Third-Party Claim Action — Asserting Rights Over Attached Property

During the application of attachment to the debtor's assets in enforcement proceedings, it may be claimed that the attached property belongs not to the debtor but to a third party, or that a third party has a right over the property. The third-party claim and third-party claim action are important legal institutions aimed at protecting the rights of third parties over attached property. The Enforcement and Bankruptcy Law No. 2004 (EBL) regulates third-party claims and actions in detail under Articles 96-99. This article comprehensively examines the assertion of third-party claims, the third-party claim action procedure, the 7-day periods, burden of proof, the rights of third parties and practical issues encountered.

What Is a Third-Party Claim and Who May Assert It?

A third-party claim is an application made to the enforcement office by a third party who claims ownership or a limited real right (pledge, usufruct, etc.) over attached property, in order to protect this right. A third-party claim may be asserted at the time of attachment or after the attachment (EBL Art. 96).

The following persons may assert a third-party claim: First, the third party who claims that the attached property belongs to them. This person claims that ownership of the property belongs to them or that they have a limited real right over the property. Second, the debtor themselves; the debtor may assert a third-party claim by stating that the attached property belongs to a third party (EBL Art. 96/1). Third, the creditor; although rare, the creditor may also assert a third-party claim in certain situations.

The subject of a third-party claim is attached movable or immovable property. Third-party claims arise more frequently for movable property, as possession and ownership of movable property may not always belong to the same person. For immovable property, since ownership is determined by the land registry, third-party claims are relatively less common; however, in cases where the land registry does not reflect the actual situation, third-party claims may also be asserted for immovable property.

How Does the Third-Party Claim Procedure Work?

The procedure for third-party claims is regulated in detail under EBL Art. 96-97. The procedure consists of the following stages:

1. Notification of the Third-Party Claim: When a third-party claim is asserted by the third party or debtor during or after the attachment, the enforcement officer records this claim in the minutes. The third-party claim may be asserted verbally during attachment or may be notified in writing after the attachment.

2. Informing the Parties: The enforcement officer notifies the third-party claim to the other party (creditor or debtor) and requests them to raise an objection within 3 days (EBL Art. 96/2). This notification is made to obtain the parties' views on whether the third-party claim is accepted or rejected.

3. Evaluation of the Objection: If the creditor or debtor objects to the third-party claim within 3 days, the enforcement officer sends the file to the enforcement court (EBL Art. 97/1). If the creditor or debtor does not object within 3 days, they are deemed to have accepted the third-party claim and the attachment on the property is lifted.

4. Enforcement Court's Decision on Continuation or Suspension of Proceedings: The enforcement court examines the file and decides on the continuation of proceedings or the lifting of the attachment on the property. The enforcement court renders a provisional decision by evaluating whether the third-party claim is serious. If the continuation of proceedings is decided, the third party is given a 7-day period to file a third-party claim action (EBL Art. 97/6).

How Is a Third-Party Claim Action Filed and What Are the Time Limits?

A third-party claim action is an action filed at the enforcement court by a third party who claims a right over the attached property, in order to prove their right (EBL Art. 97). Filing a third-party claim action is subject to specific time limits.

The period for filing a third-party claim action is 7 days from the enforcement court's decision on the continuation of proceedings (EBL Art. 97/6). This period is of a preclusive nature; if a third-party claim action is not filed within the 7-day period, the third party cannot assert a third-party claim in the same proceedings and the attachment on the property becomes final.

A third-party claim action is filed at the enforcement court. The competent court is the enforcement court, and the locally competent court is the enforcement court of the place where the proceedings are conducted. The parties in a third-party claim action are as follows: the plaintiff is the third party who asserts the third-party claim; the defendant is the enforcement creditor. The debtor is not a party in a third-party claim action but may intervene in the proceedings.

Filing a third-party claim action does not, as a rule, result in the lifting of the attachment on the property. Even if the action is filed, the attachment continues; however, the third-party claimant may request that the attached property be left with them by providing security (EBL Art. 97/5). The enforcement court may decide to leave the property with the third-party claimant against security.

Who Bears the Burden of Proof in a Third-Party Claim Action?

The burden of proof in a third-party claim action is determined according to who had possession of the attached property at the time of attachment. EBL Art. 97/a contains important presumptions regarding the burden of proof.

Where the property is attached while in the debtor's possession (EBL Art. 97/a): If the attached property was attached while in the debtor's possession, it is presumed that the property belongs to the debtor. In this case, the burden of proof lies with the third party (the third-party claimant). The third party must prove that the property belongs to them or that they have a right over the property.

Where the property is attached while in the possession of a third party (EBL Art. 99): If the attached property was attached while in the possession of a third party, EBL Art. 99 applies. In this case, the creditor is given a period of 7 days to file a third-party claim action at the enforcement court to prove that the property in the third party's possession belongs to the debtor. Here, the burden of proof lies with the creditor; the creditor must prove that the property in the third party's possession actually belongs to the debtor.

The concept of possession is critically important in determining the burden of proof. Possession is the factual control over the property. The property being located in the debtor's home, workplace or warehouse creates a presumption of the debtor's possession. However, in shared spaces (family home, shared workplace, etc.), to whom possession belongs may be disputed.

What Evidence May Be Used in a Third-Party Claim Action?

All types of evidence may be used in a third-party claim action. The enforcement court renders its decision by evaluating discretionary and conclusive evidence together. The most frequently used evidence in practice includes:

Invoices and Sale Documents: Documents such as invoices, receipts and contracts showing that the property was purchased are among the strongest evidence in a third-party claim action. An invoice issued in the name of the third party creates a strong presumption that the property belongs to the third party.

Land Registry Records and Registration Documents: For immovable property, the land registry record is conclusive evidence of ownership. For movable property, official records such as licences and registration documents (vehicle registration, ship registry records, etc.) may be used as means of proof.

