Envirofinance Group, LLC and Earthmark Nj Kane Mitigation, llc v. Environmental Barrier Company, LLC, 113 A.3d 775

Background

Earthmark obtained a ground lease from Meadowlands Conservation Trust to build a mitigation bank; Geo‑Con was the prime contractor and EFG financed the project and took a security interest in Earthmark (100% membership, leasehold, and mitigation‑credit proceeds).
Geo‑Con stopped work for nonpayment, recorded construction liens against Earthmark's leasehold, and sought foreclosure and damages; Earthmark and EFG sued to discharge the liens.
The trial court held the liens attached to Earthmark's private leasehold (not to public realty) because the contract was not "contracted for and awarded by a public entity." Judge entered default judgment against Earthmark for unpaid engineer‑approved invoices and later added fees, costs, and pre‑judgment interest under the Prompt Payment Act.
EFG claimed (1) it had standing to challenge the default judgment because of its security interest, (2) Geo‑Con breached the Contractor Consent Agreement (CCA) by executing an unauthorized side‑agreement, and (3) it was not liable for certain overrun costs. Geo‑Con counterclaimed for contract and equitable relief, including quantum meruit and an equitable lien on mitigation credits.
On summary judgment the court: denied EFG standing to challenge the Earthmark judgment; awarded Geo‑Con cure payments from EFG under the CCA for approved invoices; rejected Geo‑Con’s quantum meruit and equitable lien claims against EFG/creditor for the cost‑overrun work; and affirmed that the public‑works exception to the Construction Lien Law did not apply.

Issues

Issue	Plaintiff's Argument (EFG)	Defendant's Argument (Geo‑Con)	Held
1) Standing to oppose default judgment against Earthmark	EFG: security interest in Earthmark/leasehold gives a sufficient financial stake to challenge judgment that impairs collateral	Geo‑Con: EFG was only a secured creditor and did not have a direct adverseness to dispute Earthmark’s vendor claims	Court: EFG lacked standing; as secured lender it declined to step into borrower’s role and cannot assert third‑party defenses
2) Necessity of proof hearing before entering default judgment / damages	EFG: proof hearing required; damages award may be inflated	Geo‑Con: evidence (engineer‑approved invoices) established entitlement	Court: trial judge properly found invoices proven and appropriately assessed damages and fees; no abuse of discretion
3) Validity of construction liens vs. public‑works exception to Construction Lien Law	EFG: lien barred because project is a public works/improvement to real property	Geo‑Con: contract was private between Earthmark and Geo‑Con; public‑works exception inapplicable	Court: public‑works exception requires work "contracted for and awarded by a public entity"; lien valid against private leasehold
4) EFG liability for cure payments under CCA and breach by Geo‑Con re: side agreement	EFG: Geo‑Con breached CCA by side‑agreement; thus EFG not liable for cure payments tied to unauthorized modification	Geo‑Con: CCA allows lender to make cure payments and Geo‑Con provided engineer’s certificates; EFG elected to cure but failed to pay	Court: Geo‑Con breached by making side deal without notice, but EFG failed to prove damages from breach; EFG had contractual obligation/right to make cure payments and did not pay certified invoices, so EFG liable for cure amounts it agreed to cover
5) Quantum meruit / unjust enrichment / equitable lien on mitigation credits	Geo‑Con: performed additional work and should recover in quantum meruit or obtain equitable lien on mitigation credits; alternatively unjust enrichment	EFG: no obligation; overrun work was unauthorized and not consented by lender	Court: quantum meruit fails because no expectation/payment by EFG or benefit accepted by EFG; no unjust enrichment and no agreement to grant lien on credits; claims denied
6) Successor liability (Kane as EFG successor/assign)	EFG: Kane was not a party and cannot be held liable	Geo‑Con: Kane is EFG‑owned successor; liable as continuation	Court: Kane (100% EFG‑owned, created to assume rights) can be successor; successor liability applies based on continuation

Key Cases Cited

Brunson v. Affinity Fed. Credit Union, 199 N.J. 381 (deference to trial court factual findings)
Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366 (no special deference to legal interpretation)
In re Adoption of Baby T, 160 N.J. 332 (standing is threshold justiciability element)
N.J. Chamber of Commerce v. N.J. Election Law Enforcement Comm'n, 82 N.J. 57 (purposes of standing doctrine)
In re Camden Cnty., 170 N.J. 439 (standing requires a sufficient stake/likely harm)
Reaves v. Egg Harbor Twp., 277 N.J. Super. 360 (New Jersey’s liberal view of standing)
Strulowitz v. Provident Life & Cas. Ins. Co., 357 N.J. Super. 454 (financial interest ordinarily suffices for standing)
Silva v. Autos of Amboy, Inc., 267 N.J. Super. 546 (fee awards where claims share common core of facts)
Litton Indus., Inc. v. IMO Indus., Inc., 200 N.J. 372 (standard for counsel‑fee awards review)
VRG Corp. v. GKN Realty Corp., 135 N.J. 539 (unjust enrichment elements)
Weichert Co. Realtors v. Ryan, 128 N.J. 427 (quantum meruit principles)
Starkey, Kelly, Blaney & White v. Estate of Nicolaysen, 172 N.J. 60 (elements for quantum meruit)