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NRG Rema LLC v. Creative Environmental Solutions Corp.

Superior Court of New Jersey, Appellate Division

April 25, 2018

NRG REMA LLC, and BTU SOLUTIONS GROUP, LLC, Plaintiffs-Appellants,
v.
CREATIVE ENVIRONMENTAL SOLUTIONS CORP., and SITE ENTERPRISES, INC., Defendants-Respondents, and SIMS METAL EAST LLC, d/b/a SIMS METAL MANAGEMENT, WESTERN OIL FIELDS SUPPLY COMPANY, d/b/a RAIN FOR RENT, ACCREDITED ENVIRONMENTAL TECHNOLOGIES, INC., MINERVA ENTERPRISES, LLC, and ANI & JOE ABATEMENT DEMOLITION, LLC, Defendants. CREATIVE ENVIRONMENTAL SOLUTIONS CORP., Plaintiff-Respondent/ Cross-Appellant,
v.
NRG REMA LLC, a/k/a NRG ENERGY and BTU ENVIRONMENTAL SOLUTIONS LLC, a/k/a BTU SOLUTIONS GROUP, BTU SOLUTIONS DE, LLC, BTU STATE LINE, LLC, BTU PROJECT MANAGEMENT, LLC, BTU ENVIRONMENTAL SERVICES, LLC, and BTU SOLUTIONS GROUP, LLC, Defendants-Appellants/ Cross-Respondents, and SITE ENTERPRISES, INC., Defendant-Respondent, and SIMS METAL EAST LLC, d/b/a SIMS METAL MANAGEMENT, ACCREDITED ENVIRONMENTAL TECHNOLOGIES, INC., ATLANTIC COAST DISMANTLING, LLC, and JARED ROSSI, Defendants.

          Argued January 8, 2018

          On appeal from Superior Court of New Jersey, Law Division, Middlesex County, Docket Nos. L-3587-15 and L-0344-15.

          Thomas J. O'Leary argued the cause for appellants in A-5432-15 and appellants/ cross-respondents in A-0567-16 (Connell Foley LLP, attorneys; Thomas J. O'Leary, of counsel and on the briefs; Mitchell W. Taraschi and Lauren F. Iannaccone, on the briefs).

          Daniel S. Perlman of the New York bar, admitted pro hac vice, argued the cause for respondent Creative Environmental Solutions Corp. in A-5432-15 and respondent/cross-appellant in A-0567-16 (Cutolo Barros LLC and Daniel S. Perlman, attorneys; Gregg S. Sodini, of counsel; Daniel S. Perlman and Greg S. Sodini, on the briefs).

          Mitchell J. Malzberg argued the cause for respondent Site Enterprises, Inc. in A-5432-15 and A-0567-16 (Law Offices of Mitchell J. Malzberg, LLC, attorneys; Mitchell J. Malzberg and Jodelyn S. Malzberg, on the briefs) .

          Before Judges Sabatino, Ostrer and Whipple.

          OPINION

          OSTRER, J.A.D.

         These related appeals, consolidated for our opinion, raise a novel issue under the Construction Lien Law (CLL), N.J.S.A. 2A:44A-1 to -38, pertaining to the demolition, not the construction, of a structure. In particular, we must decide whether the value of salvage recovered by the demolition contractor enlarges the lien fund available to unpaid subcontractors who file lien claims.

         The contract at issue did not require the property owner to pay a fixed price to the prime contractor for the demolition. Instead, the contractor paid the owner for the right to demolish the building and to salvage materials. We conclude the ultimate market value of the salvage materials, transferred to the contractor in return for its demolition work, constitutes an element of the "contract price, " N.J.S.A. 2A:44A-2, and enhances the size of the "lien fund" available to lien claimants, N.J.S.A. 2A:44A-9. However, the net value of the fund is reduced by the contractor's cash payment to the owner. We also hold that the CLL requires a signatory of a corporation's lien claim to demonstrate he or she is a corporate officer pursuant to the corporation's bylaws or board resolution.

