In Turkish law, cheques and promissory notes are negotiable instruments embodying an acknowledgment of debt that is abstract in character. Because of that quality, in enforcement proceedings founded on negotiable instruments the dispute does not turn on the underlying obligation between the parties but is confined to matters concerning the form and the validity of the instrument. One of the most effective tools available to the debtor within that narrow field is to object to the signature, asserting that the signature on the note or the cheque is not his own. The validity of a negotiable instrument is tied strictly to the wet-ink signature made by the debtor’s own hand.
The time available to a debtor faced with proceedings of this kind is extremely short: the right must be exercised within five days of service of the payment order. The objection must be raised within that period and must be directed specifically at the signature; statements addressing only the debt or relationships outside the instrument do not amount to an objection to the signature. The objection is raised by an action brought before the Enforcement Court, and the proceedings are concerned in essence with whether the signature belongs to the person objecting.
Below we examine the concept of the negotiable instrument, the enforcement procedure specific to such instruments, the conditions for an objection to the signature, the conduct of the proceedings and the financial sanctions provided for the party who is unsuccessful.
Cheques and Promissory Notes Qualifying as Negotiable Instruments
Negotiable instruments are a category of commercial paper regulated in Article 670 et seq. of the Turkish Commercial Code No. 6102 and limited in number by statute. Only three documents fall within the category: the bill of exchange, the promissory note (note payable to order) and the cheque. Bound strictly to formal requirements, these instruments afford the creditor a powerful and rapid means of enforcement.
The Legal Definition of the Promissory Note, the Cheque and the Bill of Exchange
- A cheque is a means of payment by which the drawer, designating a bank as drawee, instructs that the sum written on the document be paid to the payee or to the lawful holder. It also confers on the payee the power to collect that sum directly from the drawee bank. In law, cheques are regarded as instruments payable to order.
- A bill of exchange is likewise drawn payable to order and provides for payment to be made by a third party on a specified date. The obligation arising from that document is also subject to the provisions governing negotiable instruments.
- A promissory note (note payable to order) is regulated in Arts. 776–779 of the Turkish Commercial Code No. 6102; it contains an abstract acknowledgment of debt, created by the debtor’s signature, that a specified sum will be paid unconditionally to a specified person or to that person’s order.
Requirements for Negotiable Instrument Status
Whether an instrument acquires the status of a negotiable instrument depends on its containing every formal requirement laid down in the statute. The elements required include the following:
- A specified sum must be stated,
- The date and the place of issue,
- The signature of the drawer,
- The name of the payee or of the drawee,
- In the case of a promissory note, an unconditional promise to pay.
The absence of even one of these elements causes the document to lose its character as a negotiable instrument.
The Fate of an Instrument Deficient in Form
Under the principle of strict adherence to form that governs negotiable instruments, an instrument lacking one of the mandatory elements is invalid and cannot be made the subject of the procedure specific to negotiable instruments. A document that does not bear the wet-ink signature of the drawer, for example, or that contains no information as to maturity, is treated as an ordinary debt instrument. Documents of that kind, lacking negotiable instrument status, can serve only as the basis of an action for debt brought under the general provisions.
For the detail of the subject, reference may be made to our notes entitled Elements Required in a Promissory Note and Mandatory Elements Required in a Cheque.
The Enforcement Procedure Specific to Negotiable Instruments
The Form 10 Enforcement Order
The “procedure specific to negotiable instruments”, regulated in Article 167 et seq. of the Enforcement and Bankruptcy Act No. 2004 (EBA), is a special form of enforcement without judgment provided for claims founded on cheques, bills of exchange and promissory notes. It affords the creditor a swifter and more effective means of collection than ordinary enforcement without judgment.
A creditor wishing to commence proceedings on the basis of a negotiable instrument draws up a request for enforcement under Art. 58 of the EBA. The information that must appear in the request is as follows:
- The date on which the instrument was issued,
- The type of negotiable instrument relied on (cheque, promissory note or bill of exchange),
- The number of the instrument.
The original of the instrument must also be submitted to the enforcement office together with the request for enforcement.
Once it has received the request, the enforcement office is required to carry out a preliminary examination. That examination covers, in order, the following matters:
- Whether the instrument has matured,
- Whether the document bears the character of a negotiable instrument,
- Whether the person commencing the proceedings holds the status of lawful holder.
If the preliminary examination is favourable and the necessary conditions are met, the enforcement office issues a “Form 10 – Enforcement Order Specific to Negotiable Instruments” and serves it on the debtor together with a copy of the instrument.
