# FILED Feb. 12, 1997 Cecil Crowson, Jr . Appellate Court Clerk IN THE COU RT OF A PPEA LS OF TENN ESSEE WESTERN SECT ION A T JA CKSON JAMES P. MITCHELL, ) ) Plaintiff/Appellant, ) Madison Chancery No. 48842 ) VS. ) A ppeal No. 02A 01-9510-CH- 00230 ) JAM ES DA

VENPORT, C ommissioner ) of the Department of Employment ) Security of the State of Ten nessee; ) NOMA OUTDOOR PRODUCTS, ) INC., ) ) Defendants/Ap pellees. )
APPEAL FROM THE CH ANCER Y COU RT OF M ADISO N COU NTY

AT JACKSON, TENN ESSEE THE HONORABLE JOE C. MOR RIS, CHANC ELLOR
CONNIE WESTB ROOK THOMAS E. VORNBER GER Memphis, Tennessee Attorneys for Appellant CHA RLES W. BUR SON At torney General & R eporter KIMBERLY M. FRAYN Pursuant t o Rule 7 of

the Rules of the Su preme Cour

t of Tenn essee JENNIFER HELTON SMALL Deputy At torney General Nashvil le, Tennessee Attorneys for Appellee, Stateof Tennessee CA RY SCHWIM MER KAR EN W. GR OC HAU KIESEWETTER WISE KAPLAN SCHWIMMER & PRATHER, PLC Memphis, Tennessee Attorneys for Appellee, Noma Outdoor Products, Inc.

AF FIRMED
ALAN E. HIGHERS , J.

CONCUR:
DAVID R. FA RMER, J. HOLLY K IRBY LIL LA RD, J. In this unemploy ment compensation cas e, James Mitchell (“Mitc hell”) fil ed a claim2

forunemployment compens ation wit h the Tennessee Depar tment of Employment Sec urity (“T D ES”). TDES approved Mitchell ’s claim, and Mitchell ’s employer , NOMA Outdoor Products, Inc. (“NOMA”), appealed TDES’ claim app roval. On appeal, the Appeals Tribunal ruled that

Mitchell was not el igible for unemployment benefits pursuant to T.C. A. § 50-7-303(a)(2) due to work- con nected misconduct an d declared that the $1,1 90.00 in unemployment

benefits that Mi tchell had previously received was an overpa ymen t. Mitchell ther

eaft er r equested that TDE S waive his $1,190.00 overpayment pur suant to T.C.A. § 50-7-303(d) (2). The Appeals Tribunal denied Mitchell’ s request for a waiver of the overpay ment, and Mitchell appealed the deci sion of the Appeals Tribunal to the B oard of Revie w. The Board of Rev iew adopted t he findings of fact and decision of the Appeals Tribunal and denied Mit chell’s request for a waiver of the over payment. Mi tchell thereafter filed a petition to r

ehear whic h was denied by the Board of Revi ew. Purs uant to T.C.A. § 50-7-304(i), Mitchell filed a petition for certiorari in chancery court seeking j udicial rev iew of the Board’s decision. The chan cerycourt dismissed Mitchell’s petition for certiorari and affirmed the decision of the Board of Revi ew, deny ing Mitc hell’s req uest for a wai ver of the overpay ment. Mi tchell appeals from the order of the c hancery cou rt argui ng that the chancery court erre d in admitting additional ev idence and erred in not vacating or setting aside the decision of the B oard of Re view. For the rea sons stated hereafter, we affirm the judgment of the chanc ery cour t.

FACTS

The following facts were found by the Appeals Tri bunal. From September 13, 1988 until May 18, 1993, Mitchell was employed by NOMA as an assistan t controller in credit and collections. As assistant controller, Mitchell’s employment resp onsibi lities inc luded pursuing late payments and employingcollection agencies to pursue late payments. After
an investi gation by

the U.S. Attor ney’s Office, Mitchell was indi cted in two c ou nts of an indictment

as one of the credit and co llection managers who received monetary kickbacks fr om collection agencies. As a result of the indictm ent, Mitchell was arrested by FB I officials while at

