Citation Nr: 20044512 Decision Date: 07/02/20 Archive Date: 07/02/20 DOCKET NO. 19-09 954 DATE: July 2, 2020 ORDER 1. The challenge to the propriety of the creation of an overpayment in the amount of $3,867.50 is granted. 2. The claim for a waiver of an overpayment debt in the amount of $3,867.50 is dismissed. FINDINGS OF FACT 1. A sole administrative error resulted in the creation of an overpayment in the amount of $3,867.50. 2. The challenge to the propriety of the creation of an overpayment, underlying the claim for a waiver of the overpayment debt in the amount of $3,867.50, has been granted. CONCLUSIONS OF LAW 1. An overpayment in the amount of $3,867.50 was improperly created. 38 U.S.C. § 5112; 38 C.F.R. § 3.500. 2. The claim for a waiver of the overpayment debt in the amount of $3,867.50 is moot. 38 U.S.C. §§ 511, 7104, 7105. REASONS AND BASES FOR FINDINGS AND CONCLUSIONS The Veteran had active duty from December 1973 to November 1988. The Appellant is the Veteran’s former spouse. These matters come before the Board of Veterans’ Appeals (Board) on appeal of a September 2016 Department of the Veterans Affairs (VA) Regional Office (RO) notification letter and an October 2016 VA Debt Management Center (DMC) demand letter informing the Appellant that an overpayment debt in the amount of $3,867.50 had been charged against her and became subject to recovery by VA. Effective February 2003, the Veteran was awarded a total disability rating based on individual unemployability. Because a veteran in receipt of compensation at the rate of 30 percent or higher is entitled to additional compensation for a spouse, children and/or dependent parents, 38 C.F.R. § 3.4(b)(2), the Veteran’s compensation was upwardly adjusted to reflect the fact of his marriage to the Appellant and support he provided to her and their minor child. In May 2004, the Appellant informed the RO that she began residing with their minor child in a household separate from that of the Veteran. The Appellant further stated that the Veteran was not supporting her and their child financially, and his failure to support them financially affected her ability to obtain basic necessities for herself and their minor child. Therefore, she requested an apportionment of the Veteran’s award to ensure that a portion of the Veteran’s award was paid directly to her. In October 2004, the RO issued an apportionment decision notifying the Appellant that she was awarded an apportionment in the amount of $463 monthly. However, between 2004 and 2011, the Appellant’s monthly income had increased as she began receiving Social Security Administration benefits in the amount of $773 per month, and the Veteran began paying her child support in the amount of $337 per month. Therefore, the RO reduced the Appellant’s monthly apportionment payment to $150. In August 2011, the Appellant notified the RO that the Veteran had been convicted of a penal offense and incarcerated. She clarified that, prior to his incarceration, the Veteran was providing her and their minor child with occasional financial support additional to the apportionment and child support payments. She also stated that, even though these additional funds were limited to small sums and distributed on an irregular basis, the funds were critical to her and the child’s subsistence. The Appellant pointed out that, following the Veteran’s incarceration, this source of income ceased to exist, hence contributing to her financial hardship. In support of her position, the Appellant submitted her VA Form 5655 Financial Status Report (FSR), which indicated that her monthly income was $1,185, while her monthly mortgage payment, food bill, car insurance, real estate insurance, utilities bill, and loan payments amounted to $1,087, hence leaving her and the child $98 per month for all other expenses, to include clothes, real estate tax, medicine, household goods, school supplies, etc. Based on the foregoing, the Appellant requested an increase of her apportionments benefits. In August 2013, the RO issued an apportionment decision granting her an increase in the amount of $25 monthly, effective August 2011. In November 2014, the Veteran notified the RO that he procured an October 2014 divorce decree from the Appellant. Subsequently, he requested to remove the Appellant and their minor child as dependents for the purposes of his VA compensation benefits “as soon as possible.” While the record is not in dispute that the RO received the Veteran’s notice, the RO continued to disburse the apportionment payments directly to the Appellant on a monthly basis. A year and four months passed by. In February 2016, the RO sent the Appellant a notification letter, stating, We have received information that you are no longer married to [the] Veteran . . . . We are sending you this letter to inform you that your benefits [in the form of the apportionment payments] will