Court Opinion

ID: 4685891
Source: CourtListenerOpinion
Date Created: 2021-05-11 21:16:35.370579+00
Date Added: 2024-06-11T08:04:30.689685
License: Public Domain

05/11/2021
                IN THE COURT OF APPEALS OF TENNESSEE
                            AT NASHVILLE
                                January 28, 2021 Session

    CLARKSVILLE TOWERS, LLC v. JOHN STRAUSSBERGER ET AL.

             Appeal from the Chancery Court for Montgomery County
             No. CD18-12      Laurence M. McMillan, Jr., Chancellor
                     ___________________________________

                           No. M2020-00756-COA-R3-CV
                       ___________________________________

This appeal concerns the potential personal liability of the owner of a corporation, which
was engaged as the contractor in a multi-million-dollar construction project. The trial court
granted summary judgment in favor of the construction company’s owner, determining that
the owner could not be held personally liable for the corporation’s alleged violations of
either the Tennessee Contractors Licensing Act, the Tennessee Consumer Protection Act,
the Tennessee Trust Fund Statute, or the Prompt Pay Act. The plaintiff has appealed. Upon
our de novo review, we affirm the grant of summary judgment to the corporation’s owner.

      Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court
                            Affirmed; Case Remanded

THOMAS R. FRIERSON, II, J., delivered the opinion of the court, in which D. MICHAEL
SWINEY, C.J., and KRISTI M. DAVIS, J., joined.

Todd E. Panther and Eric G. Osborne, Nashville, Tennessee, for the appellant, Clarksville
Towers, LLC.

William H. Horton and Carol M. Ballard, Chattanooga, Tennessee, for the appellee, John
Straussberger.

                                        OPINION

                          I. Factual and Procedural Background

       In July 2017, Clarksville Towers, LLC (“Clarksville Towers”), entered into a
contract with The Strauss Company, Inc. (“Strauss”), concerning the construction of a
dormitory building on Main Street in Clarksville, Tennessee. At the time the contract was
executed, Strauss held a valid contractor’s license issued by the State of Tennessee, but
Strauss’s license expired on March 31, 2018, before construction was completed.
Clarksville Towers learned of the expiration of Strauss’s license on April 5, 2018, and
provided written notice six days later of its intent to terminate the contract due to Strauss’s
failure to maintain proper licensure. Following a lack of response from Strauss, Clarksville
Towers terminated the contract on April 18, 2018.

        Nine days later, on April 27, 2018, Clarksville Towers filed a complaint in the
Montgomery County Chancery Court (“trial court”), naming John Straussberger and
Strauss as defendants. In its complaint, Clarksville Towers alleged that Mr. Straussberger
was the president of Strauss and “oversaw and directed all activities of [Strauss] relating
to the Project.” Clarksville Towers asserted that it had performed an accounting
concerning the project following termination of the contract and discovered that Strauss
had allegedly invoiced Clarksville Towers for $971,358.34 in payments that had not been
passed along to subcontractors. Clarksville Towers asserted claims against both defendants
for breach of contract, violation of the Tennessee Contractors Licensing Act, and violation
of the Tennessee Consumer Protection Act (“TCPA”). Clarksville Towers sought an award
of compensatory damages, treble damages, and attorney’s fees, as well as entry of a
restraining order and a temporary injunction prohibiting Strauss from using the funds paid
by Clarksville Towers for any purpose other than paying the respective subcontractors.
Clarksville Towers subsequently filed a notice stating that it had received three notices of
nonpayment and liens filed by various subcontractors who had worked on the project.

       On May 1, 2018, the trial court entered a restraining order that enjoined “[t]he
defendants . . . and their agents, servants, employees, attorneys . . . from using any portion
of the $971,358.34 amount Clarksville Towers paid the Contractor . . . for any purpose
other than to pay the subcontractors.” On May 10, 2018, the trial court entered an agreed
order, providing that the temporary restraining order entered in the matter would “continue
as a Temporary Injunction until trial.”

       On May 29, 2018, Strauss filed an answer, denying that it had retained excess funds
on the project. Although not pertinent to the issues on appeal, Strauss concomitantly filed
a third-party complaint against Scott DeLano, a former Strauss project manager; The
Bradley Projects, Inc. (“TBP”), the architect on the project; and Jared Bradley, a TBP
employee. Strauss alleged that Mr. DeLano was liable for breach of fiduciary duty and
that Mr. Bradley and TBP were liable for negligence.1 Mr. Straussberger similarly filed an

1
  Mr. DeLano, Mr. Bradley, and TBP filed answers denying liability and/or motions to dismiss the claims
asserted against them. Mr. Straussberger and Strauss then filed a motion seeking leave to file an amended
third-party complaint against Mr. DeLano, Mr. Bradley, and TBP. The trial court entered an order on
December 14, 2018, granting Mr. Straussberger’s motion to amend but staying the motion filed by Strauss.
Mr. Straussberger subsequently filed an amended third-party complaint. Mr. Bradley and TBP moved to
dismiss Mr. Straussberger’s amended third-party complaint on February 13, 2019, and Mr. DeLano filed a
similar motion on February 15, 2019. The trial court granted those motions by an order entered on
September 13, 2019. Neither Mr. DeLano, nor Mr. Bradley, nor TBP is participating in this appeal.
                                                  -2-
answer and third-party complaint, incorporating the answer and third-party complaint filed
by Strauss and adding, as an affirmative defense, that Clarksville Towers had failed to state
a claim against him personally. On July 20, 2018, Mr. DeLano filed a suggestion of
bankruptcy, stating that Strauss had been named as the debtor in a bankruptcy action. On
September 5, 2018, Strauss filed notice that it had removed the matter to the United States
Bankruptcy Court for the Middle District of Tennessee (“bankruptcy court”). On October
19, 2018, the bankruptcy court remanded the matter to the trial court based upon Clarksville
Towers’ voluntary dismissal of all claims against Strauss.

