I. INTRODUCTION
Legal entities who are not able to express their intent in the manner of natural persons act through their company organs. There are, accordingly, certain legal consequences attached to the intent expressed through a legal entities’ organs. This study examines a legal entity’s liability for the actions of their company organ within the scope of the Turkish Code of Obligations and the Turkish Civil Code in the light of the Supreme Court Assembly of Civil Chambers’ decision dated 13.05.2015, with merit numbered 2013/2220 and with decree number 2015/1135.
II. SUMMARY
In the case subject to the decision, the claimant sued the company officials of Joint Stock Company A and the financial consultant of the company claiming that unissued goods were declared as issued goods by issuing fake invoices and a tax refund was received from Revenue Department B, undue payment was detected in the audits, there were three times the amount of refunded tax fine with the main paid tax refund, and demanding the main tax refund and tax fine be paid by the respondents. The contents of the file show that the tax penalty was imposed on behalf of extrajudicial Joint Stock Company A and the company filed a lawsuit at the tax court for cancellation.
As a result of the first instance trial, the Ankara 2nd Civil Court of General Jurisdiction declared that the treasury’s main tax losses and the tax penalty must be taken conjointly from the respondents and paid to the claimant. The case partially accepted the decision to dismiss the excess demand concerning interest. The parties’ attorneys took the decision regarding partial acceptance of the case to the higher court and requested a re-examination of the decision. The 4th Law Office of The Supreme Court, with the verdict dated 29.02.2012 and with merit numbered 2012/1289 and with decree number 2012/1313, rejected the respondents’ objections regarding the payment of the main tax. Therefore, the matter of the respondents’ responsibility for the main tax in this case is finalized and is not a matter of dispute. Due to the fact that the tax penalty in this case is imposed on a company with a separate legal personality, the Supreme Court overturned the decision of the first instance court on the justification that the decretorials of the respondent company and the financial consultant of the company were not liable for the tax penalty. In addition, since Joint Stock Company A has joint liability due to the debt subject to the lawsuit, annotation of the not to constitute repetition in the collection was also shown as grounds for reversal of the decision. As a result of a retrial carried out by the court of the first instance, the previous decision was partially resisted in terms of the tax penalty on the grounds that “respondents are jointly liable for sanctions of tort with subsidiary punishments, legal entities are represented by natural persons, the transactions will be carried out by natural persons, and natural persons who act on behalf of the company are also responsible for the tort”. The representatives of the party appealed against the decision of persistance.
The Supreme Court Assembly of Civil Chambers evaluated whether the respondents, who are members of the administrative board, were liabile for the tax penalty in terms of their liability for the actions of the organs of their legal entity. The Supreme Court Assembly of Civil Chambers judged the court decision subject to appeal to be accurate on the grounds that tort acts committed by the organs of commercial companies with legal entity are deemed to be the tort of the legal entity (Decree of the Supreme Court Assembly dated 17.12.1958 and numbered 69/59) according to the abolished Turkish Commercial Code (aTCC) and Article 48 of Turkish Civil Code No. 743, and on the grounds that the company and its administrative board members are conjointly liable for damages resulting from tort according to Articles 41 and 50 of the abolished Code of Obligations (aCO) and 177/II, 321/last and 336/I-5th articles of the aTTC. In order to better analyze this decision, we look at how the legal liability of the organs of a legal entity is handled in Turkish law.
III. LIABILITY OF LEGALENTITIES FOR THE ACTS OF THEIR ORGANS
Legal entities, which cannot form a will as natural persons, utilize their will through their organs. In legal entities, the title of organ is recognized to the person or persons who form their will and enable the legal entity to participate in legal life by declaring this will1. To be clear, legal entities act through their company organs.
Just like natural persons, legal entities have juridical capacity. Legal entities have a capacity to act in the same scope as legal persons, except for a few differences due to their qualifications. Legal entities also have the capacity for legal transactions, the power of disposition, the capacity to sue and even the capacity for liability in tort2 . As a matter of fact, it is also regulated in Article 50 of the Turkish Civil Code that a legal entity declares its will through its organs and the organs put the legal entity under obligation in their legal transactions and all other acts. The concept of “all other acts” mentioned in the Article indicates that a legal entity will be liable for any actions contrary to the obligation and torts of the organ3. Since legal entities reflect their will to the external world through natural persons, those who commit actions contrary to their obligations and tort are also the persons who constitute the organ.
Liability in terms of breach of debt arises from a legal entity’s organs not fulfilling at all or properly their obligations. Here, the qualification of obligation forming a liability and the breach of debt do not matter. Breach of the debt by the organ is the responsibility of the legal entity4.
