Precedent No. 87/2026/AL on the order of payment priority when handling secured assets was adopted by the Council of Justices of the Supreme People’s Court on May 21, 2026, and promulgated according to Decision No. 162/QĐ-CA dated May 29, 2026, by the Chief Justice of the Supreme People’s Court.
1. What is a Precedent?
Precedents are arguments and rulings in legally effective judgments and decisions of the Court regarding a specific case, selected by the Council of Justices of the Supreme People’s Court and promulgated by the Chief Justice of the Supreme People’s Court as precedents for Courts to study and apply in adjudication. (Article 1 of Resolution 04/2019/NQ-HĐTP)
Selected precedents must meet the following criteria:
– Clarify legal provisions that are subject to different interpretations, analyze and explain legal issues and events, and indicate principles, handling guidelines, and legal norms to be applied in a specific case, or demonstrate fairness for issues not yet specifically regulated by law;
– Be exemplary;
– Have guiding value for the uniform application of law in adjudication.
2. Precedent No. 87/2026/AL on the order of payment priority when handling secured assets
2.1. Source of the Precedent
Supervisory Review Decision No. 30/2023/KDTM-GDT dated December 29, 2023, of the Committee of Judges of the High People’s Court in Hanoi regarding the commercial business case “Dispute over Credit Agreement” between the plaintiff, Commercial Joint Stock Bank A, and the defendant, Maritime Joint Stock Company H; the party with related rights and obligations being Shipbuilding Joint Stock Company D.
Location of the precedent’s content:
Paragraph 6 of the “Court’s Opinion” section.
2.2. Overview of the Precedent’s Content
– Precedent Situation:
The plaintiff (credit institution) entered into a credit agreement and a mortgage agreement for a ship with the defendant (customer). The two parties agreed for a third party to repair, upgrade, and guard the ship to increase the value of the secured asset. The defendant entered into a contract with the third party to perform the aforementioned works. Subsequently, the plaintiff and the defendant signed an amendment and supplement to the original credit agreement and a mortgage agreement for the ship after it had been repaired and upgraded. Due to the defendant’s breach of debt repayment obligations, the plaintiff initiated a lawsuit disputing the credit agreement and requested the handling of the secured asset. The party with related rights and obligations (third party) filed an independent request for payment of costs incurred in repairing, upgrading, and guarding the secured asset.
– Legal Solution:
In this case, the Court must determine that when handling the secured asset, priority should be given to paying the third party for labor wages, rent, and asset guarding costs related to the repair, upgrade, and guarding of the secured asset.
Legal provisions related to the precedent:
– Article 307 Civil Code of Vietnam 2015;
– Clause 12, Article 1 of Decree No. 11/2012/ND-CP dated February 22, 2012, of the Government amending and supplementing a number of articles of Decree No. 163/2006/ND-CP dated December 29, 2006, of the Government on secured transactions.
Keywords of the precedent:
“Credit Agreement”; “Payment priority when handling secured assets”; “Repair and upgrade costs”; “Labor wages”; “Taxes”; “Asset guarding fees”.
CASE CONTENT:
In the statement of claim dated February 16, 2017, and during the resolution of the case, the plaintiff, Commercial Joint Stock Bank A, represented by its authorized representative, stated:
Commercial Joint Stock Bank A (hereinafter referred to as the Bank) and Maritime Joint Stock Company H (hereinafter referred to as Company H) entered into Credit Agreement No. 68/13/TD/XI dated October 22, 2013, with the following content: The Bank lent Company H VND 23,331,000,000; the purpose was to pay for the purchase of the P 06 cargo ship; the loan term was 120 months; the interest rate was as stipulated at the time of disbursement and when the Bank notified a change in interest rate; the overdue interest rate was 150% of the in-term interest rate. Company H received the money according to Promissory Note No. 01 dated October 22, 2013.
