The latest judgment of the Supreme Law: if the construction project is illegal and cannot be auctioned at a discount, the contractor claims the priority of compensation and does not support it! (full text)


[gist of judgment] Article 807 of the civil code of the people’s Republic of China stipulates that if the employer fails to pay the price as agreed, the contractor may urge the employer to pay the price within a reasonable period of time

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If the employer fails to pay within the time limit, in addition to the fact that it is not suitable to discount or auction the construction project according to its nature, the contractor may negotiate with the employer to discount the project or request the people’s court to auction the project according to law

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The price of the construction project shall be paid in priority according to the discount or auction price of the project

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Therefore, the premise for the contractor to exercise the priority of compensation for the construction project price is that the construction project can be discounted and auctioned

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The project involved in the case has not obtained the administrative approval procedures such as the construction land planning license and the construction project planning license, which belongs to the illegal construction, and the project has only completed the main frame, has not been decorated and used, does not have the legal and realistic conditions for leasing, leasing and other use income, does not meet the basic conditions for exercising the priority right to compensation for the project price, and the contractor claims the priority right to compensation for the project price, No support

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Full text: China Railway Construction Group Co., Ltd

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and Jinzhou Xinjiye Housing Development Co., Ltd

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basic information of civil judgment of the second instance of construction contract dispute of construction engineering case No

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(2020) Supreme People’s court No

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905 trial court: Supreme People’s court case type: Civil document type: judgment date: December 30, 2020 trial procedure: second instance Data source: ordinary case Party appellant (first instance plaintiff): China Railway Construction Group Co., Ltd

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Address: Shijingshan District, Beijing

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Legal representative: Zhao Wei, chairman of the board of the company

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Entrusted agent ad litem: Song Zuoliang, male, an employee of the company

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Entrusted agent ad litem: Sun Shijun, lawyer of Beijing Guozhen law firm

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Appellant (defendant in the first instance): Jinzhou Xinjiye Housing Development Co., Ltd

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Address: Guta District, Jinzhou City, Liaoning Province

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Legal representative: Xu Jiaojiao, executive director of the company

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Agent ad litem: Zhou Sheng, lawyer of Beijing Zhongzhou law firm

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Entrusted agent ad litem: Duan Junru, a lawyer of Beijing Zhongzhou law firm

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In the trial, the appellant China Railway Construction Group Co., Ltd

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(hereinafter referred to as China Railway Company) and the appellant Jinzhou Xinjiye Housing Development Co., Ltd

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(hereinafter referred to as Xinjiye company) filed an appeal to the court against Liaoning Provincial Higher People’s court’s (2019) No

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59 civil judgment on construction contract dispute

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After filing the case on July 15, 2020, the court formed a collegial panel according to law and held a public hearing on October 14, 2020

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Song Zuoliang and sun Shijun, the entrusted agents ad litem of the appellant China Railway Corporation, and Zhou Sheng and Duan Junru, the entrusted agents ad litem of the appellant Xinjiye Corporation, attended the lawsuit

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The case has now been concluded

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The plaintiff claimed that the appeal request of China Railway Corporation was: 1

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The fifth item in the main text of (2019) liaominchu No

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59 civil judgment was revoked, and China Railway Corporation was given the priority of compensation for the construction project within the scope of 43637620.20 yuan project payment

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2

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The costs of appeal in this case shall be borne by new foundation

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Facts and reasons: the court of first instance did not support the claim of China Railway Corporation that the completed project should be paid in priority within the scope of 43637620.20 yuan project payment, lacking legal basis

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(1) On the one hand, Article 286 of the contract law of the people’s Republic of China, the interpretation of the Supreme People’s Court on the application of law in the trial of disputes over construction contracts of construction projects (2), and the FSHI [2002] No

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16 document of the Supreme People’s court all stipulate this, But there is no restrictive content of “the contractor of illegal construction does not enjoy the priority of compensation for the project price”

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On the other hand, according to the judicial interpretation of “if the quality of the uncompleted construction project is up to standard, if the contractor requests the price of the construction project to be compensated first according to the partial discount or auction price of the construction project, the people’s court shall support it”, It is not limited by whether the project is a legal building

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Although the project involved in the case has not been completed, all the projects completed by China Railway Corporation have passed the acceptance and are in line with the law

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China Railway Corporation enjoys the priority of compensation for the projects

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(2) The priority of compensation for construction project price is a legal right, which is not based on whether it can be discounted or auctioned

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The court of first instance held that the project involved in the case was an illegal building and could not realize the discount and auction, and determined that it was an illegal building because the project had not obtained the approval procedures such as project planning

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However, the land use right of the project involved in the case has been obtained, which does not belong to the illegal construction that cannot be used due to the unqualified quality of the project and potential safety hazards

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According to the fact found out by the court of first instance, the quality of the project involved in the case is qualified, and the project has use value

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At present, the project is still in the process of follow-up construction

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Although the project planning approval procedures have not been obtained during the first review, the possibility of obtaining it in the future is not ruled out

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If China Railway Corporation is deprived of the priority of compensation, it will not only lead to the loss of state-owned assets, but also not conducive to the embodiment of social value

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To sum up, we request to support all appeals of China Railway Corporation

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The defendant argued that Xinjiye company argued that it did not recognize the appeal of China Railway Corporation and recognized the judgment of the court of first instance on this part

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The court of first instance did not support the priority of compensation because the contract was invalid and the project involved in the case was illegal and could not be auctioned

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According to the judicial interpretation, only when the quality of the project is qualified can it enjoy the priority of compensation

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However, the court of first instance did not review whether the project quality was qualified

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Moreover, the claim filed by China Railway Corporation has exceeded the time limit, so it should not enjoy the priority of compensation

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The plaintiff claimed that Xinjiye company appealed: 1

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To request the court of second instance to remand the case for retrial; 2

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To rule that the case should be tried by Jinzhou intermediate people’s Court of Liaoning Province; 3

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China Railway Company should bear all the litigation costs of the case

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Facts and reasons: the facts in the first instance judgment are not clear

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(1) There are serious quality problems in the project

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1

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Project progress: according to the actual investigation on the site, the situation of the completed project determined by the court of first instance is not consistent with the actual situation on the site

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A large number of steel bars are exposed on the site, water in the indoor and basement is serious, and there are holes everywhere without any treatment

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Not only the secondary structure project has not been completed, but also the rough decoration project has not been completed

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However, the court of first instance found that the completed project was “foundation engineering, main structure engineering, secondary structure engineering, rough Decoration Engineering, hydropower engineering, external curtain wall and steel structure engineering” without evidence

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2

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Project quality: according to the provisions of article 278 of the contract law of the people’s Republic of China and Article 30 of the regulations on the quality management of construction projects, China Railway Corporation shall notify Xinjiye company and the project quality supervision organization for inspection and confirmation before completing the concealed works, but the project inspection application form submitted by them can only be used as the supervision identification document for the concealed works meeting the construction requirements, And there is no confirmation from new base

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China Railway (Group) Co., Ltd

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has not submitted the acceptance report of concealed project quality or the acceptance record of its subsidiary

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Therefore, it can not prove that the quality of the completed project is qualified.

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