A Study on the Priority Right to Satisfaction of the Payment for the Construction of the Project after Loss of the Project

Abstract

The priority right to satisfaction of the payment for the construction of the project is a statutory priority regime established by Article 807 of the Civil Code to protect the contractor’s claim to such payment. Its realization ordinarily presupposes that the construction project is fit for liquidation or auction. Where the project is damaged, destroyed, or expropriated and is transformed into substitute proceeds such as insurance proceeds, damages, or compensation, existing rules do not clearly provide whether the contractor may continue to seek satisfaction in priority from such proceeds, and judicial decisions remain divided. This article analyzes the subrogation effect of the Priority Right after loss of the project. It argues that loss of the project does not necessarily extinguish the Priority Right. A lawfully established Priority Right may extend to substitute proceeds within its original scope, provided that such proceeds correspond to the exchange value of the original project. Where multiple rights compete over substitute proceeds, priority ranking should be coordinated on the basis of identity of value, with procedural safeguards such as identification of proceeds, deposit, and proportional distribution.