Citation Nr: A21018581
Decision Date: 11/22/21	Archive Date: 11/22/21

DOCKET NO. 200521-86906
DATE: November 22, 2021

ORDER

Entitlement to a waiver of overpayment of Department of Veteran Affairs (VA) additional compensation benefits for a divorced spouse in the amount of $915.15 is granted.

FINDINGS OF FACT

1. The Veteran and his former spouse divorced on September 12, 2019, and the Veteran, through his fiduciary, notified VA of his divorce on September 17, 2019, and continued to advise VA that he was divorced indicating that additional benefits were being improperly paid.

2. VA took no action to remove the Veteran's spousal benefit to his overall compensation until March 20, 2020, thereby causing an overpayment calculation in the amount of $915.15.

3. The Veteran has not disputed the amount of debt in controversy, nor has he demonstrated that such a debt was based on sole administrative error by VA.

4. The Veteran did not exhibit fraud, misrepresentation, or bad faith in the creation of the overpayment of VA benefits in the amount of $915.15.

5. The Veteran was minimally at fault in the creation of the overpayment, and any fault that could be attributed to the Veteran was overwhelmed by VA's fault.  

6. VA was at fault in the creation of the overpayment by not timely removing the additional spousal benefit after being duly notified of the Veteran's divorce.

CONCLUSION OF LAW

A waiver of the Veteran's overpayment indebtedness in the amount of $915.15 is consistent with the principles of equity and good conscience.  38 U.S.C. §§ 5301, 5302 (2012); 38 C.F.R. §§ 1.962, 1.963, 1.965, 3.50, 3.51 (2021).

REASONS AND BASES FOR FINDINGS AND CONCLUSION

The Veteran served on active duty from September 2009 to October 2010.   

This matter comes before the Board of Veterans' Appeals (Board) on appeal from a March 2020 decision from a Department of Veterans Affairs (VA) Regional Office (RO).  

On August 23, 2017, the President signed into law the Veterans Appeals Improvement and Modernization Act, Pub. L. No. 115-55, 131 Stat. 1105 (2017), also known as the Appeals Modernization Act (AMA). This law creates a new framework for Veterans dissatisfied with VA's decision on their claim to seek review.  The AMA automatically applies to all claims for which VA issues notice of an initial decision on or after February 19, 2019, as here.  See 38 C.F.R. § 3.2400(a)(1) (2021) (the modernized review system applies to all claims for which VA issues notice of an initial decision on or after the effective date of the modernized review system). This decision has been written consistent with the new AMA framework.

On March 20, 2020, VA, through the Debt Management Center in St. Paul, Minnesota, determined that an overpayment had been created in the amount of $915.15.  On May 21, 2020, the Veteran, through his fiduciary, filed a VA Form 10182, notice of disagreement in the modernized system, and selected the Direct Review option; therefore, the Board may only consider the evidence of record at the time of the agency of original jurisdiction (AOJ) decision on appeal. 38 C.F.R. § 20.301 (2021).  

Veterans Claims Assistance Act of 2000 (VCAA)

The Veterans Claims Assistance Act of 2000 (VCAA) and implementing regulations impose obligations on VA to provide claimants with notice and assistance.  38 U.S.C. §§ 5102, 5103, 5103A, 5107 (2012); 38 C.F.R. §§ 3.102, 3.156(a), 3.159, 3.326(a) (2021).  

The Board has limited the discussion below to the relevant evidence required to support its findings of fact and conclusion of law, as well as to the specific contentions regarding the case as raised directly by the Veteran and those reasonably raised by the record.  The Veteran in this case has not referred to any deficiencies in either the duties to notify or assist; therefore, the Board may proceed to the merits of the claim.  See Scott v. McDonald, 789 F.3d 1375, 1381 (Fed. Cir. 2015, cert. denied, U.S.C. Oct. 3, 2016) (holding that "the Board's obligation to read filings in a liberal manner does not require the Board....to search the record and address procedural arguments when the [appellant] fails to raise them before the Board"); Dickens v. McDonald, 814 F.3d 1359, 1361 (Fed. Cir. 2016) (applying Scott to an appellant's failure to raise a duty to assist argument before the Board).

The Board has reviewed all of the evidence in the Veteran's claims file.  Although the Board has an obligation to provide adequate reasons and bases supporting this decision, there is no requirement that the evidence submitted by the Veteran or obtained on his behalf be discussed in detail.  Rather, the Board's analysis below will focus specifically on what evidence is needed to substantiate the claim and what the evidence in the claims file shows, or fails to show, with respect to the claim.  See Gonzales v. West, 218 F.3d 1378, 1380-81 (Fed. Cir. 2000) and Timberlake v. Gober, 14 Vet. App. 122, 128-130 (2000).