       Mr. Straussberger subsequently filed a motion to dismiss for failure to join an
indispensable party, asserting that the action should not proceed in Strauss’s absence. Mr.
Straussberger alternatively argued that the case should be stayed until the bankruptcy
proceedings were resolved. The trial court denied Mr. Straussberger’s motion by order
dated December 14, 2018. The court also ruled that because the claims brought by
Clarksville Towers against Strauss were voluntarily dismissed during the bankruptcy
proceedings, those claims were dismissed without prejudice. The trial court subsequently
entered an agreed order on December 2, 2019, allowing Clarksville Towers to file an
amended complaint.

        On December 23, 2019, Clarksville Towers filed a motion for partial summary
judgment, arguing that “there is no genuine issue of material fact that John Straussberger
can be held personally liable to Clarksville Towers as a matter of law.” Although no legal
basis was set forth in the motion, in its accompanying memorandum of law, Clarksville
Towers explained that it based its motion on its interpretation of the “Tennessee Trust Fund
Statute,” codified at Tennessee Code Annotated § 66-11-138; the Prompt Pay Act of 1991
(“Prompt Pay Act”), codified at Tennessee Code Annotated § 66-34-101, et seq.; and the
Tennessee Contractors Licensing Act, codified at Tennessee Code Annotated § 62-6-101,
et seq.

       On January 9, 2020, Clarksville Towers filed an amended complaint, naming only
Mr. Straussberger as a defendant. In the amended complaint, Clarksville Towers asserted
violations of the Tennessee Contractors Licensing Act, the TCPA, the Tennessee Trust
Fund Statute, and the Prompt Pay Act, as well as breach of fiduciary duty. Clarksville
Towers sought a judgment for the “$1,335,165.73 discrepancy between the amount [it]
paid the Contractor and the amount the Contractor paid the subcontractors for the same
amount of work” as well as $569,220.10 in “additional costs to complete the Project.” It
also sought treble damages pursuant to the TCPA, punitive damages, prejudgment interest,
and an award of its reasonable attorney’s fees and expenses incurred.

      Mr. Straussberger subsequently filed a motion seeking to dismiss Clarksville
Towers’ claims on the basis that the amended complaint failed to state a claim against him.
Mr. Straussberger also filed a motion for summary judgment, asserting that he could not
be held personally liable for the actions of Strauss, whether based upon the Tennessee
                                           -3-
Contractors Licensing Act, the TCPA, the Tennessee Trust Fund Statute, the Prompt Pay
Act, or any claim for breach of fiduciary duty. Mr. Straussberger also filed an answer to
the amended complaint, denying any liability.

       Although no hearing was held on the cross-motions for summary judgment, the trial
court entered an order on May 13, 2020, granting summary judgment in favor of Mr.
Straussberger and denying Clarksville Towers’ motion for partial summary judgment. The
court found that there were no genuine issues of material fact and that Clarksville Towers’
contract was with Strauss, a corporation, rather than Mr. Straussberger. The court also
determined that Clarksville Towers had not attempted to pierce the corporate veil.

       The trial court further found that there were “no facts contained in this record to
support an allegation that [Mr. Straussberger] represented or misrepresented the status or
non-existence” of Strauss’s contractor’s license, such that he could be held liable pursuant
to Tennessee Code Annotated § 62-6-136(c) of the Tennessee Contractors Licensing Act.
In addition, the trial court concluded that the Tennessee Trust Fund Statute only applied to
“prime” or “remote” contractors and that Strauss was the contractor, not Mr. Straussberger,
because there was “no proof in this record that [he] ever held a Tennessee contractor’s
license.” The court likewise determined that the Prompt Pay Act did not apply because
Clarksville Towers was an owner, not a contractor, subcontractor, laborer, or materialman.
The court also determined that no fiduciary duty was owed by Mr. Straussberger to
Clarksville Towers and that no facts existed upon which Mr. Straussberger could be held
personally liable under the TCPA. The court accordingly dismissed all of Clarksville
Towers’ claims against Mr. Straussberger. Clarksville Towers timely appealed.

                                   II. Issues Presented

       Clarksville Towers presents the following issues for our review, which we have
restated slightly:

       1.     Whether the trial court erred by determining that Mr. Straussberger
              could not be held personally liable under the Tennessee Contractors
              Licensing Act and the TCPA for his actions in disbursing funds from
              the bank account of a corporation solely owned by him while that
              corporation was contracting without a valid license.

       2.     Whether the trial court erred by determining that Mr. Straussberger
              could not be held personally liable under the Tennessee Trust Fund
              Statute for misallocating payments intended for Clarksville Towers’
              subcontractors.

                                           -4-
      3.     Whether the trial court erred by determining that Clarksville Towers
             could not state a claim against Mr. Straussberger under the Prompt
             Pay Act.

      4.     Whether the trial court erred by determining that Mr. Straussberger
             could not be held liable under the Prompt Pay Act for failing to hold
             in trust the monies Clarksville Towers provided to pay its
             subcontractors.

