MASTEC RENEWABLES CONSTRUCTION COMPANY, INC. VS. SUNLIGHT GENERAL MERCER SOLAR, LLC (L-0336-14, MERCER COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-1833-15T4
MASTEC RENEWABLES
CONSTRUCTION COMPANY,
INC.,
APPROVED FOR PUBLICATION
Plaintiff-Appellant, February 6, 2020
APPELLATE DIVISION
v.
SUNLIGHT GENERAL MERCER
SOLAR, LLC,
Defendant,
and
MERCER COUNTY IMPROVEMENT
AUTHORITY,
Defendant-Respondent.
________________________________
Argued December 5, 2018 – Decided February 6, 2020
Before Judges Fuentes, Accurso and Moynihan.
On appeal from the Superior Court of New Jersey,
Law Division, Mercer County, Docket No. L-0336-14.
Louis Anthony Modugno argued the cause for
appellant (Mc Elroy Deutsch Mulvaney & Carpenter,
LLP, attorneys; Richard J. Williams, Louis Anthony
Modugno, Eric James Hughes, and Greg Trif, of
counsel and on the briefs).
William Harla argued the cause for respondent (De
Cotiis FitzPatrick Cole & Giblin LLP, attorneys;
William Harla and Thomas A. Abbate, of counsel;
Alice M. Bergen, of counsel and on the briefs).
Florio Perrucci Steinhardt & Cappelli, LLC, attorneys
for amicus curiae Utility & Transportation Contractors
Association of New Jersey, Inc. (Adrienne L. Isacoff,
on the brief).
The opinion of the court was delivered by
FUENTES, P.J.A.D.
SunLight General Mercer Solar, LLC (SunLight) was the general
contractor of a project to construct a renewable solar generating facilit y (SGF)
on the campus of the Mercer County Community College (College). SunLight
hired MasTec Renewables Construction Company, Inc. (MasTec) as the
subcontractor to design and construct the SGF. The Mercer County
Improvement Authority (MCIA) issued bonds in excess of $29,000,000 to fund
the project. SunLight, as the designated owner of the SGF, entered into a
power purchase agreement with the College through which it sold renewable
energy at a fixed price during the term of its lease agreement with the MCIA.
MasTec completed the project and alleged it was owed in excess of
$10,000,000 from Sunlight. When it was unable to resolve this dispute with
Sunlight, MasTec filed a mechanics' lien notice against the MCIA in the
amount $10,250,500. Counsel for the MCIA responded in January 2014 and
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informed MasTec that its mechanic's lien was not valid because the County
Improvement Authorities Law (CIAL), N.J.S.A. 40:37A-44 to -135,
specifically exempts the property of a county improvement authority from
"judicial process." MasTec settled its claims against Sunlight and agreed to
reduce its lien claim to $6,900,000. Thereafter, MasTec filed a complaint
against the MCIA to foreclose on its mechanic's lien to recover the payment
owed by Sunlight. The Law Division granted the MCIA's motion to dismiss
MasTec's foreclosure complaint under Rule 4:6-2(e). The trial court held that
pursuant to N.J.S.A. 40:37A-127, all of MCIA's property is exempt from
judicial process.
In this appeal, MasTec argues its municipal mechanic's lien is
enforceable against the MCIA's SGF project fund pursuant to the Municipal
Mechanics' Lien Law (MMLL), N.J.S.A. 2A:44-125 to -142. Amicus curiae
Utility and Transportation Contractors Association of New Jersey, Inc.
(UTCA) supports MasTec's legal position. MasTec and amicus UTCA seek
that this court declare that a subcontractor on a municipal construction project
can enforce and foreclose on a municipal mechanics' lien against the project
fund held by a county improvement authority. The MCIA urges us to reject
this argument and hold that monies in that fund are exempt from judicial
process.
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In our view, the resolution of this appeal does not lie on MasTec's ability
to foreclose on a municipal mechanics' lien. The threshold question is whether
MasTec has the right to file a valid lien in the first place.
The CIAL defines a county improvement authority as "a public body
politic and corporate constituting a political subdivision of the State[.]"
N.J.S.A. 40:37A-55. Furthermore, "an authority shall not constitute or be
deemed to be a county or municipality or agency or component of a
municipality for the purposes of any other law[.]" N.J.S.A. 40:37A-90. Liens
under the MMLL attach only to the funds held by a "public agency," wh ich the
MMLL defines as "any county, city, town, township, public commission,
public board or other municipality[.]" N.J.S.A. 2A:44-126 -128. The MMLL
does not apply to county improvement authorities. In this light, we hold that
the lien notice MasTec filed against the MCIA is not valid. We thus affirm the
order dismissing the foreclosure complaint as a matter of law under Rule 4:6-
2(e) for reasons other than those expressed by the trial court. See Hayes v.
Delamotte, 231 N.J. 373, 387 (2018).
I
In May 2011, the MCIA issued a request for proposals (RFP) for the
development, design, and construction of an SGF on the grounds of the
College. In response to the RFP, SunLight and Mastec submitted a joint
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proposal. SunLight was "the lead entity" responsible for financing, future
operations, and maintenance. MasTec was "the subcontractor" responsible for
all upfront design and construction work. The MCIA accepted this proposal.
To finance the project, the MCIA agreed to pay SunLight seventy
percent of the fixed costs by issuing federally taxable, county-guaranteed
municipal Series 2011A Local Bonds (Bonds) in the amount of $29,550,000.
