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Is President or Managing Officer of Corporation Entitled to Lien Under T.C.A. § 66-13-101 as an “Employee” for Money Earned for Work Performed?

Posted on Nov 9 2014 7:39PM by Attorney, Jason A. Lee

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. 

 

Follow me on Twitter at @jasonalee for updates from the Tennessee Defense Litigation blog.

TAGS: Employment Law, Corporation/LLC Law
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Jason A. Lee is a Member of Burrow Lee, PLLC. He practices in all areas of defense litigation inside and outside of Tennessee.

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Tennessee Defense Litigation Blog
Jason A. Lee, Member of Burrow Lee, PLLC
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