TITLE XII

MORTGAGE

CHAPTER I

GENERAL PROVISIONS

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Section 702. A mortgage is a contract whereby a person, called the mortgagor, assigns a property to another person, called the mortgagee, as security for the performance of an obligation, without delivering the property to the mortgagee.

The mortgagee is entitled to be paid out of the mortgaged property in preference to ordinary creditors regardless as to whether or not the ownership of the property has been transferred to a third person.

Section 703. Immovables of any kind can be mortgaged.

The following movables can also be mortgaged provided they are registered according to law:

1. Ships of five tons and over
2. Floating houses
3. Beast of burden
4. Any other movables with regard to which the law may provide registration for that purpose.

Section 704. A contract of mortgage must specify the property mortgaged.

Section 705. No property can e mortgaged except by the ownerfor the time being.

Section 706. A person whose right of ownership over a property is subject to a condition may mortgage such property only subject to such condition.

Section 707. The provisions of Section 681 concerning Suretyship apply mutatis mutandis.

Section 708. A contract of mortgage must contain, in Thai currency, either the sum certain or a maximum amount for which the mortgaged property is assigned as security.

Section 709. A person may mortgage his property as security for the performance of an obligation by another person.

Section 710. The performance of one and the same obligation may be secured by the mortgage of several properties belonging either to one or to several owners.

The parties may agree:

1. That the mortgagee shall enforce his right against the mortgaged properties on a specific order.
2. That each property is security only for a specified part of the obligation.

Section 711. Before the obligation is due, any agreement that the mortgagee shall, in case of non-performance, become the owner of the mortgaged property or dispose of it otherwise than in accordance with the provisions concerning Enforcement of Mortgage, shall be invalid.

Section 712. Notwithstanding any clause in the contract to the contrary, a property mortgaged to one person may be mortgaged to another person during the continuance of the previous contract.

Section. 713. Unless otherwise agreed in the contract of mortgage, the mortgagor may pay off the mortgage by installments.

Section 714. A contract of mortgage must be made in writing and registered by the competent official.

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CHAPTER II

EXTENT OF MORTGAGE

Section 715. A mortgaged property is security for the performance of the obligation and for the following accessories:

1. Interest.
2. Compensation in case of non-performance of the obligation
3. Costs of enforcement of the mortgage.

Section 716. A mortgage, even part performance, extend to all the properties mortgaged and the whole of each of them.

Section 717. If a mortgaged property is divided into parcels, the mortgage continues notwithstanding to extend to each and all of such parcels.

Section 718. A mortgage extends to all things which are connected with the mortgaged property, subject, however to the restrictions contained in the following sections.

Section 719. A mortgage over land does not extend to the buildings erected by the mortgagor upon such land after the date of the mortgage, unless there is in the contract a special clause to that effect.

However, in any case, the mortgagee can have such buildings sold with the land, but he can exercise his preferential right only against the price obtained for the land.

Section 720. A mortgage over buildings erected or constructed made upon or under the land of another person does not extend to such land, and vice versa.

Section 721. A mortgage does not extend to the fruits of the mortgaged property except after the mortgagee has notified the mortgagor or the transferee of his intention to enforce the mortgage.

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CHAPTER III

RIGHTS AND DUTIES OF THE MORTGAGEE AND MORTGAGOR

Section 722. When a property has been mortgaged and a servitude or other real right is registered after the registration of the mortgage without the consent of the mortgagee, the mortgage has priority over the servitude or other real right and the latter will be erased from the register where its existence prejudice the right of the mortgagee on the enforcement of the mortgage.

Section 723. If the mortgaged property is damaged, or if one of the mortgaged properties is lost or damaged, so that the security becomes insufficient, the mortgagee may enforce the mortgage at once, unless the mortgagor has not been at fault and offers either to mortgage another property of sufficient value or to repair the damage within a reasonable time.

Section 724. A mortgagor, who has mortgaged his property as security for the performance of an obligation by another person and performs the obligation on behalf of the debtor to prevent the enforcement of the mortgage, is entitled to recover from the debtor the amount of the performance.

If the mortgage is enforced, the mortgagor is entitled to recover from the debtor the amount by which the mortgagee has been satisfied by such performance

Section 725. When two or more persons have separately mortgaged their properties as security for the performance of one and the same obligation by another person and no order has been specified, the mortgagor who has performed the obligation, or on whose property the mortgage has been enforced, has no right of recourse against the other mortgagors.

Section 726. When several persons have separately mortgaged their properties as security for the performance of one and the same obligation by another person and an order has been specified, the release granted by the mortgagee to one of the mortgagors discharges the subsequent mortgagors to the extent of the injury suffered by them thereby.

Section 727. If a person has mortgaged his property as security for the performance of an obligation by another person, the provisions of Sections 697, 700 and 701 concerning Suretyship shall apply mutatis mutandis.

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CHAPTER IV

ENFORCEMENT OF MORTGAGE

Section 728. For enforcement of mortgage the mortgagee must notify the debtor on writing to perform his obligation within a reasonable time to be fixed in the notice. If the debtor fails to comply with such notice, the mortgagee may enter an action in Court for a judgment ordering the mortgaged property to be seized and sold by public auction.

