A practical guide to filing priority mortgage debt claims and how secured creditors can effectively petition for partition of proceeds from enforcement sales.

Case Study: Claims for Payment of Mortgage Priority Debts, Mortgage Rights, and Petitions for Set-Aside of Proceeds (Khor Kan Suan) in Practice

Translator's notes: (1) Years are given in the Thai Buddhist Era (B.E.), as in the original; subtract 543 to obtain the Gregorian year (e.g., B.E. 2568 = 2025). (2) "Civil Procedure Code" (ป.วิ.พ. / ป.วิ.แพ่ง) is abbreviated "CPC"; "Civil and Commercial Code" (ป.พ.พ.) is abbreviated "CCC". The amended CPC provisions replaced old Sections 287, 288 and 289 with new Sections 322, 323 and 324 respectively. (3) "ขอกันส่วน" is rendered as a "petition for set-aside of a share of the proceeds" (khor kan suan). (4) The sample petitions at the end were translated from low-resolution images; a few personal details that were not reliably legible are marked in square brackets. A list of discrepancies noticed in the source text appears at the very end.

Rationale and Background

Problems have arisen in practice concerning petitions by mortgage creditors for payment of mortgage priority debts under Section 324 (new) of the Civil Procedure Code. These overlap with cases in which a mortgage creditor petitions for the set-aside of a portion of the proceeds of an auction sale under Section 322 (new) of the Civil Procedure Code. Neither practice nor the case law of the Supreme Court is yet clear on which kinds of allegations in a petition amount to a petition for payment of a mortgage priority debt (which is equivalent to a suit to enforce the mortgage), and which kinds amount to a petition for set-aside of a share.

How a petition is named on its face or heading is one factor in deciding the court fee to be collected and the case-code suffix to be assigned. A petition for payment of a mortgage priority debt requires the petitioner to pay a court fee of 1.00% under the Table appended to the Civil Procedure Code. The exception is where the mortgage creditor claims payment under a judgment obtained in a suit it previously brought to enforce the mortgage; in that case the fee is the same as for an uncontested case, namely 200 baht.

A problem frequently encountered in practice is that mortgage creditors, wishing to reduce the fee burden, title the petition as a petition for set-aside of proceeds. However, if the filing officer or the duty judge, on considering the petition, takes the view that it is in fact an exercise of the right to enforce the mortgage, or is akin to an exercise of rights under Section 324 (new) of the CPC, the court will order the petitioner to pay the correct fee.

Accordingly, so that lawyers preparing cases on this subject may better understand the legal principles and the procedures for filing petitions for payment of mortgage priority debts and petitions for set-aside of a share of mortgage debts, a summary has been prepared. Its purpose is to give those concerned the working skills to answer correctly any questions raised by officers or judges at the consideration stage.

Legal Principles

Civil Procedure Code, Sections 287, 288 and 289 (old); as amended: Sections 322 and 324 (new)

1. Petition for payment of a mortgage priority debt — old Section 289 / new Section 324

A petition for payment of a mortgage priority debt under old Section 289 (new Section 324) asks the Execution Officer to apply the money obtained from the sale to pay the mortgage creditor ahead of other creditors. The key requirement for a petition under this provision is that the debt must be due for payment. A petition under this provision is treated as equivalent to a suit to enforce the mortgage: the petitioner comes in to exercise rights expressly recognized by law, and must pay a court fee of 1.00% under the Table appended to the CPC. Because the petition is treated like a complaint, it must describe the nature of the cause of action and the relief sought sufficiently clearly. However, even though it is the same kind of court proceeding as a suit to enforce a mortgage, no prior notice demanding enforcement of the mortgage is required, because the petitioner is exercising a right expressly recognized by statute (Supreme Court Judgment No. 181/2568).

Summary: A petition for payment under old Section 289 and new Section 324 is an exercise of rights in the nature of a suit to enforce the mortgage. Where the mortgagor has defaulted, or the debt has fallen due, the mortgage creditor (the petitioner) may file a petition for payment of the mortgage debt ahead of other creditors, but must file it before the mortgaged property is sold at auction, and must pay court fees in accordance with the Table appended to the CPC.

Exception: Where the mortgage creditor has already sued to enforce the mortgage and obtained a court judgment, the mortgage creditor is a judgment creditor. The petition is then a claim for payment under a judgment that has already ordered enforcement of the mortgage. Since the plaintiff or petitioner is already entitled to enforce the mortgage under the court's judgment, no court fee on the claim is payable, because the petitioner already paid fees at the stage of the suit to enforce the mortgage; however, some courts may charge a petition fee of 200 baht.

