1. INTRODUCTION
One of the fundemental purposes of private lae is securing the receivables. In our legal system, right of mortgage is a collateral security which gives a right to debtee to foreclosure the movable or real estate which is subject to the security or another type of right without the consent of proprietor and receive the debts from the sum of money when the debt has not paid in due time. Mortgage which is one kind of the real estate pledge has been regulated between articles 881 and 897 of Turkish Civil Code numbered 4721 (“TCC”). Mortgage has defined as a restricted collateral right through securing the receiv - ables, without attached a negotiable commercial paper and giving an opportunity to foreclosure real estate and obtain the receivables.
As per the Article 881 of TCC, mortgage which is the type of the real estate pledge may secure three (3) different kind of receivable; which is (i) determined and existed or (ii) pos - sible to arise in the future or (iii) certain to arise in the fu - ture. The significant matter at this point is, the event of the foreclosure of mortgage right is demanded, and the receiv - able must be due and payable. In principle, there are two (2) types of mortgage due to the determination of amount of the security within the scope of TCC. At the time of es - tablishing a mortgage;
(i) For the certain receivables, “Principal Mortgage”
(ii) For the receivables which is possible or certain to arise in the future and which has not determined, “Limit Mortgage”, can be created.
Aforementioned mortgage types make differences within the scope of enforcement proceeding law in the event of the debtee request to foreclosure of mortgage in case of the failure of the debtor. In another words, debtee may request the foreclosure of the mortgage by enforcement proceeding with judgment in regard to principal mortgage or by enforcement proceeding without judgment in regard to limit mortgage. In the present article, characteristics of mortgage which is a kind of real estate pledge, process of foreclosure of mortgage, process of enforcement proceeding with judgment in regard to the foreclosure of mortgage and issues which have been arisen in this regard have been mentioned by giving examples from the Supreme Court’s precedents.
2. LIMIT MORTGAGE
2.1. Definition and Necessity of Creation
As it is mentioned foregoing, limit mortgage is created for the uncertain receivables. Such mortgage fulfill the commercial requirements such as; to create a guaranty factor to secure the receivables which shall arise upon current account balance between the dealers or the credit relationship between banks and customers within a specific upper limit.
2.2. The Characteristics of Limit Mortgage Before the Accessory Principle (Contingency with the Receivable)
Existence of mortgage depends on the existence of receivables which is subject to the mortgage security. Therefore, invalidity or termination of receivables shall cause invalidity or termination of the mortgage which aims to secure the receivables. The fact that expressed as a principle of accessory is not accrued during the establishment of a mortgage as a limit mortgage, because the receivable is not due and payable when the mortgage is established. However, this situation shall not mean to establish a contingent mortgage. As per the article 882 sub-clause 1 of TCC, the receivables which is not certain or changeable is established on a determined rank and the receivable preserve its rank without considering the difference of amount of the receivable which shall occur after the registration. For instance; after the establishment of the first rank mortgage as a limit mortgage for the receivable amounting 1.000.000.-TL even mortgages are established as second rank, third rank and fourth rank, , and the receivable subjected to limit mortgage shall due after the subsequent mortgage ranks, it shall be processed as the first rank.
2.3. Necessity of Indicating the Limit in Mortgage Contact Deed
Pursuant to the Article 851 of TCC, if the receivable is uncertain, the amount of the limit which shall be secured through the real estate within the scope of all the requests of debtee must be indicated in the mortgage contact deed. Because, it must be determined that, the mortgage established before the real estate in what manners restricts the value of the real estate. Indicating the monetary value of the mortgage in the land registry which restricts the real estate is significant in the way of the principle of publicity. There is no doubt there is a legal interest of knowing the amount of the mortgage for those who wish to create a mortgage after the former ranking mortgage, to create another kind of restricted collateral right, to file an attachment or to acquire the real estate which is registered an attachment on it.
2.4. Prohibition of Exceed the Mortgage Limit Included the Principal Receivable and All the Accessories
During the establishment of limit mortgage, the upper limit securing the receivables is determined and registered to land register. Accordingly, the upper limit indicated in land register assesses the highest amount which may be reached of the requested amount for all type of receivables which is secured by mortgage. In other words, all the demands of debtee (principal, interest, expense of enforcement) are secure only within highest limit. ( Supreme Court, numbered 1989/11-284 E., 1989/379 K. , Supreme Court 11th Civil Department, dated 09.05.2005 numbered 2004/8125 E., 2005/4761 K., Supreme Court 12th Civil Department dated 21.03.2011, numbered 2010/23451 E., 2011/3939 K.)
