The legal proceedings that can be applied on Turkish Law for the collection of a debt that is not secured with a pledge can be classified as “Execution for Debt” and “Action of Debt”.
The creditor who obtained a judgment debt with the Action of Debt can make collection over the debtor’s property ownership with the collection proceedings that cannot be estopped with an exception and named as “Enforcement Proceeding with Judgement”.
A Creditor who demands to collect the debt through an executive proceeding instead of filling an Action for Debt will make his executive proceeding finalized unless the debtor opposes against the “Order of Payment” served by the Enforcement Office and will be able to retrieve the debt through executing the procedures of confiscation on debtor’s assets and the liquidation proceedings. In case of an exception by the debtor against the execution for debt, “Withdrawal of Appeal Suit” or “Nullity Suit for Exception ” should be filed in order for continuation of the executive proceeding and judicial decision for withdrawal of the exception or judicial decision for nullity of exception which shall maintain the continuation of executive proceeding for the collection of debt shall be derived.
If ever there is a concern regarding the matter that the debtor may spirit his assets away or may conceal or dispose them in the event that the debtor is notified about the suit or the executive proceeding, precautionary distraint may be claimed from Judge. After the implementation of such an order, the proceedings will be continued with one of the ways of executive proceeding or filling a suit.
In this respect, “Precautionary Distraint” has a vital importance either for in cases of filling an “Action for Debt” and a judicial decision for execution or enforcement proceedings without judgement.
1. PRECAUTIONARY DISTRAINT
Precautionary Distraint is the precautionary sequestrating, confiscation of the assets of a debtor with a judgement decision at the phase at which the Creditor may not ask for “Final Distraint” as of the moment and before filling an action for debt or starting an executive proceeding.
As well as Precautionary Distraint is an interim measure, it aims to collateral the debt at earliest convenience. The procedure for Precautionary Distraint is embodied between the articles 257-269 of the “Bankruptcy and Enforcement Law ”.
CONDITIONS FOR PRECAUTIONARY DISTRAINT:
A) Precautionary Distraint for pecuniary claims at maturity:
According to the article 257/1 of the “Bankruptcy and Enforcement Law”; “ The Creditor of a debt which is not secured with a pledge and is matured may ask for the distraint of the chattel and real estates of the debtor which is possessed or which exists at the third party or for the other rights as a reserve.”
According to the Law, the debt must necessarily be a one which is not secured with a pledge and which is matured. The legal ground for this condition is that a debt which is secured with a pledge is already secured.
According to the order of the Supreme Court of Appeal with Docket no. 2009/13940, Order No. 2009/12459 and 7.12.2009 dated; “ … according to the article 257/1 of the Bankruptcy and Enforcement Law, the conditions of maturity for debt and not being secured with a pledge is also sufficient to claim for a precautionary distraint which is based on a bond. The maturity of the bond is fundamental and sufficient condition to claim for precautionary distraint against the issuing party of the bond and the avaliste who signs surety in favour of the issuing party and also the it is not seeked for the Holder to protest for non payment and to add this protest with the bond to the demand for precautionary distraint.”
Cheque which is one type of bill of exchange is paid at sight and the cheque which is submitted to withdraw before the date of issue, is paid at the withdrawal date of the cheque. In practise, the legitimate holder of those kinds of cheques which are called “future disposal-dated” are not supposed to wait until the date of issue. The date written on the cheque is not the due date, but it is the date of issue. Hence, it is possible to ask for precautionary distraint after submitting the cheque to bank before the date of issue of cheque and make it stipulated whether it is a kite cheque or not, as mentioned in the article 257/1 of the Bankruptcy and Enforcement Law. However; the sentence 5 of the provisional clause 1 of the “Turkish Cheque Law numbered 5941” states that; “… submittance to drawee bank for witdrawal of cheque before its date of issuance that is written on it, shall be invalid until the date of 31.12.2011”. In practise, at the applications for precautionary claims, this provisional clause of the Law maintains to monitor whether the date of issuance of the cheque is at due or not.
The Supreme Court of Appeal states that a Creditor may claim for precautionary distraint when the pecuniary claim which is not secured with a pledge, is matured and also implies that “the Court to be convinced about the existence of a debt” is accepted to be a sufficient condition for its rulings for precationary distraints. (19. Civil Chamber, Docket no. 2009/5157, Order no. 2009/5225, Date of Order. 03.06.2009).
