Lawsuits For Annulment of Objections on Enforcement Actions For Collections Under Turkish Law

ADMD Law Office
Isminnur Kilic

 In Turkey, debt enforcement proceedings are divided into two categories: enforcement proceedings with a judgment and enforcement proceedings without a judgment. In enforcement proceedings with a judgment (based on a court decision already obtained), the enforcement proceedings can be carried out for all kinds of receivables. However, this is not the case for proceedings without a judgment (which can be carried out directly and without the need for a court decision). Article 42 of the Enforcement and Bankruptcy Law No. 2004 (EBL) published in the Official Gazette dated June 19, 1932, and No. 2128. stipulates that “Enforcement proceedings for the payment of a sum of money or the provision of a collateral shall commence with a request for enforcement proceedings and shall be carried out through attachment, foreclosure of a pledge or bankruptcy” and can only be used for money and collateral receivables.

Enforcement proceedings without a judgment are also divided into three groups:

• Proceeding through general attachment/lien,
• Proceedings by way of attachment specific to bills of exchange,
• Evacuation of leased real estate through enforcement proceedings without judgment.

The annulment of objection action arises if the debtor objects to the proceedings within the scope of ‘proceeding through general attachment’ among these groups.

To bring an action for annulment of objection:

1. The creditor submits a written, verbal, or electronic request to the office of enforcement under Article 58 of the EBL,
2. The debtor must have objected to this enforcement proceeding request within the legal time limit.

As a result of the objection, the enforcement proceeding stops. To ensure the continuity of the stopped enforcement proceedings, this objection must first be eliminated.

There are various methods for the creditor to achieve such a goal. The first one is under Article 68 of the EBL, where the creditor may apply to the enforcement court within six (6) months following the notification of the objection and demand the final or provisional removal of the objection according to Article 68/a of the EBL.

Another option is for the creditor to bring an action for annulment of the objection within one (1) year following the notification of the objection.

I. The Action for Annulment of Objection

Article 67 of the EBL reads as follows: "The creditor whose enforcement request is objected to may apply to the court within one year from the date of notification of the objection, and may sue for the annulment of the objection by proving the existence of its receivable under the general provisions. In this case, if it is decided that the objection of the debtor is unjustified, the debtor; if it is deemed unfair and malicious in its proceedings, the creditor; upon the request of the other party, according to the situation of the two parties, the tolerance of the case and the judgment, shall be sentenced to appropriate compensation, not less than twenty percent of the amount rejected, or judged. If the objector is a parent, guardian, or heir, the award of compensation against the debtor shall depend on proof of bad faith. The right of the creditor who has passed the period of cancellation of the objection written in the first paragraph to bring an action for his/her receivable under the general provisions is reserved. In the determination of the compensation for denial of enforcement, compensation for bad faith, and similar damages stipulated in this Law, the enforcement proceeding request or the claim in the action shall be taken as a basis." The annulment of objection action is filed to invalidate the debtor's objection, ensuring the continuation of the stalled enforcement proceeding and confirming the existence of the receivable subject to the proceeding and it is also ensured that the creditor receives his/her receivable.

II. The Conditions

To bring an action for annulment of the objection, the creditor should not have the documents specified in Articles 68 and 68/a of the EBL. If these documents are existing, both the annulment of the objection and the removal of the objection procedures may be applied. The creditor therefore may have a choice in this regard. However, if the creditor does not have the documents listed below, there is no other way other than bringing an action for annulment of the objection:

• An ordinary bill (promissory note) whose signature is acknowledged,
• Notarized bill (promissory note),
• A receipt or document from official offices or competent authorities,  
• Loan agreements and related account statements and notices for default that have not been objected to in due time and other documents and receipts duly issued by the lender,
• Documents in which the debtor acknowledges the debt at official offices and before such officials. 

The creditor who files an action for annulment of objection before general courts cannot request the removal of the objection from the special enforcement courts. However, the creditor who first requests the removal of the objection from the enforcement court may waive this procedure and bring an action for annulment of the objection before the general courts since there is no other provision in the law stipulating the contrary.

There are special litigation conditions for bringing an action for annulment of objection. Failure to fulfill these litigation conditions constitutes the grounds for procedural rejection of the action:

There is a valid enforcement proceeding without a judgment made at the authorized enforcement office: The action for annulment of objection depends on the existence of a valid enforcement proceeding. It is not possible to bring an action for annulment of the objection unless there is an enforcement proceeding duly filed before an authorized execution office.