be terminated. . . . We propose to stop your apportionment payment [on] October 28, 2014[,] the date of your divorce. If you are not divorced[,] please let us know. This will create an overpayment in your account because . . . we paid you too much. Should we move forward [with recovery of the debt ensuing from the overpayment,] you will receive a separate letter, which will explain how much we overpaid you, and how you can repay this debt. Send any information or evidence to the [RO] within 60 days from the date of this letter. . . . If we don’t receive the information or evidence within that time, we will make our decision based only on the evidence we have received. Another seven months passed by. In September 2016, i.e., almost two years after the Veteran notified the RO of his divorce from the Appellant, the RO sent the Appellant another notification letter, which read: [In February 2016,] we proposed to terminate your apportionment due to your divorce from the Veteran. We did not receive a response from you to our proposal, therefore we must complete the proposed action. . . . Your apportionment has been terminated effective [the date of your divorce from the Veteran].” In October 2016, the DMC sent the Appellant a demand letter stating, “[because] your entitlement to [apportionment payments] changed, . . . you were paid $3,867.50 more than you were entitled to receive.” With that, the October 2016 demand letter directed the Appellant to remit the stated amount or “establish a monthly payment schedule to clear the debt within a reasonable time frame.” Due to the absence of the record as to how the overpayment was calculated, the Board is not in the position to verify the correctness of the $3,867.50 amount, although it appears that the debt amount was based on $175 monthly payments. In October 2016, the Appellant filed a Notice of Disagreement (NOD) and a lay statement elaborating on her claims. In her NOD, she stated, “I didn’t know that I could disagree with your decision [that the overpayment was properly created].” The Appellant also pointed out that she “didn’t know that [she] was getting overpaid” during the period when the overpayment was accruing. She stressed that the Veteran “told [her] that [he] would handle everything[,] and that [she] should [not] worry about anything.” The Appellant also elaborated on her dire financial condition and asked the RO to “please have mercy on [her] house,” which was her only valuable property, even though it was an “old house” and a subject to various liens. In January 2017, the Appellant filed another lay statement, essentially summarizing the position she took in her October 2016 lay statement. She also indicated that she perceived her October 2016 lay statement as an application for a waiver of the overpayment debt. In February 2017, the Appellant submitted her updated FSR, which verified her October 2016 lay statement as to her financial circumstances. However, nothing in the record suggests that her October 2016 request for a waiver was referred by the DMC to the Committee on Waivers and Compromises (COWC) for adjudication. Moreover, while the record shows that the DMC referred her January 2017 lay statement and updated FSR to COWC for adjudication upon construing those submissions as an application for a waiver, the record shows that COWC failed to adjudicate the Appellant’s request. In February 2019, the RO issued a Statement of the Case (SOC) addressing solely the issue of the Appellant’s challenge to the creation of the overpayment and stating: VA sent you notice of the proposal to terminate your apportionment in [a] letter dated February 23, 2016. This letter told you that your apportionment would terminate on October 28, 2014 and that an overpayment/debt would be created against you. Your letter also . . . explained your rights . . . in addition to instructions on how to reduce the overpayment. VA did not receive a response from you nor a request to terminate the apportionment from date of last payment to minimize the amount of the overpayment. Notably, the Board’s review of the February 2016 notification letter revealed that the RO’s “instructions on how to reduce the overpayment” were limited to a single sentence, “[i]f you are not divorced please let us know.” Further, the RO did not clarify that the Appellant could challenge the creation of the overpayment. Rather, the February 2016 notification letter set forth a hypothetical, “[s]hould we move forward[,] you will receive a separate letter, which will explain how much we overpaid you,” and limited the explanation as to how to challenge the creation of the debt to an obscure sentence, “[s]end any information or evidence to the [RO].” Upon the issuance of the SOC, the Appellant’s challenge to the creation of the overpayment and her claim for a waiver of the overpayment debt were certified to the Board. Generally, COWC’s failure to adjudicate a request for a waiver in the first instance warrants a remand. However, the U.S. Court of Veterans Appeals (Court) observed that a remand to COWC, while proper, is not required if the Board adjudicates a waiver claim after the Board adjudicates the challenge to creation of the overpayment underlying the claim for a waiver of the debt. See Schaper v. Derwinski, 1 Vet. App. 430, 431 (1991). Since, here, the Appellant’s challenge to the creation of the overpayment is being granted, thus rendering her claim for a waiver of the overpayment debt moot, no remand is required. An overpayment is created if a payee has received VA monetary benefits to which (s)he is not entitled. 