                                 III. Standard of Review

       The grant or denial of a motion for summary judgment is a matter of law; therefore,
our standard of review is de novo with no presumption of correctness. See Rye v. Women’s
Care Ctr. of Memphis, MPLLC, 477 S.W.3d 235, 250 (Tenn. 2015); Dick Broad. Co. of
Tenn. v. Oak Ridge FM, Inc., 395 S.W.3d 653, 671 (Tenn. 2013) (citing Kinsler v. Berkline,
LLC, 320 S.W.3d 796, 799 (Tenn. 2010)). As such, this Court must “make a fresh
determination of whether the requirements of Rule 56 of the Tennessee Rules of Civil
Procedure have been satisfied.” Rye, 477 S.W.3d at 250 (citing Estate of Brown, 402
S.W.3d 193, 198 (Tenn. 2013)).

       As our Supreme Court has explained concerning the requirements for a movant to
prevail on a motion for summary judgment pursuant to Tennessee Rule of Civil Procedure
56:

      [W]hen the moving party does not bear the burden of proof at trial, the
      moving party may satisfy its burden of production either (1) by affirmatively
      negating an essential element of the nonmoving party’s claim or (2) by
      demonstrating that the nonmoving party’s evidence at the summary judgment
      stage is insufficient to establish the nonmoving party’s claim or defense. We
      reiterate that a moving party seeking summary judgment by attacking the
      nonmoving party’s evidence must do more than make a conclusory assertion
      that summary judgment is appropriate on this basis. Rather, Tennessee Rule
      56.03 requires the moving party to support its motion with “a separate
      concise statement of material facts as to which the moving party contends
      there is no genuine issue for trial.” Tenn. R. Civ. P. 56.03. “Each fact is to
      be set forth in a separate, numbered paragraph and supported by a specific
      citation to the record.” Id. When such a motion is made, any party opposing
      summary judgment must file a response to each fact set forth by the movant
      in the manner provided in Tennessee Rule 56.03. “[W]hen a motion for
      summary judgment is made [and] . . . supported as provided in [Tennessee
      Rule 56],” to survive summary judgment, the nonmoving party “may not rest
      upon the mere allegations or denials of [its] pleading,” but must respond, and
      by affidavits or one of the other means provided in Tennessee Rule 56, “set
                                              -5-
       forth specific facts” at the summary judgment stage “showing that there is a
       genuine issue for trial.” Tenn. R. Civ. P. 56.06. The nonmoving party “must
       do more than simply show that there is some metaphysical doubt as to the
       material facts.” Matsushita Elec. Indus. Co., 475 U.S. [574,] 586, 106 S. Ct.
       1348 [89 L.Ed.2d 538 (1986)]. The nonmoving party must demonstrate the
       existence of specific facts in the record which could lead a rational trier of
       fact to find in favor of the nonmoving party. If a summary judgment motion
       is filed before adequate time for discovery has been provided, the nonmoving
       party may seek a continuance to engage in additional discovery as provided
       in Tennessee Rule 56.07. However, after adequate time for discovery has
       been provided, summary judgment should be granted if the nonmoving
       party’s evidence at the summary judgment stage is insufficient to establish
       the existence of a genuine issue of material fact for trial. Tenn. R. Civ. P.
       56.04, 56.06. The focus is on the evidence the nonmoving party comes
       forward with at the summary judgment stage, not on hypothetical evidence
       that theoretically could be adduced, despite the passage of discovery
       deadlines, at a future trial.

Rye, 477 S.W.3d at 264-65. “Whether the nonmoving party is a plaintiff or a defendant—
and whether or not the nonmoving party bears the burden of proof at trial on the challenged
claim or defense—at the summary judgment stage, ‘[t]he nonmoving party must
demonstrate the existence of specific facts in the record which could lead a rational trier of
fact to find in favor of the nonmoving party.’” TWB Architects, Inc. v. The Braxton, LLC,
578 S.W.3d 879, 889 (Tenn. 2019) (quoting Rye, 477 S.W.3d at 265). Pursuant to
Tennessee Rule of Civil Procedure 56.04, the trial court must state the legal grounds upon
which the court denies or grants the motion for summary judgment, and our Supreme Court
has instructed that the trial court must state these grounds “before it invites or requests the
prevailing party to draft a proposed order.” See Smith v. UHS of Lakeside, Inc., 439 S.W.3d
303, 316 (Tenn. 2014).

       This appeal also involves issues of statutory construction, which are questions of
law reviewed de novo with no presumption of correctness. See In re Estate of Tanner, 295
S.W.3d 610, 613 (Tenn. 2009). Our Supreme Court has summarized the principles
involved in statutory construction as follows:

               When dealing with statutory interpretation, well-defined precepts
       apply. Our primary objective is to carry out legislative intent without
       broadening or restricting the statute beyond its intended scope. Houghton v.
       Aramark Educ. Res., Inc., 90 S.W.3d 676, 678 (Tenn. 2002). In construing
       legislative enactments, we presume that every word in a statute has meaning
       and purpose and should be given full effect if the obvious intention of the
       General Assembly is not violated by so doing. In re C.K.G., 173 S.W.3d
       714, 722 (Tenn. 2005). When a statute is clear, we apply the plain meaning
                                             -6-
       without complicating the task. Eastman Chem. Co. v. Johnson, 151 S.W.3d
       503, 507 (Tenn. 2004). Our obligation is simply to enforce the written
       language. Abels ex rel. Hunt v. Genie Indus., Inc., 202 S.W.3d 99, 102 (Tenn.
       2006). It is only when a statute is ambiguous that we may reference the
       broader statutory scheme, the history of the legislation, or other sources.
       Parks v. Tenn. Mun. League Risk Mgmt. Pool, 974 S.W.2d 677, 679 (Tenn.
       1998). Further, the language of a statute cannot be considered in a vacuum,
       but “should be construed, if practicable, so that its component parts are
       consistent and reasonable.” Marsh v. Henderson, 221 Tenn. 42, 424 S.W.2d
       193, 196 (1968). Any interpretation of the statute that “would render one
       section of the act repugnant to another” should be avoided. Tenn. Elec.
       Power Co. v. City of Chattanooga, 172 Tenn. 505, 114 S.W.2d 441, 444
       (1937). We also must presume that the General Assembly was aware of any
       prior enactments at the time the legislation passed. Owens v. State, 908
       S.W.2d 923, 926 (Tenn. 1995).