work on May 3, 1993. An FBI investigation uncovered two checks made3

payable to Mitchel l from collect ion agencies na med i n the indictment for one-third of the amount that NOMA had paid the collection agencie s two days earlier. An investi gation by NOMA following Mitchell’s arrest rev ealed a lack of doc umentation in thei r files concer ning the collection agencies unde r indictment as compared to their documentation reg arding other collection agenciesin their files. NOMA also discovered that money was not collec ted and forwarded to them in the usual manner by the collection a gencies named i n the indictment. NOMA’s fil es indicated a lack ofcharges to debtors for fees pai d to the indict ed collection agencies, w hich wasinconsistent with NOMA’s procedure with other collection agencies. In addition, after NOMA pers onally con tacted some of the debtor s involv ed, the debtors indicated that they had had no contact with any collection agencies trying to collect
a debt. NOMA thereafter s o ught information from Mitchell concerning the irreg ularities uncovered in their investigation. W hen asked about the discrepancies, Mitchell re fu sed to respond, and N OMA terminated Mitchell’ s employment.

On June 1, 1993, Mitchell filed a claim for unemployment compensation wi th TDES. NOMA subsequently

submitted its answ er to TDES’ request for separ ation information and stated in its answer that Mitc hell was “terminated, e ffective May 18, 1 993, because of breach of the duties of loyalty and trust, and misuse of position. R eceived unauth orized payment from vendor.”
TDES approved Mitchell’ s claim for unempl oyment benefits on June 9, 1993, and NOMA appealed TD ES’ claim appr oval to the Appeals Tribunal

.
Based upon their findings of fact, the Appeals Tri bunal ruled that M itchell was not eligible for unemployment compensation benefits pursuant to T.C.A. § 50-7- 303(a)(2) du e to employee misconduct. The Appeals Tribunal determi ned that the evi dence showed that Mitchell’ s actions amounted to work- connected misconduc t within the meaning of

T.C.A. § 50-7-303(a) (2) for two reasons. Fi rst, the Appeal s Tribunal conc luded that Mitchell took personal payments from col lection agen cies that did business with NOMA in collecting past due debts; and second, the Appeals Tribunal concl uded that Mitchel l’s failure to cooperate4

with NOM A in respondin g to quest ions arisi ng out of the scope of Mit chell’s empl oyment amounted to wor k-connected mis conduct. Instead of appealing the decision of the Appeals Tribunal to the B oard of Re view, Mitchell requested th at TDES wai ve its $1, 190.00 overpay ment to him pursuant to T.C.A. § 50-7-303(d)(2) which provides:

[u]pon writ ten request b y any s uch person submi tted to the commissioner

within ninety (90) days fro m t he date of determination of the overpayment, the com missioner shall w aive repayment of the overpaid am ounts if such perso n provesto the satisfac

tion o f the commissioner that all of the following conditions ex ist: (A) The o ve rpayment was not due to fraud, misrepresentat ion or willful nondisclosure on the part of such pers on; (B) The overpay ment was rec eived without fault on the part of such p erson; and (C) The recovery

of the overpayment from such pe rs on would be ag ainst equit y and good conscience.
Mitchell’s reque st fo r a waive r of t he overpayment was referred to the Appe als Tribunal for a hearing and decision. The d ecision of the Appeals Tri bunal states i n part as follows: FINDINGS OF FACT: Cl aimant filed a cl aim for unemployment benefits on June 1, 1993, tha t was approved by Agency de cision

. The employer filed an appeal, and a hearing was conducted on July 22, 1993, at whi ch ti me both parties appeare d and testified. The A ppeals Tribunal reversed the Agencydecision, and denied ben efits, cr eati ng an ove rpaymentof $1190. Claimant is 61 year s old and unemployed. His w ife is employ ed and earns about $2 5,000 per year whi ch is t heir tota l fam ily inc ome . The y have t wo children, both of whom are colleg e students, dependant upon theirparents for support. Pr ior to his separation, claimant had worked as

an accountmanager for a co mpany for five years, and, at the time of separat ion, his salary was i n excess of $60,000 per year. Prior to that, he w orked for another co mp any

for seven years, and his salary w as about $40,000 per year there. At his sepa ration, they had livi ng expensesfor a household of four, b ased on a family inco me of about $90,000 per year, which i nc l uded a house val ued at about $200,000 o n whic h they paid three mortgage payments. Claimanthas since had to sell that house, an d purchase another one. He has estimated his mortgage payme nts are about $900 per month. H e is seeking and is able to accept employment

if offered. He feels that his age is a hindrance in employer’s [sic] wanting to offer him work, but otherwi se has no limitati on s. He graduated from college with a degree in business. The date ofthe Appeals Tri bunal decision cr eating the overpay ment was Jul y 30, 1993.5 CONCLUSIONS OF LAW: W hile claimant is not now employed, his lev el of education and past work hi story sho w t hat he is capable of obtainin g employment in a rather hig h salarylevel. The decisio n creating the overpayment in this matter is onl y a bout two mo nths old. While it may not be reas onab le on the part of the ag ency to demand i mmediate and total repayment of the overpaymen t, it is also not unreasonable to give claimant aperiod of time to see if he can obtain the type of employ ment he has had in th e past. It is premature to waive th e overpay ment. The Appeals Tri bunal finds that the clai mant does not meet thecriteria of TCA 50-7- 303(d) in order to obta i n a waiver of overpay ment. The overpay ment is not waived.

