Court Opinion

ID: 817088
Source: CourtListenerOpinion
Date Created: 2013-02-01 01:47:56.369368+00
Date Added: 2024-06-11T13:18:31.106382
License: Public Domain

UNITED STATES COURT OF APPEALS FOR VETERANS CLAIMS

                                          NO . 04-1248

                                 JOHN M. FERENC, APPELLANT ,

                                                V.

                                   R. JAMES NICHOLSON ,
                         SECRETARY OF VETERANS AFFAIRS, APPELLEE.

                         On Appeal from the Board of Veterans' Appeals

                                  (Decided     May 12, 2006 )

       Allan T. Fenley, of Schenectady, New York, was on the brief for the appellant.

        Tim S. McClain, General Counsel; R. Randall Campbell, Assistant General Counsel; Brian
B. Rippel, Deputy Assistant General Counsel; and Erika E. Liem, all of Washington, D.C., were on
the brief for the appellee.

       Before KASOLD, LANCE, and SCHOELEN, Judges.

       SCHOELEN, Judge: The appellant, John M. Ferenc, through counsel, appeals a May 28,
2004, Board of Veterans' Appeals (Board) decision in which the Board found that, as a result of his
incarceration, the appellant's disability compensation was properly reduced to that commensurate
with a 10% disability rate, effective October 1983. Record (R.) at 1-10. The appellant and the
Secretary each filed a brief. This appeal is timely, and the Court has jurisdiction over the case
pursuant to 38 U.S.C. §§ 7252(a) and 7266. For the reasons that follow, the Court will affirm the
Board's decision.

                                      I. BACKGROUND
       The appellant served on active duty in the U.S. Marine Corps from September 1945 to
January 1949. R. at 12. He was rated 70% disabled for service-connected schizophrenia, effective
January 1969, and was subsequently rated 100% disabled, effective October 1980. R. at 73.
        In September 1983, the appellant was convicted of multiple felonies and incarcerated with
the Department of Corrections of the State of Florida. R. at 357-59. The VA regional office (RO)
notified the appellant that his disability benefits would be reduced, and that his dependents were to
receive an apportionment of the reduced benefits. R. at 164-65. In October 1983, the appellant
submitted a Notice of Disagreement (NOD) regarding the reduction of his benefits. R. at 189. An
April 1984 RO action withdrew the appellant's NOD because the balance of his reduced
compensation was being apportioned to his dependents. R. at 196. A September 30, 2002, decision
of the Court determined that the RO had impermissibly withdrawn the NOD, and the Court
remanded the issue of whether the NOD was timely filed back to the Board for readjudication. R.
at 261-62. A May 2003 Board decision found that the October 1983 NOD was timely, and remanded
the case to the RO for the issuance of a Statement of the Case (SOC). R. at 348. The RO issued an
SOC in January 2004 (R. at 388), and the appellant then perfected his appeal to the Board (R. at
403).
        On May 28, 2004, the Board issued the decision here on appeal. R. at 1-11. The Board
found that, as a result of his incarceration, the appellant's disability compensation was properly
reduced to that commensurate with a 10% disability rating, effective October 1983. Accordingly,
the Board denied his claims for the resumption of benefits paid at the pre-incarceration rate. R. at
8.

                               II. THE PARTIES' ARGUMENTS
        The appellant argues that (1) the reduction of his benefits due to his incarceration violates
the statutory prohibitions against the reduction of a rating of total disability that has been in force
for more than 20 years, and the severance of service connection that has been in force for more than
10 years, and (2) the apportionment of the reduced compensation to the appellant's dependents
violates the statute governing the nonassignability of compensation benefits. Appellant's Brief (Br.)
at 4-5. The appellant argues for a reversal of the May 28, 2004, Board decision and requests that he
receive "payment of the benefits of which he has been deprived from 1983 to the present." Id. at 5-6.
        The Secretary first argues that the appellant does not have standing under this Court's
decision in Belton v. Principi, 17 Vet.App. 209 (2003). Secretary's Br. at 8. The Secretary further

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argues that the appellant's argument is "premised upon a miscomprehension of the facts and the law."
Id. at 8-9. Specifically, the Secretary states that the appellant's disability rating has not been reduced,
nor has his service connection been severed. Rather, the appellant's level of compensation, which
is distinct from a rating level and from service-connection status, has been reduced. Id. The
Secretary also argues that the reduction and apportionment of the appellant's disability compensation
does not violate the nonassignability provision of 38 U.S.C. § 5301 (a)(1). R. at 9-11.