Id. at 613-14.

                 IV. Tennessee Contractors Licensing Act and TCPA Claims

       Clarksville Towers argues that summary judgment was improvidently granted in
favor of Mr. Straussberger on Clarksville Towers’ claims pursuant to the Tennessee
Contractors Licensing Act and the TCPA. It asserts that the Tennessee Contractors
Licensing Act of 1994, codified at Tennessee Code Annotated § 62-6-101, et seq. (2019 &
Supp. 2020), requires contractors “to be licensed with sufficient capital so that project
owners like Clarksville Towers are protected and provides that the owner of a corporation
that contracts without a license is personally liable to pay for his actions.” Clarksville
Towers specifically relies upon Tennessee Code Annotated § 62-6-136 (2019), which
provides:

       (a)       It is unlawful for any person, firm or corporation to represent itself as
                 a licensed contractor or to act in the capacity of a “contractor” as
                 defined in §§ 62-6-102, or 62-37-103 [repealed], and related rules and
                 regulations of this state, or any similar statutes, rules and regulations
                 of another state, while not licensed, unless such person, firm or
                 corporation has been duly licensed under § 62-6-103 or [former] § 62-
                 37-104 [repealed].

       (b)       In addition to the penalties set out in § 62-6-120, [former] § 62-37-
                 114 [repealed] or [former] § 62-37-127 [repealed], a violation of this
                 section shall be construed to constitute an unfair or deceptive act or
                 practice affecting the conduct of trade or commerce under the
                 Tennessee Consumer Protection Act of 1977, compiled in title 47,
                                               -7-
              chapter 18, part 1; and, as such, the private right of action remedy
              under the Tennessee Consumer Protection Act of 1977 shall be
              available to any person who suffers an ascertainable loss of money or
              property, real, personal or mixed, or any other article, commodity or
              thing of value wherever situated as a result of the violation.

      (c)     An individual who violates this section and would, but for this section,
              have limited liability as owner of an entity having limited liability
              protection, including, but not limited to, a corporation, is personally
              liable for the individual’s own representations, acts or omissions to
              the same extent as if that individual rendered the representations, acts
              or omissions as an individual.

Tennessee Code Annotated § 62-6-136(a) references the definitions contained in
Tennessee Code Annotated § 62-6-102 (2019), wherein “contractor” is defined as:

      any person or entity that undertakes to, attempts to or submits a price or bid
      or offers to construct, supervise, superintend, oversee, schedule, direct or in
      any manner assume charge of the construction, alteration, repair,
      improvement, movement, demolition, putting up, tearing down or furnishing
      labor to install material or equipment for any building, highway, road,
      railroad, sewer, grading, excavation, pipeline, public utility structure, project
      development, housing, housing development, improvement or any other
      construction undertaking for which the total cost is twenty-five thousand
      dollars ($25,000) or more . . . .

Tenn. Code Ann. § 62-6-102(4)(A)(i). Tennessee Code Annotated § 62-6-102(4)(A)
further provides:

      (ii)    “Contractor” includes, but is not limited to, a prime contractor,
              electrical contractor, electrical subcontractor, mechanical contractor,
              mechanical subcontractor, plumbing contractor and plumbing
              subcontractor, masonry contractor, and roofing subcontractor where
              the total cost of the roofing portion of the construction project is
              twenty-five thousand dollars ($25,000) or more;

      (iii)   If the cost of a project exceeds twenty-five thousand dollars
              ($25,000), “contractor” also includes a construction manager of any
              kind, including, but not limited to, a residential construction manager,
              construction consultant, architect or engineer who conducts or
              provides any activity or service described in this subdivision (4) other
              than normal architectural and engineering services[.]

                                            -8-
In addition, Tennessee Code Annotated § 62-6-102(7) defines a “prime contractor” as “one
who contracts directly with the owner[.]” As our Supreme Court has previously
recognized, “contracting” encompasses “all phases and aspects of construction—from
contract formation through the contract’s completion.” See Kyle v. Williams, 98 S.W.3d
661, 665 (Tenn. 2003); see also Tenn. Code Ann. § 62-6-102(3), (4)(A), (7).

        By its plain language, Tennessee Code Annotated § 62-6-136(b) provides that a
private right of action exists pursuant to the TCPA to recover for a monetary or property
loss as a result of dealing with a contractor who contracted without a license, denominating
such a violation of that subsection to be an “unfair or deceptive act or practice affecting the
conduct of trade or commerce.” Pertinent to § 62-6-136(b), the TCPA provides in
Tennessee Code Annotated § 47-18-109(a)(1) (Supp. 2020):

       Any person who suffers an ascertainable loss of money or property, real,
       personal, or mixed, or any other article, commodity, or thing of value
       wherever situated, as a result of the use or employment by another person of
       an unfair or deceptive act or practice described in § 47-18-104(b) and
       declared to be unlawful by this part, may bring an action individually to
       recover actual damages.

Moreover, Tennessee Code Annotated § 47-18-104(b) (Supp. 2020) of the TCPA defines
the following as an “unfair or deceptive act or practice affecting the conduct of any trade
or commerce” and declares it “unlawful”:

       (35)   Representing that a person is a licensed contractor when such person
              has not been licensed as required by § 62-6-103 or § 62-6-502; or,
              acting in the capacity of a contractor as defined in § 62-6-102 (4)(A),
              § 62-6-102(7) or § 62-6-501, and related rules and regulations of the
              state of Tennessee, or any similar statutes, rules and regulations of
              another state, while not licensed[.]

