Negative Declaratory and Recovery Actions — The Debtor's Rights
A negative declaratory action is the action, under art. 72 of the Enforcement and Bankruptcy Law, in which the debtor proves that they owe nothing. Learn about recovery actions, security and the approach of the courts.
The most effective legal routes available to a debtor facing enforcement proceedings, in order to prove that they are not in fact liable or that the debt is less than the amount claimed, are the negative declaratory action and the action for recovery. Article 72 of Enforcement and Bankruptcy Law no. 2004 regulates both together and safeguards the debtor's rights. This article examines in detail the definition of a negative declaratory action, when it may be brought, security and interim relief, the burden of proof, the recovery action, limitation and the approach of the higher courts.
What Is a Negative Declaratory Action and Why Is It Brought?
A negative declaratory action is brought by a debtor to obtain a judicial declaration that they are not in fact liable for the debt forming the subject of enforcement proceedings, or that the debt is less than the amount stated in those proceedings (Enforcement and Bankruptcy Law art. 72). By giving the debtor the opportunity to prove that they owe nothing, it serves as an important protective mechanism in enforcement law.
The purpose of the action is to obtain a declaration that no debt relationship exists or that the debt has come to an end (by payment, release, set-off, limitation and so on). It may be brought before or after enforcement proceedings begin, and the legal consequences differ in each case.
A negative declaratory action is a declaratory action: what is sought from the court is not the performance of an obligation but a declaration as to a legal situation. The judgment therefore declares that the debt does not exist or is smaller. If the action succeeds, the enforcement proceedings are annulled and the debtor is freed from the pressure they created.
In a negative declaratory action the claimant is the debtor and the defendant the creditor. Under art. 72/8, an action brought after enforcement proceedings have begun may be brought in the court of the place where the enforcement office conducting the proceedings is situated or in that of the defendant's place of residence. Jurisdiction is determined not by the value of the claim but by the nature of the underlying relationship; the civil court of first instance has general jurisdiction, while the commercial court, the consumer court or the labour court may apply in commercial, consumer and employment matters respectively. Whether mediation is a condition of proceedings is likewise examined by reference to the underlying relationship.
When May a Negative Declaratory Action Be Brought?
A negative declaratory action may be brought before or during enforcement proceedings, provided there is a current legal interest in removing the threat of the debt. If the debt has been paid under the threat of compulsory enforcement, the recovery provisions in art. 72 come into play; a negative declaratory action already brought continues automatically as a recovery action upon payment.
In an action brought before enforcement proceedings, the court may by way of interim relief order that no enforcement proceedings be commenced, against security of at least fifteen per cent of the claim. The mere bringing of the action does not prevent the creditor from commencing proceedings.
In a negative declaratory action brought after proceedings have begun, the court may not order those proceedings to be halted. If the debtor provides security of at least fifteen per cent of the claim to cover any loss caused by delay, they may seek relief preventing the money in the enforcement office from being paid to the creditor.
If the threat of enforcement is not yet concrete, there may be no legal interest in a negative declaratory action. A demand for payment, conduct indicating that an instrument will be put into enforcement, proceedings already begun or pressure to pay are all significant in assessing the legal interest. Because the effects as to interim relief differ between actions brought before and after proceedings, the date of the action and the date of the proceedings must be established precisely.
How Do Security and Interim Relief Work?
In a negative declaratory action brought before enforcement proceedings, the court may by way of interim relief order that no proceedings be commenced, against security of at least fifteen per cent of the claim.
In an action brought after proceedings have begun, the court may not order those proceedings to be halted, under art. 72/3. Against security to cover any loss caused by delay, which may not be less than fifteen per cent of the claim, relief may be granted preventing only the money in the enforcement office from being paid to the creditor. Fifteen per cent is the statutory minimum; the court may set higher security according to the risk in the file. The requirements of prima facie proof, legal interest and proportionality under the Code of Civil Procedure also apply to interim relief.
