Comparison Between Annulment of Disposition Cases Under Enforcement and Bankruptcy Code vs. Turkish Code of Obligations

Creditors who suffered (unable to collect their receivables) from a disposition of the debtors who have transferred their movable/immovable properties to others with the intention of conveying property from their creditors (in order not to pay their debts) can file a "action for annulment of disposition" in accordance with the provisions of EBL Articles 277-284 or "action for annulment of disposition based on collusion" according to article 19 of the TCO.

In practice, the annulment of the disposition procedures are regulated in Articles 277 and the following of the EBL and the cases of annulment based on collusion regulated in Article 19 of the TCO are confused with each other. As stated in many decisions of the Supreme Court, at first glance, there is a similarity between annulment cases and collusion cases, but this similarity does not go beyond the similarity of purpose pursued by both cases. Indeed, the common goal of both cases is to prevent the creditors from suffering by conveyance of the debtor's property.

1) Characteristics of Action for Annulment of Disposition Based on Collusion (Article 19 of TCO):

In order to be able to file an "action for annulment of disposition" based on collusion;

• The plaintiff creditor must have a legal interest in bringing the case.
• The plaintiff creditor must suffer from the collusive transaction.
• The creditor's receivable must be real.
• The collusion of the debtor should be aimed at preventing the collection of the receivable.[1]
• With the action for the annulment of the disposition based on Article 19 of the TCO, it is aimed to determine that the disposition transactions made by the debtor have never been made. [2]
• There is no need for the plaintiff-creditor to take enforcement proceedings against the defendant-debtor and submit a certificate of insolvency to the court.[3]
• In cases of annulment of disposition based on TCO article 19, if the claim is proven, since the claim is not related to the same real estate but is for the collection of the receivable, EBL Articles 283/I and II will be applied by analogy and it will be necessary to establish a provision that the claimant can request the seizure and sale of the immovable (and movable) subject to the lawsuit without the need for cancellation and registration.[4]
• Actions for annulment of disposition based on collusion do not turn into compensation, that is, EBL article 283/II is not applied in these lawsuits. Third party cannot be held responsible for compensation.[5] In case the subject movable/immovable has changed hands several times, (i.e., the third person who bought the movable/immovable from the debtor, or the fourth, fifth, etc. persons who bought the same movable/immovable from the debtor, have transferred their purchases to others) all these people must be shown as the 'defendant' in the action for the annulment of the disposition (inclusion in the case) and it must be proved by the plaintiff that all of these people are in bad faith, that is, that all sales made are collusion. Otherwise, it will have to be decided to reject the action for annulment of the disposition.
• The right to file an action for the annulment of the disposition, granted to the claimant/creditor according to EBL article 277 and its continuation, does not prevent the creditor from filing a lawsuit for the annulment of the disposition based on collusion in accordance with the general provisions (TCO. art. 19). [6]
• For the determination of the existence of collusion; the disposition (transaction) whose cancellation is requested must have been made after the debt has arisen.
• The court cannot adjudicate a case with a difference in trial procedures based on both the annulment of the disposition (EBL article 277 et al.) and the reason for collusion (TCO. art. 19).
• Pursuant to Article 33 of the CPL, the judge has to apply Turkish law on his own, and since the legal characterization belongs to the parties and the legal characterization belongs to the parties, according to the way in which the case is asserted in the petition and the verbal and written explanations of the parties during the trial, the judge, According to article 19 of the TCO, it can be described as “the action for the annulment of the disposition based on collusion”.• An action for annulment of disposition based on article 19 of the TCO can be filed at any time. It is not subject to the five-year statute of limitations as stated in EBL 277 and its following articles.

2) Characteristics of Action for Annulment of Disposition Filed According to EBL article 277 and its continuation:

• • The claimant's receivable from the debtor must be real,
  • The enforcement proceeding on the debtor must be finalized.
  • The disposition must have been made after the debt has arisen.
  • There must be a final or temporary insolvency document about the debtor.
  • It is filed in order to invalidate some of the dispositions validly made by the debtor, in which the enforcement law allows for the cancellation of the claimant creditor.
  • In the lawsuits for the annulment of the disposition filed according to EBL article 277 and its following articles, it is investigated whether there are cancellation conditions written in EBL articles 278, 279 and 280.
  • It can be filed within a five-year period of disqualification (EBL art. 284).