                                           III. ANALYSIS
        The appellant argues that the reduction in compensation and apportionment of his reduced
compensation pursuant to 38 C.F.R. § 3.665 (2005) violates 38 U.S.C. §§ 110, 1159, and 5301.
VA's interpretation of regulations and statutes are reviewed de novo by the Court. See Lane v.
Principi, 339 F.3d 1331, 1339 (Fed. Cir. 2003) ("[I]nterpretation of a statute or regulation is a
question of law . . . ."); Butts v. Brown, 5 Vet.App. 532, 539 (1993) (en banc) (Court reviews
"questions of law de novo without any deference to the Board's conclusions of law").
        In statutory interpretation, if "the plain meaning of a statute is discernable, that 'plain meaning
must be given effect.'" Johnson v. Brown, 9 Vet.App. 369, 371 (1996) (quoting Tallman v. Brown,
7 Vet.App. 453, 460 (1995)); see also Brown v. Gardner, 513 U.S. 115, 119 (1994). "Determining
a statute's plain meaning requires examining the specific language at issue and the overall structure
of the statute." Gardner v. Derwinski, 1 Vet.App. 584, 586 (1991) (citing Bethesda Hosp. Ass'n v.
Bowen, 485 U.S. 399, 403-05 (1988)), aff'd sub nom. Gardner v. Brown, 5 F.3d 1456 (Fed.Cir.
1993), aff'd, 513 U.S. 115 (1994). "[W]hen a reviewing court 'find[s] the terms of a statute
unambiguous, judicial inquiry is complete except in rare and exceptional circumstances.'" Smith v.
Derwinski, 2 Vet.App. 429, 431 (1992) (quoting Demarest v. Manspeaker, 498 U.S. 184 (1991)).
The "plain meaning must be given effect unless a 'literal application of the statute will produce a
result demonstrably at odds with the intention of its drafters.'" Gardner, 1 Vet.App. at 586-87
(quoting Griffin v. Oceanic Contractors, Inc., 458 U.S. 564 (1982)). "[W]here two statutes are
capable of coexistence, it is the duty of the courts, absent a clearly expressed congressional intention
to the contrary, to regard each as effective." Combee v. Brown, 5 Vet.App. 248, 250 (1993) (citing
Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1018 (1984)).