To secure the loan, Company H mortgaged the asset formed from the loan capital, which was the P 06 ship, under Mortgage Agreement for Future-Formed Ship No. 112/13/TC/XI dated October 22, 2013. Subsequently, the Bank and Company H agreed for Shipbuilding Joint Stock Company D (hereinafter referred to as Company D) to repair, upgrade, change the name and number of Ship P 06 to R 268 cargo ship, increasing the value of the secured asset to VND 45,638,000,000. On July 21, 2015, the Bank and Company H further signed Amendment and Supplement to Credit Agreement No. 3278/15/PLTD-TT/IXI. Accordingly, the Bank approved Company H to change the name of the secured asset from Ship P 06 to R 268 cargo ship and signed Asset Mortgage Agreement No. 3364/15/TC/XI dated July 21, 2015, with the secured asset being swapped to Ship R 268. The mortgage agreements were notarized and registered as secured transactions in accordance with regulations.
During the execution of the credit agreement, as of September 25, 2016, Company H had repaid the Bank a total of VND 7,621,242,760; of which the principal was VND 2,316,135,000; in-term interest was VND 5,183,270,790, and overdue interest was VND 121,836,970. Company H breached the repayment terms of the Credit Agreement, so the Bank filed a lawsuit requesting the Court to resolve: To compel Company H to pay the Bank VND 32,834,248,529, including: Principal debt of VND 21,014,865,000, in-term interest of VND 2,539,919,640, and overdue interest of VND 9,279,463,889 (as of July 12, 2019). To compel Company H to continue paying the Bank interest accrued according to the credit agreement and promissory note from July 13, 2019, until the debt is fully paid. In case Company H fails to repay the loan, the Bank has the right to request the competent authority to seize and auction the secured asset, which is Ship R 268, to recover the debt. If the amount collected from the auction of the secured asset is insufficient to recover the debt, Company H must still repay the principal and accrued interest to the Bank at the overdue interest rate stated in the Credit Agreement and Promissory Note until the debt is fully paid.
The defendant, Maritime Joint Stock Company H, represented by its legal representative, stated:
Company H acknowledged that the statements of the Bank and the independent claim of Company D were correct. Company H is responsible for paying the outstanding amounts to the Bank and Company D. Currently, Company H does not request the application of the statute of limitations for interest repayment on the Bank loan. However, Company H is currently facing many difficulties and no longer has financial capacity. At the Company’s shareholder meeting, it was agreed to auction Ship R 268 to pay off debts. The proceeds from the auction of Ship R 268, after paying the above debts, if insufficient, Company H commits to continue paying; if there is a surplus, it will be transferred to Company H’s account.
The party with related rights and obligations, Shipbuilding Joint Stock Company D, represented by its authorized representative, stated:
Ship P 06 was severely damaged and no longer operational at the time of mortgage to the Bank, so Company H and Company D signed Repair, Replacement, and Upgrade Agreement (first time) No. 11/HDXT dated November 18, 2013 (amended acceptance on July 14, 2015). Pursuant to this agreement, Company D invested VND 18,774,000,000 in the ship for the first time, and then spent VND 9,013,573,634 for the second repair. The ship was operated until the end of December 2017, then stopped, and Company H was no longer able to pay.
Company D guarded Ship R 268 for Company H under Agreement No. 06-11/2017/HHHG-DTHG dated November 06, 2017, at VND 3,000,000 per day. To date, Company H has not yet paid Company D the full amount for repairs and guarding fees for Ship R 268. On December 26, 2017, Company D filed an independent request asking Company H to pay Company D VND 9,103,573,634, including: Ship repair costs of VND 8,194,157,849, comprising labor wages during ship repair of VND 4,303,138,651; electricity, water, equipment depreciation of VND 1,527,796,391, replacement materials and equipment of VND 2,363,322,807; Value Added Tax of VND 819,415,785; and mooring and guarding fees for the ship from November 06, 2017, until contract liquidation. If Company H cannot pay, it is requested to auction Ship R 268 to pay off debts to Company D.
