General Electric Capital Corp. v. Renew , 122 F. App'x 604 ( 2004 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 03-2344
GENERAL ELECTRIC CAPITAL CORPORATION,
Plaintiff - Appellee,
versus
GLORIA RENEW; FRANKLIN RACHELS; MARGARET
GILCHRIST,
Defendants - Appellants,
and
MICHAEL R. WILLIAMS,
Defendant.
Appeal from the United States District Court for the District of
South Carolina, at Spartanburg. Terry L. Wooten, District Judge.
(CA-03-117-25-7; BK-01-10254)
Argued: September 28, 2004 Decided: December 9, 2004
Before WIDENER, KING, and DUNCAN, Circuit Judges.
Affirmed by unpublished opinion. Judge Duncan wrote the opinion,
in which Judge Widener and Judge King concurred.
ARGUED: John Bush Long, TUCKER, EVERITT, LONG, BREWTON & LANIER,
Augusta, Georgia, for Appellants. Brian C. Walsh, KING & SPALDING,
L.L.P., Atlanta, Georgia, for Appellee. ON BRIEF: Louis Saul,
Augusta, Georgia; Joseph E. Mitchell, III, Augusta, Georgia; James
T. Wilson, Jr., Augusta, Georgia, for Appellants. Sarah Robinson
Borders, Allen C. Winsor, KING & SPALDING, L.L.P., Atlanta,
Georgia, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
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DUNCAN, Circuit Judge:
A group of employees of the now bankrupt Spartan
International, Inc. (“Spartan”) appeals an order resolving the
priority of liens held on Spartan’s assets. Because we agree that
the employees’ work at a manufacturing facility in Georgia does not
entitle them to a worker’s lien under South Carolina law, we
affirm.
I
This proceeding focuses on the assets of Spartan, a company
formerly headquartered in South Carolina and primarily engaged in
textile manufacturing. Spartan operated textile mills in six
locations, four in South Carolina and two in Georgia. The
employees who are parties to this action worked at the King Mill
manufacturing facility in Augusta, Georgia. With the decline of
the domestic textile industry, Spartan became unable to meet its
financial obligations and was forced to close its business.
The events leading to this litigation began in May 2001, when
Spartan turned over the remainder of its assets to General Electric
Capital Corporation (“GE Capital”). GE Capital had previously
extended a line of credit to Spartan, secured by substantially all
of Spartan’s assets. Spartan was initially placed into involuntary
bankruptcy in the United States Bankruptcy Court for the Southern
District of Georgia, but after a jurisdictional dispute that led to
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a change of venue, these proceedings commenced in the Bankruptcy
Court for the District of South Carolina.
On August 31, 2001, while the underlying bankruptcy action was
still pending in Georgia, GE Capital brought this adversary
proceeding requesting a determination of the validity, priority and
extent of its liens and security interests over Spartan’s assets.
Specifically, GE Capital sought a declaratory judgment that its
lien on Spartan’s accounts receivable was superior to the claimed
liens of the King Mill employees relating to their former
employment at the facility. In their answer and counterclaim of
September 21, 2001, the employees argued that they were entitled to
statutory worker’s liens for outstanding overtime and vacation pay
under South Carolina and Georgia law. See S.C. Code Ann. § 29-11-
10 and O.C.G.A. § 44-14-380. Generally speaking, and as discussed
in greater detail below, such statutes give employees a lien on the
property of their employers for the payment of unpaid wages that is
superior to most other liens. On February 6, 2002, the employees
moved for partial summary judgment, alleging that these statutory
worker’s liens had priority over all other claims on Spartan’s
assets, including those of GE Capital.
On May 7, 2002, the Bankruptcy Court denied the motion for
partial summary judgment, concluding that employees who work
outside the state of South Carolina are not entitled to a lien
under S.C. Code Ann. § 29-11-10 and that Spartan’s accounts
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receivable do not qualify as factory “output” under the same
provision. The court later concluded that Georgia law also
provides no relief for the employees, as it does not allow
attachment of Spartan’s accounts receivable due to their location
in South Carolina. These conclusions were incorporated into the
court’s November 27, 2002 final order that resolved all issues in
the proceeding. The employees appealed this order to the United
States District Court, which affirmed the judgment on the core
reasoning of the Bankruptcy Court. It is this decision we now
review.
II
The employees on appeal focus primarily on the interpretation
of the South Carolina worker’s lien statute. They argue that as
Georgia employees of Spartan, they are entitled to a lien in South
Carolina on all property located in the state under S.C. Code Ann.
§ 29-11-10. In addition, they contend that accounts receivable are
part of a manufacturing facility’s “output,” thus constituting
property that can be attached under that statute. Because we find
that the South Carolina worker’s lien statute does not apply to
workers in out-of-state manufacturing facilities, it is unnecessary
for us to determine the scope of the term “output” under the
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statute.1
The lower courts’ interpretation of S.C. Code Ann. § 29-11-10is a question of law that we review de novo. U.S. v. Walters, 359
F.3d. 340, 343 (4th Cir. 2004). S.C. Code Ann. § 29-11-10 states
that:
All employees of factories, mines, mills, distilleries
and every kind of manufacturing establishment of this
State shall have a lien upon all the output of the
factory, mine, mill, distillery or other manufacturing
establishment by which they may be employed, either by
the day or month, whether the contract be in writing or
not, to the extent of such salary or wages as may be due
and owing to them under the terms of their contract with
the employer, such lien to take precedence over any and
all other liens except the lien for municipal, State and
county taxes.