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                                       A. Reduction of Benefits
        The Secretary first argues that the appellant does not have standing to challenge the reduction
of his benefits under this Court's holding in Belton. Secretary's Br. at 8. In Belton, the Court
determined that the petitioner, an incarcerated veteran whose benefits were reduced and apportioned
to his mother, did not have standing to challenge the termination of his mother's apportionment.
Belton, 17 Vet.App. at 209. In denying the petitioner standing, the Court stated that he did not have
a "legally significant connection" to the apportioned benefits his mother was receiving because he
had no personal stake in the benefits. Id. at 211. However, Belton is distinguishable from the
present case in that the petitioner in Belton was challenging only the apportionment. Here, the
appellant challenges both the apportionment and the precedent reduction in benefits. Because the
holding in Belton was limited to the challenge of the apportionment, we see no reason or authority
to extend that holding to a challenge of the reduction of compensation payments. Thus, we find that
the appellant does have standing to challenge the reduction of his compensation payments because,
as it was his compensation payments that were reduced, as opposed to apportioned benefits arising
from his benefits, he has a personal stake in these reduced compensation payments.
        Under the statutory scheme, disability compensation benefits are paid to veterans for
disabilities that were incurred or aggravated in the military. See 38 U.S.C. §§ 1110, 1131. However,
if a veteran in receipt of compensation benefits is incarcerated for conviction of a felony, these
payments of compensation are subject to reduction. 38 U.S.C. § 5313(a); 38 C.F.R. § 3.665(a).
"Compensation" is defined, in relevant part, as a "monthly payment made by the Secretary to a
veteran because of [a] service-connected disability." 38 U.S.C § 101(13). The overall purpose of
the disability compensation scheme is to compensate veterans "when they have, in honorable service
to their nation, suffered a loss that is reflected in the decreased ability to earn a living for themselves
and their families." Hunt v. Derwinski, 1 Vet.App. 292, 296 (1991).
        In this regard, the term "disability" means "the average impairment in earning capacity
resulting from diseases, injuries or their residual conditions." 38 C.F.R. § 4.1 (2005); see Felden v.
West, 11 Vet.App. 427, 431 (1998). Congress granted VA authority to develop a schedule to assess
the levels of disabilities (the Schedule for Rating Disabilities). The rating schedule provides degrees
of impairment evaluated from 0% to 100% in increments of ten. 38 U.S.C. § 1155. The disability

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percentage ratings, "as far as practicable," are based on the "average impairments of earning
capacities resulting from such diseases and injuries in a civilian occupation." 38 U.S.C. § 1155,
38 C.F.R. § 4.1; see also Holland v. Brown, 6 Vet.App. 443, 446 (1994). Although Congress
delegated the authority to VA to determine the disability ratings associated with particular diseases
and injuries, Congress still dictates the amount of money afforded to each disability rating.
38 U.S.C. § 1114.
        Under the statutory scheme addressing disability compensation, Congress has provided
protection for disabilities that have been rated at or above a particular level for 20 years or more.
See Colayong v. West, 12 Vet.App. 524 (1999). Section 110 states in pertinent part that "[a]
disability which has been continuously rated at or above evaluation for twenty or more years for
compensation purposes under laws administered by the Secretary shall not thereafter be rated at less
than such evaluation, except upon a showing that such rating was based on fraud." 38 U.S.C. § 110
(emphasis added). Although the terms "rated" and "rating" are not explicitly defined in section 110,
the intended meaning of these terms "may be gleaned from reading the statute as a whole and
harmonizing the parts into a coherent mandate." Conary v. Derwinski, 3 Vet.App. 109, 112 (1992)
(Steinberg, J., concurring).
        The plain language of the statute makes clear that disabilities ratings that have been in effect
continuously for 20 years or more are protected from being reduced to lower disability ratings. Here,
it is true that the appellant's 100% disability rating has been in effect since October 1980; however,
VA has taken no action to reduce that disability rating.
        Similarly, service connection for a disability that has been in force for 10 or more years may
not be severed. 38 U.S.C. § 1159. The term "service-connected" is defined by statute as, "with
respect to disability or death, . . . such disability was incurred or aggravated . . . in the line of duty
in the active military, naval, or air service." 38 U.S.C. § 101 (16). The plain meaning of section
1159 is that one's status of service connection that has been in force for 10 years or more may not
be severed. In this case, the appellant's service-connected status has not been severed. Rather, his
payment has been reduced to that commensurate with a 10% disability rating. In order for a veteran
to receive disability compensation, the disability must be service connected.
        The appellant argues that 38 U.S.C. § 1159 prohibits the reduction of his compensation