The scope for objection open to the debtor in this form of proceedings is decidedly narrow; only objections relating to the signature and to territorial jurisdiction may be raised. While the procedure restricts the debtor’s ability to halt the proceedings on general grounds, its purpose is to allow the creditor to reach the claim embodied in the instrument within a shorter time.
Objecting to the Signature on a Cheque or a Promissory Note
Although the debtor’s options in proceedings on negotiable instruments are limited, an objection to the signature is a powerful line of defence. In enforcement without judgment founded on a cheque, a promissory note or a bill of exchange, a clear declaration that the signature on the instrument does not belong to the debtor may produce a result capable of halting the proceedings. The legal basis of the objection, the persons who may raise it and within what period, and the court with jurisdiction are explained below.
The Legal Basis of the Objection (EBA Arts. 168–170/a)
Article 168 of the Enforcement and Bankruptcy Act No. 2004 allows the debtor, in proceedings founded on negotiable instruments, to object to the payment order within five days. The subject matter of the objection is, however, limited: the debtor may assert either that the signature on the instrument is not his own or that the proceedings were commenced before a body lacking territorial jurisdiction.
Art. 170/a of the EBA, for its part, governs the consequences of an objection to the signature and the route by which the creditor may bring an action in that event. Under that provision, where it is alleged that the signature does not belong to the debtor the proceedings are stayed and the matter is determined by the enforcement court.
Who May Raise the Objection?
An objection to the signature may be raised only by the person who holds the status of debtor in the proceedings. Third parties outside the proceedings have no such right. Where proceedings are pursued against a legal person, the objection may be made only through an authorised officer or a representative of that legal person.
Beyond that, the person sought to be placed under the obligation must assert that a signature was affixed otherwise than by his own genuine will. Objections founded on the validity of a signature belonging to another person, or on authority to represent, are subject to a different legal assessment.
The Five-Day Time Limit
Under Art. 168 of the EBA the debtor must object to the signature within five days of service of the payment order. That period is preclusive in character; objections made after it has expired are disregarded.
The written objection must state beyond doubt that the declaration is directed at the signature. General expressions of the kind “I am not the debtor” do not amount to an objection to the signature and will not bring the proceedings to a halt.
The Court with Subject-Matter and Territorial Jurisdiction
An objection to the signature is directed to the Enforcement Court. The scope of that court’s examination is confined to whether the signature belongs to the debtor; it does not enter into the source or the fairness of the obligation lying behind the instrument.
As to territorial jurisdiction, the rule is that jurisdiction lies with the court of the place where the enforcement office conducting the proceedings is situated. The action must be brought before that court, and all the evidence — specimen signatures and expert reports in particular — must be submitted there.
The Course of Proceedings on an Objection to the Signature
Proceedings before the Enforcement Court begin when the debtor asserts that the signature beneath the cheque or the promissory note is not his own. The court assesses only whether the signature belongs to him; the source or the validity of the debt is kept outside the scope of those proceedings.
Whether the proceedings are stayed. If the objection has been made in time and in due form, the proceedings are stayed of their own accord. Under Article 170/a of the Enforcement and Bankruptcy Act No. 2004, if the court is satisfied that the signature is forged it upholds the objection and the proceedings lapse. If, on the other hand, the signature is found to belong to the debtor, the objection is dismissed and the proceedings resume from the point at which they were stayed.
The burden of proof and the means of proof. Where an objection to the signature is raised, the burden of proof lies with the creditor. The creditor is expected to establish clearly and conclusively that the signature beneath the instrument belongs to the debtor. The gathering of the evidence capable of showing that the signature is his, and its submission to the court, is therefore decisive. The proceedings are conducted in accordance with Art. 68/a(4) of the EBA, and it is the creditor’s obligation to meet the costs of the examination in advance.
Expert and forensic medical examination. In order to establish to whom the signature belongs, the court most often refers the file to a court-appointed expert in graphology (the science of handwriting) or to the Forensic Medicine Institute. Two kinds of specimen are gathered in the course of the examination:
- Specimen signatures previously given to public bodies, to banks or to notaries are called for,
- Fresh specimen signatures are taken from the debtor at the hearing.
The expert compares the signature on the promissory note or the cheque with those specimens and prepares a report; the court then rules on whose the signature is in the light of that report.
If the enforcement court concludes that the disputed signature does not belong to the debtor, the objection is upheld and the proceedings are stayed. The creditor may in that event bring an action for debt before the general courts if he wishes. If the signature is found to belong to the debtor, the objection is dismissed and the proceedings continue; at that stage the debtor may pursue his rights before the general courts by bringing a Negative Declaratory Action or an action for restitution.
