Erickson v. West

UNITED STATES COURT OF APPEALS FOR VETERANS CLAIMS

No. 98-1542

GERALD L. ERICKSON , APPELLANT ,

V.

TOGO D. WEST , JR.

SECRETARY OF VETERANS AFFAIRS, APPELLEE.

On Appeal from the Board of Veterans' Appeals

(Decided May 12, 2000 )

Jeffrey Wood, of York, Pennsylvania, was on the brief for the appellant.

Leigh A. Bradley, General Counsel; Ron Garvin, Assistant General Counsel; Mary Ann

Flynn, Acting Deputy Assistant General Counsel; and Brian B. Rippel, all of Washington, D.C.,

were on the brief for the appellee.

Before HOLDAWAY, IVERS, and STEINBERG, Judges.

STEINBERG, Judge, filed the opinion of the Court. HOLDAWAY, Judge, filed a dissenting

opinion.

STEINBERG, Judge: The appellant, veteran Gerald L. Erickson, appeals through counsel

a July 30, 1997, Board of Veterans' Appeals (BVA or Board) decision that determined that a debt

based on an overpayment of Department of Veterans Affairs (VA) benefits had been properly

created. Record (R.) at 3. The appellant has filed a brief, and the Secretary has filed a brief. This

appeal is timely, and the Court has jurisdiction pursuant to 38 U.S.C. §§ 7252(a) and 7266(a). For

the reasons that follow, the Court will reverse the BVA decision.

I. Background

Although no DD-214 Form is contained in the record on appeal (ROA), the Board decision

stated that the veteran had active service from August 1953 to August 1957 and from August 1961

to November 1976. R. at 2. He has been in receipt of a 100% combined VA service-connected-

disability rating for bilateral multiple sclerosis (MS) of the upper and lower extremities since at least

1980. R. at 25. In June 1992, a VA regional office (RO) awarded him special monthly

compensation (SMC) "based on a determination that the loss of use of both lower extremities . . .

is permanent and total." R. at 33. At that time, the veteran was also awarded SMC based on his

being "housebound". R. at 34.

From April to November 1995, the veteran was hospitalized at a VA Medical Center

(VAMC) based on the worsening of his MS. R. at 39-43. In May 1995, the veteran's service

organization (Paralyzed Veterans of America (PVA)) wrote to the VARO: "As the veteran's

representative we wish to advise . . . VA that the veteran is a patient at the [VAMC]. . . . Please

obtain report to adjust compensation if required to prevent an overpayment." Supplemental (Suppl.)

R. at 2. In November 1995, the RO awarded "increased" SMC "because of the severity of [the

veteran's] service-connected disabilities including [his] need for aid and attendance", effective April

1995. R. at 48; Suppl. R. at 4-6. As the basis for the SMC awarded, the RO cited, inter alia,

38 U.S.C. § 1114(l) and (r)(1). Suppl. R. at 6. A November 13, 1985, VAMC record indicated that

the veteran was "to be transferred to [a nursing home] whenever a bed is available." R. at 40; see

also R. at 45. On December 5, 1995, the RO received a letter from the veteran's PVA representative

that "advised that the veteran was discharged from the . . . VAMC [on] November 13, 1995[,] and

placed in a . . . [n]ursing [h]ome under VA contract at the present time" and that noted that "[i]t

would appear [that] the veteran may be entitled to SMC R2 [(SMC under 38 U.S.C. § 1114(r)(2))]."

R. at 45. The RO responded to the veteran on December 14, 1995, by requesting that he "provide

information from the nursing home which describes in full the care that is being administered and

supervision provided by health care professional(s)." Suppl. R. at 8.

In February 1996, the RO awarded, effective December 5, 1995, "additional aid and

attendance allowance under 38 U.S.C. § 1114, subsection (r)(2) . . . on account of [the veteran's] . . .

being in need of regular aid and attendance and, in addition, on account of [his] need of a higher

level of care". R. at 54. In addition, the RO listed in its decision and continued the prior awards of

SMC for aid and attendance that had been made pursuant to 38 U.S.C. § 1114(l), and discontinued,

effective December 5, 1995, the award that had been made under section 1114(r)(2). R. at 53-54.

