Third-party ownership claims against an attachment
The requirement that the attached property be owned by the debtor is of great importance for the debt to be deemed lawfully collected.[1]
If a third-party ownership claim is raised during the attachment, the procedures in Articles 96 and 99 of the Enforcement and Bankruptcy Law (No. 2004) (EBL) apply.
A third-party ownership claim does not prevent the attachment, but it does suspend it. Because of the claim, the matter may have been referred to the competent authority for review under EBL Article 96, or an action to dismiss the third-party ownership claim may have been filed under EBL Article 99.
The court examining the third-party ownership claim may have issued an injunction. Where there is no injunction, whether the time limits in EBL Articles 106 and 110 continue to run for the attached assets can be a problem in practice.
Creditors may find that the attachment on the attached assets has been lifted on the grounds that a sale was not requested in time while the third-party ownership action was pending.
A valid attachment is required for a third-party ownership claim to be assessed
The existence of a valid attachment is in itself one of the essential conditions for assessing a third-party ownership claim.
A third-party ownership claim cannot be raised unless there is a valid attachment:
The plaintiffs' decedent bought the attached vehicle on December 31, 1997 under a sales contract executed before a notary public. Although an attachment was registered on the vehicle's traffic record on June 25, 1998, the creditor did not request a sale within one year from the date the attachment was imposed, as required by EBL Article 106. The attachment therefore lapsed automatically on June 25, 1999 under Article 110 of the same Law. Since there was no valid attachment on August 14, 2002, when the third-party ownership action was filed, the plaintiff has no legal interest in bringing the action. (Court of Cassation 21st Civil Chamber, Docket No. 3472, Decision No. 4474, dated May 4, 2004)
The attachment in dispute was imposed on September 23, 2009, and the third-party ownership claim was raised directly by filing an action on May 4, 2011. Since the one-year period for requesting a sale under EBL Article 106/1 expired on September 23, 2010, there was no valid attachment as of the filing date. Under these circumstances, the action should have been dismissed for failure to meet a procedural requirement, and dismissing it on the merits was erroneous. (Court of Cassation 17th Civil Chamber, Docket No. 2012/15580, Decision No. 2013/1342, dated February 11, 2013)
The most common legal misconception in practice is the belief that EBL Articles 106 and 110 must be applied while the third-party ownership claim is being assessed.
The Court of Cassation precedents below show that the time limits for requesting a sale are suspended when a third-party ownership action is filed
However, if a third-party ownership action is filed regarding the attached assets, the time limits for requesting a sale are suspended
- The case concerns a third-party ownership claim filed by a third party under EBL Article 96 et seq.
The EBL subjects the creditor's request for the sale of attached assets to a time limit. If the attached property is movable, the creditor must request its sale within one year from the date of attachment, and if it is immovable, within two years, and must pay the sale costs notified to it (EBL Articles 106 and 59). Otherwise, the final attachment lapses automatically (EBL Article 110). However, if a third-party ownership action is filed regarding the attached assets, the time limits for requesting a sale are suspended. Where, following the third-party ownership action, the enforcement court decides at the third party's request to stay the proceedings and halt the sale by an interim injunction, a sale cannot be requested anyway, so the period for requesting a sale is suspended. (In the specific case, the plaintiff's request for an injunction was rejected.) If no such decision is made or the request is rejected, the creditor may request a sale while the third-party ownership action is pending, but it also has the right not to request a sale until the action ends.
In the specific case, the plaintiff third party filed this action in time on June 11, 2009, after the attachment of June 4, 2009 that is the subject of the action. As of the filing date, the period for requesting a sale had not expired. Accordingly, the defendant creditor had the right to request a sale while the third-party ownership action was pending, as well as the right not to exercise that right until the end of the action, so the attachment in dispute was legally valid. Taking this into account, the court should have dismissed the action on the grounds that the plaintiff's claim was unjustified as of the filing date, as the court itself had found, that it was neither alleged nor proven that the transfer of the business between the plaintiff and the debtor was made in accordance with EBL Article 44 and Article 179 of the former Code of Obligations, and that the plaintiff third party who took over the business would be liable for the business debts under Article 179 of the former Code of Obligations. Rendering a judgment on the stated reasoning was not found appropriate.
CONCLUSION: For the reasons explained above, the appeal of the defendant creditor's counsel is accepted and the judgment is REVERSED… (Court of Cassation 17th Civil Chamber, Docket No. 2011/11593, Decision No. 2012/823, dated January 31, 2012)
- The case concerns an action to dismiss a third party's ownership claim, filed under EBL Article 99.
During the attachment of June 17, 2010 that is the subject of the action, the defendant third party raised a third-party ownership claim, and the statement was entered in the record. The creditor filed the action on June 24, 2010, within the statutory period granted to it. Under EBL Article 97/8, “the time limits in EBL Article 106 do not run during the action.” In this case, once the action is filed in time, the rule that the attachment lapses under Article 110 of the same Law if the sale of attached movable property is not requested within one year under EBL Article 106 cannot be applied.
The court should have examined the merits of the action filed within the statutory period and ruled according to the outcome after collecting the parties' evidence. Rendering a decision as written without regard to these factual and legal circumstances is contrary to procedure and law.
CONCLUSION: For the reasons explained above, the appeal of the plaintiff creditor's counsel must be accepted and, without examining the other issues in view of the ground for reversal, the judgment is REVERSED…
Court of Cassation 17th Civil Chamber, Docket No. 2011/12352, Decision No. 488, dated January 24, 2012
In conclusion, once a third-party ownership claim has been raised, the period for requesting a sale is suspended as of the date an action based on that claim is filed in court.
[1] Çelik, Binnur, Kamu Alacaklarının Tahsil ve Takip Hukuku, p. 206, İş Bankası Kültür Yayınları, İstanbul 2000