There is a valid objection made by the debtor in the prescribed period: The debtor may object within seven (7) days following the notification of the order of payment. This objection may be an objection to the debt, an objection to the signature, or an objection to jurisdiction. The debtor shall separately and clearly state his/her objections to the signature. In cases where such objection is not made, the signature at the promissory note shall be considered as acknowledged. If the objection is a jurisdictional objection, an action for annulment of the objection cannot be filed unless an objection to the merits has also been clearly made.

The plaintiff has a legal interest: The existence of legal interest, which is a general litigation condition, is also an issue in the annulment of the objection actions. The creditor who has the documents listed in Articles 68 and 68/a of the EBL can apply for the removal of the objection. However, the removal of the objection does not constitute a final judgment in material terms, it is appropriate for the creditor to apply for the annulment of the objection when evaluated in terms of legal benefit.

The action must be filed within one (1) year from the date of notification of the objection: The annulment of objection action must be filed within one (1) year after the notification of the debtor's objection to the creditor. This period is a forfeiture period, and it is no longer possible to bring an action for annulment of objection once this period elapses. In such a case, a regular debt claim can be filed.

No final judgment and no pendency: There must be no prior final judgment on the lawsuit filed. A final judgment may be asserted at any stage of the action and shall be observed ex officio by the judge. Since the judgment to be obtained through the cancellation of the objection is a final judgment, it is no longer possible for the creditor to apply to the enforcement court and request the removal of the objection. The creditor who first applies to the enforcement court may then request the annulment of the objection from the general courts and this is not considered within the pendency limitations. However, the creditor cannot partially apply for both annulments of objection and removal of objection for the same receivable.

Mandatory mediation: There is an obligation to apply to a mediator before filing an action for labor, commercial, and consumer claims. Although mandatory mediation is a condition of litigation for the aforementioned disputes, if the action is filed, it is dismissed procedurally due to the lack of such condition fulfillment. Although there are differences of opinion in the doctrine, the Court of Cassation, with its recent consistent decisions, emphasizes that mediation is a condition of litigation in the matters specified in the annulment of objection actions as well. As an example of these judgments, the decision of the 23rd Civil Chamber of the Court of Cassation dated 04.12.2020 and numbered 2020/1943 E. - 2020/452 K. notes that; "For these reasons, Article 5/A of the Turkish Commercial Code, which was added by Article 20 of the Law No. 7155, which stipulates mandatory mediation in commercial disputes, is an alternative solution method for these disputes, considering that the parties have the opportunity to freely dispose of these disputes. Considering that Article 5/A of the Turkish Commercial Code, which was added by Article 20 of the Law No. 7155, which provides for mandatory mediation in commercial disputes, aims to resolve these disputes through mediation as an alternative solution method, considering that the parties have the opportunity to freely save on disputes aimed at the collection of money receivables, and in this way, it aims to collect the receivable with less time, less labor and expense, and to enable the parties to freely agree and save on the amount of the receivable, It has been decided that the cancellation of objection cases of commercial nature are subject to mandatory mediation and therefore, the difference of jurisprudence between the Civil Chambers of the Regional Court of Appeal, which is the subject of the application, should be unified in the direction that the cancellation of objection cases of commercial nature are subject to mandatory mediation and that the application to the mediator before the lawsuit is a condition of the action, and it has been decided to resolve the conflict between the chambers of the regional courts of justice in this way. "

III. The Procedure 

Competent and Authorized Court: The competent court for the annulment of the objection is determined under the Code of Civil Procedure No. 6100 ("CCP") published in the Official Gazette dated February 4, 2011, and No. 27836, depending on the nature of the receivable subject to annulment. In the case of a monetary receivable, the competent court is the Civil Court of First Instance. If the nature of the receivable subject to enforcement proceedings falls within the jurisdiction of courts such as Labor, Commercial Court of First Instance, Intellectual and Industrial Rights, and Family or Consumer Court, the action will be filed in these courts.

The Enforcement and Bankruptcy Law does not regulate any competent court for the annulment of the objection, and Article 50 of the Enforcement and Bankruptcy Law states that "The provisions of the Code of Civil Procedure on jurisdiction shall be applied by analogy in the follow-up for money or collateral debts. However, the execution office where the contract that is the basis of the proceeding was concluded is also authorized for the proceeding. The objection on jurisdiction shall be made together with the objection on the merits. The court of enforcement shall first examine the issue of jurisdiction and render a final decision. If a dispute arises between two enforcement courts regarding jurisdiction, the provision of Article 25 of the Code of Civil Procedure shall be applied." For this reason, the competent court in the annulment action shall be determined according to the general provisions. The jurisdiction rules regulated between Articles 5 and 19 of the CCP are applied by analogy in enforcement proceedings without a judgment.

