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The “employee lien” statute is found in T.C.A.
§ 66-13-101 and it provides for a statutory lien against the corporation’s property
for sums due to employees for their labor and services performed for the
corporation. The question therefore is
whether this statute also applies to benefit a corporation’s president and
managing officers. The Tennessee Court
of Appeals discussed this issue in Paul J.
Frankenberg, III v. River City Resort, Inc., No. E2012-01106-COA-R3-CV, 2013 WL
3877617 (Tenn. Ct. App. 2013).
This statue basically provides employees
with a super lien against a corporation and the corporation’s property for
labor and services performed on behalf of the corporation. The only other liens that have priority above
this lien are vendor’s liens and a lien of a mortgage or deed of trust to
secure purchase money. Specifically, T.C.A.
§ 66-13-101 provides as follows:
All employees and
laborers of any corporation, or firm, carrying on any corporate or partnership
business shall have a lien upon the corporate or firm property of every
character and description, for any sums due them for labor and service
performed for the corporation or firm, and such lien shall prevail over all
other liens, except the vendor's lien or the lien of a mortgage, or deed of
trust to secure purchase money.
This Frankenberg
case involved a situation where the president/chief operating officer of a
corporation was owed a significant sum of money by the corporation. As a result, he filed a “notice of lien” with
the Register of Deeds office asserting a statutory lien against the
corporation’s property under T.C.A.
§ 66-13-101. The question before the
Tennessee Court of Appeals was whether this lien was appropriate in this
circumstance because Mr. Frankenberg was the president and chief operating
officer of the corporation.
A prior Tennessee Supreme Court case of State
Ex Rel. McConnell v. People’s Bank and Trust Co., 296 S.W. 12 (Tenn. 1927)
discussed this similar situation 87 years ago.
The Tennessee Supreme Court in that case found that managing officers of
a bank were not included as “employees” within the meaning of this employee’s
lien statute. The Tennessee Court of
Appeals in Frankenberg
was asked to reconsider this opinion 87 years later, but the decision remained
the same. The plaintiff was a “managing
officer” of the corporation and therefore under the Supreme Court’s ruling in McConnell
he was excluded from the definition of an “employee” under this statute. As a result, he was not entitled to a
statutory employee lien.
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blog.
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