Mitchell appe aled the Appeals Tri bunal’s decis ion to the Board of Review . The Board of Review

adopted the finding s of fact and decis ion of the Appeals Tr ibunal and affirmed the Appeals Tri bunal’s decis ion, denyingAppellant’s request for a waiver of the overpay ment. Mitchell thereafter filed a pe tition to rehear which was denied by the Board of Re vie w. Pursuant to T.C.A. § 50-7-304(i), Mitchell filed a petition for certiorari in chancery court seek ing judi cial review of the Board’s decision. The chance ry court dismissed Mitchell ’s petition for certiora ri and affirmed the dec ision of the Boar d of Review, denying M itchell’s

request for a

waiver of the over payment.

LAW

The two issues before this Court are as f ollows: 1) W hether the chancery court erred in aff irmin g the decision of the Board of Review , denying Appellant’s request for w aiver of overpayments; an d 2) Whether the chancery cour t erred in admi tting additional ev idence in thehearing on Appellant’s petition f or certiorari.

The standard of rev iew of this Court and of the chan cery cour t is set forth in T.C.A. § 50-7-304(i) which states in part as follows:

(2) The chancellor may affirm the deci sion of the board or the chan cellor may reve rse, remand or modify the deci sion if the rightsof the pet it ioner have been prejudiced because the adm inist rative findings, i nferences, conclu sions or deci sions are:6 (A) In violation of constitutional or statut ory provisions; (B) In exces s of the s tatu tory a utho rity of the a genc y; (C) Made up on unlawful pr ocedure; (D) Arbitrary or capric iou s or charact erized by abuse of discretion or clearly

unwarrant ed exerci se of discreti on; or (E) Unsupported by

evidence w hich is both s ubsta nti al and material in t he light of the entire recor d. (3) In determining the substantial ity of evidence, t he chancellor shall take into account whatever in the record fairly detracts from its wei ght, but th e chan cellor shal l not substit ute the chancellor's judgment for that of the board of revi ew as tothe weight of the evidenc e on questions of fact. No decisi on of the boar d shall be rev

ersed, remanded or

modified by the chancellor

unless for errors which affect the merits of the fin al decision of the boar

d.

In review ing an administrative decision, a court shall not sub stitute its judgment for that of the agency as to the weight of the evidence on questions of fact. Southern Ry . Co.
v. S tate Bd. of Equali zation , 682 S.W.2d 196, 199 (Tenn. 1984). Fac tual issues ar e reviewed based upon a standar d of substantial and material ev idence. Id ; CF Industri es
v. Tennessee Public ServiceCommission , 599 S.W .2d 536, 540 (Tenn . 1980). Substantial and material ev idence has been defined as “such rel evant evi dence as a reason able mind mightacceptto support a r ational concl usion and such as to furnish areasonably sound basis for the action under consid eration.” Southern Ry. Co. , 682 S.W.2d at 199; Pace v. Garbage Disposal D istrict o f W ashin gton County , 390 S.W .2d 461, 463 (Tenn . 1965); Sweetv. State Tech. Institute at Memphis , 6 1 7 S

. W. 2d 158, 161 (Tenn. Ct. App. 1981). If subs tant ial an d ma teria l evide nce e xists t o sup port the a genc y’s de cisio n, we are limited to a review

of the q uestions of law presented. Perryman v. Bible , 653 S.W.2d 424, 429 (Tenn. Ct. App. 198 3); Irvin v . Binkley , 577 S.W .2d 677, 678 (Tenn . Ct. App. 1978). A claimant shal l be disqual ified from be ne fits if the clai mant was dis charged from work due to miscon duct c onnected with the claimant’s work. T.C.A. § 50-7-30 3(a)(2). Althou gh the statute does not define work-connected misconduct, the court s have be en left with th e authority

interpret i ts meaning on a case-by- case basis. W alla ce v. Stewart , 559 S.W.2d 647, 648 (Tenn. 1977); Troutt v. Ca rl K. Wilson Co. , 410 S.W.2d 177, 180 (Tenn. 1966); Armstrong v . Neel , 725 S.W.2d 953 (Tenn. Ct. App . 1986); Jackson v. Bible ,7

