Court Opinion

ID: 1045196
Source: CourtListenerOpinion
Date Created: 2013-10-08 02:24:14.088629+00
Date Added: 2024-06-11T10:58:47.183758
License: Public Domain

IN THE COURT OF APPEALS OF TENNESSEE
                           AT KNOXVILLE
                         Assigned on Briefs February 12, 2013

    PAUL J. FRANKENBERG, III v. RIVER CITY RESORT, INC. ET AL.

                Appeal from the Chancery Court for Hamilton County
                  No. 05-1271    W. Frank Brown, III, Chancellor

                No. E2012-01106-COA-R3-CV-FILED-APRIL 11, 2013

The former president and chief operating officer of a corporation brought this action against
the corporation and its CEO, alleging that Tennessee Code Annotated § 66-13-101, which
grants “employees and laborers of any corporation . . . a lien upon the corporate and firm
property . . . for any sums due them for labor and service performed for the corporation,”
provided him a lien in the amount of his alleged unpaid bonus and severance payments. The
trial court dismissed the statutory lien claim, holding that the claimant was not included in
the statutory definition of “employee.” The claimant has appealed. We hold that the
Supreme Court’s ruling in State ex rel. McConnell v. People’s Bank & Trust Co., 296 S.W.
12 (Tenn. 1927) that a corporation’s “managing officers” are not “employees” as defined by
Tennessee Code Annotated § 66-13-101 controls. We therefore affirm the trial court’s
judgment.

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

T HOMAS R. F RIERSON, II, J., delivered the opinion of the Court, in which C HARLES D.
S USANO, J R., P.J., and D. M ICHAEL S WINEY, J., joined.

Harry F. Burnette, Steven F. Dobson, and William H. Payne, IV, Chattanooga, Tennessee,
for the appellant, Paul J. Frankenberg, III.

David L. Moss, Chattanooga, Tennessee, for the appellees, River City Resort, Inc. and B.
Allen Casey.
                                                    OPINION

                               I. Factual and Procedural Background

        Beginning in early 2004, the Plaintiff, Paul J. Frankenberg, III, was employed by
River City Resort, Inc. (“River City”) as its president and chief operating officer. Among
his duties, Mr. Frankenberg was tasked with planning, developing, starting and operating a
resort hotel and restaurant in Chattanooga for River City. On December 29, 2005, Mr.
Frankenberg filed this action against River City and B. Allen Casey, the chairman and chief
executive officer of River City, alleging that River City owed him $268,181.81 in bonus and
severance payments. In Count I of his complaint, Mr. Frankenberg alleged that he was
entitled to a statutory lien on all of River City’s property pursuant to Tennessee Code
Annotated § 66-13-101. Mr. Frankenberg attached a copy of a “Notice of Lien” that he filed
and recorded with the Hamilton County Register of Deeds on December 29, 2005, asserting
a statutory lien against all of River City’s property. In Count II, Mr. Frankenberg alleged
breach of a settlement agreement executed by the parties to settle his unpaid wage claims in
the amount of $437,988.92.

        River City and Mr. Casey moved for partial judgment on the pleadings, arguing that
Tennessee Code Annotated § 66-13-101 does not provide officers of a corporation a lien for
labor or services performed for the corporation. The trial court agreed and granted the
motion, relying on the Tennessee Supreme Court’s decision in State ex rel. McConnell v.
People’s Bank & Trust Co., 296 S.W. 12 (Tenn. 1927), in support of its holding that Mr.
Frankenberg “is not in the class of employees protected by” the statute. The trial court
dismissed Count I of Mr. Frankenberg’s complaint and ordered him to record a written
release of his previously recorded Notice of Lien. The court also entered an order directing
that its order dismissing Mr. Frankenberg’s statutory lien claim be entered as a final
judgment pursuant to Tennessee Rule of Civil Procedure 54.02.1

                                           II. Issue Presented

       By this appeal, Mr. Frankenberg presents the issue of whether the trial court erred in
granting partial judgment on the pleadings and dismissing his statutory lien claim on the

       1
           Rule 54.02 provides in pertinent part:

           When more than one claim for relief is present in an action, whether as a claim,
           counterclaim, cross-claim, or third party claim, or when multiple parties are involved, the
           Court, whether at law or in equity, may direct the entry of a final judgment as to one or
           more but fewer than all of the claims or parties only upon an express determination that
           there is no just reason for delay and upon an express direction for the entry of judgment.