Remark

Regarding a mortgage creditor's petition for payment under old Section 289 / new Section 324: the mortgage debt must be due, and the petition must be filed before the mortgaged property is sold at auction. Since the statutory text refers to a person "having the right to receive payment," the author's opinion is that the mortgage creditor's right to payment arises upon the debtor's default, and the mortgage creditor may exercise judicial rights to claim payment only after the mortgagor has defaulted. In most such cases the case-code suffix assigned to the petition is ชร. or ขชร., meaning "claim for payment of debt" (ขอรับชำระหนี้).

If, however, the mortgagee has not exercised the right to petition for payment (because the mortgage debt had fallen due or the debtor had defaulted) within the period prescribed by Section 324 — that is, the mortgagee let the period under Section 324(1) lapse and allowed the mortgaged property to be sold at auction — the mortgage creditor or petitioner does not lose its status as a preferential creditor under CCC Section 732. It may instead file a petition exercising the mortgage creditor's rights, which in practice is called a petition for set-aside of a portion of the proceeds (khor kan suan), under CPC Section 322.

Alternatively, if the mortgage debt is not yet due — that is, the mortgagor has not yet defaulted — the mortgage creditor cannot yet file a petition for payment of the mortgage debt under Section 324. But if the mortgage agreement provides that a change in ownership of the mortgaged property, or enforcement against the mortgaged property and its sale at auction, constitutes a breach of contract, then if such an event occurs the creditor can invoke it as a necessity for the mortgage creditor to exercise judicial rights in order to enforce against the mortgaged property seized by another creditor, by filing a petition under CPC Section 322. In practice this is called a petition for set-aside of a share, and the petitioner usually asks that the proceeds of the auction sale be applied to pay the petitioner ahead of other creditors.

Further considerations for a petition under CPC Section 322

If the court conducts an inquiry into whether the mortgage creditor has a right to payment of the mortgage debt, as described above, the questions are: (1) whether the mortgage debt is in default; and (2) whether enforcement against the mortgaged property by another creditor constitutes a breach of the contract or agreement made with the mortgage creditor, such that the mortgaged property has a title problem. Because that would affect the mortgage creditor's rights, the mortgage creditor would be entitled to seek enforcement against the mortgaged property. These are matters that practitioners must verify, in terms of facts and documents, before submitting the petition to court.

A further point to note: where the mortgage debt is not yet due (the mortgagor has not yet defaulted) and the court has merely ordered the mortgagee's share to be set aside, the petitioner may take that order to claim the auction proceeds, but the Execution Officer may object that the court only ordered the mortgage creditor's share to be set aside and did not state that the mortgage creditor is entitled to be paid, since the order concerns only the setting-aside of the share and does not address the petitioner's or mortgage creditor's right to payment. If the petitioner or mortgage creditor wishes to claim payment, it must file a statement or petition informing the court that the debt for which a share was set aside has now fallen into default, and must ask the court to issue an order permitting payment of the mortgage priority debt that was set aside, before the petitioner can receive the auction proceeds. This observation is included in case such a problem arises in practice.

As to the case-code suffix assigned by the court at the petition-filing stage: for a petition for set-aside of a share under Section 322, the case-code suffix is ก. (meaning "set-aside of share," กันส่วน).

It can therefore be concluded that where the mortgagee does not file a petition for payment before the auction sale under old Section 289 / new Section 324, seizure of the mortgaged property does not affect the mortgage priority right. The mortgagee or petitioner must then file a petition for set-aside of a share under new Section 322 of the CPC. Even though the mortgagee did not file a petition for payment before the mortgaged property was put up for auction, the plaintiff's execution does not affect the mortgagee's rights. The mortgagee may apply to enforce its rights against the property under old CPC Section 287 (new Section 322), and if the property was sold at auction free of the mortgage, the mortgagee is entitled to be paid the mortgage debt ahead of other creditors. See Supreme Court Judgment No. 2698/46 [sic], which held that CPC Section 289, paragraph one, gives the mortgagee the option of having the mortgaged property sold at auction free of the mortgage and having the proceeds applied to pay it ahead of other creditors. If the mortgagee does not wish to exercise its right to enforce the mortgage, the property may instead be sold subject to the mortgage, because execution against the property does not impair the mortgage right, which the mortgagee may apply to enforce over that property under Section 287. In the case of a mortgage of immovable property, Section 289, paragraph two, provides that the mortgagee must file the petition before the property is sold at auction, so that the Execution Officer can proceed correctly in accordance with the mortgagee's intention. Hence a petitioner-mortgagee that did not petition the court before the mortgaged property was auctioned does not thereby lose its status as mortgagee, because once the mortgagor's property has been sold at auction free of the mortgage, the debt must be paid to the petitioner as mortgagee first, under CCC Section 732 (Supreme Court Judgments Nos. 1551/43 [sic] and 3655/38 [sic] held to the same effect).