B) Precautionary Distraint for Pecuniary Claims undue:
Precautionary Distraint for Pecuniary Claims, which are undue is embodied in the article 257/II of the “Bankruptcy and Enforcement Law” and in this case, the pecuniary claim that will be subject to a precautionary distraint is undue. However, if there is not a certain domicile of the debtor and it is understood that the debtor arranges to conceal, to spirit away his assets or the debtor, himself arranges to run away or runs away in order to discharge from the obligations or practise fraudulent actions which breaches the rights of the creditor, again in order to discharge from the obligations, then may be claimed for precautionary distraint. With the execution of the precautionary distraint, the debt will be matured just for the debtor.
PRECAUTIONARY DISTRAINT, AUTHORIZED AND COMPETENT COURT
In principle, if only the credit will only be due and executory, if some certain terms and conditions are existed with the attribution of the article 50 of the Bankruptcy and Enforcement Law; precautionary distraint may be claimed at the court by applying to the competence clauses of the Turkish Code of Civil Procedure. According to the article 50 of the Bankruptcy and Enforcement Law, the authorized court is the court of the place of contract. The Court of Jurisdiction (whether Civil Court of First Instance or Peace Court of Civil Jurisdiction) is determined in respect of the amount of the claim.
The agreed term to disentitle the authorization of the Turkish Courts with the contract by the contracting parties, shall not interpose to rule to precautionary distraint which is a legal precautionary protection ( The Supreme Court of Appeals 19. Civil Chamber, Docket No. 2008/4717, Order No. 2008/6504, Date of Order 12.06.2008 ).
The application for precautionary distraint is made in a written form with a petition. The Jurisdiction has the right to decide to listen or not to listen the parties and also to serve the petition to the debtor or not. The Creditor is under to obligation to prove both the grounds of a debt and the existence of the terms and conditions necessary for a ruling to precautionary distraint by submitting the evidences that Jurisdiction can be convinced with.
The Jurisdiction also rules to a collateral which will be received by the creditor together with its ruling on the precautionary distraint.
As is stated in the article 259 of the Bankruptcy and Enforcement Law, if the creditor turns out to be in the wrong in respect of the decision on precautionary distraint, the Creditor should pay the amounts of collateral in the type implied in the article 96 of the Code of Civil Procedure, in return for the losses will be incurred by the debtor and third parties.
The amount of collateral is determined by the jurisdiction. The collateral can be given in terms of cash or bank letter of collateral. It is no possible to rule to a precautionary distraint and to execute the proceeding unless the necessary amounts of collateral is paid. According to the article 260 of the Bankruptcy and Enforcement Law, the name and surname and domicile of creditor, debtor and -if there is- proxy, deeds that ground the distraint and amount of debt of which the distraint levied, grounds of the distraint and creditor’s obligation to imdemnify the loss and the contents of collateral posted should be written in the order of precautionary distraint.
THE EXECUTION OF THE ORDER OF PRECAUTIONARY DISTRAINT
The Creditor who receives the precautionary distraint by a collateral, according to the article 261 of the Bankruptcy and Enforcement Law, should ask for the execution of the precautionary distraint in ten days after the date of the order.
If ever the Creditor does not ask for the enforcement of the order from the execution Office denoted in the article mentioned above in ten days after the date of the order, the ruling on the precautionary distraint will be cancelled ipso facto.
In the enforcement of the ruling on the precautionary distraint, the general provisions of the Law regarding the distraint is applied. The chattel and real estates and the rights of the debtor are levied as a reserve. If the precautionary distraint is executed in absence of the debtor, the copy of a recording asserting that the distraint is executed is served to the debtor in respect of the article 262/2 of the Bankruptcy and Enforcement Law. If distraint is executed on a real estate, the warrant received from the Real Estate Registration Office is served to the debtor. However the ruling on the precautionary distraint cannot be appealed, the debtor has the right to oppose against the ruling on precautionary distraint in the absence of him in respect of the article 265 of the Bankruptcy and Enforcement Law. The Debtor can oppose against the distraint in seven (7) days beginning from the date of execution of the attachment execution if ever the distraint is executed in presence of the debtor and from the date of notification in other cases. The exceptionshould be made to the ruling Court. The issues that can be complained are the grounds of the precautionary distraint, the competence of the Court and the amount of the collateral.