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As a reason or basis for its decision, the RO stated: "The evidence now received records that the

veteran is in a nursing home where he is receiving 24[-]hour care by a health care professional care

[sic] that is being supervised by a physician." R. at 52. Attached to the letter from the RO notifying

the veteran of his award of additional SMC was a VA Form 21-8764. Suppl. R. at 1. That form

contained eleven separate, single-spaced sections regarding "VA CHECK DELIVERY ", "VA

HOSPITALIZATION AND OUTPATIENT TREATMENT ", "DENTAL TREATMENT ", "ADDITIONAL

COMPENSATION FO R DEPEN DEN TS ", "IN DIV ID UA L UN EM PLO YA BILITY ", "VOCATIONAL

REHABILITATION ", "EDUCATIONAL BENEFITS", "NONASSIGNABILITY AND EXEMPT STATUS OF

BENEFITS", "GOVERNMENT LIFE INSURANCE ", "CHANGE OF ADDRESS NOTICE ", and, finally, at the

bottom of the form, the section pertaining to the veteran to whom the form was sent, "CONDITIONS

AFFECTING RIGHT TO PAYMENTS ". Ibid. That final section itself contained eight provisions, the

fourth of which stated:

4. If your award includes [SMC] due to need for aid and attendance, this additional

allowance is generally subject to reduction from the first day of the second calendar

month of admission to hospitalization, nursing home[,] or domiciliary care at VA

expense.

Ibid. (emphasis added).

Later in February 1996, the RO issued a decision that stated: "Recently it was determined that

the veteran's disabilities met the requirements of the highest level of [SMC] provided by law. The

evidence now being reviewed . . . confirm[s] the findings in the pervious [sic] decision; therefore,

entitlement as previous [sic] established is continued." R. at 59.

A May 8, 1996, VA report of contact indicated: "The veteran was placed at [a nursing home]

. . . on 11-13-95 with an indefinate [sic] contract." R. at 67. Subsequently, on May 9, 1996, the RO

sent to the veteran a letter proposing to eliminate his increased SMC and to reduce his monthly

benefits payments accordingly, based on the fact that the VAMC had "told [the RO that] they

approved payment for your nursing home care which began on November 13, 1995". R. at 69. This

letter also indicated that the reduction would "result in an overpayment of benefits" that the veteran

would have to repay. Ibid. On May 14, 1996, the RO received from the veteran's PVA

representative a claim "for a VA administrative error in the creation of the debt", stating: "When the

veteran left the . . . VAMC for the . . . [n]ursing [h]ome the hospital has obligation [sic] to keep the

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adjudication division informed". R. at 75. On May 23, 1996, the RO sent to the veteran a letter

denying the claim for administrative error, which, if found, would have eliminated the veteran's

liability for any overpayment, and explained that the "overpayment occurred due to a delay in

reducing your [SMC] to the hospitalized rate". R. at 81. The veteran timely appealed to the Board.

R. at 84, 97. In the July 30, 1997, BVA decision here on appeal, the Board denied the veteran's

claim for administrative error and found that "the overpayment was not due solely to error on the part

of VA". R. at 7.

II. Analysis

Pursuant to 38 U.S.C. § 1114(l), a veteran who, "as the result of a service-connected

disability, has suffered the . . . loss of use of both feet, or of one hand and one foot . . . , or is

permanently bedridden or so helpless as to be in need of regular aid and attendance" shall be entitled

to increased SMC. 38 U.S.C. § 1114(l). In addition, "if the veteran, as the result of

service-connected disability, has suffered disability under conditions which would entitle such

veteran to two or more of the rates provided in one or more subsections (l) through (n) of [section

1114]" (38 U.S.C. § 1114(o)) and "is in need of regular aid and attendance, then" he shall be entitled

to additional SMC (38 U.S.C. § 1114(r)(1)). If, "in addition to such need for regular aid and

attendance, . . . the Secretary finds that the veteran, in the absence of the provision of such care,

would require hospitalization [or] nursing home care", then, pursuant to section 1114(r)(2), the

veteran shall be entitled to increased, additional SMC "in lieu of the allowance authorized in" section

1114(r)(1). 38 U.S.C. § 1114(r)(2). "For the purposes of clause (2) of [subsection (r) of section

1114], need for a higher level of care shall be considered to be need for personal health-care services

provided on a daily basis in the veteran's home". 38 U.S.C. § 1114(r) (emphasis added).