Governing Law and Regulations  Waiver of Overpayment

A Veteran who is in receipt of disability compensation of 30 percent or more is entitled to an additional allowance for each dependent.  38 U.S.C. §§ 1115, 1134, 1135; 38 C.F.R. § 3.4(b)(2). Specific rates are provided for the Veteran's spouse and/or children.

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).

The law provides that there shall be no collection of an overpayment, or any interest thereon, which results from participation in a benefit program administered under any law by VA when it is determined that collection would be against equity and good conscience. The term "overpayment" refers only to those benefit payments made to a designated living payee or beneficiary in excess of the amount due or to which such payee or beneficiary is entitled. 38 U.S.C. § 5302 (a); 38 C.F.R. § 1.962.

Absent fraud, misrepresentation, or bad faith, a waiver of indebtedness may be authorized in a case in which collection of the debt would be against equity and good conscience. 38 U.S.C. § 5302(b); 38 C.F.R. §§ 1.962, 1.963, 1.965. In essence, "equity and good conscience" means fairness to both the Veteran and to the government.

"Equity and good conscience" involves a variety of elements: (1) Fault of the debtor, where the actions of the debtor contribute to creation of the debt; (2) Balancing of faults, weighing fault of the debtor against VA fault; (3) Undue hardship, whether collection would deprive debtor or family of basic necessities; (4) Defeat the purpose, whether withholding of benefits or recovery would nullify the objective for which benefits were intended; (5) Unjust enrichment, failure to make restitution would result in unfair gain to the debtor; and (6) Changing position to one's detriment, reliance on VA benefits results in the relinquishment of a valuable right or incurrence of a legal obligation. See 38 C.F.R. § 1.965(a). The list of elements contained in the regulation is not all inclusive. Ridings v. Brown, 6 Vet. App. 544, 546 (1994). Particular emphasis is, therefore, placed upon the elements of the fault of the debtor and undue hardship. 38 C.F.R. § 1.965(a). 

Recovery of overpayment of any benefits made under laws administered by the VA shall 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 and recovery of the indebtedness from the payee who received such benefits would be against equity and good conscience. 38 U.S.C. § 5302 (c); 38 C.F.R. §§ 1.963 (a), 1.965(b).

Entitlement to a waiver of overpayment of Department of Veteran Affairs (VA) additional compensation benefits for a divorced spouse in the amount of $915.15

The Veteran, through his fiduciary, seeks a waiver of debt that has been charged for overpayment of compensation resulting from the retroactive removal of his spouse as his dependent.  The Veteran divorced in September 2019 and his fiduciary notified VA that same week of the divorce, but no steps were taken to adjust the Veteran's compensation until March 20, 2020, when the VA Debt Management Center created an overpayment of $915.15 and notified the Veteran.

Waiver of Recovery of Overpayment

In determining whether a waiver of overpayment is appropriate, VA's inquiry is focused on three distinct questions. First, VA must determine if the overpayment at issue was validly created, which the Board has in its above analysis. See Schaper v. Derwinski, 1 Vet. App. 430, 434-35 (1991) (noting that before adjudicating a waiver application, the lawfulness of the overpayment must first be decided); see also VAOPGCPREC 6-98 (holding that where the validity of the debt is challenged, that issue must be developed before the issue of entitlement to a waiver of the debt can be considered).  For obvious reasons, in the absence of a valid debt, no further inquiry is necessary.  

Second, if the debt is valid, VA must determine if fraud, misrepresentation, or bad faith played a role in its creation.  If it did, waiver of the overpayment is automatically precluded, and further analysis is not warranted. See 38 U.S.C. § 5302; 38 C.F.R. §§ 1.962, 1.963(a), 1.965(b); see also Ridings v. Brown, 6 Vet. App. 544 (1994) (holding that the Board must independently address the matter of bad faith before addressing whether waiver would be appropriate).  

Finally, after it has been determined that the debt is valid and that fraud, misrepresentation and/or bad faith had no part in its creation, VA must then consider whether collection of the debt would be against equity and good conscience. See 38 U.S.C. § 5302 (b); 38 C.F.R. §§ 1.962, 1.963, 1.965.  The resolution of this question involves the consideration of various elements including the fault of the debtor, the fault of VA, undue hardship, unjust enrichment, whether collecting the debt would defeat the purpose of the benefit, and whether the Veteran changed his position to his detriment as a result of the overpayment.