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payments while he is incarcerated. As discussed above, "compensation" is the "monthly payment
made by the Secretary to a veteran because of [a] service-connected disability." 38 U.S.C.
§ 101 (13). The two concepts, severance and reduction of compensation, are intertwined, but plainly
distinct.
        It is evident that "compensation" is a distinct legal term from both "rating" and "service
connection." Though the three terms are closely related to one another, it is obvious that Congress
has created a clear distinction between these terms. The plain meaning of sections 110 and 1159 is
clear in preventing the reduction of a disability rating and the severance of service connection that
have been in force for statutorily prescribed terms, but these statutes cannot be interpreted to apply
also to a prohibition of reduction of compensation due to incarceration. These statutory provisions
do not address the reduction of compensation, nor does the appellant cite to any law that suggests
that these statutory provisions apply to the reduction of compensation. Not only do 38 U.S.C. §§ 110
and 1159 not prohibit the reduction of compensation, but a separate statute also specifically allows
for the reduction in compensation payment to incarcerated beneficiaries. See 38 U.S.C. § 5313. The
statutes address separate concepts, and thus, are all capable of coexistence. See Combee, supra. It
is therefore the duty of this Court to regard each as effective. Id. As such, the appellant's argument
that a reduction in compensation is prohibited under 38 U.S.C. §§ 110 and 1159 is not a correct
interpretation of the law, and the reduction of the appellant's benefits pursuant to 38 C.F.R. § 3.665
does not abrogate 38 U.S.C. § 110 or 38 U.S.C. § 1159.
                                    B. Assignment of Benefits
        When a veteran's disability compensation has been reduced based on incarceration, all or a
part of the reduced compensation may be apportioned to dependents of the veteran. 38 U.S.C.
§ 5313 (b)(1); 38 C.F.R. § 3.665(e)(1). The appellant argues that the apportionment of his benefits
violates the statute governing the nonassignability and exempt status of benefits. According to the
appellant, the apportionment is an assignment of his benefits that is precluded under 38 U.S.C.
§ 5301(a)(1). The Secretary argues that nonassignability under 38 U.S.C. § 5301(a)(1) is subject to
exceptions specifically authorized by law, and that apportionment is an exception specifically
authorized by law. Therefore, the Secretary states, the apportionment of benefits does not violate
the nonassignability statute.

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       The statute relied upon by the appellant for this argument states that "[p]ayments of benefits
due or to become due under any law administered by the Secretary shall not be assignable except to
the extent specifically authorized by law." 38 U.S.C. § 5301(a)(1) (emphasis added). Only the
payments of benefits due or to become due are subject to this nonassignability provision. See id.
However, because the appellant's compensation has been properly reduced, the only payments due
to him are the payments reduced to the amount commensurate with a 10% disability rating that he
is currently receiving. This 10% portion has not been assigned, as he is in full receipt of these
benefits. Therefore, there has been no assignment of the appellant's benefits. The argument
regarding the assignment of the appellant's benefits is unavailing.
                                  C. Apportionment of Benefits
       Although the appellant does have standing to challenge the purported reduction and
severance of his compensation benefits, he does not have standing to challenge the apportionment
of benefits, pursuant to this Court's decision in Belton, supra. As mentioned above, in Belton, the
mother of an incarcerated veteran was collecting an apportionment of the veteran's benefits. Belton,
17 Vet.App. at 209. When she entered a Medicaid-subsidized nursing home with all of her expenses
covered by Medicaid, VA terminated her apportionment award. Id. at 210-11. The veteran
petitioned the Court to reinstate the apportionment award to the mother. Id. The Court stated that
       [a]lthough arising from a veteran's benefits, an apportionment is an entity legally
       separate from those benefits. . . .The petitioner has no legally significant connection
       to the apportioned benefits; . . .[t]herefore, he does not have a personal stake in the
       outcome, nor has he shown that he has been adversely affected . . . As such, the
       petitioner's argument that he has standing lacks merit.
Belton, 17 Vet.App. at 211. The same reasoning applies to the present case. Once the reduction of
benefits has been authorized, the appellant no longer has a personal stake in the apportioned
payments. The appellant cannot demonstrate that he has been adversely affected by the decision to
give the apportioned benefits to his dependents when the determination to reduce his compensation
payments has already been authorized. Therefore, the appellant does not have standing to challenge
the apportionment.

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                                     IV. CONCLUSION
      After consideration of the appellant's and the Secretary's briefs, and a review of the record,
the Board's May 28, 2004, decision is AFFIRMED.

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