These "Public Project Funds" were deposited into a separate account
administered by a designated trustee. SunLight agreed to finance the
remaining thirty percent of the project's fixed costs by providing an equity
contribution of the funds it received from a federal cash grant for solar
developers and contractors (the 1603 Grant Funds). 1
Despite the role of the independent trustee, MasTec alleged in its
foreclosure complaint that the MCIA "exercised control over the Public Project
Funds at all times." On December 1, 2011, the MCIA and the trustee signed
an "Indenture of Trust . . . Securing $29,550,000 COUNTY OF MERCER
GUARANTEED RENEWABLE ENERGY PROGRAM LEASE REVENUE
NOTES AND BONDS, SERIES 2011A AND ADDITIONAL BONDS OF
THE MERCER COUNTY IMPROVEMENT AUTHORITY." Article V of that
1
Section 1603 of the American Recovery and Reinvestment Tax Act of 2009,
26 U.S.C. § 48, directed the United States Treasury Department to provide
grants for certain energy property in lieu of tax credits.
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indenture created: (1) the Project Fund consisting of a bonds' proceeds
account, an account for SunLight's thirty-percent equity contribution and a
restoration security account; (2) the Administrative Fund; (3) the Revenue
Fund consisting of the lease payments from SunLight; (4) the Debt Service
Fund consisting of an interest account, a principal account, and a capitalized
interest account; (5) the County Security Fund encompassing the initial
$3,000,000 from the 1603 Grant Funds to secure payment of the debt service
on the bonds; and (6) the General Fund.
The trustee was directed to pay the costs of the project from the Project
Fund in accordance with a separate lease purchase agreement between the
MCIA, SunLight, and the College. Article V also stated:
Each of the Funds and Accounts created by this
Indenture, other than the Administrative Expense
Account and the Costs of Issuance Account within the
Administrative Fund [and] the Restoration Security
Account within the Project Fund . . . , is hereby
pledged to, and charged with, the payment of the
principal or Redemption Price, if any, of the interest
on the Bonds as the same shall become due.
Article VIII, Section 8.03, entitled, "Liens, Encumbrances and Charges,"
stated in part: "The Authority shall not create or cause to be created and shall
not suffer to exist any lien, encumbrance or charge upon the Trust Estate,
except the pledge, lien and charge created for the security of the Holders of the
Bonds." The "Trust Estate" included the lease revenue payments from
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SunLight, any monies paid through the Mercer County's guaranty, and the
funds and accounts created by the Indenture. The latter did not include the
Administrative Expense Account; the Costs of Issuance Account within the
Administrative Fund; the Restoration Security Account within the Project
Fund; and "any other amounts received from any other source by or on behalf
of the [MCIA] and pledged by the [MCIA] . . . as security for the payment of
the principal, redemption premium, if any, and interest on the Bonds."
The MCIA thereafter executed three agreements with SunLight and the
College dated December 1, 2011: (1) a site license agreement; (2) a lease
purchase agreement; and (3) a power purchase agreement. MasTec was not a
party to any of these agreements. The site license agreement permitted
SunLight to access the College's property to, among other things, construct,
operate, and maintain the SGF.
Under the lease purchase agreement, the MCIA was responsible to fund
the majority of the costs. SunLight was obligated to construct the project, pay
the initial $3,000,000 of its 1603 Grant Funds into the County Security Fund,
and provide the procedure for the MCIA to release payments for project costs.
To receive payments from the Project Fund, SunLight was required to submit
"Draw Papers" to the Trustee that were acknowledged by the College and
acknowledged, as to form only, by the MCIA. The MCIA limited its financing
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to the net amounts received from the issuance of the bonds and expressly
assumed no liability for cost overruns or excess project costs.
The lease purchase agreement: (1) conveyed to SunLight a leasehold
interest in the SGF; (2) obligated SunLight to make periodic lease payments in
amounts sufficient for the MCIA to pay the costs, expenses, and debt service
on the Series 2011A Bond; and (3) granted SunLight an option to purchase the
leased property at the end of a fifteen-year term specified in the power
purchase agreement. The lease also required SunLight to remove or discharge
"any materialman's, mechanics' or construction lien . . . filed against the
Project or any part thereof." The power purchase agreement required SunLight
to sell all of the generated renewable energy to the College at a specified fixed
price during the leasehold. This agreement defined MasTec as the "EPC
[Engineering, Procurement, and Construction] Contractor, a Florida
Corporation and an affiliate of PPM LLC."
On December 21, 2011, SunLight, the designated "Owner," and MasTec,
the designated "Turnkey Contractor," executed a Turnkey Design,
Engineering, Procurement, and Construction Contract (the EPC Contract).
Section 20.6 of the EPC Contract expressly provided that the Turnkey
Contractor
is an independent contractor. Nothing contained in
this Agreement, nor the act of the Parties in submitting
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a joint Proposal in response to the RFP, nor any act of
a Party in pursuing its rights or fulfilling its
obligations under this Agreement, will be construed as
creating a partnership or joint venture relationship
between the Parties, nor shall it be construed as
creating any relationship whatsoever between Owner
and Turnkey Contractor's employees.
In the EPC Contract, MasTec agreed, for a fixed and non-negotiable fee,
to assume and perform SunLight's obligations for designing, permitting,
supplying, constructing, installing, and testing the SGF. MasTec alleged: (1)
the original base price of the EPC Contract was $30,062,500; (2) the price
would be adjusted if the kilowatt capacity increased by a certain percentage, if
the layout or design changed, or if there was a material change to the site ; and
(3) SunLight and the MCIA agreed that the 1603 Grant Funds associated with
the project would be used to pay MasTec for the costs of construction. If
MasTec disputed the payments from SunLight, it could "initiate a [d]ispute
proceeding," which involved good faith negotiations and then arbitration, and
SunLight would have five business days to pay any amount found due and
owing, plus interest.
