I. INTRODUCTION
In the case law of the Court of Cassation, actions for annulment of disposition are defined as a type of action whereby assets and rights, or the values replacing them, which have been removed from the debtor’s estate with the intent to prejudice the creditor, are restored to the debtor’s estate through a lawsuit brought by the creditor whose rights have been adversely affected by such disposition, for the purpose of enabling the recovery of the claim [1]. In addition to the general procedural requirements for actions, certain specific conditions must also be satisfied for an action for annulment of disposition to be admissible. One such condition is the existence of a finalized debt enforcement proceeding against the debtor. In actions for annulment of disposition, the absence of this condition constitutes a procedural deficiency that may be remedied during the course of proceedings. However, since such actions are accessory to debt enforcement proceedings, the case will become moot if the debt is paid during the proceedings or if the debt enforcement proceedings initiated against the debtor are discontinued [2].
In practice, in debt enforcement proceedings based on a final judgment, uncertainties arise as to the effect of the annulment or reversal of the underlying judgment, following appellate or cassation review, on actions for annulment of disposition. At times, courts of first instance, due to an erroneous legal assessment, conclude that the requirement of a finalized debt enforcement proceeding no longer exists on the ground that the underlying judgment has been reversed, and accordingly dismiss actions for annulment of disposition for lack of a procedural condition. However, the annulment or reversal of the underlying judgment in debt enforcement proceedings based on a final judgment does not eliminate the debt enforcement proceeding itself; it merely suspends the debt enforcement measures. Therefore, in such cases, the debt enforcement proceeding continues to exist in legal terms, and the action for annulment of disposition does not become moot.
Under this article, the requirement of a finalized debt enforcement proceeding in actions for annulment of disposition will be examined first. Subsequently, the effects of the annulment or reversal of the underlying judgment in debt enforcement proceedings based on a final judgment on the debt enforcement proceedings will be assessed within the framework of Article 40 of the Debt Enforcement and Bankruptcy Law. Finally, the effects of the suspension of debt enforcement proceedings on actions for annulment of disposition will be analyzed in light of the case law of the Court of Cassation.
II. FINALIZED DEBT ENFORCEMENT PROCEEDING AS A PROCEDURAL REQUIREMENT IN ACTIONS FOR ANNULMENT OF DISPOSITION
An action for annulment of disposition is set out under Articles 277 et seq. of the Debt Enforcement and Bankruptcy Law. The purpose of this action is to render ineffective, in relation to the claimant creditor, dispositions made by the debtor with the intent to defraud creditors. In this respect, an action for annulment of disposition does not result in absolute nullity under substantive law; rather, it merely grants the claimant creditor the right to pursue compulsory debt enforcement against the asset or right that is the subject of the disposition.
In order for an action for annulment of disposition to be admissible, certain specific procedural requirements must be satisfied. According to the established case law of the Court of Cassation, the specific conditions for such actions are the existence of a genuine claim, the existence of a finalized debt enforcement proceeding against the debtor, and the requirement that the contested disposition must have been made after the debt arose.
Decision, bearing the Basis number 2022/58, the Decision number 2022/1818 and dated 21.12.2022, of the General Assembly of Civil Chambers of the Court of Cassation
"In order for an action for annulment of disposition to be admissible, in addition to the general procedural requirements applicable to all actions under Article 114 of the Code of Civil Procedure, certain specific procedural requirements must also be met. As also stated under the decisions of the General Assembly of Civil Chambers of the Court of Cassation, dated 23.10.2013 and bearing the Basis number 2013/17-224 and the Decision number 2013/1478, and dated 30.03.2016 and bearing the Basis number 2014/17-843 and the Decision number 2016/433, and dated 15.11.2017 and bearing the Basis number 2017/17-2361 and the Decision number 2017/1371, these specific conditions are the existence of a genuine claim of the claimant, the existence of a finalized debt enforcement proceeding against the debtor, and the requirement that the contested disposition must have been made after the debt arose.” [3]
Pursuant to the aforementioned case law, there must be a finalized debt enforcement proceeding against the debtor. This is because an action for annulment of disposition is not an independent claim action, but rather a type of action that is accessory to debt enforcement proceedings.