Tenn. Code Ann. § 47-18-104(b)(35) (emphasis added) (referencing the definitions
contained in § 62-6-102(4)(A) and (7) of the Contractors Licensing Act).

       In this matter, there is no dispute that Strauss was duly licensed at the time
construction began in June 2017 and when the contract between Strauss and Clarksville
Towers was executed approximately one month later. However, Strauss’s license expired
on March 31, 2018, before the project was completed. As such, Strauss acted as an
unlicensed contractor because it did not maintain a valid contractor’s license throughout
the entire time period that it performed the contracting services. See Kyle, 98 S.W.3d at
666 (holding that “a contractor is unlicensed for purposes of Tennessee Code Annotated
section 62-6-103(b) if the contractor does not maintain a valid contractor’s license
throughout the entire time contracting services are performed under the contract.”).
                                           -9-
        Based upon the High Court’s holding in Kyle, Strauss could be held liable as an
unlicensed contractor pursuant to Tennessee Code Annotated § 62-6-136(b) and the TCPA.
However, the issue presented herein is whether Mr. Straussberger could be held personally
liable in this case pursuant to Tennessee Code Annotated § 62-6-136(b) and the TCPA,
which question turns on whether the facts presented at the summary judgment stage
demonstrated that Mr. Straussberger, individually, acted in the capacity of a contractor.

       Mr. Straussberger has acknowledged that he was the president and sole owner of
Strauss. The parties agree, however, that Mr. Straussberger was not personally involved
in the negotiations or bidding process for the Clarksville Towers contract. No evidence
was presented that Mr. Straussberger personally had supervised, managed, scheduled,
directed, or assumed charge of any part of the construction project. Again, the parties agree
that Mr. Straussberger’s only involvement with the Clarksville Towers project was to sign
checks that were presented to him. It is undisputed that Mr. Straussberger neither prepared
nor approved any pay applications, nor did he determine which subcontractors were to be
paid. Accordingly, we agree with the trial court that his actions do not amount to “acting
in the capacity of a contractor” without a license so as to be declared in violation of
Tennessee Code Annotated § 62-6-136(b) or the TCPA. See Tenn. Code Ann. § 62-6-102.

        Moreover, according to Mr. Straussberger’s affidavit, he “did not direct that
Plaintiff’s payments be used for other projects or business obligations or diverted for
improper purposes.” Clarksville Towers has pointed to no evidence in the record
illustrating that this fact is disputed,2 and it has otherwise failed to demonstrate how Mr.
Straussberger’s act of signing checks to pay his company’s debts constituted an unfair or
deceptive representation, act, or omission. As such, we find no violation of Tennessee
Code Annotated § 62-6-136(b) or Tennessee Code Annotated § 47-18-104(35) by Mr.
Straussberger.

        Turning to Tennessee Code Annotated § 62-6-136(c), this subsection specifically
imposes personal liability on an owner for the owner’s “own representations, acts or
omissions.” Although this subsection has not been specifically construed by the courts of
this State, the federal district and bankruptcy courts in Tennessee that have considered the
question have determined that such “representations, acts or omissions” of an owner must
relate to the company’s licensure status in order to create liability under the Tennessee
Contractors Licensing Act. See Constr. Mgmt., Inc. v. Expo Hosp., LLC, No. 3:19-CV-
00298, 2020 WL 489461, at *8 (M.D. Tenn. Jan. 30, 2020) (determining that liability under
this subsection only attaches to “an individual who falsely holds himself out as licensed for

2
 Clarksville Towers’ reliance on its own argument in a memorandum of law to refute this statement of Mr.
Straussberger, as set forth in his affidavit and statement of undisputed material facts, does not satisfy the
demands of Rule 56.04 or create a genuine issue of material fact that would preclude summary judgment.

                                                   - 10 -
general contracting”); Triumph Hosp., LLC v. Constr. Mgmt., Inc., No. 3:19-CV-00353,
2019 WL 3841942, at *10 (M.D. Tenn. Aug. 15, 2019) (finding that a claim under
Tennessee Code Annotated § 62-6-136(c) must be based on “whether [the owner] himself
engaged in fraudulent misrepresentations or omissions regarding the licensure status of [his
construction company]”); In re Heinz, No. 10-52964, 2011 WL 4730909, at *4 (Bankr.
E.D. Tenn. Oct. 5, 2011) (“[P]ursuant to the Tennessee Contractor Licensing Act of 1994,
any individual who has an ownership in a corporation and makes misrepresentations about
the corporation’s status as a licensed contractor is personally liable for the
misrepresentation.”). We recognize that these authorities are not binding on this Court’s
decision. See Townes v. Sunbeam Oster Co., Inc., 50 S.W.3d 446, 452 (Tenn. Ct. App.
2001) (“When a federal court undertakes to decide a state law question in the absence of
authoritative state precedent, the state courts are not bound to follow the federal court’s
decision.”). However, based on the primary requirement stated in the Tennessee
Contractor Licensing Act that a contractor be and remain “duly licensed with a monetary
limitation sufficient to allow the person, firm, or corporation to engage in or offer to engage
in such contracting project under this chapter,” we believe the above-described
interpretation of Tennessee Code Annotated § 62-6-136(c) employed by the federal courts
to be appropriate.