II
Article 16 of the EPC Contract is denoted "Titles; Liens." In lieu of
quoting at length each of the six carefully drafted subsections, we note that
subsection 16.5 and 16.6 state, in relevant part that: (1) "Turnkey Contractor
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shall in no event assert a Lien on the property of the [College] arising out of or
in connection with the Work"; and (2) "Unless Owner fails to make payment
. . . , Turnkey Contractor shall not directly . . . assert or suffer to exist any Lien
on the SGF, or any part of it, or the Owner's licensed estate."
MasTec alleged that the project was plagued by cost overruns; change
orders; and extensive delays caused by SunLight, the MCIA, and Superstorm
Sandy. These factors significantly increased the project's costs.
Notwithstanding these hurdles, MasTec claimed it completed major
construction on the SGF and submitted its bills and payment applications to
SunLight for $10,250,500 plus $2,650,817.92 for the additional work.
SunLight refused to pay. 2 Consequently, pursuant to the EPC Contract,
MasTec filed a demand for arbitration to adjudicate its dispute with SunLight.
MasTec also filed a municipal mechanics' lien notice with the MCIA for
$10,250,500, an amount that MasTec alleged was greater than the balance of
the Public Project Fund at that time, excluding the 1603 Grant Funds. In
paragraph fifty-two of its verified complaint filed in the Law Division, MasTec
averred that its "Municipal Mechanic's Lien was filed both before the entire
work was performed and the project was completed by Sunlight and before the
2
In its appellate brief, the MCIA asserts that major construction was
completed by October 1, 2013, and that the project is presently operational.
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project was accepted by resolution of the Authority, or within the 60 days
thereafter, in accordance with N.J.S.A. 2A:44-132."
SunLight settled its dispute with MasTec. In a comprehensive
settlement agreement, SunLight agreed to: (1) adjust the EPC Contract 's price
to $29,625,817; (2) wire MasTec an initial cash payment of $4,302,575; (3)
escrow the remaining $2,100,000 of the 1603 Grant Funds "solely in
recognition of the fact that the MCIA has asserted . . . that it [was] owed some
amount of 1603 Grant Funds;" and (4) apply to the U.S. Treasury for more
funding estimated to be approximately $750,000 based on the adjusted contract
price. SunLight also agreed not to contest the validity of MasTec 's lien,
agreed to submit draw papers to the Trustee requesting the release of
$6,900,000 to be paid to MasTec from the Project Fund, and stipulated that
nothing in the settlement agreement could be construed as an admission of fact
or law as to any issue. 3
III
MasTec argues that the trial court erred when it dismissed its complaint
to foreclose on a municipal mechanics' lien for failure to state a cause of action
3
In the brief filed in this appeal, the MCIA claims it is not aware of any
requisitions by SunLight to the Trustee. It has asserted a default against
Sunlight due to its invasion of the 1603 Grant Funds.
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upon which relief can be granted. We disagree, albeit, for reasons other than
those expressed by the Law Division.
Under Rule 4:6-2(e), a motion to dismiss for failure to state a claim must
be denied if, giving plaintiff the benefit of all the allegations asserted in the
pleadings and all favorable inferences, a claim has been established. "At this
preliminary stage of the litigation the court is not concerned with the ability of
plaintiffs to prove the allegation contained in the complaint." Printing Mart-
Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989).
"[T]he test for determining the adequacy of a pleading [is] whether a
cause of action is 'suggested' by the facts." Ibid. (quoting Velantzas v.
Colgate-Palmolive Co., 109 N.J. 189, 192 (1988)). "[A] reviewing court
'searches the complaint in depth and with liberality to ascertain whether the
fundament of a cause of action may be gleaned even from an obscure statement
of claim, opportunity being given to amend if necessary.'" Ibid. (quoting Di
Cristofaro v. Laurel Grove Mem'l Park, 43 N.J. Super. 244, 252 (App. Div.
1957)). "When a motion challenging the legal sufficiency of a complaint is
filed, plaintiff is entitled to a liberal interpretation and given the benefit of all
favorable inferences that reasonably may be drawn." N.J. Dep't of Treasury,
Div. of Inv. ex rel. McCormack v. Qwest Commc'ns Int'l, Inc., 387 N.J. Super.
469, 478 (App. Div. 2006). Under that standard, motions to dismiss "should
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be granted in only the rarest of instances." Printing Mart-Morristown, 116 N.J.
at 772.
We review a dismissal for failure to state a claim pursuant to Rule 4:6-
2(e) de novo, following the same standard as the trial court. Castello v.
Wohler, 446 N.J. Super. 1, 14 (App. Div. 2016). In this context, we accept as
true the complaint's factual assertions. Banco Popular N. Am. v. Gandi, 184
N.J. 161, 165-66, 183-84 (2005). "The court may not consider anything other
than whether the complaint states a cognizable cause of action." Rieder v.
State Dep't of Transp., 221 N.J. Super. 547, 552 (App. Div. 1987). "It is the
existence of the fundament of a cause of action in those documents that is
pivotal; the ability of the plaintiff to prove its allegations is not at issue."
Banco Popular N. Am., 184 N.J. at 183.
Municipal Mechanics' Lien Law
The MMLL, the Public Works Bond Act (Bond Act), N.J.S.A. 2A:44-
143 to -147, and the New Jersey Trust Fund Act (Trust Fund Act), N.J.S.A.
