Due to the proliferation and diversification of banking transactions, banks' increasing intentions to manage and finalize their actions and operations with greater speed, and to standardize such actions and operations by categorizing such, the number of banking agreements containing general transaction terms has increased. While formulating their loan agreements, banks ensure a third party to provide a mortgage on an immovable property of his/her own, in favor of the bank. They frequently choose to add clauses to the official mortgage agreement, concerning the mortgagor in question, as also being a surety of the bank within the scope of the loan agreement.
As specified in the decision dated 13.02.2014 and numbered 2012/14777 E, 2013/2711 K of the 19th Civil Chamber of the Court of Cassation, these types of clauses shall be subject to the validity assessment of general transaction terms, within the framework of the relevant articles provided in the Code of Obligations ("TCO") No. 6098.
The Summary of the Decision
In the decision in question, a mortgage has been established on the immovable property registered in the defendant's name, in order to provide a security for the loan agreement signed by and between the plaintiff bank, and the company that is not a litigant. In addition, a clause has been added to the mortgage agreement table designating the mortgagor, which is also the defendant, as a joint debtor and surety, limited within the mortgage margin. Ordinary execution proceeding to the detriment of the defendant has been initiated; however, the proceeding has been ceased upon the defendant's objection. In response, the plaintiff has filed an action of the annulment of objection demanding an execution denial indemnity and the continuation of the execution proceedings.
Considering the fact that the defendant has become surety for the debt by providing a mortgage, the court of first instance has decided that the execution proceedings shall continue in the manner of foreclosure of the mortgage, but not in the manner of ordinary execution. Therefore, the court of first instance ruled for continuation of the execution proceedings with respect to the other defendants; on the other hand, ruled partial dismissal in favor of the mortgagor-defendant due to its above mentioned reasoning. Plaintiff bank has appealed against this ruling. Consequently, the Court of Cassation rendered a judgement regarding the validity of the suretyship clause added to the mortgage agreement table.
Assessments within the General Transaction Terms
In accordance with TCO Article 21, the validity of the clauses designating the mortgagor as a joint debtor and surety shall be contingent upon the refutation of the bank that they gave the adequate information to, and shared the content of the agreement with the mortgagor, while formulating the agreement. Such clauses added to the agreement to the detriment of the mortgagor shall be considered as non-conforming with the nature and characteristics of the mortgage agreement; hence, it shall be deemed to not have been written.1
By evaluating the mortgagor's commitment of being joint surety to the loan debt, within the scope of the mortgage agreement as a clause imposed by the banks, unilaterally, the Court of Cassation enabled such clauses to be subject to the assessment of the general transaction terms.
The 19th Civil Chamber of the Court of Cassation decided that the clause rendering the mortgagor, which is also the defendant, as a joint surety shall be evaluated within the scope of general transaction terms, by stating that this is not in compliance with the nature and the characteristics of the mortgage agreement. In accordance with TCO Article 21/II, and the foregoing, the Court of Cassation decided that this clause attached to the mortgage agreement table shall be considered within the scope of assessment of the general transaction terms and, accordingly, shall be deemed to not have been written.
Evaluation within the framework of the Implementation Law
Despite the above mentioned explanations, the 19th Civil Chamber of the Court of Cassation has foreseen a time limitation for the implementation of general transaction terms assessment on the clauses rendering joint suretyship for the mortgagor, attached to the mortgage agreement made in the scope of the loan agreement.
Court of Cassation referred to Articles 1 and 7 of the Law regarding the Entry into Force and Implementation of the Turkish Code of Obligations numbered 6101 ("Implementation Law") in the case in question. In accordance with Implementation Law Article 1, "The acts and actions occurred prior to the date of entry into force of the Turkish Code of Obligations, the consequences and legal grounds of such acts and actions shall be subject to the rules of the law which is in effect on the date of the occurrence." In addition, Implementation Law Article 7 states that the articles of the TCO regarding public order and public moral shall be implemented in the pending actions.
Although the joint suretyship clause attached by banks to mortgage agreements shall be deemed as a general transaction term, by virtue of Court of Cassation's attribution of these two articles and on the grounds that
- the mortgage was established prior to 01.07.2012, which is the effective date of the TCO, and
- the clauses should not have been considered within the scope of Implementation Law Article 7, which relates to public order and morality, the sanctions of which are deemed as non-written due to incompliance with the nature and characteristics of the agreement, shall not be applied to the mortgages existing prior to the effective date of the TCO.
The mortgage that is subject to this lawsuit was established in 2008, which is prior to the effective date of the TCO. Due to this fact, and in the light of the Implementation Law, Articles 1 and 7, the Court of Cassation has decided that the regulations on general transaction terms of the TCO shall not be implemented in this case, and the plaintiff bank shall be able to continue the execution proceeding to the detriment of the defendant, determined as a joint surety that is limited to the mortgage margin in the mortgage agreement table, within the scope of the Law that was in effect on the date of the execution proceeding.
Although it is stated in the decision that the objections shall be refused, and the execution proceeding shall continue, due to the fact that the execution proceeding was initiated prior to the effective date of the TCO, the Court of Cassation has enabled the validity assessment of the general transaction terms for the clauses imposed by the banks to the mortgage agreement determining the mortgagor as a joint debtor and surety. In light of this decision, and pursuant to the Implementation Law, Articles 1 and 7, following 01.07.2012, the effective date of the TCO, the clauses that the banks add to the loan agreements, which render the mortgagor as a joint debtor and surety, shall be deemed to not have been written.
Article of December 2014
1. Yeni Borçlar Kanunun Getirdiği Başlıca Değişiklikler ve Yenilikler, Prof. Dr. Turgut. Öz, p.8, Istanbul 2012
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