611 S.W.2d 588, 590-91 (Tenn. Ct. App. 198 0). In order to come wi thin the scope of the statute, the work- connec ted mis conduc

t must a mo unt to a breach of duty owed to the employer. W eaver v. Wallace , 565 S.W .2d 8 67, 870 (Tenn. 1978); Armstrong , 725 S.W.2d at 955. Moreov er, the fault of the empl oyee must be consider ed when deter mining whether an employee has

en gaged in misconduct connec ted with w

ork. McCle llan v. Bible , 699 S.W.2d 555 (Tenn. 1985); Armstrong , 725 S.W.2d at 955.

In the present cas e, Mitchell was named in two counts of an indictment for r eceiving monetary kickbacks from collecti on agencies. Appellant was later arr ested by FBI officials while at work on May 3, 1993. An FBI investigation uncovered two checks made payable to Mitchell from collection agencies name d in the indictment fo r one-thir d of th e amount t hat NOMA had p aid the collectio n agencie s two days ear lier. Af ter invest igating t h e allegations

against Mitchell, NOMA questioned Mitchell concerning certain irregularities in the files that Mi tchell was required to generate and maintain . Mitchell , howeve r, did not cooperate with NOMA in answerin g th eir questions concerning his involvement in this matter. Based upon the aforementioned ev idence, we conclude that there is substantial and material ev idence supporti ng the chancellor’s decision, deny ing Mitc hell’s req uest for a waiver of the over payment pursuant to T.C.A. § 50-7-303(a) (2) due towork- connected misconduct.

Mitchell also argue s that the decision of the chance ry court should be revers ed on the ground that t he chancery court admitted into evidence three additional exhibits which
were not considered by the Appeals Tribu nal or the Board of Review. Specif i cally, t he chancellor

admitted copies of checks received by Mitchell from various collection agencies,
a porti on of Mi tchel l’s d eposit ion fro m a separate civ il action and portions of the transcript from Mitchell ’s hearing before the Appeals Tr ibunal.

It is the duty of the chancery co ur t to review the record of the proceedings befo re the Boar d of R eview a nd to determine w hether there i s any ev idence in the record to sustain the Board’s findings of fa ct; and if there is suff icient evidence, it is the chancellor’s8

duty to apply th e applicable l aw to those findings. Cawthron v. Scott , 400 S. W.2d 240, 242-43 (Tenn. 1966); Irvin v . Binkley , 577 S.W.2d 677, 679 (Tenn. Ct. App . 1978). Considerati on of additional ev idence not proper ly bef ore the Appeals Tribunal and the Board of Revi ew is, t herefore, beyond the chancellor ’s scope of rev iew. Id

.

We note, however, that no decision of th e Board of Revie w “shall be reversed, remanded or modified by the chancellor unless for errors which affect the merits of the final decision of the board.” T.C .A. § 50-7-304( i)(3). Similarly , T.R.A.P. 36(b) states that a final judgmentshall not be s et aside unless an “error involv ing a substa ntial right more probably than not affecte d the judgment or would result in prejudice to the jud icial process.” See Keith v. Murfreesboro Livestock Market, Inc. , 780 S.W.2d 751, 757 -58 (Tenn. Ct. App. 1989) (stating that a judgment shall be reve rsed only for errors affecting the final judgment).

Notwiths tanding the fact thatthe chancellor admitted into ev idence three addi tional exhibitswhich were not before the Appe a ls Tribunal or the Board of Review, there is abundant evidence revealing that Appellant b reached his fiduc iary duti es of trust and loyalty to his employer; thus, Mitc hell’s acti ons come squarely w ithin the purv iewof workconnected misconduct as defined in T.C.A. § 50 -7-303(a)( 2). The chancellor’s admission of the additional exhibits did not affect the outcome of the proceedi ngs and was, therefore, harmless err

or.

The decision of the c hancery cou r t is hereby affirmed. Costs on appeal shall be taxed to th e App ella nt f or whic h exec utio n ma y issue if ne cess ary.

HIGHERS, J.

CONCUR:9

FARMER, J.

LILLARD, J.