According to the article 264 of the Bankruptcy and Enforcement Law; the Creditor who acquired a precautionary distraint before filling a suit or starting and executive proceeding, is under the obligation to execute the executive proceeding (distraint or bankruptcy) or to file a suit in seven days after the attachment execution or –if, in the absence of him- after the date of notification of the attachment recording. In lapse of this time, the precautionary distraint will be abated. ( Bankruptcy and Enforcement Law, art. 264/2)
As stated in the article 264/5 of the Bankruptcy and Enforcement Law If the Creditor starts the enforcement proceeding without judgement in due of time and the order of payment served to the debtor is finalized, the precautionary distraint converts into “attachment” ipso facto. But if, the debtor opposes to the order of payment, the creditor should file a suit for withdrawal or nullity of the exception in seven days after the notification date of the exceptionin order to disrupt the dissolution of the precautionary distraint. Unless these suits are filed, the precautionary distraint will be abated and in this case, the creditor will be able to file the suits for withdrawal or nullity of the Exception.
If the precautionary distraint is ruled on the grounds of a bill of exchange, the executive proceeding for the bill of exchange is executed in seven days after the enforcement of the order of the precautionary distraint. In this type of executive proceeding, because the exception of the debtor to the started executive proceeding does not cease any proceeding other than sales, the goods of the debtor will be able to be levied after 10 days, which is legally recognized for the debtor and the precautionary claim will convert into attachment.
According to the article 32 of the International Private and Procedure Law numbered 2675, the claimant, intervening party and the party started the executive proceeding who are foreign real person or legal person should post a collateral which is determined by the jurisdiction in order to indemnify the jurisdiction and execution expenses and the prejudice of the opposite party.
The derogation to the general rule is the existence of an international agreement between Turkey and foreign country on exemption from the collateral and judicial assistance. According to the Lahey Convention on Procedure of Law, which has been in effect since 13.05.1973, a collateral – under any name- cannot be claimed from the citizen of one of the contract country who domiciliates in one of the contract country and is claimant before the Court of another contract country, on the grounds that he is the foreigner or he does not have a domicile or dwelling house in this country and the same rule is valid for the disbursing that is required from the claimant in order to indemnify the jurisdiction expenses.
Even if the collateral case is not asserted in the suits which has foreignness element, it should be taken into account ex-officio by the Courts and the Supreme Court of Appeal, as well ( The Turkish Supreme Court of Appeal, Assembly of Civil Chambers, Docket No. 2002/13-376, Order No. 2002/352, Date of Order 01.05.2002 ).
In this respect, what is important is to determine whether there is an agreement between Turkey and foreign real persons and legal persons on reciprocity or not. In case of nonexistence of an agreement, it can also be required to post a collateral for the jurisdiction and execution expenses and prejudice of the opposite party.
2. THE ACTION OF DEBT AND ENFORCEMENT OF COURT DECISIONS
One of the procedures to collect the debts is to directly file an action of debt against debtor/debtors. With the action of debt, the debt is determined with a court decision. The Creditor who proves his claim should start the execution proceeding in order for the enforcement of the court decision. The Creditor whose court decision is on hand may ask for precautionary distraint before the executive proceeding with court decision. In this case, according to the article 259/2 of the Bankruptcy and Enforcement Law, the creditor is not supposed to post a collateral.
The Creditor whose claim is grounded by a court decision can start the executive proceeding in any executive Office in Turkey. In order for the finalization of the court decisions on pecuniary claims, the finalization of the court decision is not required.
The article 38 of the Bankruptcy and Enforcement Law states that not only the Court decisions but also the compromises, acceptances, notarial deeds which are regulated ex-officio and consisting cognizance of pecuniary claims, letter of collaterals for appeal, collaterals in the execution offices can be subject to executive proceeding with court decision, as well.
In the enforcement of the court decisions, the legal fee which is five(5) per thousand (1000) in advance for starting the executive proceeding is not derived.
“The Execution Order” is served to the debtor by the execution office where the proceeding has been started. In this execution order, name and surname of the claimant and the defendant and –if there is- the proxies, the name of the court which issued the judgement and the content of the judgement decision, the date and number of the court decision and the note that in case of compulsory execution and the note that the notification that discloses.
Seven days is given to the debtor for fulfilling the judicial order.
Because of the fact that the debt is grounded by a judicial order in the executive proceedings with judicial order, there is no right of the debtor to oppose in executive proceedings with judicial order, as is in executive proceedings without judicial order.
The executive proceeding is proceeded against the debtor who doesn’t enforce the execution order duly in time and doesn’t have a decision of stay of execution.
The estates and real estates and receivables of the debtor are distrained and debt is collected through compulsory execution by selling the distrained goods.
3. THE DIRECT PROCEDURE FOR EXECUTIVE PROCEEDING
The Creditor may directly start the executive proceeding against the debtor without filling a suit at the court before. This was of executive proceeding which is called the execution proceeding without a judicial order may only be executed for pecuniary claims.