         We therefore modify the trial court order that the lien fund here consisted of the value of the salvage ultimately retrieved from the demolition site; and reverse the order that an employee of one of the lien claimants informally designated a "financial director" had sufficient authority to file a lien claim on behalf of his employer. We also affirm the trial court's denial of attorney's fees to one of the lien claimants.

         I.

         The litigation arises out of the demolition of a power generating station in South Amboy known as the Werner Generating Station. NRG REMA, LLC (NRG) is the property owner.

         NRG sought bids from firms willing to undertake the demolition project. Some bidders wanted NRG to pay them from $400, 000 to $6.6 million to demolish the generating station. Six others were willing to pay for the right to demolish the structure, offering $250, 000 to $1.4 million. Those bidders counted on profiting from the resale of salvaged metals and equipment. But that upside was fraught with risk. It was difficult to estimate the amount of such material, and the ease of extracting it. NRG made no promises on that score.

         NRG selected Werner Deconstruction, LLC (Werner), which agreed to pay NRG $250, 000 and to demolish the generating station, in return for the salvage. NRG claims it rejected more remunerative bids than Werner's because of its demonstrated capacity to finish the job on time. According to their contract, title to "Salvage Materials" - defined as "equipment, parts, components and materials . . . to be salvaged during demolition, excavation or other operations" - vested in Werner when it paid NRG, which it evidently did on May 10, 2012.[1] If NRG terminated the contract for cause, title to all Salvage Materials remaining on site would revert to NRG. NRG also retained a security interest in the Salvage Materials, which NRG could exercise if it terminated the contract while Werner was in bankruptcy. Werner posted a $2 million letter of credit, upon which NRG could draw if Werner defaulted. The prime contract imposed no payment obligation on NRG after it conveyed title to the Salvage Materials.

         The value of the Salvage Materials was a factor in the parties' respective rights and duties if NRG terminated the contract for cause. Werner would be liable for NRG's costs of completion, minus revenue NRG reasonably obtained for the remaining Salvage Materials. Werner would also be entitled to a credit for its pre-termination costs, minus revenue it realized from the Salvage Materials.

         Four days after executing the prime contract, Werner subcontracted with BTU Solutions DE, LLC (BTU).[2] Essentially, BTU stepped into Werner's shoes to perform the prime contract. BTU initially projected that costs of roughly $4.5 million would generate $13 million in salvage-related revenue.

         But, it did not turn out that way. BTU overestimated the amount of salvageable metal and equipment, and underestimated the cost of recovery. Some copper cable that BTU expected to find apparently already had been removed from the long-defunct station. Other cable was encased in asbestos and more costly than anticipated to salvage. Extraction of steel from the site was also more complicated than anticipated. Shortfalls in the revenue stream that BTU anticipated would fund its expenses, required BTU to borrow working capital, incurring additional costs.

         Then, Superstorm Sandy hit in October 2012. The site filled with salt water, destroying otherwise salvageable equipment, dispersing asbestos throughout the site, and further complicating remediation. Several months thereafter, BTU entered into its subcontract with Site Enterprises, Inc. (Site), which agreed to perform demolition work after the storm in return for $3.7 million.

         BTU struggled to pay its subcontractors, including Site. On December 26, 2013, Site filed a lien claim for $450, 000, asserting it had not been paid, and ceased work.[3] BTU did not begin selling significant quantities of Salvage Materials until 2014.[4]

         In March 2014, BTU contracted for environmental consulting services from Creative Environmental Solutions Corp. (Creative). Before a year passed, Creative filed its lien claim on December 24, 2014 in the amount of $350, 000. It was signed by Ross Sikarev. He was Creative's "financial director, " a title he received at an informal dinner meeting with Creative's president, Victoria Drozdov. No formal meeting of Creative's board, amendment to its by-laws, or corporate resolution confirmed Sikarev's authority to sign a lien claim on Creative's behalf.