       In this matter, Clarksville Towers has set forth no proof demonstrating that Mr.
Straussberger misrepresented the status of Strauss’ contractor’s license after it expired on
March 31, 2018, or at any other time. In fact, in Clarksville Towers’ response to Mr.
Straussberger’s statement of undisputed material facts, Clarksville Towers admitted that
Mr. Straussberger “never made any representations to Plaintiffs about Strauss’[s] license,
and the subject matter never came up until Plaintiff’s termination letter raised the license
expiration.” As such, we determine that Mr. Straussberger cannot be held personally liable
pursuant to Tennessee Code Annotated § 62-6-136(c).

        Inasmuch as essential elements of a cause of action pursuant to both the Tennessee
Contractors Licensing Act and the TCPA have been negated, we need not consider whether
Mr. Straussberger’s actions caused Clarksville Tower’s losses, an element to which the
parties devote ample argument in their appellate briefs. We conclude that no liability can
attach to Mr. Straussberger on the basis of the Tennessee Contractors Licensing Act or the
TCPA and affirm the trial court’s grant of summary judgment on these claims.

                                      V. Tennessee Trust Fund Statute

       Clarksville Towers also claims that Mr. Straussberger is liable under the “Tennessee
Trust Fund Statute,”3 codified at Tennessee Code Annotated § 66-11-138 (2015) (“Trust
Fund Statute”), which provides:

3
 Although the Legislature did not title this statute as such, it has been referred to in this manner seemingly
based on the Tennessee Supreme Court’s interpretation in Daugherty v. State of the statute’s predecessor
                                                   - 11 -
        (a)(1) Any prime contractor or remote contractor who, with intent to
               defraud, uses the proceeds of any payment made to that contractor on
               account of improving certain real property for any purpose other than
               to pay for labor performed on, or materials, services, equipment, or
               machinery furnished by that contractor’s order for the real property,
               and overhead and profit related thereto, while any amount for the
               labor, materials, services, equipment, machinery, overhead, or profit
               remains unpaid shall be liable to an injured party for any damages and
               actual expenses incurred, including attorneys’ fees, if the damages and
               expenses incurred are the result of the misapplication of the payment.

        (2)      A violation of subdivision (a)(1) is a Class E felony.

        (b)      Notwithstanding subsection (a), there is no violation of this section
                 when:

                 (1)      Funds are disbursed pursuant to written agreement; or

                 (2)      The use of funds received and deposited in a business account
                          for use on multiple construction projects is based on the
                          allocation of costs and profits in accordance with generally
                          accepted accounting principles for construction projects.

      The applicable definitions section, found at Tennessee Code Annotated § 66-11-101
(2015), defines a “prime contractor” in pertinent part as:

as creating a type of trust fund:

        A statute of this nature is intended to make the payments to the contractor trust funds for
        the payment of labor and materials, and to afford protection against contractors who receive
        money for construction or repair of buildings and divert it to other uses prior to payment
        of claims for labor, materials, or other charges in connection with the work on the buildings.
        The legislative purpose is to punish for a fraudulent conversion and not for failure to
        comply with a contractual obligation. The essential elements for the commission of the
        offense are the payment of the money to a contractor by the owner for the construction of
        a building and a diversion of the money to other purposes by the contractor prior to the
        payment of all claims for which the money constitutes a trust fund. 29A C.J.S.
        Embezzlement § 19(2) (1965).

393 S.W.2d 739, 741 (Tenn. 1965). At the time Daugherty was decided, the statute only provided for
criminal liability for its violation, although statutory amendments enacted in 2007 added civil liability for
the statute’s violation as well. See 2007 Tenn. Pub. Acts, Ch. 189, § 37, eff. May 18, 2007. The 2007
amendments likewise modified the statute’s application to only “prime” and “remote” contractors. See id.

                                                   - 12 -
       any person other than a remote contractor who supervises or performs work
       or labor or who furnishes material, services, equipment, or machinery in
       furtherance of any improvement; provided, that the person is in direct privity
       of contract with an owner, or the owner’s agent, of the improvement. A
       “prime contractor” also includes a person who takes over from a prime
       contractor the entire remaining work under such a contract[.]

Tenn. Code Ann. § 66-11-101(12). A “remote contractor” is defined as:

       a person, including a land surveyor as defined in § 62-18-102 and a person
       licensed to practice architecture or engineering under title 62, chapter 2, who
       provides work or labor or who furnishes material, services, equipment or
       machinery in furtherance of any improvement under a contract with a person
       other than an owner[.]

Tenn. Code Ann. § 66-11-101(14). “Person” is broadly defined as “an individual,
corporation, limited liability company, partnership, limited partnership, sole
proprietorship, joint venture, association, trust, estate, or other legal or commercial entity.”
Tenn. Code Ann. § 66-11-101(11).

        Unlike the Tennessee Contractors Licensing Act, discussed in the previous section,
Tennessee Code Annotated § 66-11-138 does not provide any mechanism for piercing the
corporate veil to impose personal liability on the prime or remote contractor’s owner. As
the trial court noted, Clarksville Towers did not seek to have the court pierce the corporate
veil in this case. See Rogers v. Louisville Land Co., 367 S.W.3d 196, 215 (Tenn. 2012)
(explaining that the corporate veil may be pierced when the separate corporate entity is a
“sham or a dummy” and detailing the eleven factors to be considered when determining
whether piercing the corporate veil is warranted). Therefore, our analysis of Clarksville
Towers’ claim made pursuant to the Trust Fund Statute must turn on whether Mr.
Straussberger, individually, can be considered either a prime or remote contractor based on
the definitions found in Tennessee Code Annotated § 66-11-101.