                                                      -2-
grounds that he is not an “employee” as that term is used in Tennessee Code Annotated § 66-
13-101, which grants “employees and laborers of any corporation . . . a lien upon the
corporate and firm property . . . for any sums due them for labor and service performed for
the corporation.”

                                  III. Standard of Review

      The trial court granted the defendants’ motion for partial judgment on the pleadings
pursuant to Tennessee Rule of Civil Procedure 12.03, which provides that

       [a]fter the pleadings are closed but within such time as not to delay the trial,
       any party may move for judgment on the pleadings. If, on a motion for
       judgment on the pleadings, matters outside the pleadings are presented to and
       not excluded by the court, the motion shall be treated as one for summary
       judgment and disposed of as provided in Rule 56, and all parties shall be given
       reasonable opportunity to present all material made pertinent to such a motion
       by Rule 56.

In reviewing a trial court’s grant of judgment on the pleadings under Rule 12.03, we are
bound to regard as false all allegations of the moving party that are denied by the non-moving
party, and to accept all well-pleaded facts of the non-moving party, and the reasonable
inferences that may be drawn therefrom, as true. McClenahan v. Cooley, 806 S.W.2d 767,
769 (Tenn. 1991). “Conclusions of law are not admitted nor should judgment on the
pleadings be granted unless the moving party is clearly entitled to judgment.” Id. In our
review of this case, “all of the facts alleged by the Plaintiff in this case must be taken as true
and the issue then before us is whether upon those facts the Plaintiff’s complaint states a
cause of action that a jury should have been entitled to decide.” Id. An appellate court
“should uphold granting the [Rule 12.03] motion only when it appears that the plaintiff can
prove no set of facts in support of a claim that will entitle him or her to relief.” Young v.
Barrow, 130 S.W.3d 59, 63 (Tenn. Ct. App 2003). “A trial court’s legal conclusions
regarding the adequacy of a complaint are reviewed de novo without a presumption of
correctness.” Stewart v. Schofield, 368 S.W.3d 457, 462-63 (Tenn. 2012).

                                         IV. Analysis

       The controlling statute, Tennessee Code Annotated § 66-13-101 (the “employee’s lien
statute”), provides as follows:

       All employees and laborers of any corporation, or firm, carrying on any

                                               -3-
       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.

Mr. Frankenberg argues that he is included within the parameters of the statute as an
“employee” and thus is entitled to a lien on all of River City’s corporate assets in the amount
of $268,181.81. This sum represents his claim for unpaid compensation—bonus and
severance payments—that he alleges River City owes him. River City asserts that the trial
court correctly determined that Mr. Frankenberg is not an “employee” for purposes of the
employee’s lien statute because he was a managing officer of the corporation—its president
and chief operating officer.

        The issue presented requires the construction of a statute, and well-established rules
of statutory construction apply. The primary rule governing statutory construction requires
us to ascertain and give effect to the legislature’s intent as expressed in the statute. Myers
v. AMISUB (SFH), Inc., 382 S.W.3d 300, 308 (Tenn. 2012); In re Adoption of A.M.H., 215
S.W.3d 793, 808 (Tenn. 2007). To determine legislative intent, we first examine the
language of the statute itself, Curtis v. G.E. Capital Modular Space, 155 S.W.3d 877, 881
(Tenn. 2005), presuming that “every word in a statute has meaning and purpose” and should
“be given effect if the obvious intention of the General Assembly is not violated by so
doing.” Lanier v. Rains, 229 S.W.3d 656, 661 (Tenn. 2007). Courts must “determine
legislative intent from the natural and ordinary meaning of the statutory language within the
context of the entire statute without any forced or subtle construction that would extend or
limit the statute’s meaning.” State v. Flemming, 19 S.W.3d 195, 197 (Tenn. 2000).