Who Bears the Burden of Proof?
The burden of proof is not determined merely by the fact that the debtor is the claimant. If the claimant asserts that the debt relationship never came into existence, the creditor proves the existence of the relationship and of the claim. If the claimant admits the debt but relies on payment, release, set-off or another fact bringing it to an end, they must as a rule prove that fact themselves.
Special rules of proof for instruments, consumer transactions, current accounts and commercial books are reserved. The generalisation that “the debtor may prove any allegation by any means of evidence” is also incorrect in the light of arts. 200-201 of the Code of Civil Procedure.
An invoice does not on its own conclusively prove delivery of goods or performance of a service. The eight-day objection rule between merchants may give rise to a presumption as to the content of an invoice; the underlying contract and performance must still be shown by the evidence in the dispute. The same commercial presumption does not apply directly to consumers and non-merchants.
An official instrument is conclusive evidence until forgery is proved; the effect of a judgment is governed by the rules on the avenues of appeal and res judicata. An allegation of forgery may be raised as a principal or preliminary issue within the Code of Civil Procedure's provisions on the examination of forgery; a separate “forgery action” is not required in every case.
What Is a Recovery Action and When May It Be Brought?
Where the debtor has not objected to the proceedings, or their objection has been lifted, and they have paid in full under the threat of compulsory enforcement money that they did not owe, they may bring the recovery action in art. 72/7. The one-year period runs from the date on which the money was fully collected by the creditor through enforcement; the date of payment into the enforcement office and the date of payment to the creditor may not be the same.
If payment is made while a negative declaratory action is pending, the action continues as a recovery action without any further request. If the special one-year period is missed, the conditions of any possibility of restitution under the general provisions are assessed separately; it should not be said that the substantive claim or a claim in unjust enrichment automatically ceases to exist. For recovery, the payment must have been made on account of the proceedings and under the threat of compulsory enforcement, the claimant must not in fact have owed the debt, and the special one-year period must be observed. Whether the money was paid from the enforcement office or sent directly to the creditor is not on its own decisive; the link between the payment and the pressure of the proceedings is established from the file. For voluntary payments outside enforcement proceedings, unjust enrichment or other restitutionary provisions based on the underlying relationship may come into play.
In a recovery action the burden of proof is determined by the general rules according to the nature of the payment and of the underlying debt relationship. The claimant asserts that the money was paid under the threat of enforcement and that no debt existed; the burden may shift as regards an instrument whose signature is admitted, payment, or a fact terminating the debt.
| Basis of comparison | Negative declaratory action | Recovery action |
|---|---|---|
| Purpose | To obtain a declaration that the debtor owes nothing. | To recover money paid under the threat of compulsory enforcement that was not in fact owed. |
| When it may be brought | Before or during enforcement proceedings, before payment is completed. | After the money has been fully collected by the creditor through enforcement; a negative declaratory action brought earlier converts into a recovery action upon payment. |
| Special time limit | Article 72 lays down no special time limit for a negative declaratory action on its own; legal interest and the limitation applicable to the underlying relationship are examined separately. | A special one-year period applies from the date on which the money was fully collected by the creditor. |
| Interim relief | The scope of relief differs between actions brought before and after proceedings; the statutory conditions as to security and the prohibition on payment are observed. | There is no equivalent structure of relief aimed at halting proceedings, because the debt has been paid; the claim for restitution is adjudicated. |
| Proof | The general rules of proof apply according to the underlying debt relationship, the instrument and the fact of payment or termination relied on. | The claimant asserts that they paid under the threat of compulsory enforcement and that no debt existed; the burden is allocated according to the underlying relationship and the defence. |
| Consequence if the action succeeds | It is declared that no debt exists; the effect on the proceedings and on earlier steps is determined under art. 72/5. | If the conditions are met, the money paid is ordered to be returned to the claimant. |
| Damages | In addition to the proceedings being unjustified, damages may arise where there is bad faith, a request and the statutory conditions. | Restitution is the principal claim; claims for further loss and interest are assessed on their own conditions. |
What Happens If the Negative Declaratory Action Succeeds?