The receivables of debtee which exceed the highest limit is constitutes as an unsecure receivable, and could not benefit from the mortgage. . For the receivables of debtee which exceed the upper limit, are not subject to the requirement of the legal proceeding of foreclosure of mortgage regulated in article 45 of Bankruptcy and Enforcement Law numbered 2004 (“BEL”). An attachment proceeding or bankruptcy proceeding against the debtor as an unsecured receivable might be started for such receivables. In the event of mortgage is created by the third party, the third party is not held liable for the unsecured receivables which exceed the upper limit.
If the legal proceeding of a receivable exceeds the upper limit, debtor may always exercise the right of complaint by appealing to the enforcement court. The seven (7) day time limit regulated in Article 16 of BEL has not taken into consideration in this regard.
As per the Article 864 of TCC, after the registration of mortgage to the land registry, the statute of limitation shall not be applied to the receivable. Receivables which exceed the upper limit, are not within the scope of the mortgage, therefore statute of limitation shall be applied to such receivables.
3. FORECLOSURE OF LIMIT MORTGAGE
3.1. Legal Proceedings
Enforcement proceeding with judgment by the way of foreclosure of mortgage commences by requesting the enforcement proceeding to competent enforcement office by debtee. As per the article 149 of BEL, if the owner of the real estate and debtor is same, request of enforcement proceeding must be served to this person, if owner of the real estate and debtor are different, request of enforcement proceeding must be served both to debtor and the owner of real estate. In another words, if the principal debtor is not included into the enforcement proceeding, it is not possible to include the debtor into the enforcement proceeding afterwards. Therefore, the annulment of the enforcement proceeding is required.. However, there are also contrary decisions; the Supreme Court’s decisions are generally in the above mentioned regard. (Supreme Court, 19th Civil Department, dated 18.01.2012, numbered 2011/4432 E., 2011/355 K., Supreme Court 12th Civil Department, dated 02.04.1997, numbered 10286 E., 10717 K.) On the contrary, in the event of that enforcement proceeding is commenced against the principle debtor, but have not been commenced against to third party who established the mortgage, the third party can be included into the enforcement proceeding later on (Supreme Court 8th Civil Department, dated 15.11.2012, numbered 8463 E., 10512 K., Supreme Court 12th Civil Department, dated 19.3.1999, numbered 9512 E., 10509 K.).As per the article 887 of TCC, if the owner of the real estate who established the mortgage is not responsible for the debt personally, effectiveness of request of payment against to the third party depends upon the request of payment is made both to the principle debtor and the third party.
Pursuant to Supreme Court, if the receivable is not due and payable, the relevant deficiency may be alleged for an indefinite time period at every stage, and is considered exefficio by the enforcement court.
3.2. Order of Payment
this respect, if the debtor and owner of the real estate have objections to the debt separately, to provide an opportunity for them to claim their objections and release the real estate from the mortgage through paying the debt. Pursuant to Supreme Court, the principle of sending the order of payment to debtor and owner of real estate separately is in related with public order; therefore, it is accepted that failing to fulfill the principle may be subject to complaint for an indefinite time period (Supreme Court, 11th Civil Department, dated 09.07.2007, numbered 2006/8151 E., 2007/10454 K.)
In contradiction to the foreclosure of mortgage by enforcement proceeding with judgment, as per the dominant opinions of doctrine, it is accepted that, unless it is clearly stated, head of executive office cannot examine the base of receivable, therefore the head of executive office has not authority to examine whether the receivable is due and payable or not, in the enforcement proceeding without judgment.
On the other hand, some other remarks indicate that, if it is understood that the receivable is not due and payable from documents attached to the request of enforcement proceeding, head of execution office must reject to send an order of payment to the debtor. Pursuant to Supreme Court, if the owner of real estate is a third party, head of executive office must analyze whether the notification of maturity of the mortgage regulated in Article 887 of TCC is also made to third party or not. (Supreme Court, 11th Civil Department, dated 20.06.2011, numbered 2009/15097 E., 2011/7433 K., Supreme Court 11th Civil Department, dated 09.07.2009, numbered 2006/8151 E., 2007/10454 K.)