        If the language of the statute under examination is clear and unambiguous, “we apply
its plain meaning in its normal and accepted use.” Lanier, 229 S.W.3d at 661; see also In re
Adoption of A.M.H., 215 S.W.3d at 808 (“Where the statutory language is not ambiguous .
. . the plain and ordinary meaning of the statute must be given effect.”). If the statute is
ambiguous, meaning that “the natural and ordinary meaning of the language used may be
interpreted to reach contrary results,” In re Adoption of A.M.H., 215 S.W.3d at 808, or that
“the statute is capable of conveying more than one meaning,” Walker v. Sunrise Pontiac-
GMC Truck, Inc., 249 S.W.3d 301, 309 (Tenn. 2008), then the court may “look beyond the
statutory language to determine the legislature’s intent.” Walker, 249 S.W.3d at 309.

                                              -4-
        The employee’s lien statute was enacted in 1883 2 and amended in 1897,3 and has
remained substantively unchanged since that date. The statute does not define the term
“employee.” In 1927, the Tennessee Supreme Court decided State ex rel. McConnell v.
People’s Bank & Trust Co., 296 S.W. 12 (Tenn. 1927), the opinion relied upon by River City
and the trial court in support of its decision that Mr. Frankenberg is not an “employee” under
the statute. The McConnell Court addressed the question of whether the managing officers
of a bank4 were included as “employees” within the meaning of the employee’s lien statute
so as to give the bank officers a preferential lien in the amount of their unpaid salaries after
the bank became insolvent. Id. at 13. The Supreme Court held that it was “constrained to
the conclusion that it was not the intention of the Legislature to include the managing officers
of a bank within the provisions of the [employee’s lien] statute.” Id. at 14. The Court
examined the scope of term “employees” at length in McConnell, observing that

        the context and the connection in which the term “employee” is used must
        largely determine whether in a particular case the term includes a certain
        person, and that “it rarely refers to the higher officers of a corporation or
        government, or to domestic servants, and is usually distinguished from an
        official or officer, or one employed in a position of some authority.”

Id. at 13 (quoting 20 C.J. Employee pp. 1242-44) (emphasis added). The Court further stated
that, generally speaking, “the term ‘employee’ includes persons employed by the corporation
in comparatively subordinate positions,” and that while any person employed by a
corporation “may perhaps be considered an employee of the corporation (and if from the
context such appeared to be the meaning, the officers of the corporation might be intended
by the term under some circumstances), such is not the meaning of the word as ordinarily
employed.” Id.

       Since McConnell was decided in 1927, the Tennessee appellate courts have not had
many occasions to further construe the employee’s lien statute; it appears there is only a
single other reported Tennessee decision referencing and construing it. See Pennington v.

        2
            See Act of Feb. 28, 1883, ch. 18, sec. 1, 1883 Tenn. Pub. Acts 23.
        3
            See Act of Feb. 9, 1897, ch. 78, sec. 1, 1897 Tenn. Pub. Acts 222.
        4
          In McConnell, the lien claimants were described as “the cashier and assistant cashier,” 296 S.W.
at 13, as well as “the higher officers in control of [the] business” and “the managing officers of a bank.” Id.
at 14. A reading of the entire opinion suggests that the title “cashier” had a somewhat different meaning or
connotation in 1927 than it does today.

                                                      -5-
Webb-Hammock Coal Co., 184 S.W.2d 47, 49-50 (Tenn. 1944).5 As noted, McConnell held
that the “managing officers” of a corporation are excluded from the scope of the term
“employees” for purposes of Tennessee Code Annotated § 66-13-101. 296 S.W. at 14. Mr.
Frankenberg argues that McConnell’s different facts—specifically, the fact that McConnell
involved a bank that was insolvent, and in the present case, River City is not insolvent—and
an inapplicable rationale6 applied by the McConnell Court to support its conclusion, render
it distinguishable and inapposite. Although these arguments are not without some merit, we
agree with the trial court that the above-cited language employed by the Supreme Court in
McConnell in its analysis and stated propositions of law controls.

        River City alleged in its answer and counterclaim the following significant and, in our
view, dispositive facts: (1) that “[b]eginning in early 2004, and at all times material
thereafter, Frankenberg occupied the offices of President and Chief Operating Officer” of
River City, and (2) that “[a]mong his duties, Frankenberg was to plan, develop, start-up and
operate a resort hotel and restaurant development” for River City. Mr. Frankenberg admitted
these allegations in his answer to River City’s counter-complaint. “When the allegations of
the complaint are admitted in the answer the subject matter thereof is removed as an issue,
no proof is necessary and it becomes conclusive on the parties.” Rast v. Terry, 532 S.W.2d
552, 554 (Tenn. 1976). Mr. Frankenberg was therefore a “managing officer” of the
corporation, and, under the Supreme Court’s McConnell ruling, he is excluded from the
definition of “employee” for purposes of Tennessee Code Annotated § 66-13-101.