2A:44-148, have historically worked together to protect subcontractors
supplying material or labor on municipal construction projects. Key Agency v.
Cont'l Cas. Co., 31 N.J. 98, 104 (1959) (stating the three Acts had an "obvious
relationship" and "must be construed together"); see also Unadilla Silo Co. v.
Hess Bros., 123 N.J. 268, 277 (1991) (stating MMLL and Bond Act were "to
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be construed together" (quoting Morris Cty. Indus. Park v. Thomas Nicol Co.,
35 N.J. 522, 527 (1961))).
The Bond Act, originally enacted in 1918, L. 1918, c. 75, requires
contractors on public works construction projects to furnish a bond in an
amount equal to or more than the contract price, conditioned on the proper
completion of the work, and payable to all subcontractors for any indebtedness
that may accrue in an amount not exceeding the sum specified in the bond.
N.J.S.A. 2A:44-144. The Trust Fund Act, originally enacted in 1951, L. 1951,
c. 344, provides that any money paid by the contracting public entity to the
contractor shall constitute trust funds in favor of the unpaid subcontractors.
N.J.S.A. 2A:44-148.
The Legislature enacted the present MMLL in 1918. L. 1918, c. 280.
The Supreme Court recounted the MMLL's long history in Unadilla, 123 N.J.
at 275-76 (citations omitted):
In 1891 and 1892, the Legislature enacted the
antecedents of the present Municipal Mechanics' Lien
Law. L. 1891, c. 225, and L. 1892, c. 232. Those
statutes specifically provided laborers or materialmen
with the right to assert a lien on funds in the
municipality's control that had not yet been paid to the
contractor. Initially, it was held that the 1892 act did
not repeal the right of laborers or materialmen to bring
an action against a public body under the general
Mechanics' Lien Law. In 1909, however, the
Legislature amended the statute, L. 1909, c. 171, § 7,
and this Court held [in Key Agency, 31 N.J. at 106,]
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that that amendment indicated the Legislature's
"intention that the act of 1892 should be the sole
means for acquiring a mechanics' lien because of any
public improvement."
The MMLL gives unpaid subcontractors, materialmen, and laborers
having a contractual relationship either with a prime contractor or a
subcontractor, a lien "for the value of the labor or materials, or both, upon the
moneys due or to grow under the contract and in the control of the public
agency." N.J.S.A. 2A:44-128 (emphasis added). The lien acts as security for
payment of the services rendered or improvements made with respect to the
property. The lien only "attaches to funds appropriated for the payment of
such public work and still in the hands of the public agency." Wilson v.
Robert A. Stretch, Inc., 44 N.J. Super. 52, 55 (Ch. Div. 1957) (citing Johnson
v. Fred L. Emmons, Inc., 115 N.J. Eq. 335, 340 (Ch. 1934), aff'd, 119 N.J. Eq.
88 (E. & A. 1935)).
"'Public agency' means any county, city, town, township, public
commission, public board or other municipality in this state authorized by law
to make contracts for the making of any public improvement in any city, town,
township or other municipality." N.J.S.A. 2A:44-126. Counties are also
considered "municipalities" under the MMLL. Herman & Grace v. Bd. of
Chosen Freeholders of Essex Cty., 71 N.J. Eq. 541, 547 (Ch. 1906), aff'd o.b.,
73 N.J. Eq. 415, 417 (E. & A. 1907). However, the State and its agencies are
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not included in the MMLL's definition of "public agency," which is "limited to
counties and conventional municipal corporations." Morris Cty. Indus. Park,
35 N.J. at 528 (dictum) (citing Curtis & Hill Gravel & Sand Co. v. State
Highway Comm'n, 91 N.J. Eq. 421, 432-33 (Ch. 1920)).
The extent of the MMLL's lien protection is limited to the amount the
public agency owes
to the prime contractor at the time the notice of lien
claim is filed or thereafter becoming due. The former
cannot be liable for more than the total amount of the
prime contract, provided it pays the prime contractor
in accordance with the terms thereof and withholds a
sum sufficient to cover lien claims filed, and
satisfaction of the claim cannot be had out of the
public property which is the subject of the project.
[Hiller & Skoglund, Inc. v. Atl. Creosoting Co., 40
N.J. 6, 12-13 (1963).]
The MMLL lien is created by filing a notice with the public agency.
N.J.S.A. 2A:44-129; N.J.S.A. 2A:44-132. Upon receipt of the notice, the
public agency may require the prime contractor to show cause why the claim
should not be paid. N.J.S.A. 2A:44-135. The public agency may deny a lien
claim even if no legitimate objection is made. Bd. of Educ. of Bayonne v.
Kolman, 111 N.J. Super. 585, 588 (Ch. Div. 1970). Alternatively, the public
agency may pay the claim out of the funds in its possession. N.J.S.A. 2A:44 -
136.
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If the public agency refuses to pay the MMLL lien, the lien claimant
may enforce its rights by commencing an equitable action in the superior court
"against the fund," N.J.S.A. 2A:44-137, within a specific time limit, N.J.S.A.
2A:44-138. See Boardwalk Props., Inc. v. BPHC Acquisition, Inc., 253 N.J.
Super. 515, 526 (App. Div. 1991) (finding the Superior Court is a unitary court
and "[t]he jurisdiction of the Chancery Division to adjudicate all controversies
. . . and render both legal and equitable remedies is co-extensive with that of
the Law Division"). "If the public agency is not a corporation, then the county
or municipality under which it is constituted shall be made a party defendant."
N.J.S.A. 2A:44-139.
