Citation Nr: 0005148 Decision Date: 02/28/00 Archive Date: 03/07/00 DOCKET NO. 98-05 374 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Manchester, New Hampshire THE ISSUES 1. Whether an overpayment in the amount of $5,560.00 was properly created, to include whether the overpayment or a portion thereof was the result of administrative error. 2. Entitlement to wavier of recovery of an overpayment of compensation benefits in the amount of $5,560.00. INTRODUCTION The veteran had active military service from July 1982 to November 1983 and from October 1984 to June 1987. This case comes before the Board of Veterans' Appeals (Board) on appeal from decisions of the Committee on Waivers and Compromises (Committee) of the Manchester, New Hampshire, Regional Office (RO) of the Department of Veterans Affairs (VA). FINDINGS OF FACT 1. An overpayment was created in this case when the veteran received additional compensation benefits for a spouse following his divorce in March 1993. 2. Prior to March 1993, the veteran had been informed on various occasions, in writing, that he was receiving additional compensation benefits for his dependent spouse and children and that he should promptly notify VA of any change in dependency status to prevent an overpayment of benefits. 3. In March 1993, written correspondence was received from the veteran with regard to requested increase in disability compensation due to alleged increased severity of condition; however, the veteran failed to notify the VA of his divorce, effective that same month. 4. In August 1993, the veteran was again informed, in writing, that he was receiving additional compensation benefits for his dependent souse and children and that he should promptly notify VA of any change in dependency status to prevent an overpayment of benefits. 4. The VA was not solely responsible for the creation of any portion of the overpayment of compensation benefits by virtue of the appellant's failure to timely notify the RO of his March 1993 divorce. 5. The VA was without fault in the creation of the overpayment. 6. The veteran was at fault in creation of the overpayment because he knew or should have known that he was not entitled to continue to receive additional compensation benefits for a spouse after their divorce. 7. The veteran has not demonstrated financial hardship on his part. 8. Recovery of the overpayment would not defeat the purpose for which benefits were intended. 9. Failure to make restitution would result in unfair gain to the veteran. 10. The evidence does not show that the veteran changed his position in reliance on the VA benefit that he received. CONCLUSIONS OF LAW 1. The overpayment of compensation benefits in the original amount of $5,560.00 was not due to administrative error by the VA and was properly created. 38 U.S.C.A. §§ 5107(b), 5112(b)(2), (10) (West 1991); 38 C.F.R. §§ 3.500(b)(2), 3.501(d)(2) (1999). 2. Recovery of an overpayment of additional VA compensation benefits for a dependent spouse in the amount of $5,560.00, is not against equity and good conscience and, therefore, recovery may not be waived. 38 U.S.C.A. § 5302 (West 1991); 38 C.F.R. §§ 1.963(a), 1.965(a) (1999). REASONS AND BASES FOR FINDINGS AND CONCLUSIONS The veteran has been in receipt of VA disability compensation benefits for many years. In February 1991, he submitted a VA Form 21-686c, Declaration of Status of Dependents, on which he indicated that he was married and had three children. He also furnished copies of the children's birth certificates. Later that same month he provided the VA with a certified copy of his marriage certificate. In April 1991, the RO informed the veteran by letter of an increase in his disability benefits and advised that his award included additional compensation for his spouse and children. The RO also informed him that he "must notify us immediately if there is any change in the number or status of your dependents. Failure to promptly notify the VA of a dependency change will result in the creation of an overpayment in your account." The veteran was again informed by the RO, by letters dated February and July 1992, that he was receiving additional compensation due to his spouse and children and of his responsibility to promptly report any change in number or status of his dependents. In February 1993, the RO informed the veteran, by letter, of an increase in his disability compensation. He was also informed that this rate "includes an extra amount for your wife and children." A written response was received from the veteran, dated March 26, 1993, indicating his disagreement with the RO's determination of his disability ratings. The veteran did not mention any change in his marital status. The Board notes that the veteran's final divorce decree was signed on March 26, 1993, although the RO did not receive notice of such event until July 1997 when the veteran's former spouse furnished a copy of the decree to the RO in support of a claim for apportionment. In a letter dated August 1993, the RO again notified the veteran of an increase in his disability benefits. He was also informed that his monthly rate includes an additional allowance for his wife and