However, the fact that the existence of a finalized debt enforcement proceeding constitutes a procedural requirement does not mean that such condition must exist prior to the filing of the action for annulment of disposition, nor that any deficiency in this requirement cannot be remedied during the course of proceedings. According to the case law of the Court of Cassation, it is accepted that debt enforcement proceedings may even be initiated after the filing of an action for annulment of disposition, provided that they are finalized during the course of the proceedings. Accordingly, the absence of a finalized debt enforcement proceeding, or even the absence of any debt enforcement proceeding at the time the action is filed, does not constitute grounds for dismissal of the case [4].
Indeed, according to the case law of the Court of Cassation, the existence of a finalized debt enforcement proceeding is regarded, within the scope of Article 115/2 of the Code of Civil Procedure Nr. 6100, as a procedural deficiency that may be remedied at a later stage:
Decision, bearing the Basis number 2014/843, the Decision number 2016/433 and dated 30.03.2016, of the General Assembly of Civil Chambers of the Court of Cassation
“However, as also stated in Article 115(2) of the Code of Civil Procedure, where a remediable procedural defect exists, the action shall not be dismissed outright; instead, the court must grant a period of time for the defect to be cured. In such cases, if the procedural requirement is of a curable nature, the court should first grant time for its completion, and if the deficiency is remedied within the prescribed period, the court shall proceed to examine the merits of the case and render a decision accordingly. Otherwise, the case shall be dismissed on procedural grounds.
As also stated above in both practice and doctrine, the existence of a finalized debt enforcement proceeding against the debtor is accepted as a procedural requirement in actions for annulment of disposition. Due to this nature, the absence of such procedural requirement may also be remedied during the course of proceedings concerning the annulment action. “ [5]
As can be seen, although the existence of a finalized debt enforcement proceeding is accepted as a procedural requirement, it is possible for this requirement to be fulfilled during the course of the proceedings.
III. THE EFFECT OF THE ANNULMENT OR REVERSAL OF THE UNDERLYING JUDGMENT ON DEBT ENFORCEMENT PROCEEDINGS BASED ON A FINAL JUDGMENT
Debt enforcement proceedings based on a final judgment are set out under Articles 24 to 41 of the Debt Enforcement and Bankruptcy Law Nr. 2004 and constitute a type of debt enforcement proceedings initiated on the basis of a court judgment or documents deemed to have the force of a judgment. In this type of proceeding, since the claim has already been established by a court decision, the debtor has no right to object to the debt.
As a rule, it is not required for the judgment to have become final in order to initiate debt enforcement proceedings based on a judgment. Pursuant to Article 443 of the Code of Civil Procedure Nr. 1086, which remains applicable by reference under Provisional Article 3 of the Code of Civil Procedure Nr. 6100, the mere fact that a judgment has been appealed does not, as a rule, stay its enforcement, unless a decision for suspension of debt enforcement proceedings is granted. [6]
After a judgment subject to debt enforcement proceedings is pursued without having become final, it is possible that the underlying judgment may subsequently be annulled or reversed as a result of appellate or cassation review. In such cases, Article 40 of the Debt Enforcement and Bankruptcy Law must be applied.
Article 40/1 of the Debt Enforcement and Bankruptcy Law: The annulment of a judgment by a regional court of appeal or its reversal on cassation suspends debt enforcement proceedings at the point they have reached.
