Citation Nr: 0007960 Decision Date: 03/23/00 Archive Date: 03/28/00 DOCKET NO. 94-11 799 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Muskogee, Oklahoma THE ISSUE Entitlement to waiver of recovery of an overpayment of nonservice-connected pension benefits in the amount of $868.00. REPRESENTATION Appellant represented by: Disabled American Veterans ATTORNEY FOR THE BOARD Edward Walls, Associate Counsel INTRODUCTION The veteran served on active duty from April 1952 to April 1955. His appeal comes before the Board of Veterans' Appeals (Board) from an October 1992 rating decision of the Department of Veterans Affairs (VA) Regional Office (RO) in Muskogee, Oklahoma. This case was remanded by the Board in November 1999 to clarify whether the veteran wished to have a personal hearing before a member of the Travel Board. By a December 9, 1999 letter, the RO attempted to contact the veteran for the requested clarification. However, no response to the letter was received by the RO, and the appeal was again certified for appellate consideration in March 2000. FINDINGS OF FACT 1. The RO has obtained and fully developed all relevant evidence necessary for an equitable disposition of the veteran's appeal. 2. There is no indication of fraud, misrepresentation of a material fact, or bad faith in the creation of the overpayment. 3. The veteran did not report $3,098 made by his spouse in wages in 1989 and $95 of his own wages in 1989, resulting in an overpayment of $868. 4. The VA is not at fault for the creation of the overpayment of pension benefits in the amount of $868. 5. The veteran's combined monthly income is $634 and his total monthly expenses are $618. 6. Collection of the indebtedness would result in financial hardship to the veteran. CONCLUSIONS OF LAW 1. The overpayment was not created through fraud, misrepresentation of a material fact, or bad faith on the part of the veteran. 38 U.S.C.A. § 5302 (West 1991); 38 C.F.R. §§ 1.962(b), 1.965(b) (1999). 2. Recovery of the overpayment would be against the principles of equity and good conscience. 38 U.S.C.A. §§ 5107, 5302 (West 1991); 38 C.F.R. §§ 1.962, 1.963, 1.965 (1999). REASONS AND BASES FOR FINDINGS AND CONCLUSIONS Initially, the Board finds that the veteran's claim is well grounded. 38 U.S.C.A. § 5107(a) (West 1991). The Board is also satisfied that all relevant facts regarding this claim have been properly developed to the extent indicated by law and that no further assistance to the veteran is required to comply with the duty to assist mandated by 38 U.S.C.A. § 5107(a). At the outset, the Board notes that the veteran does not contest the propriety of the creation or amount of overpayment designated by VA. There is no issue as to whether the overpayment in benefits was properly created. See Schaper v. Derwinski, 1 Vet.App. 430, 434 (1991). The overpayment at issue arose as a result of the veteran's failure to report $3,098 of income received by his spouse in 1989, in addition to $95 in wages by the veteran in 1989. These wages were not reported to the RO, and the adjustment resulted in an overpayment of benefits which were paid to the veteran. Under applicable law, a veteran who served in the active military service for 90 days or more during a period of war, who is permanently and totally disabled from nonservice- connected disability not the result of the veteran's own willful misconduct, is entitled to pension payable at the rate established by law, reduced by the veteran's annual income. 38 U.S.C.A. § 1521. For pension purposes, payments of any kind from any source will be counted as income during the 12 month annualization period in which received, unless specifically excluded under the provisions of 38 C.F.R. § 3.272 (1999). Also see 38 C.F.R. § 3.271. A veteran who is receiving pension must notify the VA of any material change or expected change in income, which would affect entitlement to receive, or the rate, of the benefit being paid. The notice must be made when the recipient acquires knowledge that he will begin to receive additional income. 38 C.F.R. § 3.660(a)(1). The evidence of record demonstrates that the veteran applied for a nonservice-connected pension, which was granted by a March 1989 rating decision. The RO later received a report from the Oklahoma Tourism and Recreational Department stating that the veteran's spouse had made $3,098 in wages during 1989. The RO also adjusted the veteran's benefits based on a report from Bland Scaffold Rental and Erection company stating that he had received $95 in wages during 1989. The subsequent adjustment resulted in an overpayment of benefits, and the VA began deducting the veteran's pension checks $50 per month. The first question which must be answered is whether the veteran's actions represent fraud, misrepresentation or bad faith. Overpayments created by retroactive reduction of an award are subject to recovery if recovery is not waived. Waiver of repayment of an indebtedness is statutorily precluded if there is any indication of fraud, misrepresentation of a material fact, or bad faith on the part of the person having an interest in obtaining a waiver. 38 U.S.C.A. § 5302(c); 38 C.F.R. § 1.965(b). The RO considered the facts in this case, and concluded that none of the foregoing circumstances existed. Notwithstanding this, however, the Board must render an independent determination in this regard. See Ridings v. Brown, 6 Vet.App. 544, 546 (1994). The Board notes that "[t]here is no all-embracing definition of 'fraud' and the existence or lack of fraud is a case- specific conclusion based on all facts in each instance." VAOPGC 4-85 (September 16, 1985). The Office of the General Counsel has found the following definition of fraud useful: An intentional perversion of truth for the purpose of inducing another in reliance upon it to part with some valuable thing belonging to him or to surrender a legal right. A false representation of a matter of fact, whether by words or by conduct, by false or misleading allegations, or by concealment of that which should have been disclosed, which deceives and is intended to deceive another so that he shall act upon it to his legal injury. Id (citing Black's Law Dictionary (rev. 5th ed. 1979). "Misrepresentation of a material fact" must be more than non-willful or mere inadvertence. 