three children. Again, he was further instructed that "["]f there is any change in the status of your dependents, you should notify this office immediately." He was also informed that most changes affect payment at the end of the month of the change thus, "prompt notification can prevent or reduce any overpayment." Although the veteran responded by letter dated August 1993, he again failed to refer to his recent divorce. In December 1994, the RO received copies of the veteran's VA medical records dated in 1993. These records included a copy of a private medical report from Vanderbilt University Medical Center, dated in February 1993. Within this private medical report, in the paragraph labeled "SOCIAL PROFILE", was a notation that the veteran had been separated from his wife in 1990 and "[h]e will have final divorce papers drawn in March of 1993." The Board notes that at best this would only be notification of a possible pending divorce. Again, in August 1995, the RO informed the veteran by letter of an increase in his disability benefits. He was also informed that his monthly rate included an additional allowance for his spouse and children. He was also instructed to notify the RO immediately if there was any change in the status of his dependents as most changes would affect his monthly rate at the end of the month of the change. As indicated briefly above in July 1997, the veteran's former spouse submitted a copy of a divorce decree with a claim for apportionment. By letter dated May 1997, the VA informed the veteran of the proposed reduction in his compensation benefits due to his March 1993 divorce. He was also informed that he would received information concerning any overpayment by separate correspondence. In a letter dated July 1997, the veteran admitted that he was divorced and claimed to have "no idea" why VA was not aware of it. He stated that his VA patient data card showed him as a divorced male. It was his understanding that the overpayment would be only for the money he received for his spouse. He requested "forgiveness" of the overpayment and further indicated he would not be financially able to pay the entire balance of the overpayment. In September 1997, the veteran was informed, in writing, of an overpayment in the amount of $5,560.00. The veteran filed a timely request for waiver of the overpayment in November 1997. The Committee denied his claim by decision in December 1997 on the basis that he was at fault in the creation of the debt for failure to notify VA in a timely fashion of the change in his dependency status following his divorce in March 1993. This appeal followed. Financial status information obtained from the veteran during the pendency of the appeal reflects that he lives on his VA and Social Security (SSA) benefits and that his monthly income exceeds his monthly expenses by a small amount. However, the record also reflects that a significant portion of his monthly expenses was payments on several consumer credit accounts. The Board also notes that in January 1998, the veteran raised the issue of improperly created overpayment due to administrative error of VA. Specifically, it is alleged that the VA was put on notice in December 1994 of his divorce by receipt of a copy of a private medical record dated February 1993 which noted the veteran stated his divorce would be final the following month in March 1993. The Committee in a decision dated February 1998, denied the veteran's claim as to improper creation of debt due to administrative error. Finally, it is noted that the veteran has submitted several letters, in which he has alleged that he is making court ordered child support payment of $420.00 per month. However, the record also shows that his ex-spouse had filed a claim for apportionment and alleged that the veteran, in fact, was not making any support payments for his dependent children. After the veteran failed repeatedly upon request, to provide any evidence of actual contributions towards the support of his minor children, apportionment was granted by decision dated August 1998. ANALYSIS Proper creation of Debt The appellant has satisfied the threshold requirement of presenting a well-grounded claim within the meaning of 38 U.S.C.A. § 5107(a). That is, he has set forth a claim which is plausible. The Board is also satisfied that all relevant evidence has been properly developed, and that no further assistance is required to comply with the VA's duty to assist as mandated by 38 U.S.C.A. § 5107(a). Under applicable statutory and regulatory criteria, the effective date of a reduction or discontinuance of pension, compensation, or dependency and indemnity compensation benefits for a payee or dependent by reason of an erroneous award based solely on administrative error or error in judgment shall be the date of the last payment. 38 U.S.C.A. § 5112(b) (10); 38 C.F.R. § 3.500(b) (2). The effective date of a reduction of pension or compensation by reason of marriage, annulment or divorce on or after October 1, 1982, or death of a dependent of a payee shall be the last day of the month in which such marriage, annulment, divorce or death occurs. 