As is clearly understood from the wording of the provision, a decision of reversal or annulment does not eliminate debt enforcement proceedings based on a judgment; it merely suspends the debt enforcement measures at the stage they have reached. In other words, a reversal decision does not retroactively render the debt enforcement proceedings void; it only temporarily prevents the continuation of debt enforcement actions. Indeed, the case law of the Court of Cassation also expressly states that the reversal of the underlying judgment does not result in the annulment of debt enforcement proceedings based on a judgment:
Decision, bearing the Basis number 2018/7067, the Decision number 2018/12270 and dated 27.11.2018, of the 12th Civil Chamber of the Court of Cassation
“In the event that a judgment is reversed while debt enforcement proceedings are ongoing, debt enforcement measures shall be suspended at the stage they have reached (Art. 40/1 of the Debt Enforcement and Bankruptcy Law). Accordingly, the reversal of the judgment merely results in the suspension of enforcement, without annulling the debt enforcement proceedings themselves.” In the case of partial reversal and partial affirmation of the judgment, debt enforcement measures shall be suspended with respect to the reversed part, whereas debt enforcement proceedings shall continue with respect to the affirmed part. From another perspective, if the court, following the reversal decision, renders a new judgment in compliance therewith, the creditor may again seek enforcement of this new judgment without waiting for it to become final. The creditor may request enforcement of the new judgment within the pending debt enforcement file, or alternatively, there is no obstacle to initiating a new debt enforcement proceeding based on the judgment. In the event that the court renders a decision of resistance against the reversal judgment, the reversal decision becomes ineffective, and consequently the suspension of enforcement arising from the reversal is also lifted. In such a case, the creditor may request the continuation of the stayed debt enforcement proceedings based on the judgment under the same enforcement file. If the court, complying with the reversal decision, renders a new judgment consistent with the nature and scope of the reversed decision, and the creditor seeks enforcement of this new judgment within the pending debt enforcement file, there is no need to reissue a debt enforcement order to the debtor. Otherwise, where the court renders a new judgment after reversal and the subject matter of the claim and its accessories are altered, it becomes mandatory to issue a new debt enforcement order to the debtor under the pending debt enforcement file, beyond the scope of the original debt enforcement order.” [7]
In the aforementioned decision, it is clearly stated that a reversal decision does not terminate debt enforcement proceedings, but merely suspends them, and that the legal existence of the proceedings is preserved. Furthermore, the decision sets out, in the form of alternative scenarios, the manner in which debt enforcement proceedings should continue following a reversal decision.
Accordingly, in light of Article 40 of the Debt Enforcement and Bankruptcy Law and the case law of the Court of Cassation, it is not possible to interpret the annulment or reversal of the underlying judgment in debt enforcement proceedings based on a final judgment as meaning that the debt enforcement proceedings have not become final or have been annulled. In such cases, the debt enforcement proceedings merely remain suspended, and they continue to produce legal effects depending on the outcome of the proceedings conducted following the reversal.
IV. THE EFFECT OF THE SUSPENSION OF DEBT ENFORCEMENT PROCEEDINGS BASED ON A JUDGMENT ON ACTIONS FOR ANNULMENT OF DISPOSITION
In actions for annulment of disposition, the determining factor in terms of the procedural requirement of a finalized debt enforcement proceeding is the existence of an ongoing and finalized debt enforcement proceeding. As long as the debt enforcement proceeding continues to exist, the specific procedural requirement for an action for annulment of disposition is deemed to be satisfied. Moreover, since the requirement of a finalized debt enforcement proceeding constitutes a curable procedural defect within the meaning of Article 115(2) of the Code of Civil Procedure, this deficiency may be remedied during the course of the proceedings even if a finalized debt enforcement proceeding does not exist at the time of filing.
For these reasons, in the event that the underlying judgment under debt enforcement proceedings based on a final judgment is reversed or annulled, the suspension of debt enforcement proceedings does not eliminate the “finalized debt enforcement proceeding” requirement, which constitutes a specific procedural condition for actions for annulment of disposition, and the case does not become moot.
Indeed, the case law of the Court of Cassation on this matter is consistent. According to the Court of Cassation, the reversal of the judgment does not eliminate the debt enforcement proceedings; it merely suspends debt enforcement measures pursuant to Article 40 of the Debt Enforcement and Bankruptcy Law. Accordingly, since it cannot be said that the requirement of a finalized debt enforcement proceeding is eliminated on the ground that the judgment forming the basis of the debt enforcement proceedings has been annulled or reversed, rendering a decision to dismiss the action on the contrary ground is contrary to law.