         The NRG-Werner contract, and the Werner-BTU subcontract required Werner and BTU to ensure the project was lien-free. However, neither company paid Site's and Creative's lien claims.

         After Site's lien filing, but before Creative's, BTU removed over 8000 tons of ferrous metal, for which it received $2, 093, 014.[5] After Creative's lien claim, BTU removed just 181 more tons of ferrous material. The record indicates that BTU received $29, 418 in return.

         Meanwhile, in April 2 014, Werner submitted a change order for $52, 427 for removing oil from the project. NRG approved it over a year later.

         Eventually, Creative filed an action to foreclose on its lien against NRG's property (No. A-0567-16). Thereafter, NRG and BTU filed a declaratory judgment action (No. A-5432-15) against Creative, Site and others, to establish that the lien fund was limited to $52, 427, the change order amount. The trial court consolidated the two actions.

         After motion practice, the trial court concluded that the lien fund was $2, 093, 014, rather than $52, 427 as NRG contended. Furthermore, the judge rejected NRG's argument that Creative's lien was invalid because an authorized officer did not sign it. Consistent with those findings, the court granted Creative summary judgment in its action against NRG and BTU, entitling Creative to a lien of $350, 604 plus interest, and entitling it to foreclose on NRG's property. The court denied NRG's cross-motions for summary judgment for a declaration that the lien fund was limited to $52, 427. Although the court initially granted Creative's request for counsel fees under N.J.S.A. 2A:44A-15(a), the court vacated the order upon NRG's motion for reconsideration.

         NRG and BTU[6] now jointly appeal the trial court's rulings concerning the value of the lien fund as to Site and Creative. They also appeal the trial court's ruling as to the propriety of Creative's signatory on its lien claim. Creative cross-appeals the denial of its motion for counsel fees. Site is solely a co-respondent and has not sought any affirmative relief on appeal.

         II.

         We exercise de novo review of the trial court's grant of summary judgment, and apply the same standard as the trial court. Henry v. N.J. Dep't of Human Servs., 204 N.J. 320, 330 (2010). Issues of statutory construction are likewise subject to our plenary review. Cashin v. Bello, 223 N.J. 328, 335 (2015).

         We must interpret the CLL in a "nuanced way." See Craft v. Stevenson Lumber Yard, Inc., 179 N.J. 56, 67 (2004). It is "something of an overstatement" to simply say we must strictly construe the statute because it is in derogation of common law. Ibid.[7] We must read the statute "sensibly, " mindful of its underlying goals and policies. Id. at 68; see also Thomas Group, Inc. v. Wharton Senior Citizen Hous., Inc., 163 N.J. 507, 517 (2000).

         We are also guided by more general principles of statutory construction that require us to discern the Legislature's intent by focusing first on the plain language of the statute. If the meaning is plain, our job is done. In re Kollman, 210 N.J. 557, 568 (2012). However, if it is not, we may resort to extrinsic legislative materials for guidance. Ibid. We may also consider such materials if the plain meaning would lead to an absurd result, State v. Harper, 229 N.J. 228, 237 (2017), or would violate "the overall statutory scheme . . . ." DiProspero v. Perm, 183 N.J. 477, 493 (2005).

         There are two, sometimes competing, goals of the CLL: to provide a source of security to those who provide construction services and materials, and to protect property owners who have met their obligations.

The main purpose of the CLL - to help secure payment to contractors, subcontractors, and suppliers who provide work, services, material, or equipment pursuant to a written contract - is achieved by empowering them to file lien claims and thus protect the value of the work and materials they have provided. A secondary goal of the Act is to ensure the rights of property owners who have met their financial obligations and to preclude imposing upon them the burden of double payment for work and materials.
[Craft, 179 N.J. at 68 (citations omitted).][8]

See also Legge Indus, v. Joseph Kushner Hebrew Acad., 333 N.J.Super. 537, 555 (App. Div. 2000) (stating that "[t]he Lien Law attempts to protect both the owner and the supplier, " and a court must "balanc[e] the competing interests in the light of the ...


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