In practice, banks that are mortgage creditors usually do not file a petition for payment before the mortgaged property is put up for auction. Once the Execution Officer has sold the property, the creditor bank must exercise its rights by petitioning under amended Section 322, which provides that execution does not affect the rights of the petitioner as mortgage creditor. A mortgage creditor exercising rights under this section falls into three cases:

• Case 1. The mortgage debt is not yet due, the mortgaged property has been sold, and it is too late to file under Section 324. The mortgage creditor files a petition for set-aside of a share under this section. The case-code suffix is ก.

• Case 2. The mortgage debt is already due, but no petition for payment was filed within the period under Section 324. Seizure of the mortgaged property by an outside party does not affect the mortgage creditor's rights. The mortgage creditor's petition is therefore an exercise of rights under Section 322, a case of set-aside of a share, on the allegation that the mortgaged property has already been sold at auction free of the mortgage. The Execution Officer must then pay the petitioner ahead of other creditors under CCC Section 732 (citing Supreme Court Judgments Nos. 3655/2538, 1551/2543 and 2698/2564). The case-code suffix is likewise ก.

• Case 3. The mortgage creditor has sued to enforce the mortgage and the court has rendered judgment ordering enforcement of the mortgage; the mortgaged property is later seized by an outside party and the Execution Officer sells it. The mortgage creditor then files a petition for payment under the judgment it obtained in its own suit. In most cases the case-code suffix is ก.; but if the mortgaged property has not yet been sold, the suffix will be ขช. or ขชร.

In practice, whether a mortgage creditor's petition is filed when the mortgage debt has fallen due or has not yet fallen due, if the wording of the petition is to the effect that it is a claim for payment of a mortgage priority debt or a set-aside of proceeds, asking the Execution Officer to pay out the money obtained from the auction sale because the defendant has defaulted, then — if at the petition-acceptance stage the petitioner presents an account statement or debt-balance card showing accrued interest, which shows the grounds of default — the judge accepting the petition will know that the debtor, in a petition for set-aside of share, has in almost all cases already defaulted. Nonetheless, the petitioner, as mortgage creditor, usually pleads in the petition that it is a set-aside of share under old CPC Section 287 or amended Section 322.

Third parties who may exercise the right to a set-aside of a share under these sections are not limited to mortgage creditors. They may include co-owners, spouses, other types of preferential creditors, and creditors under special laws — for example, juristic persons of housing estates or condominiums under the relevant statutes, which are entitled to payment of overdue common-area fees ahead of other creditors.

In practice, most mortgage creditors, and especially mortgage creditors that are banks, take the view and instruct that petitions be filed in line with the Supreme Court judgment mentioned above: that the petition is an exercise of rights under CPC Section 322, claiming that this is a case with a request for relief that cannot be valued in money, without considering the factual issue of whether the right to payment has arisen and whether the mortgage debt is in default. On that basis they claim that the case is a non-monetary case and pay a court fee of only 200 baht, when in truth the content of the petition seeks payment of the mortgage debt, which amounts to an exercise of the right to sue to enforce the mortgage.

The problem found in practice is that most lawyers file the petition as a petition for set-aside of proceeds under Section 322 first, telling the filing officer that it is a set-aside petition and asking the officer to charge the court fee for a non-monetary case, 200 baht. If the court examines the petition and finds that it is in nature a petition for payment of a mortgage priority debt because the petitioner's debt is already due — since a petition under Section 322 (the so-called set-aside) is subject to Section 324, i.e., the mortgage creditor has the right to be paid first — it is a monetary case, because the petitioner is exercising the right to claim payment of the mortgage debt or to enforce against the mortgaged property. A court fee of 1.00% is therefore payable, even though the petitioner calls it a petition for set-aside of a share under Section 322, since the right actually exercised is that under Section 324. In most cases the duty judge, or the judge in charge of the case who later discovers the matter, will order the petitioner to deposit the correct fee within 7 days or before the court issues its order.

