veteran essentially argues that VA was, or should have been, aware of his divorce and remarriage in 2015 because he reported these events to the Army in 2015. The Veteran also essentially contends that the VA was at fault in the creation of the debt, an argument that can be construed to mean that he does not owe the debt because it was created due to sole administrative error. His primary contention is that he informed VA of the death of his spouse and his remarriage when he added his second wife, L.B., to his VA life insurance plan in December 2015, and that VA erroneously failed to adjust his VA pension benefits, thereby rendering the overpayment invalid. Validity of Debt 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). 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. 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); 38 C.F.R. § 3.501 (d)(2). A claimant has the right to dispute the existence and amount of the debt. 38 U.S.C. § 501; 38 C.F.R. § 1.911(c). 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 the 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. In June 2005, the RO granted service connection for a congestive heart failure disability. His combined disability rating was 100 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; 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; the veteran only needed to submit updated information about his dependents to receive it). In February 1982, the Veteran filed Declarations of Marital Status (VA Form 21-686c), in which he indicated that he was married to S.B. The letter further advised that if he was receiving compensation for his dependents he should notify the RO immediately regarding any change in his dependents. In December 2012, the Veteran filed Declarations of Status of Dependents (VA Form 21-686c), in which he indicated that he was married to S.B. The letter further advised that if he was receiving compensation for his dependents he should notify the RO immediately regarding any change in his dependents. In a notice, dated in October 2014, the RO advised him that he was receiving additional compensation for S.B.. The notification letter provided specific notice that he was receiving additional benefits for his spouse and child, and notified him that he must inform the RO immediately if there was any change in the number or status of his dependents. The notification letter states, "Let us know right away if there is any change in the status of your dependents." A failure to do so would result in an overpayment that must be repaid. On February 4, 2017, the Veteran filed Declaration of Status of Dependents (VA Form 21-686c), in which he indicated that S.B. had died in May 2015 and that he had married L.B. in December 2015. On February 12, 2017, the Montgomery RO created an overpayment of $3,242,38, the amount which covered the period between June 1, 2015 and February 1, 2017, and which reflected the change in spousal status, with cost of living adjustments. The letter informed the Veteran that the adjustment resulted in an overpayment and that he would be contacted by the VA Debt Management Center (DMC). The amount of the overpayment was determined to be $3,242.38, which was calculated on the amount of additional compensation benefits the Veteran received beginning June 1, 2015, the first day following the death of S.B., in May 2015, in accordance with 38 C.F.R. § 3.500, and continuing through January 31, 2017, after which time the Veteran's compensation benefits were increased as of February 1, 2017, based on his notification to VA of his remarriage (to dependent spouse L.B.). See February 2017 Debt Management letter (notifying the Veteran of an overpayment of $3,242,38). However, the Board notes that there are two distinct periods which need to be discussed. The Veteran was widowed in May 2015 and remained unmarried until December 2015 when he remarried L.B. For the period from June 2015 to November 2015, the Veteran received $162.07 per month for dependency compensation, resulting in a total of $972.42. For the period from December 2015 to February 2017, the Veteran received $162.07, with cost of living adjustments, per month for dependency compensation, resulting in a total of $2,269.96. For the reasons discussed below, the Board finds that the appeal as to validity of the debt for the period from June 2015 to November 2015 must be denied. However, the appeal as to validity of the debt for the period from December 2015 to February 2017 must be granted. Notices sent to the Veteran clearly notified him of his responsibility to immediately report any change in the status of his dependents. 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 him of his responsibility to immediately report any change in the status of his dependents. For the period from June 2015 to November 2015 The Veteran does not contend, nor does the evidence of record indicate, that he was entitled to additional compensation benefits for a dependent spouse from June 2015 to November 2015. Rather, the evidence clearly demonstrates that the Veteran was unmarried for this period but continued to receive dependency compensation which contributed to the overpayment on appeal. Based on the evidence of record, 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 appellant to consequently not be liable for the debt, the appellant 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 the death of S.B. at any point prior to December 2015. He was not eligible to receive benefits based on a dependent spouse during the first six months of the time period in issue (until his marriage to L.B. in December 2015). He should have known that, absent providing notice of the death of S.B. to VA, his receipt of benefits based on that dependent spouse (S.B.) 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 the death of his spouse S.B. is dated in February 2017. The law clearly states that upon the death of a dependent spouse, a veteran's payment of additional compensation for a dependent spouse will be reduced effective the last day of the month in which such death occurred. 