Mastec Renewables Constr. Co. v. Sunlight Gen. Mercer Solar, LLC

• Decision Date: 06 February 2020
• Docket Number: DOCKET NO. A-1833-15T4
• Citation: 462 N.J.Super. 297,226 A.3d 66
• Parties: MASTEC RENEWABLES CONSTRUCTION COMPANY, INC., Plaintiff-Appellant, v. SUNLIGHT GENERAL MERCER SOLAR, LLC, Defendant, and Mercer County Improvement Authority, Defendant-Respondent.
• Court: New Jersey Superior Court — Appellate Division

462 N.J.Super. 297

226 A.3d 66

MASTEC RENEWABLES CONSTRUCTION COMPANY, INC., Plaintiff-Appellant,

v.SUNLIGHT GENERAL MERCER SOLAR, LLC, Defendant,andMercer County Improvement Authority, Defendant-Respondent.

DOCKET NO. A-1833-15T4

Superior Court of New Jersey, Appellate Division.

Argued December 5, 2018

Decided February 6, 2020

Louis Anthony Modugno, Morristown, 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, Teaneck, 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, Phillipsburg, attorneys for amicus curiae Utility & Transportation Contractors Association of New Jersey, Inc. (Adrienne L. Isacoff, on the brief).

Before Judges Fuentes, Accurso and Moynihan.

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 facility (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 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.

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," which 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, 175 A.3d 953 (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 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 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 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 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...