Decision, bearing the Basis number 2015/3577, the Decision number 2017/11571 and dated 12.12.2017, of the 17th Civil Chamber of the Court of Cassation
“In this present case, the debt subject to debt enforcement proceedings relates to the attorney’s fee awarded in favor of the plaintiffs in the judgment rendered by the ... Commercial Court of First Instance of …….., bearing the Basis number 2011/10 and the Decision number 2011/84, and debt enforcement proceedings were initiated based on this judgment in the form of debt enforcement proceedings based on a final judgment. The debt enforcement proceedings became final in accordance with the provisions of the Debt Enforcement and Bankruptcy Law, and during the attachment carried out at the debtor’s address on 19.03.2012, no attachable assets were found. The court, however, dismissed the action on the ground that the judgment of the ... Commercial Court of First Instance of ……, bearing the Basis number 2011/10 and the Decision number 2011/84, had been reversed, and therefore the debt enforcement proceedings were not final. However, under debt enforcement proceedings based on a judgment, the reversal of the underlying judgment does not result in the non-finalization or annulment of the debt enforcement proceedings; rather, pursuant to Article 40 of the Debt Enforcement and Bankruptcy Law, debt enforcement proceeding is merely suspended. The judgment becomes final in accordance with the outcome rendered upon reversal, and if it is established that the creditor has no claim, any amounts collected from the debtor during the debt enforcement proceedings shall be refunded. Moreover, according to the case file and the UYAP (National Judiciary Informatics System) records, the judgment of the ... Commercial Court of First Instance of ……, bearing the Basis number 2011/10 and the Decision number 2011/84, which forms the basis of the debt enforcement proceedings, was reversed on jurisdictional grounds by the 11th Civil Chamber of the Court of Cassation in its decision numbered 2012/2238, on the basis that the competent court was the Labor Court. Following the reversal, the ... Labor Court of ….., in its judgment, bearing the Basis number 2014/796 and the Decision number 2015/22, partially upheld the claim for pecuniary damages and again awarded attorney’s fees in favor of the plaintiffs for the dismissed portion. This judgment was subsequently reversed by the 9th Civil Chamber of the Court of Cassation in its decision, bearing the Basis number 2015/9903 and the Decision number 2017/950, in respect of the claim for non-pecuniary damages; however, the appeal regarding the pecuniary damages, namely the damages giving rise to the plaintiffs’ claim, was rejected, and the request for rectification of the decision was also dismissed. In this case, it has also been established that the plaintiffs are entitled to attorney’s fees. The court should have examined the merits of the case, as the procedural prerequisites were satisfied, and rendered a decision in accordance with the outcome of such examination. However, rendering a decision in writing without taking into account Article 40 of the Debt Enforcement and Bankruptcy Law and the other relevant circumstances is contrary to procedural and substantive law.”
Nevertheless, in practice, it is accepted that the status of the judgment forming the basis of debt enforcement proceedings should be treated as a preliminary issue to be awaited under Article 165 of the Code of Civil Procedure.
Decision, bearing the Basis number 2019/1440, the Decision number 2020/1747 and dated 11.12.2020, of the 5th Civil Chamber of the Regional Court of Appeal of Izmir
“In order for such actions to be heard, in addition to other procedural requirements, the debt enforcement proceedings against the debtor must have become final. In this present case, the debt subject to debt enforcement proceedings relates to the claim arising from the judgment, bearing the Basis number 2014/498 and the Decision number 2015/1089, of the 1st Commercial Court of First Instance of Izmir, and debt enforcement proceedings were initiated on the basis of this judgment in the form of debt enforcement proceedings based on a judgment. The debt enforcement proceedings became final in accordance with the provisions of the Debt Enforcement and Bankruptcy Law. However, the court dismissed the action on the ground that the underlying judgment had been reversed and, therefore, the debt enforcement proceedings were not final. However, in debt enforcement proceedings based on a judgment, the reversal of the underlying judgment does not result in the non-finalization or annulment of the debt enforcement proceedings; pursuant to Article 40 of the Debt Enforcement and Bankruptcy Law, debt enforcement proceeding is merely suspended. The judgment becomes final in accordance with the outcome rendered upon reversal, and if it is established that the creditor has no claim, any amounts collected from the debtor during enforcement shall be refunded. In this respect, the relevant file should have been treated as a preliminary issue and awaited, and if the existence of a recoverable claim were to be established as a result of the proceedings, the court should have proceeded to examine the merits of the case under Articles 277 et seq. of the Debt Enforcement and Bankruptcy Law. Instead, rendering a decision based on an erroneous assessment in written form is contrary to procedural and substantive law. (Decision, bearing the Basis number 2014/21254 and the Decision number 2017/2725, of the 17th Civil Chamber of the Court of Cassation)”
When the aforementioned decisions are assessed together, it is clearly seen that a reversal or annulment decision does not eliminate the requirement of a finalized debt enforcement proceeding in actions for annulment of disposition. In such cases, the court is required to treat the proceedings concerning the judgment underlying the enforcement as a preliminary issue to be awaited, and, if the existence of a recoverable claim is established, to adjudicate the merits of the case accordingly.