        Mr. Frankenberg argues that the trial court erred by not granting him expanded time
and opportunity to present additional evidence on the question of whether he was a managing
officer of the corporation, under Tennessee Rule of Civil Procedure 12.03’s requirement that
“all parties shall be given reasonable opportunity to present all material made pertinent to
such a motion [converted from a Rule 12 motion to dismiss or for judgment on the pleadings
to a summary judgment motion] by Rule 56.” In our view, however, Mr. Frankenberg’s
binding and conclusive admissions in his answer that he (1) was the president and COO of
River City, and (2) was responsible for operating a resort hotel and restaurant development
for River City, suffice to bring him within the ambit of “managing officer” of the corporation
for purposes of the employee’s lien statute as a matter of law, pursuant to McConnell. The
trial court’s conclusion of law in this regard, based on the undisputed facts, was not in error.

        5
         The Pennington decision generally involved the question of “whether workmen’s compensation
claims are entitled to priority of payment over claims of general creditors” against the assets of an insolvent
employer, 184 S.W. 2d at 49, and its analysis and holding are inapposite to the issue decided in this case.
        6
         Among other rationales, the McConnell Court observed “the apparent unwisdom of rewarding the
higher officers in control of a business, which has been so conducted as to reduce it to insolvency, by the
granting of a preference in favor of such claims as they may assert.” 296 S.W. at 14.

                                                     -6-
Further, there is no indication in the record that the trial court considered matters outside the
pleadings in deciding the Rule 12.03 motion for partial judgment on the pleadings.7

       We emphasize that the issue presented here is a narrow one, as is our holding. We
construe the term “employee” only for the purposes of the employee’s lien statute. The
McConnell Court observed that “the context and the connection in which the term
‘employee’ is used must largely determine whether in a particular case the term includes a
certain person,” 296 S.W. at 13, confirming that “employee” can mean different things in
different statutory contexts. It is, of course, the prerogative of the Tennessee General
Assembly to define “employee” as it deems appropriate in other contexts, which it has
accomplished by various other statutes. See generally Tenn. Code Ann. § 50-3-103(7)
(defining “employee” for purposes of Occupational Safety and Health Act of 1972); Tenn.
Code Ann. § 50-1-304(a)(1) (defining “employee” for retaliatory discharge actions); Tenn.
Code Ann. § 50-6-102(10) (defining “employee” under the Workers’ Compensation Act).

                                               V. Conclusion

      The judgment of the trial court that Mr. Frankenberg is not an “employee” for
purposes of the employee’s lien statute, Tennessee Code Annotated § 66-13-101, because he
was a managing officer of a corporation, is affirmed. Costs on appeal are assessed to the
Appellant, Paul J. Frankenberg, III, and his surety, for which execution may issue if
necessary. This case is remanded to the trial court, pursuant to applicable law, for
enforcement of the trial court’s judgment and collection of costs assessed below.

                                                            _________________________________
                                                            THOMAS R. FRIERSON, II, JUDGE

        7
          The parties have referred to the affidavit of Mr. Frankenberg’s counsel, Steven F. Dobson, which
was filed with the court. Mr. Dobson filed his affidavit in support of his motion for a continuance and
response in opposition to the motion for partial judgment on the pleadings, and asserts only as a factual
matter that “[d]ue to delays in discovery in this matter, I have been unable to review Defendants’ respective
documents, and – accordingly – have not been able to take the deposition of Defendant Casey.” The affidavit
is entirely irrelevant to the dispositive issue in the case, and, therefore, its inclusion in the record does not
operate to convert the Rule 12.03 motion to a Rule 56 summary judgment motion. See Cherokee Country
Club, Inc. v. City of Knoxville, 152 S.W.3d 466, 478 (Tenn. 2004); Parker v. Fort Sanders Regional Med.
Ctr., 677 S.W.2d 455, 456 n.1 (Tenn. Ct. App. 1983).

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