The process to enforce a MMLL lien is considered a statutory
proceeding in rem, which assumes that the personal liabilities of the prime
contractor against the municipality are not the objects of the action.
Commonwealth Quarry Co. v. Gougherty, 105 N.J. Eq. 642, 649 (Ch. 1930)
During the action, N.J.S.A. 2A:44-140 directs that
[t]he superior court shall determine the validity and
priorities of the liens . . . and the amount due from the
public agency to the contractor under the contract and
from the contractor or subcontractor to the respective
claimants and shall enter judgment directing the
public agency, out of moneys due from it to the
contractor, to pay to the several claimants the sums
found due to them respectively, with interest and costs
upon claims adjudged to be just and valid under this
article.
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In addition, the public agency may "pay into the superior court the amount
which it admits to be due [to] the principal contractor upon the contract. The
contractor or claimants shall not be precluded thereby from seeking judgment
for a further sum." N.J.S.A. 2A:44-141.
Nonetheless, if the claimant neglects to bring an action within the
specified time limit, it will be barred from recovering the value of the lien,
which will be discharged. N.J.S.A. 2A:44-138; N.J.S.A. 2A:44-142(b). The
lien also may be discharged by: (1) a certificate to that effect from the
claimant to the financial officer of the public agency, (2) satisfaction of a
decree in an action to enforce the lien, or (3) final decree in an action to
enforce the lien. N.J.S.A. 2A:44-142.
Notwithstanding a claimant's right to file a MMLL lien, N.J.S.A. 2A:44-
127 states that "[n]othing in this article contained shall affect or impair the
right of a creditor for labor performed or materials furnished to maintain an
action to recover such debt against the person liable therefor." That is,
recovery under the MMLL is not the unpaid subcontractor's sole remedy and
will not affect or impair recovery against a responsible party.
County Improvement Authorities Law
The Legislature enacted the CIAL in 1960. L. 1960, c. 183. Its purpose
was, in part, to allow counties to create a flexible financing vehicle, the county
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improvement authority, that would serve almost any county purpose. N.J.S.A.
40:37A-47.1. The Legislature stated that every authority created under the
CIAL was, among other things, to provide: (1) "public facilities for use by the
State, the county or any beneficiary county, or any municipality in any such
county, or any two or more or any subdivisions, departments, agencies or
instrumentalities of any of the foregoing for any of their respective
governmental purposes"; and (2) "the planning, design, acquisition,
construction, improvement, renovation, installation, maintenance and
operation of facilities or any other type of real or personal property within the
county." N.J.S.A. 40:37A-54(a) and (i).
Accordingly, the CIAL makes every county improvement authority "a
public body politic and corporate constituting a political subdivision of the
State established as an instrumentality exercising public and essential
governmental functions to provide for the public convenience, benefit and
welfare and shall have perpetual succession and, for the effectuation of its
purposes[.]" N.J.S.A. 40:37A-55 (emphasis added). In fact, the MCIA was
created by ordinance of the Mercer County Board of Chosen Freeholders "as a
public body corporate and politic of the State pursuant to and in accordance
with the [CIAL]."
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Most noteworthy here, the CIAL grants each improvement authority
with independent powers:
(b) To sue and be sued;
(c) To acquire, hold, use and dispose of its facility
charges and other revenues and other moneys;
(d) To acquire, rent, hold, use and dispose of other
personal property for the purposes of the authority;
....
(f) . . . to lease to any governmental unit or person, all
or any part of any public facility for such
consideration and for such period or periods of time
and upon such other terms and conditions as it may fix
and agree upon;
....
(i) . . . to make agreements of any kind with any
governmental unit or person for the use or operation
of all or any part of any public facility for such
consideration and for such period or periods of time
and upon such other terms and conditions as it may fix
and agree upon;
(j)(1) To borrow money and issue negotiable bonds or
notes or other obligations and provide for and secure
the payment of any bonds and the rights of the holders
thereof, and to purchase, hold and dispose of any
bonds;
(2) To issue bonds, notes or other obligations to
provide funding to a municipality that finances the
purchase and installation of renewable energy systems
and energy efficiency improvements by property
owners . . . ;
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(k) To . . . accept . . . grants of real or personal
property, money, material, labor or supplies for the
purposes of the authority from any governmental unit
or person, and to make and perform agreements and
contracts and to do any and all things necessary or
useful and convenient in connection with the
procuring, acceptance or disposition of such gifts or
grants;
....
(o) To acquire, purchase, construct, lease, operate,
maintain and undertake any project and to fix and
collect facility charges for the use thereof;
(p) To mortgage, pledge or assign or otherwise
encumber all or any portion of its revenues and other
income, real and personal property, projects and
facilities for the purpose of securing its bonds, notes
and other obligations or otherwise in furtherance of
the purpose of this act;
....
(t) To enter into any and all agreements or contracts,
execute any and all instruments, and do and perform
any and all acts or things necessary, convenient or
desirable for the purposes of the authority . . . subject
to the "Local Public Contracts Law[.]"
[N.J.S.A. 40:37A-55(b) to (t).]
"Public facility" means "any lands, structures, franchises, equipment, or
other property or facilities acquired, constructed, owned, financed, or leased
by the authority or any other governmental unit or person to accomplish any of
the purposes of an authority[.]" N.J.S.A. 40:37A-45(p). "Real property"
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means "lands within or without the State, above or below water, and
improvements thereof or thereon, or any riparian or other rights or interests
therein[.]" N.J.S.A. 40:37A-45(q).