Observation: Section 322 provides that it is "subject to Sections 323 and 324." The author's opinion is that if a mortgage creditor holds a debt that is already due, for which it has the right to be paid under the mortgage, but did not petition before the property was auctioned and instead petitions for set-aside of a share under Section 322, one must look at the petitioner's intention: whether the petitioner is claiming a set-aside of money for a debt that has fallen due and for which it already has a right to payment under Section 324. If the court considers that the petition is an exercise of the rights described in that section, then even though the petitioner states on the face of the petition that it is a petition for set-aside of a share under Section 322, the court having concluded that the petitioner is enforcing payment as a mortgage creditor, a court fee of 1.00% must be paid.

Supreme Court judgments supporting the position of mortgage creditors who pay a 200-baht court fee

Supreme Court Judgment No. 3655/2538. CPC Section 289, paragraph one, gives the mortgagee the option of having the mortgaged property sold free of the mortgage and applying the proceeds to pay its own debt ahead of other creditors. However, if the mortgagee does not wish to exercise its right to enforce the mortgage, it may have the property sold subject to the mortgage, because execution against the property does not impair the mortgage right, and the mortgagee may apply to enforce over that property under CPC Section 287. In the case of a mortgage of immovable property, paragraph two of Section 289 provides that the mortgagee must file the petition before the property is sold at auction, so that the Execution Officer can proceed correctly in accordance with the mortgagee's intention. The petitioner-mortgagee's failure to petition the court before the mortgaged property was sold at auction does not cause it to lose its rights as mortgagee. Once the mortgaged property is sold at auction free of the mortgage, the mortgage debt must be paid to the petitioner as mortgagee first, under CCC Section 732.

Supreme Court Judgment No. 1551/2543. The Supreme Court ruled: The legal issue to be decided on the petitioner's appeal is whether the petitioner, as mortgagee of the disputed property, has the right to petition for payment from the auction proceeds of the disputed property ahead of other creditors, including the plaintiff. CPC Section 287 provides that, subject to Sections 288 and 289, the provisions of the Code on execution against a judgment debtor's property do not affect preferential rights or other rights which a third party may apply to enforce over that property in accordance with the law; and CCC Section 732 provides that when mortgaged property is sold at auction, the net proceeds are to be applied to pay the mortgagees in order of priority. The petitioner, as mortgagee of the disputed property, therefore has a preferential right to enforce over the disputed property to be paid ahead of other creditors, including the plaintiff, as those provisions state. Although CPC Section 289, paragraph two, provides that in the case of a mortgage of immovable property or a preferential right over immovable property that has been registered, the petition must be filed before the property is put up for auction, that is merely a provision empowering the mortgagee to petition the court before auction so that the Execution Officer may act in accordance with the mortgagee's intention. If the petitioner-mortgagee did not petition before the disputed property was auctioned, it does not lose its status as mortgagee, because execution against the judgment debtor's property does not affect the mortgagee's preferential right, which it may apply to enforce over the disputed property under CPC Section 287 and CCC Section 732. Therefore, since the disputed property was sold at auction free of the mortgage in accordance with the petitioner's notice of intention, and the petitioner was the winning bidder, the petitioner as mortgagee is entitled to be paid ahead of other creditors, including the plaintiff. The court of first instance erred in dismissing the petition without first inquiring into the extent of the petitioner's right to payment; it should continue to inquire into the petition and then issue an order as the case requires. The Supreme Court disagreed with the dismissal of the petition and held the petitioner's appeal well founded. The order of the court of first instance was set aside, and the court of first instance was directed to proceed further.