Section 729.

In addition to the remedy provided in the foregoing section, the mortgagee is entitled to claim foreclosure of the mortgage, subject to the following conditions:

1. The debtor has failed to pay interest for five years;
2. The mortgagor has not satisfied the Court that the value of the property is greater than the amount due; and
3. There are no other registered mortgages or preferential rights on the same property.

Section 730. When one and the same property is mortgaged to several mortgagees, they rank according to the respective dates and hours of registration, and the earlier mortgagee shall be satisfied before the later one.

Section 731. A later mortgage cannot enforce his right to the injury of an earlier one.

Section 732. The net proceeds of the auction shall be distributed to the mortgagees according to their ranks, and the surplus, if any, shall be delivered to the mortgagor.

Section 733. If the estimated value of the property, in case of foreclosure, is or the net proceeds, in case of auction, are less than the amount due, the debtor of the obligation is not liable for the difference.

Section 734. When several properties have been mortgaged to secure one and the same obligation and no order has been specified, the mortgagee may enforce his right against all or any of the properties; provided that he does not do so upon more properties than is necessary for the satisfaction of his right.

If the mortgagee enforces his right against all properties at the same time, the burden of the obligation is divided according to the respective value of the properties, except where the amounts of the mortgages have been specified for each property, in which case the division is made according to the respective amounts of the mortgages on such properties.

If, however, the mortgagee enforces his right against one of the properties, the mortgagee may receive performance of his entire obligation from such property. In that case the mortgagee who is next in rank shall be considered as being subrogated to the prior mortgagee and may enforce the mortgage in his stead to the amount which the prior mortgagee would have received from the other properties according to the provisions of the foregoing paragraph.

Section 735. When the mortgagee intends to enforce the mortgage against the transferee of a mortgaged property, the latter must be served with a written notice one month before the enforcement of the mortgage.

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CHAPTER V

RIGHTS AND DUTIES OF THE TRANSFEREE OF A MORTGAGED PROPERTY

Section 736. The transferee of a mortgaged property may remove the mortgage, provided that he is not the principal debtor, a surety or an heir of either of them.

Section 737. The transferee may remove

the mortgage at any time, but if he has been notified by the mortgagee of the mortgagee's intention to enforce the mortgage, he must do so within one month thereafter.

Section 738. The transferee who whishes to remove the mortgage must notify the principal debtor and make an offer to every registered creditor whether by way of mortgage or otherwise pay a reasonable amount corresponding to the value of the property.

The offer shall contain the following particulars:

1. The place and the description of the mortgaged property.
2. The date of transfer of ownership.
3. The name of the former owner.
4. The name and domicile of the transferee.
5. The sum offered.
6. A calculation of the total amount due to each of the creditors including accessories, and the sum which would be distributed to them according to their respective ranks.

A certifies copy of the entries in the official registered to the mortgaged property shall be enclosed.

Section 739. If any creditor refuses the offer, he must enter an action in Court within one month from the date of the offer for a judgment ordering the mortgaged property to be sold by public auction, provided that:

1. He advances the cost of sale;
2. He binds himself to make a bid or have a bid made above the sum offered by the transferee, and
3. He notifies his refusal to the transferee, other registered creditors, the former owner and the principal debtor.

Section 740. If the net proceeds of the auction are more than the sum offered by the transferee, the costs of the auction shall be borne by him; otherwise, the creditor demanding the sale shall bear the costs of the auction.

Section 741. When all the creditors have accepted the offer, either expressly or implied, the mortgage and preferential rights are removed by the transferee paying or depositing in lieu of performance the sum offered.

Section 742. When, by the enforcement or the removal of the mortgage, a person who has previously acquired the mortgaged property is deprived of the property, such deprivation has no retrospective effect, and the preferential rights registered by his own creditors of the mortgagor or other former owner.

In such case, if any rights over the mortgaged property existing in favour of or against the person who has so previously acquired the mortgaged property have been extinguished by merger at the time of his acquisition, they shall revive in his favour or against him after he has been deprived of the mortgaged property.

Section 743. The transferee is liable to damages if the property has been made less valuable by his act or negligence, and loss has thereby been suffered by the creditors having mortgages or preferential rights over the same. The transferee cannot, however, claim any sum spent by him, or reimbursement of his expenses for improvements, except so far as he has increased the value of the property, and only up to the amount of the increase of value at the time of auction.

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CHAPTER VI

EXTINCTION OF MORTGAGE

Section 744. A mortgage is extinguished:

1. By extinction of the obligation secured, otherwise than by prescription.
2. By release of the mortgage granted in writing to the mortgagor
3. By the mortgagor being discharged
4. By the mortgage being removed
5. By action sale of the mortgaged property by order of the Court as a result of enforcement or removal of mortgage
6. By foreclosure of the mortgage.

Section 745. The mortgagee may enforce the mortgage even after the obligation secured has been barred by prescription, but arrears of interest on the mortgage cannot be enforced for more than five years.

Section 746. Any performance, either wholly or partly, or any extinction, or any agreement modifying the mortgage or the obligation secured, must be registered by the competent official on the request of the interested party, failing which it cannot be set up against a third person.

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