Witness Testimony: Witnesses may testify regarding who owns the property, how the property was acquired and who uses the property. However, third-party claims based solely on witness testimony are considered weak, and it is recommended that they be strengthened with supporting documents.

Bank Records: Bank records, transfer documents and credit agreements showing who paid the price of the property are important evidence.

Expert Examination: The enforcement court may order an expert examination when deemed necessary. The expert evaluates the value of the property, technical data regarding who owns the property and the characteristics of the location where the property is found.

Rights and Protection of Third Parties

Although not a party to the enforcement proceedings, a third party faces the risk of their assets being unjustly attached. The EBL provides various mechanisms to protect the rights of third parties.

First, the third party's right to assert a third-party claim (EBL Art. 96). When the third party learns that their property has been attached, they may immediately apply to the enforcement office to assert a third-party claim. This right is the fundamental tool for protecting the third party's ownership right.

Second, the third party's right to file a third-party claim action (EBL Art. 97). If the third-party claim is not accepted, the third party may prove their right by filing a third-party claim action at the enforcement court. During the proceedings, the third party may request that the property be left with them against security.

Third, the third party's right to claim compensation. If the third-party claim action is decided in favour of the third party, they have the right to recover damages suffered due to the wrongful attachment. This compensation may be evaluated in the scope of material damage (damage arising from inability to use the property, loss of income, etc.) and non-material damage (damage to personal rights caused by the wrongful attachment).

Fourth, the third party's right to be present during the attachment and to raise objections. The statement of a third party who indicates that they are the owner of the property during attachment is recorded in the minutes and the third-party claim procedure is initiated. The third party may resort to legal remedies against the attachment action.

Simulation (Collusion) Claims in Third-Party Claim Actions

In practice, simulation (collusion) claims arise in a significant portion of third-party claim actions. Simulation is when the debtor transfers their assets or creates a false right relationship over the assets by agreement with third parties (usually close relatives, business partners, etc.) for the purpose of evading attachment.

EBL Art. 97/a-3 contains an important presumption regarding simulation: if the attached property was attached at a place where the debtor and the third party live together or use together, the property is deemed to be in the debtor's possession. This presumption is a frequently applied rule in situations where the debtor lives with close relatives or works at the same workplace.

The creditor may prove the simulation claim in a third-party claim action with all types of evidence. In determining simulation, the court evaluates the following: the timing of the transfer (transfers made close to the date of enforcement proceedings arouse suspicion), the transfer price (sales made far below the real value are an indication of simulation), the relationship between the parties (transfers between close relatives or business partners are examined more carefully), and the debtor's asset situation (the absence of other attachable assets of the debtor may create a presumption of simulation).

If simulation is determined, the third-party claim action is rejected and the attachment on the property continues. Additionally, the simulated transfer may also be evaluated within the scope of an action for annulment of dispositions (EBL Art. 277-284).

Consequences of the Third-Party Claim Action

If the third-party claim action is accepted, the attachment on the property is lifted and the property is returned to the third party. The creditor loses the ability to have the same property re-attached. Upon acceptance of the action, the creditor becomes liable to pay litigation costs and opposing attorney's fees.

If the third-party claim action is rejected, the attachment on the property becomes final and the creditor may request the sale of the property. Upon rejection of the action, the third party becomes liable to pay litigation costs and opposing attorney's fees. Additionally, pursuant to EBL Art. 97/13, the third party may be sentenced to compensation upon rejection of the third-party claim action. The amount of compensation cannot be less than fifteen percent (15%) of the value of the attached property.

An appeal may be filed against the decision to accept or reject the third-party claim action. Against the decision rendered as a result of the appellate examination, cassation appeal may be filed if the conditions are met.

Third-Party Claim Action Under EBL Art. 99

EBL Art. 99 regulates the situation where property not in the debtor's possession is attached. If property is attached while in the possession of a third party at the creditor's request, the creditor is given a 7-day period to file a third-party claim action. Here, unlike the procedure under EBL Art. 96-97, the burden of proof is reversed: the creditor must prove that the property in the third party's possession belongs to the debtor.

In the application of EBL Art. 99, if the creditor does not file a third-party claim action at the enforcement court within 7 days, the attachment on the property in the third party's possession is lifted. This period is of a preclusive nature and cannot be extended.

In practice, the most frequently encountered situations under EBL Art. 99 are: attachment of the debtor's goods in someone else's warehouse, attachment of goods at a company in which the debtor is a partner, attachment of valuables in the debtor's rented safe deposit box, and attachment of claims against third parties (bank accounts, salary receivables, etc.).

Third-Party Claim Action Practice in Light of Court of Cassation Precedents

The Court of Cassation has developed a comprehensive body of precedent on third-party claim actions. According to the Court of Cassation's settled case law, in determining the presumption of ownership in third-party claim actions, the basis is who had factual control of the property at the time of attachment.

In evaluating third-party claims in attachments carried out at the family home, the Court of Cassation takes into account the matrimonial property regime between spouses. It emphasises that in the participation in acquired property regime, invoices, payment documents and witness evidence must be evaluated together in determining which spouse owns the property acquired during marriage.

In evaluating simulation claims, the Court of Cassation evaluates the timing of the transfer, the transfer price and the relationship between the parties together. It accepts a strong presumption that transfers made to close relatives shortly before enforcement proceedings are simulated.

In third-party claim actions in commercial enterprises, the Court of Cassation states that commercial books and records, tax returns and trade registry records are important evidence. These documents are taken as the basis for determining whether the enterprise belongs to the debtor or to the third party.

Final note: This content is for general informational purposes and does not constitute legal advice. It is recommended that you seek professional support from a lawyer for your specific legal issues.