Citation Nr: 0005868 Decision Date: 03/03/00 Archive Date: 03/14/00 DOCKET NO. 99-01 876A ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Roanoke, Virginia THE ISSUE Entitlement to a waiver of recovery of an overpayment in the calculated amount of $2,275.00. REPRESENTATION Appellant represented by: Disabled American Veterans ATTORNEY FOR THE BOARD W. R. Harryman, Counsel INTRODUCTION The veteran had periods of active service from March 1970 to October 1971 and from September 1990 to November 1991. This case came before the Board of Veterans' Appeals (Board) on appeal from a decision of the Committee on Waivers and Compromises of the Department of Veterans Affairs (VA) Regional Office (RO) in Roanoke, Virginia, in March 1998 which denied the claimed benefits. FINDINGS OF FACT 1. The veteran was paid VA disability compensation benefits from July 1, 1991, to December 1, 1991. 2. On receipt of evidence in September 1995 showing that his military records had been corrected to reflect that he was on active duty until December 1, 1991, the veteran's compensation award was terminated, effective from July 1, 1991, until December 1, 1991; as a result of this adjustment, an overpayment was created in the amount of $2,275. 3. There is no evidence that the veteran intentionally misled VA as to his entitlement to payment of VA disability compensation benefits for the stated period. 4. Recovery of the assessed overpayment would result in undue hardship to the veteran and would defeat the purpose of the award of compensation. CONCLUSIONS OF LAW 1. The overpayment of VA disability compensation benefits was not the result of fraud, misrepresentation, or bad faith. 38 U.S.C.A. §§ 5107, 5302 (West 1991). 2. The overpayment of VA disability compensation benefits, for the period from July 1, 1991, through November 30, 1991, in the calculated amount of $2,275, was properly created. 38 U.S.C.A. §§ 101(1), 1110, 5107 (West 1991); 38 C.F.R. §§ 3.400(b)(2) (1999). 3. Recovery of the overpayment of compensation would violate the standard of equity and good conscience. 38 U.S.C.A. §§ 5107, 5302 (West 1991); 38 C.F.R. §§ 1.963(a), 1.965(a) (1999). REASONS AND BASES FOR FINDINGS AND CONCLUSIONS In July 1991, the veteran filed a claim for service connection. Records obtained at that time included a DD Form 214 reflecting his separation and release from active duty on June 17, 1991. A rating decision in July 1991 granted service connection for degenerative disk disease at L4-5 and L5-S1 and assigned a 10 percent rating for the disability, effective from June 18, 1991. Disability compensation payments were begun beginning July 1, 1991. In September 1995, the RO received official notice from the service department, dated in September 1994, that the veteran's military records had been corrected to show that he was discharged from active duty from the Army Reserve, effective from November 4, 1991. The RO wrote to the veteran in April 1996 stating that it was proposing to terminate his disability compensation benefits effective from July 1, 1991, until December 1, 1991, resulting in an overpayment. Although the initial notice from the service department indicated that he received severance pay, subsequent communication revealed that he did not receive any severance pay. Following an audit of the veteran's account in August 1997 that showed that the veteran was overpaid VA compensation benefits in the amount of $2,275.00 for the period from August 1, 1991, to December 1, 1991, action was taken to reduce the veteran's award. In March 1998, the veteran requested a waiver of recovery of the overpayment. By a decision in March 1998, the RO's Committee on Waivers and Compromises denied the veteran's request for a waiver, finding that, although there was no fraud, misrepresentation, or bad faith on the part of the veteran, he was paid benefits erroneously and was unjustly enriched by receipt of those benefits, resulting in an unfair gain to him at the expense of the Government. The Committee also found that, based on financial information provided by him, it would not be against equity and good conscience to require repayment of the debt. The veteran appealed that determination. A Financial Status Report from the veteran dated in March 1998 showed monthly income consisting of $1,437.00 and expenses totaling $1,335.00, although that total did not reflect any amount for food or gasoline expense, resulting in a net surplus of approximately $102.00. The veteran stated that he was charging his food and gasoline on his credit cards. Communication received from the veteran in May 1998 showed total monthly income of $1,512.00, consisting of VA disability compensation and Social Security benefits. The veteran indicated that a portion of the Social Security payment, on behalf of one of his minor sons, would stop, effective in November 1998 due to his reaching the age of 18 years. The veteran also reported a total of $1,394.49 in monthly expenses, resulting in a net surplus of approximately $117.00. That amount also did not include an amount for food or gasoline expense. Later in May 1998, the RO denied a request by the veteran's spouse, from whom he was separated, for an apportionment of the veteran's VA benefits on the basis that such an apportionment would create a hardship on the veteran. The veteran provided current financial information in February 1999, showing monthly income of $1,176.00 and monthly expenses totaling approximately $1,113.00, again without an amount for food or gasoline expense, resulting in a net surplus of approximately $63.00. Initially, the Board notes that the veteran has not argued that the overpayment was improperly created and he has not disagreed with the amount of the overpayment. VA compensation benefits are payable only to a veteran, which is defined as a person who served in the active military and who was discharged under conditions other than dishonorable. 