If it is conclusively established as a result of the proceedings following the reversal that no claim exists, restitution of enforcement will come into question and the action for annulment of disposition will become moot. Conversely, if the creditor’s claim is confirmed at the end of the proceedings, the court must proceed to examine the merits of the action for annulment of disposition and render a decision accordingly.
Accordingly, rendering a decision dismissing the action on the sole ground that the requirement of a finalized debt enforcement proceeding has ceased to exist due to the reversal of the judgment forming the basis of debt enforcement proceedings is clearly contrary to Article 40 of the Debt Enforcement and Bankruptcy Law, Article 115/2 of the Code of Civil Procedure, and the established case law of the Court of Cassation.
V. CONCLUSION
An action for annulment of disposition is a type of action that renders ineffective, in relation to the creditor, dispositions carried out by the debtor with the intent to prejudice the creditor. The specific procedural requirement of “the existence of a finalized debt enforcement proceeding against the debtor”, which is necessary for such an action to be heard, is also accepted in the case law of the Court of Cassation as being of a nature that may be fulfilled during the course of proceedings, even if it is not present at the time the action is filed.
Furthermore, in debt enforcement proceedings based on a judgment, the annulment or reversal of the underlying judgment does not eliminate the debt enforcement proceedings pursuant to Article 40 of the Debt Enforcement and Bankruptcy Law; it merely suspends debt enforcement measures at the stage they have reached. Therefore, the fact that the judgment forming the basis of enforcement has been reversed or annulled does not remove the procedural requirement of a finalized debt enforcement proceeding in relation to an action for annulment of disposition brought on the basis of such debt enforcement proceedings.
As per the case law of the Court of Cassation, in the event that the underlying judgment in debt enforcement proceedings based on a judgment is reversed, the court is required to treat the proceedings concerning the reversed or annulled judgment as a preliminary issue to be awaited, and, if the existence of the claim is established, to render a decision on the merits accordingly.
Osman
Serhat Demirci, Legal Intern
References:
1. Decision,
bearing the Basis number 2004/15-666, the Decision number 2005/1 and dated 02.02.2005,
of the General Assembly of Civil Chambers of the Court of Cassation
2. Decision,
bearing the Basis number 2018/3166, the Decision number 2020/2971, and
dated 01.06.2020, of the 17th Civil Chamber of the Court of
Cassation
3. Decision,
bearing the Basis number 2022/58, the Decision number 2022/1818, and dated 21.12.2022,
of the General Assembly of Civil Chambers of the Court of Cassation
4. Sertkaya Şehabettin
Abdulkadir /Kul Süleyman, “Tasarrufun İptali Davaları (Actions for
Annulment of Disposition)”, 2016,
Adalet Publishing House, Ankara.
5. Decision,
bearing the Basis number 2014/843, the Decision number 2016/433 and dated 30.03.2016,
of the General Assembly of Civil Chambers of the Court of Cassation
6. Decision,
bearing the Basis number 2018/1000, the Decision number 2022/373 and dated
24.03.2022, of the General Assembly of Civil Chambers of the Court of Cassation
7. Decision, bearing the Basis number 2015/3577,
the Decision number 2017/11571 and dated 12.12.2017, of the 17th
Civil Chamber of the Court of Cassation
8. Decision, bearing the Basis number 2019/1440, the Decision number 2020/1747 and dated 11.12.2020, of the 5th Civil Chamber of the Regional Court of Appeal of Izmir