In this case, in November 1995 the RO awarded the veteran SMC pursuant to both subsection

(l) and (r)(1) of section 1114, effective April 1995. Suppl. R. at 5-6. In February 1996, the RO

continued the SMC that was being paid to him pursuant to section 1114(l) (R. at 53), and

discontinued, effective December 1995, the additional SMC under section 1114(r)(1) and in its stead

awarded, effective December 1995, additional SMC pursuant to section 1114(r)(2) (R. at 54). See

also Suppl. R. at 6 (description in November 1995 RO decision of SMC paid prior to February 1996

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RO decision). At the time of both the November 1995 and February 1996 RO decisions, the veteran

was in a private nursing home, to which he had been transferred at VA expense from a VAMC (R. at

40, 45), and there is no question that the RO was specifically aware of these facts at the time of its

respective decisions. Cf. Bell v. Derwinski, 2 Vet.App. 611, 613 (1992) (holding that RO had

constructive knowledge of documents generated by VAMC); Lynch (Gary) v. Gober, 11 Vet.App.

22, 26-27 (1997) (discussing pre-Bell application of Bell constructive-knowledge doctrine), vacated

and remanded on other grounds sub nom. Lynch v. West, No. 98-7039 (Fed. Cir. Dec. 29, 1998)

(table), reinstated by Lynch v. West, 12 Vet.App. 391 (1999) (per curiam order). At the time of the

November 1995 RO decision (Suppl. R. at 4), the RO had been in receipt of the veteran's PVA

representative's May 1995 letter notifying the RO of the veteran's ongoing hospitalization at the

VAMC (Suppl. R. at 2). In addition, the November 1995 RO decision listed as evidence received

the VAMC hospital summary that indicated that the veteran was to be "transferred" to a nursing

home (R. at 40; see also Secretary's Brief at 2 (noting that veteran was "transferred directly to a VA-

contract nursing home for additional care")). Suppl. R. at 4. In making the February 1996 award,

the RO explicitly noted: "The evidence now received records that the veteran is in a nursing home

where he is receiving 24[-]hour care by a health care professional care [sic] that is being supervised

by a physician". R. at 52. The RO listed as evidence received the December 1995 PVA

representative's letter that had reported that the veteran had been transferred to a nursing home

"under VA contract at the present time" (R. at 45) and a letter from "Hollis D. Nipe, M.D.", which

is not of record. Ibid.

Hence, notwithstanding that the facts clearly show that the RO was fully aware of the

veteran's situations, the RO in February 1996 continued the award of "[SMC] under 38 U.S.C.

§ 1114[(l),] . . . on account of [the veteran's] being so helpless as to be in need of regular aid and

attendance while not hospitalized at government expense" (R. at 52-53), and awarded "additional

aid and attendance allowance under 38 U.S.C. § 1114[(r)(2)] . . . on account of [the veteran's] . . .

being in need of regular aid and attendance and, in addition, . . . of [his] need of a higher level of

care" (R. at 54). These awards were made despite the fact that the veteran did not meet the "higher

level of care" criterion set forth in section 1114(r) because he was not receiving "personal health-care

services . . . in [his] home", and despite the fact that, contrary to what the RO stated, the veteran was

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in fact "hospitalized at government expense". R. at 53. Indeed, the BVA specifically found: "There

was fault on the part of VA in the creation of the overpayment in awarding the veteran the additional

aid and attendance allowance while he was hospitalized in a [VAMC] and while he was in a nursing

home under VA contract." R. at 4.

It was not until May 1996 that the RO first proposed to reduce the veteran's compensation

benefits by the amount of the SMC to which he was not entitled. R. at 69. The RO concluded that

the reduction would "result in an overpayment of benefits which ha[d] been paid to" the veteran

(ibid.); it is the creation of that overpayment (later determined to be $30,309.00 (R. at 87)) that is

the subject of this appeal.

Pursuant to 38 U.S.C. § 5112(a), "[e]xcept as otherwise provided in this section, the effective

date of a reduction or discontinuance of compensation . . . shall be fixed in accordance with the facts

found." Section 5112(b)(10) provides otherwise, as follows:

(b) The effective date of a reduction or discontinuance of compensation . . .

(10) by reason of an erroneous award based solely on administrative error or

error in judgment shall be the date of last payment.