The competent execution office is determined by the competency rules of Code of Civil Procedure with the attribution of the Bankruptcy and Enforcement Law. According to the general principles of competency, the execution office at the domicile of the debtor is the competent execution office. However, if there is a competency agreement between the parties, the execution proceeding can be executed at the execution office authorized by the parties.
If the debtor has a bill of exchange on hand, in this case, the execution proceeding purposively for the bill of exchanges shall be chosen. According to the article 42 of the Bankruptcy and Enforcement Law, one of the procedure of executive proceeding which are “Distraint, Bankruptcy or Foreclosure” should be chosen. According to the article 58 of the Bankruptcy and Enforcement Law, the procedure of execution proceeding which is chosen should be implied.
The Creditor who does not have a bill of exchange on hand can execute the executive proceeding without judicial order. According to that, the order of payment is prepared and served with the request to issue executive proceeding to the debtor. The rules of the Law must necessarily be included in the notification of order of payment. In the order of payment, the debt and the expenses to be paid in seven days, if there is a collateral paid should be submitted in this period; if the sign under the bill that the execution proceeding is grounded by does not belong to him, this matter should be notified severally and in seven days, in the contrary case the bill shall be accepted to be belonged to him; if he opposes to the signature, he must necessarily be present before the Enforcement Court; if he is not present before the Enforcement Court, the exception shall be cancelled temporarily; he should declare property, in the contrary case he shall be punished with imprisonment; if there is no assets to proceed the execution proceeding or if the declaration of him is contrary to facts, he shall be punished with imprisonment; if not opposed to the debt and the debt is not paid, then it is notified that the compulsory execution will be proceeded.
According to the article 62 of the Bankruptcy and Enforcement Law, the execution proceeding shall be finalized if the debtor does not oppose to the executive proceeding in seven days after the notification of the order of payment. In this case, the execution proceeding is proceeded. The executive proceedings proceeded are the distraint and sale of estate, real estate, right and receivables and the payment of the money. However, the exceptionof the debtor -if made duly time- shall estop the executive proceeding. The authority of complaints is the execution office executing the executive proceeding. The debtor’s exceptionas “I oppose.” shall be valid even if he didn’t imply any grounds. Hence, the debtor’s partially exceptionis also valid if he notifies the amount he opposes certainly and clearly, in the contrary case he shall be accepted as he did not oppose (İİK 62/4). The Debtor may also oppose to the competency of the execution office.
No proceeding of execution can be proceeded against the debtor until a judicial decision to cancel or nullify the exceptionis taken. In this case, the creditor may either file a suit for nullity of the exceptionin one (1) year from the date of notification of the exceptionwith proving the existence of a debt (İİK 67/1) or a suit before the Enforcement Court for abolition of the exception in six months from the date of notification of the exceptionif the creditor has one of the bills that is mentioned in article 68 and 68a of the Bankruptcy and Enforcement Law.
In the event that the exception is cancelled by one of those suits, the executive proceedings are proceeded.
A) Withdrawal of Appeal Suit:
This is filed against the petitioner debtor. It is filed in one (1) year from the date of notification of the exceptionto the creditor. This suit is an action of debt. The suit is subject to the relative legal fee. The suit is filed before the Court of Jurisdiction which is determined according to the amount in dispute. In this type of suit, the compensation for debt denial which is stated in the article 67/II of the Bankruptcy and Enforcement Law can also be demanded besides the demand of nullify of the Exception. If the exceptionis decided to be injustice in the withdrawal of appeal suit; the debtor, if the executive proceeding is decided to be injustice and the creditor to be malicious; the creditor, shall be ruled to the compensation for bad faith damages in the rate of judicial discretion which shall not be below forty percentage (40%) of the amount that is ruled or disallowed upon request of the other party. The legal aim behind this type of compensation is to forestall the debtor’s wrongfully adjournment of the period for collection of the debt by the creditor or to forestall the creditor’s wrongfully startup for executive proceeding.
There is a vital importance of the liquidity of the amount of the debt ( determined, determinable ) in judgement of compensation for debt denial. The importance of liquidity arises from the fact that there is no necessitating for judgement to determine the amount of debt.
According to the judicial decision of the Ninth (9.) Civil Chamber of Supreme Court of Appeal , the debt should be liquid and determined. “… the amount of debt should be determined and fixed by the debtor and to make it determined all the elements should be known or knowable. If ever the debtor is able to determine for how much he is obliged to pay, then the acceptance for the debt to be as liquid and determined, is compulsory.”
