The Puerto Rico Court of Appeals recently ruled on a significant contract dispute involving MRD, LLC and ProSite Builders, LLC. The court confirmed a lower court's decision regarding a claim for payment that MRD made against ProSite, which has implications for contractors and subcontractors in the construction industry.

The case, titled MRD, LLC v. ProSite Builders, LLC, was filed under docket number KLCE202500103. The court's ruling, issued on August 27, 2026, addressed the complexities of contract law and the rights of subcontractors to claim payment from general contractors and project owners.

The dispute began when MRD, a subcontractor, was hired by ProSite to install a soil stabilization system for a warehouse project in Guaynabo, Puerto Rico. According to MRD, they completed their work on May 25, 2020, but ProSite refused to pay the remaining balance of $76,924.31, claiming that the project owner, DEYÁ Elevators Services Inc., had already paid ProSite in full for MRD's services.

MRD filed a lawsuit on October 1, 2020, alleging breach of contract, seeking payment, and claiming damages. The case eventually reached the Puerto Rico Court of Appeals after a series of legal motions and decisions by the lower court.

Background

In the initial stages of the case, MRD claimed that DEYÁ had contracted ProSite for the construction of a warehouse and that ProSite had subcontracted MRD for specific work. MRD argued that despite completing the work satisfactorily, ProSite did not pay them the full amount owed.

ProSite contended that it was not liable for the payment because DEYÁ had acquired additional land around the warehouse, making the installation of certain components unnecessary. Consequently, ProSite claimed that DEYÁ requested a credit for the work that was not performed, which affected the payment owed to MRD.

The initial ruling from the lower court dismissed MRD's claims against DEYÁ, stating that DEYÁ had already paid ProSite for all work performed, including that of MRD. This led MRD to seek a review from the Court of Appeals, arguing that the lower court misinterpreted the applicable law regarding contractor liability.

The Ruling

The Court of Appeals, led by Judge Lebrón Nieves, upheld the lower court's decision. The court found that when DEYÁ paid ProSite on May 29, 2020, that payment covered all work completed by MRD. Therefore, at the time MRD made its claim on July 27, 2020, there was no outstanding debt owed by DEYÁ to MRD.

The court ruled, "At the moment the claim was presented, there was no liquid and enforceable debt against DEYÁ," confirming that MRD's claim could not proceed against DEYÁ.

The judges on the panel included Judge Adames Soto and Judge Martínez Cordero, who agreed with the decision to confirm the lower court's ruling. The court emphasized that the legal framework, particularly Article 1489 of the Puerto Rico Civil Code, limits the rights of subcontractors regarding claims against project owners to the amounts owed to the general contractor at the time of the claim.

Impact

This ruling has significant implications for subcontractors in Puerto Rico's construction industry. It reinforces the principle that subcontractors can only claim payment from project owners for amounts that the owners owe to the general contractor at the time of the claim. This decision may discourage subcontractors from pursuing claims against project owners when the general contractor has already received payment.

Moreover, the ruling highlights the importance of clear communication and documentation in construction contracts. Subcontractors are advised to ensure that their agreements with general contractors are well-defined and that they understand their rights and obligations in relation to payments.

What's Next

As of now, there is no indication that the case will be appealed further. However, the ruling sets a precedent that may influence future contract disputes in the construction sector. Stakeholders in the industry, including contractors and subcontractors, will likely review their contract practices in light of this decision.