In Commercial Business Judgment No. 05/2019/KDTM-ST dated July 12, 2019, the People’s Court of Hong Bang District, Hai Phong City, decided:
1. To accept the Bank’s lawsuit against Company H:
– To compel Company H to pay the Bank a total outstanding amount as of July 12, 2019, of VND 32,834,248,529; including: Principal debt of VND 21,014,865,000; in-term interest of VND 2,539,919,640; overdue interest of VND 9,279,463,889.
From the day following July 13, 2019, until the judgment is fully executed, the party obligated to execute the judgment must also bear interest on the outstanding amount at the interest rate agreed upon by the parties but in accordance with legal provisions.
2. To accept Company D’s independent claim against Company H: To compel Company H to pay Company D a total ship repair cost for Ship R 268 of VND 11,967,073,634; including: Ship repair costs of VND 8,194,157,849 (comprising labor wages during ship repair of VND 4,303,138,651; electricity, water, equipment depreciation of VND 1,527,796,391; replacement materials and equipment of VND 2,363,322,807); Value Added Tax of VND 819,415,785; mooring and guarding fees for Ship R 268 from January 21, 2017, to July 12, 2019, of VND 2,953,500,000.
Company H Joint Stock Company is obligated to pay Value Added Tax according to tax laws. Company H is obligated to continue paying mooring and guarding fees for Ship R 268 to Company D from July 13, 2019 (according to Economic Contract No. 06-11/2017/HDHG-DTHG) until the relocation and liquidation of the mooring and guarding contract for Ship R 268.
Regarding the aforementioned debt, once the judgment becomes legally effective, from the date the judgment creditor files a request for execution until the judgment is fully executed, if the civil judgment debtor fails to execute, they must bear monthly interest on the outstanding amount at the interest rate stipulated in Article 357, Article 468 of the Civil Code.
3. In case Company H fails to fully repay the aforementioned debt to the Bank, the Bank has the right to request the competent Civil Judgment Enforcement Agency to handle the mortgaged asset (Asset Mortgage Agreement 3354/15/TC-TT/XI dated July 21, 2015), in accordance with legal provisions, to fulfill the payment obligation to the Bank. The mortgaged asset to be handled is: Ship R 268.
4. Regarding the order of payment:
When handling the mortgaged asset, Ship R 268, the amount collected after deducting enforcement costs shall first be used to pay Company D for labor wages of VND 4,303,318,651, Value Added Tax of VND 819,415,785, and mooring and guarding fees for the ship of VND 2,953,500,000; then to pay the Bank for principal debt of VND 21,014,865,000, in-term interest of VND 2,539,919,640, overdue interest of VND 9,279,463,889; and then to continue fulfilling the remaining payment obligation to Company D for the purchase of replacement parts of VND 2,363,322,807; and depreciation of machinery and equipment, electricity, water, lubricants, grease, gasoline, sandblasting for rust removal of VND 1,527,796,391.
During the execution of payments in the aforementioned order, if the amount is insufficient, Company H must continue to pay the remaining portion of the corresponding debts; if there is a surplus, it shall be returned to Company H.
Additionally, the judgment also decided on court fees, the right to appeal, and the enforcement of the judgment for the parties involved.
After the first-instance trial, Commercial Joint Stock Bank A appealed a part of the first-instance judgment.
In Commercial Business Appellate Judgment No. 19/2019/KDTM-PT dated November 25, 2019, the People’s Court of Hai Phong City decided:
To uphold Commercial Business First-Instance Judgment No. 05/2019/KDTM-ST dated July 12, 2019, of the People’s Court of Hong Bang District, Hai Phong City.
On July 06, 2021, Commercial Joint Stock Bank A filed a complaint requesting a supervisory review by the High People’s Procuracy in Hanoi regarding Commercial Business Appellate Judgment No. 19/2019/KDTM-PT dated November 25, 2019, of the People’s Court of Hai Phong City.