Regarding the liability of the legal entities from its organs’ torts, it is against the principle of equity to hold the legal entity responsible for every tort committed by these persons, even though the organs of the legal entity consist natural persons. Thus, it is beneficial to clearly state the limits of when the legal entity will be responsible for the acts performed by the organs of the legal entity and when the natural persons forming the organ itself will be liable5. In this context, there must be a link between the committed torts of natural persons forming the organs and their duties concerning legal entity in order for legal entities to held responsible for the torts the organs have committed. The legal entity cannot be liable for the torts of their organs in cases where the organ commits the unlawful act as a natural person and not as an organ. Tort must have occured in the framework in which the organ fulfills its duties, represents the legal entity or executes the legal entity’s transactions. As an illustration, a legal entity shall not be held responsible for a tort committed by a person who has an organ title against somebody with whom he argued in traffic while driving for a duty of the legal entity or from a theft he committed even while he was performing legal entity’s job6.
Another issue that needs to be mentioned regarding a liability occurring from torts of legal entities’ organs is the conditions sought relating to tort liability in accordance with Code of Obligations Article 49 which states that an unlawful act, damage, a causal relation between the unlawful act and the damage, and the fault of the person committing the act need to exist. In the presence of these conditions, the liability of a legal entity arises from torts committed by the fault of the persons who hold the title of an organ.
In addition to the liability of a legal entity arising with regard to tort, natural persons who commit a tort wrongfully with a title of legal entity’s organ are also liable according to Article 50/3 of the Civil Code because the Article ensures the liability of the organs personally due to their faults. Therefore, in the event of a defect of the organ, the injured party may file a claim for compensation against the person or persons constituting the organ together or seperately and to whom committed the tortious act, as well as compensating the legal entity7. In this case, there is a joint liability relation between the legal entity and the natural persons constituting the organ.
IV. REMARKS AND EVALUATION OF THE ASSEMBLY OF CIVIL CHAMBERS
The dispute examined by the Supreme Court of Assembly of Civil Chambers’ case with merit numbered 2013/220, and with 2015/1336 decree number, concentrates on whether the respondents who are members of the legal entity’s administrative board are liable and for the respondent, who is a swornin certified public accountant, is responsible for the tax penalty imposed on behalf of the legal entity. As the appeal authority, the 4th Civil Chamber of the Supreme Court ruled the respondents, who are members of the company’s administrative board, and the respondent, who is a financial consultant of the company, are not liable for the tax penalty, since the tax penalty was imposed on the company, which has a seperate legal entity, and reversed the counter-decision of the court of first instance. The dispute in question was brought before the Supreme Court of Assembly of Civil Chambers subsequent to the first instance court’s resistance to its decision. When we analyze the decision of the Assembly of Civil Chambers related to the dispute, we perceive that the Assembly primarily refers to the provisions of the law relating to the concrete case, subsequently interprets the relevant provisions of the law together, and gives a verdict regarding the liability of the members of the administrave board of Joint Stock Company A for the tax penalty subject to the concrete case.
The Assembly first scrutinizes the regulations concerning the obligations arising from tort under the title “Formation of Obligations” in the former Code of Obligations numbered 808 (aCO), and mentions the four elements sought in order to be able to speak of tort by referring to Article 41 of aCO. As stated in the justification of the decision, tort is to harm another person by a flawed or unlawful act. In order to speak of the existence of a tort, there must be an unlawful act, fault of the person performing the act, damage occurring as a result of the act and, finally, there must be an appropriate causal link between the damage in question and the unlawful act. As the Assembly of Civil Chambers correctly assessed in the case subject to the dispute, members of the administrative board of Company A and the sworn-in public accountant causing public loss by receiving a tax refund from Revenue Department B based on false invoices arranged unlawfully explicitly constitutes a tort. At this point, Assembly of Civil Chambers referred to the Article 41 of the aCO for the second time and stated that a person who harms someone else with an unlawful act and is at fault is obliged to compensate this damage and that the responsibility for the tort is the source of the compensation obligation. When we consider the provision of the Article in the context of the concrete event, we acknowledge that the damage resulting from the tort of the legal entity’s organ, namely the tax penalty, must be compensated by those who are responsible for this tort.
Subsequent to its explanations related to tort, the Assembly of Civil Cham - bers stated that the necessity adju - dicated in the canon for the organs of legal entity in order to establish relations with third parties as a right holder and to express its will by re - ferring to Article 49 of the Civil Code and then by referring to Article 50 of the Turkish Civil Code, underlines the fact that the legal entity is responsi - ble for the acts of its organs and the organs are personally responsible for their defects.
Legal entities act through their organs and can express their will to the external world through these organs. With this, as we have stated above and as is stipulat - ed in Article 50 of the Turkish Civil Code, legal entities are responsible for the legal transactions and acts carried out by their organs, including tort. In addition to this, as it is explicitly stated in Article 50/3 of the Turkish Civil Code, organs of legal entities are also personally responsible for the damage they cause. Considering that the organs of legal entities consist of natural persons and that all kinds of transactions are carried out by these persons within the scope of reflecting the will of the legal entity, holding natural persons liable for damages resulting from their actions carried out with the title of an organ of legal entity, is a nat - ural consequence of the law’s principle of equity. However, it should not be forgotten that there must be a link between the torts carried out by natural persons and their du - ties relating to the legal entity in order for the organs of the legal entity to be held respon - sible for the torts they carry out. When we examine the concrete case, we perceive that the respondents, who are members of the administrative board of Joint Stock Compa - ny A, caused a treasury loss by means of un - lawfully arranging a false invoice under the name of the legal entity and thus carrying out a tort. It is clear that the members of the administrative board committed a tort with - in the scope of function and authority of the organ with the intention of obtaining a tax refund on behalf of Joint Stock Company A. At this point, Joint Stock Company A and the members of the administrative board are conjointly responsible for the damage the administrative board caused. The fact that a tax penalty was imposed on a company that has a seperate legal entity in the concrete case, does not prevent the body of the legal entity from being personally responsible for the damage arising on behalf of the company. As it is explicitly stated in the canon, the or - gan of a legal entity is responsible for the harm it causes. As previously men - tioned, there is a joint liability relation between the legal entity and the nat - ural persons forming the body. Those who suffer from tortious acts may be compensated for the damage by the members of the company’s adminis - trative board as well as by Joint Stock Company A within the context of joint liability.
