Citation Nr: 22045397 Decision Date: 08/10/22 Archive Date: 08/10/22 DOCKET NO. 19-28 985 DATE: August 10, 2022 ORDER The debt of $12,272 due to the adjustment in effective date of Department of Veterans Affairs (VA) compensation benefits due to an adjustment in the Veteran's date of separation from service is valid; the appeal is denied. A waiver of the recovery of the overpayment of VA compensation benefits in the amount of $12,272 is granted. FINDINGS OF FACT 1. The Department of Defense (DOD) retroactively adjusted the Veteran's service dates from January 18, 1969 to September 30, 1993 to January 18, 1969 to January 31, 1997. 2. In a February 2018 rating decision, the Regional Office (RO) retroactively adjusted the effective date of the Veteran's VA compensation benefits from November 1, 1993 to February 1, 1997. 3. The adjustment in the effective date of VA compensation benefits resulted in the overpayment of VA compensation benefits in the amount of $12,272. 4. The overpayment was not due to the Veteran's fraud, misrepresentation or bad faith. 5. Recovery of the debt in this case in the amount of $12,272 is against equity and good conscience CONCLUSIONS OF LAW The debt of $12,272 due to the adjustment in effective date of Department of Veterans Affairs (VA) compensation benefits due to an adjustment in the Veteran's date of separation from service is valid. 38 U.S.C. § 5304(c) (2018); 38 C.F.R. §§ 3.654, 3.700 (2022). REASONS AND BASES FOR FINDINGS AND CONCLUSIONS The Veteran served in active duty from January 18, 1969 to September 30, 1993 when he was involuntarily separated from service. He then applied for VA compensation benefits which were originally awarded at the 20 percent rate from November 1, 1993, the date following his separation from service. The Veteran was a party to a class action lawsuit that resulted in the DOD retroactively adjusting his service dates from January 18, 1969 to September 30, 1993 to January 18, 1969 to January 31, 1997. The Court papers address matters regarding the Veteran's involuntary separation as well as retirement pay, but not VA benefits. VA did not play any role in this litigation, but was notified of the outcome. As a result, in a February 2018 rating decision, the RO retroactively adjusted the effective date of the Veteran's VA compensation benefits from November 1, 1993 to February 1, 1997. That adjustment in the effective date of VA compensation benefits resulted in the overpayment of VA compensation benefits in the amount of $12,272. The reason for this adjustment was 38 U.S.C. § 5304(c) which prohibits the receipt of VA disability compensation benefits for any period for which the person receives active service pay. See 38 C.F.R. §§ 3.654, 3.700. This matter then came before the Board of Veterans' Appeals (Board) on appeal from a September 2018 notification letter from the RO that informed the Veteran that the RO had stopped his VA compensation benefits effective September 30, 1993 because of the information received that he had returned to active duty on September 30, 1993; and that the RO resumed his compensation benefits effective February 1, 1997 because the RO received information that he completed active duty on January 31, 1997. The Veteran was also notified that an overpayment had been created. The Veteran then filed a notice of disagreement explaining that the adjustment action was the result of a class action lawsuit and indicated that he was seeking a waiver of the recovery of the debt. In July 2019, the RO issued a statement of the case (SOC), which addressed the validity of the debt, finding it valid. The Veteran filed a VA Form 9 (appeal to Board of Veterans' Appeals) in April 2017, wherein he requested a Board hearing. The Board hearing was held in July 2022 at which time the Veteran explained the historical background and again focused on his desire for a waiver of the recovery of the overpayment. He undersigned took testimony on that aspect of the debt. Accordingly, although the issue certified for appeal was the validity of the debt, it is clear that the Veteran is seeking a waiver of recovery of overpayment, which the Board accepted testimony on and at this point finds is part and parcel of the claim certified for appeal, as the overpayment was created by virtue of the decision to adjust the separation date. Thus, the Board finds it appropriate at this point to assume jurisdiction over the issue of entitlement to waiver of recovery of an overpayment of disability compensation benefits based on adjustment of the commencement of VA compensation benefits and, significantly, since the Board is granting a waiver of the recovery of the debt, there is no prejudice to the Veteran for the Board to address this matter. Initially, the debt that was created is valid since, as noted, the Veteran cannot receive VA compensation when he is on active duty and thereby subject to active duty pay. The Board recognizes that the Veteran did not "return to active duty" as was the characterization of what occurred, but rather his release date was adjusted due to the lawsuit. Nonetheless, that prohibition remains, so the validity of the debt is established. The Board initially does not find fraud, misrepresentation, or bad faith in this case. In cases where fraud, misrepresentation, or bad faith on the Veteran's part with respect to the creation of the overpayment at issue has not been demonstrated, and, therefore, waiver is not precluded pursuant to 38 U.S.C. § 5302(a), the Board must determine whether recovery of the indebtedness would be against equity and good conscience, thereby permitting waiver under 38 U.S.C. § 5302(a) and 38 C.F.R. §§ 1.963(a), 1.965(a). In making this determination, consideration is given to the following elements, which are not intended to be all-inclusive: (1) fault of debtor (where actions of the debtors contribute to the creation of the debt); (2) balancing of faults (weighing fault of the debtor vs. the fault of VA); (3) undue hardship (whether collection would deprive the 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 relinquishment of a valuable right or incurrence of a legal obligation). See 38 C.F.R. § 1.965(a). The first and second elements pertain to the fault of the debtor versus the fault of VA. The Veteran is not at fault in this case. The Board finds credible his testimony, as also supported by the court documents he submitted, that his involuntary separation was not warranted, and that he has been restored the additional active duty time as a result of the lawsuit. He did nothing to cause the overpayment. While VA also did not play a role, the Board recognizes that the underlying reason for the debt was not due to the Veteran's fault. There is no indication that the Veteran's reliance on VA benefits resulted in relinquishment of another valuable right. As to whether recoupment of those benefits would defeat the purpose of the benefit, recoupment of those benefits would not defeat the purpose of the benefit since the Veteran technically was not entitled to both payments. There is no showing of undue hardship. This is an unusual case. In cases where a waiver of the recovery of the debt is at issue, the Board must consider equity and good conscience. In this case, applying those principles with particular consideration of the lack of fault on the Veteran's part and the Board's belief that equity must be afforded to him, the Board finds that a waiver is warranted. E. I. VELEZ Veterans Law Judge Board of Veterans' Appeals Attorney for the Board J. Connolly 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.