In Decision No. 06/QDKNGDT-VC1-KDTM dated July 24, 2023, the Chief Procurator of the High People’s Procuracy in Hanoi appealed Commercial Business Appellate Judgment No. 19/2019/KDTM-PT dated November 25, 2019, of the People’s Court of Hai Phong City; requesting the Committee of Judges of the High People’s Court in Hanoi to conduct a supervisory review to annul the aforementioned commercial business appellate judgment and Commercial Business First-Instance Judgment No. 05/2019/KDTM-ST dated July 12, 2019, of the People’s Court of Hong Bang District, Hai Phong City; and to remand the case file to the People’s Court of Hong Bang District for re-trial in accordance with legal provisions, on the grounds that: The first-instance court and the appellate court incorrectly ruled to prioritize payment of ship repair costs when handling secured assets, causing damage to the Bank’s interests.
At the supervisory review hearing, the representative of the High People’s Procuracy in Hanoi requested the Committee of Judges of the High People’s Court in Hanoi to accept the appeal of the Chief Procurator of the High People’s Procuracy in Hanoi.
COURT’S OPINION:
[1] Commercial Joint Stock Bank A (hereinafter referred to as the Bank) and Maritime Joint Stock Company H (hereinafter referred to as Company H) entered into Credit Agreement No. 68/13/TD/XI dated October 22, 2013, with the following content: The Bank lent Company H VND 23,331,000,000; the purpose was to pay for the purchase of the P 06 cargo ship; the loan term was 120 months; the interest rate was as stipulated at the time of disbursement and when the Bank notified a change in interest rate; the overdue interest rate was 150% of the in-term interest rate. Company H received the money according to Promissory Note No. 01 dated October 22, 2013. To secure the loan, Company H mortgaged the asset formed from the loan capital, which was the P 06 ship, under Mortgage Agreement for Future-Formed Ship No. 112/13/TC/XI dated October 22, 2013; after upgrading, changing the name and number of Ship P 06 to R 268 cargo ship, the value of the secured asset was VND 45,638,000,000, and the parties further signed Asset Mortgage Agreement No. 3364/15/TC/XI dated July 21, 2015. The mortgage agreements were notarized and registered as secured transactions in accordance with regulations.
[2] During the execution of the credit agreement, Company H had repaid the Bank a total of VND 7,621,242,760; of which the principal was VND 2,316,135,000; in-term interest was VND 5,183,270,790, and overdue interest was VND 121,836,970 (as of September 25, 2016). Due to Company H’s breach of repayment terms, the Bank filed a lawsuit requesting the Court to compel Company H to repay VND 32,834,248,529, including: VND 21,014,865,000 principal debt, VND 2,539,919,640 in-term interest, and VND 9,279,463,889 overdue interest (as of July 12, 2019), plus interest accrued according to the credit agreement and promissory note from July 13, 2019, until the debt is fully paid. In case Company H fails to repay the loan, the Bank has the right to request the competent authority to seize and auction the secured asset, which is Ship R 268, to recover the debt. If the amount collected from the auction of the secured asset is insufficient to recover the debt, Company H must still repay the principal and accrued interest to the Bank at the overdue interest rate stated in the Credit Agreement and Promissory Note until the debt is fully paid.
[3] Regarding the request of Shipbuilding Joint Stock Company D (Company D), since Ship P 06 was severely damaged at the time of mortgage to the Bank, the Bank and Company H agreed for Company H to repair and upgrade Ship P 06 into R 268 cargo ship. Company H signed a contract with Company D for the repair, upgrade, and guarding of the ship. As of the date the Bank filed the lawsuit, Company H had not yet paid Company D the full amount for repair costs and guarding fees for Ship R 268. On December 26, 2017, Company D filed an independent request asking Company H to pay Company D ship repair costs of VND 8,194,157,849, including labor wages during ship repair of VND 4,303,138,651; electricity, water, equipment depreciation of VND 1,527,796,391, replacement materials and equipment of VND 2,363,322,807; Value Added Tax of VND 819,415,785; and mooring and guarding fees for the ship from November 06, 2017, until contract liquidation. If Company H cannot pay, it is requested to auction Ship R 268 to pay off debts to Company D.