Remark: The Supreme Court stated at the end of this judgment that the court of first instance erred in dismissing the petition without first inquiring into the extent of the petitioner's right to payment, and that it should continue to inquire into the petition and then issue an order as the case requires. The author's opinion is that, even for those who hold that a set-aside is a case seeking relief that cannot be valued in money, so that a 200-baht court fee applies by citing the priority ranking under CCC Section 732, this Supreme Court judgment still speaks of the court of first instance having to conduct an inquiry as to the extent of the petitioner's right to payment. That amounts to remanding the case file to the court of first instance to inquire into the petitioner's right to payment of the mortgage debt, so the court of first instance must then decide on the substance of the amount of mortgage debt that the petitioner will be paid. It therefore seems likely to be a monetary case. Consequently, in deciding whether a mortgage creditor's petition under CPC Section 322 — even if it uses the words "set-aside of a share" — is in fact a claim for payment, one should look at the petitioner's intention. From the Supreme Court judgment cited above, the author cannot tell whether, at the set-aside/claim-for-payment stage, the petitioner paid court fees as a monetary or a non-monetary case. That judgment merely shows that a mortgage creditor that exercises its rights after the period under Section 324 has not lost its rights under Section 322. Whether the petitioner may use the order in that judgment to receive money is a matter on which the author raises an observation for practitioners, who will need to research, study and analyze further.

Supreme Court judgment compared, for this case study

Supreme Court Judgment No. 378/2559. CPC Section 287 is made subject to Sections 288 and 289. This means that if a preferential right or other right is of a kind that may be asserted by an application for release of the property under Section 288, or for enforcement of payment under Section 289, the petitioner is entitled to proceed under those provisions. Even if the petitioner does not exercise or enforce its rights under those provisions, execution against the debtor's property still does not affect such preferential or other rights. Considering the petition in this case, the petitioner alleged that it was the mortgagee of the disputed condominium unit seized by the plaintiff, and that the debt under the mortgage agreement was not yet due, so it could not sue to enforce the mortgage against the mortgaged property; it therefore asked that money from the auction sale of the property free of the mortgage be set aside for it. The content of the petition shows that the petitioner, as mortgage creditor, was exercising rights under CPC Section 287 (new CPC Section 322), and was not applying for payment of the mortgage debt on the strength of a mortgage that was enforceable ahead of other creditors under CPC Section 289. Although at the time the petition was filed the mortgage debt that the defendant owed the petitioner had not yet fallen due, so a petition for payment under CPC Section 289, paragraph one, could not be made, execution against the defendant's property does not affect the other [preferential] rights of the petitioner as a third-party mortgagee under CPC Section 287 (new Section 322). Since the petitioner was the mortgagee of the condominium unit seized by the plaintiff, exercised its rights under Section 287 (new Section 322), and asked for the unit to be sold at auction free of the mortgage, the petitioner was entitled to apply for a set-aside of the auction proceeds under CPC Section 287.

The petitioner's petition for set-aside of a share under CPC Section 287 was therefore a case with a request for relief that cannot be valued in money, and a court fee of 200 baht was payable under Item 2(ก) of Table 1 appended to the CPC.

Observation: The Supreme Court judgment cited above concerns a case where the court ordered a set-aside of money for a debt that was not yet due. It was therefore a non-monetary case, with a 200-baht court fee. The court did not adjudge or order that the mortgage creditor was entitled to payment ahead of other creditors, or that the auction proceeds be paid to the petitioner first under CCC Section 732 (Judgments Nos. 1551/2534 [sic] and 3655/2538).

Summary: Most mortgage creditors, especially financial institutions, want the petition filed as a petition for set-aside of a share so as to pay only a 200-baht court fee, trying to draw an analogy with Supreme Court Judgment No. 378/2559 without primarily considering the right to payment or the ground of default. Lawyers handling such matters should therefore study the relevant statutory provisions and Supreme Court judgments carefully, so as to be able to answer correctly the questions of the filing officer or the court.

Considerations for Ordinary Practice in Filing Petitions

• A mortgagee has the right to choose whether to have the mortgaged property sold at auction free of the mortgage, with the auction proceeds applied to pay its own debt ahead of other creditors (this is a petition under old Section 289 / new Section 324), or to have it sold subject to the mortgage, in which case the mortgagee applies for a set-aside of a share under old Section 287 / new Section 322.

• The mortgage debt for which payment is claimed must be due or in default before the mortgagee can file a petition under old CPC Section 289 or new CPC Section 324. This means that if the mortgage debt is not yet due or in default, the petitioner cannot file under this section (that is, it must exercise the right to a set-aside of money from the sale or disposal as a preferential creditor under old CPC Section 287 and new CPC Section 322).