First Step of Analysis:  Creation of Overpayment

The Veteran married his then-spouse, S.L.D., on March 1, 2016, and they divorced September 12, 2019.  The Veteran's fiduciary notified VA on September 17, 2019, and followed up on October 18, 2019 with the local court's documentation of the divorce record.  On March 20, 2020, VA, through the Debt Management Center in St. Paul, Minnesota, determined that an overpayment had been created in the amount of $915.15.  

In this case, the Veteran does not dispute the validity of the debt. In short, prior to this claim the Veteran was paid an amount of money based on his spouse in his household; however, on September 12, 2019, he got a divorce from his then-spouse and reported such through his fiduciary on September 17, 2019.  After offsetting the amount of money owed to the Veteran for his regular compensation, VA determined that the Veteran was overpaid in the amount of $915.15. Consequently, the Board finds that the overpayment of VA benefits in the amount of $915.15 was legally created and is valid.  38 U.S.C. §§ 1115, 1134, 1135, 5103, 5103A, 5107; 38 C.F.R. §§ 3.57, 3.102, 3.503.

Second Step of Analysis: Fraud, Misrepresentation, or Bad Faith 

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; 38C.F.R. §§ 1.962, 1.963(a), 1.965(b).  No VA element has determined that the Veteran had demonstrated 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.  A Veteran'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).

The evidence does not indicate that the Veteran deliberately acted with the intent to seek an unfair advantage, with knowledge of the likely consequences.  It appears, instead, that the error was of one of omission rather than commission.  The Board finds, therefore, that the Veteran did not commit fraud, misrepresentation, or bad faith, and that there is no statutory bar to waiver of recovery of the overpayment.

Third Step of Analysis: Equity and Good Conscience

As indicated above, 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 six enumerated elements, which include fault of veteran and undue hardship. See 38 C.F.R. § 1.965(a); see also Cullen v. Brown, 5 Vet. App. 510 (1993) (when determining whether recovery is against equity and good conscience, the Board must analyze all six factors).  

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).

The definition of fault is "the commission or omission of an act that directly results in the creation of the debt." Veterans Benefits Administration Circular 20-90-5, (Feb. 12, 1990).  Fault should initially be considered relative to the degree of control the appellant had over the circumstances leading to the overpayment. If control is established, even to a minor degree, the secondary determination is whether a veteran's actions were those expected of a person exercising a high degree of care, with due regard for a veteran's contractual responsibility to the government. The age, financial experience, and education of a veteran should also be considered in these determinations. 

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 minimal fault on the part of the Veteran in the creation of the debt. He notified the VA through his fiduciary 7 days after his divorce and submitted a copy of his divorce decree as soon as it was available four weeks later. He again notified VA of the need to remove his spouse after the divorce. 

With regard to the second element, balancing the faults, the Board finds that the fault of the VA so far outweighs the fault of the Veteran that the Veteran's fault was inconsequential. The Veteran believes that VA is responsible for a more timely adjustment to his monthly benefits, but he continued to receive the same benefits as if he had dependents for eight months without notifying VA of its ongoing mistake after his last notification in October 2019. He, through his fiduciary, was aware that benefits needed to be adjusted, but did not act further when the benefits remained the same. Notwithstanding, VA was timely notified of the Veteran's change in marital status in both September 2019 and October 2019 and simply took no action until March 2020. In failing to timely act, the fault of VA was considerable and essentially was the cause of the overpayment in question since they had received the information necessary to act in a timely manner.  

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 evidence does not establish any undue financial hardship involved in repaying any debt. 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 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 spouse.  For the time period extending from September 2019 (when he was divorced) through March 2020 (when VA implemented the reduction), he was without said spouse. 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 dependent allowance. Thus, it can hardly be said that the resulting gain is unfair as 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.

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 divorced, the Veteran again notified VA and attempted to follow up with the removal of his dependents after the divorce was final. If the VA had responded to the Veteran's notices, the whole matter could have been cleared up within two or three months of the Veteran's initial notice of the divorce being final with minimal overpayment created. Instead of this reasonable administrative scenario, the VA ignored the Veteran and the situation for a period of seven months, thereby allowing the overpayment to grow to an amount in excess of $915.15. The Board notes that this inaction in itself caused the overpayment. Thus, the Board finds that waiver of the overpayment calculated in the amount of $915.15 is warranted.

 

 

MICHAEL A. PAPPAS

Veterans Law Judge

Board of Veterans' Appeals

Attorney for the Board	J. Setter, 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.