Supreme Court Seal
South Carolina
JUDICIAL DEPARTMENT
Site Map | Feedback
3660 - Venture Engineering, Inc. v. Tishman et al

THE STATE OF SOUTH CAROLINA
In The Court of Appeals

Venture Engineering, Inc.        Appellant,

v.

Tishman Construction Corporation of South Carolina; Timberland Properties, Inc.; The South Carolina Public Service Authority (Santee Cooper); and High Point Capital, LLC,        Defendants,

Of whom The South Carolina Public Service Authority (Santee Cooper) is        Respondent.


Appeal From Horry County
J. Stanton Cross, Master-In-Equity


Opinion No. 3660
Heard May 13, 2003 – Filed July 7, 2003


AFFIRMED


G. Michael Smith, of Conway; Julio E. Mendoza, of Columbia; and Mark A. Brunty, of Myrtle Beach; for Appellant.

Elizabeth Warner, of Moncks Corner; Francis B.B. Knowlton, of Columbia; John Hamilton Smith and Stephen P. Groves, both of Charleston; and John Samuel West, of Moncks Corner; for Respondent.


HOWARD, J.:    Venture Engineering, Inc. (“Venture”) appeals the master-in-equity’s order, finding Venture’s mechanic’s lien did not encumber property owned by the South Carolina Public Service Authority (“Santee Cooper”).  We affirm.

FACTS/PROCEDURAL HISTORY

In 1995, Timberland Properties, Inc. (“Timberland”) purchased approximately 422 acres of real property owned by the State of South Carolina but managed by Santee Cooper.  As part of the sale, Timberland agreed to begin construction of a “theme park” within 12 months from the date of the purchase.  This provision was later amended, extending the time limit by 90 days.  If Timberland failed to begin construction within the prescribed period, Santee Cooper had the right to repurchase the property together with all improvements for the original sale price.  The original deed and contract, along with the subsequent amendment were properly recorded in the Horry County Register of Deeds.

Subsequently, Timberland hired Venture to perform civil engineering services in connection with Timberland’s development of the property.  However, Timberland failed to pay for Venture’s services, and Venture filed a mechanic’s lien on the property for $127,786.74 on May 6, 1997.  In addition, Timberland failed to begin construction on the theme park as required by its contract with Santee Cooper, and Santee Cooper repurchased the property on May 16, 1997.

In June 1997, Timberland sought Bankruptcy protection under Chapter 7 of the Bankruptcy Code. Several months later, Venture sought to foreclose on its mechanic’s lien.  In February 1999, the Bankruptcy Court issued a Notice of Settlement and Sale, in which it advised all Timberland creditors that Timberland’s bankruptcy trustee intended to submit a proposed settlement to the Bankruptcy Court for its approval.  Among other things, the proposed settlement indicated the trustee would sell the property to Santee Cooper free and clear of all liens and encumbrances.  In addition, the notice indicated any party objecting to the proposed settlement had to submit a written objection within twenty days, pursuant to Rule 9014, District of South Carolina Bankruptcy Rules.  Venture received a copy of the notice, but did not file any objection.

Subsequently, the Bankruptcy Court issued an Approval Order, approving the proposed settlement and sale.  The property was then transferred to Santee Cooper, “free and clear of all liens and encumbrances in accordance with 11 U.S.C. § 363.”

Following the conclusion of the bankruptcy proceedings, Venture’s foreclosure action was referred to a master.  The master dismissed Venture’s claim with prejudice, finding Venture’s claim was barred because Venture failed to object to the sale of the property by the bankruptcy trustee free and clear of all liens and encumbrances.  Venture appeals.

DISCUSSION

Among other things, Venture argues the master erred in finding its claim was barred because it failed to object in Bankruptcy Court to the proposed settlement.  We disagree.