Supreme Court Judgment No. 7966/2547. The debt under the judgment was one in which the petitioner, as plaintiff, had sued the defendant in a case secured by a mortgage, but the petitioner had chosen to sue the defendant on the secured debt as an ordinary creditor and had not exercised the right to enforce the mortgage over the land given as security. Even though the court of first instance ordered the defendant to pay money to the petitioner, the petitioner was only in the position of an ordinary creditor under the judgment. The petitioner's application for payment from the defendant's land seized by the Execution Officer, relying on the mortgage under the procedure in CPC Section 289, was therefore a matter of the petitioner wishing to be paid from the defendant's mortgaged land, which is security, beyond the exercise of execution rights under the judgment as an ordinary creditor. A petition by which the petitioner claims payment of the mortgage debt thus takes effect as a complaint seeking enforcement of the mortgage, for which the petitioner must pay a court fee under Item 1(ค) of Table 1 appended to the CPC, which provides for a court fee at the rate of one baht per one hundred baht of the amount claimed, but not exceeding one hundred thousand baht, and not merely a petition fee of 20 baht as a mortgage creditor under a judgment would pay.

Summary: Under the above judgment, a claim for payment of a mortgage debt under Section 289, paragraph one, which provides "by virtue of a mortgage that may be enforced" (compare amended CPC Section 324: "a person who has the right to be paid, or to receive a share of, money obtained from the auction sale or other disposal of a judgment debtor's property seized by the Execution Officer, by virtue of a preferential right, right of retention or other right which that person has over the property under the law"), indicates that the mortgage debt must be due before the mortgage creditor can petition to enforce payment of the mortgage debt ahead of ordinary creditors under old Section 289 or amended CPC Section 324. Therefore, where the mortgage debt is due or in default, and a dispute has arisen between the mortgage creditor and the mortgagor, so that it is necessary to exercise the right to enforce the mortgage under CPC Section 55, a petition for payment of a mortgage priority debt under old CPC Section 289 or amended CPC Section 324 requires a court fee of 1.00%.

• A petition for payment of the mortgage debt ahead of other creditors under old CPC Section 289 or new CPC Section 324 is treated as a suit to enforce the mortgage and requires a court fee of 1.00%.

Supreme Court Judgment No. 7409/2546. What rate of court fee must be paid on a petitioner's petition to enforce a mortgage, which is a complaint? This is a legal issue concerning public order and good morals. Even though the petitioner did not contest the court of first instance's order requiring it to pay additional court fees, which amounts to its not having raised the issue in the court of first instance, the petitioner may still raise it on appeal under CPC Section 225, paragraph two, which is an exception to Section 226(2). And even though the petitioner appealed only on the matter of court fees, it was an appeal on the ground that the court of first instance had not fixed the court costs in accordance with the law, and so it is not barred by Section 168. The petitioner, as mortgagee, filed a petition under CPC Section 289, which is regarded as a complaint to enforce the mortgage against the defendant itself. Item 1(ค) of Table 1 appended to the CPC provides that the court fee is to be charged at the rate of 1%, and at 2.5% only when the defendant files an answer contesting the case. In this case, however, the defendant mortgagor did not file an answer contesting the case or oppose the petitioner's petition, so the petitioner must pay the court fee at 1% of the amount of the debt claimed under Item 1(ค) of Table 1. Although the plaintiff filed an objection, that was merely the plaintiff's objection at the execution stage, and cannot be considered an answer contesting the case on the defendant's behalf within the meaning of Item 1(ค) of Table 1.

Summary: A petition for payment of a mortgage debt under CPC Section 289 is treated as a suit to enforce the mortgage and requires a court fee under Item 1(ค) of Table 1 appended to the CPC, namely 1% of the amount of debt claimed; but when the defendant contests the case, a court fee of 2.5% of the amount claimed is payable. If the defendant does not oppose the petitioner's petition, the defendant is regarded as not contesting; even if the plaintiff objects, that is not a contest by the defendant, and the petitioner pays a court fee of 1% of the amount claimed.

If a mortgage creditor applies for payment relying on a judgment in another case in which the court has already adjudged enforcement of the mortgage, the creditor pays only a petition fee of 20 baht (now 200 baht). But if the debt under the earlier judgment was merely a suit on an ordinary debt, court fees must be paid as usual.

The court with jurisdiction over a petition under old CPC Section 289 or new CPC Section 324 is the court that issued the writ of execution appointing the Execution Officer to seize the mortgaged property, not the court in whose file the petitioner is the plaintiff.

Time Limits for Filing a Petition for Payment of a Mortgage Priority Debt under Old CPC Section 289 / New CPC Section 324

• The petition must be filed before the property is put up for sale or disposal / put up for auction. If the sale is postponed and the property is re-advertised for sale, the petition is filed before the sale, i.e., the latest sale announcement is the benchmark.