38 U.S.C.A. § 5112(b) (2); 38 C.F.R. § 3.501(d) (2). For purposes of reducing or discontinuing compensation benefits, a statement by a claimant/payee setting forth the month and year of the change of status which would result in a reduction or discontinuance of benefits to that person will be accepted to establish the change in status, in the absence of contradictory information. 38 C.F.R. § 3.213(a). In addition, individuals to whom benefits are being paid are required to certify, when requested, that any or all of the eligibility factors which established entitlement to the benefit being paid continue to exist. 38 C.F.R. § 3.652(a). The beneficiary will be advised at the time of the request that the certification must be furnished within 60 days from the date of the request and that failure to do so will result in the reduction or termination of benefits. Id. The appellant's status changed in March 1993, at which time he was divorced. The effective date of a reduction or discontinuance of compensation by reason of divorce shall be the last day of the month in which such divorce occurs. 38 U.S.C.A. § 5112(b)(2) (West 1991). There is no dispute in this case that he was divorced in March 1993. Accordingly, the RO properly adjusted the appellant's compensation award to reflect that he no longer had a dependent spouse, effective April 1, 1993, the first day of the month following the divorce. Prior to April 1993, he was properly paid compensation benefits at the rate specified for a veteran with a dependent spouse based on the information he had provided to the RO as detailed above. However, as reflected by evidence of record, it is clear that he was paid benefits to which he had no legal entitlement following his divorce in March 1993. Nevertheless, the appellant contends that the VA committed administrative error by failing to adjust his compensation benefits to reflect the change in his marital status in or about December 1994. He asserts not that he himself notified the RO of his divorce, but that at that time the RO received a copy of a February 1993 private medical record which referred to his pending divorce in March 1993. Further, he argues that the RO had knowledge that he was single in that he was so identified on his VA medical patient card. Accordingly, he believes that the VA is solely at fault with respect to creation of the overpayment. Notwithstanding his contentions, the appellant continued to receive benefits in an amount that included compensation for a dependent spouse. The fact that he continued to receive this compensation each month does not in any way support his claim that the overpayment was created by error of the VA. These arguments only reflect that he was possibly unaware of the monthly benefit amount, especially with consideration of the fact that cost of living increases would add an increased amount to his award each year. Hence, while these arguments are plausible standing alone, these circumstances did not abrogate the reporting requirements for dependents which is at the crux of the issue in this case. On this point, there is simply no evidence of file that the appellant ever informed the RO of his change of marital status at the time of his divorce. He had been informed on various occasions that his compensation award included such additional benefits. The same point made in the preceding sentences applies equally to his arguments regarding the medical records or other documents in the file that indicated he was either single, not married, divorced, etc. The bottom line here is that he had an obligation to notify the RO of his marital status change in a timely manner, and it is not shown that he actually did so for a number of years after the event in question, specifically, in 1997 after he was informed that his ex-spouse had furnished the RO with a copy of the divorce decree. That he knew of these reporting requirements is not in dispute based on the record. In view of the foregoing, the Board finds that the creation of the overpayment was not attributable solely to error on the part of the VA. As there is no dispute as to the amount of the additional benefits paid on behalf of a dependent spouse, and there is no dispute as to the effective date of the event terminating entitlement to such benefits, and the effective date of termination was in accordance with statutory and regulatory requirements, the Board finds that the overpayment was properly created and that its creation was not the result of administrative error. Accordingly, the Board concludes that the overpayment of compensation benefits in the original amount of $5,560.00 was properly created and that removal of the dependent spouse from the appellant's award was not administrative error. For the reasons discussed above, the Board finds that the evidence in this case is not so evenly balanced so as to allow application of the benefit of the doubt rule. 38 U.S.C.A. § 5107(b). Waiver of debt The appellant's claim is well grounded. 