The United States Bankruptcy Code provides, in relevant part: “(b)(1) The trustee, after notice and a hearing, may . . . sell . . . property of the [bankruptcy] estate . . . (f) free and clear of any interest in such property of an entity . . . if . . . (2) such entity consents . . . .”  11 U.S.C. § 363 (1999); see also In re Collins, 180 B.R. 447, 450 (Bankr. E.D. Va. 1995).  South Carolina’s local bankruptcy rules provide the specific notice procedures the trustee must follow before the trustee may sell the property.  SC LBR 6004-1(b) states: “Motions to sell property free and clear of liens pursuant to . . . 11 U.S.C. § 363 must be made using the passive notice procedure prescribed by SC LBR 9014-2 . . . and must be served on all parties in interest.”  See SC LBR 9014‑2 (stating, when giving notice of a proposed settlement and sale, parties must adhere to South Carolina’s local clerk’s instructions).

The local clerk’s instructions provide, in relevant part, “the moving party must serve on . . . any other interested party . . . (1) The motion; (2) The notice of hearing of the motion; [and] (3) A proposed order . . . .”  SC CI 9014-2(b).  Furthermore, SC CI 9014-2(c) provides “Any response, return and/or objection to the motion must be served no later than twenty (20) days following the service date of the motion . . . .  (2)  If the objection time expires without the filing of an [sic] response, return and/or objection or other request, the proposed order will be promptly submitted to the judge for his consideration.” (Emphasis added); cf. In re Parrish, 171 B.R. 138, 140 (Bankr. M.D. Fla. 1994) (indicating a hearing need only be held when, after having received notice, a creditor objects to the proposed settlement).

Venture received notice pursuant to the rules and clerk’s instruction noted above and was given an opportunity to object within twenty days.  Venture did not object, but argues on appeal it was not required to do so.  Venture bases this argument on its misplaced belief that because both the bankruptcy trustee and Santee Cooper claimed title to the same property, Venture was not required to make its claim until after the Bankruptcy Court determined which entity owned the property.

However, a bankruptcy trustee “has the rights and powers of a hypothetical creditor possessing a judicial lien which attaches upon commencement of the case; the law treats a trustee as a hypothetical lien creditor.  See 11 U.S.C. § 544.”  In re Parrish, 171 B.R. at 141 (internal quotations omitted).  Once Timberland filed for bankruptcy, the bankruptcy trustee took a judicial lien on the property.  Thus, notwithstanding the adversarial position taken by Santee Cooper, the property remained subject to the trustee’s judicially created lien until the date of the sale.  See id. (holding “[o]nce the property is sold and relinquished by the Trustee, the property ceases to belong to the estate, and the Trustee’s fictional hypothetical lien terminates on the date of sale”).  As such, we find Venture was required to timely object to the trustee’s Notice of Proposed Settlement and Sale if it wished to protect its interest in the property itself or the proceeds of the sale of the property.

Having failed to object to the sale, Venture consented to having its lien extinguished.  See FutureSource, LLC v. Reuters Ltd., 312 F.3d 281, 284 (7th Cir. 2002), cert. denied, 123 S. Ct. 1769 (2003) (holding, although Futuresource was not a party to the bankruptcy proceeding, it was a party in interest, and thus, it had a right to raise and appear to be heard on any issue in the case.  Moreover, “it was notified of [the sale and the purchase agreement] and had access to a copy of the agreement yet it did not object to the sale or challenge the bankruptcy court’s order.”); see also In re Elliot, 94 B.R. 343 (E.D. Pa. 1988) (holding section 363(f)(2) permitted the bankruptcy trustee “to sell the property free and clear of all liens because [the creditor] consented to the sale . . . by failing to make any timely objection after receiving notice of the sale”).  Therefore, we find the master did not err in dismissing Venture’s mechanic’s lien foreclosure action.

CONCLUSION [1]

For the foregoing reasons, the master’s order dismissing Venture’s claim with prejudice is

AFFIRMED.

ANDERSON, J., and BEATTY, Acting Judge, concur.


[1] Because of our holding with respect to Venture’s failure to object to the proposed settlement, we need not reach Venture’s other issues on appeal.