In furtherance of the Legislature's underlying public policy, the CIAL
gives an improvement authority certain tax exemptions. N.J.S.A. 40:37A-85
states that "[a]ll properties of an authority . . . and all public facilities, whether
or not owned by the authority . . . shall be exempt from all taxes and special
assessments of the State or any subdivision thereof." It also states that
[a]ll bonds issued pursuant to this act are hereby
declared to be issued by a political subdivision of this
State and for an essential public and governmental
purpose and to be a public instrumentality and such
bonds, and the interest thereon and the income
therefrom, and all facility charges, funds, revenues
and other moneys pledged or available to pay or
secure the payment of such bonds, or interest thereon,
shall at all times be exempt from taxation except for
transfer inheritance and estate taxes.
[Ibid.]
Particularly relevant to our analysis, the CIAL states:
All property of the authority, except as otherwise
provided herein, shall be exempt from levy and sale
by virtue of an execution and no execution or other
judicial process shall issue against the same nor shall
any judgment against the authority be a charge or lien
upon its property; provided, that nothing herein shall
apply to or limit the rights of the holder of any bonds,
bond anticipation notes or other notes or obligations to
pursue any remedy for the enforcement of any pledge
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or lien given by the authority on its revenues or other
moneys; and provided, further, that nothing herein
shall limit the authority's ability to enter into
partnerships, limited partnerships, joint ventures or
other associations as a general partner, limited partner
or participant therein.
[N.J.S.A. 40:37A-127 (emphasis added).]
Similarly, the CIAL states:
All property of an authority shall be exempt from levy
and sale by virtue of an execution and no execution or
other judicial process shall issue against the same nor
shall any judgment against an authority be a charge or
lien upon its property; provided, that nothing herein
contained shall apply to or limit the rights of the
holder of any bonds to pursue any remedy for the
enforcement of any pledge, mortgage or lien given by
an authority on its facility revenues or other moneys,
or on its real or personal property.
[N.J.S.A. 40:37A-82 (emphasis added).]
IV
MasTec and amicus UTCA argue the trial court erred when it failed to
harmonize the MMLL and the CIAL. Instead, the trial court held that the plain
language in N.J.S.A. 40:37A-127 exempts the execution of municipal
mechanics' liens against county improvement authorities. 4 MasTec and UTCA
4
The record shows the trial court's decision was substantially influenced by
the reasoning in an unpublished opinion from this court. Rule 1:36-3 makes
clear that
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23
thus argue that funds purposely appropriated for a public works project under
the control of a county improvement authority are private, personal property.
As such, these funds are not subject to the judicial process exemption in
N.J.S.A. 40:37A-127. Furthermore, because the MMLL liens never attach to
the public, real property of any public agency, appellants argue they may
impose a lien confined to the amounts owed to the prime contractor or to the
subcontractor.
MasTec further asserts that judicial process against a county
improvement authority is not per se precluded by the CIAL. According to
MasTec, N.J.S.A. 40:37A-55(a) expressly permits authorities to be sued and
does not prevent an authority from being named in an in rem proceeding as a
necessary party under the MMLL in its capacity as stakeholder and custodian
of the Project Fund. Because the public agency does not have a claim to the
[n]o unpublished opinion shall constitute precedent or
be binding upon any court. Except for appellate
opinions not approved for publication that have been
reported in an authorized administrative law reporter,
and except to the extent required by res judicata,
collateral estoppel, the single controversy doctrine or
any other similar principle of law, no unpublished
opinion shall be cited by any court.
[(Emphasis added).]
None of the exemptions codified in the Rule apply here.
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24
Project Fund, MasTec argues it is not personally affected by a mandamus-type
judgment directing distribution of those monies. Finally, MasTec argues the
holder of a statutory mechanics' lien has a constitutionally protected property
interest. Thus, the trial court violated its constitutional rights by const ruing
N.J.S.A. 40:37A-127 to foreclose the means of enforcing its municipal
mechanics' lien against the MCIA.
Amicus UTCA maintains that the CIAL is not in conflict with the
MMLL's protections that allow liens to be filed against funds owed to
contractors. According to the UTCA, the trial court's decision vitiates the
MMLL's long history of protecting subcontractors, suppliers, and laborers and
discourages them from participating in public works projects. Pursuing this
line of reasoning, the UTCA argues that MasTec must be able to foreclose on
its lien because the MCIA did not require SunLight to furnish a performance
and payment bond. In citing to Picker v. Bayonne, 60 N.J. Super. 251, 257
(App. Div. 1960), UTCA also argues this action by the MCIA removed the
safety net for subcontractors afforded by the Bond Act.
The MCIA argues that the plain language in CIAL shows that "all
property" is exempt from judicial process and that includes the funds from
bondholders held by a Trustee and controlled by a county improvement
authority. According to the MCIA, the MMLL does not apply to this
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25
construction project due to the complex financing arrangement between the
authority and the joint venture team of MasTec and SunLight. It argues that
SunLight is the true owner of the project and MasTec is not a subcontractor.
Therefore, the MCIA is merely the financing vehicle for SunLight's lease
payments and the bondholders have a first priority lien.
We review matters of statutory interpretation de novo. Verry v. Franklin
Fire Dist. No. 1, 230 N.J. 285, 294 (2017). "The Legislature's intent is the
paramount goal when interpreting a statute and, generally, the best indicator of
that intent is the statutory language." DiProspero v. Penn, 183 N.J. 477, 492
(2005). Thus, any analysis to determine legislative intent begins with the
statute's plain language. Ibid. "We ascribe to the statutory words their
ordinary meaning and significance and read them in context with related
provisions so as to give sense to the legislation as a whole." Ibid. (citations
omitted). Our authority is bound by clearly defined statutory terms. Febbi v.
