PROTECTION OF THE RIGHT OF THE THIRD PARTY IN GOOD FAITH IN RESPECT OF AN ACCOMMODATION BILL

PART ONE

§ 1 THE CONCEPT OF THE ACCOMMODATION BILL AND THE PLACE OF THE ACCOMMODATION BILL IN THE TURKISH LEGAL SYSTEM

I. THE CONCEPT OF THE ACCOMMODATION BILL

Instruments which, although there is in reality no debt relationship, are drawn up knowingly and willingly, by creating a discrepancy between intention and declaration, as if a debt relationship existed, are called accommodation bills (hatır senedi). For example, where A, while having no commercial relationship with B, gives B a bill so that B may continue his commercial life and use it in his commercial life. When A gives the bill to B, they have not entered into the transaction in order for A to become indebted to B or for B to become a creditor. For third parties, however, the apparent transaction is a confidence-inspiring transaction creating a debt.

II. THE PLACE OF THE ACCOMMODATION BILL IN THE TURKISH LEGAL SYSTEM

The accommodation bill has not found a place in the Turkish legal system. In the doctrine and in the case law of the high court it has been examined under the headings of simulation (muvazaa) and written acknowledgement of debt, and an attempt has been made to meet the legal needs. This is because, although it is not expressly provided for in the statutory regulations, the accommodation bill exists as a concept and is used by society.

§ 2 THE LEGAL NATURE OF THE ACCOMMODATION BILL

The making of an apparent declaration by two persons concealing their true intentions is called simulation (muvazaa).¹ According to TBK.m.19/I, “In determining and interpreting the type and content of a contract, the true and common intention of the parties shall be taken as the basis, without regard to the words used by the parties by mistake or in order to conceal their true purposes”.

The high court has also defined simulation by its precedent stating: “Simulation, in its simplest definition, is an agreement of the parties to a contract, concealing the true situation from third parties with the aim of deceiving them, on a matter which does not correspond to their true intentions and which is not valid between themselves. Transactions made in this way are called simulated transactions”². In this sense, the drawing up of an accommodation bill is a case of simulation.

The accommodation bill at the same time also contains a written acknowledgement of debt peculiar to securities. Therefore, as regards its legal nature, the accommodation bill must be assessed within the framework of the Turkish Commercial Code, the Turkish Code of Obligations, the Turkish Civil Code and the HUMK.

§ 3 DIFFERENCES BETWEEN THE ACCOMMODATION BILL AND OTHER INSTRUMENTS

I. DIFFERENCE FROM SIGNATURE IN BLANK

Whereas in an accommodation bill the parties to a contract have the intention of agreeing, concealing the true situation from third parties with the aim of deceiving them, on a matter which does not correspond to their true intentions and which is not valid between themselves, in a signature in blank there is no intention to deceive third parties by concealing the true situation from them.

In a signature in blank, a person signs a blank sheet of paper and gives it to another person. For this reason, the possibility that the signature in blank may be filled in contrary to the agreement results in the signature in blank being capable of becoming the subject of a tort. In an accommodation bill, however, the parties do not act with the motive of committing a tort against each other.

II. DIFFERENCE FROM A DEBT INSTRUMENT BASED ON A VALID DEBT INSTRUMENT

Whereas in an accommodation bill the parties to a contract have the intention of agreeing, concealing the true situation from third parties with the aim of deceiving them, on a matter which does not correspond to their true intentions and which is not valid between themselves, in debt instruments based on a valid debt instrument there is no intention to deceive third parties by concealing the true situation from them. Whereas in an accommodation bill there is no genuine transaction, in debt instruments based on a valid debt instrument there is a genuine transaction at the basis.

§ 4 ABSOLUTE NULLITY IN THE ACCOMMODATION BILL AND ITS LIMITS

I. ABSOLUTE NULLITY IN THE ACCOMMODATION BILL

Here the parties in reality wish to conclude no contract (transaction) at all, and by means of the apparent contract they merely deceive third parties.³

For this reason, the apparent (simulated) transaction is deemed non-existent and produces no effect between the parties. Here TBK m.19 has adopted the theory of intention. Indeed, according to TBK.m.19, in determining and interpreting the type and content of a contract, the true and common intention of the parties is taken as the basis, without regard to the words used by the parties to conceal their true purposes.⁴ In the doctrine there are also views that simulation is not a case of absolute nullity but a case of non-existence.

This view is based on the idea that there is no intention whatsoever behind the simulated transaction and that, therefore, the transaction must be deemed not to have been made.⁵

According to another view, however, where there are mutual declarations of intention, even if only in form, one cannot speak of non-existence; only an invalidity based on the wishes of the parties may be in question.⁶

In absolute simulation there is no concealed contract between the parties. There is only an apparent contract. The apparent contract does not reflect the true intentions of the parties. The provision of BK.md 19 (former BK.md.18) has ordered that, in a contract, the true and common purposes of the parties must be established without regard to the expressions and designations used by the parties either by mistake (inadvertently) or in order to conceal their true purposes.⁷

As a consequence of this provision, in absolute simulation the apparent contract is invalid. The invalidity here is a case of invalidity of the absolute nullity type. For this reason, all the principles and characteristics relating to the sanction of absolute nullity apply here in exactly the same way. Foremost among these characteristics is that the sanction of absolute nullity is not subject to any time limit and that this invalidity may be asserted at any time.⁸

There is no time limit for bringing an action for annulment on the ground of simulation. For nullity (butlan) may be asserted at any time.⁹

Accommodation bills are instruments prepared with declarations of intention that satisfy the conditions of absolute simulation. Therefore, absolute nullity, which is a consequence of absolute simulation, is a sanction that also applies to accommodation bills.