In the acceptance of this suit, the executive proceeding is proceeded over the same execution file. Even if the withdrawal of appeal suit is appealed by the debtor, the executive proceeding is proceeded because of the fact finalization of the decision is not seeked.
If the creditor didn’t file a withdrawal of appeal suit in one(1) year, afterall an action for debt may only be filed within the frame of general provisions. However, in this case the compensation for bad faith damages which is ruled under the withdrawal of appeal suit cannot be demanded.
B) Suit for Abolition of Exception:
This suit is filed before the Enforcement Court in six (6) months after the date of notification of the exceptionby the creditor. The competent court is the Enforcement Court which resides in the location of the execution office at which the executive proceeding is executed. In case of exception of the debt, the exception can be abolished absolutely; in case of exception of the signature, the exception can be abolished ad interim.
The “Absolute” Abolition of the Exception: The executive proceeding of the creditor should be grounded by one of the bills implied in the article 68 of the Bankruptcy and Enforcement Law. These kinds of bills are either the bills containing signature as cognovit or acknowledgement of debt verified by the notary or a voucher or bill submitted duly and by the competent authority within the limits of their power. The Creditor cannot claim for the executive proceeding without judicial order once again if he didn’t claim for abolition of the exception when he didn’t demand for abolition of the exception in six months period . In the lapse of this time, the Creditor may also file an action of debt beginning from the date of notification of the exception. The Debtor should also prove his legitimacy with the documents implied in the article 68 of the Bankruptcy and Enforcement Law. In the contrary case, the exception is abolished absolutely. According to the last paragraph of the article 68 of the Bankruptcy and Enforcement Law, in case of acceptance of abolition of the exception, the debtor; in case of denial of it, the creditor shall be convicted to indemnity which is not below than forty percentage (40%) upon request of the other party.
However, if the debtor files a negative declaratory action and an action for restitution or the creditor files a suit in general courts, collection of the debt is reprieved until the result of these suits and the ruled indemnity of the one, in whose favour the suit is resulted, is abolished.
Upon the decision of absolute abolition of the exception, the executive proceeding is proceeded. The appealment of the judicial order does not cease any proceedings of enforcement other than sale.
The “Ad Interim” Abolition of the Exception: If the debtor opposed against the signature under the deed subject to the executive proceeding, he may either file this type of suit, or again a withdrawal of the appeal suit, as well. The Creditor, in order for acceleration of the judgement, can claim from the debtor through execution procedure to bring his signatures that can be taken as a valid evident for investigation of the signature. According to the sentence 2 of the article 68 a. of the Bankruptcy and Enforcement Law, if it is in the judicial district of the execution office following up the execution, the debtor denying the signature under the deed is under the obligation to be present personally in the trial for abolition of the exception before the authority if he didn’t notify the court about his essoin and certify his essoin. The Debtor to whom the order of payment is served out of the judicial district of the execution office is under the same obligation if ever interrogated through rogatory process.
The Debtor should be present personally at the trial which will be held by the Enforcement Court or if he cannot come, then should evidence his essoin, in the contrary case, according to the sentence 4 of the article 68/a of the bankruptcy and Enforcement Law, without any other necessity to investigate, the ad interim abolition of the exception and a fine of ten percentage (10%) of the amount of debt shall be ruled. For this, the submittion to –personally- the debtor of a writ including those terms to debtor is compulsory. In the signature investigation, the exception of signature of the debtor is investigated primarily by the judge. For this, comparison of signatures is executed. The proper signatures of the debtor are obtained by importing the documents signed before for different reasons by the debtor. Also, in addition to those, the judge has the signature of the debtor signed before the court and has him written. As is the Judge may use its judicial discretion, he may also rule to expert examining (İİK 68a/3). If it is determined that the sign is the debtor’s sign at the end of the investigation executed, the ad interim abolition of the exception shall be ruled; but if it is understood that the sign is not the debtor’s sign, then judge will rule to “dismissal of the action”.
In the acceptance of the suit, an amount of fine which is ten percentage (10%) of the debt shall be ruled (İİK 68a/5). With the ad interim abolition of the exception, the creditor may distraint the debtor’s goods temporarily. Against this type of decision, the debtor may file a “ Remission Action” in seven days after the notification or the pronouncement of the decision provided that fifteen percentage (15%) of the debt is reservoired as collateral. If the debtor doesn’t file this suit or lose it, the provisional seizure shall convert into final seizure. According to the article 69 of the Bankruptcy and Enforcement Law, the wrongful party of the remission action shall be convicted to a proper indemnity which shall not be lower than forty percentage (40%) of the claim or whatever judged.