Supreme Court Judgment No. 7569/2549. At the first auction no one was interested in bidding, so the Execution Officer suspended the sale and announced a new auction for 15 February 2544 [B.E.]. When the petitioner filed a petition for payment of the mortgage debt on 9 February 2544, it was therefore a petition filed before the mortgaged property was put up for auction. The date of 18 August 2543 was merely the date on which the Execution Officer announced the first auction, and no auction of the property was actually held. The petitioner cannot be regarded as having filed the petition after the period under CPC Section 289, paragraph two, had expired.

Supreme Court Judgment No. 1995/2535. A petition asking the court to apply the proceeds of the auction sale of the defendant's mortgaged property to pay the petitioner ahead of other creditors, which is an exercise of rights under CPC Section 289, paragraph two, must be filed before the property is put up for auction. Accordingly, where the petitioner filed a petition for payment of the mortgage debt ahead of other creditors after the mortgaged property had already been auctioned, the filing was made after the statutory time limit, and the petitioner has no right to ask that the proceeds of the auction sale of the defendant's mortgaged property be applied to pay the petitioner's mortgage debt ahead of other creditors.

Where the mortgage debt is not yet due or not yet in default, the petitioner must file a petition for payment or a petition for set-aside of a share under CPC Section 322, as stated above.

Summary

1. Where the debt is not in default, the creditor may claim payment by petitioning for a set-aside of a share under CPC Section 287 (new CPC Section 322). The court fee is 200 baht.

2. Where the debt has fallen due or is in default, the creditor claims payment of the mortgage priority debt under old CPC Section 289 or new CPC Section 324, and must file before the mortgaged property is put up for auction under (1)(ข). If the property has already been sold and it is too late to file, the creditor must apply for a share of the sale proceeds under CPC Section 324(4), but must file within 15 days from the date the property was sold or disposed of. The court fee is 1.00%.

3. Where the mortgage creditor has sued to enforce the mortgage and the court has rendered judgment, and the creditor claims payment by virtue of the judgment: if the property has not yet been auctioned, it files a petition for payment of the mortgage debt on the strength of that judgment before the auction, under new CPC Section 324, but it must file before the auction under (1)(ข). In most cases the case-code suffix is ขช. If the property has already been sold and it is too late to file, the creditor must apply for a share of the sale proceeds under CPC Section 324(4), within 15 days from the date the property was sold or disposed of. If that period is exceeded, it must file a petition for set-aside of a share under new CPC Section 322, with the case-code suffix ก. The petition fee used to be 20 baht and is now 200 baht, because the plaintiff is regarded as having already paid court fees in the earlier suit to enforce the mortgage, so that the petition for payment of the mortgage priority debt is an exercise of rights under the court's judgment in which the mortgage creditor was ordered to be paid.

Documents Used in Filing the Petition

• Certificate of the plaintiff (company affidavit)

• Main power of attorney

• Sub-power of attorney (if any)

• Loan agreement, which is the principal contract

• Mortgage agreement together with any memorandum appended to the mortgage agreement

• Judgment / compromise agreement / judgment by consent (where the mortgage creditor has already sued)

• Debt calculation statement or debt-balance statement (for both debts already in default and debts not yet in default)

• Execution Officer's report of seizure of the property, and the auction announcement

• Report of the purchase of the property, or information on the purchase of the property

• Interest-rate announcement (where the creditor is a bank)

If the property was sold before the petition was filed, or the petition is filed after the 15-day period from the auction date

Where the property has been sold before a petition for payment is filed, or the petition is filed after the 15-day period from the date the mortgaged property was sold at auction, the mortgage creditor may have to exercise its rights by a petition for set-aside of a share under CPC Section 322. Even though this is a petition for set-aside of a share under Section 322, if the mortgagor is already in default, the set-aside amounts to a claim to enforce against the mortgaged property, and one must consider whether a court fee of 1.00% must be paid. (Can the ground of default be used as the criterion? In this case, when the mortgage creditor exercises the right to request that the Execution Officer apply the money obtained from the sale or disposal of the property to pay the creditor ahead of other creditors under CPC Section 324(1), the request must be made before the property is sold or within 15 days after the sale under Section 324(4). That is an exercise of rights by virtue of a mortgage that may be enforced, which indicates that the mortgage debt is already due, and so the petition to enforce the mortgage ahead of ordinary creditors is filed. Accordingly, under current practice, court fees must be paid.)