Bd. of Review, Div. Emp. Sec., 35 N.J. 601, 606 (1961). Where a specific
definition is absent, "[w]e must presume that the Legislature intended the
words it chose and the plain and ordinary meaning ascribed to those words."
Paff v. Galloway Twp., 229 N.J. 340, 353 (2017).
However, this court's review "is not limited to the words in a challenged
provision." State v. Twiggs, 233 N.J. 513, 532 (2018). A court "can also draw
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inferences based on the statute's overall structure and composition and may
consider the entire legislative scheme of which [the statute] is a part." Ibid.
(alteration in original) (citations omitted). We do not "view [statutory] words
and phrases in isolation but rather in their proper context and in relationship to
other parts of [the] statute, so that meaning can be given to the whole of [the]
enactment." Ibid. (alterations in original) (quoting State v. Rangel, 213 N.J.
500, 509 (2013)). A court must make every effort to avoid rendering any part
of a statute inoperative, superfluous or meaningless. Jersey Cent. Power &
Light Co. v. Melcar Util. Co., 212 N.J. 576, 587 (2013).
"'[S]tatutes that deal with the same matter or subject should be read in
pari materia and construed together as a unitary and harmonious whole.'" Nw.
Bergen Cty. Utils. Auth. v. Donovan, 226 N.J. 432, 444 (2016) (quoting Saint
Peter's Univ. Hosp. v. Lacy, 185 N.J. 1, 14-15 (2005)). Furthermore, "'[t]he
Legislature is presumed to be familiar with its own enactments, with judicial
declarations relating to them, and to have passed or preserved cognate laws
with the intention that they be construed to serve a useful and consistent
purpose.'" Ibid. (alteration in original) (quoting State v. Federanko, 26 N.J.
119, 129-30 (1958)). Thus, unless there are other clues, a court must "presume
that the Legislature intended for its two statutory schemes . . . to generally
work harmoniously, not in conflict with one another." Ibid. Finally, when a
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27
statute is silent on an issue and both parties have competing interests in how
the statute is interpreted, the reviewing court's "task is to fashion protections
for both interests, if it can reasonably be done, within the four corners of the
statutory scheme." Thomas Grp., Inc. v. Wharton Senior Citizen Hous., Inc.,
163 N.J. 507, 518-19 (2000).
N.J.S.A. 40:37A-127 excludes all of the MCIA's property from
"execution or other judicial process," except "its revenues or other moneys" in
actions brought by "the holder of any bonds, bond anticipation notes or other
notes or obligations" to enforce any pledge or lien. This text can be construed
to show that subcontractors cannot recover against the MCIA's revenues or
other moneys by foreclosure of a municipal mechanics' lien. However, that
construction of the statute does not consider the Legislature's intent in the
MMLL to protect unpaid subcontractors supplying material or labor on
municipal construction projects by enabling them to claim against monies due
to the general contractor payable by the public agency.
Our Supreme Court has rejected an approach that elevates form over
substance when interpreting statutes. Times of Trenton Pub. Corp. v.
Lafayette Yard Cmty. Dev. Corp., 183 N.J. 519, 535-36 (2005). We presume
that the Legislature was aware of the MMLL, which was enacted in 1918,
when it enacted the CIAL in 1960. Thus, the two statutes should be
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considered together. However, when we connect the CIAL with the MMLL,
an ambiguity in N.J.S.A. 40:37A-127 is revealed in the phrase "all property."
The CIAL is silent on what is covered under the phrase "all property" in
N.J.S.A. 40:37A-127. The question therefore becomes whether, in light of the
MMLL's legislative intent, "all property" includes the Project Fund created
from the MCIA's bond issuance and allocated for the SGF project.
"When the statutory language is ambiguous and 'leads to more than one
plausible interpretation,' courts may resort to extrinsic sources, like legislative
history and committee reports." Twiggs, 233 N.J. at 532 (quoting DiProspero,
183 N.J. at 492-93). The CIAL's legislative history of its initial enactment and
of its subsequent amendments provides no assistance here, as there is no hint
that the Legislature ever considered the MMLL in relation to the CIAL or its
judicial process exemption.
The resolution lies not in MasTec's attempt to execute or foreclose a
municipal mechanics' lien, but in its right, or lack thereof, to file a valid lien in
the first place. While mechanics' lien laws may be "liberally construed as to
provisions for enforcement," our Supreme Court has instructed that such laws,
"being of statutory origin and in derogation of the common law, should be
strictly construed with respect to the provisions giving rise to the lien." Morris
Cty. Indus. Park, 35 N.J. at 526 (emphasis added). The Court explained:
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This is really saying no more than that where a statute
imposes a non-contractual obligation or charge, and
one which may result in one party . . . having to
satisfy the debt of another party, a court should not
extend the substantive benefit thereby given beyond
the fair intent and purpose of the legislation, to be
discerned primarily from the language of the statute
itself and related enactments.
[Ibid.]
Following that direction of strict construction, under the MMLL's
N.J.S.A. 2A:44-128(a), a subcontractor on a public improvement project can
obtain a lien upon moneys due under the contract and in the control of the
"public agency." N.J.S.A. 2A:44-126 defines "public agency" as "any county,
city, town, township, public commission, public board or other municipality in
this state authorized by law to make contracts for the making of any public
improvement in any city, town, township or other municipality." A county
improvement agency is not mentioned in that definition.