3) To Compare

In lawsuits for the annulment of the disposition to be filed based on the 277 and following articles of the EBL; The claimant's receivable from the debtor must be real, the enforcement proceedings against the debtor must be finalized, the disposition requested to be canceled must have been made after the debt subject to the proceedings, and there must be a final or temporary insolvency document obtained about the debtor.  

In cases based on the legal characterization of collusion regulated in Article 19 of the TCO; a collusive transaction must be made in order to have a receivable from the colluded party and to prevent the payment of this receivable. In cases based on collusion, the plaintiff does not need to go to enforcement proceedings and obtain a certificate of insolvency.

Another important difference in terms of both types of cases is about the statute of limitations. Although the allegation of collusion is not subject to statute of limitations, the action for the annulment of the disposition regulated in Articles 277 and the following of the EBL must be filed within a five-year period of infringement.

As it can be seen, the conditions of both cases and the procedure to which they are subject are different. Therefore, it is not possible for the plaintiff to request the annulment of the disposition based on both Article 19 of the TCO and Article 277 of the EBL in the same case. [7]The Supreme Court states that in such cases, the Court should be asked to make a statement or preference from the plaintiff regarding the legal reason for the claimant's request.[8]

. On the other hand, as stated in many decisions of the Court of Cassation, the plaintiff is free to use one of these elective litigation rights. In other words, it does not constitute an obstacle for the person who has the right to file an action for the annulment of the disposition pursuant to Articles 277 et al. of the EBL, instead of filing an action for annulment due to collusion based on Article 19 of the TCO. [9]

The common point in both cases is that the transfer transaction, which is the subject of the case, was made after the debt was arising.

If there are conditions for the action for annulment of the disposition stipulated in Articles 277 and the following of the EBL, it would be appropriate for the plaintiff to file a lawsuit pursuant to these articles. On the other hand, if the conditions stipulated in Articles 277 and the following of the EBL are not met, for example, if the two-year periods in Article 278, one-year in Article 279 or five-year periods in Article 280 are missed, the plaintiff will have to rely on the legal reason for collusion regulated in Article 19 of the TCO and file a lawsuit accordingly.

In cases filed based on collusion pursuant to Article 19 of the TCO, the court decides to authorize the claimant to demand the lien and sale of the immovable without the need for cancellation and registration by applying the 283/1-2 articles of the EBL by analogy. The established practice of the Supreme Court is also in this direction. [10]This approach of the Supreme Court brings the cases of annulment based on collusion to the cases of annulment of the disposition, which are filed based on Articles 277 and the following of the EBL and which provide a personal right, not a real right, to each other in terms of the outcome of both cases.

4) As a Conclusion:

Apart from the similarity of purpose, there are important differences in terms of content, procedure, quality and conditions between the actions for annulment filed based on collusion regulated in Article 19 of the TCO and the actions for the annulment of the disposition filed based on Article 277 and more of the EBL. Therefore, it is very important to file a lawsuit based on the legal reason, whichever is in favor of the plaintiff, taking into account the characteristics of each concrete case while filing the lawsuit.

Özlem Baysal Özkan

Bibliography

1) Actions for Cancellation of Disposition in Execution and Bankruptcy Law, Talih Uyar-Alper Uyar-Cüneyt Uyar, Bilge Publishing House

2) Euyar.com

3) Ankara Bar Association Magazine

4) Decisions of the Supreme Court in the footnotes

[1] 17. HD. 12.12.2016 T. 21228/11433, 17. HD. 14.10.2020 T. 937/55667; 07.10.2020 T.

[2] 17. HD. 14.10.2020 T. 937/5567; 25.12.2019 T.

[3] HGK. 23.02.2021 T. 17-2249/146, HGK. 23.02.2021 T. 2249/146

[4] 17. HD. 14.10.2020 T. 937/5567; 07.10.2020 T.

[5]  İSTANBUL BAM HD. 31.05.2021 T. 792/866, 17. HD. 25.12.2019 T. 3373/12468

[6] 17. HD. 07.10.2020 T. 617/5184

[7] Decision of the 17th LO of the Supreme Court dated 14.10.2020, numbered 2019/937 E., 2020/5567 K.

[8] Decision of the 17th LO of the Supreme Court dated 28.03.2016, numbered 2016/3939 E., 2016/3805 K.

[9] LGA dated 04.07.2007, 2007/4-450 E., 2007/449 K., 17. LO of the Supreme Court dated 07.10.2020, 2019/617 E., 2020/5184 K.

[10] 17. LO dated 07.10.2020, 2019/617 E., 2020/5184 K. and 19.04.2016 dated, 2016/2560 E., 2016/5017 K.