BVA9506411 
DOCKET NO.  93-13 559     )       DATE
          )
          )

On appeal from the decision of the
Department of Veterans Affairs Regional Office in Denver,
Colorado

THE ISSUE

Entitlement to retroactive release of liability from loan
guaranty indebtedness.

REPRESENTATION

Appellant represented by: The American Legion

ATTORNEY FOR THE BOARD

Barry F. Bohan, Counsel

INTRODUCTION

The appellant served from April 1942 to November 1945.

This appeal arose from a March 1993 denial of the appellant's
request for a retroactive release of liability under the
provisions of 38 U.S.C.A. § 3713(b) (West 1991).

REMAND

The appellant is seeking a retroactive release of VA loan
guaranty liability.  In the interest of clarity, the Board will
first review the history of this case.  The issue on appeal will
then be discussed.

History of the case

In July 1986, the appellant and his spouse offered to purchase a
house in Security, Colorado.  The real estate broker was 
[redacted].  In October 1986, the appellant and his spouse
purchased the house for $56,050, using a loan which was
guaranteed, in part, by VA.  38 U.S.C.A. §§3701 et seq. (West
1991).  The property was secured by a Deed of Trust and Deed of
Trust Note.  The first monthly home loan payment was made in
November 1986.

The appellant defaulted on his home loan payments in August 1988.
On October 25, 1988, the appellant and his spouse sold the house
to  [redacted] by warranty deed.  On November 1, 1988, the
appellant's spouse notified the lender that [redacted] was
trying to assume the loan.  The property transfer was recorded on
November 15, 1988.  Ms. [redacted] had a sporadic payment record
and defaulted on loan payments starting in July 1990.  The house
was sold for $50,293.60 at a trustee's sale in July 1991.  In
November 1991, VA paid the lender $12,624.84 under the loan
guaranty.  The appellant was charged with responsibility for loan
guaranty indebtedness in the amount of $12,207.84.

In November 1990, the appellant, who had moved to Missouri, wrote
to VARO, requesting information concerning a retroactive release
of liability.  He stated that he had "turned this house...over to
[redacted] when I found that the payments were too high for
me."  VARO denied the appellant's request in March 1993,
informing him that "there is no evidence that your purchaser
assumed liability for repayment of the loan and there are no
other liable obligors."  This appeal followed.

In his May 1993 Appeal to the Board, the appellant stated that
Ms. [redacted] "was the real estate broker and I assumed she was
able to finance the home."  The appellant further stated:  "Also,
I do not have sufficient funds to repay this debt.  If I am
forced to pay the debt, it would cause undue hardship and deny me
the basic necessities of living."

In a March 1994 informal presentation, the appellant's accredited
representative, The American Legion, requested that this case be
remanded to VARO because the appellant's claims folder was not
forwarded to his local representative for comment prior to its
being sent to the Board in Washington, D.C., and because in the
representative's opinion the appellant should have been given the
opportunity to submit additional documentation in support of his
claim.

Analysis

In transferee cases, such as this, a legal mechanism exists for
determining that a veteran does not have responsibility to repay
an indebtedness under a VA guaranteed loan: release of liability.
38 U.S.C.A. § 3713 (West 1991).  There two methods of securing
such a release: an application at the time of transfer [§ 3713(a)]
and retroactive release [§ 3713(b)].  The United States Court of
Veterans Appeals has emphasized the role a retroactive release of
liability may play where a veteran has disposed of property to a
transferee without having obtained a release of liability.
38 U.S.C.A. § 3713(b) (West 1991); 38 C.F.R. § 36.4323(g) (1993);
Travelstead v. Derwinski, 1 Vet.App. 344, 347-8 (1991); Schaper v.
Derwinski, 1 Vet.App. 430, 434-6 (1991); and Carlson v. Derwinski,
2 Vet. App. 144 (1992).

In pertinent part, 38 C.F.R. § 36.4323(g) (1994) reads as follows:

"...the Secretary may relieve the veteran of such liability if he
determines that:

          (1) A transferee either immediate
or remote         is legally liable to the Secretary
for the debt      of the original
veteran-borrower established      after the
termination of the loan, and

          (2) The original loan was current
at the time       such transferee acquired such
property, and

          (3) The transferee who is liable to
the       Secretary is found to have been a
satisfactory      credit risk at the
time he acquired the      property."

                                               [emphasis added by
the Board]

In short, "the law and regulations require the Secretary to look
back and make a hypothetical decision as to what decision he would
have made on a release-of-liability request made contemporaneous
with the transfer."  Schaper, at 435.

If a retroactive release of liability is not available, a waiver
of recovery of loan guaranty indebtedness may be authorized in a
case in which collection of the debt would be against equity and
good conscience.  38 U.S.C.A. § 5302(b) (West 1991); 38 C.F.R. §
1.964 (1994).  "Equity and good conscience" involves a variety of
elements.  Particular emphasis, however, is placed upon the
elements of the fault of the debtor and undue hardship.  38
C.F.R. § 1.965 (a)(1),(3) (1994).  In essence, however, "equity
and good conscience" means fairness to both the appellant and to
the government.  In this case, the appellant has requested a
waiver of liability based on undue hardship in addition to having
requested a retroactive release of liability.

The Board believes that further development is necessary in this
case.  The case is therefore REMANDED to VARO for the following
actions:

1.  The appellant should be afforded the
opportunity to furnish any additional
documents which he may choose in support of
his contention that a retroactive release
of liability should be granted.  Any such
documents so furnished by the appellant
should be associated with his loan guaranty
file.

2.  The issue of waiver of recovery of the
charged indebtedness based on the standard
of equity and good conscience should be
developed for appellate purposes.

After the above development has been completed, VARO should
readjudicate the appellant's claim.  If the claim remains denied,
in whole or in part, the case should be returned to the Board
after compliance with all requisite appellate procedure.  The
purpose of this REMAND is to procure clarifying information and to
satisfy due process requirements.  The Board intimates no opinion
as to the ultimate conclusion warranted, pending completion of the
requested development.  No action is necessary on the appellant's
part until he receives further notice.

          KENNETH R. ANDREWS, JR.
          Member, Board of Veterans' Appeals

The Board of Veterans' Appeals Administrative Procedures
Improvement Act, Pub. L. No. 103-271, § 6, 108 Stat. 740, ___
(1994), permits a proceeding instituted before the Board to be
assigned to an individual member of the Board for a

determination.  This proceeding has been assigned to an
individual member of the Board.

Under 38 U.S.C.A. § 7252 (West 1991), only a decision of the
Board of Veterans' Appeals is appealable to the United States
Court of Veterans Appeals.  This remand is in the nature of a
preliminary order and does not constitute a decision of the Board
on the merits of your appeal.  38 C.F.R. § 20.1100(b) (1994).