We agree with the Chancery Division's conclusion that there is "no
question" that a municipal housing authority is a "public agency" within the
meaning of N.J.S.A. 2A:44-126. Brown Strober Bldg. Supply Corp. v.
Fannew Realty, Inc., 174 N.J. Super. 491, 497 (Ch. Div. 1980) (concluding
that the MMLL did not apply because subcontractors also asserted liens under
the CLL's predecessor). However, N.J.S.A. 40:37A-55 states that, under the
CIAL, every county improvement authority is "a public body politic and
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30
corporate constituting a political subdivision of the State," and the State and its
agencies are excluded from the reach of the MMLL's liens. The Legislature's
express intent to exempt county improvement authorities from the terms of the
MMLL is found in N.J.S.A. 40:37A-90, which states:
This act shall be construed liberally to effectuate the
legislative intent and as complete and independent
authority for the performance of each and every act
and thing herein authorized, and an authority shall not
constitute or be deemed to be a county or municipality
or agency or component of a municipality for the
purposes of any other law; provided, however, that no
authority, other than an authority created in or
performing services for a county of the second class
having a population in excess of 265,000, but less than
350,000 inhabitants, in a county of the third class
having a population not in excess of 70,000
inhabitants, or in a county of the fifth class having a
population in excess of 150,000, but less than 300,000
inhabitants, shall exercise the powers of a common
carrier in any such county, and, except as hereinabove
in this section set forth, nothing contained in this act
shall in any way affect or limit the jurisdiction, rights,
powers or duties of any State regulatory agencies.
[(Emphasis added).]
This explicit language, guided by the mandate to construe the CIAL
liberally, makes clear that the MCIA cannot constitute or be deemed to be a
county or municipality or agency or component of a municipality for the
purposes of "any other law," such as the MMLL. The only exception to
N.J.S.A. 40:37A-90 can be found in N.J.S.A. 40:37A-55(t), which expressly
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makes a county improvement authority's agreements and contracts subject to
the Local Public Contracts Law (LPCL). See Meadowbrook Carting Co. v.
Borough of Island Heights, 138 N.J. 307, 313 (1994) (stating the LPCL
requires "that municipalities and counties advertise for bids on public contracts
that exceed the statutory threshold amount"). Although this exception does not
apply here, it shows that the Legislature has made exceptions to N.J.S.A.
40:37A-90, just not one for the MMLL.
N.J.S.A. 40:37A-90 has been cited in a published opinion by this court
only once. In Clean Earth Dredging Techs., Inc. v. Hudson Cty. Improvement
Auth., 379 N.J. Super. 261, 263-267 (App. Div. 2005), we were asked to
decide whether a lease executed by a county improvement authority was
subject to public bidding laws under the Local Lands and Building Law,
N.J.S.A. 40A:12-1 to -30. Relying on the CIAL, we held:
We are satisfied, however, as was the trial court, that
the Improvement Authority is not subject to the Local
Lands and Building Law. N.J.S.A. 40A:12-14 details
the bidding requirements for the leasing of real
property; that statute only applies, however, to
counties and municipalities. It does not apply to a
public body such as defendant Improvement
Authority.
. . . The Legislature, moreover, specifically included
within the [CIAL] authorizing the creation of an
improvement authority the directive that such an
authority "shall not constitute or be deemed to be a
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county or municipality . . . for the purposes of any
other law." N.J.S.A. 40:37A-90.
....
We consider it clear that the Legislature has made a
conscious choice to exempt improvement authorities
from the terms of the Local Lands and Buildings Law.
We are not authorized to second-guess or ignore that
choice.
[Id. at 271-72.]
Following that reasoning, it is clear that "the Legislature has made a
conscious choice[,]" id. at 272, to exempt county improvement authorities,
like the MCIA, from the terms of the MMLL and its protections. Thus, the
lien notice that MasTec filed against the MCIA is not valid. Consequently,
MasTec held no constitutionally protected property interest.
Finally, the dire policy implications predicted by amicus UTCA, that
subcontractors will be discouraged from supplying material or labor on
municipal construction projects are speculative and unlikely. In Friedman v.
Stein, 4 N.J. 34, 41 (1950), the Supreme Court pointed out that a statutory lien
is separate and distinct from the underlying debt, and only affords a
cumulative remedy for enforcement of that debt. Thus, recovery under the
MMLL is not an unpaid subcontractor's sole remedy. See N.J.S.A. 2A:44-127
("Nothing in [the MMLL] shall affect or impair the right of a creditor for labor
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performed or materials furnished to maintain an action to recover such debt
against the person liable therefor.").
Our courts have found that statutes that prohibit levy and execution,
similar to Section 127 of the CIAL, permit enforcement by writ of mandamus.
See First Nat'l Bank of Chicago v. Bridgeton Mun. Port Auth., 338 N.J. Super.
324, 329 (App. Div. 2001) (N.J.S.A. 40:68A-60 permits enforcement of bank
loans in action in lieu of prerogative writs for mandamus); Jersey Cent. Power
& Light Co. v. Kingsley Arms, Inc., 271 N.J. Super. 68, 80 (Law Div.)
(creditor barred from execution on housing authority's bank accounts under
N.J.S.A. 40A:12A-34, but "appropriate remedy to obtain satisfaction of its
judgments" existed "in the form of an action in lieu of prerogative writs"),
supplemented, 273 N.J. Super. 607 (Law Div. 1993).
In this light, we hold that the lien notice filed by MasTec against the
MCIA is not valid under N.J.S.A. 40:37A-90 and affirm the trial court's order
dismissing MasTec's lien foreclosure complaint.
Affirmed.
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