3.3. Payment of the Debt by the Debtor
Upon the notification of order of payment, debtor may prelirvent the sale of the real estate through paying the debt at every stage of enforcement proceeding. Third party who is the owner of the real estate, and received the notification of order of payment may also suspend the enforcement proceeding by paying the debt. In such event, as per the article 127 of Turkish Code of Obligations numbered 6098 (“TCO”), third party becomes a successor of the debtee and may revoke the debtor in regard to the internal relationship among them.
3.4. Objection to Order of Payment By Debtor
Debtor and third party who is the owner of the real estate by whom the notification of order of payment made, shall object to enforcement within seven (7) days, from the date of the notification of order of payment, in written or verbally. The objection made to the enforcement court instead of enforcement office is invalid and should be rejected by the court. The objection made within the abovementioned time period, suspends enforcement proceeding of foreclosure of mortgage.
Debtor (or third party who is the owner of the real estate) may object the existence and amount of receivable or legal proceeding which exceeds the limit. However, debtor (or third party who is owner of real estate) cannot make an objection about the statute of limitation and right of mortgage of debtee. Because, as well as the statute of limitation for receivables secured by mortgage shall not be applied, registration of mortgage to land registry is a presumption for the existence of the right of a mortgage and annulment of right of a mortgage shall be set forward through law suit.
If the debtee whose receivables secured by limit mortgage request the receivable within the exceeding amount of the limit, in the request of enforcement proceeding and order of payment made in accordance with it, debtor should be made objection to the enforcement proceeding within the given time period in regard to the exceeding amount. In this case, the objection shall be bring forward, not to the right of mortgage, but in regard to the exceeding amount of the upper limit which is not secured and the exceeding amount of the upper limit cannot requested by foreclosure. Pursuant to the Supreme Court’s recent decisions, in regard to time limit of objection, such event is in regard to the public order, therefore the objection may be served as a complaint for an indefinite time period and e such event is considered ex-efficio by execution court. (Supreme Court, 12th Civil Department, dated 22.11.2011, numbered 2011/11811 E. and 20111/30041 K., Supreme Court 12th Civil Department, dated 06.10.2009, numbered 2009/9414 E. and 2009/18089 K.)
3.5. Abolishment of Objection to Annulment Action
3.5.1. Action for Annulment of Objection
If the debtor or the third party who is the owner of the real estate make an objection to request of the enforcement proceeding within seven (7) days, as per the article 67 of BEL, mortgagee may file a lawsuit in order to bring an annulment action of objection by means of proving of existence of receivable within one (1) year from the date of notification of objection. In the action for annulment of objection, if the injustice of the objection made by the debtor is decided then the debtor, if the injustice and bad intention of the execution proceeding is decided then the debtee, within the request made by the other party, shall be sentenced to the appropriate compensation which is not below %20 of the rejected or the resolved amount.
3.5.2. Release of the Objection
As per the article 68 of BEL, in the event of enforcement proceedings of debtee whose demand is objected based upon a promissory note which is notarized or whose signature is accepted including acknowledgment of debt or based upon a voucher or deed is duly given by a competent authority or governmental agencies within the scope of their power, debtee may want to abolishment of objection permanently within six (6) months from the date of notification of objection. On the other hand as per the Article 68 sub-clause (a) of BEL, if the documents which are based to the enforcement proceeding of debtee are ordinary, and the debtor make an objection to his signature before the documents evidently and separately, debtor may want to abolishment of objection temporarily within six (6) months from the date of notification of objection. Unless the decision of abolishment of objection permanently turns into the decision of abolishment of objection temporarily, debtor cannot request the sale of the real estate in which the mortgage has established before.
3.6. Finalizing the Legal Proceedings and Request of Sale
If the debtee or third party who is the owner of the real estate has not made objection to order of payment within seven (7) days or has not paid the debt within thirty (30) days, then the enforcement proceeding becomes definite, and debtor shall request to foreclosure sale of real estate in which the mortgage has established before.. As per the article 150 sub-clause (e) of BEL, debtor must request to foreclosure sale of the real estate within one (1) year from the date of notification of order of payment. If foreclosure sale of the real estate is not requested within the time limit given, the enforcement proceeding will be forfeiture.