38 C.F.R. § 1.962. In consideration of the propriety of the creation of the overpayment, it should first be determined whether the payee was legally entitled to the benefits in question and, if it is found that the payee was not legally entitled, then it must be determined whether VA was solely responsible for the erroneously paid benefits, i.e., if VA has committed an administrative error. The concept of a sole administrative error connotes that the payee neither had knowledge of nor should have been aware of the erroneous award. Further, neither the payee’s actions nor his/her failure to act must have contributed to the overpayment. 38 U.S.C. § 5112(b)(9), (10); 38 C.F.R. § 3.500(b)(2). Notably, if an overpayment is deemed properly created, the issue of a waiver of the resulting debt can be addressed. Schaper, 1 Vet. App. at 437. A waiver is precluded if an overpayment arose from the payee’s fraud, or misrepresentation, or bad faith. 38 U.S.C. § 5302(c); 38 C.F.R. § 1.965(b). Assuming such a bar on a waiver is not present, it is then determined whether the recovery of the debt would be against equity and good conscience. See 38 U.S.C. § 5302(a); 38 C.F.R. § 1.962. At the onset of such a determination, the Board considers the fault on the part of the payee and weighs it against that of VA. The balance-of-fault analysis is, therefore, a consideration associated with both the waiver analysis and the creation-of-the-overpayment analysis. Shephard v. Shinseki, 26 Vet. App. 159 (2013). In Shepard, an incarcerated veteran was overpaid her VA benefits because VA continued to pay her benefits at an unreduced rate for two years after VA learned of her incarceration. Addressing such a scenario, the Court pointed out that VA could not create or increase an overpayment through undue practices that fail to mitigate the overpayment, e.g., by procrastinating the termination or reduction of benefits by an unreasonable long period, e.g., two years. The Court noted that the issue of a delay in reduction or suspension of erroneous payments was relevant not only to the contemplation of a waiver, but also to the issue of a debt creation. Here, the record is not in dispute that the Veteran notified the RO of his divorce from the Appellant less than three weeks after the divorce decree was procured. The record is also not in dispute that, notwithstanding the Veteran’s notice, the RO continued paying the apportionment benefits to the Appellant for two years. Further, neither the November 2004 nor the August 2013 apportionment decision, nor any other VA communication to the Appellant informed her that she had the responsibility to notify the RO of her divorce from the Veteran. In fact, these apportionment decisions failed to inform the Appellant that the Veteran was obligated to notify the RO in the event she and their minor child would cease being his dependents for VA compensation purposes. Rather, notices to that effect were provided to the Veteran, and the record demonstrates that the Appellant had no access to his communications with the RO. Further, the Appellant’s lay statements submitted with her NOD show that the Veteran informed the Appellant that he would provide notice of their divorce to the RO, and the record shows that the Veteran diligently did so. In Erickson v. West, the Court stressed that the determination of an administrative error encompasses the inquiry as to whether the VA provided the payee with a “clear” notice detailing the payee’s obligations. See 13 Vet. App. 495 (2000). Here, no evidence associated with the claims file suggests that the RO provided the Appellant with any notice as to what actions on her part were required in the event of her divorce from the Veteran. Therefore, until the RO issued the February 2016 notification letter, the Appellant neither knew nor should have known that she lost her entitlement to the apportionment benefits upon her divorce, especially given that she continued receiving child support from the Veteran. Accordingly, the Board finds that the portion of the overpayment generated prior to the date of the February 2016 notification letter qualifies as a sole administrative error. Correspondingly, that