In enforcement proceedings without judgment, the general competent enforcement office is defined in Article 6 of the CCP as "The general competent court is the court of the place of residence of the defendant real or legal person on the date the lawsuit is filed." The place of residence is determined according to the provisions of the Turkish Civil Code.

However, the Court of Cassation is convinced that the court where the enforcement proceeding without judgment is filed is also competent for the annulment of the objection. In the decision of the 23rd Civil Chamber of the Court of Cassation dated 22.02.2021 and No. 2017/153 E. - 2017/537 K., which supports this issue; "...in the case of objection to the jurisdiction of the enforcement office in the case of annulment of the objection, the court should first examine the objection to the jurisdiction of the enforcement offices, and if it is concluded that the enforcement office is unauthorized, the court should decide to dismiss the action "since there is no execution proceeding duly filed in the authorized place" regardless of whether it is authorized or not, while it is not correct to decide in writing."

In cases regulated between Articles 8 and 17 of the CCP, the jurisdiction of the enforcement offices is certain, and the jurisdiction over contractual monetary debts is included in this jurisdiction. As regulated in Article 10 of the CCP, "Contractual actions can also be filed in the court of the place where the contract is to be performed." If there is no explicit regulation on the place of performance of the contract in cases arising from the contract or in cases where it is not implicitly understood, the place of performance of the contract shall be determined according to Article 89 of the Turkish Code of Obligations No. 6098 ("TCO") published in the Official Gazette dated February 4, 2011, and No. 27836, which states that "The place of performance of the obligation shall be determined according to the express or implicit will of the parties. In the absence of an agreement to the contrary, the following provisions shall apply; 1. Monetary debts shall be performed at the place of residence of the creditor at the time of payment, 2. Partial debts shall be performed at the place where the subject of the debt is located at the time of the conclusion of the contract, 3. All debts other than these shall be performed at the place of residence of the debtor at the time of their arising. If, after the birth of an obligation that is required to be performed at the place of residence of the creditor, performance is significantly difficult due to the change of residence of the creditor, the obligation may be performed at the previous place of residence of the creditor." Accordingly, if the subject of the action is a monetary debt arising from a contract and the contract does not stipulate otherwise, this monetary debt shall be paid at the place of residence of the creditor at the time of payment.

The authority of the enforcement office is not definitive and is not related to public order. For this reason, the court or the enforcement office shall not consider the issue of jurisdiction ex officio. There are various discussions on the issue of jurisdiction in the annulment of objection. If the debtor does not object to the authority of the enforcement office, but only objects to the debt, the authority of the enforcement office will be finalized. In this case, there is no regulation in the EBL regarding whether the debtor may object to the jurisdiction of the court in the annulment of the objection to be filed. However, in practice, the Court of Cassation accepts that the debtor may object to the jurisdiction in the annulment of the objection even if the debtor does not object to the jurisdiction in the enforcement proceedings. The decision of the 5th Civil Chamber of the Court of Cassation dated 07.06.2021 and No. 2021/3890 E. - 2021/8373 K. is an example of this established practice of the Court of Cassation: "Although the defendant debtor is considered to have accepted the jurisdiction of the Execution Office, this does not mean that he also accepts the jurisdiction of the general court where the annulment of the objection will be heard. The defendant debtor, who does not object to the jurisdiction of the enforcement offices, has the right to object to the jurisdiction of the court in the annulment of the objection. In the concrete case, it is understood that the action for the annulment of the objection by the plaintiff against the defendant was filed at the ... 3rd Civil Court of First Instance, the defendant duly and in due time objected to the jurisdiction, and the residence of the plaintiff is "./...". In this case, since the residence of the plaintiff is "./... " and since the plaintiff has exercised his right of preference in this direction, the dispute must be heard and concluded at the ... 3rd Civil Court of First Instance."