II. PROTECTION OF THIRD PARTIES IN GOOD FAITH AS A LIMIT OF ABSOLUTE NULLITY

A) In General

In our legal system, the protection of good faith is fundamental. Therefore, the rights of third parties in good faith have been protected as a limit of absolute nullity.

B) The Concept of the Third Party in Good Faith in the Accommodation Bill

If the third party knows, or ought to know, that the written acknowledgement of debt between the creditor and the debtor is simulated

1. The Concept of Good Faith

Although the term good faith does not appear in TBK. 19/II, it is laid down in the German and French texts of Swiss TBK.m18/II. The same provision also applies under the Turkish Code of Obligations; therefore, in order for the third party to be protected against simulation, he must, when taking over the claim, have acquired it in good faith, that is, believing in the existence of the debt relationship, namely of the claim. A third party who, relying on the written acknowledgement of debt, is bound to accept, and in the circumstances is entitled to accept, that the claim assigned to him has arisen genuinely and not merely in appearance, is in good faith. By contrast, if the third party knows or ought to know that the claim is simulated, he is not in good faith. In that case, he cannot be protected under TBK.m.19/II. The good faith in question here cannot be protected under TB. M. 19/II. The good faith in question here is the subjective good faith regulated in TMK.m.3.¹⁰

For a third party who acquires the claim without knowing of the simulation, the simulated claim takes effect as a valid claim. For this, a voluntary written form is sufficient; a statutory form is not required.¹¹

Good faith here means not knowing of the simulation at the moment the right is acquired. The third party’s learning of the simulation after the moment the right is acquired does not eliminate good faith.

2. Burden of Proof

Article 201 of the new HMK No. 6100 regulates the “prohibition of proof by witnesses against a document”. The text of the article contains the provision: “Legal transactions which are asserted against any kind of claim against a document and which are of a nature to eliminate or reduce the effect and force of the document cannot be proved by witnesses even if they relate to an amount of less than two thousand five hundred Turkish liras.” Since bearer instruments are instruments having the nature of a written acknowledgement of debt, a person alleging simulation can prove the allegation only by a document.

Third parties who are outside the contract and have the power to request its annulment cannot obtain a document (instrument) concerning the simulation agreement, since they are not parties to the contract. For this reason, third parties may prove simulation by all kinds of evidence. The means of proof resorted to in order to prove it may include documents, witnesses, social and economic circumstances, close relationship, expert examination, valuation and similar means.¹²

Our new HMK No. 6100 has turned into a statutory provision the view, accepted without dispute in doctrine and in judicial decisions, that third parties may prove simulation by all kinds of evidence. By provision 203 1/d of this law, “allegations of simulation by third parties against legal transactions and documents” have been accepted as one of the exceptions to the requirement of proof by document.¹³

The Court of Cassation (Yargıtay)¹⁴, by its precedent stating “It must be accepted that the promissory note which is the subject of the dispute and of the enforcement proceedings is legally valid. Therefore, since the claimant-debtor alleges that the promissory note was given to the defendant party on the basis of simulation, the burden of proof lies with the claimant. The claimant must prove this allegation by written evidence.”, has also emphasised that the allegation of simulation must be proved by the claimant by means of a written document.

In this case, the drawer of the bill may act against the third party in good faith holding the bill only within the framework of the requirement of proof by document.

C) Protection of the Third Party in Good Faith

The provision of Article 19 f. II. of the TBK, which reads “ The debtor cannot raise against a third party who has acquired the claim by relying on a written acknowledgement of debt the defence that this transaction is simulated.”, has introduced the rule that the allegation of simulation cannot be asserted against a person who has entered into a transaction in good faith by relying on a written acknowledgement of debt.

By this article, the legislator has protected third parties in good faith against the allegation of simulation.¹⁵

That the claim has been acquired by relying on a written acknowledgement of debt and that the claim has been acquired as a third party in good faith are the conditions required under Article 19 f.II. of the TBK for the allegation of simulation to be incapable of being raised. Article 19 f.II. of the TBK is an exceptional situation with regard to simulation.

The third party must have taken over the claim by relying on a written acknowledgement of debt. The acknowledgement of debt referred to in TBK.m.19/II is the abstract acknowledgement of debt laid down in TBK.m18. However, this acknowledgement must be in writing.¹⁶

Good faith must exist at the moment of the assignment of the claim.¹⁷

The Court of Cassation (Yargıtay)¹⁸, too, has rendered judgment in the following terms: “the court decided to dismiss the action on the grounds that a cheque is a means of payment and, as a rule, it must be accepted that it was given for the purpose of paying an existing debt, that the allegation that the cheque was given by way of accommodation or as security must be proved by written evidence, that carrying out an expert examination of the commercial books as to whether or not the cheque is recorded in the commercial books would not affect the outcome, that the claimant was unable to prove by a written document that the cheque was an accommodation cheque, that he also did not rely on the evidence of oath, and that there was an interim injunction decision which had been issued and enforced”. By its precedent, the Court of Cassation has placed emphasis on written evidence and has disregarded other means of proof apart from written evidence.

BIBLIOGRAPHY

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