portion of the overpayment is not subject to recovery. The preceding analysis, however, does not resolve the Appellant’s challenge to the portion of the overpayment accrued during the period from the February 2016 notification letter that stated, albeit as a hypothetical, the possibility of termination of her apportionment benefits, to the September 2016 notification letter, which informed her of such a termination. The Board acknowledges the RO’s position that this portion of the overpayment was caused by the Appellant’s failure to mitigate the amount of overpayment by taking unspecified actions in response to the February 2016 notification letter. The Board finds the RO’s position without merit. The notice provided by the RO in the February 2016 notification letter as to the scope of challenges that the Appellant could raise as to the propriety of the overpayment was limited to a single sentence, “[i]f you are not divorced[,] please let us know.” Moreover, the instructions provided by the RO in the February 2016 notification letter as to the actions that the Appellant was required to take to mitigate the overpayment were also limited to a single sentence, “[s]end any information or evidence to the [RO].” Neither of these sentences could reasonably be qualified as a clear notice that the Appellant had the right to challenge the propriety of the creation of the debt by detailing her lack of knowledge about the overpayment or by pointing out that the Veteran duly notified the RO of the divorce. Erickson, 13 Vet. App. 495. Further, nothing in the record suggests that that the RO would have ceased disbursing apportionment payments to the Appellant prior to September 2016 had she filed her lay statements (submitted in conjunction with her NOD) within 60 days of the February 2016 notification letter. Rather, the record is indicative of the RO’s callous disregard to the Appellant’s dire financial circumstances, given that the RO procrastinated with the termination of her apportionment payments during the period of two years, hence allowing the overpayment to accrue in an amount that would impose a severe financial hardship on the Appellant and her minor child in the event the debt is recovered. Given that the record establishes that it is at least as likely as not that the Appellant neither knew nor should have known that she was required to take any action to prevent or mitigate the overpayment created during the period from February to September 2016, this portion of the overpayment was not properly created. See VAOPGCPREC 2-90 (Mar. 1990) (“whenever the evidence of record was equally susceptible of being interpreted as showing a lack of knowledge by the beneficiary and as showing that he or she knew but failed to disclose material facts to the VA, the doubt would be resolved in the beneficiary’s favor”). Since both the pre February-2016 and post-February-2016 portions of the overpayment were improperly created, the Board finds that the overpayment was improperly created in its entirety. Therefore, the Appellant’s challenge to the propriety of the overpayment is granted. Under 38 U.S.C. § 7104; 38 C.F.R. § 20.101, the Board has jurisdiction in all matters where there is a question of law or fact necessary to a decision by the Secretary under a law that affects the provision of benefits by the Secretary to veterans or their dependents, or survivors. Accordingly, under 38 U.S.C. § 7105, the Board may dismiss any appeal that fails to allege specific error of fact or law in the determination being appealed, or where the case or controversy ceased to exist. See 38 U.S.C. § 511(a); Church of Scientology v. United States, 506 U.S. 9, 12 (1992); accord Armstrong v. VA, 2016 MSPB LEXIS 6372 (M.S.P.B., Oct. 27, 2016) (“While the Board is not a federal court but, rather, an ‘administrative agency with quasi-judicial functions,’ and -- therefore -- it has ‘powers and limitations distinct from those of an Article III court,’ this is a distinction without a difference for the purposes of the mootness analysis”) (quoting Conrad v. Department of Justice, 24 M.S.P.R. 452, 454 (1984)). Here, the Board’s grant to the Appellant’s challenge to the propriety of the overpayment underlying her debt constitutes a greater award than the award she would have obtained had she been granted a waiver of her debt because, if the overpayment is found to be an administrative error, no taxes are owed by the payee, while a grant of a waiver could have tax implications. Therefore, the Appellant’s claim for a waiver does not present a case or controversy amenable to the Board’s favorable resolution. Based on the foregoing, the Appellant’s claim for a waiver of the overpayment debt is dismissed as moot. Cynthia M. Bruce Veterans Law Judge Board of Veterans’ Appeals Attorney for the Board Anna Kapellan, Associate Counsel 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.