Proceedings and Evidence: The procedure in the annulment of objection cases is subject to the general provisions of the CCP. The court in charge is determined according to the content of the dispute. For this reason, the trial procedures differ according to the type of court in charge. If the court in charge is the Civil Court of Peace, the simple trial procedure is applied, if it is the Civil Court of First Instance, the written trial procedure is applied, and if it is the Labor Court, the verbal trial procedure is applied. Just as it was mentioned in the authorization section, the annulment of objection cases differs according to the type of receivable subject to the objection.

IV. The Judgement

Judgment: As a result of the annulment of objection proceedings, the court may decide to approve, partially approve, partially reject or dismiss the case.

Acceptance of the Action: If the court decides that the debtor is indebted as a result of its examination, it decides to cancel the debtor's objection. With the acceptance of the annulment of the objection, the execution proceeding, which has stopped with the objection made by the debtor, will continue. The receivable subject to the enforcement proceeding without enforcement will be finalized and foreclosure will be possible. An enforcement order will be sent to the debtor, including the judicial expenses, attorney fee, and execution denial compensation, and the seven (7) day period will start to run from the notification of the enforcement order to the debtor.

Dismissal of the Action: If the court decides that the creditor's receivable subject to enforcement proceedings does not exist (or that the receivable is time-barred), it shall dismiss the action for annulment of the objection. With the finalization of this rejection decision, the enforcement proceeding initiated by the creditor is considered canceled. With the decision to dismiss, the non-existence of the receivable subject to the enforcement proceeding is determined as a final judgment. The creditor cannot file a new action against the debtor for the same receivable.

Enforcement Denial Compensation: The compensation to be awarded in favor of the creditor is called compensation for denial of enforcement. The award of this compensation depends on the fulfillment of certain conditions: 

• Partial or full acceptance of the annulment action,
• Enforcement-denial compensation requested,
• Specificity of the receivable that is subject to the action.

If the specified conditions are not met, it is not possible to award enforcement denial compensation. At the decision of the 9th Civil Chamber of the Court of Cassation dated 15.12.2021 and No. 2021/11575 E. - 2021/16593 K., which supports these conditions; “If it is decided that the debtor is unfair in the annulment of the objection and provided that the creditor has requested it, the enforcement denial compensation is awarded, provided that the amount of the debt is not less than the rate shown in the Law. To decide on the denial of enforcement compensation, the receivable must be certain or determinable... ...On the other hand, the wages, and supplements (food and accommodation fee) based on the calculation of severance and notice indemnities are also disputed between the parties and require a trial. When all these issues are evaluated together, it is erroneous for the Court of First Instance to award enforcement denial compensation in favor of the plaintiff, although the receivables subject to the action are illiquid and require a trial.”

Compensation for Bad Faith: The compensation to be awarded in favor of the debtor is called bad faith compensation. The award of this compensation depends on the fulfillment of certain conditions: 

• Partial or full rejection of the annulment action,
• Claim for bad faith compensation,
• Proving the creditor's bad faith in the enforcement proceedings and the annulment of the objection.

If the specified conditions are not met, it is not possible to award bad-faith compensation. According to the decision of the Civil General Assembly of the Court of Cassation dated 30.09.2021 and No. 2017/19-950 E. - 2021/1125 K., which supports these conditions stating the following; “It should be emphasized that a creditor who initiates enforcement proceedings by believing in the existence of his receivable within the framework of the substantive law rules, but whose request for annulment of the objection is rejected due to his inability to prove this under the rules of procedural law, is considered to be 'unfair' within the meaning of Article 67 of the EBL, but 'bad faith', and therefore, the said creditor, who stipulates that these two conditions must be met together, cannot be considered as 'unfair', but 'bad faith. Even if the creditor is "wrongful" within the meaning of Article 67 of the EBL, it is not legally possible for him to be considered as "malicious" and therefore, it is not legally possible for him to be held liable for compensation within the framework of the said provision, which explicitly stipulates that these two conditions must be met together. In other words, according to Article 67/2 of the EBL, upon the conclusion of the annulment of objection case in favor of the defendant (the debtor), whether the receivable is liquid or not, if the proceeding based on such a receivable is unfair and malicious, if there is a request, it is necessary to award bad faith compensation in favor of the defendant (the debtor). Here, it is not enough for the proceeding to be unfair alone, it must also be malicious, and the burden of proof is on the defendant (the debtor) who claims that the proceeding is malicious. In that case, it is contrary to the procedure and the law for the court to decide resistance to sentence the plaintiff company to bad faith compensation because it was in bad faith in the enforcement proceedings initiated against the defendant.”