        We find unpersuasive Clarksville Towers’ arguments attempting to impose personal
liability pursuant to the wholly different statutory scheme set forth in the Tennessee
Contractors Licensing Act for violations of the Trust Fund Statute. For liability to attach
pursuant to the Trust Fund Statute, Clarksville Towers would have to prove that Mr.
Straussberger was the prime contractor, in privity of contract with the owner, or a remote
contractor, who personally “provide[d] work or labor or who furnishe[d] material, services,
equipment or machinery in furtherance of any improvement under a contract with a person
other than an owner.” See Tenn. Code Ann. § 66-11-101(12), (14).

                                             - 13 -
        The undisputed facts demonstrate that the construction contract at issue was
between Clarksville Towers, as owner, and Strauss, as prime contractor. The contract
identified Scott DeLano, Vice President of Strauss, as the “Contractor’s representative,”
and Mr. DeLano signed the contract in that capacity. The parties agree that Mr.
Straussberger was not personally involved in the negotiation or bidding of the Clarksville
Towers contract. More importantly, the record contains no proof that Mr. Straussberger
was in privity of contract with the owner or that he personally provided work, labor,
materials, services, or equipment for the construction project “under a contract with a
person other than the owner.”4 See id. Ergo, Mr. Straussberger, as an individual, was not
acting as a prime or remote contractor pursuant to the definitions found in the Trust Fund
Statute. As such, the trial court properly granted summary judgment in favor of Mr.
Straussberger on this claim.

                                  VI. Tennessee Prompt Pay Act

        Finally, Clarksville Towers argues that Mr. Straussberger should be held personally
liable pursuant to the Prompt Pay Act, codified at Tennessee Code Annotated § 66-34-101,
et seq. (2015 & Supp. 2020). The Prompt Pay Act utilizes the definitions set forth in
Tennessee Code Annotated § 66-11-101 of the Trust Fund Statute. See Tenn. Code Ann.
§ 66-34-102 (2015). Clarksville Towers specifically relies upon the version of § 66-34-
304 of the Prompt Pay Act in effect at the time of the complaint’s filing, which required
that “[a]ny sums received by the contractor as payment for work, services, equipment, and
materials supplied by the subcontractor, materialman or furnisher for improvements to real
property must be held by the contractor in trust for the benefit and use of such
subcontractor, materialman or furnisher and shall be subject to all legal and equitable
remedies.” Tenn. Code Ann. § 66-34-304 (2015).5 We note, however, that the plain
language of § 66-34-304 addresses only the relationship between the contractor and its
subcontractors or materialmen.

4
  We also find Clarksville Towers’ reliance upon cases construing the criminal portion of the statute prior
to the 2007 amendments to be unavailing.
5
  Effective July 1, 2020, the General Assembly amended Tennessee Code Annotated § 66-34-304 to
substitute “prime contractor in place of “contractor” and “remote contractor” in place of “subcontractor,
materialman or furnisher,” now providing as follows:

        Any sums received by the prime contractor as payment for work, services, equipment, and
        materials supplied by the remote contractor for improvements to real property must be held
        by the prime contractor in trust for the benefit and use of the remote contractor, and are
        subject to all legal and equitable remedies.

See 2020 Tenn. Pub. Acts, Ch. 749, § 26 (S.B. 2681).

                                                  - 14 -
        Certain provisions within the Prompt Pay Act provide for a private right of action
benefitting a contractor or subcontractor based on an owner’s or contractor’s nonpayment
for work performed. See Tenn. Code Ann. § 66-34-104 (2015) (providing that if funds
retained pursuant to a construction contract are not timely released, “the prime contractor
or remote contractor, as applicable, may seek any remedy in a court of proper
jurisdiction[.]”; see also § 66-34-602 (2015) (“A contractor who has not received payment
from an owner, or a subcontractor, materialman or furnisher who has not received payment
from a contractor or other subcontractor, materialman or furnisher . . . shall notify the party
failing to make payment” and “the notifying party may, in addition to all other remedies
available at law or in equity, sue for equitable relief, including injunctive relief, for
continuing violations of this chapter, in the chancery court of the county in which the real
property is located.”). As the trial court noted in its final order, however, the provisions of
the Prompt Pay Act do not provide such relief to an owner.

        In instances when a statute does not expressly create a private right of action, this
Court may “examin[e] the statute’s structure and legislative history” to determine whether
the legislature intended to imply a private right of action. See Affordable Constr. Servs.,
Inc. v. Auto-Owners Ins. Co., ___ S.W.3d ___, ___, No. M2020-01417-SC-R23-CV, 2021
WL 1608412, at *3 (Tenn. Apr. 26, 2021). Based on the factors outlined by our Supreme
Court, we determine that no private right of action benefitting an owner is implied within
the Prompt Pay Act because (1) an owner is not an intended beneficiary within the
protection of the statute, as evinced by the statute’s sole focus on the timely payment of
contractors and subcontractors; (2) Clarksville Towers has not “proven that there was any
express or implied indication of a legislative intent to create or deny a private right of
action” benefitting an owner; and (3) implying such a right is inconsistent with the
underlying purpose of the legislation, which is to ensure prompt payment of contractors
and subcontractors under construction contracts. See id. at __-__,*3-6; see also Tenn. Code
Ann. § 66-34-602.