38 C.F.R. § 3.500(g). Thus, he should not have continued to receive additional compensation benefits for his dependent spouse (S.B.) after May 31, 2015, the last day of the month of her death. See 38 U.S.C. § 5112(b)(2); 38 C.F.R. § 3.500. For the period from June 2015 to November 2015, it is not shown that there was sole administrative error on the part of VA. The Veteran is shown to have been notified that he was to inform VA of any change in the status of his dependents. Nevertheless, he continued to receive VA benefits based on his dependent spouse S.B. after her death. Under the law pertaining to sole administrative error, regardless of whether or not he notified VA of the death of S.B., and regardless of whether VA error existed, his continued receipt of these benefits shows that he shared fault. 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, 27 Vet. App. at 380. Therefore, sole administrative error is not shown. Jordan, 10 Vet. App. at 174 (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). Based on the foregoing, the Board finds that the provision of 38 C.F.R. § 3.500 (b)(2) prohibiting creation of an overpayment where the payment was solely due to VA administrative error does not apply. See also VAOPGCPREC 2-90. Nor do the facts in this case demonstrate that the doctrines of equitable tolling or detrimental reliance are applicable based upon erroneous VA action. But see Henderson v. Shinseki, 562 U.S. 428, 131 S.Ct. 1197, 179 L.Ed.2d 159 (2011); Bove v. Shinseki, 25 Vet. App. 136 (2011); see also Noah v. McDonald, 28 Vet. App. 120 (2016). In accordance with the facts found (38 C.F.R. § 3.500(b)(2)), the effective date of discontinuance of the award was properly established as the first day of the month following the death of S.B. (i.e., June 1, 2015), through the last day of the month that he first notified VA of his marriage to L.B. (i.e., in February 2017). See 38 C.F.R. § 3.500. Accordingly, the Board concludes that the overpayment of $972.42 for the period from June 2015 to November 2015 is valid, and that the benefit sought on appeal must be denied. In reaching this decision, the Board has considered the doctrine of reasonable doubt; however, as the preponderance of the evidence is against the claim, the doctrine is not for application. 38 U.S.C. § 5107; Gilbert v. Derwinski, 1 Vet. App. 49 (1990).   For the period from December 2015 to February 2017. In December 2015, the Veteran remarried L.B. The Board finds that the Veteran provided VA with constructive notice of the death of S.B., as well as his marriage to L.B. Therefore, the overpayment for the period from December 2015 to February was improperly created. In reaching this decision, the Board has considered whether a grant of the claim is warranted based on the Veteran's argument that he informed both the Department of the Army and/or DFAS of the death of S.B. in May 2015 and his marriage to L.B. in December 2015. There is no objective documentation of record to corroborate his allegation that he informed the Department of the Army, or that an employee informed him that the system would inform VA. While his reports of notice to the Department of the Army and DFAS are credible, VA had no duty to obtain marriage status information from them in order to continue a running award. With regard to the Veteran's notifications to the Department of the Army, and DFAS, VA adjudicators are assumed to have constructive notice of VA records existing at the time of the decision. See Bell v. Derwinski, 2 Vet. App. 611, 613 (1992). However, the claim of notifying DFAS at Redstone Arsenal is not a case in which notice was filed with the wrong VA office and there is no basis to extend the doctrine of constructive notice to verbal or written notifications made to a Federal agency other than VA, to include a service department, or DFAS. In short, the Board can find no basis to extend the doctrine of constructive notice of the death of S.B. in December 2015, or earlier, from this evidence. However, in his April 2020 Board hearing, the Veteran credibly testified that he went to the personnel office of the Birmingham VAMC to change beneficiaries on his life insurance plan. He testified that he informed the VA employee that S.B. had passed away, and that he had remarried L.B. He subsequently had S.B. removed as his beneficiary and added L.B. as his spouse and beneficiary. The Veteran did not provide notification as specified in the notifications that he received, nor did he file a Declaration of Status of Dependents at that time. The Board finds that the Veteran notified the incorrect VA office. As notice was filed with the wrong VA office, there is a basis to extend the doctrine of constructive notice to verbal or written notifications made to VA. In short, the Board finds that the extension of the doctrine of constructive notice of the death of S.B. in December 2015, or earlier, from this evidence is warranted. VA, at the very least, was on constructive notice of the death of S.B., and subsequent remarriage, and his VA dependency compensation benefits should have been adjusted accordingly. In short, the Board finds that the overpayment that was created in this case occurred due to sole administrative error. The Veteran had notified a VA office of the death of S.B. and added L.B. to his life insurance policy as his spouse on December 12, 2015. As discussed above, the Veteran reasonably assumed that the proper actions were taken after he changed his life insurance policy on a VA form and in person at the VAMC. The United States Court of Appeals for Veterans Claims (Court) noted that, "(s)tated 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." Erickson, supra. An overpayment is created when VA determines that a beneficiary or payee has received monetary benefits in excess of the amount to which he or she was entitled. 38 C.F.R. § 1.962. 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. 27757 (1990). In sum, the overpayment of $2,269.96 for the period from December 2015 to February 2017 was solely the result of VA administrative error; the Veteran's actions did not contribute to the creation of the debt. The error was solely VA's error.   Therefore, the Board finds that the overpayment for this period was not properly created, and the appeal for this period is granted. DAVID L. WIGHT Veterans Law Judge Board of Veterans’ Appeals Attorney for the Board Michael J. O’Connor The Board’s decision in this case is binding only with respect to the instant matter decided. This decision is not precedential and does not establish VA policies or interpretations of general applicability. 38 C.F.R. § 20.1303.