38 U.S.C. § 5112(b)(10); see 38 C.F.R. § 3.500(b)(2) (1999) (effective date of reduction of VA

benefits is "date of last payment on an erroneous award based solely on administrative error or error

in judgment"). Hence, when an overpayment has been made "by reason of an erroneous award based

solely on administrative error", the reduction of that award cannot be made retroactive to form an

overpayment debt owed to VA from the recipient of the erroneous award.

The question in this case, then, is whether the Board properly determined that the

overpayment in this case "was not due solely to error on the part of VA". R. at 7. The Board's

conclusion that the veteran was at least partly at fault in this case was predicated on the Board's

finding that "the veteran had reason to believe that he was not entitled to the full amount of his VA

compensation[,] which included the aid and attendance rate." R. at 6. This Court reviews BVA

factfinding under a "clearly erroneous" standard of review. 38 U.S.C. § 7261(a)(4). Under this

standard "if there is a 'plausible' basis in the record for the factual determinations of the BVA . . . [the

Court] cannot overturn them." Gilbert v. Derwinski, 1 Vet.App. 49, 53 (1990).

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The Board supported its finding as to the veteran's "reason to believe" in large part "based

on the information provided to the veteran on VA Form 21-8764". R. at 6. However, that form, in

addition to containing a great deal of information that was not relevant to the veteran's particular case

and being single-spaced and printed in a reduced typeface, indicated only that his "additional

allowance is generally subject to reduction from the first day of the second calendar month of

admission to hospitalization[ or] nursing home . . . at VA expense." Suppl. R. at 1 (emphasis added).

Moreover, in addition to the form being difficult to read, containing mostly irrelevant information,

and stating only a general policy, the VA Form 21-8764 was sent as an attachment to the February

1996 RO decision that both continued and awarded the additional SMC that VA now seeks to

recoup, and did so while expressly recounting the fact of the veteran's hospitalization and subsequent

nursing-home admission (R. at 64; Secretary's Brief at 3) and after the RO had specifically inquired

of the veteran as to the circumstances of his care at the nursing home (Suppl. R. at 8). In light of all

of these facts, the Court cannot find a plausible basis in the record for the Board's conclusion that

the veteran had had "reason to believe" that he was not entitled to the full amount of the checks that

he had received or was receiving. Moreover, the RO acknowledged not once but three times that the

veteran would be or was placed in a nursing home. It did so first in its November 1995 decision that

had awarded additional SMC for aid and attendance during the veteran's period of hospitalization

(Suppl. R. at 4 (noting that "plans were being made for nursing home placement")), then in its

February 1996 decision erroneously awarding SMC (R. at 52), and then again in a second February

1996 decision that reevaluated the veteran's situation and "continued" the entitlement (R. at 59).

Thus, the veteran had no reason to believe that the RO was not fully aware of his institutionalization.

Quite to the contrary. The Court finds that the veteran had good reason to believe that he was

entitled to the amounts that he had received under the circumstances described above.

The Secretary relies almost exclusively on this Court's opinion in Jordan v. Brown,

10 Vet.App. 171 (1997), to support his position that the BVA correctly determined that the

overpayment debt in this case was properly created. Br. at 9. The Secretary is correct that in Jordan

the Court determined that the appellant there had been "in receipt of . . . information which plainly

instructed that remarriage would preclude additional compensation, and that any payment checks

received subsequent to a remarriage were to be returned to VA". Jordan, 10 Vet.App. at 174

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(emphasis added). However, in this case, the VA Form 21-8764 cannot be said to have "plainly

instruct[ed]" the veteran to take any action whatsoever, and, in any event, did not suggest that the

veteran should return his checks to VA. Indeed, unlike the appellant in Jordan, the veteran in this

case was entitled to at least some, if not most, of the compensation amounts that he was paid; the

only amount to which he was not entitled was the amount of the check that represented increased

SMC for aid and attendance. Thus, were he to have returned the checks he would have had to return

as well a great deal of compensation to which he was entitled by virtue of his 100%

service-connected disability.