But where the mortgage creditor files the petition too late, within the period prescribed, the petitioner's (mortgage creditor's) rights are such that it can no longer rely on the power to request that the Execution Officer apply money obtained from the sale or disposal of the property to pay it ahead of other creditors. However, the mortgage creditor's rights as a preferential creditor remain in existence and are unaffected, under CPC Section 322 read with CCC Section 732. The mortgage creditor cannot, though, ask the court to declare that the petitioner, as mortgage creditor, has the right to be paid ahead of other creditors, because the period has lapsed and the law requires a petitioner who is a mortgage creditor to exercise its rights under CPC Section 324. If the petition is filed on the basis of that section, the court has no power to order that the petitioner be paid as a preferential creditor ahead of other creditors. The mortgage creditor must therefore exercise its right to have the money from the auction sale set aside for it under CPC Section 322; the petitioner must therefore file the petition in the correct channel.

In the author's opinion, even when a petition for set-aside is filed after the property has been sold, if the mortgage debt for which the set-aside is requested is already in default and the content of the petition is in the nature of a claim for payment of a mortgage priority debt, some duty judges may order that such a set-aside petition is in the nature of a claim for payment or enforcement against the mortgaged property itself, and may order the petitioner to pay court fees at 1.00%. In recent times, even where the petition is filed under Section 322, filing officers have mostly required court fees at 1.00%. For the 1.00% fee, petitioners usually use as the basis for calculating the value of the claim the amount they are entitled to receive from the auction sale; but some courts calculate it on the entire debt the mortgagor owes. Sometimes the mortgaged property sells for less than the debt, so the creditor may have to pay fees on the entire debt — for example, where the debt is 2,000,000 baht but the mortgaged property is sold for 1,000,000 baht. In truth the mortgage creditor is entitled to be paid only 1,000,000 baht, so the value of the claim in the petition should be determined from the amount the mortgage creditor is entitled to receive, or the money the Execution Officer obtained from selling the mortgaged property. The shortfall must be sued for separately as an ordinary debt, with further court fees at 2.00%, so practitioners must check this carefully. In general, however, fees are paid in the amount of the property sold.

It should be noted that in a set-aside case under CPC Section 322, the court must still consider the petition for set-aside in deciding what sum the Execution Officer is to pay the mortgage creditor. Copies must be served on, and objections heard from, all interested parties. If there is an objection, the court must conduct an inquiry as in a contested case, and must consider and issue an order on whether the petitioner is entitled to the money for which the set-aside is requested and in what amount. Making the judgment or order is almost no different from the situation in which the petitioner files for payment of a mortgage priority debt under Section 324. Hence some duty judges do not agree with a petitioner relying on a gap in the law, that a petition under Section 322 is a set-aside of a share and pays fees as a non-monetary case at 200 baht. Practitioners must therefore understand this matter correctly.

Note: To whom copies are to be served

• 1. Plaintiff / defendant / Execution Officer

• 2. Co-owners, co-mortgagors (if any)

• 3. Other defendants in the main case (if the court orders additional service); in practice, service is waived if they are not connected with the mortgaged property.

Points practitioners should watch

Follow the court's orders. Even where the petition is drafted as a set-aside of a share, the court may order that the correct fees be deposited within 7 days. At the petition-filing stage the court may not order any additional deposit but may do so at the inquiry stage or on the hearing date. Consider what effect incomplete payment of fees has on the filed petition, and whether it affects the inquiry stage and the issuing of the court's order. Therefore, comply with every order at every stage, and do not let the right of appeal lapse.

Prepared by Mr. Kanawut Chantarapirom

References:

• Explanation of the Civil Procedure Code, Part 4, by Mr. Natthaphong Thapananetipong

• Library of the Courts of Justice: "Court Fees for Petitions for Set-Aside of a Share — A Study Specific to Set-Aside of a Share in a Debt Not Previously Sued upon to Enforce the Mortgage," Mr. Rasawan Thapsuphan, course materials, Chief Judge of Court Training Course, Class 16

• http//thai-civil-process.blogspot.com/2010/03/blog-post_6104.html (as given in the source)

Examples of requests to pay off debts and ask for various types of reductions

Mortgagee's petition to receive preferential debt repayment according to Civil Procedure Code Section 322

A mortgage creditor's petition according to the judgment to request the money obtained from the auction sale