By its terms, the statute creates a lien for workers who work in
facilities “of this state” that is superior to all non-tax liens.
The Bankruptcy and district courts interpreted this language as
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The employees also raise a new contention on appeal that was
not addressed in the lower courts. They maintain that even if not
entitled to a lien under South Carolina law, they are entitled to
a lien under the Georgia worker’s lien statute as well. O.C.G.A.
§ 44-14-380. They argue that this lien takes priority over any
lien of GE Capital in accordance with the priority provisions of
the South Carolina statute. Absent exceptional circumstances, not
present here, we do not consider issues raised for the first time
on appeal. Williams v. Prof’l Transp. Inc., 294 F.3d 607, 614 (4th
Cir. 2002). Moreover, even assuming that the employees are
entitled to a lien under the Georgia statute, they have already
conceded that such a lien is subordinate to that of GE Capital
under Georgia law. Their newly created “hybrid” scheme is
unsupported by any authority and is especially unconvincing because
the South Carolina statute does not purport to control the priority
of liens created by other states. Rather, it controls only
priority of liens the statute itself created for employees of mills
and other manufacturing facilities located in South Carolina.
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providing a territorial limitation on the statute’s scope, allowing
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it to provide such a lien only for employees that work for
facilities within the boundaries of South Carolina.
Although the employees’ argument is often less than clear,
they assert that the South Carolina legislature’s use of the
preposition “of” in the phrase “of this state,” as opposed to the
phrase “in this state,” is both deliberate and significant.
According to the employees, the South Carolina General Assembly
could easily have limited the availability of workers’ liens to
employees located “within” the state had it chosen to do so. The
employees urge that the term “within” connotes inclusion within a
state or area, whereas the phrase “of this state” is broader. The
term “of,” according to the employees, connotes “derivation, origin
or source.” Appellants’ Reply Br. at 3. Under this
interpretation, employees claim that the availability of a worker’s
lien under S.C. Code Ann. § 29-11-10 “encompasses [employees of]
all corporations incorporated in South Carolina.” Id. Because the
statute does not specify that the property subject to the lien must
be located in South Carolina, employees further contend that they
could have liens on property produced at out-of-state facilities
and kept outside the boundaries of South Carolina.
The employees’ argument is not compelling for two reasons.
The first has been definitively articulated by the Supreme Court of
South Carolina. In Ex Parte First Pennsylvania Banking and Trust
Co., 148 S.E.2d 373, 374 (S.C. 1966), it recognized the general
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principle that “...no law has any effect, of its own force, beyond
the territorial limits of the sovereignty from which its authority
is derived.” The reasons for such a rule are apparent. State
legislation that attempts to have effect beyond its territorial
limits raises, at the very least, numerous potential constitutional
issues.
As the current version of American Jurisprudence, which the
South Carolina Supreme Court cited, states:
Unless the intention to have a statute operate beyond the
limits of the state or country is clearly expressed or
indicated by its language, purpose, subject matter, or
history, no legislation is presumed to be intended to
operate outside the territorial jurisdiction of the state
or country enacting it. To the contrary, the presumption
is that the statute is intended to have no
extraterritorial effect, but to apply only within the
territorial jurisdiction of the state or country enacting
it. Thus an extraterritorial effect is not to be given
statutes by implication.
73 Am. Jur. 2d Statutes § 250.
We are unwilling to infer the broad applicability of South
Carolina’s worker’s lien statute in the manner the employees seek
on the strength of the use of the preposition “of.” While the
employees in this case seek a lien on property that now happens to
be located in South Carolina, to accept their interpretation of the
statute would allow workers at out-of-state facilities owned by
South Carolina corporations to have lien rights over the output of
those facilities even though located outside South Carolina’s
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borders, in violation of the prohibition against state statutes
having extraterritorial effect.
Second, we are also given pause by another potentially
anomalous consequence of the employees’ own argument. If the
employees contend that South Carolina law creates liens only for
employees who work for businesses incorporated in South Carolina,
it would have the perverse result of applying its protection to
workers having no connection with the state whatsoever, solely on
the strength of their employer’s incorporation. Simultaneously,
South Carolina citizens employed by businesses incorporated
elsewhere would be left unprotected. We are unwilling to construe
section 29-11-10 in such a manner.
III
Finally, the employees argue that rather than deciding the
issue ourselves, we should certify the question as to the proper
interpretation of § 29-11-10 to the South Carolina Supreme Court.
This request was previously made to the district court, which
denied certification holding that sufficient authority exists to
make a determination as to the scope of South Carolina law. When,
as here, there is no state law that directly addresses an issue, we
should only certify that issue to the state court “if the available
state law is clearly insufficient.” Roe v. Doe, 28 F.3d 404, 407
(4th Cir. 1994). We agree with the district court’s determination
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that sufficient authority exists to determine the proper
interpretation of § 29-11-10 and thus similarly deny the request
for certification. For the foregoing reasons, the judgment of the
district court is
AFFIRMED.
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