Finally, the veteran was at all times within VA control -- he went from a VAMC to a nursing

home under VA contract -- and his PVA representative even took the initiative to call to the RO's

attention the veteran's current hospitalization in May 1995, to request VA to take action to avoid an

overpayment of compensation (Suppl. R. at 2), and also to report to the RO in December 1995 that

the veteran was then in a nursing home under VA contract (R. at 45). This is the exact opposite of

the situation in Jordan, where the appellant had "fail[ed] to act in accordance with the rules

governing DIC payments" and had admitted that she had not read materials that had been sent to her

by VA. Jordan, 10 Vet.App. at 175. It is simply unreasonable to conclude that a person who has

been institutionalized in a VAMC and then transferred therefrom to a nursing home at VA expense

is at fault for not refusing to cash checks, a large portion of which he was entitled to, sent to him

while he was in that nursing home and when the RO had previously expressly affirmed its awareness

that he was under VA's auspices. In fact, the RO on May 23, 1996, appears to have acknowledged

that its own error had been the cause of the overpayment in this case, when it stated that the

"overpayment occurred due to a delay in reducing your [SMC] to the hospitalized rate". R. at 81.

Accordingly, the facts of this case differ materially from those in Jordan, supra, and, in view of the

foregoing analysis, the Court holds that the Board's factual finding that the veteran had "reason to

believe" (R. at 6) that he was not entitled to the checks that he received did not have a plausible basis

in the record and was thus clearly erroneous. See 38 U.S.C. § 7261(a)(4); Gilbert, supra.

Absent the "reason to believe" cited by the Board, there is no basis in law for the Board's

conclusion that the overpayment debt was validly created and, accordingly, the Court reverses the

Board's decision and holds, on de novo review, that the overpayment in this case was created "by

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reason of an erroneous award based solely on administrative error", and, therefore, cannot serve as

the basis of an overpayment debt owed to VA from the veteran. 38 U.S.C. § 5112(b)(10); see

38 C.F.R. § 3.500(b)(2); see also Jordan, 10 Vet.App. at 174 ("question whether the BVA erred in

determining the validity of the creation of debt is a question of law, which this Court reviews de

novo"). In effect, the creation of the overpayment debt on the facts of this case was void ab initio,

just as we have held that rating reductions effected without compliance with applicable regulations

are "void ab initio". Greyzck v. West, 12 Vet.App. 288 (1999) (citing Kitchens v. Brown, 7 Vet.App.

320, 325 (1995); Murincsak v. Derwinski, 2 Vet.App. 363, 369 (1992); and Schafrath v. Derwinski,

1 Vet.App. 589, 596 (1991)); see also Dofflemyer v. Derwinski, 2 Vet.App. 277, 280-81 (1992).

III. Conclusion

Upon consideration of the foregoing analysis, the ROA, and the submissions of the parties,

the Court reverses the July 30, 1997, BVA decision and remands the matter for the repayment to the

veteran by VA of the overpayment debt that VA wrongfully collected.

REVERSED AND REMANDED.

HOLDAWAY, Judge, dissenting: I respectfully dissent with the holding of the majority. I

do so reluctantly because the result reached by the majority is a good equitable result, given the fact

that the VARO's negligence and actions, as ably noted in the majority opinion, were certainly the

principal cause in creating the overpayment to the appellant. However, this Court is a court of law,

not a court of equity. Unless the Board was clearly erroneous in its factual finding that VA was not

solely to blame, this Court cannot overturn that finding, no matter how much we may wish to do so

out of sympathy for this appellant.

My review of this case ineluctably leads me to the conclusion that the Board's finding was

firmly based in the record which clearly indicated that the appellant was well aware of the fact that

he was receiving overpayments. The inescapable conclusion is that while VA was primarily at fault

for the creation of the overpayment, there still is an element of fault on the appellant's part because

he accepted money to which he was not entitled. To find that VA was not solely to blame is not

intended to excuse the errors made in creating the overpayments but simply applies the requirements

for a valid creation of the debt set forth by the law. Had the appellant pursued an equitable waiver

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of this valid debt, I believe that there would have been a strong case for relief, assuming that the

other factors for waiver had been present. See 38 C.F.R. § 1.965. Nonetheless, the appellant sought

to deny the validity of the indebtedness and argued that this error was solely the fault of VA and, for

whatever reason, eschewed a request for waiver of the indebtedness.

I note parenthetically that to the extent that there is an inference that VA acted somewhat

ogreishly in attempting to recover an overpayment which its negligence was largely responsible for

creating, it should be borne in mind that the appellant did receive monies to which he was not legally

entitled. VA acted reasonably and responsibly in trying to recapture the windfall that the appellant

received.

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