38 U.S.C.A. §§ 101(1), 1110. The regulations provide that the effective date for a grant of service connection shall be the day following separation from active service or the date entitlement arose if claim is received within 1 year after separation from service; otherwise, the date of receipt of claim, or the date entitlement arose, will be used, whichever is later. 38 C.F.R. § 3.400(b)(2). The Board finds that the evidence is clear that the veteran was improperly paid VA benefits for the period from July 1, 1991, to December 1, 1991, based on the service department's later revision of the date of his release from active duty. Therefore, the overpayment in question, in the amount calculated by the RO, was properly created. The law precludes waiver of recovery of an overpayment or waiver of collection of any indebtedness where any one of the following elements is found to exist: (1) Fraud, (2) misrepresentation, or (3) bad faith. 38 U.S.C.A. § 5302. The Board agrees with the Committee's resolution of this question in favor of the veteran, which found that, resolving all doubt in the veteran's favor, his actions did not represent fraud, misrepresentation, or bad faith. 38 U.S.C.A. § 5107(b). Therefore, waiver of recovery of the overpayment is not precluded by law. The Board next turns to consideration of whether the evidence establishes that recovery of the indebtedness would be against equity and good conscience, in which case recovery of that overpayment may be waived. 38 U.S.C.A. § 5302; 38 C.F.R. §§ 1.963, 1.965. The following is pertinent to this matter: The standard "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. 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 the following elements, which are not intended to be all-inclusive: 1. Fault of debtor. Where actions of the debtor contribute to creation of the debt. 2. Balancing of faults. Weighing fault of 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 the VA benefits were intended. 5. Unjust enrichment. Failure to make restitution would result in unfair gain to the debtor. 6. Changing position to one's detriment. Reliance on VA benefits results in relinquishment of a valuable right or incurrence of a legal obligation. 38 C.F.R. § 1.965(a). Regarding the elements concerning fault, the evidence is clear that VA bore no fault in the creation of the debt. The effective date for payment of VA benefits was established based on information furnished by the veteran and the service department on the DD From 214 as to the date the veteran was released from active duty. Likewise, at least in 1991, the veteran was also not at fault. The debt arose solely because of the veteran's actions in correcting his military records to reflect the actual date of his release from active duty from his Reserve component. Thus, while it was his actions that led to the creation of the overpayment, there is no evidence of any intent on the veteran's part to retain any funds to which he was not entitled. Consideration of this element weighs neither for or against recovery of the overpayment. Further, withholding of benefits or recovery of the overpayment would defeat the purpose of the VA benefits, since, during the period on question, the veteran is in receipt of compensation benefits which are meant to compensate a veteran for the reduction in earning capacity due to service-connected disabilities. Because the veteran was paid by the service department for the period in question, he was not entitled to disability compensation from VA; therefore, failure to make restitution would result in unfair gain to him. There is no evidence that the veteran changed his legal position to his detriment on the basis of the amount he was overpaid. Each of the last two elements weigh in favor of recovery of the debt. The overriding concern in this case, however, is whether collection of the overpayment would deprive the veteran of the basic necessities of life. In this regard, the record reflects financial information that the veteran submitted on three occasions, in March 1998, May 1998, and February 1999. The information supplied by the vet on those occasions shows approximate monthly surpluses of $102, $117, and $63. The veteran made clear, however, that the expense data that he had provided did not include any amount for food or gasoline, indicating that he was having to charge those costs on his credit cards. Allowing a reasonable amount for those purposes, the Board finds that the veteran's monthly expenses exceed his monthly income. Such a finding weighs against requiring the veteran to repay the overpayment, since doing so would apparently deprive him, to some degree, of the necessities of life. Weighing all of the above factors, and despite the fact that VA has apparently already recovered most, if not all, of the stated overpayment, the Board is persuaded that recovery of the overpayment at issue would not be equitable, inasmuch as doing so either did or would impose undue financial hardship on the veteran so as to deprive him of the basic necessities of life. 38 U.S.C.A. § 5107(b). ORDER Waiver of recovery of the overpayment of disability compensation benefits is granted. C. W. Symanski Member, Board of Veterans' Appeals