Lawsuit Filed Against the Debtor’s Assets Transferred with the Purpose of Smuggling: Actions for Annulment of Disposition

The creditor who wants to collect her/his receivables from the debtor must initiate an enforcement proceeding and have the debtor’s goods seized and sold. However, the debtor may have tried to dispose of the movable and immovable properties in her/his possessions, as she/he foresees that the creditor will have the property seized. Although the debtor’s powers over her/his property and rights are restricted after the seizure or bankruptcy decision is made, the debtor can freely transact on the property and rights at the stage before the seizure or bankruptcy decision is made. Here, the purpose of the debtor is to damage the creditor mostly and to prevent the creditor from getting results from the enforcement proceedings initiated by the creditor. For example, the debtor can apparently empty her/his assets by donating or selling the property, which may be subject to seizure, to her/his relatives and friends. The legislator, who wants to protect the creditor against such malicious transfers and transactions made before the seizure or bankruptcy, has given the creditor the right to file a lawsuit for the annulment of disposition. This case, which will be filed, is subject to certain special conditions.  In this bulletin, there are general explanations about the special conditions of the action for the annulment of disposition and the rules of proof in the case.

1. What is the Action for Annulment of Disposition?

The action for annulment of disposition is a lawsuit filed in order to ensure that the debtor’s collusive transactions, which are mostly aimed at smuggling goods from the creditor, are annuled and the the creditor regains their receivables.  According to the regulation in Article 280 of the EBL, all transactions made by the debtor whose assets are not sufficient for the debts, with the intention of harming the creditors, may be annulled in cases where the financial situation of the debtor and the intent to harm are known or there are clear indications that the other party of the transaction is aware of it.

In the action for the annulment of disposition, the court is requested to invalidate the transactions such as sales, donations, transfers made about the assets of the debtor before the properties are seized. In this case, the creditor must prove that the debtor acts in order to hide and smuggle the goods in her/his possession, and that the other party to whom the transaction is made is also aware of this issue.

If the court finds that the creditor is justified in the action for the annulment of the disposition and decides to accept the case, the creditor will be able to demand the amount that he/she will receive from the sale price by having the goods subject to the action seized and sold.

2. What are the Special Conditions of the Action for Annulment of Disposition?

There are some special conditions for the actions for annulment of disposition. These are summarized below;

  • The disposition requested to be annulled (transfer, sale, donation, etc., whatever the transaction) must have been made on the date after the debt is due. This is a condition of litigation and is very important. An action for annulment of disposition s cannot be filed for transactions dated before the debt is due.
  • Enforcement proceedings (payment order) must be finalized.
  • The creditor must have a temporary or final certificate of insolvency belonging to the debtor. The prerequisite for filing an action for annulment of disposition is that a temporary or final insolvency document has been obtained by the creditor about the debtor (ELB art.109). Although the merits of the case for which the precondition is not fulfilled cannot be examined, it is accepted that with the established practices of the Supreme Court, a certificate of insolvency can be submitted until the end of the trial.

3. The Competent Court in the Action for Annulment of Disposition

The courts in charge of the actions for annulment of dispositon are the general courts. Depending on the subject of the case, it is necessary to determine which court is in charge. If it is not within the jurisdiction of a special court according to the subject of the case, commercial courts of first instance are in charge of the case. If the lawsuit is in the nature of a commercial lawsuit, the commercial courts of first instance will be in charge. In cases of annulment of disposition to be filed against the detinue lawsuit, the competent court is the enforcement court.

The competent court is determined according to the general rules of the CCP regulating the authority. In this case, the action must be filed before the defendant’s domicile court. If there is a contract of jurisdiction between the parties, the local courts determined in this contract are competent in cases of annulment of disposition. Even if the subject of the action for annulment of disposition is an immovable property, it is not correct to file the lawsuit in the place where the immovable is located, since this case is not related to the same property. The Supreme Court also emphasizes this issue in its case law;

The lawsuit is about the annulment of the disposition filed pursuant to EBL article 277 and its continuation. Since these lawsuits are not related to the same property, the general jurisdiction rule should be applied. [1]

4. Judicial Procedure in Actions for the Annulment of Disposition

Pursuant to Article 281 of the EBL,  the actions for the annulment of the disposition are heard according to the simple trial procedure. The judge, upon the request of the creditor, may issue a provisional attachment on the goods that are the subject of the dispositions subject to annulment.

In cases of annulment of disposition, the judge freely appraises the reasons for annulment. The lawsuit of the plaintiff based on one of the grounds for annulment listed in the Enforcement and Bankruptcy Law may also be accepted by the judge for another reason. The judge is not preoccupied with the reasons given by the plaintiff.