       Nevertheless, Clarksville Towers argues that by paying the subcontractors itself, it
has stepped into Mr. Straussberger’s shoes and is entitled to recover the amounts paid from
Mr. Straussberger via the doctrine of equitable subrogation. This Court has previously
explained the doctrine of equitable subrogation as follows:

              Tennessee applies the doctrine of equitable subrogation. Bankers
       Trust Co. v. Collins, 124 S.W.3d 576, 579 (Tenn. Ct. App. 2003). Equitable
       subrogation “‘does not arise from any contractual relationship between the
       parties, but takes place as a matter of equity, with or without an agreement
       to that effect.’” Hartman v. State, No. M2002-01430-COA-R3-CV, 2003
       WL 1872648, *6 (Tenn. Ct. App. Apr. 14, 2003) (quoting 83 C.J.S.
       Subrogation § 4 (2000)). The purpose of equitable subrogation has been
       described as follows:

                                            - 15 -
                       It is an equitable doctrine designed to obtain substantial
                justice and to prevent wrongdoing. It arises when a person,
                even if for his own benefit, pays a debt for which another is
                also liable. The Tennessee Supreme Court has held that an
                insurer was subrogated to the rights its insured had against
                others when the insurer paid its insured’s claim.

        Almany v. Nationwide Ins. Co., No. 85-341-II, 1987 WL 4745, *4 (Tenn. Ct.
        App. Jan. 29, 1987) (citations omitted). Equitable subrogation is based on
        the principle that “‘substantial justice should be attained regardless of form,
        that is, its basis is the doing of complete, essential, and perfect justice
        between all the parties without regard to form.’” Castleman Constr. Co. v.
        Pennington, 222 Tenn. 82, 432 S.W.2d 669, 674 (1968) (quoting 83 C.J.S.
        Subrogation §§ 1-2).

Acuity v. McGhee Eng’g, Inc., 297 S.W.3d 718, 724 (Tenn. Ct. App. 2008).

        We find Clarksville Towers’ reliance on the doctrine of equitable subrogation
unavailing in this instance. First, we are mindful of the fact that we are reviewing the trial
court’s ruling on cross-motions for summary judgment. Neither Clarksville Towers’
statement of undisputed material facts filed with its motion for partial summary judgment
nor its response to Mr. Straussberger’s statement of undisputed material facts filed with his
motion for summary judgment points to any evidence in the record demonstrating that
Clarksville Towers paid the subcontractors itself, such that its reliance on this doctrine is
justified.6 See Tenn. R. Civ. P. 56.03 (providing that when a motion for summary judgment
is filed, facts relied upon by the movant are to be supported by specific citations to the
record). Moreover, although Clarksville Towers’ appellate brief makes the bald assertion
that it “paid the debt to the subcontractors so it could finish its dormitory,” Clarksville
Towers again provides no citation to proof in the record to support its statement.

       Second, as Clarksville Towers admits in its appellate brief, the doctrine of equitable
subrogation has never been applied in the context of a claim under the Prompt Pay Act.
Clarksville Towers has provided no authority for application of the doctrine in this instance
even if the facts supported it.

       Third and most importantly, assuming, arguendo, that Clarksville Towers could rely
on the doctrine of equitable subrogation here, it has failed to demonstrate that Mr.
Straussberger would be the party from whom repayment could be sought. If Clarksville
Towers were allowed to “stand in the shoes” of Strauss’s subcontractors, the
subcontractors’ remedy would be against Strauss because Strauss was the contractor—not

6
  Although Clarksville Towers cites to the April 27, 2018 affidavit of Donald A. DiRenzo as proof of this
statement, the respective affidavit states no such thing and contains no documentary evidence of this claim.
                                                  - 16 -
Mr. Straussberger. As such, Strauss would have been the entity required to hold Clarksville
Towers’ payments in trust for the subcontractors.

        The Prompt Pay Act’s provisions simply do not impose personal liability on the
owner of a company when that company is operating as a prime contractor. To hold
otherwise would undermine the effect of creating a corporation and operating within the
strictures imposed on such business entities instead of as a sole proprietorship. See Cambio
Health Sols., LLC v. Reardon, 213 S.W.3d 785, 790 (Tenn. 2006) (“The separate legal
status of a corporation protects its shareholders from direct responsibility for the
corporation’s debts and other liabilities, except in rare circumstances when a plaintiff is
successful in persuading a court to disregard the separate corporate entity, also referred to
as ‘piercing the corporate veil.’” (quoting Cont’l Bankers Life Ins. Co. v. Bank of Alamo,
578 S.W.2d 625, 631 (Tenn. 1979)).

        We reiterate that Clarksville Towers did not request that the trial court pierce
Strauss’s corporate veil. Moreover, Clarksville Towers has made no attempt to
demonstrate facts that would justify piercing the corporate veil. See Rogers, 367 S.W.3d
at 215. As explained in the previous section concerning the Trust Fund Statute, the Prompt
Pay Act provides no basis for Mr. Straussberger’s personal liability because he,
individually, was not a prime or remote contractor pursuant to the applicable statutory
definitions.

        Clarksville Towers further asserts that Mr. Straussberger can be held personally
liable pursuant to the Prompt Pay Act based on a theory of breach of fiduciary duty. We
note, however, that Clarksville Towers is, at best, a creditor of Strauss, and our Supreme
Court has unequivocally held that “individual creditors of an insolvent corporation have no
right to assert direct claims for breach of fiduciary duty against corporate officers and/or
directors.” See Sanford v. Waugh & Co., Inc., 328 S.W.3d 836, 847 (Tenn. 2010). We
therefore affirm the trial court’s grant of summary judgment in favor of Mr. Straussberger
on Clarksville Towers’ Prompt Pay Act and fiduciary duty claims.

                                       VII. Conclusion

        For the foregoing reasons, we affirm the trial court’s grant of summary judgment in
favor of Mr. Straussberger and dismissal of all causes of action against him. We remand
this case to the trial court, pursuant to applicable law, for collection of costs assessed below.
Costs on appeal are assessed to the appellant, Clarksville Towers, LLC.

                                                      s/Thomas R. Frierson, II
                                                      _________________________________
                                                      THOMAS R. FRIERSON, II, JUDGE
                                             - 17 -