38 U.S.C.A. § 5107(a) (West 1991) and Murphy v. Derwinski, 1 Vet. App. 78 (1990). Waiver of recovery of overpayments 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(a), (c) (West 1991). "Equity and Good Conscience" will be applied when the facts and circumstances in a particular case indicate a need for reasonableness and moderation in the exercise of the government's rights. The decision reached should not be unduly favorable or adverse to either side. 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 the following elements, which are not intended to be all inclusive: fault of debtor; balancing of faults; undue financial hardship; collection would defeat purpose of the benefits; unjust enrichment to either VA or debtor; and changing position to one's detriment. 38 C.F.R. § 1.965(a) (1999). The list of elements contained in the regulation is not, however, all inclusive. See Ridings v. Brown, 6 Vet. App. 544, 546 (1994). The Board concludes that no fraud, misrepresentation or bad faith was involved in the creation of the overpayment and thus, consideration of wavier of recovery under the standard of equity and good conscience is not precluded by law. 38 C.F.R. §§ 1.963(a), 1.965(b) (1999). After having carefully considered the appellant's contentions and all of the other evidence of record, the Board concludes that a waiver of the overpayment of disability benefits in the amount of $5,560 is not in order. The Board finds that he bears responsibility for the creation of the debt. The record in this case reflects that the appellant was aware of the income/dependency reporting requirements applicable to his award of benefits, and has been so since the original grant. Thus, the appellant's failure to notify VA promptly of the change in his marital/dependency status as a result of his divorce in March 1993 violated the reporting requirements of 38 C.F.R. § 3.660 (1999). The record reflects that he did not affirmatively take action to notify VA of this status change until after the RO sent him a letter in 1997 that informed him of their proposed retroactive reduction of his pension based on information obtained from his former spouse. Moreover, it is not claimed or shown by the evidence that the appellant was impaired in his ability to comprehend the reporting requirements, or that any event or act of God prevented him from notifying VA of the marital/dependency status change beginning in March 1993. Hence, the record clearly supports a finding that he was at fault in the creation of the overpayment at issue. With respect to whether recover of the overpayment would result in undue hardship to the appellant, the Board notes that the appellant's most recent Financial Status Report of 1997 reflects that he had an approximate balance of monthly income to monthly expenses. Although he listed payments of each month for child support, he has repeatedly failed, upon request, to provide evidence of actual payments. He subsists on a fixed income, however, derived from receipt of his compensation and SSA benefits. Nevertheless, as it is not alleged nor shown by this financial report that the actual repayment of this debt would deprive the appellant of the basic necessities of life (food, clothing, or shelter), and because the debt to the Government is entitled to as much consideration as any other debt incurred, the Board concludes that collection of the overpayment would not in fact result in undue financial hardship. The Board further finds that failure to make restitution of the overpayment totaling $5,560 would result in unfair gain to the appellant. In effect, a waiver of this overpayment would allow the appellant to realize a gain (receipt of additional compensation benefits for which he was not entitled) based on his failure to notify VA promptly of his marital/dependency status change in March 1993. Under such circumstances, the element of equity and good conscience pertaining to undue financial hardship is not considered to be of such significance as to outweigh the other critical elements cited herein (i.e., the appellant's fault in creation of debt and unjust enrichment to him if debt was waived) which favor the Government's right to collect the overpayment. The Board does not find applicable to the facts in this case the other elements of the standard of equity and good conscience discussed above. Specifically, there is absolutely no evidence of fault on the part of VA, any evidence that collection of the debt, either in whole or in part, would defeat the purposes for which benefits were intended, or evidence that the appellant changed his position to his detriment by reliance on VA benefits by giving up some other valuable right or legal obligation. Accordingly, in view of the above, the Board concludes that waiver of recovery of this overpayment is not in order, based on the standard of equity and good conscience. 38 C.F.R. §§ 1.963(a), 1.965(a) (1999). For the reasons discussed above, the Board finds that the evidence in this case is not so evenly balanced so as to allow application of the benefit of the doubt rule. 38 U.S.C.A. § 5107(b) (West 1991). ORDER An overpayment of compensation benefits in the original amount of $5,560.00 was properly created, and the appeal is denied. Waiver of recovery of an overpayment of compensation benefits in the amount of $5,560.00 is denied. SANDRA L. SMITH Acting Member, Board of Veterans' Appeals