5. Reasons for Cancellation in Actions for Annulment of Disposition

In the Enforcement and Bankruptcy Law, three different reasons for the annulment of the disposition are envisaged. However, the Supreme Court is of the opinion that these reasons are not limited in number. The reasons listed in the law are as follows;

  • Transactions made by the debtor gratuitously,
  • Transactions made in case of insolvency,
  • Transactions with the intention of causing damage to the creditor.

In one of its decisions, the Supreme Court stated that the grounds for annulment were not limited to those listed in the Law as follows;

“The debtor’s dispositions subject to annulment before insolvency or bankruptcy are  Regulated under three groups and in Articles 278, 279 and 280 of the EBL. However, not all dispositions that can be an nulled are considered as limited in these articles. The law leaves it to the discretion of the judge to determine whether the dispositions subject to annulment are subject to annulment. For this legal reason, the judge may rule according to one of the 278, 279 and 280. Articles of the EBL.”[2]

There are some dispositions that are considered gratuitous and subject to annulment in the law and the Supreme Court decisions. The most important of these is the situation in which the transfers in which the debtor accepts a very low price in return are considered as gift provision.  In a decision of the Supreme Court;

“According to Article 278/2 of the EBL, contracts in which the debtor accepts a very low price as a consideration (performance) at the time the contract is made, according to the value of what he has given, are in the provision of gift and are subject to annulment. Here, the goodwill of the natural or legal person buying from the debtor is not considered. Even if the buyer is in good faith, if there is a significant disproportion (exorbitant difference) between the fair value of the vehicle and the sales value, the sale is invalid for the creditor. In order to talk about a significant disproportion, there must be at least a double difference between the acts.”[3]

6. Periods in Actions for Annulment of Disposition

The right of action for annulment forfeits five years from the date of the null and void disposition. This period has a final term, to which you should pay attention. Apart from this, there are other periods of 1, 2 and 5 years, which are important in the action for the annulment of disposition. To take a look at these briefly;

To be able to file a lawsuit about the transactions made with the intention of harming the creditors is stipulated to the enforcement or bankruptcy proceedings within a period of 5 years. The relevant article is as follows;

All transactions made by the debtor whose assets are not sufficient for the debts, with the intention of harming the creditors, may be annulled in cases where the financial situation of the debtor and the intent to harm are known or there are clear indications that the other party of the transaction is aware of it. However, within five years from the date of the transaction, an attachment or bankruptcy proceeding must be issued against the debtor. ” (EBL art. 280).

In order for the uncovered or insolvent dispositions to be accepted as null and void and to be annulled by the debtor, there must be a disposition made within a maximum of 2 years, from the seizure or the insolvency or bankruptcy of the debtor to the disposition that caused it to become insolvent or bankrupt. The relevant regulation is as follows;

“Except for ordinary gifts, due to lien or lack of property to be seized, all donations and gratuitous dispositions made during the period from insolvency or bankruptcy to the date when the oldest of the debts accepted to the table was established, which is the reason for the attachment or the issuance of a certificate of insolvency, are void. However, this period cannot exceed the two years preceding the seizure, insolvency or bankruptcy.” (EBL art. 278).

The following savings are also void if they are made by a non-paying debtor within one year before the insolvency or bankruptcy due to seizure or lack of property:

  • Pledges made by the debtor to secure an existing debt, with the exception of the cases in which the debtor has not provided any guarantee;
  • Payments made informally in money or customary means of payment;
  • Payments for undue debt.
  • Annotations given to the title deed for the strengthening of personal rights.

Conclusion

Actions for annulment of disposition are a lawsuit that serves the creditor to recover their receivables. Since this case has very technical features in terms of proof rules, deadlines and trial procedure, it is very important to open and execute the case with the help of an expert lawyer. In this way, it is possible to prevent the loss of rights that may be incurred due to mistakes made in the trial process and petitions.

You can contact our team for more detailed information and consultancy about the actions for annulment of disposition.

Best Regards.

Solmaz Law and Consultancy Team.

References

ERDÖNMEZ, Güray, (2017), Alacaklılara Zarar Verme Kastıyla Yapılan Tasarrufların İptali, Onikilevha yayınları, İstanbul.

KAÇAK, Nazif, (2008), İcra ve İflas Kanunu’nda Tasarruf İptal Davaları, Seçkin Yayıncılık, Ankara.

15th Civil Chamber of the Supreme Court, E.2004/1084, K.2004/1939.

17th Civil Chamber of the Supreme Court, 30.11.2010, 8301/10368.

21st Civil Chamber of the Supreme Court, 23.09.2003, 5979/7282.

[1] 15th Civil Chamber of the Supreme Court, E.2004/1084, K.2004/1939.

[2] 17th Civil Chamber of the Supreme Court, 30.11.2010, 8301/10368.

[3]21st Civil Chamber of the Supreme Court, 23.09.2003, 5979/7282.

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