If the action succeeds for the debtor, the proceedings are halted immediately; when the judgment becomes final, the proceedings are annulled and steps are taken to restore the previous position. If payment was made during the proceedings, the claim converts into one for recovery.
If the proceedings that forced the debtor to bring the action were unjustified and the creditor acted in bad faith, the loss suffered by the debtor may, on their request, be recovered from the creditor in an amount of not less than twenty per cent of the claim. The success of the action is not on its own proof of bad faith.
What Happens If the Action Is Dismissed?
If the action is dismissed on the merits and the judgment becomes final, res judicata attaches as regards the assertion that no debt was owed. A dismissal on procedural grounds or for want of legal interest does not have the same substantive effect. Any interim relief granted lapses on dismissal and the proceedings continue within the statutory framework.
On dismissal, the interim relief lapses. If the dismissal becomes final, the loss the creditor suffered by receiving payment late because of the interim relief is recovered from the debtor in the same action; the statutory damages may not be less than twenty per cent. The security provided serves as a guarantee for that loss; the whole of the security is not automatically transferred to the creditor without the loss and the judgment being determined.
Whether an appeal lies against the judgment in a negative declaratory action is determined by the type of decision and the current threshold of finality. Under art. 72/4, interim relief previously granted lapses on dismissal; taking the judgment to appeal does not on its own halt the proceedings. Whether interim relief may separately be sought from the appellate court is assessed according to the stage of the file.
When a dismissal becomes final, the costs of the proceedings and the attorney's fee are also allocated to the parties in accordance with the outcome. It is important that the debtor assess the risk of interim relief and damages, together with their evidence, before bringing the action.
How Does the Case Law Shape Negative Declaratory Actions?
The burden of proof is determined by the underlying debt relationship and the parties' assertions. As a rule the creditor who asserts the existence of the debt proves that the legal relationship arose, while the debtor proves payment, release or another fact terminating the debt. A bill of exchange or a signed document, the rule requiring a written instrument to be met by another written instrument, and an allegation of a defect of intention may alter the outcome.
Interim relief under art. 72 has different consequences depending on whether the action was brought before or after enforcement proceedings. The statutory minimum security of fifteen per cent does not remove the court's power to set higher security or additional conditions. Halting the whole of the proceedings by interim relief after they have begun must be distinguished from preventing the money from being paid to the creditor.
Damages for bad faith are not automatic. In addition to the creditor being unjustified in the proceedings, the statutory condition of bad faith and a request are required; the conditions for damages against the debtor are likewise examined by reference to the time the action was brought and to the interim relief.
How Do Limitation and Forfeiture Periods Work?
Article 72 lays down no single, independent limitation period for a negative declaratory action. The claimant must be under the threat of the debt and must have a current legal interest in bringing the action; the limitation and defences relating to the underlying legal relationship are assessed separately.
If the debt is paid during the proceedings, a negative declaratory action already brought continues as a recovery action. If no action was brought earlier, then under art. 72/7 a recovery action to recover money paid under the threat of compulsory enforcement must be brought within one year of the date on which the money was fully collected by the creditor. This one-year period is a forfeiture period.
The date of payment may not always coincide with the payment of the money into the enforcement office; the dates of payment to and collection by the creditor must be established from the file. If the underlying relationship is subject to the consumer, tenancy, bill-of-exchange or another special regime, jurisdiction, mediation and the time limits are examined separately.
Official sources: Enforcement and Bankruptcy Law no. 2004, Code of Civil Procedure no. 6100, Turkish Commercial Code no. 6102, Consumer Protection Law no. 6502, Law no. 6325 on Mediation in Civil Disputes
This article was prepared by Av. Mehmet Serhat MALGIR.