38 C.F.R. § 1.962(b). "Bad faith" refers to "unfair or deceptive dealing by one who seeks to gain thereby at another's expense." 38 C.F.R. § 1.965(b)(2). Conduct by a claimant undertaken with intent to seek an unfair advantage, with knowledge of the likely consequences, and with resulting loss to the government is required for a showing of bad faith. Id. In this case, the record in general discounts any knowingly wrongful action by the veteran or his wife in creation of the overpayment. Apparently, there has been significant marital discord and he may not have been aware of the economic undertakings assumed by his wife. Although the veteran and his wife were divorced in April 1990, and the wages in question were earned before that time, the claims file contains numerous references to the veteran leaving his wife for long periods of time even prior to the divorce. Thus, it is reasonable to assume that he may not have known that she was earning wages from Oklahoma Tourism and Recreational Department. In regard to the wages earned by the veteran in 1989, as the amount is below $100, the veteran may not have been aware that he needed to report the wages. As the Board has found that the veteran's actions do not represent fraud, misrepresentation or bad faith, the next issue which must be addressed is whether the collection of debt was contrary to the principles of equity and good conscience. If there is no indication of fraud, misrepresentation or bad faith, as in this case, recovery of overpayments of benefits under laws administered by the Secretary of Veterans Affairs is prohibited if the Secretary determines that recovery would be against equity and good conscience. 38 U.S.C.A. § 5302(a); 38 C.F.R. § 1.962. Recovery of the overpayment shall be waived if it is determined that recovery of the indebtedness would be against equity and good conscience. 38 C.F.R. § 1.963(a). The regulation provides that the standard of "equity and good conscience" will be applied when the facts and circumstances in a particular case indicate the need for reasonableness and moderation in the exercise of the Government's rights. 38 C.F.R. § 1.965(a). In such a determination, consideration will be given to six elements which include the degree of fault of the debtor; a balancing of fault between the debtor and VA; whether recovery of the overpayment would cause undue financial hardship to the debtor, or result in unjust enrichment; and whether repayment of the debt would defeat the purpose for which it was intended. 38 U.S.C.A. § 5302; 38 C.F.R. § 1.965. The first element is "fault of the debtor," defined as "[w]here actions of the debtor contribute to creation of the debt." 38 C.F.R. § 1.965(a)(1). Here, the debt was created because the veteran did not correctly report wages received by himself and his wife. In light of the fact that the veteran incorrectly reported these earnings, he bears fault in creation of the overpayment. The second element concerns "balancing of faults." 38 C.F.R. § 1.965(a)(2). This element requires weighing the fault of the debtor against the fault of the VA. In this case, the VA does not appear to be at fault in creation of the overpayment. The VA had no part in the creation of the overpayment; as stated above, it was the veteran who did not report the 1989 wages. The RO duly notified the veteran in advance that income and expenses must be reported. The veteran was also notified of the importance of immediate and direct notification of any change in the source or amount of income or expenses. The RO has acted promptly in adjusting the veteran's benefits and in assessing an overpayment. Thus, the Board finds no fault on the part of the VA in the creation of the debt. The third element regards "undue hardship," described as "[w]hether collection would deprive debtor or family of basic necessities." 38 C.F.R. § 1.965(a)(3). The veteran has essentially based his appeal on this hardship element, and he has indicated on several occasions that payment of the debt would result in financial hardship. The veteran is a farmer, and he indicated in a December 1993 statement that his roof was leaking and he needed the money to fix it. The veteran also submitted a statement in October 1994 that his home was sold and that he would have been homeless except that he was able to move in with his sister. When the veteran requested in September 1993 that his overpayment be waived, he indicated that he could not pay his bills and he would have to sell some cows to cover some expenses. He reported that his combined monthly net income was $634 and his monthly expenses were $618. The Board finds these figures to be reasonable. Parenthetically, the Board notes that the RO found that the veteran's wife was not entitled to an apportionment of his VA checks because it would have been an undue hardship to him. Because it appears from the record that the recovery of the overpayment would result in undue financial hardship on the veteran, the Board will grant a waiver of recovery of the overpayment. In light of the grant of the veteran's appeal, the elements concerning whether recovery would defeat the purpose of the benefit, unjust enrichment, and reliance on a VA benefit are not relevant. In this regard, the Board notes that the veteran will not be unjustly enriched because the Board has found that recovery of the overpayment would result in undue hardship. In this case, recovery of the indebtedness would be against equity and good conscience. ORDER Entitlement to waiver of recovery of an overpayment of nonservice-connected pension benefits in the amount of $868.00 is granted. WARREN W. RICE, JR. Member, Board of Veterans' Appeals