[4] During the resolution of the case, Company H confirmed the principal and interest owed to the Bank; confirmed the amount still owed to Company D. Therefore, the first-instance court and the appellate court’s decision to compel Company H to pay Q Vietnam Limited Company (as the successor to the Bank’s procedural rights and obligations) and Company D the outstanding amounts is well-founded.
[5] In Supervisory Review Decision No. 06/QDKNGDT-VC1-KDTM by the Chief Procurator of the High People’s Procuracy in Hanoi, it was stated: “…Both the first-instance court and the appellate court ruled to compel Company H to pay Q Vietnam Limited Company (as the successor to the Bank’s procedural rights and obligations) a total principal and interest debt of VND 32,834,248,529 as of July 12, 2019; to compel Company H to pay Company D for ship repair costs and guarding fees for Ship R 268, totaling VND 11,967,073,634, which is well-founded”; only proposing to re-resolve the order of payment priority, but then requesting to annul both the appellate and first-instance judgments for re-resolution is inappropriate.
[6] Regarding the order of payment priority, it is found that the repair, upgrade, and guarding of Ship R 268 between Company H and Company D were real; the Bank was aware of and agreed to Company H repairing and upgrading the ship’s value. As of the first-instance and appellate trials, Company H had not yet paid Company D the repair and guarding costs according to the signed contracts. The first-instance court and the appellate court cited Article 307 of the Civil Code 2015 and point b, Clause 12, Article 1 of Decree No. 11/2012/ND-CP dated February 22, 2012, to decide that when handling the mortgaged asset, priority should be given to paying Company D for labor wages, taxes, and ship guarding fees, which is well-founded, reasonable, ensures the rights of laborers, and ensures the fulfillment of tax obligations to the State. Therefore, the decisions of the first-instance judgment and the appellate judgment should be upheld.
For the above reasons,
DECISION:
Pursuant to point a, Clause 1, Article 337, and Clause 1, Article 343 of the Civil Procedure Code 2015;
1. To reject Supervisory Review Appeal Decision No. 06/QDKNGDT-VC1-KDTM dated July 24, 2023, of the Chief Procurator of the High People’s Procuracy in Hanoi.
2. To uphold Commercial Business Appellate Judgment No. 19/2019/KDTM-PT dated November 25, 2019, of the People’s Court of Hai Phong City regarding the case “Dispute over Credit Agreement” between the plaintiff, Commercial Joint Stock Bank A, and the defendant, Maritime Joint Stock Company H; the party with related rights and obligations being Shipbuilding Joint Stock Company D.
CONTENT OF THE PRECEDENT
“[6] Regarding the order of payment priority, it is found that the repair, upgrade, and guarding of Ship R 268 between Company H and Company D were real; the Bank was aware of and agreed to Company H repairing and upgrading the ship’s value. As of the first-instance and appellate trials, Company H had not yet paid Company D the repair and guarding costs according to the signed contracts. The first-instance court and the appellate court cited Article 307 of the Civil Code 2015 and point b, Clause 12, Article 1 of Decree No. 11/2012/ND-CP dated February 22, 2012, to decide that when handling the mortgaged asset, priority should be given to paying Company D for labor wages, taxes, and ship guarding fees, which is well-founded, reasonable, ensures the rights of laborers, and ensures the fulfillment of tax obligations to the State. Therefore, the decisions of the first-instance judgment and the appellate judgment should be upheld.”
[*] This precedent was proposed by the Department of Legal Affairs and Scientific Management of the Supreme People’s Court.