Consequences of the Decision on Whose the Signature Is
At the conclusion of the proceedings before the Enforcement Court, whether the signature belongs to the debtor is established through the expert examination and the evidence on the file. That finding determines the fate of the enforcement proceedings directly. The decision is not confined to whether the proceedings continue or are stayed; it also shapes the remedies open to the parties in the future.
A finding that the signature does not belong to the debtor. If the court establishes that the signature beneath the promissory note or the cheque does not belong to the debtor, the objection is upheld and the proceedings are stayed definitively. The consequences that then arise are as follows:
- The costs of the proceedings and the attorney’s fee are awarded against the creditor,
- The creditor may not commence fresh proceedings on negotiable instruments relying on the same instrument,
- Where bad faith is present in the proceedings, the debtor’s right to claim damages may arise,
- The creditor may, if he wishes, bring an action for debt before the general courts.
For the debtor, that decision means release from the strict enforcement regime peculiar to the law of negotiable instruments.
A finding that the signature belongs to the debtor. If the expert reports and the decision of the court establish that the signature belongs to the debtor, the objection is dismissed and the proceedings run on from where they left off. In that case:
- The debtor may be required to make a declaration of assets,
- The creditor may proceed to attachment and collection,
- If no payment is made, attachment may be levied on the debtor’s immovable and movable property.
The debtor’s option beyond that stage is to prove that he is not liable by bringing a negative declaratory action before the general courts, or to seek the return of the sum he has paid by way of an action for restitution. Those actions do not, however, stay the enforcement proceedings of their own accord; an interim injunction is required for that.
Denial Compensation and the Fine
An objection to the signature raised in proceedings on negotiable instruments does not merely produce the effect of staying the proceedings; it also carries penal and financial sanctions where the application is unfounded or made in bad faith. Paragraphs 3 and 4 of Article 170 of the Enforcement and Bankruptcy Act No. 2004 contain provisions producing consequences for the debtor and the creditor alike.
The Sanction for an Unfounded Objection
Under Art. 170(3) of the EBA, where the debtor’s objection to the signature is dismissed and it emerges that the disputed signature is his own, the court may order denial compensation and a fine against the debtor. Two conditions are required for that: that the proceedings were stayed upon the objection, and that the court has established that the signature belongs to the debtor.
Where those conditions are satisfied, the debtor is ordered to pay, of the claim that is the subject of the proceedings:
- denial compensation of not less than 20%,
- a fine at the rate of 10%.
If the debtor brings a negative declaratory action or an action for restitution at that stage, collection of those sanctions is postponed until the action has been concluded. If the debtor succeeds in the proceedings, the compensation and the fine previously ordered fall away.
The Sanction for Proceedings Brought in Bad Faith
The commencement of proceedings in bad faith is made subject to sanction just as an unfounded objection is. Under Art. 170(4) of the EBA, if the court upholds the objection to the signature and concludes that the creditor acted in bad faith or with gross fault in putting the instrument into enforcement:
- the creditor is ordered to pay damages at a rate of at least 20% of the claim,
- together with a fine at the rate of 10%.
If the creditor then brings an action for debt before the general court, collection of the fine is postponed until the end of that action; if the action is decided in the creditor’s favour, the fine ceases to have effect.
Independent Legal Assessment
In proceedings on negotiable instruments, an objection to the signature is a defence of high return but of equal risk for the debtor. Raised in time and in the right form, it stays the proceedings and places the creditor under the burden of proof; if the objection is dismissed, by contrast, the debtor faces denial compensation at a rate of 20% of the claim together with a fine at the rate of 10%. The decision should therefore never be taken without a preliminary assessment of the specimen signatures and of the physical condition of the instrument.
In practice the most common cause of the loss of a right is the missing of the five-day preclusive period, or the failure to direct the objection expressly at the signature in the written objection. In any given file the following points should be addressed first:
- Establishing the date of service correctly and tracking the five-day period from the first day
- Expressing the objection in the written objection as directed at the signature alone, beyond any doubt
- Checking separately, alongside the objection, whether the instrument bears the character of a negotiable instrument
- Determining at the outset the bodies from which the official specimen signatures to be used for comparison are to be called for
- Calculating in advance the risk of compensation and a fine should the objection be dismissed
- Assessing, once the enforcement process is over, whether a negative declaratory action or an action for restitution is needed
Independent Legal provides advisory services and conducts proceedings throughout the whole of the process in enforcement founded on negotiable instruments, from the preparation of the objection to the signature to the conduct of the proceedings before the enforcement court.