3.6.1. Sale Of The Real Estate In Which More Than One Mortgage Has Been Established Before
If more than one mortgage has been established before the real estate, the distribution of the sale price shall be made to debtees in respect with their ranking order. If the sale price does not fulfill the absolute amount of receivables, then the amount get on their rank shall be distributed within the ratio of their receivables.
3.6.2. If The Sale Amount Of The Real Estate Shall Not Fulfill The Mortgage Debt
When real estate/estates in which a mortgage has established before are sold, if the sale price does not fulfill the mortgage debt, then an open mortgage certificate is given to principal debtee in regard to the article 150 sub-clause (f ) and 152 of BEL. However, liability of the third party shall be terminated within the foreclosure sale of real estate in which a mortgage has established, open mortgage certificate is not formed for the third party mortgager/ mortgagers.
3.6.3. The Situation Of The Security Regarding The Receivables is Not Due And Payable After The Foreclosure Of The Real Estate In Which A Mortgage Has Established Before
The situation faced with the practice, even though it has not regulated clearly before the relevant legislation is, after the part of the receivable become due within the receivables secured with the upper limit mortgage, mortgagee shall commence an enforcement proceeding only for the receivables which become due and payable. In such circumstances, because the respective real estate is foreclosed, the security mechanisms of the receivables which are not due and payable remain unanswered. The situation which is abstract will be much more clear with a specific example, for instance a mortgagee whom 10.000.000.-USD upper limit mortgage has been established on his behalf commences an enforcement proceedings for the amount of 1.000.000.-USD which is the due and payable part of the debt and fulfills his receivable through the foreclosure of the real estate, then the situation of the remaining 9.000.000.-USD shall be appeared as a legal issue.
As it is indicated above, the BEL does not include a specific regulation for this situation. In a similar situation, Supreme Court, 12th Civil Department, with the verdict dated 7.11.2003, numbered 2003/16972 E. and 2003/21995 K. decided that “with the execution proceeding by the way of foreclosure of mortgage of the Bank, and the situation where the real estate is responsible of the debt only with a limit, bank may request to store the amount of the guarantee letters which has not foreclosed yet. With the sale of the real estate, the mortgage has removed; the exceeding amount up to the upper limit shall be stored on behalf of the bank. In other words, the mortgage right before the real estate of the bank turns into the lien before the money through the sale of the real estate. Accordingly, if the remaining receivable is within the upper limit mortgage and if only there is one real estate as a security, for the given example above, the mortgagee has right to request to store the 9.000.000.-USD remaining amount after the sale of the real estate, for the receivable which is not become due or payable, through applying to the execution office.
4. CONCLUSION
As it is mentioned foregoing, limit mortgage is established in order to secure receivables which shall arise or is possible to arise in the future. Because of the reason of uncertainty,, for the avoidance of issues which may occur in the future the security amount of the real estate of an uncertain debt has been decided with the upper limit indicated in the mortgage contract deed. Accordingly, the principle debt, interest which shall be added to the mentioned debt and expenses of enforcement proceedings in another words, the amount which is under the security of the upper limit mortgage shall be restricted by the upper limit of the mortgage, therefore for the receivables of debtee which are exceeded the mortgage amount may only be prosecuted by an ordinary attachment proceeding. Foreclosure of the limit mortgage shall be made by an enforcement proceeding without judgment. Besides, for the third parties who has established a mortgage, a valid enforcement proceedings cannot be made against him before the debt becomes due and payable.
Mortgagee may demand foreclosure of mortgage in concurrence with the receivable becomes due and payable. In this regard various issues are faced in practice. One of them is whether head of execution office has the authority to examine if the receivable indicated in the request of enforcement proceeding is due and payable or not. Even there are dominant remarks of the doctrine is that the head of execution office does not have an authority to examine if the receivable is due and payable, or not, there is a Supreme Court decision contrary to this remark. Another issue faced in regard to limit mortgage is how the security of the receivable which is not due and payable yet shall continue after foreclosure of mortgage. In this respect, in accordance with the principle of trustworthiness of law, when the real estate has been foreclosed, the security of the receivable which becomes due and payable should continue as a pecuniary guaranty on condition that the guaranty shall be restricted up to the amount of the limit mortgage.