In our opinion, even though the provisions of the Assembly of Civil Chambers referred to above are sufficient in order to reach a conclusion regarding the concrete event, the Assembly preferred to maintain its justification by referring to the provisions of the abolished Turk - ish Commercial Law. The Assembly made a reference to Article 321 of the aTCC regulating the incorporation’s li - ability for the tortious acts committed by those who are authorized to rep - resent or administrate while carrying out their duties and to Article 336/I-5, which regulates the joint liability of the members of the administrative board to the company or individual sharehold - ers and to claimants from the company for their transactions on behalf of the company in the event that the mem - bers of the administrative board do not fulfill their other duties delibaretly or as a result of negligence, imposed by the law and the articles of incorporation. We would like to state that since there is no loss arising from the defect of the members of the administrative board to fulfill a duty imposed by the law or the articles of incorporation within the context of the concrete event, we con - sider that the reference made by the Assembly is not appropriate.
In conclusion, the Assembly of Civil Chambers evaluated that the tortious acts of the organs of commercial companies with legal entity are deemed to be the tort of the legal entity and that the company and the members of the administrative board are jointly responsible for the damage caused as a result of the tort, based on the conclusion presented by the provisions it mentioned in the justification and prophylactically delivered a judgment relating to the joint liability of Joint Stock Company A and the decretorials of the administrative board arising from the public loss resulting from their tortious actions.
V. CONCLUSION
Persons or groups of persons holding the title of the organ of legal entity enable the legal entity to utilize its capacity to act and, thus, enter into legal relations. Therefore, in legal entities who do not have the ability to form a will as natural persons and to declare this will to the external world, the will formed by legal entity’s organs is considered the will of the legal entity and legal consequences are attached to this8. Therefore, legal entities are responsible for the acts performed by their organs, including tortious acts. At the same time, natural persons or groups of individuals who represent the legal entity under the title of organ committing the tortious act are jointly liable together with the legal entity for damages resulting from an injury due to their faults. At this point, there is a joint liability relation between the legal entity and its organs. In our opinion, specifically in the concrete incident, the legal entity and the organ of the legal entity are also jointly liable for damages resulting from the tortious act of the organ of the legal entity based on our explanations stated above. The fact that the tax penalty subject to the incident is imposed on behalf of the legal entity does not eliminate the liability of the organ of the legal entity regarding this penalty. The members of the administrative board and Joint Stock Company A are jointly liable for damages resulting from the tortious act, namely the tax penalty. In this regard, we consider the Supreme Court Assembly of Civil Chambers’ decision regarding the joint liability of the members of the administrative board of Joint Stock Company A for the penalty of tax evasion to be appriopriate.
BIBLIOGRAPHY
DURAL MUSTAFA, ÖĞÜZ TUFAN, Türk Özel Hukuku Cilt II, İstanbul 2019
AKİPEK JALE, AKINTÜRK TURGUT, ATEŞ DERYA, Türk Medeni Hukuku Başlangıç Hükümleri Kişiler Hukuku Cilt I, İstanbul 2020
ERMAN HASAN, Medeni Hukuk Dersleri Başlangıç Hükümleri ve Kişiler Hukuku, İstanbul 2020
HELVACI SERAP, ERLÜLE FULYA, Medeni Hukuk, İstanbul 2020
FOOTNOTE
1 Helvacı, Erlüle, Medeni Hukuk, s.116
2 Akipek, Akıntürk, Ateş, Türk Medeni Hukuku Başlangıç Hükümleri Kişiler Hukuku Cilt I, s.555
3 Helvacı, Erlüle, Medeni Hukuk, s.117
4 Erman, Medeni Hukuk Dersleri Başlangıç Hükümleri ve Kişiler Hukuku, s.204
5 Akipek, Akıntürk, Ateş, Türk Medeni Hukuku Başlangıç Hükümleri Kişiler Hukuku Cilt I, s.556
6 Dural, Öğüz, Türk Özel Hukuku Cilt II, s.264
7 Erman, Medeni Hukuk Dersleri Başlangıç Hükümleri ve Kişiler Hukuku, s.204
8 Dural, Öğüz, Türk Özel Hukuku Cilt II, s.256
