Negative Declaratory Actions and Actions for Recovery of Payment
A person may bring a negative declaratory action to establish that he or she is not indebted on account of a negotiable instrument. If the debt was paid under the threat of enforcement, an action for recovery of payment may, depending on its conditions, come into question. Grounds such as forgery of the instrument, an unauthorized signature, lack of consideration, a security purpose, performance of the debt, set-off, release or invalidity of the underlying contract may be raised in these actions.
In the review:
- The instrument and the underlying debt relationship
- Filing the action before or after enforcement
- Whether payment was made
- The burden of proof and written evidence
- The holder’s standing as a party and the conditions under which the instrument was acquired
- Personal defenses and defenses apparent from the text of the instrument
- Temporary legal protection to stop the enforcement
- Security and proportionality
- Mediation as a condition of suit
- The recovery period and the heads of claim
are assessed. Filing a negative declaratory action does not by itself stop the enforcement; a request for interim protection must be addressed separately within the statutory conditions.
Proof, Document Review and Financial Records
Although negotiable instruments carry the features of an abstract acknowledgment of debt and strict adherence to form, many disputes are resolved on the basis of evidence concerning the underlying relationship, payment and the purpose for which the instrument was given.
The main evidence:
- The original of the check, promissory note or bill of exchange
- The contract, order, invoice, waybill and delivery document
- Bank receipts, account transactions and the check image
- Current account statements and reconciliation
- Commercial books and supporting documents
- Notices through a notary, KEP, e-mail and message records
- Note delivery or return records
- Records of security and payment plans
- Signature circulars, representation resolutions and trade registry records
- Presentment, protest and “returned for lack of funds” documents
- The enforcement file and service papers
- Camera, cargo, access and delivery records
- Graphological and document examination reports
- Examinations by a certified public accountant and by experts
For a technical examination of the instrument to be carried out properly, it is important to preserve the original document, to make no new marks on it and to record the custody process.
Mediation as a Condition of Suit and Determining the Competent Authority
In disputes over negotiable securities, not every application is subject to mediation. For receivables, compensation, actions for annulment of an objection, negative declaratory actions and claims for recovery of payment that are commercial actions, mediation as a condition of suit may come into question, subject to the statutory exceptions. By contrast, objections and complaints before the enforcement court specific to enforcement on negotiable instruments, requests for cancellation of a lost instrument and criminal complaints are subject to different procedures.
In determining jurisdiction and the route of application:
- Whether the dispute arises from the negotiable instrument or from the underlying relationship
- The capacity of the parties as merchant, consumer or otherwise
- Whether the claim is for a money receivable, a declaration, cancellation, recovery of payment or a criminal complaint
- The jurisdiction of the commercial court of first instance, the consumer court, the enforcement civil court or the enforcement criminal court
- A jurisdiction agreement and an arbitration clause
- Mediation as a condition of suit
- The connection between the enforcement and the action
are examined. An application to the wrong authority or under the wrong procedure may cause short-period rights to be lost.
Interim Protection Before and After Enforcement Differs
Within the framework of the Enforcement and Bankruptcy Law, Art. 72, in a negative declaratory action filed before enforcement, a stay of the enforcement may, if the conditions are met, be requested against security. In an action filed after enforcement has begun, a stay of the enforcement cannot be ordered under the same article; if the conditions and security are provided, it may be requested that the money held at the enforcement office cashier not be paid to the creditor. Other special procedural routes are examined separately according to the file.
If payment has been made, which route can be used?
In recovery of payment under the Enforcement and Bankruptcy Law, Art. 72, it is examined whether money not owed was paid under the threat of enforcement and whether the relevant conditions are met. In an action based on this provision, the one-year period running from the payment date is important. Not every payment outside enforcement can be subject to the same rule. The effect of making a payment on the nature of a pending negative declaratory action is assessed separately.
Mediation in a commercial negative declaratory action
Under Turkish Commercial Code Art. 5/A and the amendment by Law No. 7445, mediation as a condition of suit must be considered in commercial negative declaratory and recovery actions filed on or after September 1, 2023 whose subject is a sum of money. The same procedure does not apply to special objections and complaints before the enforcement court. Urgent protection and application periods are planned separately.
Prepare the proof at the start of the file
The reason the instrument was issued, the holder’s position, and the delivery, payment and transfer records are examined together. The burden of proof cannot be assumed to be the same in all files merely on the basis of being the “claimant” or the “respondent.”